Publication of Prospectus & Offer for Subscription

RNS Number : 2230N

Baronsmead VCT 3 PLC

27 January 2016

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR SOUTH AFRICA OR ANY JURISDICTION WHICH THE SAME COULD BE UNLAWFUL. THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION, INCLUDING IN THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR SOUTH AFRICA

Baronsmead VCT 3 plc
Baronsmead VCT 4 plc

27 January 2016

Publication of a Prospectus and Circulars in connection with recommended proposals for the merger of Baronsmead VCT 3 plc and Baronsmead VCT 4 plc (the "Companies") and an offer for subscription to raise up to £10 million

The boards of the Companies (the "Boards") announced on 10 December 2015 that they had entered into discussions regarding a possible merger of the Companies (the "Merger"). The Boards are pleased to announce that they have reached agreement in respect of the Merger and that the Companies have today issued circulars to set out the proposals for the Merger for consideration by their respective shareholders (the "Circulars"). Both of the Companies are managed by Livingbridge VC LLP ("Livingbridge").

The Merger will be completed pursuant to a scheme of reconstruction and winding up of Baronsmead VCT 4 plc ("BVCT4") under section 110 of the Insolvency Act 1986 (the "Scheme"). The Scheme provides for the undertaking, assets and liabilities of BVCT4 to be transferred to the Company in consideration for the issue of new shares (the "New Shares") in Baronsmead VCT 3 plc ("BVCT3") of an equivalent value to BVCT4 shareholders ("BVCT4 Shareholders"). The Scheme is subject to, amongst other conditions, approval by the shareholders of the Companies. The Merger will create a larger merged company with net assets of £157 million (the "Enlarged Company").

Subject to the Merger completing the Enlarged Company will carry out an offer for subscription to raise up to £10 million (before costs) (the "Offer"). Until close of business on 15 February 2016 the Offer will be open exclusively to existing shareholders of the Companies. Should the Offer not be fully subscribed before this time, the remaining New Shares to be issued under the Offer will be used to satisfy subscriptions from shareholders in the Baronsmead VCTs until close of business on 3 March 2016. If the Offer is not fully subscribed by close of business on 3 March 2016, the balance, if any, will be used to satisfy the subscriptions of any other investors. The full terms and conditions of the Offer are set out in the prospectus which was published by BVCT3 today (the "Prospectus").

Background to and reasons for the Scheme

Prior to April 2012, the VCT rules restricted the amount a VCT could invest in a portfolio company to £1 million per annum. This led to investment managers, such as Livingbridge, establishing numerous VCTs that pursued the same investment strategy allowing larger investments to be made in VCT qualifying companies. With effect from 6 April 2012, the VCT rules were amended and the annual investment limit was increased to £5 million per investee company. As a result there is no longer as significant an advantage in having multiple VCTs pursuing the same investment strategy.

Since 2012 Livingbridge have been reviewing the merits of merging the Baronsmead VCTs. In April 2014 changes to the stamp duty rules significantly reduced the overall cost of a merger. As a result, the Boards now believe that there is a compelling argument for a merger from a cost savings point of view, with shareholders of the Companies benefitting from estimated aggregate costs savings of the Enlarged Company of approximately £355,000. In addition, the Directors believe that the size of the Enlarged Company will give it greater presence in the market for making investments. For these reasons the directors of the Companies believe that their respective shareholders' interests will be best served by the Merger.

Performance track record

Both of the Companies have been managed by Livingbridge and its predecessor businesses since their respective launches in 2001. Since its launch, BVCT3 has paid an average annual dividend of 6.9 pence per share (equivalent to 9.1 pence per share to investors who are higher rate tax payers). Over the last five years BVCT3 has paid an average annual dividend of 9.4 pence per share (equivalent to 12.5 pence per share to investors who are higher rate tax payers). Summaries of the track records of the Companies are set out in the table below.

Company	Launch date	NAV* (£m)	Average annual dividends paid per share since launch**(p)	Average annual dividends paid per share in the past 5 years** (p)	NAV total return per share since launch *‡
BVCT3	January 2001	82.1	6.9	9.4	286.8
BVCT4	December 2001	75.1	5.9	8.2	232.3

Notes:
* As at 30 November 2015.
** As at 31 December 2015. These figures include the interim dividend that was paid on 18 December 2015.

‡ AIC methodology: NAV total return to the investor, including the original amount invested (rebased to 100p) from launch, assuming dividends paid were reinvested at the NAV of the Companies at the time the shares were quoted ex-dividend.

NAV total return per Share (p)
Period to 30 November 2015	1 year	3 years	5 years	Since launch
BVCT3	114.0	135.0	161.5	286.8
BVCT4	113.3	129.3	152.3	232.3

Note: AIC methodology: NAV total return to the investor, including the original amount invested (rebased to 100p) from launch, assuming dividends paid were reinvested at the NAV of the Companies at the time the shares were quoted ex-dividend.

The past performance of the Companies is not a guide to the future performance of the Enlarged Company.

The Scheme

The number of New Shares in BVCT3 to be issued to BVCT4 Shareholders under the Scheme will be based on the adjusted net asset value of an ordinary share in BVCT3 (the "FAV per BVCT3 Share") and the adjusted net asset value of an ordinary share in BVCT4 (the "FAV per BVCT4 Share"). The FAV per BVCT3 Share and the FAV per BVCT4 Share will be calculated as at 10 March 2016 (the "Calculation Date") using each company's respective accounting policies (which are identical). The investments held by the Companies which are listed, quoted or traded on a recognised stock exchange will be valued by reference to the bid price on the principal stock exchange where the relevant investment is listed, quoted or dealt. Unquoted investments held by the Companies will be valued at their fair value as at the Calculation Date as determined by the Boards respectively.

The FAV per BVCT3 Share will be the net asset value of an ordinary share in BVCT3 adjusted to add back the costs and expenses of the Scheme already incurred by BVCT3 prior to the effective date of the Scheme, expected to be 11 March 2016 (the "Effective Date"). The FAV per BVCT4 Share will be calculated in accordance with the Scheme and will be the net asset value of an ordinary share in BVCT4 adjusted to add back the costs and expenses of the Scheme already incurred by BVCT4 prior to the Effective Date.

Shareholders in BVCT4 will be issued such number of New Shares with a FAV per BVCT3 Share equal to 100 per cent. of the FAV per BVCT4 Share of their shareholding in BVCT4. The New Shares issued pursuant to the Scheme will rank equally in all respects with the existing issued ordinary shares of BVCT3.

The Offer

The Offer will be open exclusively to existing shareholders of the Companies until close of business on 15 February 2016. Should the Offer not be fully subscribed before this time, the remaining New Shares to be issued under the Offer will be used to satisfy subscriptions from shareholders in the Baronsmead VCTs until close of business on 3 March 2016. If the Offer is not fully subscribed by close of business on 3 March 2016, the balance, if any, will be used to satisfy the subscriptions of any other investors. Applications will be processed on a "first come, first served" basis by the Registrar, subject to the Scheme becoming effective.

The minimum subscription under the Offer is £3,000 and thereafter in multiples of £1,000. There is no maximum investment. However, potential investors should be aware that tax relief is only available on a maximum of £200,000 in each tax year. Potential investors should consult their professional or financial advisers before deciding whether and, if so, how much they should invest under the Offer.

The number of New Shares to be allotted under the Offer will be determined by dividing the subscription amount by an offer price calculated on the basis of the following Pricing Formula:

Latest published net asset value of an existing ordinary share in BVCT3 at the time of allotment divided by 0.97 (to allow for the costs of the Offer of 3.0 per cent.) rounded up to the nearest 0.1 pence per share.

The number of New Shares to be issued under the Offer will be rounded down to the nearest whole number (fractions of New Shares will not be allotted).

Costs and expenses

Costs and expenses of participation in the Scheme

The aggregate costs and expenses to be incurred by the Companies in connection with the Scheme are expected to be approximately £365,000 (including VAT and stamp duty). It has been agreed that all costs of implementing the Scheme will be met by the Enlarged Company following the completion of the Scheme (including the costs of purchasing the interests of any dissenting shareholders of BVCT4). Should the Scheme be implemented, it is expected that the costs of the Merger will be recouped from cost savings achieved by the Enlarged Company within approximately 12 months of the Effective Date.

The effect of this arrangement is that the costs of the Merger are borne by the shareholders of the Companies in proportion to their relative contribution to the net asset value of the Enlarged Company.

Costs and expenses of the Offer

Livingbridge, which is a related party of BVCT3 will, in respect of services provided pursuant to the Offer, receive a fee of 3.0 per cent. of the gross proceeds of the Offer. Out of this fee, Livingbridge will pay all costs associated with the Offer, on behalf of the Enlarged Company. In addition, Livingbridge will pay permissible annual trail commission payments in relation to non-advised sales. Livingbridge will be responsible for any costs associated with the Offer in excess of this fee. This transaction is classified as a smaller related party transaction under Listing Rule 11.1.10R. The net proceeds of the Offer will, therefore, be £9,700,000 if the Offer is fully subscribed.

In the event that the Scheme does not become effective and as a result the Offer does not proceed, it is estimated that the aggregate costs incurred by the Companies in connection with the Scheme and the Offer will be approximately £385,000. The Companies have agreed to bear these abort costs in proportion to their respective unaudited net asset values as at 30 November 2015, being 52 per cent. by BVCT3 and 48 per cent. by BVCT4.

Expected Scheme timetable

	2016
Latest time and date for receipt of the forms of proxy for the first general meeting of BVCT4	2.30 p.m. on 1 March
Latest time and date for receipt of forms of proxy for the general meeting of BVCT3	3.30 p.m. on 1 March
First general meeting of BVCT4	2.30 p.m. on 3 March
General meeting of BVCT3	3.30 p.m. on 3 March
Time and date from which it is advised that dealings in BVCT4 shares should only be for cash settlement and immediate delivery of documents of title	8.00 a.m. on 7 March
Latest time and date for receipt of forms of proxy for the second general meeting of BVCT4	10.30 a.m. on 9 March
Calculation Date	5.00 p.m. on 10 March
Record date for BVCT4 Shareholders entitlements under the Scheme	6.00 p.m. on 10 March
Dealings in BVCT4 shares suspended	7.30 a.m. on 11 March
Second general meeting of BVCT4	10.30 a.m. on 11 March
Effective Date for implementation of the Scheme and commencement of the liquidation of BVCT4	11 March
Admission to listing and dealings commence in the New Shares issued pursuant to the Scheme	8.00 a.m. on 16 March
New Shares issued in uncertificated form credited to CREST accounts of BVCT4 Shareholders under the Scheme	8.00 a.m. on 16 March
Cancellation of listing of BVCT4 shares from the premium segment of the Official List and trading on the Main Market of the London Stock Exchange	8.00 a.m. on 16 March
Share and tax certificates in respect of New Shares issued in certificated form pursuant to the Scheme despatched to Shareholders entitled thereto	week commencing 21 March

Note: Each of the times and dates in the above expected timetable (other than in relation to the General Meetings) may be extended or brought forward without further notice. If any of the above times and/or dates change, the revised time(s) and/or date(s) will be notified to investors by an announcement through a Regulatory Information Service provider.

Expected Offer timetable

	2016
Record date for the Offer	21 January
Offer opens	1 February
Exclusive period for shareholders in the Companies ends	close of business on 15 February
Exclusive period for shareholders in the Baronsmead VCTs end	close of business on 3 March
First allotment	11 March
Final allotment	24 March
Offer closes	24 March
Dealings in New Shares commence	3 business days after allotments
Definitive share certificates despatched	within 10 Business Days of allotments

Note: The board of BVCT3 may close the Offer earlier than the date stated above if it is fully subscribed by an earlier date or may extend such Offer. The board of BVCT3 further reserves the right to accept subscription forms and to allot and arrange for the listing of New Shares in respect of subscriptions received on or prior to the closing date of the Offer as the Board of BVCT3 sees  fit, which may not be on the dates stated above.

Copies of the Prospectus and Circulars will shortly be available for inspection at the National Storage Mechanism, which is located at:

http://www.hemscott.com/nsm.do

and on the website of the Companies:

http://www.baronsmeadvcts.com

For additional information, please contact:

Michael Probin - VCT Investor Relations Director
Livingbridge VC LLP
Tel: [phone]

 

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