The Acquisition is to be funded through a placing of 16,769,500 new ordinary shares of 1p each in the Company (the “Placing Shares”) at 25 pence per share (the “Placing”). The Company has conditionally placed the Placing Shares with various institutions to raise approximately £4.1 million (net of expenses).

The balance of the funding for the Acquisition is coming from the Company’s own resources, including the proceeds of the sales of all of the 54.0 million B shares of Shelton Petroleum A.B. (“Shelton”) owned by the Company. The Company announced on 26 November 2010 that it had sold 46.0 million B shares in Shelton.  The Company has subsequently sold its remaining 8 million B shares in Shelton.  The salesrealised aggregate proceeds of approximately £2.8 million (net of expenses).

Shelton is fully supportive of the Acquisition and retains its holding of approximately 19.5 per cent. in the Company’s issued share capital.  The two companies, through their strategic relationship, remain fully committed to evaluating the strategic opportunities in order to explore ways of developing and strengthening the relationship in the future.

The Placing represents a premium of approximately 2.0 per cent to the mid market closing price of 24.5 pence per ordinary share of 1p each in the Company (“Ordinary Share”) on 1 December 2010, being the last dealing day prior to this announcement. The Placing Shares represent approximately 17.68 per cent of the enlarged issued share capital of the Company following the Placing.

Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM (“Admission”) and it is anticipated that dealings in the Placing Shares will commence on AIM on 22 December 2010.

The Acquisition

Under the terms of the sale and purchase agreement for the Acquisition, the Company has conditionally agreed to acquire the entire issued share capital of PBI for a cash consideration of US$10.8 million (approximately £6.9 million), payable upon completion. 

PBI operates two heated fuel oil tanks, with a total capacity of 120,000 cubic metres, in Europoort Rotterdam, which it leases from Vopak. The leases expire in April 2014. However, management are confident that lease extensions can be negotiated on equitable terms. PBI benefits from low operating costs and is currently net cash flow positive, with all storage fully let until mid-2011.  The Acquisition will be on a debt-free basis. 

Unaudited profit before tax of PBI for the ten months ended 31 October 2009 was approximately US$3.5 million and unaudited net assets at 31 October were approximately US$10.0 million.  Net assets of PBI at completion are expected to be approximately US$2.3 million.

By acquiring PBI, the Company will gain access to an important new market, with opportunities to trade and trans-ship significant volumes of oil product out of a major global shipping hub. The addition of PBI to the Group’s existing operations will also provide an additional immediate source of free cashflow for the Group, estimated to be approximately US$0.5m per month.

The Company intends to take full advantage of the experienced management team within PBI to establish a single management team, responsible for managing all of the Group’s trading and terminal activities both in Kaliningrad and Rotterdam.  In particular, Ben Haargort, the General Manager of PBI, who has over twenty years’ experience in the terminal and trading market, will assist Simon Escott in further developing Baltic’s operations.

The purchase price is subject to a dollar-for-dollar post-closing adjustment based on PBI’s net asset value at the time of completion.  Completion of the Acquisition remains conditional upon passing by shareholders of resolutions to approve the Placing at a general meeting of the Company and to Admission.  It is expected that completion of the Acquisition will take place on 22 December 2010.