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 EEA 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.
28
November
2023
Fidelity
China Special Situations PLC
Legal
Entity Identifier: 54930076MSJ0ZW67JB75
Proposed
Combination
with
abrdn China Investment Company Limited
Introduction
The Board
of Fidelity China Special Situations PLC (the "Company"
or "FCSS")
is pleased to announce that it has agreed heads of terms with the
Board of abrdn China Investment Company Limited
("ACIC")
in respect of a proposed combination of ACIC with the Company. The
combination, if approved by the companies' respective shareholders,
will be effected by way of a Guernsey scheme of reconstruction and
winding up of ACIC (the "Scheme")
and the associated transfer of part of the cash, assets and
undertaking of ACIC to the Company in exchange for the issue of new
ordinary shares in the Company ("New
FCSS Shares")
(together the "Proposals").
Following
implementation of the Proposals, the enlarged FCSS will continue to
be managed, in accordance with its existing investment objective
and policy, by FIL Investment Management (Hong Kong) Limited with Dale Nicholls continuing as the named portfolio
manager.
The Board
of the Company believes that, if the Proposals are implemented,
FCSS shareholders will benefit from, amongst other things, the
economies of scale that are expected to result from the enlarged
asset base, including improved market liquidity in FCSS shares
(including in relation to its existing share buyback policy) and
cost efficiencies.
The
Proposals will be subject to approval by the shareholders of both
FCSS and ACIC in addition to regulatory and tax
approvals.
Summary
of the Scheme
The
Proposals will be effected by way of a Guernsey scheme of
reconstruction of ACIC, resulting in the voluntary winding up of
ACIC and the transfer of part of ACIC's cash, assets and
undertaking to FCSS on a formula asset value ("FAV")
for FAV basis.
Under the
Scheme, ACIC shareholders will be deemed to have elected to receive
New FCSS Shares in respect of their ACIC shares unless they elect
to receive cash in respect of some or all of their ACIC shares (the
"Cash
Option").
The Cash
Option is limited to 33 per cent. of ACIC's shares in issue
(excluding treasury shares). Should total elections for the Cash
Option exceed this 33 per cent. threshold, excess elections for the
Cash Option will be scaled back into New FCSS Shares on a
pro
rata basis.
The Cash
Option will be offered at a discount of 2 per cent. to the ACIC FAV
per share (less the further costs of any realisations required to
fund the cash pool) (the "Cash
Discount"). The
benefit of the Cash Discount will be credited towards the interests
of the ACIC shareholders rolling over their shareholdings in ACIC
into the enlarged FCSS.
The Scheme
will be subject to approval by the shareholders of both companies
in addition to regulatory and tax approvals. In accordance with
customary practice for such transactions involving investment
trusts, the City Code on Takeovers and Mergers is not expected to
apply to the Scheme. A timetable and further details of the Scheme
will be announced in due course.
Benefits
of the Proposals
The Board
believes that, if implemented, the Proposals will have a number of
benefits for FCSS
shareholders, including:
-
Scale
and enhanced profile: the
enlarged FCSS is expected to have net assets of approximately £1.2
billion (as at 28 November 2023). As
the flagship UK closed ended vehicle for investment in China and a constituent of the FTSE 250 Index,
it is expected that the enlarged FCSS would benefit from enhanced
profile and marketability.
-
Enhanced
liquidity: the
scale of the enlarged FCSS, as the largest and most liquid company
in the sector, is expected to further improve secondary market
liquidity for the Company's shareholders (including in relation to
its share buyback policy).
-
Shareholder
register: the
implementation of the Proposals would allow a number of
shareholders to consolidate their holdings across FCSS and ACIC
whilst also creating a more diversified shareholder base through a
combination of the two share registers.
-
Lower
ongoing charges: the
enlarged FCSS would be expected to benefit from a lower ongoing
expense ratio with the Company's
fixed costs being spread over a larger asset base.
-
Contribution
to costs: the
Company's alternative investment fund manager, FIL Investment
Services (UK) Limited ("Fidelity"),
is willing to make a material cost contribution in respect of the
Proposals, which is expected to offset the direct transaction costs
for FCSS shareholders.
-
Lower
tiered management fee: Fidelity
has agreed that, with effect from the admission to listing and
trading of the New FCSS Shares, the base management fee payable by
the Company under the investment management agreement will be
reduced to 0.65 per cent. (currently 0.70 per cent.) in respect of
the Company's net assets in excess of £1.5 billion.
Costs
of the Proposals and Fidelity Contribution
Each
company intends to bear its own costs incurred in relation to the
Proposals.
As noted
above, Fidelity has undertaken to make a material contribution
towards the costs of the Proposals of £500,000 plus an amount equal
to eight months of management fees in respect of the assets to be
transferred from ACIC to FCSS (the "Fidelity
Contribution"). The
Fidelity Contribution will first be applied to meet the Company's
costs (up to a maximum of £1 million). Any surplus will then be
applied to meet ACIC's costs. The Fidelity Contribution is expected
to fully offset the Company's direct costs in respect of the
Proposals.
Continuation
vote
Subject to
implementation of the Scheme, FCSS will also commit to holding a
continuation vote in 2029 and every five years
thereafter.
Expected
timetable
A circular
to shareholders of the Company, providing further details of the
Proposals and convening a general meeting to approve the Proposals,
and a prospectus in respect of the issue of New FCSS Shares in
connection with the Scheme, will be published by the Company as
soon as practicable. The Proposals are anticipated to become
effective by the end of the first quarter of 2024.
The
Chairman of FCSS, Mike Balfour,
commented:
"I am
pleased we are able to offer existing shareholders, as well as
shareholders of ACIC who roll over, the benefits of an enlarged
vehicle with additional liquidity, cementing the Company's status
as the leading constituent of the China investment company sector. The proposals
will also help spread costs over a larger base of assets, thereby
reducing the ongoing charges for both new and existing
shareholders.
As a
Board, we are positive about the long-term prospects of investing
in China. FCSS is seen by many as
the one-stop shop solution for exposure to this asset class and
this proposal enhances the prospect of the Company building on its
long-term success story."
For
further information please
contact:
|
|
FIL
Investment Services (UK) Limited
|
+44 (0) 20
3986 5367
|
Claire
Dwyer
Daniel
Summerland
|
|
Dickson
Minto Advisers (Financial Adviser)
|
+44 (0) 20
7649 6823
|
Douglas
Armstrong
|
|
Jefferies
International (Corporate Broker)
|
+44 (0) 20
7029 8000
|
Gaudi Le
Roux
Harry
Randall
|
|
Important
Information
This
announcement contains information that is inside information for
the purposes of Article 7 of the UK version of Regulation (EU) No.
596/2014 which is part of UK law by virtue of the European Union
(Withdrawal) Act 2018, as amended. Following publication of this
announcement, this inside information is now considered to be in
the public domain. The person responsible for arranging for the
release of this announcement on behalf of the Company is FIL
Investments International acting as company secretary.
This
announcement is not for publication or distribution, directly or
indirectly, in, into or from the United
States of America. This announcement is not an offer of
securities for sale into the United
States. The securities referred to herein have not been and
will not be registered under the U.S. Securities Act of 1933, as
amended, and may not be offered or sold in the United States, except pursuant to an
applicable exemption from registration. No public offering of
securities is being made in the United
States.