Contingent tender offers

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Strategic Equity Capital plc

Contingent tender offers

LEI:  2138003R5GB8QZU2G577

28 May 2021

The Board of Strategic Equity Capital plc (the “Company” or “SEC”) has been actively considering possible actions to address the discount to net asset value at which the Company’s ordinary shares trade, which has been a source of frustration the Board shares with shareholders. 

Whilst the average discount has narrowed significantly from 20.9 per cent. for the 6 months to 31 December 2020 to an average of 15.6 per cent. for the year to date and a current discount of 13.4 per cent. (as at 26 May 2021, the latest available NAV calculation date), in the Board’s view, the discount remains too wide. 

Strong portfolio performance and promotion over the medium and long term will be the key determinants of the discount or premium of the Company’s share price to NAV in the Board’s view.  In this respect, the Board has been encouraged by the investment performance this year under the management of Ken Wotton and Adam Khanbhai. 

The Board also believes that the Company’s well-established investment process, which involves extensive due diligence and engaged ownership, coupled with the depth of resource available to the investment team, makes the Company relevant to a wider range of investors. The collaborative marketing effort that the Company has in place with Gresham House, ABRDN and its advisers, is well-placed to promote the Company to those investors.

The Board is today announcing two contingent tenders as part of its commitment to take action to address the persistent discount:

2022 Contingent Tender

The Board has determined to put in place a contingent tender offer in 2022, should the ordinary shares trade at a wider than average discount of 8 per cent. over the 12 months ending 30 June 2022.  In this event, the Board will undertake a tender offer for up to 10 per cent. of the Company’s issued share capital (excluding shares held in treasury) shortly after the 2022 AGM (the “2022Tender Offer”).  The tender price will be equal to a 3 per cent. discount to NAV (less costs) per ordinary share.  In the event that shareholders tender in excess of their basic entitlement of 10 per cent., such excess applications will be satisfied on a pro rata basis to the extent that other shareholders tender less than (or none of) their basic entitlement.

2024 Contingent Tender

In addition to the 2022 Tender Offer, the Board has resolved to undertake a further tender offer if, over the three year period ending 30 June 2024, the NAV total return per ordinary share lags the FTSE Small Cap (ex Investment Companies) Index on a total return basis (the “2024 Tender Offer”). 

In the event that the 2024 Tender Offer is triggered, the Board will undertake a tender offer for up to 15 per cent. of the issued share capital of the Company (excluding shares held in treasury) shortly after the 2024 AGM at a tender price equal to a 3 per cent. discount to NAV (less costs) per ordinary share. In the event that shareholders tender in excess of their basic entitlement of 15 per cent., such excess applications will be satisfied on a pro rata basis to the extent that other shareholders tender less than (or none of) their basic entitlement.

Richard Hills, Chairman of Strategic Equity Capital plc, commented:

“Through the investment management expertise of Ken Wotton and Adam Khanbhai, supported by their team at Gresham House, we believe that SEC is well placed to capitalise on opportunities to invest in high quality, publicly quoted smaller companies, where value can be materially increased over the medium to long term through strategic, operational or management change. With economic growth recovering, and strong M&A activity, we are enthusiastic about the outlook for SEC’s portfolio and the wider investment opportunity.  We expect that the actions we have announced today should further enhance shareholder returns.”

Enquiries:

Strategic Equity Capital plc
Richard Hills (Chairman)
Richard Locke (SID)
(via PATAC below)

PATAC Limited (Company secretary)    0131 378 0500
Steven Davidson

Investec Bank plc (Broker)   020 7597 4000
Lucy Lewis   
Tom Skinner 

KL Communications  [e-mail]
Charles Gorman  [phone]
Saurav Karia

About Strategic Equity Capital

Strategic Equity Capital plc (SEC) is a London-listed investment trust investing predominately in small cap UK equities. SEC is managed by Gresham House, a UK listed specialist investment manager.

The investment objective of the Company is to achieve absolute returns (i.e. growth in the value of investments) rather than relative returns (i.e. attempting to outperform selected indices) over a medium-term period, principally through capital growth.

SEC listed on the London Stock Exchange on 19 July 2005, having raised funds from a wide range of investors including institutions, pension funds and private banks. The Strategic Equity Capital Board consists of four Non-Executive Directors, all of whom are independent of the Investment Manager.