Notice of EGM

RNS Number : 0122S

Marwyn Value Investors Limited

01 November 2013

 



This announcement is not for release, publication, or distribution, directly or indirectly, in whole or in part, to US persons or into or within the United States (including its territories and possessions, any state of the United States and the District of Columbia), Australia, Canada, Japan, the Republic of Ireland, the Republic of South Africa, or any other jurisdiction where to do so would constitute a violation of the relevant laws or regulations of such jurisdiction.

1 November 2013

MARWYN VALUE INVESTORS

FURTHER DETAILS OF THE PROPOSED FUND RESTRUCTURE AND POSTING OF SHAREHOLDER CIRCULAR

Summary

On 27 August 2013, the Board announced proposals to amend the investment policy of Marwyn Value Investors L.P. (through which the Company invests), introduce a distribution policy and regular realisation opportunities and cancel the Exchange Procedure for investors in the Ordinary Shares.

Since that announcement, the Company has consulted a wider range of investors, including a material new investor whose interests had not previously been disclosed to the Company or its advisers.  Following those discussions, the Company has made a number of amendments to the proposals announced in August.  These amendments relate principally to:

·           providing a minimum annual return of capital to Ordinary Shareholders in January each Year, commencing with 8p per Ordinary Share in January 2014, irrespective of the capital gains realised in any Year on the investments attributable to the Ordinary Shares;

·           Marwyn's incentive allocation (often referred to as "carry"), which will continue to be payable to current and future partners and employees of Marwyn on the current terms, which require certain levels of cash to be returned to Ordinary Shareholders before the incentive allocation can be paid (cash realised on disposals of investments and reinvested will no longer be treated as if it were cash returned to Ordinary Shareholders) and, in the case of ; and

·           simplifying the proposed structure at the level of the Master Fund. 

The Directors believe that, if the Proposals are implemented:

·           Ordinary Shareholders will continue to benefit from significant investment returns through a combination of maximising the value of the existing investments attributable to the Ordinary Shares (which is expected to include making follow-on investments) and backing a number of new investment opportunities;

·           Ordinary Shareholders will also benefit from a clearly defined distribution policy, including a progressive return of capital in January each Year, commencing in 2014;

·           the commitment to return cash in January each Year will ensure that Marwyn continues to focus on exit opportunities for the investments attributable to the Ordinary Shares in order to fund the returns; and

·           the basis on which Marwyn's incentive allocation will be payable will create a close alignment of the interests of the current and future partners of Marwyn with Ordinary Shareholders' interests in cash being returned to Ordinary Shareholders.

The Directors believe that these benefits should enhance the appeal of the Ordinary Shares to a broader range of investors over time and, accordingly, should attract market support for the Ordinary Shares over the medium to long term.  The Directors believe this should lead to an improvement in the rating (i.e. a narrowing of the spread between the NAV per Ordinary Share and the market price per Ordinary Share) and liquidity of the Ordinary Shares.  In any event, implementation of the Proposals will provide Ordinary Shareholders with regular opportunities to elect for all or part of their investment to be realised in a manner that aims to maximise their investment returns and at a value close to its NAV.

Implementation of the Proposals is subject to the approval of Shareholders at an extraordinary general meeting of the Company.  Accordingly, the Directors have convened an extraordinary general meeting of the Company for 11.30 a.m. on 19 November 2013 at which a resolution will be proposed to approve the Proposals.  Investors representing approximately 54 per cent. of the Shares in issue have confirmed that they intend to vote in favour of the resolution to be proposed at the EGM.

Full details of the Proposals and the notice convening the EGM are set out in a circular to Shareholders, which will be posted later today.  A copy of that circular will also be available on the Company's website at www.marwynvalue.com.

Enquiries:

Robert Ware, Chairman	Marwyn Value Investors Limited	T:  44 (0) 20 7258 8670
Sue Inglis / Andrew Davey	Cantor Fitzgerald Europe	T:  [phone] / [phone]

The Proposals

The Proposals involve, amongst other things:

·           amending the investment policy of the Master Fund, in so far as it relates to the Ordinary Shares, so that the Master Fund is permitted to make investments in new portfolio companies;

·           introducing a distribution policy for the Ordinary Shares which will result in:

-         a progressive capital return, payable in January each Year (the capital return in January each Year will be maintained or grown on a pence per  Ordinary Share basis) - this policy will commence immediately with a return of 8p per Ordinary Share (representing 3.2 per cent. of the NAV and 4.2 per cent. of the closing price per Ordinary Share as at 18 October 2013), which will be paid in January 2014;

-         in addition, where the Master Fund disposes of an asset for a Net Capital Gain (which, in the case of existing investments, will be calculated based on the value of the relevant investment at 27 August 2013, being the date on which the original Proposals were announced) and has not already returned an aggregate amount in excess of 50 per cent. of that gain and any previous such gains pursuant to the distribution policy, it will make an additional capital return of the difference to Ordinary Shareholders by way of tender offers, share repurchases or other returns of capital and distributions; and

-         keeping under review the opportunity to augment the distribution policy by returning cash in excess of the amounts referred to above to Ordinary Shareholders through periodic  tender offers, share repurchases or other returns of capital and distributions;

·           introducing regular opportunities, commencing on 30 November 2016 and every five years thereafter, for any Ordinary Shareholder to elect to re-designate their Ordinary Shares as Realisation Shares and to receive capital distributions at NAV less costs when investments then held by the Master Fund are realised (unlike the existing investment policy, the Master Fund will not be permitted to use sales proceeds attributable to Realisation Shares for follow-on investments); and

·           cancelling the Exchange Procedure for Ordinary Shares.

When the Master Fund's investment policy was changed in 2009, it was agreed that Marwyn would be entitled to an incentive allocation (often referred to as "carry") based on levels of cash returned by the Master Fund.  For this purpose, "returns" include any distribution, dividend or return of capital by the Master Fund to Ordinary Shareholders, either through the Company or directly, and purchases for cancellation of Ordinary Shares by the Company or the Master Fund.  Marwyn is entitled to receive an initial incentive allocation up to an amount of approximately £2.8 million once approximately £55.1 million of cash (the "reference amount") has been returned to Ordinary Shareholders (approximately £10.6 million of that amount has been returned already).  The balance of the incentive allocation is payable once additional preferred returns have been made to Ordinary Shareholders of an amount equal to 7.5 per cent. per annum on the daily amount of the reference amount outstanding from 8 July 2009 (the "preferred return").  As at 18 October 2013, the preferred return stood at approximately £14.5 million and, therefore, the aggregate of the current reference amount of approximately £44.5 million and the preferred return was approximately £59 million.

As at 18 October 2013, Marwyn's accrued incentive allocation amounted to approximately £32.2 million and was fully accrued in the NAV of the Ordinary Share Interests.  Approximately 30 per cent. of Marwyn's accrued incentive allocation is held by partners who have left Marwyn.  If  the Proposals are approved by Shareholders, the incentive allocation arrangements will be amended so that the Retired Partners may receive their incentive allocation once both (i) cash of at least £25 million has been returned to Ordinary Shareholders pursuant to the Company's new distribution policy and (ii) the aggregate gross proceeds of realisations of investments attributable to the Ordinary Share Interests since the Proposals were originally announced on 27 August 2013 exceeds the aggregate of the reference amount as at 27 August 2013 and the preferred return accrued as at the date the Retired Partners receive their incentive allocation (since 27 August 2013, the aggregate of such gross proceeds prior to the date of this announcement is approximately £18.4 million).  Any additional carry which is freed up from the Retired Partners being paid out under this arrangement will be used to incentivise Marwyn's current and future investment teams.

No current or future partner or employee of Marwyn will receive any sum pursuant to the arrangement described in the previous paragraph.  Instead, Mark Watts, James Corsellis and the other current partners of Marwyn have agreed that, if the Proposals are approved by Shareholders (and notwithstanding that reinvestment of cash resulting from sales of investments will be permitted, subject to the requirements to return cash under the new distribution policy), their incentive allocation will only be payable upon cash being returned to Ordinary Shareholders in accordance with the existing incentive allocation arrangements.  Furthermore, if sums paid to Retired Partners exceed those that would have been paid had they not been paid out under the arrangement described above, the excess will be deducted from the incentive allocation payable to current and future partners and employees of Marwyn. 

Upon the creation of any Realisation Shares, a pro rata proportion of the incentive allocation (and of the relevant thresholds) will be allocated to the realisation pool of interests held on behalf of the Realisation Shares.

Benefits of the Proposals

The Directors believe that the principal benefits for Ordinary Shareholders of implementing the Proposals will be:

·           enabling the Master Fund to take advantage of new investment opportunities identified by Marwyn using the investment strategy outlined above, which, to date, has created significant value for Ordinary Shareholders;

·           a clearly defined distribution policy, including a progressive return of capital in January each Year, which the Board expects should create increased liquidity for Ordinary Shareholders and reduce the cash drag on Ordinary Shareholders' returns following realisations;

·           ensuring that Marwyn continues to focus on exit opportunities for the investments attributable to the Ordinary Shares, where required, in order to fund the returns of capital in January each Year;

·           arrangements for payment of Marwyn's incentive allocation that create a close alignment of the interests of the current and future partners of Marwyn with Ordinary Shareholders' interests in cash being returned to Ordinary Shareholders;

·           regular opportunities for Ordinary Shareholders to realise all or part of their investment in a manner that aims to maximise their investment returns and at a value close to its NAV; and

·           simplifying the Company's capital structure by removing the Exchange Procedure for the Ordinary Shares.

The Directors believe that these benefits should enhance the appeal of Ordinary Shares to investors over time and, accordingly, should attract market support for the Ordinary Shares over the medium to long term.  The Directors believe this should lead to an improvement in the rating (i.e. a narrowing of the spread between the NAV per Ordinary Share and the market price per Ordinary Share) and liquidity of the Ordinary Shares.

Board Composition

Robert Ware has interests in, and Robert Ware and Paul Cookson, as employees of a Marwyn group company, have other directorships within, the Marwyn group and, accordingly, are not considered independent of Marwyn.  Whilst Paul Everitt is a director of other Marwyn group companies, he has no economic interest in Marwyn, the Proposals, the Company or the Master Fund and is regarded as independent of Marwyn. 

In recent years, it proved difficult to identify individuals who were independent of Marwyn and who were willing to join the Board due to the significant holding of Ordinary Shares by an arbitrageur.  That arbitrageur sold their Ordinary Shares following the original announcement of the Proposals in August 2013.  Accordingly, the Directors intend to appoint two new independent directors to the Board as soon as practicable following the EGM. 

EGM

The Proposals are conditional on Shareholder approval.  Accordingly, an extraordinary general meeting of the Company will be held at 11.30 a.m. on 19 November 2013 at 8 Beresford Street, St. Helier, Jersey, JE2 4WN at which a special resolution will be proposed to approve the Proposals.  Investors representing approximately 54 per cent. of the Shares in issue have confirmed that they intend to vote in favour of that resolution.

Circular to Shareholders

Full details of the Proposals and the notice convening the EGM are set out in a circular to Shareholders, which will be posted later today.  A copy of that circular will also be available on the Company's website at www.marwynvalue.com.

Definitions

The following definitions apply throughout this document unless the context otherwise requires:

Amended Articles	the amended and restated articles of association of the Company to be adopted pursuant to the resolution to be proposed at the EGM
B Shareholders	the holders of B Shares or depository interests representing B Shares (as the case may be)
B Shares	the class B ordinary shares of 0.0001p each in the share capital of the Company shown with such class demarcation in the register of members of the Company
Board	the board of directors of the Company
Business Day	a day on which banks are generally open for normal banking business in London and the Cayman Islands
Company	Marwyn Value Investors Limited
Director	a director of the Company
EGM	the extraordinary general meeting of the Company convened for 11.30 a.m. on 19 November 2013
Exchange Procedure	the mechanism permitting holders of Ordinary Shares to convert their Ordinary Shares into Ordinary Exchange Shares and, at their election, to receive either (i) Ordinary Share Interests in the Master Fund; or (ii) ordinary shares in the Marwyn Value Investors (Pte) Limited, subject to the relevant investors receiving the consent of Axio Capital Solutions Limited (the exchange administrator) and the mechanism for permitting investors to convert Ordinary Exchange Shares back into Ordinary Shares
Exchange Shares	Ordinary Exchange Shares and B exchange shares of 0.0001p each in the share capital of the Company
Marwyn	Marwyn Investment Management LLP and entities owned or controlled by it, or under common ownership or control with it, from time to time, including Marwyn Asset Management Limited, but excluding Marwyn 10 Buckingham Street LLP and Marwyn 11 Buckingham Street LLP
Master Fund	Marwyn Value Investors LP
NAV	net asset value
Ordinary Exchange Shares	exchange shares of 0.0001p each in the share capital of the Company with no class demarcation
Ordinary Shareholders	the holders of Ordinary Shares or depository interests representing Ordinary Shares (as the case may be)
Ordinary Share Interests	Class F limited partnership interests in the Master Fund (references to Ordinary Share Interests are to be construed as references to Ordinary Share Interests held by the Company and attributable to the Ordinary Shares, unless the context requires otherwise)
Ordinary Shares	ordinary shares of 0.0001p each in the share capital of the Company not designated with a class demarcation
Proposals	the proposals relating to the Ordinary Shares described in this announcement and full details of which are set in the circular to Shareholders dated 1 November 2013
Re-designation Dates	30 November 2016, and thereafter, the fifth anniversary of such date (or, if any such date is not a Business Day, the first Business Day thereafter)
Realisation Shares	Ordinary Shares that are re-designated as Realisation Shares following receipt of valid elections to re-designate such Ordinary Shares as Realisation Shares, as at a Re-designation Date, in accordance with the Amended Articles
Retired Partners	former partners or employees of Marwyn at the date of this announcement who are entitled to receive some of the incentive allocation on the Ordinary Share Interests
Shareholders	Ordinary Shareholders and B Shareholders
Year	the period of 12 months commencing on the date on which the resolution to be proposed at the EGM is passed and each successive period of 12 months

Important Notices

Cantor Fitzgerald Europe, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting solely for the Company and for no one else in connection with the Proposals and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Cantor Fitzgerald Europe or for affording advice in relation to the Proposals or any other matter referred to in this announcement.

This announcement does not constitute or form part of, and should not be construed as, any offer for sale of, or solicitation of any offer to buy or subscribe for, any share in the Company or securities in any other entity, in any jurisdiction, including the United States Australia, Canada or Japan, nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with, any contract or investment decision whatsoever, in any jurisdiction.  This announcement does not constitute a recommendation regarding any securities.

This announcement, and the information contained in it, is not for viewing, release, distribution or publication in or into the United States, Canada, Australia or Japan or any other jurisdiction where applicable laws prohibit its release, distribution or publication, and will not be made available to any national, resident or citizen of the United States, Canada, Australia or Japan.  The distribution of this announcement in other jurisdictions may be restricted by law and persons into whose possession this announcement comes must inform themselves about, and observe, any such restrictions.  Any failure to comply with the restrictions may constitute a violation of the federal securities law of the United States, Canada, Australia or Japan or other jurisdictions.

All investments are subject to risk, including the loss of the principal amount invested.  Past performance is no guarantee of future returns.  All investments held by the Company involve a substantial degree of risk, including the risk of total loss.  Investors should always seek expert legal, financial, tax and other professional advice before making any investment decision.

Neither the Company, Cantor Fitzgerald Europe, their affiliates or any other person (including, without limitation, the directors, officers, employees, partners, agents, representatives, members and advisers of the Company, Cantor Fitzgerald Europe and their affiliates) undertakes any obligation to update or revise any statement made in this announcement (including, without limitation, any forward looking statements), whether as a result of new information, future events or otherwise.

The information in this announcement contains forward-looking statements (being any statement other than a statement of historical fact).  Actual results may differ materially from those expressed or implied by any forward-looking statement.  Investors should not place undue reliance on any forward-looking statement, which speaks only as of the date of this announcement.

 

END

 

 

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