Merger
23 3월 2007 - 2:02AM
UK Regulatory
RNS Number:5559T
Rutland Trust PLC
22 March 2007
Not for release, publication or distribution, in whole or in part, in or into
the United States, Canada, Australia or Japan.
22 March 2007
August Equity Trust plc
Rutland Trust PLC
Proposals regarding the merger of August Equity Trust plc and Rutland Trust PLC
Introduction
The boards of August Equity Trust plc ("August") and Rutland Trust PLC ("Rutland
") announce today proposals for a merger of the two companies. The merged
company will be named New Star Private Equity Investment Trust PLC ("NSPEIT")
and will be managed by New Star Asset Management Limited ("New Star"). NSPEIT
will have an investment policy to invest in a diversified portfolio of private
equity funds, predominantly exposed to mid-market buyout funds in the UK and
Europe. NSPEIT's initial portfolio will comprise existing investments from both
August and Rutland and investments in listed private equity vehicles. In
addition, NSPEIT will have commitments to existing, and seek to make commitments
to new, private equity limited partnerships ("LPs").
The merger will also give shareholders of both companies the opportunity to
realise a significant portion of their holdings for cash at a price which is
close to their respective prevailing net asset values per share.
Background to the merger
The respective boards of both companies have for some time been reviewing the
strategic options available.
Each board is aware that a number of shareholders of each company wish to
continue with exposure to private equity whilst others wish to realise their
interests at a price at or near to net asset value.
The board of Rutland announced in September 2006 that it was considering
broadening the scope of the investment policy in a way which will deploy the
financial resources of Rutland more quickly than through a commitment to a
single private equity fund.
The board of August announced in November 2006 that it was committed to
exploring a number of options available to August including a merger proposal
from a fund of funds.
The proposals
The merger seeks to create a diversified fund of private equity funds vehicle
benefiting from the combined management expertise of New Star, August Equity
Limited and Rutland Partners LLP. It is expected that such a vehicle should be
attractive to a wide audience of potential investors who wish to access private
equity returns. The rating of the shares in the market should be enhanced with
a more fully invested portfolio and the ongoing support of New Star.
August Equity Trust plc
Under the proposals, August will implement a tender offer at a 3% discount to
formula asset value. Formula asset value will be August's net asset value
adjusted for associated transaction costs, a full provision for stamp duty on
the repurchase of any shares and the relevant proportion of the termination fee
of its existing investment manager, August Equity Limited ("AEL"). Shareholders
will have a basic entitlement to tender their shares for up to 40% of their
holding. Shareholders may tender more than their basic entitlement but such
tenders will only be satisfied to the extent that (i) other shareholders tender
less than their basic entitlement or (ii) shares are acquired by shareholders
and new investors in a matching purchase facility. Under the matching purchase
facility, shareholders will be able to purchase shares at the tender price to
the extent that there are shares available to be so purchased through valid
tenders.
New Star and JPMorgan Cazenove will seek to place all or some of the shares
tendered. New Star have agreed to invest or procure investment via the matching
facility sums which should result in August having net assets of at least #90
million. To the extent the shares are not placed they will be repurchased by
August for cancellation up to a level equal to the overall basic entitlement.
August, which will be renamed New Star Private Equity Investment Trust PLC, will
then be the rollover option for shareholders of Rutland under a scheme of
reconstruction under s.110 Insolvency Act to be implemented by Rutland.
The Board of August has, conditional upon shareholder approval of the proposals,
agreed a termination fee of #0.84 million (plus VAT) with AEL in respect of the
year from 3 November 2006. New Star has agreed to reimburse August for the
entire termination fee remaining unpaid at the time of implementation of the
Proposals.
The existing August directors will remain in place and John Duffield, Chairman
of New Star, will be appointed on completion of the proposals as a
non-independent director.
Rutland Trust PLC
Rutland will enter into a Scheme of Reconstruction under s.110 Insolvency Act
(the "Scheme"), whereby shareholders will have the option to roll their holdings
into NSPEIT or to elect for cash at the outset in respect of all or part of
their holdings. Shareholders who make no election at all will be deemed to have
elected to roll their holdings into NSPEIT (subject to relevant securities
laws).
Rutland will appoint a liquidator to administer the reconstruction. The
liquidator will distribute cash to those shareholders electing to receive cash
under the Scheme and will transfer certain assets to NSPEIT in exchange for
NSPEIT shares which will be issued directly to the relevant Rutland shareholders
according to an exchange ratio based on the relative formula asset value per
share of each of Rutland and August. Formula asset value of Rutland will be net
asset value as adjusted for costs incurred by Rutland under the proposals and
adjusted for any retention made by the liquidator. Formula asset value for
August will be net asset value as adjusted for the effects of the tender offer
and adjusted for an accrual for certain costs incurred by August in respect of
the proposals. The remainder of August's costs will be incurred by the enlarged
group following the implementation of the proposals.
The assets transferred to NSPEIT in consideration of the issue of NSPEIT shares
will comprise Rutland's private equity holdings in The Rutland Fund and, to the
extent required, cash or near cash instruments. In the event that the rollover
is insufficient to result in all of Rutland's private equity holdings in The
Rutland Fund being transferred, NSPEIT will purchase for cash the private equity
holdings which otherwise would not be transferred.
In February 2007, Rutland announced that it had exchanged contracts for the sale
of its investment property, Rutland House ("RH"). It is intended that the merger
will complete following completion of the sale of RH (which is not expected to
occur until the end of June 2007) and that the proceeds of the sale will
therefore be reflected within the formula asset value of Rutland. If the sale
of RH has not been completed prior to completion of the merger, RH shall remain
with Rutland's liquidator and shall not pass to NSPEIT pursuant to the Scheme.
Any proceeds subsequently realised on the sale of RH will be distributed to the
Rutland shareholders pro rata to their entitlements, regardless of whether they
elect for cash or rollover their holdings into NSPEIT. Any retention made by
the liquidator which is subsequently deemed unnecessary will also be distributed
in this way.
Costs
Rutland's costs under the proposals, which are estimated at #0.65 million
(inclusive of VAT), will be shared across its shareholders. August's costs
under the proposals are estimated at #0.8 million (inclusive of VAT) of which
#0.46 million will be borne by all August shareholders prior to the merger with
Rutland, and the remaining #0.34 million will be incurred by the enlarged group
following the implementation of the proposals.
Financial Effects of Proposals
The net asset value of both August and Rutland will be calculated at the latest
practicable date prior to the implementation of the proposals. Each of August
and Rutland's net asset values will be reviewed by their respective auditors.
By way of illustration only, based on August's published NAV at 31 December 2006
of 330.4 pence per share and Rutland's NAV of approximately 69 pence per share
as referred to in its preliminary announcement of results to 31 December 2006
and based on the relevant assumptions set out in Appendix I, the effect of the
proposals on the net asset value of August shareholders either successfully
tendering all their shares or not tendering any of their shares and on Rutland
shareholders either electing entirely for cash or their entire holding rolling
into NSPEIT would have been as follows:
August Shareholders
Successful election of entire holding Effect on net asset value (%)
Tender offer -3.8%
Continuation +0.2%
Rutland Shareholders
Successful election of entire holding Effect on net asset value (%)
Cash -0.6%
NSPEIT -1.0%
NSPEIT
Following the merger, New Star will take over the management of the portfolio.
The name of the ongoing vehicle will be New Star Private Equity Investment Trust
PLC. NSPEIT will have an investment policy to invest in a diversified portfolio
of private equity funds, predominantly exposed to mid-market buyout funds in the
UK and Europe. NSPEIT will also invest in listed private equity vehicles.
It is expected that NSPEIT will have an initial size of at least #90 million and
that the portfolio will be fully invested shortly after implementation of the
proposals thereby minimising the effects of any cash drag.
NSPEIT will be managed by an experienced team at New Star led by Paul Craig who
has invested in listed private equity vehicles since 2003 and generated a
compound annual return from such investments of 21.7 per cent. from 1 September
2003 to 28 February 2007. An advisory committee will provide support to New Star
through sourcing and assessing proposed investments in private equity limited
partnerships. The advisory committee will be chaired by Michael Langdon,
Chairman of Rutland Partners LLP.
Immediately following the merger, prior to any further investments or
commitments to private equity vehicles it is expected that NSPEIT's unlisted
portfolio will comprise the investments listed below:
(estimated value*) #m
August Equity managed funds 29
The Rutland Fund 24
Other Limited Partnerships 13
66
*Based on estimated valuations as at close of business on 21 March 2007
In addition it is expected that NSPEIT will have commitments totalling #73
million, comprising remaining commitments in existing funds of #33 million and
new commitments of #30 million to August Equity Partners II and #10 million to
Rutland Fund II. NSPEIT expects to arrange borrowing facilities to allow for an
over-commitment policy. In addition, investments will be made at the outset in
listed private equity vehicles which may be realised to meet commitments to
limited partnerships.
New Star will be entitled to a basic management fee of 1.25 per cent per annum
of the assets invested in limited partnerships and direct private equity
interests and 0.75 per cent per annum on all other assets. New Star will also
be entitled to a performance fee of 10 per cent of any return in excess of 8 per
cent per annum. The performance fee will be subject to a high watermark
provision such that only growth in the total return on net asset value per share
from a previous high point will attract a performance fee. The management
agreement will be for an initial period of 2 years with a rolling 12 month
notice period thereafter.
Benefits of the proposals
The boards of both August and Rutland believe the merger will have the following
benefits for their shareholders:
* investment in a listed vehicle with a fully invested, more diversified
portfolio exposed to leading private equity funds and benefiting from the
combined experience of New Star, August Equity and Rutland Partners;
* a trust benefiting from New Star's marketing support;
* a continuation vehicle which should not trigger a liability to UK
capital gains tax for those shareholders who wish to remain invested; and
* in the case of Rutland, shareholders who choose to do so can realise
their interests at around net asset value. In the case of August, shareholders
can realise a significant portion of their holding at a small discount to net
asset value. In both cases, this will be at a significant premium to current
share price.
Timetable and approval
The Boards of each company will publish documents containing detailed
information on the proposals as soon as practicable following regulatory
approval of the documentation. It is expected that the proposals will become
effective at the end of June 2007. The Boards of August and Rutland have each
received letters of intent from shareholders representing in excess of 60% of
August's share capital and in excess of 50% of Rutland's share capital,
respectively, to support the proposals.
Enquiries
Oliver Stocken 020 7432 3714
Chairman, Rutland Trust PLC
Michael Langdon 020 7556 2600
Chairman, Rutland Partners LLP
Ravi Anand 020 7225 9200
New Star Asset Management Limited
Lough Callahan 020 7951 2000
Ernst & Young LLP
JPMorgan Cazenove Limited, which is regulated in the United Kingdom by the
Financial Services Authority, is acting for August and no-one else in connection
with the proposals and will not be responsible to anyone other than August for
providing the protections afforded to clients of JPMorgan Cazenove Limited or
for providing advice in relation to the proposals.
Ernst & Young LLP, which is regulated in the United Kingdom by the Financial
Services Authority, is acting for Rutland and no-one else in connection with the
proposals and will not be responsible to anyone other than Rutland for providing
the protections afforded to clients of Ernst & Young LLP or for providing advice
in relation to the proposals.
This announcement does not constitute, or form any part of, any offer for, or
solicitation of any offer for, securities. Any acceptance or other response to
the proposals should be made on the basis of the information contained in the
formal documentation to be dispatched to shareholders of August and Rutland in
due course.
Appendix I
Assumptions underlying the financial effects of the proposals
1. The fixed costs and expenses incurred by August in respect of the
tender offer are #0.46m (inclusive of VAT), the further costs and expenses
incurred by August and charged to the enlarged company following implementation
of the proposals are #0.34m (inclusive of VAT).
2. Stamp duty of 0.5% is charged to August on the consideration of the
shares bought back.
3. Holders of 40% of August's shares elect to tender at the tender price.
4. New Star procure investors under the matching purchase facility such
that 28% of August's shares are bought back by August under the tender offer.
5. August's NAV is 330.4 pence per share as per its published NAV at 31
December 2006.
6. Rutland's NAV is 69.0 pence per share which is based on the NAV of
approximately 69 pence as reported in the preliminary announcement of results
for the year ended 31 December 2006.
7. No provision is made in respect of any amount which the liquidator may
retain as part of Rutland's Scheme of Reconstruction.
8. Shareholders in Rutland roll their holding into August to the value of
#30 million.
9. The fixed costs and expenses incurred by Rutland in respect of the
Scheme of Reconstruction are #0.65 million (inclusive of VAT).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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