FXX / LLL Demerger, page-72

Although FFX have said they set aside $10m to prevent dilution (to their planned 20% holding) from the Entitlement Offer, they've never said they will participate in the EO. As you say, they can't because the EO is made to FFX shareholders.

So what they've done is purchased $4.6m shares in Leo to prevent that dilution, implying the EO will be for 4 x 4.6m shares at whatever price they set after the meeting.

The in-specie distribution is just a reduction in capital, they'll retain 20% & distribute 80% to FFX shareholders.
The in-specie distribution comes first, so it's 20/80, then the EO to shareholders, with the previously issued 4.6m shares maintaining that 20/80 ratio.