Y stated that "they are not a viable entity unless they t/o ETW" to paraphrase. they have no sales, no crush, are selling stock at bulk prices, cannot pay current debts and seem to be looking to ETW as their saviour ! l cannot understand the idea of ETW holders having 20% of their own company after this deal, but saddled with even more debt. it all seems like madness to me.
YARRAMAN WINERY'S proposed merger with Evans & Tate will see shareholders in Australia's sixth largest wine maker end up with only 15 per cent of the combined group.
If Evans & Tate shareholders accept the proposed scheme of arrangement put by Yarraman, existing shareholders in the much smaller Hunter Valley winery will end up owning a 23 per cent stake.
This is despite Evans & Tate generating around 30 times more revenue than the debt-laden Yarraman, a company which has conceded in its latest filing to the US corporate regulator that it may struggle to survive if the deal does not proceed.
"We are currently in discussions with potential acquisition candidates that will significantly improve our operating results and working capital," said the Nasdaq-listed Yarraman in a filing to the US Securities and Exchange Commission.
The company, which has already revealed it will not crush grapes this year in order to clear the glut of wine in its cellars, reported a $US1.9 million loss for the six months to December. It also suffered a 18 per cent slump in wine sales to only $US836,543.
Counter to its claims as being an ultra-premium wine company, Yarraman disclosed in its accounts it had secured a bulk order to sell 5000 cases of wine to a health food company which markets a Gnome-branded wine.
And despite Yarraman's assurances it has secured $110 million in debt and fresh equity to fund the deal, it has conceded it is struggling paying its $US5 million odd of debt.
In its SEC filing, Yarraman said it had "suffered recurring losses from operations, cash deficiencies and the inability to meets it's maturing obligations without borrowing from related parties and sale of its stock".
Following an agreement by Yarraman to allow Evans & Tate to go through its books and see if the little known Hunter Valley winery has access to the $110 million in debt and equity funding to finance the deal, Yarraman has conceded it had its repayments on a recent $US750,000 loan "extended until such time as the company receives bridge financing related to the proposed merger".
While most of the funding will go to pay off the $97.3 million of debt Evans & Tate owes its banker ANZ, part of the $38.5 million raised by Yarraman in fresh equity will represent a 27 per cent of the new company.
The remaining 23 per cent will be in the form of convertible notes and warrants.
ETW Price at posting:
0.0¢ Sentiment: Buy Disclosure: Not Held
