RNS Number : 5830P
Manchester & London Inv Tst PLC
27 March 2009
Manchester & London Investment Trust PLC
Possible merger with
Osprey Smaller Companies Income Fund Limited
For immediate release
27 March 2009
The boards of Manchester and London Investment Trust PLC ('MLIT') and Osprey Smaller Companies Income Fund Limited ('Osprey) announce that they are considering proposals which may lead to a merger of MLIT and Osprey to be effected by way of a recommended offer by MLIT for Osprey. Under the Offer it is expected that accepting Osprey Shareholders will receive new MLIT Shares, the number of which will be determined by reference to a formula based on net assets per share.
The formula to be used to determine the value of the Offer is summarised in the appendix to this announcement.
Both MLIT and Osprey are managed by Midas Investment Management Limited ('Midas').
Midas and the Board of MLIT believe the proposed Offer allows the two investment companies to increase their respective scale which in turn could lead to the following benefits:
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cost reductions as a proportion of net assets through economies of scale;
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the increased size of the merged Group which may provide more liquidity for shareholders; and
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the increased Net Asset Value may increase the probability that the Group can gain access to loan finance if required, particularly in the current climate where smaller companies may struggle to find lending solutions.
Certain major shareholders in Osprey have been approached and have signed letters indicating that if an Offer based on the relative formula asset value of MLIT and Osprey were to be made, they would accept it in respect of 5,564,047 Osprey Shares owned by them or under their discretionary management representing 52.7% of its issued share capital as follows:
Name Osprey Shares %
Manchester & Metropolitan Investment Ltd 4,047,000 38.3%
Brewin Dolphin Ltd 541,030 5.1%
Philip J Milton & Company Plc 476,025 4.5%
Cenkos Channel Islands Nominee Company Ltd 193,000 1.8%
Rathbone Investment Management Limited 159,100 1.5%
Adam & Company Investment Management Ltd 147,872 1.4%
Total 5,564,047 52.7%
It is emphasised that the letters of intent are not legally binding and that it is possible that no offer or other proposals will be made to the shareholders of either MLIT or Osprey. MLIT and Osprey reserve the right to implement the proposed merger by way of a scheme (instead of by an Offer) and the letters of intent state the signatories' intention to vote in favour of such a scheme. In addition to the Osprey Shares held in funds under discretionary management shown above, Rathbone Investment Management Limited and Brewin Dolphin Ltd hold 50,000 and 115,081 Osprey Shares respectively on behalf of advisory clients and have stated their intention to advise such clients to accept the Offer in respect of such 165,081 Osprey Shares representing 1.6% of Osprey's issued share capital.
A further announcement will be made in due course.
Rule 2.10 of the City Code on Takeovers and Mergers requires the announcement of the number of shares in issue of MLIT and Osprey. MLIT has 13,946,338 Ordinary Shares of 25p each in issue and admitted to trading on the London Stock Exchange under ISIN code GB0002258472 and Osprey has 10,554,612 Ordinary Shares of 10p each in issue and admitted to trading on the London Stock Exchange and the Channel Island Stock Exchange under ISIN code GB0031797698.
Dealing Disclosure Requirements
Under the provisions of Rule 8.3 of the Takeover Code (the 'Code'), if any person is, or becomes, 'interested' (directly or indirectly) in 1% or more of any class of 'relevant securities' of MLIT or of Osprey, all 'dealings' in any 'relevant securities' of that company (including by means of an option in respect of, or a derivative referenced to, any such 'relevant securities') must be publicly disclosed by no later than 3.30 pm (London time) on the London business day following the date of the relevant transaction. This requirement will continue until the date on which the offer becomes, or is declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the 'offer period' otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an 'interest' in 'relevant securities' of MLIT or Osprey, they will be deemed to be a single person for the purpose of Rule 8.3.
Under the provisions of Rule 8.1 of the Code, all 'dealings' in 'relevant securities' of MLIT or Osprey by
MLIT or Osprey, or by any of their respective 'associates', must be disclosed by no later than 12.00 noon (London time) on the London business day following the date of the relevant transaction.
A disclosure table, giving details of the companies in whose 'relevant securities' 'dealings' should be disclosed, and the number of such securities in issue, can be found on the Takeover Panel's website at www.thetakeoverpanel.org.uk.
'Interests in securities' arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an 'interest' by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities.
Terms in quotation marks are defined in the Code, which can also be found on the Panel's website. If you are in any doubt as to whether or not you are required to disclose a 'dealing' under Rule 8, you should consult the Panel.
The Directors of MLIT and of Osprey accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the Directors of MLIT and Osprey (who have taken all reasonable care to ensure that such is the case), the information contained in this announcement is in accordance with the facts and does not omit anything likely to affect the import of such information.
This Announcement does not constitute, or form part of, an offer or invitation to purchase any securities.
Appendix
CALCULATION OF THE FORMULA ASSET VALUES
Each of Osprey and MLIT is, unless the context otherwise requires, referred to as the “Relevant Company”. Each of the FAV per Osprey Share and the FAV per MLIT Share shall be calculated as at the close of business on the Calculation Date (being the date on which the Offer becomes or is declared unconditional as to acceptances) and shall be the amount in pence which is the result of the following formula, rounded to four decimal places (with 0.00005p being rounded upwards):
FAV per share of the Relevant Company = A - B
C
where “A” is the aggregate of:
(i) the value of those investments of the Relevant Company which are listed, traded, quoted or dealt in on a recognised stock exchange or on AIM, a market of the London Stock Exchange, calculated by reference to the bid quotations or, if not available, prices or the last trade prices for those investments as at the close of business on the Calculation Date as derived from the relevant exchange’s recognised method of publication of prices for such investments (any CFD accounts containing cash and positions to be valued using the statement from the independent CFD administrator as at the close of business on the Calculation Date);
(ii) the value of those investments of the Relevant Company which are dealt in or traded on any publicly-available exchange or market (including any “over the counter” market but excluding any exchange or market referred to in sub-paragraph A(i) above), calculated by reference to the average of the daily average of the prices marked for such investments on each of the five business days up to and including the Calculation Date on which there were dealings or trading in such investments as derived from the relevant market’s recognised method of publication of prices for such investments;
(iii) the value of those investments of the Relevant Company which are units in unit trust or shares in open-ended investment companies, calculated by reference to the prices or, in the case of units or shares in respect of which cancellation and bid prices are quoted, the lower of the cancellation and bid prices quoted as at the close of business on the Calculation Date by the manager of the relevant unit trust or open-ended investment company for holdings of the size held by the Relevant Company (and, for the avoidance of doubt, any such investments which are listed, traded, quoted or dealt in on a recognised stock exchange shall be valued under this sub-paragraph (iii) and not under sub-paragraph A(i) above);
(iv) the value of those traded uncovered options and futures contracts to which the Relevant Company is a party as at the close of business on the Calculation Date which are traded on a stock, commodities, financial futures or other securities exchange, calculated by reference to the official middle-market closing prices on the Calculation Date as derived from the relevant exchange’s recognised method of publication of prices for such traded options and futures contracts;
(v) the value of traded call options contracts to which the Relevant Company is a party as at the close of business on the Calculation Date which are traded on a stock held in the portfolio of the Relevant Company shall be valued at zero unless the premium is still due in which case the position will be valued at the premium value due;
(vi) the value of those investments of the Relevant Company which have unexpired call options sold against an underlying stock held in the portfolio of the Relevant Company shall be valued at the strike price of the call if the bid price of the investment is above the strike price as at the close of business on the Calculation Date;
(vii) the value of all other investments of the Relevant Company, calculated as being their fair realisable values as at the close of business on the Calculation Date as determined by agreement between the Company Secretary of MLIT, on behalf of MLIT, and Elysium on behalf of Osprey (or, failing such agreement within seven days after the Calculation Date, as determined by an independent expert);
(viii) the amount as at the close of business on the Calculation Date of any sums due from debtors (including, for this purpose, any dividends or distributions receivable on investments quoted ex-dividend or ex-distribution on the Calculation Date and any interest accrued on any debt securities as at the Calculation Date and any recoverable tax credit in relation thereto, but excluding any dividend, distribution or interest not yet received which has been taken into account in the value of any of the investments referred to in sub-paragraphs A (i) to (vii) (inclusive) above or is unlikely to be received), cash and deposits with or balances at banks, bills receivable and any money market instruments of the Relevant Company (together with, in each case, any accrued interest at that date less an accrual for any associated tax) and the fair realisable value of any other tangible assets of the Relevant Company not otherwise accounted for in sub-paragraphs A (i) to (vii) (inclusive) above, less any provision for diminution of value which may be appropriate in respect of any of sub-paragraphs A (i) to (vii) (inclusive) above (including provisions for bad or doubtful debts), in each case as determined by agreement between the Company Secretary of MLIT, on behalf of MLIT, and Elysium, on behalf of Osprey (or, failing such agreement within seven days after the Calculation Date, as determined by an independent expert); and
(ix) in the case of the FAV per MLIT Share only, (a) the value of its Wimbledon debentures will be valued at £110,000 which was the last valuation as provided by the All England Lawn tennis Ground plc; and (b) the value of its outstanding claim for VAT and interest repayable from HM Customs which shall be valued at £45,017.23.
“B” is the aggregate of:
(i) in respect of each Relevant Company, the principal amounts as at the close of business on the Calculation Date of any outstanding borrowings plus any accrued but unpaid interest, commitment fees and other charges up to and including that date and the higher of any premiums or penalties payable on either early or final repayment if required;
(ii) the cost of closing as at the close of business on the Calculation Date any open foreign exchange or other forward purchase or sale contract to which the Relevant Company is a party on that date (save to the extent otherwise taken into account in calculating the FAV per share of the Relevant Company);
(iii) in the case of the FAV per Osprey Share only, the cost of termination as at the close of business on the Calculation Date of any investment advisory (Midas have agreed that no termination fee will be due in the event the Offer becomes unconditional), advisory, custody and administrative arrangements in force on that date, including, but not limited to, any compensation or other payments to be made to any investment manager, investment adviser, administrator, secretary, director or employee of Osprey, such amount to include irrecoverable value added tax (where applicable) but to exclude any tax relief;
(iv) in the case of the FAV per Osprey Share only, the cost of terminating as at the close of business on the Calculation Date any other contracts or arrangements whatsoever in force on that date to which Osprey is a party, but excluding, for the purpose of this sub-paragraph B (iv), any investment management, advisory and administrative arrangements in force at the close of business on the Calculation Date;
(v) the total cost of any dividend or other distribution of the Relevant Company declared on or before the Calculation Date, so far as not previously paid;
(vi) in the case of the FAV per Osprey Share only, the costs, expenses and fees of any independent expert appointed in connection with determining the Formula Asset Values (of either/or both Relevant Companies), as well as any additional accrued but unpaid costs and expenses to the Relevant Companies arising directly as a result of and specifically in connection with the appointment of an independent expert and the performance of its function, such amount to include irrecoverable value added tax (where applicable) but to exclude any tax relief;
(vii) the aggregate of the amount of any POTM fees or UKLA fees to be borne equally by each Relevant Company in respect of the Offer (including any VAT chargeable);
(viii) the amount of all stamp duty or stamp duty reserve tax as may be payable by MLIT in respect of the transfer of the Osprey Shares pursuant to the Offer (assuming full acceptance of the Offer), as estimated by agreement between the Company Secretary of MLIT, on behalf of MLIT, and Elysium, on behalf of Osprey (or, failing such agreement within seven days after the Calculation Date, as determined by an independent expert) to be borne equally by each Relevant Company;
(ix) the aggregate of the amount of all accrued but unpaid professional, advisory, legal and other fees and other advertising costs and expenses incurred by the Relevant Company in connection with the Offer, such amount to include irrecoverable value added tax (where applicable) but to exclude any tax relief including all such fees, costs and expenses relating to or in connection with the determination of the Formula Asset Values (excluding any amounts arising under sub-paragraph B (vi) above) but excluding for the purpose of this sub-paragraph B (ix) all stamp duty and stamp duty reserve tax already provided for in accordance with sub-paragraph B (viii) above, such amount to include irrecoverable value added tax (where applicable) but to exclude any tax relief;
(x) the aggregate of the amount of any accrued but unpaid professional, advisory, legal and other fees and advertising and other costs and expenses whatsoever incurred by the Relevant Company otherwise than in connection with the Offer, such amount to include irrecoverable value added tax (where applicable) but to exclude any tax relief; and
(xi) an amount which fully reflects all other liabilities and obligations of the Relevant Company whatsoever, including a fair provision for any contingent liabilities (including any additional liabilities to taxation, whether or not deferred, and any liabilities arising on liquidation) or losses (including disputed claims), as at the close of business on the Calculation Date determined by agreement between the Company Secretary of MLIT, on behalf of MLIT, and Elysium, on behalf of Osprey (or, failing such agreement within seven days after the Calculation Date, as determined by an independent expert); and
“C” is the aggregate of:
(i) the number of shares in the Relevant Company in issue as at the close of business on the Calculation Date.
Notes:
1. For the purpose of the above calculations, the value of any investments, other assets or liabilities denominated or valued in currencies other than sterling shall be converted into sterling at the closing mid-point spot rate of exchange between sterling and such other currencies in London as at the close of business on the Calculation Date as published in the Financial Times or, failing which, as certified by Midas (acting as an expert and not as an arbiter).
2. In the case of sub-paragraphs A(i), (ii), (iii), (iv), (v) and (vi) above, if there has been any general suspension of trading on the relevant stock, commodities, financial futures or other securities exchange or market, or if it was closed for business on the Calculation Date, the value of the relevant investments, traded options or futures contracts shall be taken as at the close of business on the immediately preceding date on which there was trading on such exchange or market, provided that such date is not more than seven days prior to the Calculation Date and save that, if there has been a material adverse change in the financial position of any such underlying investment, traded option or futures contract since the date by reference to which its value is calculated but prior to the close of business on the Calculation Date, a fair provision (as determined by agreement between the Company Secretary of MLIT, on behalf of MLIT, and Elysium, on behalf of Osprey (or, failing such agreement within seven days after the Calculation Date, as determined by an independent expert)) shall be made to take account of such adverse change in the value of the relevant investment, traded option or futures contract.
3. Subject to note 2 above, in the case of sub-paragraphs A (i) to (vi) (inclusive) above:
(i) where any such investment, traded option or futures contract is subject to restrictions on transfer or a suspension of dealings or if no such published or quoted prices are available in respect of any such investment, traded option or futures contract, in each case as at the close of business on the Calculation Date, the value of such investment, traded option or futures contract will be calculated as at the close of business on the Calculation Date in accordance with sub-paragraph A (vii) above; and
(ii) where any such investment, traded option or futures contract is, at the close of business on the Calculation Date, subject to any right of any person to acquire the same or any obligation on the Relevant Company to dispose of the same, whether as a result of the Offer being made or becoming or being declared unconditional or otherwise, at a price more or less than would otherwise be determined in accordance with sub-paragraphs A (i) to (vi) (inclusive) above, such investment, traded option or futures contract shall be valued at such greater or lesser price unless such right or obligation is unconditionally and irrevocably waived or lapses prior to the calculation of the FAV per share of the Relevant Company otherwise being agreed or determined.
4. Subject to note 5 below, with regard to sub-paragraphs A (vii) and (viii) above, the Company Secretary of MLIT and Elysium and, if appointed, any independent expert shall have regard, inter alia, to the following when determining the value of any investment or other asset (which shall be calculated on the basis of a notional sale by a willing seller to a willing buyer, without regard to any additional value that might be attributed to such investment or other asset by any special category of potential purchaser):
(i) the existence or exercise of any pre-emption rights or obligations in respect of such investment or other asset or any other restrictions on the transfer or disposal of the same which may exist or which may arise as a consequence of the proposed acquisition by MLIT of Osprey or any Osprey Shares or of the transfer of such investment or other asset to any party or of the winding up of Osprey;
(ii) the terms and volumes of any recent dealings in, and marketability of, such investment or other asset; and
(iii) the amount of any bona fide offer to acquire such investment or other asset which may be made by any person and brought to the attention of the Company Secretary of MLIT and Elysium or, if appointed, any independent expert.
5. With regard to sub-paragraphs A (vii) and (viii) above, the Company Secretary of MLIT and Elysium and, if appointed, any independent expert shall, except in the case of debtors and tangible assets, be bound by the actual amount of cash items and, in the case of debtors and tangible assets, shall adopt the accounting policies used by the Relevant Company in its latest audited financial statements.
6. If any liability referred to in sub-paragraphs B(i) to (xi) (inclusive) above has not been determined by the date on which the calculations and adjustments otherwise necessary to determine the FAV per share of the Relevant Company have been made, there shall be included in “B” such amount in respect of any such liability as shall be considered to be an appropriate estimate by agreement between the Company Secretary of MLIT and Elysium (or, failing such agreement within seven days after the Calculation Date, as determined by an independent expert).
7. In agreeing any fair realisable value (in the case of sub-paragraphs A (vii) and (viii) above) or estimating or determining the amount of any liabilities, obligations or losses (in the case of sub-paragraphs B(viii) or B(xi) above), or in making any determination under notes 2 and 6 above, the Company Secretary of MLIT and Elysium shall act as experts and not as arbitrator and any such determination shall be final and binding on all persons and neither of them shall be under any liability to any person by reason thereof or by reason of anything done or omitted to be done by them for the purposes thereof or in connection therewith.
8. The independent expert referred to herein shall be a member of the London Investment Banking Association (not connected with any of the parties providing advice to Osprey or MLIT in connection with the Offer) selected by the Company Secretary of MLIT and Elysium or, in default of such selection within 14 days after the Calculation Date, by the chairman for the time being of the London Investment Banking Association on the application of either the Company Secretary of MLIT or Elysium. Such member shall act as an expert and not as an arbitrator and his determination shall (subject to any agreement to the contrary between MLIT and Osprey) be final and binding on all persons and such member shall not be under any liability to any person by reason of his appointment or by anything done or omitted to be done by him for the purposes of such appointment or in connection therewith.
9. Notwithstanding any of the above provisions, in the event that the valuation of any investment or other asset of the Relevant Company in accordance with any of such provisions, or the amount of any deduction made in accordance with sub-paragraphs B (i) to (xi) (inclusive) above, is, in the opinion of the Company Secretary of MLIT and Elysium, incorrect or unfair they may, if they so agree, adopt an alternative method of valuation or deduction, as the case may be.
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