Merger Announcement
20 Februar 2009 - 6:01PM
UK Regulatory
TIDMAAV TIDMAAM
RNS Number : 6851N
Artemis AiM VCT PLC
20 February 2009
JOINT ANNOUNCEMENT
ARTEMIS AIM VCT PLC
ARTEMIS AIM VCT 2 PLC
20 February 2009
RECOMMENDED PROPOSALS FOR A MERGER BETWEEN ARTEMIS AIM VCT PLC ("VCT1") AND
ARTEMIS AIM VCT 2 PLC ("VCT2") TO BE COMPLETED BY PLACING VCT1 INTO MEMBERS'
VOLUNTARY LIQUIDATION PURSUANT TO SECTION 110 OF THE INSOLVENCY ACT 1986 AND THE
TRANSFER BY VCT1 OF ITS ASSETS AND LIABILITIES TO VCT2 IN CONSIDERATION FOR NEW
ORDINARY SHARES OF 10 PENCE EACH IN VCT2 ("VCT2 SHARES") AND THE CANCELLATION OF
THE LISTING OF THE VCT1 ORDINARY SHARES OF 10 PENCE EACH ("VCT1 SHARES")
SUMMARY
The boards of VCT1 and VCT2 announced on 28 January 2009 that agreement in
principle had been reached for the merger of the two companies. Both boards are
pleased to advise that discussions have concluded and both boards are today
writing to their respective shareholders with proposals for consideration for
the proposed merger ("the Scheme"). The Scheme will, if effected, result in VCT1
being merged into VCT2 creating an enlarged company ("Enlarged Company") having
net assets of over GBP40 million, which is expected to deliver cost savings and
other strategic benefits.
The Scheme will be effected by VCT1 being placed into members' voluntary
liquidation pursuant to a scheme of reconstruction under Section 110 of the
Insolvency Act 1986. The assets and liabilities of VCT1 will be transferred to
VCT2 in consideration for VCT2 Shares (which will be issued directly to the
shareholders of VCT1). The merger will be completed on a relative net asset
basis.
The effective date for the transfer of the assets and liabilities of VCT1 and
the issue of VCT2 Shares pursuant to the Scheme is expected to be 31 March 2009
("the Effective Date"). Following the Effective Date the listing of the VCT1
Shares will be cancelled and VCT1 will be wound up.
The Scheme is conditional, inter alia, on the approval of resolutions to be
proposed to shareholders of VCT1 and VCT2 at extraordinary general meetings to
be held on 20 March 2009 (for both VCT1 ("VCT1 EGM 1") and VCT2 ("VCT2 EGM"))
and 31 March 2009 (for VCT1 only ("VCT1 EGM 2")) and dissent not having been
expressed by shareholders of VCT1 holding more than 10 per cent in nominal value
of the issued VCT1 share capital.
The board of VCT2 also consider it appropriate, subject to resolutions being
passed at the VCT2 EGM and the Scheme becoming effective, to revise the
management arrangements with Artemis Investment Management Limited ("Artemis"),
change the name of VCT2, on completion of the Scheme, to Artemis VCT plc and
extend the life of VCT2 to 2012. In addition, it is also proposed to renew share
issue and share repurchase authorities for VCT2.
BACKGROUND
In September 2004, the Venture Capital Trusts (Winding-up and Mergers) (Tax)
Regulations 2004 were introduced, allowing venture capital trusts ("VCTs") to be
acquired by or merge with each other without prejudicing tax reliefs obtained by
their shareholders. A number of VCTs have now taken advantage of these
regulations to create larger VCTs where running costs can be spread over a
substantially greater asset base.
With the above in mind, the boards of VCT1 and VCT2 entered into discussions to
consider a merger of the companies to create a single larger VCT and reduce the
overall running costs. Following detailed consideration of the portfolio and
financial position of each company (both of which are managed by Artemis and
which broadly have the same investment objectives and policies, the same
advisers and a number of common investments) the boards of VCT1 and VCT2 reached
an agreement to merge the companies.
Both boards consider that this merger will bring significant benefits to both
groups of shareholders through:
*
*
*
*
* a reduction in annual running costs for the Enlarged Company compared to the aggregate annual running costs of the separate companies;creation of a single VCT of a more economically efficient size with a greater capital base over which to spread administration and management costs;participation in a larger VCT with prospects for a more diversified portfolio thereby dispersing the portfolio risk across a broader range of investments and businesses;increased potential to maintain steady distributions and maintain a buy-back programme due to the increased size and the reduced need to retain funds to remain at an economically viable size; andincreased flexibility in meeting the various requirements for qualifying VCT status.
The boards believe that the Scheme provides an efficient way of effecting a
merger with an acceptable level of costs compared with other merger routes.
Although either company could have acquired the assets and liabilities of the
other under such a scheme, VCT2 was selected as the acquirer because of its
marginally greater size (and, therefore, a lower stamp duty cost would be
incurred on the transfer of assets and liabilities from VCT1). Shareholders
should note that the merger will be outside the provisions of the City Code on
Takeovers and Mergers.
EXPECTED TIMETABLE
VCT1 EGM 1
10.00 a.m. on 20 March 2009
VCT2 EGM
11.30 a.m. on 20 March 2009
Record date for VCT1 shareholders'
entitlements under the merger
5.00 p.m. on 30 March 2009
Calculation date
after 5.00 p.m. on 30 March 2009
Suspension of listing of the VCT1 Shares
7.30 a.m. on 31 March 2009
VCT1 EGM 2
11.00 a.m. on 31 March 2009
Effective Date for transfer of assets and
liabilities of VCT1 to VCT2 and the
issue of VCT2 Shares
31 March 2009
Announcement of results of the VCT1 EGM 2
and completion of the Scheme (if applicable)
31 March 2009
Cancellation of listing of the VCT1 Shares
8.00 a.m. on 1 April 2009
Admission of and dealings in VCT2 Shares
to commence
2
April 2009
Share certificates for the VCT2 Shares to be issued
9 April 2009
pursuant to the Scheme despatched
BACKGROUND TO VCT1 AND VCT2
VCT1 was launched in 2001 with the objective of achieving long-term capital and
income growth and to generate tax-free capital and income distributions. VCT1
has, over the years, raised GBP48.1 million (net of expenses) which has, in
accordance with its investment policy, been invested predominately in companies
traded on AIM and, to a lesser extent, in unquoted companies and companies
traded on PLUS Markets. VCT1 has paid and declared dividends of 17.85p per VCT1
Share since launch. As at 31 January 2009, VCT1 had investments in 51 companies
with an aggregate value of GBP18.8 million and an unaudited net asset value of
GBP20.7 million (50.67p per VCT1 Share).
VCT2 was launched in 2004 with the same objectives and investment policies as
those of VCT1. VCT2 has raised GBP37.9 million (net of expenses) which is also
invested predominantly in companies listed on AIM and, to a lesser extent, in
unquoted companies and companies traded on PLUS Markets. VCT2 has paid and
recommended dividends of 6.2p per VCT2 Share since launch. As at 31 January
2009, VCT2 had investments in 50 companies with an aggregate value of GBP19.7
million and an unaudited net asset value of GBP22.4 million (62.46p per VCT2
Share).
VCT1 and VCT2, as at 31 January 2009, had 14 common investments which, had the
merger taken place on that date, would have represented 22.3% of the combined
portfolio of the Enlarged Company.
The VCT2 board comprises four non-executive directors, Peter Arthur (chairman),
Robin Field, Edward Murray and Fiona Wollocombe. Both boards have discussed the
size and future composition of the VCT2 board and it has been concluded that
Fiona Wollocombe will assume the role of chairman with Peter Arthur having
stated his intention to step down as chairman and as a director of VCT2,
following the Scheme becoming effective. In addition, following completion of
the Scheme, it is intended that Calum Paterson, who is a director of VCT1, be
appointed as a director of VCT2.
The VCT2 board has recommended a final capital dividend for the year ended 30
September 2008 of 2.2p per VCT2 Share, to be approved by VCT2 shareholders at
the VCT2 annual general meeting to be held on 20 March 2009. This dividend, if
approved, will be paid on 31 March 2009 to VCT2 shareholders on the register on
6 March 2009.
VCT1 has declared an interim dividend of 4.0p per VCT1 Share for the year ended
31 January 2009 payable to VCT1 shareholders on 1 June 2009 to those VCT1
shareholders on the VCT1 register on 6 March 2009.
THE MERGER
The merger of the two companies should result in significant cost savings and
enhanced administrative efficiency. Due to a number of their common features,
this is achievable without major additional costs in terms of rearranging the
existing VCT2 board constitution or the investment and administrative
arrangements of the two companies.
Both boards believe that overall investment risk should be reduced as the
portfolio will be spread across a larger number of investments, operating in a
broader range of businesses. The Enlarged Company should also be better placed
to release funds to support investment in new companies and further investment
in existing investee companies when required.
The aggregate anticipated cost of undertaking the Scheme is approximately
GBP336,000, including VAT, legal and professional fees, stamp duty and the costs
of winding up VCT1. The costs of the Scheme will be split proportionally between
VCT1 and VCT2 by reference to their respective unaudited net asset values as at
close of business on 30 March 2009. Following completion of the Scheme, annual
cost savings for the Enlarged Company of at least GBP324,000 per annum,
representing 0.75% per annum of the projected net assets of the Enlarged
Company, are expected to be achieved. On this basis, both boards believe that
the costs of the Scheme will be recovered in just over a year.
The VCT2 board intends to pursue a policy of buying-back VCT2 Shares in the
market at a discount to net asset value of approximately 10%, as has previously
been the case.
ARTEMIS AND THE REVISED MANAGEMENT ARRANGEMENTS
Artemis is a dedicated investment management house which has managed both VCT1
and VCT2 since their respective launches. Artemis currently manages over GBP10.3
billion of assets with a team of 17 fund managers. Clients' investments are
spread across a range of unit trusts, an investment trust, hedge fund projects,
VCTs, a SICAV - an international open-ended collective investment vehicle and
segregated institutional portfolios.
Andy Gray and Lindsay Whitelaw are co-managers of VCT1 and VCT2 with Andy Gray
becoming the lead manager on 31 March 2009. Lindsey Whitelaw will continue to
work with Andy Gray on the Company's investments, whilst working on a number of
other Artemis projects. Supporting Andy Gray and Lindsay Whitelaw in helping to
identify possible investments will be other members of the Artemis UK investment
team, which includes John Dodd (a previous co-manager for the Company) who have
a wide range of investment experience.
Andy Gray
Andy Gray is co-manager for the Company and VCT1 and is co-manager of Artemis
New Enterprises Fund. After graduating from Loughborough University with a BSc
in Banking and Finance, Andy qualified as a chartered accountant with Deloitte
and Touche. His focus moved to fund management in 1998 when he joined Murray
Johnstone as assistant fund manager, in its UK Small Cap team. Three years
followed at Legg Mason as a fund manager of UK Small Caps. Andy joined Artemis
in July 2006 from Scottish Widows Investment Partnership where he was investment
director responsible for a number of Large Cap Funds and institutional mandates.
Lindsay Whitelaw
Lindsay Whitelaw has been manager of the Artemis New Enterprises Fund since its
launch in 2000 and is co-manager for the Company and VCT1. Lindsay qualified as
a chartered accountant, moving into a corporate finance role with Johnston Press
in 1985, leaving in 1989 to join the venture capital group 3i plc, where he was
responsible for identifying, negotiating and monitoring a range of unquoted
investments. Prior to Artemis, Lindsay spent five years at Ivory & Sime,
latterly as a director of the venture capital team. Lindsay Whitelaw is a
founding member of Artemis and has managed the Company's investments since its
launch.
In view of the fact that Artemis will continue to manage the Enlarged Company's
funds after the Scheme is implemented, by virtue of Artemis continuing to be the
ongoing investment manager of VCT2, Artemis has agreed to the termination by
VCT1 of the existing investment management agreement between them, without
notice or penalty, with effect from the Effective Date.
From the Effective Date, and subject to approval of resolutions to be put to
VCT2 shareholders at the VCT2 EGM and the Scheme becoming effective, the VCT2
board believes it appropriate to revise the management fee arrangements for
VCT2. The new fee structure will result in a lower minimum annual fee payable to
Artemis, but with an opportunity to generate greater fees based on performance
of the net assets of the Company. The VCT2 board believes the new fee structure
will provide a continuing incentive to Artemis to generate positive returns for
shareholders.
The revised management arrangements will amend the existing investment
management agreement between VCT2 and Artemis to provide for revised management
fees to apply with effect from the Effective Date and subject to the Scheme
becoming effective.
VCT2 will pay to Artemis a performance related fee, subject to a maximum and
minimum amount being payable. The fee shall be calculated as 25% of the increase
in the net asset value of VCT2 over each performance period, taking into account
the effects of any sums returned, whether by distributions or purchases of
VCT2's own shares and any VCT2 share capital raised. This fee is subject to a
maximum amount payable of GBP2 million in any year to 30 September and a minimum
of 1.4% per annum of the average monthly net asset value of VCT2. If a
performance fee is paid in relation to any performance period, the net asset
value will be re-set following that performance period to the net asset value
prevailing on the last day of that performance period and become the net asset
value against which future performance is measured. In the event that there are
two consecutive performance periods in which no performance fee is paid, the net
asset value will be re-set to the net asset value prevailing on the last day of
the second performance period and will become the net asset value against which
future performance is measured.
Artemis will (subject to the maximum annual fee limit) be entitled to an interim
payment on account for the first three months in each performance period. This
shall be calculated as 1.4% per annum of the average monthly net asset value.
Any interim payment made to Artemis will be deducted from the total fee due at
the end of each performance period.
For the above purposes, 'performance period' will be the six month periods to 31
March and 30 September in each year.
VCT2 and Artemis have agreed that they shall enter into negotiations in good
faith with a view to concluding a review of the management fee arrangements in
respect of VCT2 before the continuation vote of VCT2 in 2012. This review will
again take into account relevant market conditions and market benchmarking.
The investment management agreement with Artemis will be further amended to
provide that the Company or Artemis can terminate the investment management
agreement on six months' notice.
DOCUMENTS AND APPROVALS
VCT2 shareholders will receive a copy of a circular convening the VCT2 EGM to be
held on 20 March 2009 (together with the VCT2 prospectus) at which VCT2
shareholders will be invited to approve resolutions in connection with the
Scheme, to revise the management arrangements with Artemis, change the name of
VCT2 to Artemis VCT plc and extend the life of VCT2 (subject to the Scheme
becoming effective) and also renew share issue and share repurchase authority.
VCT1 shareholders will also receive a circular convening VCT1 EGM 1 on 20 March
2009 and VCT1 EGM 2 on 31 March 2009 (together with the VCT2 prospectus) at
which VCT1 shareholders will be invited to approve resolutions in connection
with the Scheme.
Copies of the prospectus and the circulars for VCT1 and VCT2 have been submitted
to the UK Listing Authority and will be shortly 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
Telephone: 0207 066 1000
Investment Manager for VCT1 and VCT2
Artemis Investment Management Limited
Billy Aitken
Telephone: 0131 225 7300
Solicitors to VCT1 and VCT2
Martineau
Kavita Patel
Telephone: 0870 763 2000
Corporate Finance Adviser and Sponsor to VCT2
Blomfield Corporate Finance Limited
Alan MacKenzie
Emily Morgan
Peter Trevelyan-Clark
Telephone: 020 7489 4500
Corporate Finance Adviser to VCT1
BDO Stoy Hayward LLP
John Stephan
Susan Brice
Telephone: 0121 352 6200
The directors and the proposed director of VCT2 accept responsibility for the
information relating to VCT2 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 VCT2 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 VCT1 accept responsibility for the information relating to VCT1
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 VCT1 and its directors contained
in this document, 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.
Blomfield Corporate Finance Limited, which is authorised and regulated in the
United Kingdom by the Financial Services Authority, is acting exclusively for
VCT2 and for no one else in connection with the matters described herein, and
will not be responsible to anyone other than VCT2 for providing the protections
afforded to customers of Blomfield Corporate Finance Limited or for providing
advice in relation to any matters referred to herein.
BDO Stoy Hayward LLP, which is authorised and regulated in the United Kingdom by
the Financial Services Authority, is acting exclusively for VCT1 and for no one
else in connection with the matters described herein, and will not be
responsible to anyone other than VCT1 for providing the protections afforded to
customers of BDO Stoy Hayward LLP or for providing advice in relation to any
matters referred to herein.
Martineau are acting exclusively for VCT1 and VCT2 and for no one else in
connection with the matters described herein and will not be responsible to
anyone other than VCT1 and VCT2 for providing the protections afforded to
clients of Martineau or for providing advice in relation to the matters
described herein.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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