Saturday, 29 August 2015

Gunn Aims at McLean , Wang & Ang

Percentage of AIM Securities not in public hands

91.6% of shares are not in public hands

As at 28th July 2014, significant shareholders with more than 3% holding in the Company were:
RAY ANG W B ESQ 33.79%
WALKER CRIPS 6.46%
WESTMINSTER ENTERPRISES LIMITED 5.47%
GUNN J H ESQ 4.21%
HERMES FINANCIAL GROUP BVI LIMITED 3.73%
PEEL HUNT LLP 3.44%
181 FUND LIMITED 3.02%

So only 8.4% of shares are in public hands. None of the above holders have sold and all are in at significantly higher levels than the current share price. In rough terms, at the current SP there is only approximately £200k of equity outside of the holders above.

New due next week on the Mongolian compensation and the release of some the £7 million of cash on the companies books in China.

Current MC less than £2 million.

Underlying business is consistently profitable and growing demand for their products.

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2015 A pocket summary of SORB for new investors:

* SORB is one of the world's leading food sorbate (preservative) suppliers. People must eat...

* Revenues = £14m;
* Net assets = £10m;
* Cash = £7m;
* Profit = £1m;

Upcoming news:

* Potentially up to £6m compensation coming from a Mongolia factory dispute;
* Potential repayment of £2m loan-notes compensation from a subsidiary;

* Current marcap today = £2m...

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2008
Hong Kong financier Ray Ang Wee Boon is acquiring AIM investment shell Ninety through a £20 million paper reverse takeover.
Under the proposed deal, Ninety, steered by executive director John McLean, will issue shares to buy Honour Field, Ray Ang Wee Boon’s British Virgin Islands-based investment company. In April, Honour Field agreed to buy LVST, based in China’s Shandong Province, which produces food preservatives sorbic acid and potassium sorbate and followed £3.4 million pre-tax profit on £12.9 million turnover last year with first-half pre-tax profits of £2.3 million (£1.9 million after tax) on £7.4 million turnover.
Ninety, which plans to change its name to Sorbic International, intends to pay nearly half the shares now and the rest if Honour Field/LVST makes at least £4.38 million after tax for the whole of this year. The deal is to be accompanied by a one-for-60 share consolidation and £240,000 placing at 75p for Ninety, whose shares now stand at 1.25p.
If it all goes through, McClean will stay on the transformed company’s board. LVST’s founder and boss, Wang Yan Tin, will be president and Ray Ang Wee Boon chief executive officer.
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Interesting letter in the FT today from John
Gunn (ex CEO of B&C amongst other claims to fame). I'm not sure I
completely buy it - if an geezer like me can see (as I did) that all
these China AiM listings were likely to be frauds shouldn't a big multi
millionaire businessman like him not have been able to do so but anyway
here's what he says

Sir, As a meaningful shareholder and (smaller) loan-note holder in
Sorbic, I read Patti Waldmeir’s article (Notebook, May 27,2015) with great
interest. This is indeed a terrible state of affairs, whereby the system
created to give reasonable protection to shareholders of Aim-listed
companies has failed completely. 

The Aim arm of the London Stock Exchange has allowed so many flaky
Chinese companies, where corporate governance is seemingly an unknown
concept, to list in London. What information on Chinese executives
holding corporate seals and licences, and therefore total control over
the companies’ finances, was given by nominated advisers (nomads) and
brokers? Precious little I think.

Is the lack of action (by the London Stock Exchange) on these many
scandals the result of brushing a problem under the carpet so as not to
annoy the Chinese authorities or a fear of putting off further lucrative
Chinese IPOs (with big fees for the LSE), or a combination of both?

I have been pressing the company for some time to come clean on this
affair. Now, with your assistance, it has. However, the biggest scandal
is the complete lack of protection for shareholders under Aim rules at
all stages in the life of such companies. Compensation from the LSE,
nomads and brokers is surely due?

John Gunn 

London W8, UK

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Shareholder newsletter 20th August 2015
Dear Shareholders, Following the interim statement on 30th June, 2015, both Jay Newman and I have either met or had discussions with a number of shareholders, loan-note holders and other stake-holders to update them on the current progress. Given that six weeks have elapsed since our last formal communication, we thought it would be appropriate to give an update to all parties, and to provide significantly more detail about the background of this issue. As shareholders are aware, on 22nd April the Board voted to terminate Mr Wang Yan Ting’s (“Wang”) role as Legal Representative in China and to replace him with Mr Cai Jun, the Managing Partner of Guolan, a Beijing law firm. Legal Representative For the change in Legal Representative to be legally (as opposed to corporately) effective, the change has to be registered with the relevant branch of the State Administration of Industry and Commerce (“SAIC”). As Mr Wang retained the business licences and chops, it was not possible to register the Legal Representative change and therefore, legally in China, Mr Wang remains the legal representative and retains effective control of LVST and its assets. Actions taken Given Mr Wang’s refusal to comply with a valid board resolution, it is essential that other influences are brought to bear within China to achieve a satisfactory resolution. Your Board considered all legal options at the outset. We informed the Police and the Public Security Bureau, but with no discernible benefit, as they characterised the matter as a commercial dispute. We have been advised that if we were to pursue the matter through the local courts, it could take between 18-24 months with no certainty of a satisfactory conclusion. Moreover, our advice is that there is an established precedent in China, that in similar situations where a dispute occurs between foreign and local interests, the underlying business often becomes unstable with suppliers, customers and employees all taking action to protect their respective interests. Accordingly, if a legal route is taken, there is a significant risk that, by the time a court decision is issued, the assets would be significantly depleted in value and there is also a lengthy appeal process. Therefore, in the current circumstances, your Board is no longer actively pursuing the legal route, but will keep it under review as the situation develops. At present, your Board believes that the diplomatic route will prove more fertile and reliable in achieving a solution as an engaged Chinese Government will want to protect the local economy and will be able to exert pressure on Mr Wang to achieve an amicable solution. Accordingly, as I indicated before, we have been in contact with the British Embassy in Beijing. Our Ambassador has discussed the business environment in Shandong and made specific reference to Sorbic International plc (‘Sorbic’) with the Provincial Governor in a letter which was sent early August 2015. To complement this action, I wrote a detailed letter to the Governor which has been hand delivered to him personally by a mutual friend. We are now in contact with the Governor’s office to progress matters. The above initiative has been taken in conjunction with various discussions between Mr Wang, Tim Clissold and Frank Li (Tim Clissold’s colleague) in Linyi, Shandong Province, both in person and by phone in search of an agreed settlement. These discussions have given focus to Mr Wang’s concerns and his reasons for refusing to give up the Linyi Van Science and Technique Co., Ltd (“LVST”) chops and licences. Background history Prior to Sorbic’s involvement, Mr Wang consolidated his shareholding by buying out the other local shareholders in LVST to achieve a 100% holding. It appears from what Mr Wang has told us that several of the original Chinese shareholders were never paid in full by him for their shares and, as a result, some monies are still outstanding to these shareholders. Furthermore, Mr Wang has stated that the outstanding consideration obligation was guaranteed by LVST. Chronologically, Mr Wang’s share acquisitions took place in January 2008, and subsequently Mr Wang sold his shares to Honourfield International Limited (“HF”) in May 2008. HF was then acquired by Sorbic in September 2008, prior to the IPO. At the time of Sorbic’s acquisition of HF and its subsidiary LVST, professional due diligence was conducted on the originating share transactions and from what we can see, there was nothing to suggest that any monies were outstanding. Further, Mr Wang gave Sorbic formal representations at the time of the acquisition that full disclosure had been made in respect of LVST and that there were no actual or contingent liabilities outstanding. In respect of the purported guarantee from LVST for the outstanding share consideration, we have seen preliminary evidence that Mr Wang’s share purchase document was chopped by LVST, implying a company guarantee. However following consultation with our Chinese Legal advisors, it would appear that if any guarantee existed, it would now have expired. Further, the documents supplied by Mr Wang differ significantly from those which were officially recorded at SAIC. It has to be said that a significant amount of the above information is based on Mr Wang’s version of events as there is very little corroborative detail available. In addition to the above, Mr Wang is aggrieved as the shares he received on the sale of HF no longer belong to him, as they are held by Prime Mega International Limited (‘PM”). The circumstances of this are detailed below. PM is a nominee company registered in the British Virgin Islands and whose sole shareholder and director is Mr Ray Ang (Sorbic’s former CEO). From what we can understand, PM has no other assets apart from its holding in Sorbic. Your Board understands that, at the time of the acquisition of HF, Mr Wang’s shares were agreed to be held by PM under an entrustment agreement between Mr Wang and PM and others because PRC exchange regulations prohibited Mr Wang from holding them directly at that time Your Board has recently seen a draft copy of this agreement, which is for a term of three years expiring in 2011. Again, your Board understands that on the conclusion of this agreement, Mr Wang intended to transfer the shares back to himself or to a nominee company controlled by him, depending on the exchange regulations in force at the time. However no such transfer took place. PM has been contacted and they have been asked to furnish a copy of the entrustment agreement, however they have refused to provide any documentation and further they have confirmed that they retain the beneficial ownership of these shares, which amounts to approximately 30% of Sorbic’s issued share capital. Your Board believes that Mr Wang may have a legitimate grievance concerning the PM shares. However if such a grievance exists, it is with Prime Mega International Limited and not with Sorbic International plc, HF or LVST. Furthermore, when Mr Wang initially brought his concerns to the Board’s attention in autumn 2014, a meeting was expressly held to review the matter and, in conjunction with eCFO, a PRC-based Western consulting firm, it was agreed that Mr Wang should pursue his grievance directly with PM. From our understanding, Mr Wang has taken no such action. The arguments that Mr Wang has deployed to justify his actions on 22nd April have no merit as both of his justifications relate to his personal position and NOT to the any of the group companies. Strategies In should be noted, positively, that Mr Wang remains willing to enter into negotiations and has not absconded. Further, we understand that LVST continues to operate with Mr Wang in regular contact. Mr Wang has had discussions with both Tim Clissold and Frank Li, which may lead to a conclusion and in this respect a framework for an outline solution is currently under discussion. Your Board’s prime objective is to regain control of LVST, its cash, licences and chops and if there are other significant possible solutions, then any such solution will require both support and approval from the loan stock holders and shareholders. In addition, given the issues raised by Mr Wang concerning both the outstanding share consideration and the PM shareholding, your Board will consider what additional action can be taken for the benefit of shareholders; however any such action will be of a secondary nature to the prime objective.
To assist shareholders in understanding the strategies which have been considered, I have summarised them below:
1. Recover control of LVST
2. Recover the relationship, repay the loan-note holders and develop the business; 3. A deal could be done with Mr Wang for him to exit LVST thus allowing Sorbic shareholders to develop the business and repay the loan note holders;
4. A deal could be done for Mr Wang to buy-out and compensate Sorbic shareholders with part of the proceeds being used to repay the loan-note holders
5. Sorbic shareholders and loan-note holders could sell LVST to a third party;
 6. Sorbic shareholders and loan-note holders could lobby the provincial and local government to broker a resolution to the matter;
7. Sorbic shareholders and loan-note holders could fight the case through the national Chinese courts;
 8. Any combination of the above.

 In determining the strategies to adopt, your Board is mindful of the time and cost it will take to achieve a resolution together with the optimisation of the funds available to shareholders after the repayment of the loan- notes. In order to maintain the integrity of all of the options, the Board has not taken any precipitative action which could both jeopardise the ongoing operations of LVST nor upset the supply of product to its current customers. Corporate governance As has been widely documented in the press, the relationship between China and the UK is entering a ‘golden period’ and the forthcoming visit of President Xi to the UK in October will go further in cementing the bond. However, as has been widely publicised recently both with Sorbic and several other Chinese companies listed in London, corporate governance remains an issue of considerable concern and importance to investors and the London Stock Exchange, and it needs to be addressed by serious government to government dialogue in order to ensure the future viability of China stocks on the London markets. One of the main issues to be addressed is how the key company decision makers within China are disincentivised from doing anything for either personal gain or the non-adherence of corporate processes, as currently, the sanctions available are external to China and therefore the local manager believes he/she can act with impunity. It should be noted in passing, that these types of problems are equally common in China stocks quoted in other financial markets including the US and Hong Kong. Loan notes and cash As reported in the interim statement, Sorbic is in default on the repayment of the outstanding loan stock and is wholly dependent on the successful resolution of the issues in China for redemption. The loan-stock holders have been regularly updated with the possible solutions and the actions taken and remain supportive with the strategies adopted. Furthermore, as Sorbic’s cash reserves are minimal, your Board has reduced Sorbic’s expenditure and has not been drawing any fees (since April 2015) and has been part funding expenses. However, to maintain the momentum of the actions to date, there will be a requirement to raise some additional working capital and your Board is exploring the available options, which include issuing additional loan notes or shares. In respect of the former, Sorbic has sufficient capacity to issue additional loan notes, whilst in respect of the latter; Sorbic will require shareholder approval (together with a Shareholder Circular) and also the approval of the loan-note holders. Whether the Group will have sufficient resources to continue in operational existence for the foreseeable future will ultimately be dependent on the repayment of the outstanding loan notes and the successful resolution and return of the funds controlled by Mr Wang. Nomad and delisting As reported in my interim statement, Finncap, our Nomad announced their resignation on 16th June 2015. Prior to Finncap's resignation, discussions had taken place with a number of Nomads, however none were willing to replace Finncap until the Company and Board were regularised (the return of control of LVST and the control and return of the cash). As Mr Wang has continued to ignore the Board's instructions, Sorbic had no alternative other than to delist on 17th July, 2015. Board As has been demonstrated above, the resolution of the Sorbic issue will take time and, given the delicate balance which exists between all the various interested parties and the complicated nature of the discussions, your Board believes that it would be appropriate that they appoint additional Directors to the Board. Accordingly I would be grateful if shareholders could nominate (by email to me as per below) potential Directors for your Board’s consideration by 5th September 2015. Furthermore, from discussions with shareholders, it is apparent that some prefer a more direct approach and if this is a widely held view and the current strategy is unacceptable, I am willing to step aside and let others take up the mantle.
Shareholders should be aware that the contents of this letter will be available both to Mr Wang and Prime Mega International. Summary In summary, your Board believes that, through the experience of Tim Clissold and Frank Li, the use of diplomatic channels, media and your Board’s connections, a framework will be found which will provide a solution in the near term. Any such solution will wholly depend on all of Sorbic’s stakeholders working together in harmony. It is therefore our hope that the addition of new board members nominated by the shareholders will help us achieve that.
Both Jay Newman and I remain available to discuss our progress at any time and can be contacted on either
 jaynewman.china@gmail.com or
mcleanjnm@aol.com.
Both Jay Newman and I would like to thank the shareholders, loan-note holders and the current advisers for their help and support and both of us will continue to work tirelessly to seek an acceptable resolution.
 John McLean Non-executive Chairman 20th August 2015

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Press Release 28 August 2015
 Sorbic International plc (“Sorbic” or the “Company”) Request for appointment of directors On 25th August 2015, the Company received a notice under section 303 of the Companies Act 2006 requisitioning the convening of a general meeting to appoint three additional directors, namely:
1) John Gunn;
2) Piers Monckton;
3) Les Allan.
The Board is considering the notice and will communicate with Sorbic’s shareholders in due course. John McLean Non Executive Chairman 28th August 2015
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We will now have above the Quorum required by AIM rules , the pot brews .

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Soft launch of new facility: November 2011

 http://www.rns-pdf.londonstockexchange.com/rns/4860R_-2011-11-3.pdf


                       And May

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