AVANTI CAPITAL PLC 
By
Avanti Capital plc News Announcement
Avanti Capital plc - Proposed Capital Reduction and Share Buy Back Authority
Avanti Capital plc
6 February 2014
Avanti Capital plc
(the "Company ")
Proposed Capital Reduction
Authority for the purchase of ordinary shares by the Company
and
Notice of General Meeting
London, UK, 6 February 2014 - The Company (AIM: AVA) announces that it is today posting an explanatory circular (the "Circular ") to the shareholders of the Company containing details of a proposed reduction of the Company's capital (the "Capital Reduction ") and a request for shareholder authority to refresh the Company's existing authority for the Company to make market purchases of its ordinary shares, together with formal notice of the requisite general meeting (the "General Meeting ") to be held at the offices of the Company's legal advisers, Berwin Leighton Paisner LLP, Adelaide House, London Bridge, London EC4R 9HA at 11.00 a.m. on 5 March 2014.
The Circular together with the notice of the General Meeting will shortly be made available on the Company's website atwww.avanticap.com.
Highlights
· The Company proposes to increase the distributable reserves of the Company by means of the Capital Reduction in order to support the Company's ability to buy back ordinary shares of the Company and/or pay dividends in the future (should circumstances in the future make it desirable to do so).
· The Capital Reduction will comprise the:
o capitalisation of the amount standing to the credit of the Company's merger reserve by way of the issue and subsequent cancellation of new B ordinary shares of the Company;
o subsequent cancellation of the newly created B ordinary shares of the Company;
o cancellation of the amount standing to the credit of the Company's capital redemption reserve account; and
o reduction of the Company's share capital.
· As announced by the board of directors of the Company on 7 January 2014, one purpose of the Capital Reduction is to maximise the amount of the Company's distributable reserves to enable the Company to fulfil its intention in making a payment of the balance of the intended dividend of £1.05 per ordinary share of the Company to those shareholders on the register of the Company on the as at 27 December 2013. The balance of such intended dividend payment represents 43 pence per ordinary share of the Company. Another purpose of the Capital Reduction is to create further distributable reserves in order to permit any potential dividend payments or share purchases that the Company may wish to make following future realisations of its investments.
· Other than the intended dividend payment, the Capital Reduction itself will not involve any distribution or repayment of capital or share premium by the Company and will not in itself reduce the underlying net assets of the Company.
· In order to facilitate a buy back of the ordinary shares of the Company at a future date, the board of directors of the Company is also seeking shareholder authority to refresh the Company's existing authority for the Company to make market purchases of ordinary shares of the Company in accordance with the Companies Act 2006 (the "Share Buy Back Authority ").
· There is no current intention for the Company to exercise the Share Buy Back Authority. The Directors intend to exercise this right only when, in light of the market conditions prevailing at the time and taking into account all relevant factors (for example, the effect on earnings per share), they believe that such purchases are in the best interests of the Company and its shareholders generally.
The Directors consider the Capital Reduction and Share Buy Back Authority to be in the best interests of the Company and its shareholders as a whole and, accordingly, unanimously recommend the shareholders of the Company to vote in favour of the resolutions to be proposed at the General Meeting as they intend to do in respect of their beneficial holdings amounting, in aggregate, to 1,142,363 ordinary shares of the Company, representing approximately 14.2 per cent. of the existing issued ordinary share capital of the Company.
TIMETABLE OF EXPECTED EVENTS | |
Publication of the Circular | 6 February 2014 |
Latest time and date for receipt of Form of Proxy | 11.00 a.m. on 3 March 2014 |
General Meeting | 11.00 a.m. on 5 March 2014 |
Capital Reduction Record Time | 6.00 p.m. on 25 March 2014* |
Court directions hearing | 13 March 2014* |
Court hearing to confirm the Capital Reduction | 26 March 2014* |
Registration of Court order and effective date of the Capital Reduction | 27 March 2014* |
* This date is subject to change. Any change will be notified via a Regulatory Information Service.
Unless otherwise defined, capitalised terms used in this announcement have the meanings given to them in the Circular.
Canaccord Genuity Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting as nominated adviser to the Company in relation to the transaction referred to in this announcement. The responsibilities of Canaccord Genuity Limited as the Company's nominated adviser under the AIM Rules for Nominated Advisers are owed solely to the London Stock Exchange and are not owed to the Company or to any Director or to any other person. Persons reading this announcement should note that Canaccord Genuity Limited will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for advising any other person on the arrangements described in this announcement. Canaccord Genuity Limited has not authorised the contents of, or any part of, this document and no liability whatsoever is accepted by it for the accuracy of any information or opinion contained in this announcement or for the omission of any information.
Enquiries:
Avanti Capital plc | |
Richard Kleiner | +44 (0)20 7299 1459 |
Canaccord Genuity Limited | |
Bruce Garrow / Joe Weaving | +44 (0)20 7523 8350 |
1 Introduction
I am writing in connection with proposals recommended by the Board in order to increase the distributable reserves of the Company in order to support the Company's ability to buy back ordinary shares of the Company and/or pay dividends in the future.
The background to and reasons for the Capital Reduction and seeking authority for a Share Buy Back are set out more fully in paragraph 3 below. The Board believes it is an appropriate time to create distributable reserves which would allow the Company to return cash to Shareholders, should it be considered desirable to do so in the future.
Accordingly, your approval is being sought to:
(a) carry out a reduction of the Company's capital by way of:
(i) the capitalisation of the amount standing to the credit of the Company's merger reserve by way of the issue and subsequent cancellation of the Capital Reduction Shares;
(ii) the cancellation of the amount standing to the credit of the Company's capital redemption reserve account; and
(iii) the reduction of the Company's share capital,
so as to create distributable reserves; and
(b) authorise the Company to make market purchases of ordinary shares of the Company.
The Capital Reduction and any Share Buy Back are conditional upon, amongst other things, the Company obtaining appropriate Shareholder approval at the General Meeting.
The purpose of this announcement is to provide you with information about the background to and the reasons for the Capital Reduction and the Share Buy Back Authority, to explain why the Board considers the Capital Reduction and Share Buy Back Authority to be in the best interests of the Company and its Shareholders as a whole and why the Board unanimously recommend that you vote in favour of the Resolutions to be proposed at the General Meeting, notice of which is set out at the end of the Circular. Shareholders should note that, unless the Resolutions are approved at the General Meeting (and the Court confirms the Capital Reduction), the Capital Reduction will not take place.
2 Background to and reasons for the Capital Reduction
Following the realisation by the Company in December last year of its investment in Eclectic Bars Limited, following Eclectic Bar Group Limited's admission to trading on AIM, the Board announced an intention to make an interim dividend of £1.05 per ordinary share of the Company (£8,427,040) to those Shareholders on the register of the Company as at 27 December 2013. As announced by the Board on 7 January 2014, due to the size of the intended dividend payment relative to the Company's reserves, it is necessary for the Company to increase its distributable reserves in order to effect the payment of such intended dividend in full.
An initial dividend of 62 pence per ordinary share of the Company (£4,976,000) has already been paid to qualifying Shareholders in satisfaction of part of the intended dividend payment. Accordingly, as announced by the Board on 7 January 2014, one purpose of the Capital Reduction is to create sufficient distributable reserves in order to, upon such Capital Reduction becoming effective, enable the payment of the balance of such intended dividend, representing 43 pence per ordinary share of the Company.
Accordingly, the background to and reasons for the Capital Reduction is to maximise the amount of the Company's distributable reserves to deal not only with the ability for the Company to fulfil its intention in making a payment of the balance of the intended dividend of £1.05 per ordinary share of the Company originally announced in December 2013, but also to create further distributable reserves in order to permit any potential dividend payments or share purchases that the Company may wish to make following future realisations of other investments.
As a result of the Capital Reduction, any future profits of the Company earned after the date on which the Capital Reduction takes effect would be available for the Directors to use for the purposes of buying back ordinary shares of the Company and/or paying dividends (should circumstances in the future make it desirable to do so).
Following the implementation of the Capital Reduction, there will be no change in the number of ordinary shares of the Company in issue. No new share certificates will be issued as a result of the Capital Reduction.
3 The Capital Reduction
The Company does not have sufficient distributable reserves to effect the Board's proposals to pay dividends, buy back ordinary shares of the Company and/or to return cash to Shareholders, should it be considered desirable to do so in the future. The Board therefore proposes that the Capital Reduction be effected in order to increase the distributable reserves of the Company.
It is proposed that:
· the amount standing to the credit of the Company's merger reserve in the sum of £2,044,726.31 is capitalised by way of a bonus issue of newly created Capital Reduction Shares;
· the newly created Capital Reduction Shares are cancelled;
· the amount standing to the credit of the Company's share capital redemption reserve (such amount being, as at 30 June 2013, £1,409,004 is cancelled; and
· the share capital of the Company be reduced from £4,815,451.20 divided into 8,025,752 ordinary shares of 60 pence each, to £80,257.52 divided into 8,025,752 ordinary shares of 1 pence each, and that the resulting sum of £4,735,193.68 be credited to the distributable reserves of the Company.
In addition to the approval by the Shareholders of the Resolutions, the Capital Reduction requires the approval of the Court. Accordingly, following approval of the Capital Reduction by Shareholders, an application will be made to the Court in order to confirm and approve the Capital Reduction. The Capital Reduction, if approved by the Court, will create realised profits of £8,188,924.
In seeking the Court's approval of the Capital Reduction, the Court is likely to require protection for the creditors (including contingent creditors) of the Company whose debts remain outstanding on the relevant dated, except in the case of creditors which have consented to the Capital Reduction. Any such creditor protection may include seeking the consent of the Company's creditors to the Capital Reduction or the provision by the Company to the Court of an undertaking to deposit a sum of money into a blocked account created for the purpose of discharging the non-consenting creditors of the Company. The Company currently owes no more than £45,000 to its creditors and has a provision in its audited accounts for the financial period ended 30 June 2013 of £2,554,000 in respect of carried interest due by the Company and its subsidiary, Avanti Partners NV, to Odyssey Partners Limited in connection with the management of the group's portfolio. Following the payment to Odyssey Partners Limited of part of such outstanding carried interest, there is, a contingent liability in the sum of £1,640,000 that remains provided for as owing to Odyssey Partners Limited. This amount is based on the remaining investments realising proceeds which are equivalent to the values as reflected in the audited accounts for the financial period ended 30 June 2013. As at the date of this announcement, consent to the Capital Reduction has been obtained from Odyssey Partners Limited in respect of such amount.
It is anticipated that the initial directions hearing in relation to the Capital Reduction will take place on 13 March 2014, with the final Court Hearing taking place on 26 March 2014 and the Capital Reduction becoming effective on the following day, following the necessary registration of the Court Order at Companies House. Thereafter, the Company intends to make arrangements to immediately declare and pay the 43 pence per share being the balance of the £1.05 per share referred to previously in this announcement.
Other than the intended dividend referred to in paragraph 2 above, the Capital Reduction itself will not involve any distribution or repayment of capital or share premium by the Company and will not reduce the underlying net assets of the Company. The distributable reserves arising on the Capital Reduction will, subject to the discharge of any undertakings required by the Court as explained below, support the Company's ability to buy back ordinary shares of the Company and/or pay dividends, should circumstances in the future make it desirable to do so.
The Board reserves the right to abandon or to discontinue (in whole or in part) the application to the Court in the event that the Board considers that the terms on which the Capital Reduction would be (or would be likely to be) confirmed by the Court would not be in the best interests of the Company and/or the Shareholders as a whole. The Directors have undertaken a thorough and extensive review of the Company's liabilities (including contingent liabilities) and consider that the Company will be able to satisfy the Court that, as at the date (if any) on which the Court Order relating to the Capital Reduction and the statement of capital in respect of the Capital Reduction have both been registered by the Registrar of Companies at Companies House and the Capital Reduction therefore become effective, the Company's creditors will be sufficiently protected.
4 Share Buy Back
In order to facilitate a Share Buy Back at a future date, the Board is seeking the authority of Shareholders to enable the Company to purchase ordinary shares of the Company in the market in accordance with the Act. The terms of the Share Buy Back Authority are set out in full in Resolution 2 as set out in the Notice of General Meeting.
The Share Buy Back Authority replaces the existing share buy back authority granted to the Directors at the Company's last annual general meeting held on 12 December 2013 in order to reflect a reduction in the minimum price that can be paid for an ordinary share of the Company from its current nominal value of 60 pence to 1 pence. The Share Buy Back Authority will be limited to a maximum of 802,500 ordinary shares of the Company (representing approximately 10 per cent. of the total issued ordinary share capital of the Company as at the date of this announcement). Ordinary shares so purchased may be cancelled or held as treasury shares. The authority will expire at the end of the next Annual General Meeting of the Company or 18 months from the passing of Resolution 2, whichever is the earlier. The Directors intend to seek renewal of the Share Buy Back Authority at future Annual General Meetings of the Company.
The minimum price that can be paid for an ordinary share of the Company is 1 pence, which will be the nominal value of an ordinary share of the Company following the Capital Reduction. The maximum price that can be paid is 5 per cent. over the average of the middle market prices for an ordinary share of the Company, derived from the Daily Official List of the London Stock Exchange, for the five business days immediately before the day on which the ordinary share is contracted to be purchased. The Directors intend to exercise this right only when, in light of the market conditions prevailing at the time and taking into account all relevant factors (for example, the effect on earnings per share), they believe that such purchases are in the best interests of the Company and Shareholders generally. The overall position of the Company will be taken into account before deciding upon this course of action. The decision as to whether any such ordinary shares of the Company bought back will be cancelled or held in treasury will be made by the Directors on the same basis at the time of the purchase.
5 The Capital Reduction Bonus Issue and the rights of the Capital Reduction Shares
It is proposed to capitalise the sum of £2,044,726.31 standing to the credit of the Company's merger reserve by applying that sum in paying up in full new Capital Reduction Shares prior to the Court Hearing (such capitalisation to take effect at the Capital Reduction Record Time), and allotting and issuing such Capital Reduction Share by way of a bonus issue to the persons at that point holding ordinary shares of the Company on the basis of one Capital Reduction Share for every one ordinary share of the Company held at the Capital Reduction Record Time.
The Capital Reduction Shares will not be admitted to trading on the Main Market of the London Stock Exchange, AIM or any other market. No share certificates will be issued in respect of the Capital Reduction Shares. The Capital Reduction Shares will have extremely limited rights. In particular, the Capital Reduction Shares will carry no rights to participate in the profits of the Company and no rights to participate in the Company's assets, save on a winding-up. The Capital Reduction Shares will be transferable, but no market will exist in them and it is anticipated that the Court will confirm their cancellation at the Court Hearing on the day immediately after the date on which they have been issued.
The capitalisation of the merger reserve is needed as an additional step since the Court only has the power to reduce share capital and other statutory reserves, including share premium and capital redemption reserves. Hence, in order to utilise the merger reserve in the Capital Reduction, it is necessary to convert that reserve into share capital (the new Capital Reduction Shares) and thereafter to cancel the Capital Reduction Shares.
6 Takeover Code
Under Rule 9 of the Takeover Code, any person who acquires an interest (as such term is defined in the Takeover Code) in shares which, taken together with the shares in which he and persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights in a company that is subject to the Takeover Code is normally required to make a general offer to all of the remaining shareholders to acquire their shares. Similarly, when any person, together with any persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent. but does not hold shares carrying more than 50 per cent. of the voting rights of such a company, a general offer will normally be required if any further interests in shares are acquired by such a person. Such an offer would have to be made in cash at a price not less than the highest price paid by him, or by any member of the group of persons acting in concert with him, for any interest in shares in the Company during the 12 months prior to the announcement of the offer.
Under Rule 37 of the Takeover Code, any increase in the percentage holding of a shareholder which results from a company buying-back its own shares will also be treated as an acquisition for the purposes of Rule 9 of the Takeover Code. Where, as a result of such an increase, a shareholder comes to exceed the limits in Rule 9 of the Takeover Code referred to above, the shareholder will not normally incur an obligation to make a general offer unless the shareholder is a director, or the relationship of the shareholder with any one or more of the directors is such that the shareholder is, or is presumed to be, acting in concert with any of the directors. However, an obligation to make a general offer may be imposed if the relevant shareholder (or any relevant member of a group of persons acting in concert) acquires an interest in shares at a time when such shareholder had reason to believe that a buy back of shares by the company would take place.
In situations where the directors of a company are aware that a buy back of shares by that company would otherwise give rise to an obligation for a shareholder (or group of shareholders acting in concert) to make a general offer, the board of directors should ensure that an appropriate resolution to approve the waiver of this obligation is put to the company's independent shareholders prior to implementation of the relevant buy back of shares as a pre-condition to its implementation.
7 Taxation
The following comments are intended as a general guide only and relate only to certain UK tax consequences of receiving the Capital Reduction Shares under the Capital Reduction Bonus Issue. The comments are based on current legislation and HM Revenue & Customs practice, both of which are subject to change, possibly with retrospective effect. These comments deal only with Shareholders who are resident for taxation purposes in the UK, who are the absolute beneficial owners of ordinary shares of the Company and who hold them as an investment and not on trading account. They do not deal with the position of certain classes of Shareholders, such as dealers in securities, insurance companies, collective investment schemes or persons regarded as having obtained their ordinary shares in the Company by reason of employment.
Capital Reduction Bonus Issue and Capital Reduction
The Capital Reduction Bonus Issue should be treated as a "reorganisation" for the purposes of UK taxation of chargeable gains ("CGT "), so that a Shareholder should not be treated as making a disposal or part disposal of his ordinary shares in the Company for CGT purposes upon receipt of the Capital Reduction Shares. Instead, the Capital Reduction Shares will be treated as the same asset, acquired at the same time, as his ordinary shares in the Company. On the basis that the Capital Reduction Shares will be treated as being paid up for "new consideration" received by the Company, the issue of the Capital Reduction Shares should not give rise to any liability to United Kingdom income tax (or corporation tax) in a Shareholder's hands.
Due to the fact that the Capital Reduction Shares:
· have no voting rights or rights to income;
· have no market; and
· at the time issued, it is anticipated that the Capital Reduction Shares will be cancelled for no payment on the day immediately following the date of their issue,
the market value of the Capital Reduction Shares is likely to be nil for the duration of their existence. The CGT base cost of the Capital Reduction Shares and ordinary shares of the Company should be calculated by apportioning the base costs of the ordinary shares between the Capital Reduction Shares and the ordinary shares based on their respective market values. Consequently the issue of the Capital Reduction Shares should not impact the base cost of the ordinary shares, and there should be no tax charge (nor any allowable loss) on the cancellation of the Capital Reduction Shares.
Stamp Duty and Stamp Duty Reserve Tax ( "SDRT ")
No stamp duty or SDRT will be payable on the issue of the Capital Reduction Shares.
The information on taxation set out in this section is a general guide only and is not intended to be, and should not be construed to be, legal or taxation advice to any particular Shareholder. Any Shareholder who has any doubt about his own taxation position, whether regarding CGT or otherwise, or who is subject to taxation in any jurisdiction other than the UK should consult his professional taxation adviser immediately.
8 The General Meeting
Set out at the end of the Circular is a notice convening the General Meeting to be held on 5 March 2014 at the offices of Berwin Leighton Paisner LLP, Adelaide House, London Bridge, London EC4R 9HA at 11 a.m., at which the Resolutions will be proposed.
Resolution 1, which will be proposed as a special resolution, is to approve the Capital Reduction. Resolution 2, which will be proposed as a special resolution, is to authorise the Share Buy Back.
9 Action to be taken
A Form of Proxy for use by Shareholders at the General Meeting is appended at the end of the Circular. Whether or not you intend to attend the General Meeting, you are requested to complete and sign the Form of Proxy in accordance with the instructions printed thereon and to return it, using the reply paid envelope provided, to the Registrars, Capita Asset Services, PXS, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU as soon as possible, but in any event so as to be received by no later than 11.00 a.m. on 3 March 2014. The completion and return of a Form of Proxy will not preclude Shareholders from attending the General Meeting and voting in person should they so wish.
10 Recommendation
The Directors consider the Capital Reduction and Share Buy Back Authority to be in the best interests of the Company and its Shareholders as a whole and, accordingly, unanimously recommend Shareholders to vote in favour of the Resolutions to be proposed at the General Meeting as they intend to do in respect of their beneficial holdings amounting, in aggregate, to 1,142,363 ordinary shares of the Company, representing approximately 14.2 per cent. of the existing issued ordinary share capital of the Company.
11 Definitions
The following definitions apply throughout this announcement unless the context otherwise requires:
"Act " | the Companies Act 2006 (as amended) |
"AIM " | the AIM Market operated by the London Stock Exchange |
"AIM Rules " | the AIM Rules for Companies published by the London Stock Exchange from time to time |
"Capita Asset Services " or "Registrars " | Capita Asset Services Limited, registrars to the Company |
"Capital Reduction " | the proposed cancellation of the Company's capital redemption reserve account and the Capital Reduction Shares and the reduction of the Company's share capital pursuant to Resolution 1 as set out in the Notice of General Meeting |
"Capital Reduction Bonus Issue " | the bonus issue of one Capital Reduction Share for every one ordinary share of the Company held by each Shareholder on the register of members of the Company at the Capital Reduction Record Time in order to facilitate the Capital Reduction as described in this announcement |
"Capital Reduction Record Time " | 6.00 p.m. on the date immediately preceding the date of the Court Hearing |
"Capital Reduction Shares " | the B ordinary shares in the capital of the Company to be created by the Capital Reduction Bonus Issue, whereby the nominal value of such B ordinary shares is equal to the sum that is obtained by dividing the number of B ordinary shares to be issued into £2,044,726.31, being the amount standing to the credit of the Company's merger reserve |
"Company " | Avanti Capital plc, a company incorporated and registered in England and Wales under the Companies Act 1985 with registered number 03319365 |
"Court " | the High Court of Justice in England and Wales |
"Court Hearing " | the hearing by the Court to confirm the Capital Reduction |
" Court Order " | the order of the Court confirming the Capital Reduction |
"Directors " or "Board " | the directors of the Company or any duly authorised committee thereof |
"Form of Proxy " | the form of proxy for use by Shareholders in connection with the General Meeting and which is appended at the end of the Circular |
"FSMA " | the Financial Services and Markets Act 2000 (as amended) |
"General Meeting " | the general meeting of the Company to be held at the offices of Berwin Leighton Paisner LLP, Adelaide House, London Bridge, London EC4R 9HA at 11 a.m. on 5 March 2014, or any adjournment thereof, notice of which is set out at the end of the Circular |
"Group " | the Company, its subsidiaries and its subsidiary undertakings |
"London Stock Exchange " | London Stock Exchange plc |
"Notice of General Meeting " | the notice convening the General Meeting and which is set out at the end of the Circular |
"Prospectus Rules " | the Prospectus Rules brought into effect on 1 July 2005 pursuant to Commission Regulation (EC) No. 809/2004 |
"Resolutions " | the resolutions to be proposed at the General Meeting as set out in the Notice of General Meeting |
"Share Buy Back " | a buy back of shares by the Company pursuant to the Share Buy Back Authority |
"Share Buy Back Authority " | the proposed authority of the Company to make market purchases of ordinary shares of the Company pursuant to Resolution 2 as set out in the Notice of General Meeting (and any equivalent authority granted by the Shareholders from time to time) |
"Shareholders " | the registered holders of ordinary shares of the Company |
"Takeover Code " | the City Code on Takeovers and Mergers |
"UK " | the United Kingdom of Great Britain and Northern Ireland |
END
This information is provided by RNS
|
distributed by
|
