Tender Offer

RNS Number : 6855X

Baillie Gifford European Grw Ts PLC

20 December 2019

 

THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO, AUSTRALIA, CANADA, JAPAN, NEW ZEALAND AND THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO MAY RESULT IN THE CONTRAVENTION OF ANY REGISTRATION OR OTHER LEGAL REQUIREMENT OF SUCH JURISDICTION

20 December 2019

Baillie Gifford European Growth Trust plc

Publication of Tender Offer Circular

Further to the announcement made on 10 October 2019, Baillie Gifford European Growth Trust plc (the "Company") announces that it has today published a circular (the "Circular") in connection with a tender offer to purchase up to 10 per cent. of the issued share capital of the Company.

A copy of the Circular will be submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM. The Circular will also be available on the Company's website (www.bgeuropeangrowth.com) and at the registered office of the Company (Grimaldi House, 28 St James's Square, St James's, London SW1Y 4JH).

Background to the Tender Offer

On 10 October 2019, the Board announced that, after an extensive review of the Company's management arrangements, it had entered into heads of terms to appoint Baillie Gifford & Co Limited (the "Investment Manager") as the Company's new AIFM, company secretary and administrator. The Board noted at that time, following consultation with the Company's largest Shareholders and in connection with the appointment of the Investment Manager, that it intended to undertake a tender offer for up to 10 per cent. of the Shares in issue (excluding treasury shares) at a tender price equal to 98 per cent. of the prevailing Net Asset Value (less the stamp duty costs of implementing the Tender Offer) (the "Tender Offer").

Reasons for the Tender Offer

The appointment of the Investment Manager became effective on 29 November 2019 and, as such, the Board has resolved to implement the Tender Offer. This will enable Shareholders who wish to do so to retain their investment in the Company whilst offering those Shareholders who wish to realise their investment, either in part or potentially in whole, a chance to do so in each case having regard to the different investment approach which the Investment Manager follows by comparison with the Company's former investment manager. The Investment Manager's approach is set out below.

The decision to proceed with the Tender Offer was taken following discussions about the future of the Company which the Board held with major Shareholders and Peel Hunt. The Board believes that many Shareholders will wish to continue with their investment in the Company unchanged. However, in order to provide those Shareholders who have so requested with an opportunity to exit (either in part or potentially in whole), the Board proposes that those Shareholders wishing to realise part or all of their investment in the Company will have a chance to do so through the Tender Offer for up to 10 per cent. of the Shares in issue (excluding treasury shares) as at the Record Date at the Tender Price. Shareholders tendering in excess of 10 per cent. of their shareholding may be able to realise those Shares through the Tender Offer to the extent that other Shareholders do not tender any of their Shares or tender less than their Basic Entitlement.

The Board is satisfied that, following the Tender Offer, the Company will remain an attractive size with sufficient liquidity. The Board believes that this proposal is in the interests of all Shareholders. It provides an exit mechanism (either in part or potentially in whole) for the Shareholders who have asked for one.

Baillie Gifford's long-term growth investment management approach

The Company's new Investment Manager believes too many investors spend too much time worrying about top-down macroeconomic considerations, which are out of their and businesses' control, rather than approach investing with a view to becoming a long-term owner in a select number of fundamentally attractive businesses. The Investment Manager devotes its time and energy to gaining a deep understanding of what drives success in business in general, and in specific companies.

The Investment Manager believes exceptional companies generate a disproportionate amount of wealth within and for society including by virtue of the following reasons:

·      they endure and prosper thanks to attractive growth opportunities and strong competitive advantages;

·      they create wealth over long periods of time by aligning the interests of customers, employees, managers and owners; and

·      more often than not, they are owned or managed by entrepreneurial founders, families or other inside owners.

To achieve superior returns, the Investment Manager believes that investors need to find these exceptional companies and own them for a long time.

The Investment Manager believes that Europe is home to some of the world's most impressive growth companies. These range from niche industrials that dominate their fragmented markets, to large luxury brands with pricing power derived from heritage and provenance. There are also now many more companies exploiting the availability of technology to erode the profit pools in traditional sectors in Europe like financials, healthcare and energy. It is likely that the European market will continue to divide, but at an accelerating rate, into winners and losers. The Investment Manager believes many of these future winners will choose to stay private longer and the number of attractive public companies will continue to fall and so, in order to take advantage of these dynamics, investors need to invest in both listed and private companies.

The Investment Manager believes that businesses which are fundamentally sound may none the less be structurally mispriced as the market often underestimates their durability and attractiveness. At the same time, most investors have a time horizon that is far too short to appreciate fully the potential of outstanding businesses; they are neither willing nor able to align themselves with the timescale of achievement of such businesses. The Investment Manager believes that capturing big winners requires the adoption of a long-term mindset: thinking about companies, their progress and opportunities, not in months and quarters but in years and decades, so investors must have the courage and conviction to own businesses through periods of volatility. The Investment Manager is of the view that market and portfolio returns are driven by a relatively small number of companies and the performance of these exceptional companies is driven mostly by profit and cashflow growth rather than a change in valuation. The Investment Manager believes that focussing on companies that have large, structural growth opportunities, and which are also capable of reinvesting at high rates of return as a result of strong competitive advantages, offers the best chance of outperforming over long periods of time.

Dividends

It remains the Board's intention to pay a final dividend, for the year ended 30 September 2019, subject to approval by Shareholders at the Company's annual general meeting to be held on 23 January 2020. Subject to such Shareholder approval a final dividend of 21.5 pence per Share will be paid on 31 January 2020. This will be paid in respect of all Shares in issue on 3 January 2020, including any which are tendered through the Tender Offer.

Following the payment of the proposed final dividend for the year ended 30 September 2019, the Company will change its dividend policy and any annual dividend will be paid only to the extent needed for the Company to maintain its investment trust status.

Share buy backs

In addition to the Tender Offer authority, the Board intends to renew its authority to make market purchases of up to 14.99 per cent. of the Shares currently in issue at the Annual General Meeting and intends to renew this authority on an annual basis thereafter, as appropriate. The Board may, subject to normal market conditions, seek to limit the discount to Net Asset Value at which the Shares trade through the prudent use of this authority to repurchase Shares in the market. Any buy back of Shares will be at the absolute discretion of the Board. It should be noted that this is a mechanism primarily to limit discount volatility and there is no guarantee that such limitation will be achieved or that any Shares will be bought back. Due to US regulatory requirements, the Board does not intend to undertake any Share buy backs between publication of this document and the close of the Tender Offer on 28 January 2020.

Tender Offer

The Tender Offer enables those Shareholders (other than Restricted Shareholders and certain Overseas Shareholders) who wish to sell some or all of their Shares to elect to do so, subject to the overall limits of the Tender Offer. Shareholders who successfully tender Shares will receive the Tender Price per Share being a two per cent. discount to the fair value cum income NAV per Share on the Calculation Date, less their pro rata proportion of the stamp duty. The Tender Price has been set at this level to allow Shareholders who wish to realise a portion of their holding of Shares to do so at a price close to NAV whilst providing for a modest uplift to NAV per Share for continuing Shareholders should the Tender Offer be fully subscribed.

Under the terms of the Tender Offer, which is being made by Peel Hunt, Shareholders (other than Restricted Shareholders and certain Overseas Shareholders) will be entitled to tender up to their Basic Entitlement, being 10 per cent. of the Shares they hold as at the Record Date. Shareholders may also tender additional Shares, but any such excess tenders above the Basic Entitlement will only be satisfied, on a pro rata basis, to the extent that other Shareholders tender less than their aggregate Basic Entitlement.

Subject to the satisfaction of the conditions relating to the Tender Offer, Peel Hunt will purchase, as principal, Shares validly tendered under the Tender Offer at the Tender Price. Following completion of those purchases, it will then sell the relevant Shares back to the Company pursuant to the Repurchase Agreement at the Tender Price by way of an on-market transaction on the main market of the London Stock Exchange. The Shares which the Company acquires from Peel Hunt will be cancelled or held in treasury. The repurchase of Shares by the Company under the Repurchase Agreement will be funded from the Company's capital reserve that is distributable for this purpose.

The Tender Offer is subject to the terms and conditions set out in the Circular. The Tender Offer may also be terminated in certain circumstances as set out in the Circular. Shareholders should note that, once tendered, Shares may not be sold, transferred, charged or otherwise disposed of other than in accordance with the Tender Offer.

The Company's authority to repurchase its own Shares, which was granted at the last annual general meeting of the Company held on 22 January 2019, in respect of up to 14.99 per cent. of the Company's issued share capital as at the date of that meeting, will remain in force and be unaffected by the Tender Offer. However, as noted above, in order to comply with applicable US securities law, the Company does not intend to repurchase any of its own Shares throughout the period of the Tender Offer.

Estimated expenses

The fixed costs relating to the Tender Offer are expected to be approximately £400,000 including VAT. The foregoing figure does not include portfolio realisation costs or stamp duty. All costs in relation to the Tender Offer (save in respect of stamp duty) will be borne by all Shareholders. Shareholders should note that, if the Board and Peel Hunt reasonably consider the fixed costs of the Tender Offer to be excessive relative to the number of Shares tendered, the Tender Offer may not proceed.

Overseas Shareholders and Restricted Shareholders

The making of the Tender Offer to persons outside the United Kingdom, the Channel Islands or the Isle of Man may be prohibited or affected by the laws of the relevant overseas jurisdictions. Shareholders with registered or mailing addresses outside the United Kingdom, the Channel Islands or the Isle of Man or who are citizens or nationals of, or resident in, a jurisdiction other than the United Kingdom, the Channel Islands and the Isle of Man should read carefully paragraph 11 of Part 3 of the Circular.

The Tender Offer is not being made to Shareholders who are resident in, or citizens of, Restricted Jurisdictions. Restricted Shareholders are being excluded from the Tender Offer in order to avoid offending applicable local laws relating to the implementation of the Tender Offer. Accordingly, copies of the Tender Form are not being and must not be mailed or otherwise distributed in or into Restricted Jurisdictions.

It is the responsibility of all Overseas Shareholders to satisfy themselves as to the observance of any legal requirements in their jurisdiction, including, without limitation, any relevant requirements in relation to the ability of such holders to participate in the Tender Offer.

US Shareholders

The Tender Offer is being made for securities of an English company and the Shareholders in the United States should be aware that this announcement, the Circular and any other documents relating to the Tender Offer have been prepared in accordance with the requirements of English law, the London Stock Exchange and the FCA, format and style, all of which differ from those in the United States. The Company's financial statements, and all financial information that is included in this announcement or that may be included in the Circular or any other documents relating to the Tender Offer, have not been prepared in accordance with generally accepted accounting principles in the United States and thus may not be comparable to financial information relating to United States companies.

The Tender Offer will be made in the United States pursuant to applicable US tender offer rules and securities laws (or pursuant to no action or exemptive relief therefrom granted by the United States Securities and Exchange Commission (the "SEC")) and otherwise in accordance with the requirements of English law, the London Stock Exchange and the FCA. Accordingly, the Tender Offer may be subject to disclosure and other procedural requirements, including with respect to withdrawal rights, offer timetable, settlement procedures and timing of payments that are different from those applicable under United States domestic tender offer procedures and law.

In accordance with the requirements of English law, the London Stock Exchange and the FCA and normal United Kingdom market practice and subject to exemptive relief being granted by the SEC from Rule 14e-5 under the United States Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company, Peel Hunt or their nominees or brokers (acting as agents) may from time to time make certain purchases of, or arrangements to purchase, the Company's Shares outside the United States, otherwise than pursuant to the Tender Offer before or during the period in which the Tender Offer remains open for acceptance, such as in open market purchases at prevailing prices or privately negotiated purchases at negotiated prices.

Such purchases, or arrangements to purchase, will comply with all applicable United Kingdom rules, including the rules of the London Stock Exchange and the FCA.

The attention of US Shareholders is drawn to the section entitled ''Notice For US Shareholders" on page 3 of the Circular and to paragraph 12 of Part 3 of the Circular.

Taxation

The attention of Shareholders is drawn to Part 5 of the Circular which sets out a general guide to certain aspects of current UK taxation law and HMRC published practice. This information is a general guide and is not exhaustive. Shareholders who are in any doubt as to their tax position or who are subject to tax in a jurisdiction other than the UK should consult an appropriate professional adviser.

General Meeting

The proposed Tender Offer is subject to Shareholder approval. A notice convening the General Meeting which is to be held at The Institute of Directors, 116 Pall Mall, London SW1Y 5ED on Thursday, 23 January 2020 at 12 noon (or as soon thereafter as the Annual General Meeting has concluded or adjourned) is set out at the end of the Circular. At this meeting, at which Shareholders may attend, speak and vote, a special resolution will be proposed to approve the Tender Offer on the terms set out in this document and to give the Company authority to make market purchases pursuant to the Tender Offer. Should the resolution fail to be passed, the Tender Offer will not proceed.

In order to be passed, the resolution, which is proposed as a special resolution, will require the approval of Shareholders representing at least 75 per cent. of the votes cast at the General Meeting. The Company's articles of association provide that at the General Meeting each Shareholder present in person or by proxy or who (being a corporation) is present by a representative shall, on a show of hands, have one vote and on a poll, shall have one vote for each Share of which he/she is a holder.

The quorum for the General Meeting shall be two persons entitled to attend and to vote, each being a Shareholder or a proxy of a Shareholder or a duly authorised representative of a corporation which is a Shareholder.

Shareholders should note, however, that they are not obliged to tender any shares. The Directors will not tender any of their own Shares under the Tender Offer.

Expected Timetable

	2019
Publication of this document and Tender Offer opens	20 December
	2020
Latest time and date for receipt of Forms of Proxy from Shareholders	12 noon on 21 January
General Meeting	12 noon on 23 January
Results of General Meeting announced	23 January
Latest time and date for receipt of Tender Forms and submission of TTE Instructions from Shareholders	1.00 p.m. on 28 January
Record Date and time for the Tender Offer	6.00 p.m. on 28 January
Calculation Date	close of business on 30 January
Results of Tender Offer elections and Tender Price announced	3 February
CREST Settlement Date: payments through CREST made and CREST accounts settled	5 February
Balancing share certificates and cheques despatched to certificated Shareholders	Week commencing 10 February

References to times in this announcement are to London time unless otherwise stated.

The dates set out in the expected timetable may be adjusted by Peel Hunt, with the consent of the Company, in which event details of the new dates will be notified to Shareholders by an announcement made by the Company through a Regulatory Information Service.

Defined terms used in this announcement have the meanings given in the Circular unless the context otherwise requires.

The Company's Legal Entity Identifier is: 213800QNN9EHZ4SC1R12

For further information please contact:

Baillie Gifford & Co

Anzelm Cydzik

0131 275 2000

Peel Hunt LLP

Luke Simpson / Liz Yong (Corporate Broking)

020 7418 8900

Important Information

The content of this announcement has been prepared by, and is the sole responsibility of, Baillie Gifford European Growth Trust plc. The information contained in this announcement is given at the date of its publication (unless otherwise marked) and is subject to updating, revision and amendment from time to time. Neither the content of the Company's website nor any website accessible by hyperlinks to the Company's website is incorporated in, or forms part of, this announcement.

The Tender Offer is not available to Shareholders with registered or mailing addresses in any Restricted Jurisdiction, or who are citizens or nationals of, or resident in, a Restricted Jurisdiction and such Shareholders should read carefully paragraph 11 of Part 3 of the Circular.

This announcement does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase or subscribe for any Shares nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefor. The Tender Offer is made only pursuant to the Circular and the related Tender Form with respect to the Shares. The Tender Offer is not being made to holders of Shares residing in any jurisdiction in which the making of the Tender Offer would not be in compliance with the laws of that jurisdiction.

The full terms and conditions of the Tender Offer are set out in the Circular, which should be read in full in conjunction with this announcement.

Peel Hunt LLP ("Peel Hunt"), which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively for the Company and no-one else in connection with the Tender Offer and the contents of the Circular and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Peel Hunt or for providing advice in relation to the Tender Offer and the contents of the Circular or any matter referred to herein. Nothing in this paragraph shall serve to exclude or limit any responsibilities which Peel Hunt may have under FSMA or the regulatory regime established thereunder.

Apart from the responsibilities and liabilities, if any, which may be imposed on Peel Hunt by FSMA or the regulatory regime established thereunder, Peel Hunt does not make any representation, express or implied, in relation to, nor accepts any responsibility whatsoever for, the contents of the Circular or any other statement made or purported to be made by it or on its behalf in connection with the Company or the Tender Offer. Peel Hunt (and its affiliates) accordingly, to the fullest extent permissible by law, disclaims all and any responsibility or liability (save for statutory liability), whether arising in tort, contract or otherwise which it might otherwise have in respect of the contents of the Circular or any other statement made or purported to be made by it or on its behalf in connection with the Company or the Tender Offer.

This announcement contains (or may contain) certain forward-looking statements with respect to the Company's current expectations and projections about future events. These statements, which sometimes use, but are not limited to, words such as 'anticipate', 'believe', 'intend', 'estimate', 'expect' and words of similar meaning, reflect the Directors' beliefs and expectations and involve a number of risks, uncertainties and assumptions that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward looking statement. Statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The information contained in this announcement is subject to change without notice and, except as required by applicable law, neither the Company nor Peel Hunt assumes any responsibility or obligation to update publicly or review any of the forward-looking statements contained herein. You should not place undue reliance on forward-looking statements, which speak only as of the date of this announcement.

 

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