NOT FOR
RELEASE, PUBLICATION OR DISTRIBUTION INTO THE UNITED STATES,
CANADA, AUSTRALIA, JAPAN, NEW ZEALAND OR THE REPUBLIC OF SOUTH
AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO MAY RESULT IN THE
CONTRAVENTION OF ANY REGISTRATION OR OTHER LEGAL REQUIREMENT OF
SUCH JURISDICTION
21 May 2024
Odyssean Investment Trust
PLC
Seventh-Year Realisation
Opportunity
Tender Offer and Publication of
Circular
Odyssean Investment Trust PLC (the
"Company") launched on 1
May 2018 and at that time, the Board stated its intention to offer
Shareholders the opportunity to elect to realise the value of their
investment in the Company at the Net Asset Value per Ordinary Share
less applicable costs during the seventh year following initial
admission of the Ordinary Shares and every seventh year thereafter.
The exact timing of the realisation within each seventh year is at
the discretion of the Board, in consultation with the Portfolio
Manager.
As the Company enters into its seventh year
following initial admission, the Board has agreed to provide the
realisation opportunity to Shareholders at this time and has
determined to implement the realisation opportunity by way of the
Tender Offer.
Accordingly, the Company will today publish a
circular (the "Circular")
containing details of the Tender Offer including the notice of a
general meeting to be held at 11:00am on 6 June 2024. The Circular
will shortly be available on the Company's website at https://www.oitplc.com and will also
be submitted to the National Storage Mechanism, where it will
shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
A video, produced by the Portfolio Manager,
reviewing progress since the Company's launch, more details on the
realisation opportunity, and the Portfolio Manager's outlook for
the medium to long term will also shortly be available on the
Company's website at https://www.oitplc.com.
The Tender
Offer is not conditional on the Ordinary Shares trading at a
discount to the Net Asset Value per Ordinary Share as at the
Calculation Date. In the event that the Ordinary Shares are
trading at a premium to the Net Asset Value per Ordinary Share as
at the Calculation Date, Shareholders who tender Ordinary Shares
may receive less than they would otherwise be able to realise by
selling such Ordinary Shares in the market. The Company's share
price of 168.25 pence as at close on 20 May 2024, being the closing
price immediately prior to this announcement, represents a premium
of 2.1 per cent. to the last published NAV of 164.78 pence as at 17
May 2024.
The publication of the Company's annual report
and accounts for the year-ended 31 March 2024 is expected following
conclusion of the Tender Offer, on or around 10 June
2024.
Tender
Offer
Shareholders will be offered the opportunity to
tender for sale none, some or all of their Ordinary Shares at the
Tender Price pursuant to the Tender Offer by Winterflood. A
Tender Pool will be established by the Company representing the
pro-rata interests of the Tendering Shareholders. The Tender
Price shall be the Final Tender Offer Asset Value of the Tender
Pool divided by the total number of Exit Shares, where the Final
Tender Offer Asset Value is the value of the Tender Pool following
the realisation of all assets within the Tender Pool, less any
stamp duty or stamp duty reserve tax arising on the repurchase of
Ordinary Shares by the Company from Winterflood pursuant to the
Tender Offer (adjusting for any monies paid to Tendering
Shareholders by way of an interim distribution).
Incoming Investors will be invited to acquire
the tendered Ordinary Shares from Tendering Shareholders through
Winterflood at the Investment Price, being a price equal to the NAV
per Ordinary Share on the Calculation Date. The aggregate
Investment Price (less costs and commissions), for such number of
Ordinary Shares as Incoming Investors agree to acquire, will be
paid to the Company and allocated to the Tender Pool and may form
part of the cash proceeds to be paid to Tendering Shareholders for
the Exit Shares.
Any Ordinary Shares not sold by Winterflood to
Incoming Investors, will be repurchased by the Company pursuant to
the Repurchase Agreement. The Company may, at its option, issue new
Ordinary Shares for sale in the market and use the proceeds, in
whole or in part, to fund the Tender Pool. The Board retains the
discretion to allocate only cash and near cash assets of the
Company to the Tender Pool.
If the number of Ordinary Shares tendered is
such that the Board is of the view that the continuance of the
Company is not in the best interests of the continuing
Shareholders, it reserves the right to terminate the Tender
Offer. Additionally, if the Tender Offer were to result in
the Concert Party (as defined below) being interested in Ordinary
Shares which, in aggregate, carry 30 per cent. or more of the
voting rights of the Company, the Board will terminate the Tender
Offer. If the Tender Offer is terminated, the Board will put
forward alternative proposals as soon as practicable and, in any
event, within six months of termination of the Tender Offer, which
proposals will allow Shareholders to realise the value of their
investment in the Company at Net Asset Value per Ordinary Share
less applicable costs. If the Tender Offer is terminated, the
Company will make an announcement through an RIS that such is the
case.
Investment
Performance and Outlook
The Company raised £87.5 million before
expenses at launch through the issue of new Ordinary Shares at 100p
per Ordinary Share. In the period since initial admission, the
Company's market capitalisation has grown to £206.5 million through
both investment performance and new issuance as the Company's
Ordinary Shares outperformed the market on both an NAV and share
price basis. The NAV per Ordinary Share has increased to 164.78
pence (as at 17 May 2024), generating a total return for
Shareholders of 67.6 per cent. (or 8.9 per cent. annualised) which
compares to the return of the NSCI + AIM (ex-investment trusts)
Index over the same period of 12.3 per cent. (or 1.9 per cent.
annualised).
The Board and the Portfolio Manager believe
that the investment opportunity set out at the time of the
Company's launch in 2018 continues to remain. Over the long term,
UK quoted smaller companies have significantly outperformed UK
larger companies on a compounding basis, as well as generating
low-teens annualised absolute returns. However, unusually, this has
not been the case since the Company was launched, with UK smaller
companies lagging UK larger companies, and delivering annualised
returns of 1.9 per cent. per annum. Given the unsupportive
market backdrop since launch, the absolute and relative performance
of the Company's NAV per Ordinary Share demonstrates how the
Company's differentiated investment strategy can add considerable
value.
The recent underperformance of UK smaller
companies has been driven by a number of factors including but not
limited to the asset class being out of favour, rising interest
rates and smaller companies being less able to absorb the impact
from market wide events including the COVID-19 pandemic and the UK
recession. This has been exacerbated by a flight of equity
investors to US equities, especially large-cap technology
stocks.
The UK smaller companies sector is currently
unloved. The Board shares the Portfolio Manager's view that there
is considerable value in parts of the market. Valuation data
provided by Quest, Canaccord Genuity`s cashflow based tool,
suggests that UK equities, especially UK smaller companies, are
trading at very significant absolute discounts to their intrinsic
value, and are extremely attractively priced relative to other
equity markets.
The Board and the Portfolio Manager believe
that many quoted UK smaller companies offer the potential to
re-rate markedly in the medium-term, or benefit from continued
M&A activity. Since launch, the Company has benefitted from
M&A activity, with 12 companies of the 41 investments since
launch being subject to completed or attempted takeover approaches.
The Portfolio Manager views the combination of the scope for
re-rating and improving sentiment towards UK smaller companies as
providing more of a tailwind for the absolute performance of the
strategy than has existed since the time of the Company's
IPO.
There is less sell-side research cover on UK
smaller companies, which has only reduced since the introduction of
MiFID II in January 2018. In addition, there are fewer natural
buyers of smaller companies given the liquidity mis-match with that
required for open-ended funds. This has been exacerbated by
negative fund flows from open-ended funds focused on smaller
companies, which the Portfolio Manager estimates has totalled £2.8
billion since the Company's launch. The Portfolio Manager believes
that these negative fund flows have depressed valuations of UK
smaller companies, with open-ended funds becoming forced sellers
and more reluctant to invest in less liquid smaller
companies.
As a result, UK smaller companies are
overlooked and undervalued further reducing liquidity. This
illiquidity leads to a mis-pricing opportunity which the Board and
the Portfolio Manager continue to believe is best accessed via the
Company's closed-ended structure that allows the Portfolio Manager
to invest through the cycle in a concentrated portfolio of stocks
in which it has high conviction. As well as trading at historically
low multiples, the Portfolio Manager believes many of these
companies, often market leaders in a niche, are undergoing positive
change driven by refreshed leadership. The market environment is
well suited to the Portfolio Manager's selective and engaged
investment strategy in which liquidity is poor and an investment is
more akin to a private equity investment, both with regards to
management of the position and eventual liquidity.
The Portfolio Manager believes that as interest
rates start to fall, interest in UK smaller companies will improve
and it's likely that the valuation headwinds will abate. With
liquidity much reduced this could lead to a period of above average
returns if valuations of smaller companies return to historic
levels. Using the closed-ended fund structure to enable investment
in less liquid companies, the Portfolio Manager has positioned the
portfolio to benefit from such a scenario. With many portfolio
companies' valuations significantly below their long-term average
enterprise value to sales ratio and price to book ratio, the
Portfolio Manager anticipates that either these holdings are likely
to re-rate or alternatively be acquired by larger corporations,
probably from North America or Asia.
The Company's shares have maintained a strong
rating in the period since launch having traded at an average
discount of 0.1 per cent. despite the asset class being out of
favour. The Board believes this reflects the marketing efforts of
the Portfolio Manager allied with a differentiated strategy and
strong absolute performance. In addition, the combination of the
Realisation Opportunity and discount control mechanism has ensured
that the rating has remained relatively stable even during periods
of market instability - both mechanisms that will remain in place
during the next investment cycle.
The Board is optimistic about the opportunity
for the Company. It is expected that as market conditions and
sentiment improve, the UK smaller companies sector should see a
re-rating delivering strong absolute performance while the
Portfolio Manager's engaged investment strategy has the potential
to deliver outperformance, with M&A in the UK market
anticipated to provide continued potential for re-rating or exit
opportunities and the benefits of self-help initiatives being
executed at portfolio companies begin to bear fruit.
The Concert
Party
For the purposes of the Takeover Code, Odyssean
Capital LLP, to whom certain day-to-day portfolio management
services in respect of the Company's assets has been delegated by
the Company, is deemed to be acting in concert with the Company.
Each of Stuart Widdowson, Ian Armitage, Christopher Mills and
Edward Wielechowski are members and/or directors/key employees of
Odyssean Capital LLP. Christopher Mills is also the Chief Executive
Officer and Investment Manager of NASCIT (the Company's largest
shareholder), with day-to-day discretionary authority over the
management of NASCIT's assets. In addition, Harwood Capital
Management Limited (a company under the control of Christoper
Mills) controls 50 per cent. of the voting rights in Odyssean
Capital LLP. Harwood Capital Management Limited is also the parent
company of Harwood Capital Management (Gibraltar) Ltd.
Harwood Capital Management Limited, Harwood
Capital Management (Gibraltar) Ltd, Odyssean Capital LLP, Stuart
Widdowson, Ian Armitage, Christopher Mills and Edward Wielechowski
are deemed to be acting in concert for the purposes of the Takeover
Code (together the "Concert
Party").
As at the close of business on 20 May 2024, the
members of the Concert Party were interested in, for the purposes
of the Takeover Code, 26,494,285 Ordinary Shares. Such Ordinary
Shares represent, in aggregate, approximately 21.58 per cent. of
the Company's Voting Rights as at the close of business on 20 May
2024.
If the Tender Offer were to result in the
Concert Party being interested in 30 per cent. or more of the
Company's total Voting Rights, the Board will terminate the Tender
Offer. By way of illustration, in order for the Tender Offer
to result in the Concert Party being so interested, on the
assumption that no members of the Concert Party tender any Ordinary
Shares under the Tender Offer, other Shareholders would need to
tender 28.0 per cent, or more of the issued Ordinary Share capital
under the Tender Offer.
General
Meeting
The Proposals are subject to Shareholder
approval. A notice convening the General Meeting to be held
at offices of Odyssean Capital LLP, 6 Stratton Street, Mayfair,
London W1J 8LD on 6 June 2024 at 11.00 a.m. is set out at the end
of the Circular.
At the General Meeting, a resolution will be
proposed to give the Company authority to make market purchases
pursuant to the Tender Offer (the "Resolution"). Should the Resolution
fail to be passed, the Tender Offer will not proceed.
In order to be passed, the Resolution, which is
to be proposed as a special resolution and taken on a poll, will
require the approval of Shareholders representing at least 75 per
cent. of the votes cast at the General Meeting.
Recommendation
The Board considers that the Proposals are fair
and reasonable and in the best interests of the Company and its
Shareholders as a whole. Accordingly, the Board recommends
unanimously that Shareholders vote in favour of the Resolution to
be proposed at the General Meeting.
The Directors intend to vote in favour, or
procure the vote in favour, of the Resolution at the General
Meeting in respect of their own beneficial holdings of Ordinary
Shares which, in aggregate, amount to 460,549 Ordinary Shares
representing approximately 0.38 per cent. of the issued Ordinary
Share capital of the Company (excluding any shares held in
treasury).
The Directors
will not tender any of their own Ordinary Shares. In addition, no
member of the Concert Party intends to tender any of its own
Ordinary Shares under the Tender Offer.
The Directors make no recommendation to
Shareholders as to whether or not they should tender all or any of
their Ordinary Shares in the Tender Offer. Whether or not
Shareholders decide to tender their Ordinary Shares will depend,
amongst other factors, on their view of the Company's prospects and
their own individual circumstances, including their own tax
position.
Expected
Timetable
Latest time and date for receipt of
Forms of Proxy or transmission of CREST Proxy Instructions for the
General Meeting
|
|
11.00 a.m. on 4 June 2024
|
Tender Closing Date: latest time and date for receipt of Tender
Forms and TTE Instructions in CREST
|
|
1.00 p.m. on 4 June 2024
|
Record Date for participation in the
Tender Offer
|
|
6.00 p.m. on 4 June 2024
|
General Meeting
|
|
11.00 a.m. on 6 June 2024
|
Results of General Meeting
announced
|
|
6 June 2024
|
Results of Tender Offer
announced
|
|
6 June 2024
|
Calculation Date
|
|
close of business on 6 June
2024*
|
Sale of On-Sale Shares
|
|
7 June 2024**
|
Establishment of Tender Pool and
Continuing Pool
|
|
10 June 2024**
|
Realisation of the Tender Pool
commences
|
|
10 June 2024**
|
Tender Price announced; final
distribution under the Tender Offer of assets in the Tender Pool
announced and Tender Offer settlement timetable
announced
|
|
11 June 2024 (where the Tender Pool
consists only of cash or near-cash
assets)(1)**
|
CREST Accounts credited with Tender
Offer cash consideration
|
|
14 June 2024 (where the Tender Pool
consists only of cash or near-cash
assets)(2)**
|
Cheques issued in respect of the
Tender Offer cash consideration
|
|
20 June 2024 (where the Tender Pool
consists only of cash or near-cash
assets)(3)**
|
*The
Calculation Date may be at such later date as may be agreed between
the Company and Winterflood.
**The sale of the On-Sale Shares is anticipated to take place
on 7 June 2024. To the extent the sale of On-Sales Shares occurs at
a later date, the date of subsequent events will be adjusted
accordingly.
(1) In the
event that assets (not being near-cash assets) are required to be
realised in the Tender Pool this date will be as soon as
practicable after commencement of the realisation of such assets in
the Tender Pool.
(2) In the
event that assets (not being near-cash assets) are required to be
realised in the Tender Pool this date will be within 5 business
days from the Tender Price announcement.
(3) In the
event that assets (not being near-cash assets) are required to be
realised in the Tender Pool this date will be within 10 business
days from the Tender Price announcement.
Capitalised terms used but not defined in this
announcement will have the same meaning as set out in the
Circular.
For further information:
Frostrow
Capital LLP (Company Secretary)
Mark Pope
|
+44 (0)20
3008 4913
|
Odyssean
Capital LLP (Portfolio Manager)
Stuart Widdowson
|
+44 (0)7710 031 620
|
Winterflood
Securities Limited (Financial Adviser and Broker)
Neil Langford
Phoebe Pankhurst
|
+44 (0)20 3100 0000
|