Silver Chef (ASX: SIV) has come to an agreement with the consortium led by Next Capital that is seeking to take the company private.
Now that Next Capital has pored over Silver Chef's books it appears as if Silver Chef is willing to settle for less.
The embattled Silver Chef and the consortium led by Next Capital have deliberated and landed on a scheme implementation agreement.
Under the deal which is 30 per cent less than than what was initially announced only 2.5 months ago, Silver Chef shareholders would receive $0.70 per share, thus valuing the company at $27 million.
The company has unanimously recommended shareholders accept the new offer, when considering the current money troubles the group is facing.
"The independent directors have carefully considered the offer from Next Capital and its relative certainty compared to the existing challenges in raising sufficient debt and/or equity to cure breaches of debt covenants," says Silver Chef's chair of the independent board committee Sophie Mitchell.
"The independent directors have also weighed up the material risk of Silver Chef not receiving ongoing support from financiers and that it may be required to repay its credit facilities within a short timeframe without that support. The scheme consideration provides certainty of value to Silver Chef shareholders and an ability to share in the potential upside from the rundown of the GoGetta business."
This announcement has seen shares in Silver Chef skyrocket 122 per cent to $0.69 per share at 12.52pm AEST. This came after the company exited a trading halt in the morning, with the group's previous closing price sitting at $0.31 per share.
However, it is a far cry from its peak in 2016 when it was trading at $11.67. Back then, the company had a market capitalisation of $525 million, today that market capitalisation is sitting at $26.9 million.
Silver Chef has been beset by financial issues since it dumped the GoGetta equipment financing brand early last year and as of 30 June 2018 it remained in breach of debt agreements.
The company sought waivers from its financiers to undertake a capital raising of $45 million to repay these debt facilities.
In March when Silver Chef released its financial results for the half year, it admitted it had not yet raised this minimum $45 million mark and had sought an extension from its financiers until the end of April.
Since then, the financial waivers have been extended three times with the last due date on 30 June. In today's announcement Silver Chef has received another extension to 30 November 2019.
Since September 2018, the hospitality group has explored options to recapitalise the company so it could continue to grow the business. The initial preferred option was to seek offers of sub-debt, but the group concurrently explored the potential for a take-private option where an incoming party, in this case Next Capital, would acquire the shares in the company and recapitalise it on a basis agreed with Silver Chef's financiers.
The process culminated in Silver Chef entering into an exclusivity agreement with a preferred private equity partner and a preferred sub-debt party in January 2019. The sub-debt party proposed that it would provide $45 million of subordinated debt conditional on a minimum equity raising of $20 million. The equity raising was subsequently delayed following the additional financier conditions imposed on 28 February.
The sub-debt proposal lapsed on 23 May 2019, however discussions about a potential public equity solution have continued but have not proved feasible.
That bring us to this latest proposal from Next Capital, representing "extensive" negotiations between Next Capital, Silver Chef, and the company's financiers.
The proposal by Next Capital follows Silver Chef posting a statutory net loss of $11.7 million at the half year.
Its revenue also fell to $121.6 million, down from its previous corresponding result of $146 million.
The general meeting and scheme meetings to deliberate the Next Capital offer is expected to occur on Friday, 30 August 2019. If accepted by shareholders the implementation of the takeover is expected to occur in mid to late September.
Silver Chef was founded by chairman Allan English (pictured) in 1986 and floated on the ASX in 2005 at $1 when he imported 20 conveyor style pizza ovens in a container, valued at $25,000. English found it almost impossible to offload them, but came up with the brainwave of the rent-try-buy system.
Business News Australia
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