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Corvus Capital Inc (CVS)

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Monday 06 October, 2008

Corvus Capital Inc

Notice of EGM - Proposals for

RNS Number : 1135F
Corvus Capital Inc
06 October 2008
 



6 October 2008

Corvus Capital Inc

('Corvus')

Proposed special dividend
Proposed de-listing
Notice of extraordinary general meeting

Corvus announces a proposal for a special dividend payment of 2p per share and the cancellation of the trading facility for its shares with a par value of 5p each ('Shares') on the AIM Market of the London Stock Exchange plc ('AIM')('De-listing')('Proposals'). The Proposals are subject to the approval of shareholders at an  extraordinary general meeting ('EGM').

Summary

  • Subject to approval by shareholders at the EGM, the directors have resolved to pay a special dividend of 2p per share amounting to £5.75 million in aggregate. There is no scrip alternative.  The dividend will be paid on 31 October 2008 to shareholders and depositary interest holders on the register of members at the close of business on 17 October 2008 ('record date').

  • Reasons for proposed de-listing of the Company's shares:

  • The nature of potential transactions being made available to the Company has moved away from stable cash generating businesses towards more speculative opportunities which are inherently higher risk in nature. 

  • This change in the nature of potential transactions has meant the funding for these transactions is more appropriately sourced from private sources rather than public funding. As a result of this reassessment the Board has reached the conclusion that the nature of the Company in the prevailing economic climate supports the De-listing.

  • A notice of EGM will be sent to shareholders today convening the EGM to be held at 11:00 a.m. (Geneva time) on 30 October 2008 at 30 Quai Gustave-Ador, 1207 GenevaSwitzerland at which a special resolution will be proposed to approve the Proposals. The notice to shareholders is available to download from the Company's website at www.corvus.com


Commenting, Adrian Collins, Chairman of Corvus Capital, said:


'The significant changes in market conditions has meant that Corvus' investment strategy has moved away from smaller cap transactions, which to date has meant that shareholder gains have predominantly accrued within the special purpose vehicles set up by Corvus rather than within Corvus itself, to more speculative opportunities which are inherently higher risk in nature.


'Having examined a number of alternatives, and following consultation with our major shareholders, we have concluded that the proposed special dividend, de-listing and the eventual liquidation of remaining assets is the appropriate strategy in the current and foreseable market  and provides an orderly and timely cash payout to shareholders.


'The Company's management intend to operate through a new, private vehicle and will continue to consider the use of special purpose vehicles to pursue future opportunities with the support of such of the Company's major shareholders that wish to participate.'


Enquiries:

Adrian Collins, Chairman, Corvus Capital Inc.
tel: +44(0)870 389 6999
James Harris, Strand Partners
tel: +44(0)20 7409 3494
John Bick, Hansard Group
tel: +44(0)7917 649362


  Corvus Capital Inc

('Corvus')

Proposed special dividend
Proposed de-listing
Notice of extraordinary general meeting

Background 

In 2004, the Company set out its strategy to build a company with a skill set and financial resources to enable it to bid for cash-flow based assets of size. A strong team was assembled with expertise across a range of disciplines in finance, accounting and law and a number of successful transactions were undertaken building up a significant portfolio of quoted and unquoted investments over time.


Historically, the Company's strategy has been to invest in companies with strong income generation or that have proven or anticipated stable and cash generating businesses. This strategy has been executed predominantly through the formation of cash shells on AIM followed by the acquisition of trading businesses by way of reverse takeover. Whilst Corvus acquired a small stake in these AIM companies the majority of the funding for each transaction has been provided by placing new shares with other investors, amongst them core shareholders in Corvus. In addition, Corvus shareholders bought the shares of these investee companies through the market. Through this mechanism, the core returns to supporters of Corvus have been through their direct shareholdings in the special purpose vehicles set up for transactions initiated by Corvus. 

Trading update 

On 8 September 2008 the Company announced that it had disposed of 76,000,000 ordinary shares in Commoditrade Inc ('CMM')('CMM Shares') to Bluecrest Capital Management Limited ('Bluecrest'). 

Bluecrest has paid to Corvus by way of initial consideration £6.84 million, being 9p per CMM Share ('Initial Consideration'). The Initial Consideration per share was a premium of 7.5 per cent. over the closing middle market price of 8.375p for a CMM Share on AIM on 5 September 2008.

 

On a subsequent sale (including by way of a buyback of shares or cancellation by way of scheme or plan of arrangement) by Bluecrest of all or some of the CMM Shares in excess of 15p per CMM Share, Bluecrest will pay to Corvus an additional amount of 30 per cent. of the excess amount, subject to a cap on the additional consideration of 6p per CMM Share. 


Bluecrest will pay to Corvus 6p per CMM Share if the closing price per share of the ordinary shares of CMM listed on AIM (or if the CMM Shares cease to be listed on AIM, such other market as the CMM Shares may be listed on from time to time) is 45p or above for five consecutive trading days, the last such day being the 'Final Day', except that such further consideration will only be payable in respect of the number of the CMM Shares owned by Bluecrest at the close of trading on the Final Day. If payment is made under this provision, there will be no additional payment to Corvus when and if the CMM Shares are sold. 


Accordingly, the maximum further consideration payable in accordance with the two preceding paragraphs ('Additional Consideration') is £4.56 million and the maximum aggregate consideration payable is £11.4 million. There is no requirement for the triggers for the further consideration to occur within a particular timeframe. 


The original cost of the Company's investment in CMM amounted to £78,500 and the aggregate gain of the recent and earlier disposals amounts to approximately £7.56 million with a potential £4.56 million of Additional Consideration still to come. In the period in which Corvus held the CMM Shares, CMM paid one dividend of 1.5p per CMM Share, being £1.14 million in aggregate payable to Corvus. The CMM Shares were marked to market in the Company's books. As per the Company's interim statement for the six months ended 31 March 2008, the CMM Shares were valued by Corvus at £8.93 million.


  Proposed special dividend 

Following the disposal of the CMM Shares, the directors consulted with the Company's major shareholders, who expressed a wish to receive a majority of the cash generated by the sale of the CMM Shares by way of dividend. In light of this, subject to approval by shareholders at the EGM, the directors have resolved to pay a special dividend of 2p per share amounting to £5.75 million in aggregate. There is no scrip alternative.


The dividend will be paid on 31 October 2008 to shareholders and depositary interest holders on the register of members at the close of business on 17 October 2008.


Reasons for De-listing 

As set out above, the methodology applied by the Company to execute its strategy has meant that shareholder gains have predominantly accrued within the special purpose vehicles set up by Corvus rather than within Corvus itself. In addition, the nature of potential transactions being made available to the Company has moved away from stable cash generating businesses towards more speculative opportunities which are inherently higher risk in nature. 


This change in the nature of potential transactions has meant the funding for these transactions is more appropriately sourced from private sources rather than public funding and has led the Board to reassess the Company's future plans and the rationale for the Company's continued admission to trading on AIM. As a result of this reassessment the Board has reached the conclusion that the nature of the Company in the prevailing economic climate supports the De-listing.


Alternatives to De-listing have been considered by the Board. Given current market conditions and the Board's expectation that it will remain difficult to raise funds in the public markets for some time to come, the Company could simply retain its cash on deposit until market conditions improve. The Board consulted with the Company's major shareholders, following the sale of the CMM Shares, who were of the strong opinion that they wanted a swift distribution of the Company's cash rather than the Company retaining those funds (whilst at the same time incurring personnel, premises, administrative and office expenses). 


The Board has also examined the benefits of the Company's admission to trading on AIM to see if they justify the administration and costs involved. In doing so the Board has considered the price of the Corvus shares and the necessary ongoing compliance costs that are imposed on the Company, along with the professional advisory fees that are incurred as a result of the Company's admission to trading on AIM, and has concluded that the costs now outweigh the benefits for the Company.


The Board has also considered whether the current nature of the Company remains ideally suited to the AIM Market, given its entrepreneurial management and its status as an investment company. The Board has concluded that management's strengths would be better suited to an off-market vehicle, unrestricted by market rules which can occasionally hinder the taking of fast-moving opportunities. The Company's management intend to operate through a new, private vehicle and will continue to consider the use of special purpose vehicles to pursue future opportunities with the support of such of the Company's major shareholders that wish to participate. 


As a result of the above, the Board has decided the De-listing would be in the best interests of the Company and the shareholders as a whole. 


De-listing 

The De-listing is conditional on the consent of not less than 75 per cent. of votes cast, in person or by proxy, by the Company's shareholders at the EGM. Subject to the passing of the resolution proposed at the EGM, the Company expects the Company's trading facility on AIM to be cancelled with effect from close of dealings on 7 November 2008. 


Effecting transactions in the Shares following De-listing 

For shareholders retaining Shares following the De-listing, although the Shares will remain freely tradeable between willing parties, they will no longer be tradeable on the AIM Market and no other formal facility will be available to facilitate the trading of the Shares. 

If a shareholder has identified a purchaser and wishes to effect a transaction in the Shares following the De-listing, the shareholderer may, subject to the articles of association of the Company, effect the sale by signing a share transfer form (in a form approved by the Company's secretary) and sending the duly executed, and if necessary stamped, share transfer form, together with the relevant share certificate to the Company's secretary, Kitwell Consultants Limited at Kitwell House, The Warren, Radlett, Hertfordshire WD7 7DU, England. If a shareholder has not identified a purchaser, the shareholder may notify the Company's secretary of the number and price at which it would sell such Shares. On receipt of such notice the secretary will, subject to applicable laws, notify any person(s) it is aware of who have shown an interest in purchasing Shares and provide the contact details of the prospective seller to such persons. The Company cannot provide any guarantees that this will lead to any information being forwarded or a sale of such Shares.


The holders of depositary interests will be contacted in due course by the depositary, Computershare Investor Services PLC, in connection with the conversion of their depositary interests back into Shares. 


Strategy following the De-listing 

Following De-listing it is the Board's intention to continue its programme of realising the Company's investments, assets where possible and settling liabilities. Once that programme is complete or substantially complete it is the Board's intention to put proposals to shareholders in a general meeting to approve a solvent liquidation of Corvus followed by the distribution of the Company's net cash to shareholders on the closing of the liquidation. 


As at 2 October 2008 the Company's assets comprise £6.39 million in cash (of which £5.75 million will be used in paying the dividend), the right to the Additional Consideration (if any), the subsidiary companies and the interests in the investee companies listed below. 


Based on the closing mid-market prices on the Main Market, AIM or JSX as the case may be, the market value of the following investments as at 31 March 2008 (the date of the Company's interim results) and as at 3 October 2008, being the latest practicable day before publication of this document was and is as follows:


Name of Investment

Market

Market value of investment as at 31 March 2008 

£'000

Market value of investment as at 3 October 2008 £'000





Canisp plc (note 1)

AIM

73

73

Corvus Capital (SA) Holdings Ltd

JSX

Suspended

Suspended

Conival plc (note 2)

AIM

4

Nil

DiamondTech Inc

AIM

830

249

Highway Capital plc

Main Market

199

135

Roeford Properties plc

AIM

95

130

Sirius Petroleum plc

AIM

35

1,919


Note 1

Canisp plc is indebted to Corvus in the sum of £1,600,000. The indebtedness is convertible into ordinary shares of one penny each in Canisp plc at par. The Board recognised Canisp plc would not be in a position to repay its debt to Corvus in the short term and accordingly Corvus agreed to defer repayment by Canisp plc in the short term. Canisp plc's ordinary shares have traded at less than their par value for more than 12 months. If, therefore, Corvus were to convert its debt at par, the shares arising would have a current market value of approximately £400,000 and such shares would represent a significant proportion of Canisp plc's share capital. As such and under current market conditions your Board considers the likelihood of being able to dispose of Canisp plc shares, arising on conversion of the debt, for £400,000 or more to be slim.


Note 2

Corvus has sold all of its shares in Conival plc since 31 March 2008. Conival plc is indebted to Corvus in the sum of £1,075,000. The indebtedness is convertible into ordinary shares of 0.5p each in Conival plc at par. The Board recognised that Conival plc would not be in a position to repay its debt to Corvus in the short term and accordingly Corvus agreed to defer repayment by Conival plc in the short term. Conival plc's ordinary shares have not traded at more than their par value since 25 July 2008. If, therefore, Corvus were to convert its debt at par, the shares arising would have a market value of approximately £300,000 and such shares would represent a significant proportion of Conival's share capital. As such and under current market conditions your Board considers the likelihood of being able to dispose of Conival plc shares, arising on conversion of the debt, for £300,000 or more to be slim.

The Corvus group's principal liabilities are its office leases in London and Geneva, staff costs, corporate hospitality costs, office and other administrative expenses. 

If liquidation is proposed by the Board and subsequently approved by shareholders, the liquidator will assess the market value of the Company's remaining assets and estimate its liabilities before attempting to realise those assets. The management team will work with the liquidator to assist in the realisation process and may consider assuming some of the liabilities and acquiring some of the assets as part of the liquidation process. Management will not have any preferential right to acquire assets from the liquidator. To the extent that disposals of the remaining assets generate additional funds and to the extent that the Additional Consideration is paid, the net cash would be distributed by the liquidator on the closing of the liquidation. 


EGM 

A notice of EGM will be sent to shareholders today convening the EGM to be held at 11:00 a.m. (Geneva time) on 30 October 2008 at 30 Quai Gustave-Ador, 1207 GenevaSwitzerland at which a special resolution will be proposed to approve the Proposals. The notice to shareholders is available to download from the Company's website at www.corvus.com


Recommendation 

The Board believes that the Proposals are in the best interests of the Company and its shareholders as a whole and accordingly recommend that shareholders vote in favour of the resolution proposed at the EGM, as they intend to do so in respect of their own holdings of 83,800,000 Shares representing, in aggregate, 29.15 per cent of the Company's issued share capital. 



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