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Schemes of arrangement: Reverse takeover adventures

How Geovic managed to make three companies into one in Cayman.

(This article appears courtesy of International Financial Law Review, sign up for a free trial on their site

In late 2006, the Cayman Islands saw one of the more novel and challenging schemes of arrangement undertaken in that jurisdiction. The Geovic scheme brought three companies together using a reverse takeover. Its successful completion was exemplary of the flexibility of the Cayman Islands scheme procedure.

Each of these three companies brought something different to the deal. Geovic Limited (Geovic) brought the business opportunity. Geovic was a widely held but unlisted mining company, incorporated in Wyoming. Through a subsidiary, it held mining rights to perhaps the largest primary cobalt resource in the world. Geovic was the driving force for the scheme – it was looking to grow, needed an injection of capital, and wanted its shareholders to have ready access to a secondary market.

Geovic Finance Corporation (FinCo) brought the new investors and their capital. Geovic's financial advisers set up FinCo in the Cayman Islands. Investors in FinCo would be asked to invest expressly on the basis of the transaction contemplated by the Geovic scheme. If the scheme were not completed by the end of December 2006, all this would be unwound, and all funds would be returned to investors.

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