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English & Scot.Inv (HGL)

  Print      Mail a friend       Annual reports

Tuesday 29 January, 2002

English & Scot.Inv

Tender Offer

English & Scottish Investors PLC
29 January 2002



Dresdner Kleinwort Wasserstein Securities Limited

Embargoed for 7.00am on 29 January 2002

Andrew Zychowski       020 7623 8000   Ext.  56681


                      English & Scottish Investors p.l.c.
     Proposed tender offer and partial early redemption of debenture stock

Introduction

English & Scottish Investors p.l.c. (the 'Company') announces that it is
proposing to make a tender offer for up to two-thirds of its Ordinary Shares on
the basis described below. Caledonia Investments plc ('Caledonia'), the
Company's largest shareholder (which owns 32.4% of the Company's Ordinary
Shares), has notified the Company that it wishes to realise its entire
investment and accordingly has undertaken to vote in favour of the proposals at
the forthcoming extraordinary general meeting and to tender all of its Ordinary
Shares for repurchase.  Caledonia's undertaking is conditional on there not
being a materially adverse movement in the markets prior to the date of despatch
of the tender offer circular.

In view of the Company's relatively strong performance over both the short term
and the long term the Board believes that many shareholders, particularly
private individuals, will wish to remain invested in the Company.  The Directors
have therefore set the maximum number of shares available for repurchase under
the tender offer at a level which should result in the Company being of a
substantial size in the future while enabling those shareholders who wish to do
so to exit.

Summary of the proposals

Tender Offer

•     Shareholders may tender up to two-thirds of their shares.  However, to the
extent that any shareholders do not tender their full two-thirds, other
shareholders will be able to tender a greater proportion of their holding

•     The tender offer price will be set once assets which have been allocated
to a tender pool, on the basis of 99% of a formula asset value, have been
realised.  The tender pool will bear all the costs of the tender (including the
premium payable on the partial early redemption of the debenture stocks)

•     On the basis, inter alia, of a net asset value as at 25 January 2002 of
209.4p per share and two-thirds of shares being tendered, it is estimated that
the tender price would be some 182.5p, representing a discount of 12.8% to net
asset value. This discount is principally due to the premium payable on the
partial early redemption of the debenture stocks. The market price of an
ordinary share as at 25 January 2002 was 172.25p

•     Continuing shareholders will benefit from a marginal increase in net asset
value per share, estimated at 3.8p per share on the above basis assuming a full
two-thirds tender. They will also benefit from a marginal reduction in the
overall cost of borrowing through the redemption of the £20m 11% 2014 debenture
stock in full

•     The proposals are subject to shareholder approval and the agreement of
debentureholders to partial early redemption of the Company's debenture stocks
on modified terms.

Partial early redemption of debentures

•     In order to retain post-tender gearing levels at approximate current
levels, the tender offer proposals involve the partial early repayment of the
Company's debenture stocks, subject to debentureholder approval

•     A circular has been despatched today to debentureholders seeking approval
for modifications to the debenture stock trust deeds which will allow early
redemption at prices such that the gross redemption yield on the two stocks will
equal 40 basis points over the gross redemption yield on the relevant reference
gilt

•     The £20m 11% 2014 stock will be redeemed in full, and a proportion of the
£50m 8.25% 2023 stock will be redeemed based on the level of take-up by
shareholders of the tender offer

•     Members of a special committee of The Association of British Insurers
(representing 60.6% of the 2014 stock and 57.6% of the 2023 stock) have agreed
to vote in favour of the proposed modifications to the debenture stock trust
deeds

Expected timetable

Debentureholder EGMs                                                21 February 2002

Despatch of tender offer circular and tender election forms         end February 2002

Close of tender offer and shareholder EGM                           mid March 2002

Payment of tender offer proceeds and repayment of debenture stocks  1-2 weeks thereafter



                      English & Scottish Investors p.l.c.
      Proposed tender offer and partial early repayment of debenture stock

English & Scottish Investors p.l.c. (the 'Company') announces that it is
proposing to make a tender offer for up to two-thirds of its Ordinary Shares on
the basis described below. Caledonia Investments plc ('Caledonia'), the
Company's largest shareholder (which owns 32.4% of the Company's Ordinary
Shares), has notified the Company that it wishes to realise its entire
investment and accordingly has undertaken to vote in favour of the proposals at
the forthcoming extraordinary general meeting and to tender all of its Ordinary
Shares for repurchase.  Caledonia's undertaking is conditional on there not
being a materially adverse movement in the markets prior to the date of despatch
of the tender offer circular, as described later in this announcement.

In view of the Company's relatively strong performance over both the short term
and the long term the Board believes that many shareholders, particularly
private individuals, will wish to remain invested in the Company.  The Directors
have therefore set the maximum number of shares available for repurchase under
the tender offer at a level which should result in the Company being of a
substantial size in the future while enabling those shareholders who wish to do
so to exit. Over the 10 years to 31 December 2001, the Company showed an
increase in net asset value of 153.7% (compared to a 112.5% increase in the FTSE
All Share Index) and, over the same period, ranked 8th out of 20 on a net asset
value total return basis in the AITC Global Growth sub-sector.  Over the 12
months to 31 December 2001 the Company outperformed the FTSE All Share Index by
2.2% and was ranked 8th out of 25 on a net asset value total return basis in the
AITC Global Growth sub-sector.

The proposals will give shareholders the opportunity, subject to the level of
tender elections received, to realise all or a substantial part of their
shareholding at close to the realisable value of the underlying assets after
taking account of various costs.  For the reasons described below, the Board's
intention to make the tender offer is conditional upon the Company's
debentureholders agreeing to certain modifications being made to the terms of
the Company's existing debenture stocks.

In formulating the proposals, the Board has had regard to the Company's existing
capital structure and in particular the Company's debenture stocks.  The Board
is conscious that any proposal to repurchase Ordinary Shares without seeking to
deal with the debenture stocks would result in an increase in potential gearing
for on-going shareholders.

The Company's £20 million 11% 2014 and £50 million 8.25% 2023 debenture stocks
represent expensive borrowings in the current low-interest rate environment, and
early repayment of such stocks would be at a considerable premium to their
nominal value with a consequent reduction in the net asset value of the Company.

Under the terms of the debenture stock, the Company would be able to repurchase
two-thirds of its issued Ordinary Shares without breaching any of the financial
covenants to which the debenture stock is subject. However, for illustrative
purposes, on the basis of a tender offer for the full two-thirds of issued
Ordinary Shares at the market price of an Ordinary Share as at the close of
business on 25 January 2002, this would result in an increase in the Company's
potential gearing (calculated on the same basis as the financial covenants in
the debenture stock trust deed) from the current 22.5 per cent. to 49.6 per
cent. Having considered the possible options for counteracting this increase in
the Company's potential gearing, the Board is of the view that the partial
redemption of debenture stock on a basis fixed for the purposes of the proposed
tender (described further below) represents the best available option for the
Company and one which balances the interests of both shareholders and
debentureholders. The premium payable on the partial redemption of the debenture
stocks will be borne by those shareholders tendering their shares.

Details of the redemption of the Debenture Stock

The Company has therefore despatched today to its debentureholders a circular
informing them that, if the tender offer proceeds, it intends to redeem all of
its 11% 2014 Stock and a proportion of its 8.25% 2023 Stock.  No amount of 2023
Stock will be redeemed until take-up under the tender offer reaches 36 per cent.
at which point £2 million in nominal amount of 2023 Stock will be redeemed.
Thereafter a further £8,000 in nominal amount of 2023 Stock will be redeemed for
each additional 0.01 per cent. of Ordinary Shares validly tendered. Redemptions
will be undertaken pro rata to the amounts of stock held. The circular gives
notice of Extraordinary General Meetings of holders of each series of debenture
stock, to be held on 21 February 2002, at which approval will be sought for
modifications to be made to the terms of the debenture stock.

One modification would result in a permanent change to the reference gilts used
to calculate the amounts payable to debentureholders in the event of any early
redemption or repayment of stock. The Board has been advised that the existing
reference gilts specified in the debenture stock trust deeds no longer represent
the commonly used benchmark gilts in the fixed interest market, and therefore
proposes that new reference gilts be adopted in their place. In the case of the
2014 Stock, the proposed new reference gilt would be 8 per cent. Treasury Stock
2015 and, in the case of the 2023 Stock, the proposed new reference gilt would
be 8 per cent. Treasury Stock 2021.

The other modifications are of a temporary nature and are being proposed to
enable the Company to redeem debenture stock on the basis described below for a
limited period following completion of the tender offer. These would enable the
Company to redeem stock on 5 days' notice following the completion of the tender
offer on an alternative redemption price basis. This alternative basis would
permit redemption of stock at prices such that the gross redemption yield would
equal 40 basis points over the gross redemption yield on the relevant new
reference gilt (being Treasury 8 per cent. Stock 2015) in the case of the 2014
Stock, and 40 basis points over the gross redemption yield on the relevant new
reference gilt (being Treasury 8 per cent. Stock 2021) in the case of the 2023
Stock, in each case together with any interest accrued up to the date of
redemption.

Based on the yield on the applicable reference gilts on 25 January 2002 and on
the proposed changes described above, the early repayment prices would be 150.5p
(11 per cent. 2014 stock) and 137.7p (8.25 per cent. 2023 stock) as compared
with the mid-market prices for those stocks on that date of 136.7p and 119.7p
respectively as derived from the Daily Official List.

A special committee of the Association of British Insurers ('ABI') has examined
the proposed amendments to the debenture stock and has found them acceptable.
The Company has been informed that the members of the committee (who represent
holders of approximately £12.1 million in nominal amount of the 2014 Stock and
approximately £28.8 million in nominal amount of the 2023 Stock, representing
respectively 60.6 per cent. and 57.6 per cent. of the outstanding nominal value
of each series of debenture stock) have agreed to vote in favour of the
extraordinary resolutions in respect of their holdings.  The special committee
is recommending the same course of action to other ABI members who hold the
Company's debenture stocks.

The exact amount of debenture stocks to be redeemed can only be determined once
the tender offer for Ordinary Shares has been completed.  On the assumption that
the modifications to the terms of the debenture stocks are approved by
debentureholders, it is intended that the tender offer be made towards the end
of February 2002 and will close approximately 3 weeks thereafter at which time
the gross redemption yield on the reference gilts will be established. Following
completion of the tender offer, the Company will then have 10 business days
within which to serve notice to redeem the debenture stock on the basis referred
to above. In any event, no redemption notice may be despatched to redeem
debenture stock on this basis after 31 May 2002. The Company will announce the
exact amount of debenture stock it wishes to redeem prior to redeeming any such
stock.

Details of the Tender Offer for Ordinary Shares

The price at which the tender offer for Ordinary Shares will be made can only be
determined once the Company's assets have been allocated between a continuation
pool and a separate tender pool, on the basis of tender offer elections
received, and the assets in the tender pool have been realised.  The valuation
of assets to be allocated to the tender pool will take place at the calculation
date, which will follow shortly after the close of the tender offer.  The value
of the assets to be allocated to the tender pool will be 99% of a formula asset
value ('FAV') plus such an amount as is required to redeem the appropriate
proportion of debenture stocks. The FAV will be the NAV (being the net asset
value attributable to the tendered shares, after including undistributed revenue
reserves for the Company's financial periods 2000/1 and 2001/2 and updating the
valuation of the unquoted investments in accordance with the Company's normal
accounting policy) less the net premium over par of redeeming the appropriate
proportion of the debenture stocks as at the above calculation date and the
additional provision to be made against the unquoted stocks as described further
below .

The tender pool, after payment of the debenture stocks to be redeemed, will bear
all costs and expenses of the tender offer including the costs of realising the
assets comprising the tender pool and the amount of stamp duty payable on the
Ordinary Shares to be tendered.

Unquoted investments will be retained by the continuing Company. They will be
revalued at the above calculation date. Such valuation was last undertaken at
the Company's year end of 31 January 2001. If such stocks, carrying value at 25
January 2002 of some £16.9m, were to be revalued as at that date, this would
have resulted in a reduction of 0.3p in the net asset value per Ordinary Share.
In addition, to reflect the fact that the continuing Company will retain all of
the unquoted stocks and will be looking to realise a proportion of such
unquoteds following completion of the tender so as to maintain its present 5%
weighting in unquoteds, there will be a further reduction in their valuation
(proportional to the amount of Ordinary Shares tendered) which, as at 25 January
2002, is estimated to equate to 1.6p per Ordinary Share tendered.

The tender price per Ordinary Share will also depend upon the number of Ordinary
Shares tendered in the tender offer. The greater the number of Ordinary Shares
to be tendered, the less the fixed costs of the tender will be as a proportion
of Ordinary Shares tendered. Additionally, the cost per Ordinary Share tendered
of the premium payable on redeeming the debenture stocks will reduce as the
number of Ordinary Shares tendered increases and the amount of the more
expensive 11% 2014 debenture stock as a proportion of the aggregate debenture
stocks to be redeemed is thereby reduced.  Assuming a NAV of 209.4p as at 25
January 2002 (debentures deducted at par) and reference gilt yields calculated
as at the same date, if two thirds of the Company's Ordinary Shares were
tendered it is estimated that the tender price would be approximately 182.5p, a
discount of 12.8% to NAV, if one half of the Company's Ordinary Shares were
tendered it is estimated that the tender price would be approximately 181.5p, a
discount of 13.3% to NAV, and if one third of the Company's Ordinary Shares were
tendered it is estimated that the tender price would be approximately 179.3p, a
discount of 14.4% to NAV.  The market price of an Ordinary Share as at 25
January 2002 was 172.25p. The NAV of 209.4p per Ordinary Share as at 25 January
2002 for these illustrative purposes excludes the current year undistributed
revenue reserves of 1.9p per Ordinary Share as tendered shares will be entitled
to receive a second interim dividend for the current year to 31 January 2002.
It is however calculated after the reduction of 0.3p per Ordinary Share for the
revaluation of the unquoted investments to 25 January 2002.  The tender price
may vary significantly from the above illustrations depending, inter alia, on
movements in the NAV and reference gilt yields.

The discount to NAV of the estimated tender price is primarily accounted for by
the cost of the premium in redeeming the appropriate amount of the debenture
stocks.  This cost (assuming a NAV and reference gilt yields calculated as at 25
January 2002) amounts to 19.2p per tendered Ordinary Share if two-thirds of the
Company's Ordinary Shares are tendered, 19.6p per tendered Ordinary Share if one
half of the Company's Ordinary Shares are tendered and 20.4p per tendered
Ordinary Share if one third of the Company's Ordinary Shares are tendered.

Caledonia may withdraw its undertaking to vote in favour of the proposals and to
tender all of its Ordinary Shares if the estimated tender price at the time of
despatch of the tender offer circular to shareholders is less than 155p (on the
basis of two-thirds of the shares being tendered).  In such circumstances, the
tender offer may not proceed.

Shareholders who wish to remain with the Company will benefit from a marginal
increase in the continuing NAV per Ordinary Share of the Company, estimated as
3.8p if two-thirds of the Company's Ordinary Shares are tendered, 1.9p if one
half of the Company's Ordinary Shares are tendered and 0.9p if one third of the
Company's Ordinary Shares are tendered and a marginal reduction in the cost of
borrowings per Ordinary Share through the redemption in full of the 11% 2014
debenture.

Provided that debentureholders approve the resolutions described above, full
details of the proposed tender offer will be set out in a circular (together
with accompanying tender offer election form), which is expected to be
despatched to shareholders at the end of February shortly after the
debentureholder EGMs.  Tender offer forms would have to be returned mid-March
and proceeds of the tender offer are then expected to be distributed in late
March. To the extent that shareholders do not wish to take up any or all of
their pro rata entitlement to tender shares pursuant to the tender offer, such
unused entitlement will be available to those tendering more than their pro rata
entitlement.

Given the size of Caledonia's shareholding in the Company, and the presence on
the Company's Board of Directors of a number of directors connected with
Caledonia, an independent committee of Directors has been established. This
committee, which consists of Edward Adeane, Richard Bernays and Lord Tryon, is
responsible for the ongoing consideration and review of the tender offer
proposals described above.

Enquiries:

Edward Adeane/Richard Bernays /Lord Tryon                       020 7782 2000
Directors, English & Scottish Investors p.l.c.

Vivien Gould                                                    020 7782 2000
Gartmore Investment Management

Andrew Zychowski                                                020 7623 8000
Dresdner Kleinwort Wasserstein

In relation to the tender offer, Dresdner Kleinwort Wasserstein, which is
regulated by the Financial Services Authority, is acting for English & Scottish
Investors p.l.c. and no one else and will not be responsible to any other person
for providing the protections afforded to its clients or for providing advice in
relation to the tender offer or any other matter referred to herein. Dresdner
Kleinwort Wasserstein is the marketing name for the investment bank of Dresdner
Bank AG, a member of the Allianz Group.

                      This information is provided by RNS
            The company news service from the London Stock Exchange