THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR
IN PART, IN, INTO OR FROM THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA OR
JAPAN OR ANY JURISDICTION WHERE TO DO THE SAME WOULD CONSTITUTE A VIOLATION OF
THE RELEVANT LAWS OF SUCH JURISDICTION
13 OCTOBER 2008
RECOMMENDED PROPOSALS
by
SPARK VCT 2 PLC
for a merger by way of a scheme of arrangement with
SPARK VCT 3 PLC
Introduction
The Boards of SPARK VCT 2 plc ("SVC2") and SPARK VCT 3 plc ("SVC3") are pleased
to announce the formal agreement of the terms and conditions of a Merger to be
effected by way of a Scheme of Arrangement pursuant to Part 26 of the 2006 Act.
SVC2 and SVC3 are both listed venture capital trusts with similar investment
objectives and investment policies, and are both managed by SPARK Venture
Management Limited ("SPARK" or the "Manager"). SPARK will continue to manage
the Enlarged SVC2 after the Merger and has indicated its support for the
Merger.
Summary of terms of the Merger
Under the terms of the Merger, SVC3 Shareholders will receive New SVC2 Shares,
the number of which will be worked out according to detailed calculations set
out in the Scheme based on the relative Formula Asset Values of SVC2 and SVC3.
These Formula Asset Values will be based on the net asset value of the
appropriate company adjusted to take account of the expenses of the Merger,
allocated on the basis of an equal payback period for shareholders in each VCT.
Fractions of New SVC2 Shares will not be allotted and SVC3 Shareholders'
entitlements will be rounded down to the nearest whole number of New SVC2
Shares.
Following the Merger, it is intended that a transfer agreement will be entered
into between SVC2 and SVC3 pursuant to which the assets and liabilities of SVC3
will be transferred to the Enlarged SVC2.
The Scheme will require the approval of SVC3 Shareholders at the SVC3 General
Meeting and at the separate Court Meeting. The Scheme must also be sanctioned
by the Court. Owing to the size of SVC3 in relation to SVC2, the Merger
requires the approval of SVC2 Shareholders.
Once the Scheme becomes effective, it will be binding on all SVC3 Scheme
Shareholders, whether or not they voted in favour of the resolution relating to
the Scheme to be proposed at the SVC3 Court Meeting and the SVC3 General
Meeting. The Scheme is expected to become effective and the Merger completed by
27 November 2008.
Following completion of the Merger, SVC2 will procure that SVC3 will apply for
the delisting of its shares from the Official List of the UK Listing Authority
and for the removal from trading of such shares on the London Stock Exchange's
market for listed securities. It is expected that dealings in SVC3 Shares will
be suspended with effect from the opening of business on 26 November 2008. The
last day of dealings in SVC3 Shares on the London Stock Exchange prior to
suspension is expected to be 25 November 2008 and no transfers of shares will
be registered after 6.00 p.m. on that date.
SVC2 General Meeting, SVC3 General Meeting and SVC3 Court Meeting
The SVC2 Board will shortly be despatching a circular to SVC2 Shareholders
giving notice of the SVC2 General Meeting to be held at 11.30 a.m. on 12
November 2008.
The SVC3 Board will also shortly be despatching a circular to SVC3 Shareholders
detailing the terms of the Scheme and giving notice of the SVC3 Court Meeting
to be held at 10.30 a.m. on 12 November 2008 and the SVC3 General Meeting to be
held at 10.45 a.m. on 12 November 2008.
The SVC2 General Meeting, SVC3 Court Meeting and SVC3 General Meeting will all
be held at Central Court, 25 Southampton Buildings, London, WC2A 1AL.
A Prospectus is also being sent to SVC2 Shareholders and SVC3 Shareholders
relating to the issue of up to 40,000,000 New SVC2 Shares.
Summary expected timetable of the Merger
SVC3 Court Meeting 10.30 a.m. on 12 November 2008
SVC3 General Meeting 10.45 a.m. on 12 November 2008
SVC2 General Meeting 11.30 a.m. on 12 November 2008
FAV Calculation Date 19 November 2008
Last day of dealings in SVC3 Shares 25 November 2008
SVC3 Shares suspended from trading on London 7.30 a.m. on 26 November 2008
Stock
Exchange
Court hearing to consider sanctioning Scheme 26 November 2008
Scheme Record Date 6.00 p.m. on 26 November 2008
Effective date of Merger 27 November 2008
Dealings commence in New SVC2 Shares 8.00 a.m. on 27 November 2008
Cancellation of listing of SVC3 Shares 8.00 a.m. on 27 November 2008
Benefits of the Merger
SVC2 and SVC3 are both listed venture capital trusts with similar investment
objectives and investment policies. There is a substantial degree of overlap in
their venture capital investment portfolios. Since May 2007, when SPARK
Ventures plc acquired the former Quester management company, both have been
under the management of the new team within SPARK.
In the view of the SVC2 Board and the SVC3 Board the Merger has become
desirable because both VCTs have suffered a decline in net asset values over
recent years bringing them to a size where by merging they could become more
efficient as investment vehicles. With this reduction in the net asset values,
fixed operating costs become disproportionate to the assets managed. In
addition, the financial resources required to ensure that good investments are
supported, and exits are achieved at the optimal point in the economic cycle,
may be curtailed, thereby increasing the risk of continued underperformance.
The SVC2 Board and the SVC3 Board consider that the principal benefits of the
Merger will be:
* the introduction of cost savings from reduced duplication of functions
(such as board costs, audit and legal fees, registrars' and brokers' fees)
and allowing the Manager to benefit from sufficient economies to be able to
alter the basis of charge of the investment management fee, which will be
reduced to the extent that the annual running costs of the Enlarged SVC2
exceed 3.0% of year end net assets; and
* the increased scale of the combined funds should permit a smoother flow of
realisations and allow the Manager additional flexibility in the allocation
of financial resources towards follow on investments, new investments or to
provide the board of directors of the Enlarged SVC2 additional flexibility
to determine the payment of dividends.
Cost savings
The running costs of SVC2 in its last accounting period ended 31 December 2007
were equivalent on an annualised basis to �943,000 (excluding irrecoverable
VAT), including �687,000 in respect of the investment management fee
(calculated at 2.5% of net assets) and �256,000 in respect of other fixed
costs.
The running costs of SVC3 in its last accounting period ended 31 December 2007,
amounted to �538,000 (excluding irrecoverable VAT), representing 3.5% of the
net assets as at the year end. The total included �304,000 in respect of the
investment management fee (calculated at 2.5% of net assets reduced to the
extent that the annual running costs of SVC3 exceeded 3.5% of the year end net
assets) and �234,000 in respect of other fixed costs.
The Merger will facilitate the introduction of cost savings from reduced
duplication of functions in areas such as administrative and secretarial
services, directors' remuneration, audit fees, legal and professional fees
(including broker's fees), insurance and the fees of the UKLA, LSE and share
registrars. It is anticipated that savings in fixed running costs will amount
to �224,000 per annum (excluding savings in irrecoverable VAT) or �246,000
(including savings in irrecoverable VAT).
In addition, the Merger will allow the Manager to benefit from sufficient
economies to be able to alter the basis of charge of the investment management
fee for the Enlarged SVC2: this will continue to be calculated at 2.5% of net
assets but will be reduced to the extent that the annual running costs
(excluding irrecoverable VAT) of the Enlarged SVC2 exceed 3.0% of year-end net
assets. This is a benefit currently enjoyed by SVC3 but at a higher level (3.5%
of year-end net assets) and not enjoyed at all by SVC2.
With the benefit of the lower cap on the annual running costs (following the
alteration in the basis of charge of the investment management fee), the
overall running costs of the Enlarged SVC2 are estimated, on the basis of the
net assets of SVC2 and SVC3 at 30 June 2008, to amount to �1,022,000 (excluding
irrecoverable VAT) or 3.0% of the pro forma net assets of the Enlarged SVC2.
This compares with the present figure of 3.5% of net assets for SVC3 on its
own.
Increased scale of the combined funds
Upon completion of the Merger, it is expected that the net assets of the
Enlarged SVC2, after the costs of the Merger, will be �34.1 million.
Costs of the Proposals
The costs of the Proposals are estimated to amount to approximately �450,000
(inclusive of VAT). If the Merger is successful, the costs of the Merger will
be split between SVC2 and SVC3 in such a way that the payback period of the
Merger, being the time taken to recoup the costs of the Merger through savings
in annual running costs, will be the same for the shareholders in each VCT.
This will form the basis for the FAV calculation.
If the Merger should, for any reason, not successfully complete, each of SVC2
and SVC3 would bear the costs incurred in respect of the Merger in the manner
set out above.
Assuming that the estimated cost savings are achieved, the Merger is expected
to be beneficial to earnings once the Scheme costs have been recovered. It is
expected that costs of the Merger should be recovered out of savings in overall
running costs of the Enlarged SVC2 in approximately two years following
implementation.
Principal terms and conditions of the Merger
The principal conditions of the Scheme and the Merger are:
* the approval of the Scheme by a majority in number representing 75% in
value of the SVC3 Scheme Shareholders voting at the SVC3 Court Meeting;
* the passing at the SVC3 General Meeting of the special resolution required
to implement the Scheme and the associated reduction of capital;
* the passing, at the SVC2 General Meeting, of the resolution to approve the
Merger;
* no notice having been received by the SVC2 or SVC3 before 6.00 p.m. on the
day before the final Court hearing to approve the Scheme from HMRC which
indicates that either SVC2 or SVC3 may not remain as a venture capital
trust pursuant to the VCT Rules;
* the sanction (with or without modification) of the Scheme by the Court;
* the registration of the Court Order with the Registrar of Companies; and
* (i) the admission to the Official List of the New SVC2 Shares becoming
effective in accordance with the Listing Rules or the UK Listing Authority
agreeing to admit such shares to the Official List and (ii) the admission
to trading of the New SVC2 Shares becoming effective in accordance with the
rules of the London Stock Exchange or the London Stock Exchange agreeing to
admit such shares to trading.
As referred to above, the Scheme requires the sanction of the Court. The Court
hearing to sanction the Scheme and to confirm the capital reduction comprised
in the Scheme is expected to be held on 26 November 2008, subject to
satisfaction or waiver of the other Conditions. SVC2 will be represented by
counsel at the Court hearing so as to consent to the Scheme and to undertake to
the Court to be bound thereby.
The Merger will become effective upon the delivery to the Registrar of
Companies of office copies of the Court Order and its registration by the
Registrar of Companies. Unless the Scheme becomes effective by no later than 31
January 2009 or such later date, if any, as SVC2 and SVC3 may agree and the
Court may allow, the Scheme will not become effective and the Merger will not
proceed.
Appendix I contains further details on the conditions of the Merger and
implementation of the Scheme.
Formula Asset Values
The FAVs of SVC2 and SVC3 will be calculated in accordance with the terms of
the Scheme, a copy of which is available for inspection. In summary, the
formulae provide that the assets and liabilities of each of SVC2 and SVC3 will
be valued as at 30 June 2008 using the relevant VCT's unaudited financial
statements for the six month period to 30 June 2008 for this purpose, save
that:
* the value of investments listed or dealt in on a recognised stock exchange,
including AIM, will be calculated by reference to the middle market
quotations or prices as at the close of business on the FAV Calculation
Date or in the case of an investment listed or dealt in on Nasdaq by
reference to the average of the best bid and asked price on the FAV
Calculation Date and debt-related securities (including convertible
securities) will be valued at the middle market quotation or price as at
the close of business on the FAV Calculation Date; and
* where there has been an event in the period between 1 July 2008 and the FAV
Calculation Date which would require a revaluation of an investment in
accordance with the International Private Equity and Venture Capital
Valuation Guidelines or where there has been some other event in the period
between 1 July 2008 and the FAV Calculation Date, which in the reasonable
opinion of the SVC2 Board and the Board of SVC3 has had a material impact
on the value of an investment, then the value attributed to the investment
in the unaudited financial statements of the relevant company for the half
year to 30 June 2008 shall be adjusted as agreed between the SVC2 Board and
the Board of SVC3.
The actual FAVs will be determined for the purpose of the Scheme on or shortly
following the FAV Calculation Date, but before the Scheme becomes effective
(expected to be on 27 November 2008). It is therefore not possible until then
to specify the actual number of New SVC2 Shares to which the holders of SVC3
Shares will become entitled.
Share exchange ratio
The number of New SVC2 Shares which the holders of SVC3 Scheme Shares will
receive will be based on the relative Formula Asset Values of SVC2 and SVC3.
The Formula Asset Values will be determined for the purpose of the Scheme as at
the FAV Calculation Date which is expected to be 19 November 2008. It is
therefore not possible until then to specify the actual number of New SVC2
Shares to which the holders of SVC3 Scheme Shares become entitled.
At the close of business on 30 June 2008 (the date when the last unaudited NAVs
of the two VCTs prior to this announcement was made) SVC3's unaudited Net Asset
Value was approximately �14.1 million and SVC2's unaudited Net Asset Value was
approximately �20.4 million. Based on these figures and taking into account the
estimated expenses of the Merger, the net assets of the Enlarged SVC2 would be
approximately �34.1 million, equivalent to a net asset value of 43.6p per
share.
On this basis, had the FAV Calculation Date been 30 June 2008, the Merger would
have resulted in shareholders in SVC3 receiving 1,404 New SVC2 Shares for every
1,000 SVC3 Shares held. This equates to approximately 31.9 million New SVC2
Shares in aggregate, representing approximately 40.9 per cent. of the Enlarged
SVC2. On an illustrative basis this would be equivalent to a FAV of 61.3 pence
per SVC3 Share as at that date.
Information on SVC2
SVC2 is a venture capital trust established in November 2000. As at 30 June
2008, SVC2 held 22 venture capital investments (individual valuations of not
less than �100,000) including 16 unquoted and six quoted investments. The
aggregate unaudited valuation of the venture capital investments amounted to �
15.1 million and listed equity and fixed interest investments, cash and other
assets of �5.3 million as at that date. SVC2's unaudited gross asset value was
�20.9 million and its unaudited Net Asset Value as at 30 June 2008 was �20.4
million (44.3p per SVC2 Share). SVC2 has distributed cumulative dividends of
6.9p per SVC2 Share since its launch, the latest dividend having been paid as a
final dividend in respect of the year ended 31 December 2007 of 1p per share,
paid on 27 June 2008.
Information on SVC3
SVC3 is a venture capital trust established in December 2001. As at 30 June
2008, SVC2 held 21 significant venture capital investments (individual
valuations of not less than �100,000) including 17 unquoted and four quoted
investments. The unaudited aggregate valuation of the venture capital
investments amounted to �9.8 million and listed equity investments, cash and
other assets amounted to �4.3 million as at that date. As at 30 June 2008,
SVC3's unaudited gross asset value was �14.2 million and SVC3's unaudited Net
Asset Value was �14.1 million (61.9p per SVC3 Share). Cumulative dividends of
3.5p per SVC3 Share have been distributed since SVC2 was established, the
latest having been a final dividend of 1p per share in respect of the year
ended 31 December 2006, paid on 28 March 2007. The absence of dividend payments
since then reflects the lack of realisations during that period.
Investment policy of the Enlarged SVC2
The Enlarged SVC2 investment policy will remain unchanged, It will therefore
invest principally in a diversified venture capital portfolio, including
unquoted companies with good growth prospects and companies whose shares are
traded on AIM, and also in a portfolio of listed equities and fixed interest
securities.
In selecting new investments to add to the portfolio, when the availability of
cash resources permits, the SVC2 Directors and the Proposed Director expect
that the new team within SPARK will give greater emphasis to the identification
of later-stage venture capital opportunities and investments for which the
holding period may be expected to be less than the five or more years which was
typically the case previously.
Having regard to the particular experience and reputation of SPARK, the
programme of new investment of the Enlarged SVC2 may be expected to include,
within the TMT sector, a greater emphasis on opportunities in the digital media
and software applications sectors and a reduced exposure to `hardware'
investments which tend to involve longer holding periods and are typically
highly demanding in terms of capital requirements. In the healthcare sector,
for similar reasons, a reduced exposure to drug discovery and a greater
emphasis on areas such as medical devices and diagnostics may be expected.
It is expected that the emphasis will be on unquoted companies. Where
investment in an AIM traded company is being considered, the investment
decision will be made by reference to underlying risk and return criteria in
the Manager's area of expertise rather than against a plan for the building of
a quoted venture capital portfolio.
It is expected that fresh venture capital investments to be made by the
Enlarged SVC2 will generally be made alongside SPARK VCT plc (a second venture
capital trust managed by the Manager) and SPARK Ventures plc, the Manager's
parent company. The VCT Rules require that for a venture capital investment to
be a Qualifying Holding, no more than �1 million (in any one period, which
varies in length depending on when the investment is made, of between six and
12 months) may be invested in shares or securities issued by a Qualifying
Company to the VCT. The effect of this requirement could in certain
circumstances be perceived as a disadvantage of merging previously separate
VCTs. However, the SVC2 Directors and the Proposed Director believe that, given
the co-investment arrangements operated by the Manager and the limited capacity
for investment in the two separate VCTs, this requirement of the VCT Rules is
unlikely in practice to restrict the desirable development of the venture
capital portfolio of the Enlarged SVC2.
Investment management agreement
Following the Merger, the Enlarged SVC2 will continue to be managed by SPARK.
Conditional upon the Merger becoming effective, the existing investment
management agreement will be amended so that the investment management fee will
be reduced to the extent that the annual running costs (exclusive of
irrecoverable VAT) of the Enlarged SVC2 exceed 3.0% of year end net assets.
This is a benefit currently enjoyed by SVC3 at a higher level (3.5% of year end
net assets) and not currently enjoyed at all by SVC2. The agreement will
continue to be terminable by SVC2 or the Manager on a notice period the longer
of (i) twelve months and (ii) the period from the date on which notice is given
to 9 November 2010. If such notice is given on or after 9 November 2010, the
notice period will be twelve months.
Following completion of the Merger, SVC2 will procure that SVC3 will apply for
the cancellation of the listing of its shares from the Official List of the UK
Listing Authority and from trading of such shares on the London Stock
Exchange's market for listed securities. It is expected that dealings in SVC3
Shares will be suspended with effect from the opening of business on 26
November 2008 and that the listing of SVC3 Shares on the London Stock Exchange
will be cancelled on or around 27 November 2008. The last day of dealings in
SVC3 Shares on the London Stock Exchange prior to suspension is expected to be
25 November 2008 and no transfers of shares will be registered after 6.00 p.m.
on that date.
Performance incentive arrangement
The existing management performance incentive arrangements in each of SVC2 and
SVC3 are largely held by former members of the Quester management team who are
no longer employed by the Manager. These arrangements, which are structured
through the issue of loan notes by SVC2 and SVC3 which give an entitlement to
interest at five per cent. per annum and, provided the defined performance
targets have been achieved, to performance related interest payments. In
present circumstances it is unlikely for the performance targets to be met,
making the arrangements ineffective as a performance incentive. Accordingly it
is intended that the existing schemes will be brought to an end and the loan
notes subscribed for by the participants will be redeemed at par (together with
the related entitlement to accrued interest) but no performance related
payments will be made. It is expected that such redemptions will take place by
the date of the SVC2 General Meeting and SVC3 General Meeting.
Several holders of loan notes have entered into irrevocable undertakings in
favour of SVC2 and SVC3 (as appropriate) in respect of a variation to the loan
note instruments to permit the redemption of all of the loan notes in the
manner described above.
Dividend policy
It is expected that the payment of dividends by the Enlarged SVC2 will reflect
the progress of the venture capital portfolio. The amount of the dividend
payments will take account of a number of factors including the realisation of
investments, the availability of distributable reserves, the movement in Net
Asset Value per share of the Enlarged SVC2 and the requirements for investment
in fresh venture capital opportunities and for reserving for follow-on
investments. Subject to balancing these considerations, it is the intention to
distribute a proportion of any gains on investment realisations.
Owing to the nature of a VCT, dividends payable can vary considerably from time
to time depending both on the level of income received from investments and,
more significantly, on whether gains on disposal of investments have been made
by the VCT and the return achieved on the realisations. Accordingly, the level
of dividends will fluctuate and in some periods it is possible that no dividend
will be paid.
Share buy-back policy
It is expected that the Board of the Enlarged SVC2 will periodically review the
need for share buybacks. The purpose of share buy-backs is to satisfy demand
from those shareholders who seek to sell their shares, given that there is a
very limited secondary market for shares in venture capital trusts generally.
In line with the practice currently adopted by SVC2, the Enlarged SVC2 may be
able to buy back limited numbers of its shares from time to time. However its
ability to do so may be constrained by the level of its own liquid resources,
VCT specific legislation and the regulations of the UKLA.
Boards of directors
Enlarged SVC2
It has been agreed that, if the Merger becomes effective, Patrick Seely, a
director of SVC3, will be appointed to the Board of the Enlarged SVC2 and from
such time will be entitled to director's fees of �15,000 per annum in respect
of SVC2's current financial period and, in later periods, such amount as the
Enlarged SVC2's board shall determine. Patrick Seely currently receives
director's fees of �15,000 per annum as a director of SVC3. Robert Wright, the
Chairman of SVC2, has agreed to remain in that position and Alan Lamb and Jay
Patel will continue to be directors, whilst Rudy Burger has retired.
SVC3
Following implementation of the Merger, Michael Inwards and Sir Colin Southgate
have agreed to retire from the SVC3 Board. For administrative purposes, Patrick
Seely will remain as a director of SVC3 along with Jay Patel, who will be
appointed in place of Andrew Carruthers, who will retire, as a representative
of the Manager.
Transfer agreement
Following the Merger becoming effective, SVC2 and SVC3 will enter into a
transfer agreement pursuant to which SVC2 will agree to acquire and SVC3 will
agree to transfer its investment portfolio interests and any other assets
(including cash), subject to any necessary consents, waivers of pre-emption
rights and other requisite documents being entered into or obtained. Under the
agreement, SVC2 will also assume any liabilities of SVC3. Transfers of
individual investments or assets to SVC2 may take place as and when such
consents, waivers and other requisite documents in relation to those
investments or assets have been entered into or obtained. Transfers to SVC2 may
be made by means of a distribution in specie by SVC3 to SVC2 or for cash. Any
cash consideration for the assets acquired by SVC2 is intended to be left
outstanding as an inter-company loan. No part of the consideration for these
transactions will be payable to the Shareholders.
Merger agreement
SVC2 and SVC3 entered into a merger agreement on 13 October 2008 pursuant to
which each company undertook, subject to the fiduciary duties of their
respective directors, not to act in a manner which may frustrate the Merger or
jeopardise their approval as venture capital trusts under the Income Tax Act
and agreed to use all reasonable endeavours to complete the Merger.
Irrevocable undertakings
SVC2
Robert Wright and Alan Lamb have given irrevocable undertakings to vote in
favour of the resolution at the SVC2 General Meeting in respect of all of their
beneficial holdings of SVC2 Shares (and, where applicable, their connected
persons) as set out below:
Name Number of Percentage of SVC2's
SVC2 Shares Issued Share Capital
Robert Wright 100,000 0.218
Alan Lamb 21,646 0.047
Robert Wright has also given an irrevocable undertaking to vote in favour of
the resolution at the SVC3 General Meeting and the SVC3 Court Meeting in
respect of all of his beneficial holdings of SVC3 Shares (and, where
applicable, his connected persons) as set out below:
Name Number of Percentage of SVC3's
SVC3 Shares Issued Share Capital
Robert Wright 20,000 0.088
SVC 3
Michael Inwards has given an irrevocable undertaking to vote in favour of the
Scheme and the resolutions at the SVC3 Court Meeting and the SVC3 General
Meeting in respect of all of his beneficial holdings of SVC3 Shares (and, where
applicable, his connected persons) amounting to 15,000 SVC3 Shares,
representing approximately 0.066% of SVC3's existing issued share capital.
Disclosure of interests in SVC3
The following SVC2 Directors have interests in SVC3 Shares as at the date of
this announcement:
No. of SVC3
Shares held
Robert Wright 20,000
Save as disclosed above neither SVC2 nor any of the SVC2 directors nor, so far
as SVC2 is aware, any party acting in concert with SVC2, has an interest in, or
has any right to subscribe for, any relevant securities of SVC3, nor are they
party to any short positions (whether conditional or absolute and whether in
the money or otherwise) relating to relevant securities of SVC3, including
short positions under derivatives, agreements to sell or any delivery
obligations or rights to require another person to purchase or take delivery.
Neither SVC2 nor the SVC2 directors nor, so far as SVC2 is aware, any person
acting in concert with SVC2, has borrowed or lent any relevant securities of
SVC3.
VCT status
HMRC has given clearance in respect of the Proposals pursuant to the Merger
Regulations. The effect of this clearance is that the tax reliefs currently
available under the VCT Rules in respect of the SVC3 Shares by virtue of SVC3
being approved by HMRC should continue to be available in respect of the New
SVC2 Shares, notwithstanding that SVC3 will cease to be so approved after
completion of the Merger.
Recommendations
The SVC2 Board, who has received financial advice from Noble & Company Limited,
consider the Merger to be in the best interests of SVC2 Shareholders as a
whole. In giving its financial advice, Noble has relied on the SVC2 Board's
commercial assessment of the transaction. The SVC2 Board unanimously recommend
that SVC2 Shareholders vote in favour of the resolution to be proposed at the
SVC2 General Meeting, as they intend to do so in respect of their aggregate
shareholdings of 121,646 Ordinary Shares representing 0.266% of the current
issued share capital of SVC2.
The directors of SVC3, who have been so advised by Daniel Stewart & Company,
consider the terms of the Merger to be in the best interests of SVC3
Shareholders as a whole. In giving its advice, Daniel Stewart & Company has
taken into account the SVC3 directors' commercial assessment of the
transaction. The directors of SVC3 unanimously recommend that SVC3 Shareholders
vote in favour of the resolutions to be proposed at the SVC3 Court Meeting and
the SVC3 General Meeting, as they intend to do in respect of their own
aggregate beneficial shareholdings of 15,000 SVC3 Shares representing 0.066% of
the issued share capital of SVC3.
Appendix II contains the definition of terms used in this announcement.
Enquiries:
SPARK VCT 2 plc +44 (20) 7851 7777
Nghi Tran, Company Secretary
Noble & Company Limited (financial adviser to SPARK VCT 2 plc) +44 (20) 7763
2200
John Riddell/Alastair Maclachlan
SPARK VCT 3 plc +44 (20) 7851 7777
Nghi Tran, Company Secretary
Daniel Stewart & Company plc (financial adviser to SPARK VCT 3 plc) +44 (20)
7776 6550
Paul Shackleton/Charlotte Stranner
SPARK Venture Management Limited (Manager of SPARK VCT 2 plc +44 (20) 7851 7777
and SPARK VCT 3 plc)
Andrew Carruthers/Martin Williams
Noble & Company Limited, which is authorised and regulated in the UK by the
Financial Services Authority, is acting for SPARK VCT 2 plc and no-one else in
connection with the Proposals and will not be responsible to anyone other than
SPARK VCT 2 plc for providing the protections afforded to clients of Noble &
Company Limited nor for providing advice in relation to the Proposals nor any
other matter referred to in this announcement.
Daniel Stewart & Company plc, which is authorised and regulated in the UK by
the Financial Services Authority, is acting as financial adviser to SPARK VCT 3
plc in connection with the Proposals and no-one else and will not be
responsible to anyone other than SPARK VCT 3 plc for providing the protections
afforded to clients of Daniel Stewart & Company plc nor for providing advice in
relation to the Proposals nor any other matter referred to in this
announcement.
Noble & Company Limited has given and not withdrawn its written consent to the
inclusion in this announcement of its name and the references to it in the form
and context in which they appear.
Daniel Stewart & Company plc has given and not withdrawn its written consent to
the inclusion in this announcement of its name and the references to it in the
form and context in which they appear.
This announcement does not constitute an offer or invitation to acquire or
exchange securities in SPARK VCT 2 plc or SPARK VCT 3 plc. Any such offer or
invitation will only be made in documents to be published in due course and any
such acquisition or exchange should be made solely on the basis of information
contained in any such documents.
The availability of the Proposals to persons who are not resident in the United
Kingdom may be affected by the laws of the relevant jurisdiction. Persons who
are not resident in the United Kingdom should inform themselves about and
observe any applicable requirements.
The implications of the Scheme for persons resident in, or citizens of,
jurisdictions outside the UK ("Overseas Shareholders") may be affected by the
laws of the relevant jurisdictions. Such Overseas Shareholders should inform
themselves about and observe any applicable legal requirements. It is the
responsibility of each Overseas Shareholder to satisfy himself as to the full
observance of the laws of the relevant jurisdiction in connection therewith,
including the obtaining of any governmental, exchange control or other consents
which may be required to be observed and the payment of any issue, transfer or
other taxes in such jurisdictions.
Dealing disclosure requirements
Under the provisions of Rule 8.3 of the Code, if any person is, or becomes,
`interested' (directly or indirectly) in one % or more of any class of
`relevant securities' of SVC3 or SVC2, all `dealings' in any `relevant
securities' of each company (including by means of an option in respect of, or
a derivative referenced to, any such `relevant securities') must be publicly
disclosed by no later than 3.30 p.m. (London time) on the London business day
following the date of the relevant transaction. This requirement will continue
until the date of the shareholder and Court-convened meetings of the companies
or on which the `offer period' otherwise ends. If two or more persons act
together pursuant to an agreement or understanding, whether formal or informal,
to acquire an `interest' in `relevant securities' of SVC3 or SVC2, they will be
deemed to be a single person for the purpose of Rule 8.3.
Under provisions of Rule 8.1 of the Code, all `dealings' in `relevant
securities' of SVC3 or SVC2 by SVC3 or SVC2 or by any of their respective
`associates', must be disclosed by no later than 12.00 p.m. (London time) on
the London business day following the date of the relevant transaction. A
disclosure table, giving details of the companies in whose `relevant
securities' `dealings' should be disclosed, and the number of such securities
in issue, can be found on the Panel's website at www.thetakeoverpanel.org.uk.
`Interests in securities' arise, in summary, when a person has long economic
exposure, whether conditional or absolute, to changes in the prices of
securities. In particular, a person will be treated as having an `interest' by
virtue of the ownership or control of securities, or by virtue or any option in
respect of, or derivative referenced to, securities.
Terms in quotation marks are defined in the Code, which can also be found on
the Panel's website. If you are in any doubt as to whether or not you are
required to disclose a `dealing' under Rule 8, you should consult the Panel.
Important information
This document, including information included or incorporated by reference in
this document, may contain "forward-looking statements" concerning SVC2, SVC3
and the Enlarged SVC2. Generally, the words "will", "may", "should",
"continue", "believes", "expects", "intends", "anticipates" or similar
expressions identify forward-looking statements. Many of these forward-looking
statements involve risks and uncertainties that could cause actual results to
differ materially from those expressed in the forward-looking statements. Many
of these risks and uncertainties relate to factors that are beyond SVC2, SVC3
or the Enlarged SVC2's ability to control or estimate precisely, such as future
market conditions and the behaviour of other market participants. Although it
is believed that the expectations will prove to have been correct, you are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as at the date of this announcement.
These forward-looking statements are made as of the date of this announcement
and are not intended to give any assurances as to future results. Save as
required by law or regulation (including, without limitation the Listing Rules,
the Prospectus Rules and the Disclosure and Transparency Rules), SVC2, SVC3 and
the Enlarged SVC2 undertake no obligation to update these forward-looking
statements, and will not publicly release any revisions they may make to these
forward-looking statements that may result from events or circumstances arising
after the date of this announcement.
Documents and approvals
SVC2 Shareholders will receive a copy of the SVC2 circular dated 13 October
2008, which contains the notice of the SVC2 General Meeting to be held on 12
November 2008, and a copy of the Prospectus.
SVC3 Shareholders will receive a copy of the SVC3 scheme circular dated 13
October 2008, which contains notices of the SVC3 Court Meeting and SVC3 General
Meeting to be held on 12 November 2008, and a copy of the Prospectus.
Copies of the Prospectus, SVC3 scheme circular dated 13 October 2008 and SVC2
circular have been submitted to the UK Listing Authority and will shortly be
available for inspection at the UK Listing Authority's Document Viewing
Facility which is situated at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS
Telephone: 020 7066 1000
APPENDIX I
CONDITIONS TO THE MERGER AND THE IMPLEMENTATION OF
THE SCHEME
The Merger can only become effective if all the conditions to the
implementation of the Scheme have been satisfied (or waived, where applicable,
in accordance with paragraph 4 below).
The Scheme will become effective upon the delivery to the Registrar of
Companies of office copies of the Court Order and registration of the Court
Order which, subject to the sanction of the Scheme by the Court, is expected to
occur on or about 27 November 2008. Unless the Scheme becomes effective by no
later than 31 January 2009, or such later date as SVC2 and SVC3 may agree and
the Court may permit, the Scheme will not become effective and the Merger will
not proceed. The conditions which need to be satisfied (or waived, if
applicable) for the Scheme to be implemented are set out below:
1. The Merger is conditional upon the Scheme becoming unconditional and
becoming effective by not later than 31 January 2009 or such later date as
SVC2 and SVC3 may agree and the Court may permit.
2. The Scheme will be conditional upon:
a. approval of the Scheme by a majority in number representing at least 75 %
In value of the holders of the SVC3 Shares present and voting, either in
person or by proxy, at the SVC3 Court Meeting;
b. the resolution required to implement the Scheme and the associated
reduction of capital being passed at the SVC3 General Meeting;
c. the resolution to approve the Merger being passed at the SVC2 General
Meeting;
i. the admission to the Official List of the New SVC2 Shares becoming
effective in accordance with the Listing Rules or the UKLA agreeing to
admit such shares to the Official List; and
ii. the admission to trading of the New SVC2 Shares becoming effective in
accordance with the rules of the London Stock Exchange or the London Stock
Exchange agreeing to admit such shares to trading;
e. no notice having been received by SVC2 or SVC3 before 6.00 p.m. on the day
before the final Court hearing to approve the Scheme from HMRC which
indicates that either SVC2 or SVC3 may not remain approved as venture
capital trusts pursuant to the VCT Rules; and
f. the sanction (with or without modification) of the Scheme and confirmation
of the reduction of capital involved therein by the Court, an office copy
of the Court Order being delivered for registration to the Registrar of
Companies and registration of the Court Order confirming the reduction of
capital involved in the Scheme by the Registrar of Companies.
3. Subject as stated in paragraph 4 below, the Merger will be conditional
upon, and accordingly the necessary action to make the Scheme effective
will not be taken, unless the following conditions are satisfied or waived
before 6.00 p.m. on the day before the final Court hearing to approve the
Scheme as referred to below:
a. no notification having been received by either SVC2 or SVC3 from the Office
of Fair Trading in the United Kingdom indicating its intention to refer the
proposed Merger or any matter arising therefrom or related thereto to the
Competition Commission;
b. no notice having been given or action taken by HMRC which indicates that
SVC2 or SVC3 may not remain approved as a venture capital trust up to the
time when the Scheme becomes effective, or that the Merger and/or the
transfer of SVC3 assets to SVC2 might cause SVC2 or SVC3 to cease to be
approved as a venture capital trust;
c. no governmental authority, regulatory body, court or other person having
instituted or threatened any action, proceedings or investigation, or
enacted or proposed any statute, regulation or order, which would or might
make the implementation of the Scheme and the other steps involved in the
Merger void or illegal, or restrict or prohibit the implementation of the
Merger, or impose material additional conditions in relation to that
implementation, or otherwise adversely affect in any material respect the
business of SVC2 or SVC3;
d. since 31 December 2007, being the date to which the latest audited report
and accounts of SVC2 were made up, or as disclosed in the latest audited
report and accounts of the SVC2 (as the case may be):
i. there being no material pending or threatened litigation, arbitration
proceedings, prosecution or other legal proceedings against SVC2; and
ii. there having been no material adverse change in the business, financial or
trading position or prospects or profits of SVC2, in either case, which
cannot be accounted for through an adjustment to the relevant FAV pursuant
to the Scheme;
e. since 31 December 2007, being the date to which the latest audited report
and accounts of SVC3 were made up, or as disclosed in the latest audited
report and accounts of SVC3 (as the case may be):
i. there being no material pending or threatened litigation, arbitration
proceedings, prosecution or other legal proceedings against SVC3; and
ii. there having been no material adverse change in the business, financial or
trading position or prospects or profits of SVC3, in either case, which
cannot be accounted for through an adjustment to the relevant FAV pursuant
to the Scheme;
f. SVC2 not having incurred any liability for or in the nature of borrowings,
or any material contingent liabilities not reflected in its latest annual
report or accounts or otherwise disclosed to SVC3 in writing before 13
October 2008;
g. SVC3 not having incurred any liability for or in the nature of borrowings,
or any material contingent liabilities not reflected in its latest annual
report or accounts or otherwise disclosed to SVC2 in writing before 13
October 2008;
h. except as publicly disclosed before 13 October 2008 or contemplated by the
Scheme, SVC3 not having issued any shares or other securities or securities
convertible into, or any warrants or options to subscribe for, its shares
or other securities, or entered into any commitment to do so, or made any
material change in its investment policies other than as agreed between
SVC2 and SVC3, or entered into any material agreement or commitment which
is of a long term or unusual nature or magnitude, other than agreements the
existence of which has been disclosed in writing to SVC2 before 13 October
2008;
i. except as publicly disclosed before 13 October 2008 or contemplated by the
Scheme, SVC2 not having issued any shares or other securities or securities
convertible into, or any warrants or options to subscribe for, its shares
or other securities, or entered into any commitment to do so, or made any
material change in its investment policies other than as agreed between
SVC2 and SVC3, or entered into any material agreement or commitment which
is of a long term or unusual nature or magnitude, other than agreements the
existence of which has been disclosed in writing to SVC3 before 13 October
2008.
4. SVC2 and SVC3, acting together, may waive all or any of the conditions
contained in paragraphs 3(a) to 3(i) (inclusive) in whole or in part on or
before the Scheme Record Time.
APPENDIX II
DEFINITIONS
The following definitions apply throughout this announcement, unless the
context requires otherwise:
"1985 Act" the Companies Act 1985, as amended
"2006 Act" the Companies Act 2006, as amended
"Business Day" any day (excluding Saturdays, Sundays and public holidays)
on which banks are open for business in London
"Court" the High Court of Justice in England and Wales
"Court Order" the order of the Court in relation to SVC3 sanctioning the
Scheme pursuant to Part 26 of the 2006 Act and confirming
the reduction of capital therein under section 135 of the
1985 Act
"Effective Date" the date on which the Scheme becomes effective in
accordance with its terms, which is expected to be 27
November 2008
"Enlarged SVC2" SVC2 as enlarged after the implementation of the Scheme and
the Merger including, for the purposes of this document,
SVC3
"FAV" or "Formula the formula asset value per share to be calculated for the
Asset Value" purposes of the Merger as at the FAV Calculation Date as
set out in the Schedule to the Scheme
"FAV Calculation the date at the close of business of which the SVC2 FAV and
Date" the SVC3 FAV are to be calculated, which is expected to be
19 November 2008
"FSA" Financial Services Authority
"HMRC" Her Majesty's Revenue & Customs
"Income Tax Act" the Income Tax Act 2007, as amended
"International the guidelines for valuation and disclosure of venture
Private Equity and capital portfolios as published by the British Venture
Venture Capital Capital Association, the Association Fran�aise des
Valuation Investisseurs en Capital and the European Private Equity
Guidelines" and Venture Capital Association
"Listing Rules" the listing rules of the FSA
"London Stock London Stock Exchange plc
Exchange" or "LSE"
"Manager" or SPARK Venture Management Limited, a company incorporated in
"SPARK" England and Wales, with registered number 2454345, having
its registered office at 33 Glasshouse Street, London W1B
5DG, which is authorised and regulated in the United
Kingdom by the FSA
"Merger" the proposed merger between SVC2 and SVC3 to be effected by
means of the Scheme
"Merger Regulations the Venture Capital Trust (Winding-up and Mergers) (Tax)
" Regulations 2004 (SI 2004 No. 2199)
"NAV" or "Net Asset the unaudited net asset value of the relevant company
Value" calculated in accordance with the normal reporting policies
of that company
"New SVC2 Shares" new ordinary shares of 1p each in the capital of the
Enlarged SVC2 to be issued pursuant to the Scheme further
details of which are contained in the Prospectus
"Official List" the Official List of the FSA
"Proposals" the Merger and other related proposals referred to in this
announcement
"Proposed Director" the proposed new director of the Enlarged SVC2, being
Patrick Seely
"Prospectus" the prospectus relating to SVC2 and the issue of New SVC2
Shares dated 13 October 2008
"Qualifying a relevant company within the meaning of Chapter 4 of Part
Company" 6 of the Income Tax Act
"Qualifying a relevant holding within the meaning of Chapter 4 of Part
Holding" 6 of the Income Tax Act
"Scheme" or "Scheme the proposed scheme of arrangement of SVC3 and SVC2
of Arrangement" pursuant to Part 26 of the 2006 Act with any modification
thereof or addition thereto or condition approved or
imposed by the Court and agreed by SVC3 and SVC2
"Scheme Record 6.00 p.m. on the last Business Day immediately prior to the
Time" Effective Date
"SVC2" SVC2 plc, a company incorporated in England and Wales, with
registered number 4063505 and having its registered office
at 33 Glasshouse Street, London, W1B 5DG
"SVC2 Board" or the board of directors of SVC2
"SVC2 Directors"
"SVC2 FAV" the Formula Asset Value in respect of the SVC2 Shares
"SVC2 General the general meeting of SVC2 (and any adjournment thereof)
Meeting" convened in connection with the Scheme to be held at
Central Court, 25 Southampton Buildings, London WC2A 7AC at
11.30 a.m. on 12 November 2008
"SVC2 Shareholders" holders of SVC2 Shares
"SVC2 Shares" ordinary shares of 1p each in the capital of SVC2
"SVC3" SVC3 plc, a company incorporated in England and Wales, with
registered number 4282877 and having its registered office
at 33 Glasshouse Street, London, W1B 5DG
"SVC3 Board" the board of directors of SVC3
"SVC3 Court the meeting of SVC3 Shareholders (and any adjournment
Meeting" thereof) convened pursuant to an order of the Court under
section pursuant to Part 26 of the 2006 Act, to be held at
Central Court, 25 Southampton Buildings, London WC2A 7AC on
12 November 2008 at 10.30 a.m. for the purpose of
considering and if thought fit, approving the Scheme (with
or without amendment)
"SVC3 FAV" the Formula Asset Value in respect of the SVC3 Shares
"SVC3 General the general meeting of SVC3 (and any adjournment thereof)
Meeting" convened in connection with the Scheme to be held at
Central Court, 25 Southampton Buildings, London WC2A 7AC at
10.45 a.m. on 12 November 2008 (or as soon thereafter as
the SVC3 Court Meeting shall have been concluded or
adjourned)
"SVC3 Shareholders" holders of SVC3 Shares
"SVC3 Shares" ordinary shares of 1p each in the capital of SVC3
"UK Listing the Financial Services Authority acting in its capacity as
Authority" or the competent authority for the purposes of the Financial
"UKLA" Services and Markets Act 2000
"VCT Rules" the Merger Regulations and every other statute (including
any orders, regulations or other subordinate legislation
made under them) for the time being in force concerning
VCTs
"venture capital a company approved as a venture capital trust under section
trust" or "VCT" 259 of the Income Tax Act by HMRC
END
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