Foresight 3 VCT PLC Foresight 3 Vct Plc : Recommended Proposals For A Merger
May 19 2017 - 8:38AM
UK Regulatory
TIDMFTD
JOINT ANNOUNCEMENT
19 May 2017
FORESIGHT 3 VCT PLC ("F3")
FORESIGHT 4 VCT PLC ("F4")
(together the "Companies" and each a "Company")
TIDM: FTD and FTF
RECOMMED PROPOSALS FOR:
-- A MERGER BETWEEN F3 AND F4 TO BE COMPLETED BY WAY OF A SCHEME OF
RECONSTRUCTION UNDER SECTION 110 OF THE INSOLVENCY ACT 1986; AND
-- OFFER FOR SUBSCRIPTION BY F4 TO RAISE FURTHER FUNDS
SUMMARY
On 12 September 2016, the board of the Companies (together the "Boards"
and each a "Board") announced that they had entered into discussions
regarding the merger of the Companies ("Merger"). Both Companies are
managed by Foresight Group CI Limited ("Foresight"). In light of
comments received by the F4 Board from certain of its shareholders, it
was decided to first seek views from shareholders of both Companies
through an on-line advisory vote.
The results of the advisory vote in each Company were materially in
favour of proceeding with the Merger (97% to 98% of those who responded
in each Company). Each Board has continued to consider a number of
options and, in particular taking into account the advisory vote, remain
of the view that a Merger remains the preferred option.
The Boards are, therefore, pleased to announce that they have reached
agreement on recommended proposals for the Merger to create a single
enlarged VCT. The Merger is conditional upon certain conditions
(including the approval of each Company's shareholders) being satisfied
as further set out in the circulars being posted to the Companies'
respective shareholders today ("Circulars") alongside a prospectus
published by F4 in connection with, amongst other things, the Merger
(the "Prospectus").
The Merger will be effected by F3 being placed into members' voluntary
liquidation pursuant to a scheme of reconstruction under section 110 of
the Insolvency Act 1986 ("Scheme"). The assets and liabilities of F3
will then be transferred to F4 in exchange for the issue of new F4
shares to existing F3 shareholders ("F4 Consideration Shares"). The
Merger will be effected on a relative net asset basis and is expected to
become effective on 22 June 2017.
The Merger is expected to deliver cost savings and other benefits to
both sets of shareholders which each Board believes is in line with the
strategy to expand the size of its Company and be better positioned to
improve shareholder value. The Boards also believe that there will be
other benefits for shareholders arising from participating in a larger
company with an increased net asset base, including the ability to
sustain a significantly wider spread of investments which will
facilitate risk management and a reduced need to maintain liquid assets
allowing the enlarged entity to consider making additional returns to
shareholders.
As a result, the F4 Board is pleased to advise that it has declared a
special dividend of 4.0p per F4 share, conditional on the Merger
becoming effective ("F4 Special Dividend"). In addition, the F4 Board
intends to make available a tender offer of up to GBP5 million if the
Merger becomes effective ("Tender Offer").
The F4 Board are also taking the opportunity to make available an offer
for subscription ("F4 Offer") to raise up to GBP50 million (with an
over-allotment facility to raise a further GBP50 million) through the
issue of new F4 shares ("F4 Offer Shares"). As part of the Offer
arrangements, Foresight Group Limited ("Foresight Group") will be paid a
promoter's fee, which constitutes a related party transaction and
requires the approval of F4 shareholders.
The approval of resolutions in connection with the Merger, the F4 Offer
and related proposals will be proposed at a general meeting of F4 to be
held on 14 June 2017 ("F4 Meeting"). The approval of resolutions in
connection with the Merger will be proposed at general meetings of F3 to
be held on 14 June 2017 and 22 June 2017 ("F3 Meetings").
Further details of the Merger, the F4 Offer and related proposals are
set out below.
THE MERGER
Benefits and features
Each Board reviews the costs of managing its respective Company on a
regular basis. A larger company is able to spread the fixed elements of
running costs across a wider asset base and, as a result, can reduce
these costs as a percentage of net assets.
In recommending the Merger, the principal benefits and features that the
Boards have taken into account are set out below:
-- an enlarged entity ("Enlarged Company") with assets immediately post
Merger of approximately GBP72.78 million taking into account the Special
Dividend (GBP115.03 million assuming full subscription under the Offer,
but ignoring the over-allotment facility, and taking into account the
Tender Offer);
-- A portfolio of over 25 companies, many of which are making good progress
and are profitable and which have delivered the recent improvements in
NAV of both F3 and F4.
-- A payback period of under 12 months based on the estimated Merger costs
and annual cost savings post Merger.
-- A reduction in the aggregate number of directors.
-- A reduction in Foresight's annual investment management fee from 2.25% of
net assets to 2% of net assets.
-- A reduction in the annual expenses cap from 3.5% of net assets to 2.95%
of net assets.
-- An enlarged entity better positioned to raise further funds and continue
with the current investment strategy.
-- The ability to consider investment realisations and create liquidity
events for Shareholders and support dividend payments.
Merger and cost savings
The estimated total Merger costs are GBP400,000 (including professional
fees, UKLA fees, stamp duty, VAT and the costs of winding up F3). The
costs of the Merger will be split proportionately between the Companies
by reference to their respective Merger net assets (ignoring the Merger
costs).
The projected annual running costs (these being normal expenses and
ignoring exceptional items, performance incentive fees and trail
commission) of the Enlarged Company are estimated to be GBP2.04 million
(2.80% of the expected net assets of the Enlarged Company of GBP72.78
million immediately post Merger and taking into account the Special
Dividend, but ignoring the Offer and the Tender Offer). This compares to
GBP2.52 million in aggregate for the Companies (3.4% of their aggregate
unaudited net assets as at 31 December 2016) based on the unaudited
annual running costs for the 12 month period ended 31 December 2016 for
each of the Companies.
The reduction in Foresight's annual investment management fee from an
amount equal to 2.25% of net assets to 2% of net assets will reduce its
fee by approximately GBP182,000 per annum across the Companies. As the
Foresight's annual administration fees for the Enlarged Company will
remain the same as currently for the Company, this will result in a
further reduction of GBP129,000 per annum in its fees. Foresight will
also make an additional cash contribution to the Merger costs of
GBP100,000. This will effectively enable the Merger to take place
entirely at Foresight's expense within one year as the total Foresight
annual cost savings and the additional contribution of approximately
GBP411,000 are expected to be greater than the estimated Merger costs of
GBP400,000.
On the basis of the expected annual cost savings of approximately
GBP480,000 and the Foresight contribution of GBP100,000, the estimated
Merger costs of GBP400,000 would be recovered in just over eight months.
The Scheme
The mechanism by which the Merger will be completed is as follows:
-- F3 will be placed into members' voluntary liquidation pursuant to a
scheme of reconstruction under section 110 of the Insolvency Act 1986;
-- all of the assets and liability of F3 will be transferred to F4 in
consideration for the issue of new shares in F4 directly to the
shareholders of F3; and
-- F3 will subsequently be wound up.
Implementation of the Merger will require resolutions being approved by
each Company's shareholders.
Whilst there will only be one general meeting of F4, at which
shareholders will be invited to consider and vote in favour of the
Merger and authorise the issue of new shares pursuant to the Merger,
there will be two general meetings for F3. At F3's first general meeting,
the shareholders will be invited to approve the Merger and authorise the
liquidators to implement the Scheme and, at the second general meeting,
the shareholders will be invited to pass a special resolution to wind up
F3 and cancel the listing of the F3 shares.
If a shareholder in F3 does not vote in favour of the Merger and
expresses his dissent in writing then he may require the liquidators to
purchase his shares at their break-value price (this being an estimate
of the amount he would receive in an ordinary winding up of F3 if all of
the assets had to be realised). The break-value price is expected to be
significantly below the net asset value of F3.
In addition to the approval of shareholders being sought at the F4
Meeting and the F3 Meetings, the Scheme is conditional upon:
-- notice of dissent not being received from shareholders of F3 who hold
more than 10% in nominal value of the issued share capital of F3;
-- F4 confirming to F3 and F3 confirming to F4 that, in each case, it has
not received any notice of any claims, proceedings or actions of whatever
nature threatened or commenced, as relevant, against F4 which the F3
Board regard as material or against F3 which the F4 Board regard as
material; and
-- the Companies maintaining their VCT status.
Subject to the above, the Scheme shall proceed and become effective
immediately after the passing of the special resolution for the winding
up of F3 to be proposed at the F3 second general meeting and will be
binding on all F3 shareholders, including dissenting F3 shareholders,
and all persons claiming through or under them.
If the conditions have not been fulfilled by 31 July 2017, the Scheme
will not proceed.
The Enlarged Company board
The Boards have considered the size and composition of the Enlarged
Company board and it has been agreed that, subject to completion of the
Merger, Peter Dicks will step down as a director of F4 and Raymond
Abbott will be appointed as a director to the Enlarged Company board.
Raymond Abbott will also, on Merger, take over as chairman of the
Enlarged Company. The Enlarged Company board will then comprise Raymond
Abbott, Simon Jamieson and Michael Gray.
Merger illustration
In terms of the proposed number of consideration shares to be issued if
the Merger proceeds, this will be calculated based on a relative net
assets basis, by reference to the formulas contained in the Circulars.
Had the Merger been completed on the basis of the Scheme examples set
out in the Circulars (which are based on the unaudited net assets of the
Companies as at 31 December 2016, but adjusting for the recent F3 top up
offer for subscription), the number of consideration shares which would
be issued for each existing F3 share would be 0.8674, representing
approximately 45.4% of the Enlarged Company.
Special Dividend
The Boards believe that a larger VCT would provide the ability to
consider realisations and the creation of liquidity events for
shareholders. The Boards have discussed the expected position of the
Enlarged Company and believe that the Merger would reduce the need to
retain certain investments and liquid assets.
The F4 Board has, therefore, declared the Special Dividend of 4.0p per
F4 share conditional on the Merger becoming effective and payable to F4
shareholders on the register on 30 June 2017 (this being after the date
on which the F4 Consideration Shares are expected to be issued pursuant
to the Merger thereby allowing the F3 shareholders to participate in the
dividend). The Special Dividend, if it becomes payable, will be paid on
17 July 2017.
F4 OFFER
The F4 board has decided to take the opportunity to raise further funds
through the Offer. This will provide shareholders and new investors with
the opportunity to invest in F4 and benefit from the tax reliefs
available to qualifying investors. The Offer is conditional on the
approval of F4 shareholders being sought at the F4 Meeting, but is not
conditional on the Merger.
Foresight Group is acting as the promoter to the Offer and will be paid
a fee equal to 2.5% (as reduced by any relevant discounts) of the amount
subscribed by Retail Client Investors, Professional Client Investors and
Execution-Only Investors (as each term in defined in the F4 Circular)
and 5.5% (as reduced by any relevant discounts) of the amount subscribed
by Direct Investors (as defined in the F4 Circular) ("Promoter's Fee
Arrangement"). In consideration of the promoter's fee, Foresight Group
has agreed to meet all costs, expenses and charges of, or incidental to,
the Offer (other than intermediary commissions and adviser charges). All
up-front costs and intermediary charges and commissions will be borne by
the investor through the price which the investor pays for the offer
shares as more particularly described in the Prospectus. The F4 Board
considers the Promoter's Fee Arrangement to be in line with market
practice.
Foresight Group, as a subsidiary undertaking of Foresight (the
investment manager to the Company), is a related party of the Company
for the purposes of the Listing Rules. The Promoter's Fee Arrangement is,
therefore, a related party transaction for the purposes of the Listing
Rules. Assuming full subscription under the Offer utilising the
over-allotment facility (i.e. raising GBP100 million) and assuming that
all investors are Direct Investors and no discounts apply, the maximum
Promoter's Fee Arrangement would be GBP5.5 million. It is likely that
the majority of the investors will be Retail Client Investors,
Professional Client Investors and Execution-Only Investors and, as a
result, the actual fee to Foresight Group is expected to be much lower
(in particular taking into account the discounts being made available by
Foresight Group for early investment and shareholder loyalty as set out
in the Prospectus). The Listing Rules, however, require the maximum
possible fee amount to be taken into account when assessing related
party transaction requirements and, as a result, the approval of
shareholders is required for the Promoter's Fee Arrangement. Should the
F4 shareholders not approve the Promoters Fee Arrangement at the F4
Meeting, the aggregate fee payable to Foresight Group under this
agreement will be limited to GBP1.6 million, which will constitute a
smaller related party transaction for the purposes of the Listing Rules.
The price at which the offer shares are being made available is the net
asset value of an F4 share at the time of allotment plus associated
Offer costs directly or indirectly incurred by an investor (including
the Foresight Group promoter's fee). As a result, the Offer is not
expected to have any material dilution effect on existing Shareholders.
Full details of the Offer are set out in the Prospectus. The Offer opens
today and will close on 30 April 2018 (unless closed earlier or extended
by the F4 Board). The offer shares will rank pari passu with the
existing F4 shares from issue.
F4 TER OFFER
Alongside the Special Dividend, the Boards believe that the Enlarged
Company should be in the position to provide a partial or full exit
event for shareholders by way of the F4 Tender Offer of up GBP5 million.
The Tender Offer will only be made if the Merger becomes effective, F4
has the ability to implement the Tender Offer and the F4 Board continues
to believe it to be in the best interests of F4.
A summary of the expected terms of the F4 Tender Offer is set out below
(subject to further consideration and agreement by the F4 Board):
-- F4 ender Offer period - mid-July 2017 to mid-September 2017.
-- F4 Tender Offer price - NAV per F4 share less 7.5% (to take into account
the costs of making the F4 Tender Offer and what the F4 Board believes to
be an appropriate discount).
-- Availability - all F4 shareholders (other than certain overseas
shareholders).
-- F4 Tender Offer record date - occurring after the Merger and the payment
of the F4 Special Dividend, but before the first allotment of offer
shares.
-- F4 shares will be purchased on-market through F4's broker, Panmure Gordon
(UK) Limited.
F4 shares purchased by F4 under the F4 Tender Offer will be cancelled
and not re-issued.
The actual number of Shares to be purchased will depend on the level of
take-up and on the NAV per Share at the time of implementation of the
Tender Offer. For illustrative purposes only, based on a NAV per Share
of 69.2p (this being the example Merger Value per Share of 73.2p)
reduced by the Special Dividend, which would give a Tender Offer price
of 64.01p, the maximum number of Shares which would be purchased is
approximately 7.8 million if fully subscribed.
Details of the Tender Offer (including application forms for
participation) will be provided to F4 shareholders in separate
documentation following the Merger in mid-July 2017 (i.e after the
Merger is expected to become effective allowing F3 shareholders to
participate).
EXPECTED TIMETABLE
Expected Timetable for F3
Latest time for receipt of forms of proxy for the 11.00 a.m. on 12
F3 First General Meeting June 2017
F3 First General Meeting 11.00 a.m. on 14
June 2017
Latest time for receipt of forms of proxy for the 11.00 a.m. on 20
F3 Second General Meeting June 2017
Calculation Date 21 June 2017
Register of members closed and Record Date for Shareholders' 6.00 p.m. on 21
entitlements under the Scheme June 2017
Dealings in Shares suspended 7.30 a.m. on 22
June 2017
F3 Second General Meeting 11.00 a.m. on 22
June 2017
Effective Date for the transfer of the assets and 22 June 2017
liabilities of the Company to F4 and the issue of
F4 Consideration Shares pursuant to the Scheme
Announcement of the results of the Scheme 22 June 2017
Cancellation of the Shares' listing 8.00 a.m. on 20
July 2017
Expected Timetable for F4
Merger with the Company and F4 Special Dividend
Latest time for receipt of forms of proxy for the 11.30 a.m. on 12
F4 General Meeting June 2017
F4 General Meeting 11.30 a.m. on 14
June 2017
Calculation Date 21 June 2017
Effective Date for the transfer of the assets and 22 June 2017
liabilities of the Company to F4 and the issue of
F4 Consideration Shares pursuant to Scheme*
Announcement of the results of the Scheme 22 June 2017
Admission of and dealings in F4 Consideration Shares 23 June 2017
issued pursuant to the Scheme to commence
CREST accounts credited with F4 Consideration Shares 23 June 2017
issued pursuant to the Scheme
F4 Special Dividend Record Date 30 June 2017
F4 Special Dividend Payment Date 17 July 2017
Certificates for F4 Consideration Shares issued pursuant 17 July 2017
to the Scheme dispatched
F4 Offer
F4 Offer opens 19 May 2017
First allotment of F4 Offer Shares end-September
2017
Subsequent allotments of F4 Offer Shares monthly
Admission of, and dealings in, F4 Offer Shares to 3 business days
commence following
allotment
F4 Offer Share certificates and tax certificates to 10 business days
be dispatched following
allotment
F4 Offer Closes 12.00 noon on 30
April 2018
DOCUMENTS AND APPROVALS
F4 shareholders will receive the F4 Circular convening the F4 Meeting to
be held on 14 June 2017, at which F4 shareholders will be invited to
approve various resolutions in connection with the Merger, the Offer and
the Tender Offer.
F3 shareholders will receive the F3 Circular convening the F3 Meetings
on 14 June 2017 and 22 June 2017 at which F3 shareholders will be
invited to approve the various resolutions in connection with the
Merger.
Copies of the F3 Circular, the F4 Circular and the F4 Prospectus have
been submitted to the UK Listing Authority and shall shortly be
available for download from the Foresight website
(www.foresightgroup.eu) and the national storage mechanism
(www.morningstar.co.uk/uk/NSM).
FURTHER INFORMATION
For further information, please contact:
Company Secretary
Foresight Fund Managers Limited
Contact: Gary Fraser Tel: 0203 667 8100
Solicitors to F3 and F4
Shakespeare Martineau LLP
Contact: Kavita Patel Tel: 0121 214 0000
The directors of F4 accept responsibility for the information relating
to F4 and its directors and proposed director contained in this
announcement. To the best of the knowledge and belief of such directors
and proposed director (who have taken all reasonable care to ensure that
such is the case), the information relating to F4 and its directors and
proposed director contained in this announcement, for which they are
solely responsible, is in accordance with the facts and does not omit
anything likely to affect the import of such information.
The directors of F3 accept responsibility for the information relating
to F3 and its directors contained in this announcement. To the best of
the knowledge and belief of such directors (who have taken all
reasonable care to ensure that such is the case), the information
relating to F3 and its directors and proposed director contained in this
announcement, for which they are solely responsible, is in accordance
with the facts and does not omit anything likely to affect the import of
such information.
Shakespeare Martineau LLP is acting as joint legal advisers for F3 and
F4 and for no one else in connection with the matters described herein
and will not be responsible to anyone other than F3 and F4 for providing
the protections afforded to clients of Shakespeare Martineau LLP or for
providing advice in relation to the matters described herein.
BDO LLP, which is authorised and regulated in the United Kingdom by the
Financial Conduct Authority, is acting as sponsor for F4 and no one else
and will note be responsible to any other person for providing the
protections afforded to clients of BDO LLP or for providing advice in
relation to the matters described herein.
-END-
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Foresight 3 VCT PLC via Globenewswire
http://www.foresightgroup.eu/
(END) Dow Jones Newswires
May 19, 2017 09:38 ET (13:38 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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