In March 2008, Plastics Capital plc (AIM: PLA), through its subsidiary, Plastics Capital Trading Limited ("Plastics Capital Trading") acquired Palagan Limited ("Palagan") for a total consideration of £6.4 million, of which £0.5 million was deferred for two years and is now due. Certain Directors of Plastics Capital, being Faisal Rahmatallah, Arun Nagwaney, Andrew Walker and Richard Vessey have established a specially formed company ("NewCo"), to pay the deferred consideration and the accumulated interest of £52,510 on behalf of Plastics Capital Trading in consideration for Plastics Capital Trading undertaking to pay NewCo £552,510 within 6 months. Interest payable to NewCo on this sum will not exceed £33,151. This payment obligation is unsecured.
The payment to NewCo constitutes a Related Party Transaction pursuant to AIM Rule 13. Nick Ball, the Group Finance Director of Plastics Capital, and for the purposes of this transaction an independent director, considers that, having consulted with its nominated adviser, the terms of the transaction are fair and reasonable insofar as its shareholders are concerned.
Commenting on the transaction, Faisal Rahmatallah, Executive Chairman, said:
"The Directors are pleased with the performance of Palagan since acquisition and have decided to handle the relatively small deferred consideration liability by substituting with new funds rather than increasing net bank debt. The Company has been reducing its net bank debt in line with expectations and is committed to a continuing reduction."