It has entered into an agreement to acquire NSMS, an Ivory Coast-based forestry operation, which is expected to compliment the Woodbois business which was acquired six months ago - the Woodbois trading arm has worked with NSMS for ten years.
NSMS’s primary asset is a sawmill located in the centre of a 70,000 hectare hardwood plantation.
The deal is with NSMS owner Sidani Yahia, an Ivory Coast citizen, who may potentially work for Obtala’s forestry company Argento Limited. To acquire NSMS, the company will pay US$1.2mln, less Argento’s spend on ASMS timber (between December 16 and March 31), and the company is providing working capital loan to ASMS.
“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, Obtala chairman.
Expanding Woodbois business
A significant portion of the new funds will be invested into Woodbois. Some US$1.75mln will be invested to double the businesses harvesting capacity in Gabon, with the cash spent on infrastructure and equipment. A further US$1.5mln is earmarked for customer pre-payments and US$0.75mln will be spent on wood drying kilns.
“We have spent over 6 months since the acquisition of WoodBois identifying and prioritising the investments required to scale the business,” Pelham added.
“The opportunity for expansion in both timber trading and production was clear to us during the due diligence process, and we have now had the chance to validate the impact of additional funds on both divisions through the purchase of two new bulldozers that have been operational in our forest in Gabon and a €1m increase in WoodBois' overdraft facility, which was secured on completion of the acquisition in June.
“This has given us confidence that funds from the current equity raise, and the expected imminent arrival of additional trade finance, will have a significant impact within 2018.”
Through a share sale Obtala is raising £4.5mln before expenses. New shares are being issued at a price of 12.5p each (Monday’s closing price was 13p) and they will represent around 12% of the group’s enlarged share capital.
Obtala directors Miles Pelham, Paul Dolan, Martin Collins will subscribe for £1.1mln worth of new shares. Dealing in the new shares is expected to begin on February 13.