Circ re Tender Offer and revised proposals
18 Febbraio 2009 - 1:07PM
UK Regulatory
TIDMEIN
Eaglet Investment Trust plc ("Eaglet" or the "Company")
Proposals for change of investment policy, change of name, amendments to the
Articles of Association, Tender Offer to purchase up to 58 per cent. of the
Shares in issue, granting of Authority to make Market Purchases, New Investment
Management Agreement, Management Warrants Deed, Investment Advisory Agreement,
cancellation of share premium account and re-election of N Jeffrey as a
Director
The Company is pleased to announce that it has today published a circular (the
"Circular") in respect of the proposals comprising the change of investment
policy, change of name, amendments to the Articles of Association, Tender Offer
to purchase up to 58 per cent. of the Shares in issue, granting of Authority to
make Market Purchases, New Investment Management Agreement and Investment
Advisory Agreement, Management Warrants Deed, cancellation of the Company's
share premium account and re-election of N Jeffrey as a Director (together the
"Proposals").
The Circular sets out the background to and reasons for the Proposals and why
the Board of the Company believes the Proposals to be in the best interests of
Shareholders as a whole as well as including a notice convening the
Extraordinary General Meeting to seek Shareholder approval for the Proposals.
Introduction
In October 2008 the Board put forward certain proposals in relation to the
Company which included, amongst other things, proposals for:
1. a change of investment policy to invest in UK listed shares which are
identified as having patterns of directors' dealing which suggest that
following such signals (whether acquiring or disposing) will lead to superior
investment performance; and
2. a tender offer for the Company's Shares.
Following the extraordinary general meeting in November 2008 convened to
consider those proposals where certain of the resolutions did not secure the
required majorities, the Board discussed the Company's future with certain of
the larger shareholders to address concerns which had been expressed.
The Board is now pleased to put forward revised proposals which provide the
following options to Shareholders:
1. Shareholders can remain fully invested in the Company, whose new investment
policy will be to
invest in companies listed on regulated investment exchanges in the United
Kingdom in accordance with patterns of directors' dealing as further described
below; or
2. those Shareholders who are not Restricted Shareholders or certain Overseas
Shareholders can decide whether to tender some or all of their Shares within
the overall limits of the Tender Offer (but tenders in excess of a
Shareholder's Basic Entitlement (being 58 per cent. of their Shares held on the
Record Date) will only be accepted to the extent that other Shareholders tender
less than their Basic Entitlement or do not tender any Shares).
As at the Calculation Date, the Company's unaudited Net Asset Value amounted to
GBP57.8 million. This included approximately GBP34.9 million of cash and cash
equivalents and approximately GBP22.6 million in investments in a portfolio of
some 30 companies which are generally illiquid.
Calculation of the Tender Price will be calculated by reference to, among other
things, the unaudited Net Asset Value as at the Calculation Date and the costs
of the Proposals. The costs of the Proposals will be borne, pro rata, by those
Shareholders whose Shares are to be repurchased by the Company pursuant to the
Tender Offer. As a result, the Tender Price will be dependent, inter alia, on
the total number of Shares tendered pursuant to the Tender Offer.
The Directors' Dealing Investment Trust Plc
Following completion of the Proposals the Company's investment policy will be
to achieve attractive returns for Shareholders primarily through capital
appreciation by investing, generally, in companies listed on regulated
investment exchanges in the United Kingdom. The investment premise of The
Directors' Dealing Investment Trust Plc (as the Company is proposed to be
re-named) is that directors of listed companies are better informed than the
market generally and therefore their investments in the companies they manage
are expected to outperform the market.
The Directors' Dealing Investment Trust Plc will invest in shares of UK listed
companies which are identified as having patterns of directors' dealing which
suggest that following such patterns could lead to attractive investment
returns. These patterns have been combined to form various dealing strategies
which have historically outperformed the relevant FTSE index. The Board and KAM
(the proposed investment manager of the Company) believe that no other listed
investment trust in the United Kingdom offers investors the opportunity to gain
exposure to such dealing strategies.
As part of the implementation of the Proposals, the investment policy will be
changed so that the Company invests in accordance with the `directors' dealing'
strategy.
Over a period of up to 18 months from the date of approval of the Proposals the
Company intends to realign the investment portfolio to reflect the new
investment policy and to operate further regular tender offers. Further details
on the realisation of the Existing Portfolio and the Board's intentions
regarding subsequent tender offers are set out in the paragraphs "Further
Regular Tender Offers" and "Portfolio management" below. Accordingly, over the
course of such 18 month period the investment portfolio is likely to comprise
certain investments from the Existing Portfolio, cash and cash equivalents and
certain new investments made in accordance with the new investment policy, the
relevant proportions of which will be dependent, inter alia, on the timing of
realisation of the Existing Portfolio, the expected timing of a subsequent
tender offer, the results of subsequent tender offers and the availability of
suitable investment opportunities in accordance with the new investment policy.
Tender Offer
The Tender Offer is being made by Arbuthnot Securities. Arbuthnot Securities
will, as principal, purchase the Shares tendered by means of on-market
purchases and, following the completion of all those purchases, sell them to
the Company pursuant to the terms of the Repurchase Agreement. All shares
acquired by the Company under the Tender Offer will be cancelled.
Shareholders (other than Restricted Shareholders and certain Overseas
Shareholders) will be able to decide whether to tender some or all of their
shares within the overall limits of the Tender Offer (but tenders in excess of
a Shareholder's Basic Entitlement (being 58 per cent. of their Shares held on
the Record Date) will only be accepted to the extent that other Shareholders
tender less than their Basic Entitlement or do not tender any Shares).
If the Tender Offer is accepted in full then the Company will be returning
approximately GBP33.5 million to Shareholders, which represents substantially all
of the Company's current surplus cash after providing for the costs of the
Proposals and taking account of the Company's working capital requirements
(including a creditors' reserve for the purposes of cancellation of the
Company's share premium account).
Costs
The Directors expect that the total costs of the Proposals (excluding stamp
duty payable by the Company on the repurchase of its Shares pursuant to the
Tender Offer) will amount to approximately GBP0.5 million (inclusive of VAT).
This amount represents approximately 0.87 per cent. of the unaudited Net Asset
Value as at the Calculation Date. These costs will be borne, pro rata, by those
Shareholders whose Shares are to be repurchased by the Company pursuant to the
Tender Offer.
Investment trust status
The Company may not, with respect to its current accounting period, qualify for
investment trust status for tax purposes. Further details of this (and the
consequences) are set out in the Circular.
The City Code on Takeovers and Mergers
Arbuthnot Securities will purchase, as principal, Shares under the Tender Offer
which could result in Arbuthnot Securities temporarily owning 30 per cent. or
more of the issued share capital of the Company. Arbuthnot Securities has
undertaken that, immediately subsequent to such purchase, it will sell all
those Shares to the Company at the Tender Price for cancellation. Accordingly,
a waiver has been obtained from the Panel in respect of the application of Rule
9 to the purchase by Arbuthnot Securities of the Shares under the Tender Offer.
QVT and Laxey are no longer treated as acting in concert either together, or
individually with KAM
or KIL. Furthermore, the Directors are no longer treated as acting in concert
with QVT, Laxey, KAM or KIL. Accordingly, in the context of the Proposals in
relation to QVT and Laxey, Rule 9 does not now give rise to any potential
implications under the City Code and it will not be necessary for the Proposals
to include (as was the case in the context of the proposals described in the
October 2008 Circular) a waiver of the obligation to make a general offer that
would have otherwise arisen under Rule 9 as a result of the Proposals.
Cancellation of share premium account
In order to ensure that there are sufficient distributable profits to enable
the Company to have the ability to complete the Tender Offer, it is proposed
that the Company's share premium account (currently standing at GBP28,318,619) be
cancelled thereby creating additional distributable reserves available for such
purpose. Such cancellation will require confirmation by the Court. To the
extent of any distributable profits remaining unused following the Tender
Offer, such balance will be available to enable the Company to make further
market purchases pursuant to the Authority to Make Market Purchases or to make
purchases pursuant to any future proposed tender offer.
Further information concerning the cancellation of the share premium account is
set out in the Circular.
Further regular tender offers
It is the Board's intention that, subject to there being sufficient
distributable reserves available to the Company for such purpose, further
tender offers will be considered by the Directors based on the proceeds
realised from the sale of the Existing Portfolio. It is expected that such
tender offers will be considered at least every 6 months during the period of
18 months from the date of approval of the Proposals. Any such further tender
offer will be subject to Shareholder approval to be sought at the relevant
time. The Board expects to fund purchases of Ordinary Shares by the Company
under the further tender offers from cash resources arising from the
realisation of the Existing Portfolio and, if necessary, from the realisation
of assets invested in accordance with the Company's new investment policy.
In the event that the Company has insufficient distributable reserves then the
Board will consider alternative ways to provide Shareholders with the
opportunity to share in the realisation proceeds from the sale of the Existing
Portfolio.
Portfolio management
A realignment of the investment portfolio to reflect the changed investment
policy will commence following the passing of the Resolutions in relation to
the Proposals and it is expected that the realisation will be completed or
substantially completed within approximately 18 months of the approval of the
Proposals. The Board intends to maintain approximately 50 per cent. of the
proceeds in cash or cash equivalents prior to the further tender offers
referred to above with the balance invested in accordance with the new
investment policy (and initially in companies with a market capitalisation of
over GBP150 million). To the extent that the realisation proceeds held in cash or
cash equivalents are not utilised as part of a subsequent tender offer they
will be invested in accordance with the new investment policy.
Amendments to Articles of Association
Given that it is proposed that the Company adopt a new investment policy it is
proposed that certain changes be made to the Articles of Association.
The Articles of Association currently provide that an ordinary resolution will
be put to the Shareholders at the 2011 Annual General Meeting proposing that
the Company continue as an investment trust for an unlimited period thereafter.
The Articles of Association go on to provide that if such resolution were to be
defeated at that time, the Directors would be obliged to draw up proposals for
the voluntary liquidation, unitisation or other reorganisation of the Company
for submission to Shareholders no later than the 2012 Annual General Meeting
(and requiring approval by special resolution). It is proposed that the
relevant article be amended in the New Articles so that such ordinary
resolution is not required to be put to Shareholders until the 2019 Annual
General Meeting and, were it to be defeated at that time, the Directors would
be obliged to submit the proposals to Shareholders no later than the 2020
Annual General Meeting.
In addition, the New Articles take account of the proposed new name of the
Company and, if approved, will also allow the Company to borrow up to 30 per
cent. of its gross assets (at the time the borrowing is made). The New Articles
will also reflect the removal of an article dealing with the maximum price at
which purchases by the Company of its own shares can be made. Such provision is
considered to be inappropriate and unnecessary since the Company is bound to
comply with the pricing restrictions imposed by the Listing Rules.
These changes are enshrined in the New Articles which it is proposed should be
adopted.
Savings Scheme
Savings Scheme Participants will receive a copy of the Circular. Savings Scheme
Participants who were Savings Scheme Participants on the Record Date will also
receive a Savings Scheme Tender Form which they can use to tender all or part
of their beneficial holding of Shares. All Savings Scheme Participants will
also receive a Form of Direction with the Circular with which to indicate the
manner in which they wish their Shares to be voted at the Extraordinary General
Meeting.
Extraordinary General Meeting
In order to implement the Proposals, the Company requires the consent of
Shareholders at an Extraordinary General Meeting to be held on 11 March 2009.
The re-election of Nicholas Jeffrey (which is not part of the Proposals as
such) will also be considered at the EGM.
Irrevocable undertakings and non-binding letter of intent
The Company has received irrevocable undertakings from certain institutional
Shareholders to vote in favour of all the Resolutions, in respect of a total of
9,793,618 Shares representing 44.3 per cent. of the Company's issued share
capital as at 17 February 2009 (being the latest practicable date prior to
publication of this document).
In addition, the Company has also received a non-binding letter of intent to
vote in favour of all the Resolutions from an institutional Shareholder in
respect of 1,865,216 Shares representing 8.4 per cent. of the Company's issued
share capital as at 17 February 2009 (being the latest practicable date prior
to publication of this document).
In total therefore, the Company has received irrevocable undertakings and a
non-binding letter of intent to vote in favour of the Resolutions in respect of
11,658,834 Shares representing 52.7 per cent. of the Company's issued share
capital as at 17 February 2009 (being the latest practicable date prior to
publication of this document).
Expected Timetable
2009
Calculation Date close of business on 31
January
Record Date for Tender Offer close of business on 17
February
Latest time and date for receipt of Savings Scheme 3.00 p.m. on 6 March
Tender Forms
Latest time and date for receipt of Forms of 3.00 p.m. on 6 March
Direction for the EGM
Latest time and date for receipt of Tender Forms 11.00 a.m. on 9 March
Latest time and date for receipt of Forms of Proxy 11.00 a.m. on 9 March
for the EGM
Extraordinary General Meeting 11.00 a.m. on 11 March
Change of name and new investment policy effective, 11 March
New Investment Management Agreement, Investment
Advisory Agreement and Management Warrants Deed and
New Articles effective
Result of EGM and Tender Offer announced 11 March
Review documents in relation to the cancellation of 20 March
share premium account of the Company with Court
(Directions hearing)
Court hearing of application to confirm cancellation 1 April
of the share premium account of the Company
Effective date of cancellation of the share premium 2 April
account of the Company
Tender Price announced 3 April
Cheques despatched in respect of proceeds of the as soon as reasonably
Tender Offer and CREST accounts credited with practicable after 3 April
proceeds of Tender Offer and unsold uncertificated
Shares
Balance certificates despatched in respect of unsold as soon as reasonably
certificated Shares practicable after 3 April
The dates set out in this expected timetable of principal events may be
adjusted by the Company and Arbuthnot Securities, in which event details of the
new dates will be notified to the UKLA, the London Stock Exchange and, where
appropriate, to Shareholders and Savings Scheme Participants.
All references are to London time.
Enquiries:
Steve Winrow 01624 623994
Knox D'Arcy Asset Management Ltd
Alastair Moreton 020 7012 2000
Hannah Pearce
Arbuthnot Securities Limited
Capitalised terms used in this announcement will have the same meaning as in
the Circular to be sent to Shareholders today unless the context requires
otherwise.
The above information is extracted from the Circular being sent to Shareholders
today and should be read in conjunction with the full text of the Circular
which will shortly be available to view at www.eagletinvestmenttrust.co.uk.
Copies of the Circular are also being submitted today to the UK Listing
Authority and will shortly be available for inspection at the UK Listing
Authority's Document Viewing Facility, which is situated at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS
Arbuthnot Securities Limited, which is regulated by the Financial Services
Authority, is acting for Eaglet Investment Trust plc and no-one else and will
not be responsible to any person for providing the protections afforded to its
customers nor for providing advice in relation to the Proposals nor any other
matter referred to in this announcement.
END
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