30 November 2022

 

CARBON REVOLUTION LIMITED

 

Announces Merger With

 

TWIN RIDGE CAPITAL ACQUISITION CORP.

 

Combined entity expected to be listed on U.S. exchange by mid-CY2023

 

GEELONG, VIC, AUS & NAPLES, FL, US -- Carbon Revolution Limited (“CBR”) (ASX:CBR) and Twin Ridge Capital Acquisition Corp. (NYSE:TRCA), a special purpose acquisition company listed on the New York Stock Exchange (the “SPAC”), today announced that they have entered into a binding business combination agreement (“BCA”) and accompanying scheme implementation deed (“SID”) pursuant to which a newly-formed Irish company Poppetell Limited to be renamed Carbon Revolution plc (“MergeCo”) will acquire both CBR (via a scheme of arrangement (“Scheme”)) and the SPAC (via the BCA) (“Transaction”).

 

Upon closing of the Transaction, the ordinary shares and warrants of MergeCo are expected to trade on either the New York Stock Exchange or Nasdaq, and CBR’s shares shall cease to be quoted on the ASX. A copy of the BCA and SID are included as Attachment 1 and Attachment 2 to this announcement, respectively. Attachment 3 to this announcement is an investor presentation which will be filed in the US by the SPAC and which includes material non public information in relation to CBR.¹

 

Given CBR’s current cash and liquidity position and given the Transaction is not expected to close until Q2 CY23 at the earliest, CBR intends to put in place short term bridge funding to meet cash flow requirements until at least the date that the Transaction closes. CBR is pursuing a range of liquidity improvement initiatives and reviewing a number of bridge financing options. The final form and amount of bridge financing will be determined following the completion of the liquidity improvement initiatives, however up to A$30 million of bridge financing may be required. If the full requirement of bridge funding cannot be obtained the Transaction is highly unlikely to proceed, and this will have adverse implications for CBR and its shareholders as discussed further below.

 

 

 

 

¹ This presentation is by the SPAC. It has been prepared to meet US regulatory requirements and practices (including in respect of the overview of the Transaction). CBR shareholders should rely on this announcement rather than the presentation to the extent it relates to the Transaction.

² Based on potential total proforma equity value of the combined group at closing. See footnote 2 as to how this has been calculated.

³ The estimated US$300.4 million is based on the following assumptions:

 

 

The Transaction values CBR’s enterprise value at US$200.0 million (~A$296.3 million).⁴ The Transaction is anticipated to unlock critical investment capital to fund operations, capital expenditure and strategic growth opportunities, support commercialisation and accelerate the path to expected profitability.

 

Under the BCA, the SPAC will merge with and into a wholly owned subsidiary of MergeCo (“Merger Sub”), with Merger Sub surviving the merger as a wholly owned subsidiary of MergeCo, and existing SPAC shareholders receiving MergeCo shares and warrants in exchange for their existing SPAC shares and warrants, subject to the terms of the BCA. Completion of the merger under the BCA is subject to completion of the Scheme under the SID.

 

Under the SID, CBR has agreed to propose to its shareholders a Scheme under Part 5.1 of the Corporations Act 2001 (Cth) and capital reduction under Part 2J.1 of the Corporations Act (“Capital Reduction”) which, if implemented, will result in all shares in CBR being cancelled in return for the Consideration, with CBR issuing a share to MergeCo (resulting in CBR becoming a wholly owned subsidiary of MergeCo), subject to the satisfaction or waiver of various conditions, including:

 

 

⁴ See footnotes 1 and 2 for further detail.

 

A full list of conditions is set out in the SID. The Transaction will not proceed if any one of the conditions is not satisfied or (where applicable) waived by the relevant party.

 

The SPAC is currently capitalised with US$214.3 million cash (held in its trust account on behalf of shareholders) and has on issue 21.3 million Class A ordinary shares, 5.3 million Class B ordinary shares (or “Founder Shares”) which will convert to 5.0 million ordinary shares in MergeCo upon Transaction close⁵, and approximately 5.1 million private warrants  and 7.1 million public warrants with a strike price of US$11.50.

 

Impacts to CBR and MergeCo’s cash balance

 

As is customary for special purpose acquisition companies, the SPAC’s ordinary shares held by the public contain a redemption feature which allows for redemption in the event of a shareholder vote in connection with both the extension of the SPAC’s business combination deadline and a business combination itself, which the Transaction will amount to. The redemption requests at both stages will be met through the cash held in the SPAC trust account and based on current market experience may be received with respect to around 90% of the shares held by the SPAC’s public shareholders. This means that the amount of cash available for the benefit of MergeCo from the trust account will only be known at the date of the SPAC’s shareholder meeting to approve the Transaction and is likely to be substantially less than US$214.3 million. A sensitivity table is included below, which outlines cash available to MergeCo from the SPAC’s trust account following the Transaction closing depending on the aggregate redemption rate from SPAC shareholders resulting from both the extension of the business combination deadline and the Transaction itself.

 

⁵ SPAC Founders are forfeiting ~0.3 million of their Founder Shares, subject to the Transaction closing

 

The combined group’s liquidity after the Transaction closes will be further impacted by a number of factors, including:

 

 

Furthermore, subject to an SEC filing and review process discussed further below, some time after the Transaction closes the merged group will have access to the CEF, which is expected to entitle MergeCo to issue additional shares to the CEF provider to raise up to US$60m (as discussed further immediately below).

 

 

MergeCo has entered into a binding agreement with Yorkville with respect to the future issuance of up to US$60 million in MergeCo shares, at MergeCo’s election. Under the terms of the CEF:

 

⁶ Current market experience suggests redemption rates can be particularly high. Therefore, redemption rates at or above 75% would not be abnormal

 

The ability to require Yorkville to purchase MergeCo shares under the CEF is subject to the filing by MergeCo with the SEC of a registration statement for the resale of the MergeCo shares. Such registration statement is subject to SEC review and will not be available until declared effective by the SEC following the completion of such SEC review, if any.

 

 

Prior to the despatch of CBR’s Scheme booklet (“Scheme Booklet”) to CBR shareholders, the SPAC will seek to enter into binding written FPAs pursuant to which one or more third party investors will purchase up to 2 million shares of MergeCo. Neither CBR nor Twin Ridge has engaged in any discussions or negotiations with any potential counterparties to any FPAs. Accordingly, the pricing terms of any such FPAs, which may be based upon the trading price of the MergeCo shares following the closing of the Transaction and may include the payment of a discount or other fee to the counterparty, have not been determined.

 

There is no guarantee this will occur on the terms sought by the SPAC or CBR (including as to quantum), or at all.

 

 

Prior to the close of the Transaction, CBR and Twin Ridge will seek to arrange additional debt financing for the benefit of MergeCo, which may be secured by CBR’s intellectual property. Any discussions relating to this potential source of financing are preliminary only and there is no guarantee that any financing will ultimately be available (or that terms will be agreeable).

 

Ownership impacts to CBR shareholders

 

Under the proposed Transaction:

 

 

⁷ See further footnotes 1 and 2 in relation to how this has been calculated.

 

Set out below is a sensitivity table outlining CBR shareholders’ collective ownership in MergeCo, depending on the redemption rate from SPAC shareholders and the price at which the CEF provider is issued MergeCo shares (assuming the full US$60 million is issued at that price⁸).

 

 

There is a risk that CBR shareholders will be diluted to a greater extent than is set out in the table above to the extent:

 

 

⁸ In practice MergeCo will not be able to obtain the full US$60m in one advance so it is unlikely to be issued at one price.

⁹ Whilst a high redemption rate reduces the cash available in MergeCo, it ultimately increases CBR shareholders’ collective ownership of MergeCo.

Accordingly, the ownership percentage range shown above is indicative only and is subject to a variety of factors. Further information is expected to be provided in the Scheme Booklet.

 

Valuation outcomes for CBR shareholders

 

The value to CBR shareholders for each CBR share currently held after the Transaction closing will be equal to MergeCo’s post-closing trading price, divided by the merger exchange ratio of 10.5 discussed above. Given the uncertainties of the proposed Transaction, the future trading price of MergeCo is unknown today and will be influenced by a number of factors including, amongst other things:

 

 

Set out below is a sensitivity table outlining the premium (discount) to CBR shareholders, depending on the price at which MergeCo Shares ultimately trade post the Transaction closing.

 

 

Bridge funding

 

Given CBR’s current cash and liquidity position and given the Transaction is not expected to be completed until Q2 CY23 at the earliest, CBR will require short term bridge funding to meet cash flow requirements until the Transaction closes and potentially afterwards, if there is no cash remaining in the SPAC’s trust account following redemptions and payment of Transaction expenses (as the CEF will not be available until the effectiveness of the resale registration statement filed by MergeCo with the SEC following closing and the FPA is not guaranteed).

 

CBR is currently exploring a range of bridge funding options (including obtaining debt funding, issuing convertible notes and undertaking an equity capital raising) and other cash flow improvement initiatives, including working with customers to reduce working capital requirements for the short term and working with governments to access grant funds allocated to future periods.

 

The final form and amount of bridge financing will be determined following the completion of the liquidity improvement initiatives however CBR has assessed that it may require up to A$30 million of bridge financing to fund near-term Transaction expenses and ongoing business requirements depending on the success of other cash flow initiatives and assuming closing of the Transaction occurs by 30 June 2023. CBR is seeking to secure this capital by 31 March 2023.

 

Should sufficient bridge funding not be secured, the Transaction will be highly unlikely to proceed, and this will have adverse implications for CBR and its shareholders. In particular, should bridge financing not be obtained:

 

¹⁰ Exchange rate of 0.675 as at end of day 25 November 2022

¹¹ Pre conversion of other CBR securities on issue

¹² Premium (discount) to CBR’s closing price at 30 October 2022 (the day prior to the disclosure of the potential Transaction in CBR’s Appendix 4C for the September 2022 quarter) of A$0.215.

 

 

 

 

The risks and disadvantages for CBR shareholders will be more fully detailed in the Scheme Booklet but include:

 

---

¹³ See footnotes 1 and 2 for how this has been calculated.

 

 

The Board of Directors of CBR unanimously recommends that CBR shareholders vote in favour of the Scheme, in the absence of a superior proposal and subject to an independent expert concluding in the independent expert’s report (and continuing to conclude) that the Scheme is in the best interests of CBR shareholders. Subject to those same qualifications, each member of the CBR Board of Directors and all members of senior management intend to vote all of their CBR shares held or controlled by them in favour of the Scheme.

 

Jake Dingle will be appointed as CEO of MergeCo, which will become the parent of the CBR Group and its subsidiaries should the Transaction close. He will receive a market-based CEO salary.

 

It is anticipated that James Douglas will become Chair of the Board of Directors of MergeCo and the remaining CBR Directors will also become Directors of MergeCo from the Transaction close along with two directors nominated by the SPAC.

 

 

The Board of Directors of TRCA has unanimously approved the proposed transaction. Completion of the Transaction is subject to customary closing conditions, including the approval of the TRCA shareholders.

 

 

The SID includes certain exclusivity arrangements in respect of CBR and the SPAC (including "no shop", and "no talk" obligations on both parties, and a "notification" and "matching right" in favour of the SPAC) and a USD$2 million reimbursement fee payable by either CBR or the SPAC to the other in certain circumstances, including:

 

 

The exclusivity arrangements are subject to customary exceptions that enable both the CBR and SPAC boards to comply with their fiduciary and/or statutory duties. The exclusivity arrangements are set out in full in the SID in Attachment 2 to this announcement.

 

 

CBR and SPAC shareholders do not need to take any action at this stage.

 

A Scheme Booklet containing information in relation to the Transaction, reasons for the CBR Directors' recommendation, an Independent Expert's Report and details of the Scheme meeting and Scheme will be sent to CBR shareholders in due course, likely in the first or second quarter of CY2023.

 

It is currently anticipated that CBR shareholders will be given the opportunity to vote on the Scheme at the scheme meeting expected to be held in the second quarter of CY2023.

 

It is anticipated that the Transaction will close in the second quarter of CY2023, subject to, among other things, the approval of both the SPAC’s and CBR’s shareholders, the approval of the Federal Court of Australia and satisfaction or waiver (where applicable) of a number of other conditions.

 

Indicative dates are set out in the SID and remain subject to change.

 

 

Additional information about the Transaction will be provided in a Current Report on Form 8-K to be filed by the SPAC with the U.S. Securities and Exchange Commission (the “SEC”) and available at www.sec.gov.

 

 

E&P Corporate Advisory Pty Ltd is acting as advisor to the CBR Board in relation to the Australian aspects of the Transaction. Herbert Smith Freehills and Goodwin Procter LLP are serving as Australian and US legal counsel, respectively, to CBR. Ashurst and Kirkland & Ellis LLP are serving as Australian and US legal counsel, respectively, to the SPAC.

 

For further information, please contact:

 

ABOUT TWIN RIDGE

Additional Information about the Transaction and Where to Find It

 

This communication relates to the proposed business combination by and between CBR, the SPAC, MergeCo and a merger subsidiary of MergeCo (“Merger Sub”). In connection with the proposed business combination, MergeCo intends to file with the SEC a Registration Statement on Form F-4 (the “Registration Statement”), which will include a preliminary proxy statement of the SPAC and a preliminary prospectus of MergeCo relating to the MergeCo Shares to be issued in connection with the proposed business combination. This communication is not a substitute for the Registration Statement, the definitive proxy statement/final prospectus or any other document that MergeCo or the SPAC has filed or will file with the SEC or send to its shareholders in connection with the proposed business combination. This communication does not contain all the information that should be considered concerning the proposed business combination and other matters and is not intended to form the basis for any investment decision or any other decision in respect of such matters.

 

BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, THE SPAC’S SHAREHOLDERS AND OTHER INTERESTED PARTIES ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE AND ANY AMENDMENTS THERETO AND ANY OTHER DOCUMENTS FILED BY THE SPAC OR MERGECO WITH THE SEC IN CONNECTION WITH THE PROPOSED BUSINESS COMBINATION OR INCORPORATED BY REFERENCE THEREIN IN THEIR ENTIRETY BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED BUSINESS COMBINATION BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED BUSINESS COMBINATION AND THE PARTIES TO THE PROPOSED BUSINESS COMBINATION.

 

After the registration statement is declared effective, the definitive proxy statement will be mailed to shareholders of the SPAC as of a record date to be established for voting on the proposed business combination. Additionally, the SPAC and MergeCo will file other relevant materials with the SEC in connection with the proposed business combination. Copies of the Registration Statement, the definitive proxy statement/final prospectus and all other relevant materials for the proposed business combination filed or that will be filed with the SEC may be obtained, when available, free of charge at the SEC’s website at www.sec.gov. In addition, the documents filed by the SPAC or MergeCo may be obtained, when available, free of charge from SPAC at www.twinridgecapitalac.com. The SPAC’s shareholders may also obtain copies of the proxy statement/prospectus, when available, without charge, by directing a request to Twin Ridge Capital Acquisition Corp., 999 Vanderbilt Beach Road, Suite 200, Naples, Florida 60654.

 

No Offer or Solicitation

 

This communication is for information purposes only and is not intended to and does not constitute, or form part of, an offer, invitation or the solicitation of an offer or invitation to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities, or the solicitation of any vote or approval in any jurisdiction, pursuant to the proposed business combination or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law. The proposed business combination will be implemented solely pursuant to the Business Combination Agreement and Scheme Implementation Deed, in each case, filed as exhibits to the Current Report on Form 8-K filed by the SPAC on 29 November 2022, which contains the full terms and conditions of the proposed business combination. No offer of securities shall be made except by means of a prospectus meeting the requirements of the Securities Act.

 

Participants in Solicitation

 

This communication may be deemed solicitation material in respect of the proposed business combination. The SPAC, CBR, MergeCo, Merger Sub and their respective directors and executive officers, under SEC rules, may be deemed to be participants in the solicitation of proxies from the SPAC’s shareholders in connection with the proposed business combination. Investors and security holders may obtain more detailed information regarding the names and interests in the proposed business combination of the SPAC’s directors and officers in the SPAC’s filings with the SEC, including the SPAC’s initial public offering prospectus, which was filed with the SEC on March 5, 2021, the SPAC’s subsequent annual report on Form 10-K and quarterly reports on Form 10-Q. To the extent that holdings of the SPAC’s securities by insiders have changed from the amounts reported therein, any such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC. Information regarding the persons who may, under SEC rules, be deemed participants in the solicitation of proxies to the SPAC’s shareholders in connection with the business combination will be included in the proxy statement/prospectus relating to the proposed business combination when it becomes available. You may obtain free copies of these documents, when available, as described in the preceding paragraphs.

 

Forward-Looking Statements

 

All statements other than statements of historical facts contained in this communication are forward-looking statements. Forward-looking statements may generally be identified by the use of words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “plan,” “project,” “forecast,” “predict,” “potential,” “seem,” “seek,” “future,” “outlook,” “target” or other similar expressions (or the negative versions of such words or expressions) that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding the financial position, business strategy and the plans and objectives of management for future operations including as they relate to the proposed business combination and related transactions, pricing and market opportunity, the satisfaction of closing conditions to the proposed business combination and related transactions, the level of redemptions by the SPAC’s public shareholders and the timing of the completion of the proposed business combination, including the anticipated closing date of the proposed business combination and the use of the cash proceeds therefrom. These statements are based on various assumptions, whether or not identified in this communication, and on the current expectations of CBR’s and the SPAC’s management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and may differ from such assumptions, and such differences may be material. Many actual events and circumstances are beyond the control of CBR and the SPAC.

 

These forward-looking statements are subject to a number of risks and uncertainties, including (i) changes in domestic and foreign business, market, financial, political and legal conditions; (ii) the inability of the parties to successfully or timely consummate the proposed business combination, including the risk that any required regulatory approvals are not obtained, are delayed or are subject to unanticipated conditions that could adversely affect the combined company or the expected benefits of the proposed business combination, or that the approval of the shareholders of the SPAC or CBR is not obtained; (iii) the ability to maintain the listing of MergeCo’s securities on the stock exchange; (iv) the inability to complete any private placement financing, the amount of any private placement financing or the completion of any private placement financing with terms unfavorable to you; (v) the risk that the proposed business combination disrupts current plans and operations CBR or the SPAC as a result of the announcement and consummation of the proposed business combination and related transactions; (vi) the risk that any of the conditions to closing of the business combination are not satisfied in the anticipated manner or on the anticipated timeline or are waived by any of the parties thereto; (vii) the failure to realize the anticipated benefits of the proposed business combination and related transactions; (viii) risks relating to the uncertainty of the costs related to the proposed business combination; (ix) risks related to the rollout of CBR’s business strategy and the timing of expected business milestones; (x) the effects of competition on CBR’s future business and the ability of the combined company to grow and manage growth, establish and maintain relationships with customers and healthcare professionals and retain its management and key employees; (xi) risks related to domestic and international political and macroeconomic uncertainty, including the Russia-Ukraine conflict; (xii) the outcome of any legal proceedings that may be instituted against the SPAC, CBR or any of their respective directors or officers, following the announcement of the proposed business combination; (xiii) the amount of redemption requests made by the SPAC’s public shareholders; (xiv) the ability of the SPAC to issue equity, if any, in connection with the proposed business combination or to otherwise obtain financing in the future; (xv) the impact of the global COVID-19 pandemic and governmental responses on any of the foregoing risks; (xvi) risks related to CBR’s industry; (xvii) changes in laws and regulations; and (xviii) those factors discussed in the SPAC’s Annual Report on Form 10-K for the year ended December 31, 2021 and subsequent Quarterly Reports on Form 10-Q, in each case, under the heading “Risk Factors,” and other documents of the SPAC or MergeCo to be filed with the SEC, including the proxy statement / prospectus. If any of these risks materialize or the SPAC’s or CBR’s assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that neither the SPAC nor CBR presently know or that the SPAC and CBR currently believe are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect the SPAC’s and CBR’s expectations, plans or forecasts of future events and views as of the date of this communication. The SPAC and CBR anticipate that subsequent events and developments will cause the SPAC’s and CBR’s assessments to change. However, while the SPAC and CBR may elect to update these forward-looking statements at some point in the future, each of the SPAC, CBR, MergeCo and Merger Sub specifically disclaim any obligation to do so, unless required by applicable law. These forward-looking statements should not be relied upon as representing the SPAC’s and CBR’s assessments as of any date subsequent to the date of this communication. Accordingly, undue reliance should not be placed upon the forward-looking statements.

 

Attachment 1 – BCA

Attachment 2 – SID

Attachment 3 – Investor presentation