TIDMDNDL
RNS Number : 7560Z
Dunedin Smaller Cos Inv Tst PLC
04 September 2018
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domain.
LEI: 213800CI43OQT8KBKE03
4 September 2018
Dunedin Smaller Companies Investment Trust plc
Publication of circular
The Company has today published a circular to Shareholders in
connection with the proposals announced on 21 June 2018 in respect
of a merger with Standard Life UK Smaller Companies Trust plc (the
"Circular").
Introduction
The Board announced on 21 June 2018 that it had undertaken a
strategic review of the Company and its position in the UK smaller
companies sector and that it had reached agreement, in principle,
on the terms of a merger with Standard Life UK Smaller Companies
Trust plc ("Standard Life Smaller" or "SLS") to be effected through
a scheme of reconstruction and winding up of the Company.
General Meetings have been convened for 28 September 2018 and 8
October 2018 to implement the Proposals.
The Proposals
Background to and rationale for the Proposals
As announced in June, the Board was aware that the Company's
size and the secondary market liquidity in its shares had made it
challenging to attract new investors and believed that these
factors had contributed to the discount to net asset value at which
the Company's shares traded prior to the announcement of the
merger. In addition, the recent merger of the parent company of the
Company's manager Aberdeen Asset Management PLC with Standard Life
plc has resulted in the Company being managed alongside SLS, a
company with a very similar UK smaller companies mandate.
Having considered a number of options and following consultation
with the Company's largest Shareholders, the Board believes that
Shareholders, as a whole, still wish to retain exposure to UK
smaller companies via an investment trust with a similar mandate
managed by the Company's current manager. Consequently, the Company
has agreed the terms of a merger with Standard Life Smaller.
Details of the Scheme
Under the Scheme:
- The Company will be put into members' voluntary liquidation
following the realignment of its business and assets into two
separate funds namely (i) the "Rollover Fund" comprising the
interests of Shareholders, whose holdings will be rolled over into
shares in Standard Life Smaller and (ii) the "Liquidation Fund"
which will comprise an amount which the Liquidators consider
sufficient to provide for all current and future liabilities
(including tax and contingent liabilities) of the Company,
including the entitlements of any Dissenting Shareholders and the
costs of the Scheme.
- Standard Life Smaller will allot New Shares to the Liquidators
who will renounce them in favour of the Shareholders (save for any
Dissenting Shareholders) in exchange for the transfer to it of the
cash, undertaking and other assets comprised in the Rollover
Fund.
- The issue of New Shares to citizens of, or persons or
residents in, jurisdictions outside the United Kingdom may be
affected by the laws of the relevant jurisdiction. Further details
relating to Overseas Shareholders and Restricted Shareholders are
set out in the paragraph headed "Overseas Shareholders and
Restricted Shareholders" contained in Part 3 of the Circular.
On the Calculation Date, there will be appropriated to the
Liquidation Fund such of the cash, undertaking and other assets of
the Company estimated by the Board in consultation with the
Liquidators to be sufficient to meet the outstanding current and
future liabilities, including contingent liabilities, of the
Company, including the costs of the Scheme and the entitlements of
any Dissenting Shareholders. The balance of the cash, undertaking
and other assets of the Company will be allocated to the Rollover
Fund.
Management of the Company's portfolio prior to implementation of
the Scheme
Since the announcement of the Proposals in June, the Company's
portfolio has continued to be managed in accordance with the terms
of its current investment policy but with the objective of ensuring
that, to the extent possible, ahead of the implementation of the
Proposals it will comprise assets that the SLS Investment Manager
expects SLS to hold following the merger. The Board is pleased to
report that the realignment process is substantially complete and
therefore the transaction costs associated with this process have
now been crystallised.
The Board is pleased to report that the costs incurred by the
Company in the realignment of its portfolio amounted to
approximately 0.8 per cent. of the Company's Net Asset Value (as at
30 July 2018). The Board considers this cost to represent good
value for Shareholders given the liquidity profile of the Company's
portfolio prior to commencement of the realignment process.
Benefits of the Proposals
The Board believes that the Proposals will have the following
benefits for Shareholders:
- a continued investment exposure to UK smaller companies via a
significantly larger investment trust, with a strong track record,
a narrower discount and substantially greater secondary liquidity,
all of which should appeal to a broader range of investors.
- access to Standard Life Smaller's robust discount control
mechanism which seeks to maintain a discount level of less than 8
per cent. to the cum-income, diluted, NAV per share under normal
market conditions and the potential for a periodic exit route by
way of periodic tender offer.
- a significant increase in the valuation of Shareholders'
investments due to the narrower discount to net asset value at
which the Company's shares have traded since announcement of the
Proposals. The Proposals are expected to result in a continued
increase in the valuation of Shareholders' investments due to the
narrower discount to net asset value at which the SLS Ordinary
Shares have historically traded compared with the Shares. Over the
12 months ended 20 June 2018, the shares of the Company and of
Standard Life Smaller traded at average discounts to net asset
value of 17.4 per cent. and 3.8 per cent. respectively). Since
announcement of the Proposals on 21 June 2018 to 30 August 2018,
the shares of the Company and of Standard Life Smaller traded at
average discounts to net asset value of 10.4 percent. and 7.4 per
cent. respectively.
Standard Life Smaller
The investment objective of Standard Life Smaller is to achieve
long-term capital growth by investment in UK quoted smaller
companies, which is very similar to the Company's current
investment objective. Standard Life Smaller's alternative
investment fund manager for the purposes of the AIFM Directive is
Standard Life Investments (Corporate Funds) Limited, which has
delegated the day-to-day management of the portfolio to Standard
Life Investments Limited ("SLI"). In particular, the Aberdeen
Standard Investments Smaller Companies team, led by Harry Nimmo and
supported principally by Abby Glennie, is responsible for the
management of the portfolio. Standard Life Smaller's portfolio has
been managed by Harry Nimmo since SLI was appointed as its manager
in September 2003.
Shareholders' entitlements
Under the Proposals, if implemented, Shareholders (save for
Restricted Shareholders) will receive New Shares in respect of
their entire investment in the Company. The Scheme will be effected
on a NAV for NAV basis as at the Calculation Date. Following the
Calculation Date, the Company will set aside cash and other assets
in the Liquidation Fund in an amount which it, following
consultation with the liquidators, considers sufficient to provide
for all current and future, actual and contingent liabilities of
the Company, including a retention (estimated to be GBP50,000) in
respect of unascertained and unknown liabilities, an amount equal
to the costs of the Scheme and an amount (if required) in respect
of Shareholders who have exercised their right to dissent from the
Scheme under section 111 of the Insolvency Act 1986. Thereafter,
the balance of the cash, undertaking and other assets of the
Company will be transferred to Standard Life Smaller. To the extent
that any part of the Liquidation Fund is not subsequently required
to discharge the Company's liabilities, it will be transferred to
Standard Life Smaller for the account of Standard Life Smaller, as
an accretion to its assets without any further SLS Ordinary Shares
being issued in respect of such transfer.
For the purposes of the Scheme, the NAV of the Company as at the
Calculation Date will be adjusted to take account of (i) the
Liquidators' retention (estimated to be GBP50,000) and the
Liquidators' costs; and (ii) all other costs associated with the
Proposals not already accrued by the Company, including the costs
incurred by SLS in connection with the Proposals and an amount in
respect of Dissenting Shareholders (if any) (the "FAV per Dunedin
Share"). The SLS NAV at the Calculation Date will be adjusted to
take account of any dividends that have been declared but not paid
and any costs already accrued in the SLS NAV (the "FAV per SLS
Share").
Shareholders will be issued such number of New Shares with a FAV
per SLS Share (as at the Calculation Date) equal to 100 per cent.
of the FAV per Dunedin Share of their holding of Shares. The
Calculation Date for determining the value of the Rollover Fund is
expected to be 4 October 2018. The Record Date for the basis of
determining Shareholders' entitlements under the Scheme is 6.00
p.m. on 27 September 2018.
For illustrative purposes only, had the Calculation Date been 30
August 2018 (being the latest practicable date prior to the
publication of the Circular) and assuming that no Shareholders
exercise their right to dissent from participation in the Scheme,
the FAV per Dunedin Share would have been 324.05 pence and the FAV
per SLS Share would have been 560.99 pence. This would have
produced a conversion ratio of 0.577639. Therefore, in aggregate,
27,644,268 New Shares would have been issued to Shareholders under
the Scheme, representing approximately 27.4 per cent. of the issued
ordinary share capital of the enlarged Standard Life Smaller.
Therefore, a holder of 1,000 Shares would receive 577 New Shares
with an aggregate net asset value of GBP3,237 and an illustrative
market value of GBP3,012 and would have received a final interim
dividend of GBP55. These figures may be compared with the NAV and
market value of 1,000 Shares as at 30 August 2018, being GBP3,278
and GBP3,000 respectively.
Final interim dividend
The dividend yield of Standard Life Smaller is approximately 1.3
per cent. as at 30 August 2018, compared to 2.1 per cent. for the
Company (in both cases by reference to the total dividends paid
over the preceding 12 months). For this reason, the merger of the
Company and Standard Life Smaller is expected to result in a
reduction in dividends received by Shareholders in the medium
term.
In recognition of this, the Board has resolved to pay a final
interim dividend of 5.5 pence per Share, being approximately
equivalent to the estimated aggregate reduction in dividends for
the 12 months following the merger. This dividend will be paid on 3
October 2018 to Shareholders on the register on 21 September 2018.
No further dividends are expected to be paid by the Company after
the payment of this final interim dividend. The Company's revenue
reserves remaining after the payment of the final interim dividend
will be allocated to the Rollover Fund.
Costs of implementing the Scheme
In the event that the Scheme is implemented, the Company will
bear all its own costs as well as the costs of Standard Life
Smaller associated with the Scheme. The aggregate costs are
estimated to be approximately GBP1.8 million (including
irrecoverable VAT and stamp duty but excluding the portfolio
realignment costs referred to above), equal to approximately 3.76
pence per Share or 1.1 per cent. of Net Asset Value (both figures
as at 30 August 2018). If the Scheme becomes effective, Standard
Life Smaller will bear no costs in connection with the
Proposals.
The costs of the Scheme will therefore be borne by the
Liquidation Fund.
In the event that Standard Life Smaller resolves not to proceed
to implement the Scheme on the terms described in the Circular
(including if SLS Shareholders do not approve any resolution
required to implement the Scheme) then Standard Life Smaller will
bear the abort costs of both parties (estimated at GBP325,000 in
respect of the Company and GBP410,000 million in respect of
Standard Life Smaller).
In the event that the Company resolves not to proceed to
implement the Scheme on the terms described in the Circular
(including if Shareholders do not approve any resolution required
to implement the Scheme) then the Company will bear the abort costs
of both parties.
In the event that both of the parties resolve not to proceed to
implement the Scheme on the terms described in the Circular
(including if both Shareholders and the SLS Shareholders do not
approve any resolutions required to implement the Scheme) then each
party will bear its own abort costs.
The Liquidator's retention is estimated at GBP50,000, which will
be retained by the Liquidators to meet any unknown or unascertained
liabilities of the Company.
In respect of termination of the Company's various service
contracts with service providers in the light of the proposed
voluntary winding up, it is not anticipated that any compensatory
payments will be made to any service providers in this regard.
Conditions of the Proposals
Implementation of the Proposals is subject to a number of
conditions, including:
- the passing of the special resolutions to approve the Proposals at the General Meetings;
- the passing of the special resolution to approve the issue of
New Shares pursuant to the Proposals at a general meeting of SLS
Shareholders which has been convened for 3 October 2018; and
- the UK Listing Authority agreeing to admit the New Shares to
the Official List and the London Stock Exchange agreeing to admit
the New Shares to trading on its Main Market, subject only to
allotment.
If any condition is not satisfied, the Proposals will not become
effective, the Company will not proceed with the winding up and
instead will continue in existence and continue to be managed under
the current investment policy. In these circumstances the Directors
will reassess the options available to the Company at that
time.
Taxation
The receipt by Shareholders of New Shares under the Proposals
should not constitute a disposal of the relevant Shares for the
purposes of UK taxation of chargeable gains. On the issue of New
Shares, a Shareholder's base cost allocated to the corresponding
Shares will be attributed to the new holding of New Shares and the
Shareholder will not be regarded as having disposed of their
Shares.
General Meetings
The Proposals are conditional, inter alia, upon Shareholders'
approval of the resolutions to be proposed at the First General
Meeting and the Second General Meeting. Both General Meetings will
be held at the offices of Aberdeen Standard Investments, 1 George
Street, Edinburgh EH2 2LL.
First General Meeting
The First General Meeting will be held at the offices of
Aberdeen Standard Investments, 1 George Street, Edinburgh EH2 2LL
on 28 September 2018.
The Resolution to be considered at the First General Meeting
(which will be proposed as a special resolution) will, if passed,
empower the Liquidators to accept the New Shares for distribution
to Shareholders, approve the Scheme and authorise its
implementation by the Liquidators, and authorise the Liquidators to
apply to delist the Shares. Further details of the Scheme are set
out in Part 4 of the Circular. The Resolution will require the
approval of at least 75 per cent. of the votes cast in respect of
it.
The Scheme will not become effective unless and until, amongst
other conditions, the Resolution to be proposed at the Second
General Meeting has also been passed.
Second General Meeting
The Second General Meeting will be held at the offices of
Aberdeen Standard Investments, 1 George Street, Edinburgh EH2 2LL
on 8 October 2018.
The Resolution to be considered at the Second General Meeting
(which will be proposed as a special resolution) will, if passed,
place the Company into members' voluntary liquidation, appoint the
Liquidators and authorise the Liquidators to exercise certain
powers for which the express sanction of Shareholders is required.
The Resolution will require the approval of at least 75 per cent.
of the votes cast in respect of it.
Overseas Shareholders and Restricted Shareholders
Overseas Shareholders will not receive a copy of the SLS
Prospectus unless they have satisfied the SLS Directors that they
are entitled to receive and hold New Shares without breaching any
relevant securities laws and without the need for compliance on the
part of the Company or Standard Life Smaller with any overseas
laws, regulations, filing requirements or the equivalent.
No action has been taken or will be taken in any jurisdiction
other than the UK where action is required to be taken to permit
the distribution of the Circular and/or the SLS Prospectus.
Accordingly, such documents may not be used for the purpose of, and
do not constitute, an offer or solicitation by anyone in any
jurisdiction or in any circumstances in which such offer or
solicitation is not authorised or to any person to whom it is
unlawful to make such offer or solicitation.
General
Expressions used but not defined in this announcement have the
meanings ascribed to them in the Circular.
The Circular may be downloaded from
www.dunedinsmaller.co.uk.
A copy of the Circular has been submitted to the National
Storage Mechanism and will shortly be available for inspection at:
http://www.morningstar.co.uk/uk/NSM.
Enquiries
Dunedin Smaller Companies Investment Trust plc James Barnes T: +44 (0) 131 528 4287
Cantor Fitzgerald Europe Robert Peel T: +44 (0) 20 7894 8016
Aberdeen Standard Investments Maria Allen T: +44 (0) 20 7463 6000
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END
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