Core VCT IV PLC Circ re.Raising of ÂGBP46.8m of Capital
14 Juin 2011 - 4:28PM
UK Regulatory
TIDMCR4
CORE VCT PLC
CORE VCT IV PLC
CORE VCT V PLC
14 JUNE 2011
RECOMMENDED PROPOSALS (the "Proposals") RELATING TO THE:
* RAISING OF GBP46.8M OF CAPITAL;
* CASH DISTRIBUTION TO SHAREHOLDERS;
* THE TRANSFER OF CERTAIN ASSSETS OF THE VCTs TO CORE CAPITAL I LP;
* THE CANCELLATION OF CORE VCT'S SHARE PREMIUM ACCOUNT; AND
* NOTICE OF GENERAL MEETINGS OF VCTs
INTRODUCTION
Each of Core VCT, Core VCT IV and Core VCT V (the "VCTs") has completed their
investment programme in line with their respective investment policies. The
Boards of the VCTs are, therefore, planning the routes to maximise returns for
Shareholders as they seek to realise the value in the portfolio over the next
few years and distribute the proceeds to Shareholders.
The VCTs are now fully invested in 13 companies with a current combined cost of
GBP45.1m and an audited NAV and gross asset value (as at 31 December 2010) of
GBP58.5m and GBP59.0m respectively. Of these, six of the largest companies, Kelway
Holdings Limited, Ark Home Healthcare Limited, Brasserie Bar Co. plc, Colway
Limited, Better at Homes Limited and SPL Services Limited (the "Portfolio
Companies") have grown into significant businesses of scale, or where the
opportunity for further growth is greater than the Manager originally expected.
However, the execution of their business plans will require access to further
capital of a quantum which cannot be provided within the constraints of a
venture capital trust structure.
Accordingly, the Boards of the VCTs, in consultation with the Core Capital LLP,
the investment manager (the "Manager"), have deliberated on and identified an
alternative strategy for raising fresh capital. Outside investors (the "New
Investors") have been identified who have agreed to invest in a new fund, Core
Capital 1 LP, which will provide this expansion capital for the Portfolio
Companies.
The GBP46.8 million of additional capital from the New Investors will be used to:
* support the development of the Portfolio Companies
* support the acquisition of further shares in the Portfolio Companies to
increase participation in the value growth that is expected to be created
from the new investment
* provide early liquidity for Shareholders by way of an enhanced interim
dividend of 10p per Ordinary Share
* provide additional cash headroom in order to be able to invest further in
the remaining companies in the VCTs' portfolio should that be desired
The VCTs will obtain an interest in Core Capital I LP, as part consideration for
the transfer to it of their interests in the Portfolio Companies (the balance of
consideration being cash). In addition, the VCTs will retain their existing
interest in the remaining investee companies, Pureleaf Limited, Adapt Group
Limited, Allied International Holdings Limited, Cording Land LLP, Augentius Fund
Administration LLP and Camwatch Limited (the "Residual Portfolio"), which will
not be transferred to Core Capital I LP and which will continue to be managed
and owned as hitherto.
Following the completion of the Proposals, the VCTs will continue to be managed
in accordance with the original objectives set out at the time each of the VCTs
was launched. In particular, with the foreseeable funding requirements of the
Portfolio Companies having been met as a result of the Proposals, the Manager
intends to seek realisations across the portfolio with the aim of realising a
majority of the value within a 3-4 year timeframe. As far as possible, it is
intended that the proceeds of such realisations are returned to Shareholders by
way of distributions.
Offer terms
The New Investors have offered to provide the sum of GBP46.8m to be used for the
following purposes:
1. Growth capital for the Portfolio Companies GBP27.3m
2. Capital to acquire additional shares in the Portfolio Companies GBP7.4m
3. Capital to enable cash distributions to be made GBP6.5m
4. Capital for the cost of the transaction and future operating costs GBP3.9m
5. Capital available for investment in the Residual Portfolio GBP1.7m
Total GBP46.8m
To achieve the objectives of the recommended option:
a. Wholly owned subsidiaries of the VCTs (the "Subsidiaries"), will contribute
a nominal sum to Core Capital I LP, that will be managed by the Manager, in
return for a nominal interest in Core Capital I LP
b. the VCTs will transfer their interests in the Portfolio Companies to Core
Capital I LP, in consideration for (i) the Subsidiaries, at the direction of
the VCTs, receiving an additional interest in Core Capital I LP and (ii) the
VCTs receiving from the New Investors, in aggregate, a cash sum of GBP8.2m
which cash sum the VCTs will use to make cash distributions of 10p per
Ordinary Share, for working capital and/or the Residual Portfolio
c. In addition to the payment of the cash sum of GBP8.2m referred to above, the
New Investors will commit GBP38.6m to Core Capital I LP
d. the VCTs will make the cash distribution to Shareholders.
As derived from the audited accounts as at 31 December 2010 and adjusted for
further investment in the Portfolio Companies since the year end, the aggregate
value of the VCTs interests in the Portfolio Companies amounts to GBP37.6m. Core
Capital I LP's assets will on implementation of the Proposals, comprise these
interests in the Portfolio Companies together with commitments from the New
Investors under the terms of the limited partnership agreement. On the basis
that the value of the Portfolio Companies remains unchanged for accounting
purposes, the aggregate committed capital of Core Capital I LP will be GBP76.2m,
and the value of the VCTs' interest in Core Capital I LP will total GBP22.5m.
This value when added to the GBP8.2m realised in cash, implies that Core Capital I
LP has invested in the Portfolio Companies at an effective discount of 17.90%
for Core VCT, and 19.55% for Core VCT IV and Core VCT V. Based on the net asset
values as at 31 December 2010, this is equivalent to a reduction in the VCTs'
net asset values of 12.84% for Core VCT, 9.68% for Core VCT IV and 9.24% for
Core VCT V.
The discounts compare favourably with the share price discount to NAV as at 6
June 2011 for each of the VCTs being 53.37% for Core VCT, 51.99% for Core VCT IV
and 41.72% for Core VCT V.
The Boards have considered the NAV discounted price at which it is proposed that
Core Capital I LP will acquire the interests in the Portfolio Companies, which
is largely due to the illiquid nature of the VCTs' investments in the Portfolio
Companies and the general lack of available cash for growing businesses in the
current economic climate, and believe that it is still in the best interest of
Shareholders to proceed with the Proposals.
Effect of the Proposals
The Proposals will impact on the VCTs' assets, earnings and liabilities as
follows: the Proposals will result in the VCTs' beneficial holdings in the
Portfolio Companies being transferred to Core Capital I LP at a discount to
their audited valuations, with the VCTs receiving cash and, through the
Subsidiaries, a minority interest in Core Capital I LP. The assets of the VCTs
will be reduced by these discounts. The net assets will also be reduced by the
proposed dividends of 10p per Ordinary Share amounting to GBP6.5m in aggregate.
It is not expected that the Proposals will materially impact on earnings and
liabilities of the VCTs.
Following the completion of the Proposals, each of the VCTs' interests in Core
Capital I LP will represent 65.22% of Core VCT's portfolio, 36.30% of Core VCT
IV's portfolio and 36.30% of Core VCT V's portfolio. The VCTs' interests in the
Residual Portfolio will continue to be managed and owned as hitherto.
The cash distribution to be made to Shareholders under the Proposals will be
subject, in the case of Core VCT, to the cancellation by Core VCT of its share
premium account which will create distributable reserves allowing the cash
distribution to be made to Core VCT Shareholders and, in the case of all of the
VCTs, confirmation from HMRC that the cash distributions will not result in any
tax liability for individual Shareholders who acquired their shares in the VCTs
within the annual GBP200,000 limit and are at least 18 years of age.
Terms for the Manager and Related Party Issues
Under the Proposals, the Manager will continue to receive no annual management
fees directly from the VCTs and the existing profit share and B share
arrangements are unchanged.
Management of Core Capital I LP will be undertaken by the Manager, under the
terms of an investment management agreement which will provide for its general
partner LP to receive GBP750,000 per annum until the fourth anniversary of the
completion of the Transfers, payable out of the assets of Core Capital I LP.
The Manager will also be entitled to receive carried interest payments from the
investment vehicle of the New Investors which will have no effect on the
distributions or profit participation entitlement of the VCTs through their
holdings in Core Capital I LP.
As the Proposals involve the transfer by the VCTs of their interests in the
Portfolio Companies to a newly formed fund which will be managed by the Manager
(the "Transfers") , the VCTs' fund manager, and also involve an investment by
associates of Core Capital I LP, the entry into the Transfers and the investment
by the associates of the Manager into Core Capital I LP will constitute a
related party transaction for the purpose of the Listing Rules, and will,
therefore, require to be approved by Shareholders. Shareholder consent is also
required because the Transfers constitute Class 1 transactions under the Listing
Rules.
Conditionality of Proposals
The Proposals are subject to (i) the entering by the related parties into the
partnership agreement relating to Core Capital I LP (ii) the passing of
resolution 1 at the General Meetings (iii) the receipt of third party consents
as may be required to effect the Transfers (iv) the Manager requesting the
funding that the New Investors will have committed to Core Capital I LP under
the Proposals (v) the New Investors fulfilling this funding commitments and (vi)
the completion of the Transfers. The cash distribution to Core VCT Shareholders
will also be conditional on the passing of resolution 2 that will be proposed at
the Core VCT General Meeting. It is anticipated that these conditions will be
satisfied shortly after the passing of the resolutions at the VCTs' General
Meetings.
Expected Timetable for Core VCT plc
Last time and date for receipt of Forms of Proxy for 10.00 am on 5 July 2011
General Meeting
General Meeting 10.00 am on 7 July 2011
Effective Date for transfer of the Portfolio 7 July 2011
Companies to Core Capital I LP
Cancellation of the VCT's Share Premium Account Early August 2011
Ex-Dividend Date* August 2011
Record Date for Dividend* August 2011
Dividend Payment Date* August 2011
* subject to court approval of the cancellation of the share premium account
Expected Timetable for Core VCT IV plc
Last time and date for receipt of Forms 10.30 am on 5 July 2011
of Proxy for General Meeting
General Meeting 10.30 am on 7 July 2011 (or as soon as
practicable thereafter as the General
Meeting of Core VCT has concluded or
been adjourned)
Effective Date for transfer of the 7 July 2011
Portfolio
Companies to Core Capital I LP
Ex-Dividend Date August 2011
Record Date for Dividend August 2011
Dividend Payment Date August 2011
Expected Timetable for Core VCT V plc
Last time and date for receipt of Forms 11.00 am on 5 July 2011
of Proxy for General Meeting
General Meeting 11.00 am on 7 July 2011 (or as soon as
practicable thereafter as the General
Meeting of Core VCT IV has concluded or
been adjourned)
Effective Date for transfer of the 7 July 2011
Portfolio
Companies to Core Capital I LP
Ex-Dividend Date August 2011
Record Date for Dividend August 2011
Dividend Payment Date August 2011
A copy of the circular to Shareholders relating to the Proposals has been
submitted to the National Storage Mechanism and is available to the public for
viewing online at the following website address: http://www.hemscott.com/nsm.do
For enquiries:
Walid Fakhry 020 3179 0915
Stephen Edwards 0203 179 0919
Rhonda Nicoll 020 3179 0930
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Core VCT IV plc via Thomson Reuters ONE
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