THIS ANNOUNCEMENT
AND THE INFORMATION CONTAINED IN IT ARE NOT FOR RELEASE,
PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN
PART, IN, INTO OR FROM THE UNITED STATES
OF AMERICA (INCLUDING ITS TERRITORIES AND POSSESSIONS, ANY
STATE OF THE UNITED STATES AND THE
DISTRICT OF COLUMBIA),
AUSTRALIA, CANADA, JAPAN, NEW
ZEALAND, THE REPUBLIC OF SOUTH
AFRICA, ANY MEMBER STATE OF THE EUROPEAN ECONOMIC AREA OR
ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE
UNLAWFUL.
This announcement is not
an offer to sell, or a solicitation of an offer to acquire,
securities in the United States or
in any other jurisdiction in which the same would be unlawful.
Neither this announcement nor any part of it shall form the basis
of or be relied on in connection with or act as an inducement to
enter into any contract or commitment whatsoever.
This announcement contains
inside information for the purposes of Article 7 of Market Abuse
Regulation (EU) 596/2014 as it forms part of UK domestic law by
virtue of the European Union (Withdrawal) Act 2018 as amended
("MAR"),
and is disclosed in accordance with the Company's obligations under
Article 17 of MAR. The person responsible for arranging for the
release of this announcement on behalf of Artemis Alpha Trust plc
is Artemis Fund Managers Limited as Company
Secretary.
ARTEMIS ALPHA
TRUST PLC
("Artemis
Alpha" or the
"Company")
Proposed
combination with Aurora Investment Trust
plc
LEI:
549300MQXY2QXEIL3756
2
September 2024
Introduction
The Board of Artemis Alpha
Trust plc is pleased to announce that heads of terms have been
agreed for a proposed combination of the assets of the Company with
the assets of Aurora Investment Trust plc ("Aurora")
(the "Proposals").
Highlights of the
Proposals include:
-
Artemis Alpha's assets to
be rolled into Aurora in exchange for the issue of new ordinary
shares in Aurora ("New Aurora
Shares") to shareholders in
Artemis Alpha ("Shareholders"
or "Artemis Alpha
Shareholders") by way of a scheme of
reconstruction under section 110 of the Insolvency Act 1986 (the
"Scheme").
-
A cash exit option will be
made available for up to 25 per cent. of Artemis Alpha's issued
share capital, allowing Artemis Alpha Shareholders the ability to
exit part of their investment. The cash exit will be offered at a 2
per cent. discount to Artemis Alpha's Residual NAV, less a
liquidity adjustment of 20 per cent. of the relevant proportion of
Artemis Alpha's unquoted holdings that will transfer to Aurora
pursuant to the Scheme (as detailed below).
-
Strong commonality in
high-conviction investment philosophies between Artemis Alpha and
Aurora allows for continued exposure to a similar investment
strategy to Artemis Alpha.
-
Following the
implementation of the Proposals, Artemis Alpha Shareholders who
roll over are expected to benefit from holding a larger investment
trust with a reduced ongoing charges ratio and enhanced secondary
market liquidity.
-
Artemis Alpha Shareholders
who roll over will benefit from Aurora's fee structure, whereby
Aurora does not charge a base management fee and remunerates its
manager, Phoenix Asset Management Partners Limited
("Phoenix"), only by way of a
performance fee that is paid in shares.
-
A number of major Artemis
Alpha Shareholders, representing 31.5 per cent. of the Company's
issued share capital, have expressed support for the Proposals.
Likewise, Aurora shareholders, representing 31.6 per cent. of
Aurora's issued share capital, have expressed support for the
Proposals.
-
The Scheme is expected to
become effective during Q4 2024 subject to, amongst other things,
obtaining the relevant shareholder approvals and regulatory and tax
clearances.
-
Conditional on the Scheme
becoming effective, Aurora Investment Trust plc intends to change
its name to Aurora UK Alpha plc.
Duncan Budge, Chairman of the Company,
commented:
"After consulting our
major shareholders, the Board is pleased to propose the combination
of Artemis Alpha and Aurora, which will bring together two
investment companies that have long shared a high-conviction
investment approach to create a larger, more attractive proposition
for investors with enhanced secondary market liquidity and a lower
cost ratio."
Summary of the
Proposals
Pursuant to the Proposals,
Artemis Alpha Shareholders will have the opportunity to receive in
respect of their ordinary shares in Artemis Alpha
("Artemis Alpha
Shares"):
(a) New
Aurora Shares (the "Rollover
Option");
and/or
(b) cash,
subject to Cash Option Adjustments (as described below) and an
overall limit of 25 per cent. of Artemis Alpha Shares in issue on
an aggregate basis (the "Cash
Option").
The default option under
the Scheme is for Shareholders to receive New Aurora Shares
pursuant to the Rollover Option. The number of New Aurora Shares
issued to Artemis Alpha Shareholders under the Rollover Option will
be calculated on a Formula Asset Value ("FAV")
to FAV basis, as described in the section titled
"Calculation of Formula
Asset Value and Scheme entitlements" below.
Cash entitlements under
the Cash Option will be calculated on the basis of the Cash Pool
NAV. The Cash Pool NAV will be calculated as the Residual NAV
multiplied by the percentage of Artemis Alpha Shares accepted under
the Cash Option (limited to 25 per cent. of Artemis Alpha Shares in
issue) (the "Cash Exit
Percentage"),
less:
-
a discount of
2 per cent. of such amount (the "Cash Option
Discount"); and
-
a discount of
20 per cent. of the value of the Company's unquoted holdings that
form part of the Rollover Pool multiplied by the Cash Exit
Percentage (the "Liquidity
Adjustment"),
(altogether, the
"Cash Option
Adjustments").
The Liquidity Adjustment
reflects, for those shareholders who elect for the Cash Option, the
benefit of being able to exit their holdings without immediately
triggering a requirement upon the Company to sell assets that may
not be readily realisable within the timeframe of the
Proposals. The Liquidity Adjustment
will be calculated on the calculation date of the Scheme (the
"Calculation
Date") on the value of the
unquoted holdings transferring to Aurora pursuant to the
Scheme.
For illustrative purposes
only, based on the latest value of the unquoted investments
(£5,735,524, comprising 4.1 per cent. of Artemis Alpha's portfolio)
and assuming maximum take up of the Cash Option of 25 per cent. of
Artemis Alpha's Shares in issue, the Liquidity Adjustment would be
equal to £286,776. On a per share basis, this
would be equivalent to a further discount of 0.83% to the estimated
Residual NAV per share under the Cash Option. For the avoidance of
doubt, the value of the Liquidity Adjustment will depend on the
take up under the Cash Option and the value (on the Calculation
Date) of the unquoted investments that transfer to Aurora pursuant
to the Scheme, and may therefore differ from this
figure.
The Proposals will be
conditional upon, amongst other things, the approvals of Artemis
Alpha Shareholders and Aurora shareholders at their requisite
general meetings in relation to the Proposals.
Further details and
definitions of capitalisation terms are set out in the section
titled "Calculation of Formula Asset Value and Scheme entitlements"
below.
Benefits of the
Proposals
-
Enhanced
optionality: The Board believes that,
in offering all Artemis Alpha Shareholders options to rollover
Artemis Alpha Shares into Aurora and/or elect for a cash exit in
respect of a proportion of their Artemis Alpha Shares, the
Proposals represent a superior opportunity compared to the
triennial 25 per cent. tender offer that would otherwise be offered
at or around the AGM in October
2024.
-
Investment
strategy: Aurora's patient and
focused investment approach differentiates it from many of its
peers with a portfolio of high conviction investments. This
strategy aligns well with Artemis Alpha's own investment
approach.
-
Performance track
record: Since the appointment of
its Investment Manager, Phoenix,
in January 2016, Aurora has returned
a share price total return of 91.2 per cent. and a NAV total return
of 102.4 per cent., compared to the total return of the FTSE All
Share of 91.8 per cent. over the same time
period.
-
Enhanced
liquidity: Artemis Alpha Shareholders
rolling over into Aurora are expected to benefit from exposure to a
larger investment trust with enhanced secondary market liquidity
following the implementation of the Proposals.
-
Favourable fee
structure and lower ongoing charge ratio ("OCR"):
Aurora has a
unique and favourable fee structure, whereby no base management fee
is charged by Phoenix, which is
remunerated by way of a performance fee payable in shares and only
if the benchmark is outperformed. Furthermore, the enlarged Aurora
UK Alpha will be able to spread its fixed costs over a larger pool
of assets, which is expected to result in a lower
OCR.
-
Phoenix cost contribution:
Phoenix, in demonstrating its support for the
Proposals, has agreed to make a contribution of £750,000 to the
costs of the Proposals, of which at least £250,000 will be
allocated to meeting the fixed direct costs incurred by Artemis
Alpha.
-
Improved share
rating: Artemis Alpha Shareholders
that roll over are expected to benefit from an uplift in the market
valuation of their investment. As at 29
August 2024, Artemis Alpha's share price discount to NAV was
11.5 per cent., whereas Aurora's share price discount to NAV was
7.8 per cent.
Information on
Aurora Investment Trust plc
Aurora Investment Trust
plc, a UK investment trust managed by Phoenix since January
2016, targets attractive capital for its shareholders by
investing in a relatively concentrated portfolio of mainly UK
listed equities. Aurora takes a high conviction approach to its
investments. Aurora's net assets were £215.7 million as at
29 August 2024.
Since the appointment of
its Investment Manager, Phoenix,
in January 2016, Aurora has returned
a share price total return of 91.2 per cent. and a NAV total return
of 102.4 per cent., compared to the total return of the FTSE All
Share of 91.8 per cent. over the same time
period.
Phoenix receives no management fee and is
remunerated only by way of a performance fee equal to one third of
the outperformance of the Aurora NAV total return over the FTSE
All-Share total return for each financial year (or, where no
performance fee is payable in respect of a financial year, in the
period since a performance fee was last payable). The performance
fee is subject to a cap of: (i) 4 per cent. per annum of the end of
year Aurora NAV in the event that the Aurora NAV per share has
increased in absolute terms over the period; or (ii) 2 per cent. in
the event that the Aurora NAV per share has decreased in absolute
terms over the period. When a performance fee is payable, it is
paid by way of the issuance of shares, which are subject to a fixed
three-year lock-in period, at the end of which a test is performed
and if there has been underperformance during the lock-in period,
Aurora is entitled to require Phoenix to transfer back to Aurora some or all
of the shares it received in satisfaction of the performance
fee.
Conditional on the Scheme
becoming effective, Aurora intends to change its name to Aurora UK
Alpha plc.
Aurora has a triennial
continuation vote, with the next vote expected to take place at the
AGM in June 2025.
Background to the
Proposals
In concluding the
Company's strategic review in 2018, the Board stated its intention
to propose to Shareholders a tender offer for up to 25 per cent. of
the issued Artemis Alpha Shares at or around the time of the
Company's annual general meeting in October
2021, and every three years thereafter, subject to the level
of discount prevailing at the time. In 2021, owing to changing
circumstances, the Board sought and obtained Shareholder approval
not to put forward proposals for a tender offer that year, and
instead committed itself to a sustainable share buyback policy with
the target of maintaining a narrow discount to NAV. At that time,
the Board was clear that it still intended to propose a tender
offer every three years, with the next tender offer scheduled to
occur in 2024. As a result of adverse
market conditions, it became evident that the buyback policy was
not effective in maintaining a narrow discount to
NAV.
The Company's annual
report for the year ended 30 April
2024 (the "2024 Annual
Report") stated the Board's
intention to carry out a tender offer of up to 25 per cent. of
issued Artemis Alpha Share capital in 2024. However, the Board has
also been reviewing alternative options for the future of the
Company because the tender offer, if fully taken up, would leave
the Company reduced in size and therefore potentially less
attractive to investors.
The options reviewed
included combinations with other listed closed-ended funds and a
solvent liquidation with no rollover option. In conducting its
review, the Board took account of the Company's distinctive
investment approach and the fact that many of the Company's
investors are long term supporters of the listed investment fund
structure and concluded that a rollover into an investment trust or
similar vehicle was the most appropriate outcome. Furthermore,
given the intention to propose a tender offer in 2024, the Board
wished to see an appropriate cash exit opportunity being made
available to Shareholders as well as an option for ongoing
liquidity in the shares of a suitable listed closed ended
fund.
Given the commonality in
terms of a focused investment strategy and the performance track
record, the Board identified Aurora as a suitable vehicle with
which to explore a combination and commenced discussions in
July 2024. The Board believes that
the Proposals provide Artemis Alpha Shareholders with greater
choice through access to a focused investment opportunity with
enlarged scale as well as the option of a partial cash
exit.
For the avoidance of
doubt, the tender offer referred to in the 2024 Annual Report will
not be proposed to Shareholders in addition to, or alongside, the
Proposals.
The Board wishes to place
on record its appreciation of the long-standing dedication and
service to the Company of its investment manager, Artemis
Investment Management LLP ("Artemis").
Shareholder
support
The Company has consulted
with a number of its major Shareholders who have indicated support
via letters of intent for the Proposals. These Shareholders
represent approximately 31.5 per cent. of the Company's issued
share capital.
Likewise, Aurora
Shareholders representing 31.6 per cent. of Aurora's issued share
capital have expressed support for the Proposals.
Cost
contribution
Phoenix, the investment manager to Aurora, has
demonstrated its conviction in the combined fund and support for
the Proposals by agreeing to contribute £750,000 towards the fixed
direct transaction costs to be incurred by Aurora and Artemis Alpha
in connection with the Proposals (the "Phoenix
Contribution").
The Phoenix Contribution
will be allocated first to Aurora's fixed direct costs up to a cap
of £500,000, with the balance of at least £250,000 contributing to
Artemis Alpha's fixed direct costs in connection with the
Proposals.
The Phoenix Contribution
will be reflected in the calculation of the FAVs. It is expected
that the Phoenix Contribution will constitute a waiver of
Phoenix's future entitlement to a
performance fee.
Investment
Manager
Separate to the Proposals,
Kartik Kumar, the lead manager on Artemis Alpha, has accepted an
offer from Phoenix to join its
investment management team later in the year. John Dodd, a named manager on the Company's
portfolio since June 2003, has
announced his intention to retire from Artemis Investment
Management at the end of the year.
Calculation of
Formula Asset Value and Scheme
entitlements
The number of New Aurora
Shares issued to Artemis Alpha Shareholders will be calculated on
the basis of the ratio between Artemis Alpha's Rollover FAV and
Aurora's FAV.
At the Calculation Date,
Artemis Alpha will calculate a residual NAV (the
"Residual
NAV"). The Residual NAV will
be calculated as the gross assets of Artemis Alpha as at the
Calculation Date, plus the portion of the Phoenix Contribution
attributable to Artemis Alpha, minus: (a) the value of the
Liquidation Pool (which shall comprise: (i) a provision sufficient
to meet any outstanding known liabilities of Artemis Alpha; (ii) a
provision sufficient to meet any contingent or unknown liabilities
of Artemis Alpha following its entry into liquidation, not expected
to exceed £100,000; and (iii) the value of any of Artemis Alpha's
unquoted investments that do not form part of the Rollover Pool);
and (b) the value of any dividends or other distributions which are
declared prior to the Calculation Date but not paid to Artemis
Alpha Shareholders nor accounted for in the Artemis Alpha NAV as at
the Calculation Date.
Based on the percentage of
Artemis Alpha Shares accepted under the Cash Option (the
"Cash Exit
Percentage"), the Cash Pool NAV will
be calculated as the Residual NAV multiplied by the Cash Exit
Percentage, minus 2 per cent. of such amount (the
"Cash Option
Discount"), and minus 20 per cent.
of the value of the Company's unquoted holdings that form part of
the Rollover Pool multiplied by the Cash Exit Percentage (the
"Liquidity
Adjustment", the combined value of
the Cash Option Discount and the Liquidity Adjustment being the
"Cash Option
Adjustments").
The Cash Option
Adjustments will be allocated to the Rollover Pool, up to the
relevant proportion of Artemis Alpha's Scheme costs, and,
thereafter, to the enlarged Aurora UK Alpha; as such it will
benefit Artemis Alpha Shareholders who roll over and ongoing
shareholders in Aurora UK Alpha.
Artemis Alpha's Rollover
FAV will be calculated using the Residual NAV multiplied by the
percentage of Artemis Alpha Shares accepted under the Rollover
Option, plus the relevant portion of the Cash Option
Adjustments.
As a result, Artemis
Alpha's portfolio will be split into three notional pools, being
(i) the Liquidation Pool; (ii) the Cash Pool (valued at the Cash
Pool NAV); and (iii) the Rollover Pool (valued at Residual NAV less
the Cash Pool NAV). In addition, certain of the unquoted
investments held by Artemis Alpha may be allocated to the
Liquidation Pool.
Dividends
The Company intends to pay
the final dividend proposed in respect of the financial year to
30 April 2024 subject to approval by
Shareholders at the annual general meeting to be held on
17 October 2024.
The Company also intends
to pay a pre-liquidation interim dividend to its Shareholders of at
least the minimum size sufficient to ensure it maintains investment
trust status.
For the avoidance of
doubt, Artemis Alpha Shareholders will not qualify for any Aurora
dividend with a record date before the date that the Scheme becomes
effective. The New Aurora Shares issued under the Rollover Option
will rank fully pari passu
with the
existing ordinary shares of Aurora for all dividends declared by
Aurora on or after the date of their issue.
Aurora does not have a
fixed dividend policy. However, the board of Aurora expects to
distribute substantially all of the net revenue arising from the
investment portfolio. Accordingly, Aurora is expected to pay an
annual dividend that may vary each year. Aurora does not intend to
change this approach as a result of the
Proposals.
Approvals and
expected timetable
Implementation of the
Proposals is subject to, amongst other things, the approval of the
Company's Shareholders as well as regulatory and tax approvals and
approval by the shareholders of Aurora.
The Company will publish a
circular setting out full details of the Proposals and to convene
the necessary general meetings to implement the Scheme. At the same
time, Aurora will publish a prospectus in connection with the issue
of New Aurora Shares pursuant to the Proposals and a circular to
convene a general meeting of Aurora shareholders to approve the
issue of New Aurora Shares pursuant to the Proposals. It is
anticipated that such shareholder documentation will be published
in October 2024.
All references to the
Company's shares in issue or issued share capital exclude treasury
shares.
For further information
please contact:
Artemis Alpha Trust plc
Duncan Budge (Chair)
via Singer Capital Markets
Singer Capital Markets (Financial Adviser and Corporate
Broker to Artemis Alpha Trust)
Robert Peel, Alaina
Wong, James Todd
(Investment
Banking)
Alan Geeves, James
Waterlow, Sam
Greatrex, William Gumpel
(Sales)
Tel: +44
(0)20 7496 3000
Company Secretary
Artemis Fund
Managers Limited
Tel: +44
(0)131 225 7300
City
Code
In accordance with
customary practice for schemes of reconstruction, The Panel on
Takeover and Mergers has confirmed that the City Code on Takeovers
and Mergers is not expected to apply to the combination of the
Company and Aurora.
Important
Information
The information in this
announcement is for background purposes only and does not purport
to be full or complete. No reliance may be placed for any purpose
on the information contained in this announcement or its accuracy
or completeness. The material contained in this announcement is
given as at the date of its publication (unless otherwise marked)
and is subject to updating, revision and amendment. In particular,
any proposals referred to herein are subject to revision and
amendment.
The distribution of this
announcement in jurisdictions outside the United Kingdom may be restricted by law and
therefore persons into whose possession this announcement comes
should inform themselves about, and observe, such restrictions. Any
failure to comply with the restrictions may constitute a violation
of the securities laws of such jurisdictions.
The New Aurora Shares have
not been, and will not be, registered under the U.S. Securities Act
of 1933 (as amended) (the "Securities
Act") or with any securities
regulatory authority of any state or other jurisdiction of
the United States, and may not be
offered or sold in the United
States or to, or for the account or benefit of, U.S. persons
absent registration or an exemption from registration under the
Securities Act. Moreover, the New Aurora Shares have not been, nor
will they be, registered under the applicable securities laws of
Australia, Canada, Japan, New
Zealand, the Republic of South
Africa, or any member state of the EEA (other than any
member state of the EEA where the shares are lawfully marketed).
Further, Aurora is not, and will not be, registered under the US
Investment Company Act of 1940, as amended.
The value of shares and
the income from them is not guaranteed and can fall as well as rise
due to, inter
alia, stock market and
currency movements. When you sell your investment you may get back
less than you originally invested. Figures refer to past
performance and past performance should not be considered a
reliable indicator of future results. Returns may increase or
decrease as a result of currency fluctuations.
This announcement contains
statements about the Company that are or may be deemed to be
forward looking statements. Without limitation, any statements
preceded or followed by or that includes the words "targets",
"plans", "believes", "expects", "aims", "intends", "will", "may",
"anticipates", "estimates", "projects" or words or terms of similar
substance of the negative thereof, may be forward looking
statements. All statements other than statements of historical
facts included in this announcement, including, without limitation,
those regarding financial position, strategy, plans, proposed
acquisitions and objectives of Artemis Alpha or the enlarged
Aurora, are forward looking statements.
These forward looking
statements are not guarantees of future performance. Such forward
looking statements involve known and unknown risks and
uncertainties that could significantly affect expected results and
are based on certain key assumptions. Many factors could cause
actual results to differ materially from those projected or implied
in any forward looking statement. Due to such uncertainties and
risks, readers should not rely on such forward looking statements,
which speak only as of the date of this announcement, except as
required by applicable law. Subject to their respective legal and
regulatory obligations, both Artemis Alpha and Artemis expressly
disclaim any obligations or undertaking to update or revise any
forward-looking statements contained herein to reflect any change
in expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is based
unless required to do so by law or any appropriate regulatory
authority, including FSMA, the Listing Rules, the Prospectus
Regulation Rules, the Disclosure Guidance and Transparency Rules,
the Prospectus Regulation and MAR.
None of Artemis Alpha,
Artemis or any of their respective affiliates, accepts any
responsibility or liability whatsoever for, or makes any
representation or warranty, express or implied, as to this
announcement, including the truth, accuracy or completeness of the
information in this announcement (or whether any information has
been omitted from the announcement) or any other information
relating to any of them, whether written, oral or in a visual or
electronic form, and howsoever transmitted or made available or for
any loss howsoever arising from any use of the announcement or its
contents or otherwise arising in connection therewith. Each of
Artemis Alpha, Artemis and their respective affiliates, accordingly
disclaim all and any liability whether arising in tort, contract or
otherwise which they might otherwise have in respect of this
announcement or its contents or otherwise arising in connection
therewith.