Capital Reorganisation
9 August 2004
Pantheon International Participations PLC
Recommended proposals for reorganisation of capital structure and authority for
future issues of redeemable shares, including by way of a placing
The Board of Pantheon International Participations PLC (the 'Company') today
announces proposals for the reorganisation of its capital structure and for the
granting of authority for future issues of redeemable shares, including by way
of a placing.
A circular has been sent today to all shareholders and holders of Participating
Loan Notes ('PLNs') of the Company ('Noteholders') providing details of the
proposals and giving notice of extraordinary general meetings of Noteholders
and shareholders at which approval will be sought for their implementation.
The proposals can be summarised as follows:
i. a conversion of all the debt represented by the PLNs into a new class of
fully paid redeemable shares ('Redeemable Shares') and/or (at the option of
Noteholders) ordinary shares ('Ordinary Shares') (the 'Conversion');
ii. a cancellation of the share premium reserve which will arise on Conversion
in order to create a distributable reserve (which will be available, inter
alia, for funding the future redemption of Redeemable Shares);
iii. the granting of shareholder authority necessary to permit the Company to
allot for cash (otherwise than by way of a pre-emptive offer to existing
shareholders) up to 100,000,000 new Redeemable Shares at or above the
prevailing net asset value per share at the time of issue. This authority
will be used to issue up to 21,231,709 Redeemable Shares in connection with
Conversion, with the balance available for future Redeemable Share issues
by the Company, including a placing of up to 20,000,000 Redeemable Shares
which the Company proposes to undertake shortly following Conversion,
subject to market conditions being favourable;
iv. an increase in the Company's existing authority to allot Ordinary Shares
for cash (otherwise than by way of a pre-emptive offer to existing
shareholders) to permit the Company in such circumstances to allot Ordinary
Shares up to an aggregate nominal amount equal to 10 per cent. of the
Company's existing issued ordinary share capital, at or above the
prevailing net asset value per share at the time of issue; and
v. an extension to Redeemable Shares of the Company's current authority to
repurchase Ordinary Shares.
(together, the 'Proposals')
The Redeemable Shares will have economic rights substantially similar to those
of the PLNs, save that the redemption value of the Redeemable Shares will be
equal to the prevailing net asset value per share.
On Conversion Noteholders on the register of Noteholders on the record date
will be entitled to new shares on the following basis and the PLNs will be
cancelled:
For the PLNs held by a Noteholder on the record date: such aggregate number of
Redeemable Shares and/or, if elected, Ordinary Shares, as equals the number of
PLNs held multiplied by the Conversion Ratio
The Conversion Ratio will be the Adjusted Redemption Value for the PLNs divided
by the NAV per Ordinary Share, both as at 31 August 2004. The 'Adjusted
Redemption Value' for the PLNs is the value of PLNs from time to time
calculated in accordance with the trust deed for PLNs by reference to the NAV
per Ordinary Share. The Conversion Ratio will be approximately 0.9802. This
will ensure that the net assets attributable to the present PLNs in issue will
be the same as those attributable to the Redeemable Shares and any Ordinary
Shares issued to Noteholders on Conversion. Thus, Conversion will not result in
any dilution to net asset value for Existing Shareholders.
Background to the Proposals
PLNs were first issued as part of a reorganisation of the Company which was
undertaken in May 2000, with the intention that they would assist the Company
to manage its cash requirements in a more advantageous manner. At that time the
Company held a relatively high level of uninvested cash; this was the result of
a number of the Company's investments maturing and returning cash to the
Company as well as a concurrent diminution in the supply of new secondary
interests in private equity funds into which the Company could invest.
The Company's investment performance was being adversely affected by the high
level of cash held, and thus proposals were put forward for a reorganisation of
the Company which would counter the problem. At the time, the PLNs were
considered to be the most suitable instrument for this purpose since they
allowed for greater flexibility in controlling the levels of cash held at any
time, thereby helping to counter the effects of the `cash drag' on investment
performance. However, given the number of PLNs in issue and the recent
volatility in the value of the Company's assets, the Board now considers that
the continuing utility of the PLNs, particularly as a means of raising
additional funds, is diminished by the taxation treatment of PLNs as `loan
relationships' and the resulting potential liability of the Company to
corporation tax.
Taxation of the Company in respect of the Participating Loan Notes
The PLNs represent a debt owed by the Company to Noteholders and are subject to
the tax regime relating to loan relationships. The PLNs are redeemable at the
option of the Company (and on certain events of default or a takeover of the
Company) at the Adjusted Redemption Value, which tracks the changes in the NAV
per Ordinary Share. Both the NAV per Ordinary Share and the Adjusted Redemption
Value are calculated and published on a quarterly basis. Since the PLNs are
taxed under the loan relationships regime, any fall in the Adjusted Redemption
Value of the PLNs which is brought into account in the Company's accounts at
the end of any accounting period will represent a taxable profit of the Company
for that accounting period. Any such profit would be chargeable to corporation
tax even if no profit had actually been realised (i.e. no PLNs had in fact been
redeemed).
In addition, the amount by which the Adjusted Redemption Value payable on the
redemption of any PLNs is less than their effective issue price or (in the case
where such PLNs have been revalued in the Company's accounts since their issue)
the value at which they were brought into account as at the end of the previous
accounting period, will constitute a taxable profit of the Company for the
accounting period in which such redemption takes place. Profits made or treated
as having been made by the Company under the loan relationships regime would
not fall within the tax exemption provided by the Company's status as an
investment trust.
Conversely, any increase in the Adjusted Redemption Value of the PLNs which is
recognised in the Company's accounts as at the end of any accounting period or
which is realised on the redemption of any PLNs will (except to the extent that
it is classified as a distribution for tax purposes) result in the Company
being treated for tax purposes as having made a loss equal to the amount of the
increase. The Company would be able to offset any such loss against the
Company's taxable profits from loan relationships of the immediately preceding
accounting period or carry it forward to offset against any future taxable
non-trading profits.
The Board has been advised that no provision for taxation is required in the
accounts of the Company to date in relation to its PLNs. Although there have
been movements in the Adjusted Redemption Value recognised in the Company's
accounts from year to year since PLNs were first issued and PLNs have been
redeemed at less than their book value as at the end of the accounting period
immediately preceding their redemption, brought forward tax losses from rises
in the Adjusted Redemption Value in certain accounting periods, together with
surplus expenses which the Company has accumulated over its accounting periods
since PLNs were first issued, have more than offset any taxable profit
resulting from falls in the Adjusted Redemption Value.
Nevertheless, the factors referred to above introduce a level of uncertainty as
to whether the Company may in the future be liable to corporation tax in
consequence of PLNs being in issue. The Board considers this uncertainty to be
undesirable and likely to constrain the ability of the Company to raise
additional funds through the issue of PLNs, since issuing further PLNs would
both increase the potential amount of any such tax liability and reduce the
amount by which the Adjusted Redemption Value would have to fall in order for
tax liabilities to be triggered.
Elimination of the Loan Relationships Tax Issue
Having PLNs outstanding exposes the Company to a potential liability to
corporation tax, as explained above. In view of this, the Board considers that
it is not prudent to issue further PLNs to finance new investment activities.
Under the Proposals, if implemented, the PLNs would be converted into new
Redeemable Shares and/or new Ordinary Shares which would, for the future,
eliminate the potentially adverse tax consequences for the Company associated
with the PLNs.
Creating a new class of redeemable share capital would allow the Company to
retain flexibility in controlling the levels of cash held at any time. The
Board believes that the characteristics of the Redeemable Shares, being similar
to those of the PLNs, make them a suitable security for funding future capital
requirements of the Company.
If the Proposals are not implemented, the PLNs will remain in issue and the
Company will continue to be subject to potential liability to corporation tax
under the loan relationship regime resulting from falls in the Adjusted
Redemption Value from time to time.
Conversion of the PLNs into Redeemable Shares and/or Ordinary Shares
The debt represented by the PLNs will be converted in full into new Redeemable
Shares or, at the option of individual Noteholders, new Ordinary Shares which,
in each case, will be credited as fully paid. Redeemable Shares are a new class
of share capital in the Company which will be created for the purposes of
Conversion and which will be redeemable at the net asset value per share (which
will be the same for both Ordinary Shares and Redeemable Shares) rather than
the lower Adjusted Redemption Value which is the redemption price for PLNs. The
new Ordinary Shares will be subject to the same rights and restrictions as the
existing Ordinary Shares. On Conversion, Noteholders on the register of
Noteholders on the record date will be entitled to new shares on the following
basis and the PLNs will be cancelled:
For the PLNs held by a Noteholder on the record date: such aggregate number of
Redeemable Shares and/or, if elected, Ordinary Shares, as equals the number of
PLNs held multiplied by the Conversion Ratio
The Conversion Ratio is the Adjusted Redemption Value for the PLNs divided by
the NAV per Ordinary Share, both as at 31 August 2004. This will ensure that
the net assets attributable to the present PLNs in issue will be the same as
those attributable to the Redeemable Shares and any Ordinary Shares issued to
Noteholders on Conversion. Thus, Conversion will not result in any dilution to
net asset value for Existing Shareholders. The Conversion Ratio will be
expressed to eight decimal places and will be published by the Company on the
record date. The Conversion Ratio will be approximately 0.9802.
Conversion will be conditional upon the passing by Noteholders at the
Noteholder Meeting of the extraordinary resolution set out in the notice of
Noteholder Meeting, the passing by Shareholders at the EGM of the special
resolution set out in the notice of EGM and on admission. Subject to the
Resolutions being passed, the NAV per Ordinary Share and Adjusted Redemption
Value as at 31 August 2004 will be calculated by the Company and are expected
to be published on or around 17 September 2004.
Admission of the new Redeemable Shares and any new Ordinary Shares to the
Official List of the UK Listing Authority, and admission of such shares to
trading on the London Stock Exchange, is expected to occur (and, accordingly,
Conversion is expected to become effective) on the business day following such
publication (expected to be on or around 20 September 2004). The PLNs will be
cancelled on Conversion.
The Redeemable Shares will have economic rights substantially similar to those
of the PLNs, save that the redemption value of the Redeemable Shares will be
equal to the prevailing net asset value per share. Currently, the Adjusted
Redemption Value is calculated by reference to the NAV per Ordinary Share,
subject to a one per cent. discount thereon. This discount element was
originally incorporated in the PLN terms for structural reasons; however it has
become clear that it is of no particular value or benefit and it has caused
difficulties in practice since it has complicated the calculation of the NAV
per Ordinary Share and the Adjusted Redemption Value. Further, it can be
confusing since it leads to the difference in percentage terms between the NAV
per Ordinary Share and the Adjusted Redemption Value varying in direct
proportion to the number of PLNs in issue relative to the number of Ordinary
Shares in issue. Accordingly, a similar discount element is not incorporated in
the Redeemable Share rights.
Cancellation of Share Premium arising on Conversion
It is proposed that the share premium arising upon issue of the new Redeemable
Shares and any new Ordinary Shares be cancelled in order to establish a special
reserve to be treated as distributable profits available for use, inter alia,
for the purposes of redeeming new Redeemable Shares and Redeemable Shares to be
issued by way of the Placing and otherwise in the future by the Company. The
special reserve will also be available to fund future repurchases of Shares.
The Company is not seeking to reduce the amount standing to the credit of the
Company's share premium account as at 9 August 2004, being £6,034,249.
The Company is seeking, by way of the special resolution to be proposed at the
EGM, cancellation of the share premium arising on Conversion. Cancellation will
be conditional upon subsequent confirmation by the High Court of Justice in
England and Wales (the 'Court') and will take effect upon registration of the
relevant court order with the Registrar of Companies. In order to confirm the
cancellation, the Court will need to be satisfied that any creditors of the
Company whose debts are outstanding on the date on which the cancellation takes
effect are protected, unless they consent to the cancellation. Accordingly, it
is anticipated that the Company may be required to undertake to the Court that
it will not use the special reserve until it has either repaid any such
creditors who have not consented or put in place such form of alternative
protection for such creditors as the Directors consider appropriate.
Authorities for Placing and Future Issues of Redeemable Shares
The Company intends, subject to Conversion, to raise funds for investment by
the Company in accordance with its investment policy, as and when required from
time to time, by the issue of additional Redeemable Shares at or above the
prevailing net asset value per share at the time of issue. In particular, for
the reasons explained above, the Company intends to undertake a placing of up
to 20,000,000 new Redeemable Shares shortly following Conversion, subject to
market conditions being favourable.
By way of the special resolution to be proposed at the EGM, the Company is
seeking authority to allot for cash (otherwise than by way of a pre-emptive
offer to existing shareholders) up to 100,000,000 Redeemable Shares at a price
per share equal to or above the prevailing net asset value per share at the
time of allotment. This authority will also extend to the sale by the Company
of Redeemable Shares as Treasury Shares and be used in order to facilitate the
placing and future issues of Redeemable Shares and the sale of any Redeemable
Shares held from time to time by the Company as treasury shares (as well as to
facilitate Conversion). Of these 100,000,000 Redeemable Shares, up to
21,231,709 Redeemable Shares will be allotted in connection with Conversion,
with the balance available for future issues and sales by the Company following
Conversion, including the issue of up to 20,000,000 Redeemable Shares by way of
the placing.
The Company is also seeking, by way of the special resolution to be proposed at
the EGM, authority to make further allotments of Redeemable Shares for cash and
sales for cash of Redeemable Shares held as treasury shares by way of a
pre-emptive offer to existing shareholders.
Authority for Future Issues of Ordinary Shares
The Company is seeking, by way of the special resolution to be proposed at the
EGM, authority to allot for cash (otherwise than by way of a pre-emptive offer
to existing shareholders) up to 21,231,709 Ordinary Shares pursuant to
Conversion and also authority to make further allotments of Ordinary Shares for
cash and sales for cash of Ordinary Shares held as treasury shares by way of a
pre-emptive offer to existing shareholders.
Further, the Company is also seeking, by way of the special resolution to be
proposed at the EGM, authority to allot for cash (otherwise than by way of a
pre-emptive offer to existing shareholders) up to 2,159,296 Ordinary Shares,
which represent 10 per cent. of the issued ordinary share capital of the
Company as at 9th August 2004. This authority will also extend to the sale for
cash by the Company of Ordinary Shares held as treasury shares and replaces and
increases the authority to allot Ordinary Shares for cash in such circumstances
given at the Company's last annual general meeting held on 20 November 2003.
Ordinary Shares will only be allotted (or sold) by the Company pursuant to such
renewed authority at a price per share at or above the prevailing net asset
value per share at the time of allotment (or sale).
Renewal of Authorities for Future Issues of Redeemable Shares and Ordinary
Shares
These authorities to allot Redeemable Shares and Ordinary Shares for cash which
are being sought by the Company will, if given, expire at the next annual
general meeting of the Company, which is expected to be held in November this
year. The Board intends to seek a renewal of the authorities at that time and
at subsequent annual general meetings of the Company. Renewal of the
authorities will not require the approval of Redeemable Shareholders. Further,
the issue of new Redeemable Shares and/or new Ordinary Shares (including the
sale of any Redeemable Shares or Ordinary Shares held from time to time by the
Company as treasury shares) will not require the approval of Redeemable
Shareholders provided that such issue (or sale) takes place within 60 days
following a date by reference to which the net asset value per share is
calculated (save for an issue of Ordinary Shares to satisfy demand for the
purchase of Ordinary Shares under the Company's savings scheme) and at a price
per share at or above the net asset value per share as at such date.
Extension of Share Buy-back Facility
The Company is presently authorised to repurchase, by way of market purchases,
up to 14.99 per cent. of its current issued ordinary share capital. This
authority, which is sought by the Company on an annual basis, was last renewed
at the Company's annual general meeting held on 20 November 2003. However, the
Company has not recently used its power to repurchase shares since, on the
occasions when the Company would have considered doing so, it has not been
practical due to timing restrictions imposed by the trust deed.
The Board believes that the discount to net asset value at which Shares trade
in the market from time to time may make it beneficial for the Company to
utilise surplus cash (to the extent available) and/or short-term borrowings in
order to repurchase shares. It is therefore intended that, subject to
Conversion, the Company use, each year, up to one per cent. of the total net
assets attributable to its Redeemable Shares and Ordinary Shares for the
purpose of buying in such shares. At the same time it is proposed that the
Company should retain the ability to undertake a more comprehensive share
buyback, although the Company's policy will be to seek to return excess cash
through the redemption of Redeemable Shares at net asset value per share and,
thus, such a repurchase would only be undertaken in exceptional circumstances
and where the Board believes that it would benefit Shareholders. In
repurchasing shares, the Company may purchase Redeemable Shares or Ordinary
Shares or both in any combination or proportions as the Board considers to be
appropriate. Accordingly, the Board is seeking, by way of the special
resolution to be proposed at the EGM, to renew the authority to repurchase up
to 14.99 per cent. of the Ordinary Shares in issue immediately following
Conversion and to obtain authority to repurchase up to 14.99 per cent. of the
Redeemable Shares in issue immediately following Conversion. These authorities
would expire at the next annual general meeting of the Company, expected to be
held in November of this year, when the Board proposes to seek their renewal.
Increases in Authorised Share Capital and Authority to Allot Relevant
Securities
For the purpose of implementing the Proposals, the Company is seeking, by way
of the special resolution to be proposed at the EGM, an increase in the
authorised share capital of the Company from £20,899,450.70 to £36,124,695.73
by the creation of 100 million Redeemable Shares and 21,231,709 new Ordinary
Shares. The Redeemable Shares are being created for the purposes of Conversion,
the placing and future issues of Redeemable Shares as described above.
The Ordinary Shares are being created for the purposes of Conversion. The
proposed increase of £14,225,245.03 in the Company's authorised ordinary share
capital represents an increase of 68 per cent. in the Company's existing
authorised ordinary share capital. The number of new Ordinary Shares to be
allotted on Conversion will depend upon the extent to which Noteholders elect
to receive new Ordinary Shares rather than Redeemable Shares on Conversion but
will not exceed 23,231,709 new Ordinary Shares in aggregate.
The Company is presently authorised for the purposes of section 80 of the
Companies Act to allot relevant securities up to an aggregate nominal amount of
£4,822,428. This authority was given at the Company's annual general meeting
held on 20 November 2003. For the purpose of implementing the Proposals, the
Company is seeking, by way of the special resolution to be proposed at the EGM,
to increase this authority so as to be able to allot up to an aggregate nominal
amount of £20,047,673.03 comprising not more than £19,047,673.03 in nominal
amount of Ordinary Shares and £1,000,000 in nominal amount of Redeemable
Shares. This aggregate nominal amount represents 139 per cent. of the total
ordinary share capital in issue as at 9 August 2004. As at such date the
Company held no shares as treasury shares.
This authority, if given, will expire at the Company's next annual general
meeting, which is expected to be held in November this year. The Board intends
to seek a renewal of the authority at that time and at subsequent annual
general meetings of the Company, provided that any such renewal will be
limited, in so far as it relates to authority to allot Ordinary Shares, to an
aggregate nominal amount in Ordinary Shares not exceeding one-third of the
Company's issued ordinary share capital at the time of such annual general
meeting. In the meantime, following Conversion and prior to the Company's next
annual general meeting, the Board will not, without further Shareholder
approval, allot Ordinary Shares having an aggregate nominal value exceeding
one-third of the Company's issued ordinary share capital immediately following
Conversion.
Extraordinary General Meetings
The circular gives notice of two extraordinary general meetings:
i. an Extraordinary General Meeting of Noteholders to be held at the offices
of Pantheon Ventures Limited, Norfolk House, 31 St James's Square, London
SW1Y 4JR on 8 September 2004 at midday; and
ii. an Extraordinary General Meeting of Shareholders to be held at the offices
of Pantheon Ventures Limited, Norfolk House, 31 St James's Square, London
SW1Y 4JR on 8 September 2004 at 12.05 p.m. (or as soon thereafter as the
meeting for Noteholders is concluded or adjourned).
Enquiries:
Tom Bartlam: 020 7484 6200
Chairman
Pantheon International Participations PLC
Andrew Lebus: 020 7484 6200
Pantheon Ventures Limited
Andrew Zychowski: 020 7623 8000
Dresdner Kleinwort Wasserstein Securities Limited
Adviser to the Company