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February : Obtala closes $7.5m investment round after signing MoU to acquire NSMS

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14 February, 2018

Obtala closes $7.5m investment round after signing MoU to acquire NSMS

Obtala


Obtala Limited, the Africa-focused Agriculture and Forestry Group, announced further advancements into the West African forestry market, with the proposed acquisition of Nouvelle Scierie Moderne de Sassandra (NSMS), a forestry production company operating in the Ivory Coast since 1987 for up to $1.2m.

Since the acquisition of WoodBois in June 2017, the Obtala team has conducted a review of WoodBois' supplier relationships to understand how to best increase trading volume and profits. NSMS has been a key supplier for the past 10 years, yet historic lack of trading capital has prevented WoodBois from expanding this flow significantly.  

Importantly, NSMS has rights to purchase timber from the Ivory Coast's government Société de Développement des Forêts (SODEFOR) and owns a sawmill centrally located on SODEFOR's 70,000-hectare plantation of 5 hardwood species (including Teak and Cedrella). 

NSMS is owned and operated by Sidani Younes, a second-generation forester of Lebanese descent, with notable forestry expertise in both Ivory Coast and neighbouring Liberia. Sidani adds to Obtala's exceptional African management team and has agreed to enter into discussions with the company to remain for at least three years following the completion of the acquisition.

"In NSMS we have an opportunity to grow what has been one of our most profitable areas of business and the potential to acquire a business that is already well known to our team, with the prospect of future expansion in West Africa," said Miles Pelham, Chairman.

To fund the prospective acquisition of NSMS, as well as other growth investments the Board launched a fund raise via the issuance of new ordinary shares at 12.5p, with 2 year warrants exercisable at 20p into Obtala Ltd. This was closed yesterday having raised $7.5m (£5.41m) from management, private investors and funds.

Obtala values its retail investors and opened this round through the commission-free PrimaryBid platform, attracting a further investment of £230,000. 

Obtala was also pleased to welcome its first institutional investor as part of this round.

Ongoing management commitment:

Obtala senior management, including Chairman Miles Pelham, once again demonstrated their commitment with hard cash, contributing the first $1.5m to this round. Senior management have participated in every round of funding under the current Chairman, bringing their total investments to $10.5m

Obtala Chairman Miles Pelham discussed the fund raise and Obtala's business plans with Vox Markets' Justin Waite Monday, February 5th.

Vox Markets

Use of Funds

Acquisition of NSMS:

Up to $1.2m acquisition consideration plus $845,000 working capital loan.

Obtala Obtala

NSMS, Ivory Coast

Expansion of harvesting Capacity in Gabon:

$1.75m to purchase forestry equipment required to double logging production in Gabon and supply more raw material to the sawmill and veneer factory.

Obtala Obtala

Sawmill, Ivory Coast

Timber pre-finance fund:

$1.5m for pre-payments to timber suppliers. Supplier pre-payments for timber that has not yet arrived at our warehouses is not considered eligible collateral by external trade finance providers. Typical pre-payments are 20-50% of the invoice amount, meaning a $1.5m pre-finance fund can support up to $7.5m of additional purchase volume. Such pre-payments are only made with suppliers with whom we have a long track record and where a pre-payment can provide favourable pricing and/or exclusivity.

Obtala Obtala

Veneer Factory, Gabon

Purchase of drying kilns:

$0.75m.  Currently all timber is kiln dried at a third-party facility and construction of our own kilns in Gabon will allow us to dry timber at 20% of the cost of third-party drying.

Obtala Obtala

Timber loaded into drying kiln sheds

Any additional proceeds will be used for further supplier pre-payments, capital expenditure in Mozambique and general working capital purposes.

Trade Finance Update

Separately, Obtala said that it was negotiating final legal contracts to support an external trade finance facility, with an initial $5m available for draw down in February 2018, based on the eligible collateral pool of inventory and receivables, with further $5m increments as funds are utilised.

RNS

RNS


About Obtala Limited

The Obtala Group embraces a vertically integrated trading platform with emphasis on sustainable agriculture and forestry through its operations in Tanzania, Mozambique, Ivory Coast and Gabon. It aims to become one of Sub-Saharan Africa's largest sustainable food and timber producers, consistently delivering world-class product to the global marketplace, to deliver material, positive social impact through commercial enterprise, helping to alleviate poverty and enriching the lives of future generations.

Obtala Group Mission Statement

"To take the lead in the sustainable commercialisation in Sub-Saharan Africa of two of the world's most in demand and diminishing natural resources, arable land and forestry. To pursue every opportunity to move up the agriculture and forestry value chain, in partnership with key stakeholders, contributing to long term economic and social development in the markets we operate in."

Find out more about Obtala and register for news alerts: www.obtala.com

 


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