Acquisition and Readmission

RNS Number : 5491Q

EPE Special Opportunities PLC

04 August 2010

 

4 August 2010

EPE Special Opportunities plc

(the 'Company')

Proposed Acquisition of a majority interest in the EPIC Private Equity Portfolio

Reorganisation of the ESO Portfolio and investment by ESD

Proposed issue of Convertible Loan Notes

Re-admission to trading on AIM

and

Notice of Extraordinary General Meeting

The Company is announcing today that it has entered into certain arrangements which provide for, subject to approval of the Shareholders, the transfer of the ESO Portfolio to a new limited partnership(being the Fund), for ESD to invest £10 million of cash in the Fund and for the Fund to acquire the EPIC Private Equity Portfolio for an aggregate consideration of £22 million. The consideration for the Acquisition will comprise the issue of Convertible Loan Notes and Consideration Shares to EPIC and payment of £10 million in cash funded by the ESD Investment in return for ESD's participation in the Fund which will hold the Combined Portfolio.

Summary of the Proposals:

·      Proposed acquisition of a majority interest in the EPIC Private Equity Portfolio for an aggregate consideration of £22 million. The consideration for the acquisition includes:

o  Consideration Shares issued to EPIC with a value of £2 million at a price of 55.86 pence per Ordinary Share, representing a discount of 20.0 per cent to the theoretical combined NAV per Ordinary Share of the Enlarged Group of 69.83 pence and a premium of 132.7 per cent to the mid-market price of an Ordinary Share on 3 August 2010, being the last practicable date prior to the publication of this announcement;

o  Convertible Loan Notes issued to EPIC with a nominal value of £10 million; and

o  £10 million of cash

·      The transaction is deemed a reverse takeover for the purposes of the AIM Rules, requiring shareholder approval and readmission of the Company's Ordinary Shares to trading on AIM

The consideration paid for the EPIC Private Equity Portfolio represents a discount of approximately 17 per cent to its unaudited holding value in the reported NAV of EPIC as at 31 January 2010. The cash element of the consideration for the Acquisition will be funded through cash provided by ESD, a special purpose vehicle formed by European Secondary Development Fund IV, L.P., in return for ESD's participation in the Fund which will hold the Combined Portfolio.

The Company has received irrevocable undertakings and letters of intent from ESO Shareholders to vote in favour of the Resolutions in respect of approximately 56.6% of the Company's Existing Ordinary Shares. EPIC has received irrevocable undertakings from certain Capital Shareholders to vote in favour of the resolution to approve the Acquisition in respect of approximately 51.8% of Capital Shares in issue.

Geoffrey Vero, Chairman, commented: "The Board believes that the proposed Acquisition represents an opportunity to acquire an interest in a mature portfolio of private equity assets at an attractive price and one which will transform the Company by increasing its scale and diversity. The Acquisition involves minimal integration risk as the same investment team manages or advises on all thirteen portfolio companies (the four existing portfolio companies of the Company and the nine portfolio companies of EPIC). The Board believes that the Acquisition has the potential to enhance returns to existing Shareholders and therefore considers the Proposals to be in the best interests of the Company."

Enquiries:

EPIC Private Equity LLP

Giles Brand Tel: [phone]

IoMA

Philip Scales Tel: [phone]

Cardew Group

Catherine Maitland Tel: [phone]

Numis Securities Limited

Nominated Advisor: Stuart Skinner Tel: [phone]

Corporate Broker: Alex Ham Tel: [phone]

This summary should be read in conjunction with the detailed announcement which follows.

Paragraph 20 of the full announcement contains the definitions of certain terms used in this summary and the full announcement. This announcement does not constitute, or form part of, the Admission Document.

The Directors of EPE Special Opportunities plc have taken all reasonable care to ensure that the information contained in this announcement is, to the best of their knowledge, in accordance with the facts and does not omit anything likely to affect the import of such information.

Numis, which is authorised and regulated in the UK by the Financial Services Authority, is acting as Nominated Adviser and broker exclusively to the Company and will not be responsible to anyone other than the Company for providing the protection afforded to clients of Numis or for providing advice in relation to the proposed Acquisition, the re-admission to trading on AIM, or any other matters referred to in this announcement.

A circular to shareholders comprising an admission document (the 'Admission Document') will be dispatched today.  The Admission Document contains a notice of a General Meeting to approve certain resolutions necessary to implement the proposals set out in the Admission Document, expected to be held at IOMA House, Hope Street, Douglas, Isle of Man, IM1 1AP on 27 August 2010 at 10.00am. The Admission Document gives further details of the proposed Acquisition, the Reorganisation of the ESO Portfolio and the investment by ESD, the re-admission to the AIM market and the Company's business.

EPE Special Opportunities plc ('ESO' or the 'Company')

Proposed Acquisition of a majority interest in the EPIC Private Equity Portfolio

Reorganisation of the ESO Portfolio and investment by ESD

Proposed issue of Convertible Loan Notes

Re-admission to trading on AIM

Notice of Extraordinary General Meeting

1.         Introduction

The Company is announcing today that it has entered into certain arrangements which provide for, subject to approval of the Shareholders, the transfer of the ESO Portfolio to a new limited partnership (being the Fund), for ESD to invest £10 million of cash in the Fund and for the Fund to acquire the EPIC Private Equity Portfolio for an aggregate consideration of £22 million. The consideration for the Acquisition will comprise the issue of Convertible Loan Notes and Consideration Shares to EPIC and payment of £10 million in cash funded by the ESD Investment in return for a participation in the Fund which will hold the Combined Portfolio. It is proposed that the EPIC Private Equity Portfolio to be acquired will be held in a new limited partnership structure and that the ESO Portfolio will be passed into this structure in order to create an enlarged combined portfolio.

In view of the size of the Acquisition, the transaction is deemed a reverse takeover for the purposes of the AIM Rules, requiring shareholder approval and readmission of the Company's Ordinary Shares to trading on AIM. An Admission Document has therefore today been posted to shareholders, and is available on the Company's website at www.epicprivateequity.com/epespecialopportunitiesplc_aimrule26.

Resolutions will be proposed to the Extraordinary General Meeting, amongst other matters, to approve the Acquisition, to increase the authorised share capital of the Company from £1,650,000 to £2,250,000 and authorise the Company to purchase Ordinary Shares in the market.

2.         Reasons for the Acquisition, the Reorganisation and the ESD Investment

The Board believes that the proposed Acquisition represents an opportunity to acquire an interest in a mature portfolio of private equity assets at an attractive price and one which will transform the Company by increasing its scale and diversity.

In order to finance the Acquisition, the Company is entering into a limited partnership with ESD which will provide £10 million of capital in return for a minority interest in a limited partnership through which the EPIC Private Equity Portfolio will be acquired and to which the ESO Portfolio will be transferred.  ESD will invest £10 million at the theoretical valuation of the Combined Portfolio, which minimises dilution to existing Shareholders.

Additionally, the Board believes that the Acquisition involves minimal integration risk as the same investment team manages or advises on all thirteen portfolio companies (the four existing portfolio companies of the Company and the nine portfolio companies of EPIC).

Taking into account the above considerations, the Board believes that the Acquisition has the potential to enhance returns to existing Shareholders and therefore considers the Proposals to be in the best interests of the Company. In reaching this conclusion, the Board sought guidance from an independent adviser on the valuation of the EPIC Private Equity Portfolio.

The Proposals are conditional inter alia upon approval by Shareholders and the Acquisition is conditional inter alia upon approval by the Capital Shareholders of EPIC.

3.         Consideration for the Acquisition

The consideration for the Acquisition will be £22 million which comprises of:

·      £10 million of cash;

·      Convertible Loan Notes issued to EPIC with a nominal value of £10 million; and

·      Consideration Shares issued to EPIC with a value of £2 million at a price of 55.86 pence per Ordinary Share, representing a discount of 20.0 per cent to the theoretical combined NAV per Ordinary Share of 69.83 pence as it is calculated in the Admission Document and a premium of 132.7 per cent. to the mid-market price of an Ordinary Share on 3 August 2010, being the last practicable date prior to the publication of this document.

The consideration represents a discount of approximately 17 per cent. to the unaudited holding value attributed to the EPIC Private Equity Portfolio in the reported NAV of EPIC as at 31 January 2010.

The cash element of the consideration for the Acquisition will be funded through cash provided by ESD, a special purpose vehicle formed by European Secondary Development Fund IV, L.P., in return for ESD's participation in the Fund which will hold the Combined Portfolio.

4.         Convertible Loan Notes

The Company is satisfying £10 million of the total consideration payable to EPIC for the Disposal by way of the issue of the Convertible Loan Notes to EPIC. The terms of the Convertible Loan Notes are summarised in the Admission Document which was sent to shareholders today; the principal terms include:

·      10 million loan notes due 31 December 2015

·      Nominal value and issue price £1 each

·      Interest will be payable at a rate of 7.50 per cent. per annum.  Any interest due will be payable semi-annually in arrears in equal instalments on 31 January and 31 July in each year. Additionally, the Company will pay interest at a rate of 12 per cent. per annum on any interest accrued but unpaid on the interest payment dates and such accrued but unpaid interest will be paid at the next interest payment date on which sufficient funds are available (and not required or reserved for other purposes) or on the conversion or final redemption of the Convertible Loan Notes (as applicable).  

·      Each holder of the Convertible Loan Notes will have the right to convert the Convertible Loan Notes into Ordinary Shares at any time on or after 31 December 2011 and up to the close of business on the fourteenth business day prior to the final redemption date

·      The initial conversion price will be 170 pence nominal value of Convertible Loan Notes per Ordinary Share

 

5.         Purchase of Ordinary Shares

It is proposed that the Board be authorised to purchase in the market up to 7,722,915 issued Ordinary Shares, equivalent to up to 25 per cent. of the Enlarged Issued Ordinary Share Capital. Any purchase of the Ordinary Shares will be made subject to the Act and in accordance with the Articles, the special resolution passed by Shareholders of the Company authorising such purchase and guidelines established from time to time by the Board. The Ordinary Shares purchased by the Company shall be treated as cancelled on purchase and the nominal amount of the Company's issued share capital shall be diminished by the nominal value of the cancelled Ordinary Shares accordingly.

In accordance with Section 13 of the Isle of Man Companies Act 1992, the authority granted by Shareholders must specify a maximum price payable. This has been set at £5 per Ordinary Share but purchases of the Shares will only be made for cash at prices well below the estimated NAV per Share at the relevant time and where the Board believes such purchases will enhance Shareholder value and/or earnings per Ordinary Share.

The Board recognises that the payment of sums to effect such repurchases will diminish funds available for investment but believes that addressing the imbalance between the market price for the Ordinary Shares and the NAV is a priority. Any such purchase will only be made on a basis which would enhance the NAV per Share.

The authority to purchase Ordinary Shares will expire 18 months after the date on which the authorising resolution is passed. The Company may seek the renewal of the authority to purchase its Ordinary Shares at the Annual General Meeting of the Company in 2011 or at any earlier General Meeting of the Company. Ordinary Shares cannot be purchased by the Company in the two month period immediately preceding the announcement of the Company's interim and annual results or, if shorter, the period from the end of the Company's financial period up to and including the time of the relevant announcement, unless a dispensation to deal has been granted by the London Stock Exchange. The Company will seek to obtain a dispensation in each such close period if circumstances allow.

6.         Cancellation of Share Premium Account of the Company

Following the issue of the New Ordinary Shares the Company will have approximately £2,215,516 standing to the credit of its share premium account. To increase the distributable reserves available for dividends and for the purposes of repurchasing the Ordinary Shares, the Board also proposes that, subject to obtaining the Shareholder approval referred to below, the Company will apply to the Court to confirm the cancellation and transfer of the amount standing to the credit of the share premium account of the Company to a new distributable reserve out of which repurchases of Ordinary Shares may be made.

As the price of any purchases cannot be identified at this stage and to provide flexibility for purchases under any future renewal of the buyback authority, the Directors are seeking Shareholder and Court approval for the cancellation of the entire sum standing to the credit of the share premium account following completion of the Acquisition.

The Court may decide in its discretion whether to confirm the cancellation and will need to be satisfied that the interests of the Company's creditors will not be prejudiced as a result of the cancellation. The Company will take such steps in that regard as it deems appropriate and as required by the Court.

It is expected that the cancellation of the amount standing to the credit of the share premium account should become effective as soon as possible after the Court Order confirming the cancellation comes into effect, estimated to be within eight weeks of the passing of the resolution by Shareholders.

7.         Investment strategy

The Company is a private equity investment company advised by EPE and focused on investing in small and medium-sized special situation transactions and distressed companies in the United Kingdom. The acquisition by the Fund of both the EPIC Private Equity Portfolio and the ESO Portfolio will unite EPE's investment discipline across special situations, distressed, growth and buyout transactions. Going forward, the Company will seek to target all these types of transaction, making investments where it believes that pricing is attractive and the opportunity for value creation is strong.

When sufficient financial resources are available, the Company will seek to invest between £2 million and £10 million in a range of debt and equity instruments with a view to generating returns through both yield and capital gain. Whilst in general the Company aims to take controlling equity positions, it may seek to develop companies as a minority investor. Occasionally the Board may authorise investments of less than £2 million. For investments larger than £5 million, the Company may seek co-investment from third parties, either from large existing Shareholders or, from time to time, non-Shareholders.

The Company will consider most industry sectors and shareholding structures. The Investment Adviser has experience in the consumer, retail, manufacturing, financial services, healthcare, support services and media industries.

Following the Acquisition, the Company intends to continue to develop the Combined Portfolio through the Fund. The Investment Adviser considers that current market conditions provide opportunities to make bolt-on acquisitions at favourable values to enhance the value of existing investments.

The Board, and in relation to the Fund, the advisory committee of the Fund will manage any conflicts of interest and related party matters accordingly.

In the current credit environment, the Company recognises that bank syndicated lending is scarce. Therefore, the Company is targeting investments with minimal leverage requirements, and in particular, the acquisition of distressed and undervalued companies with high quality assets and sustainable business models in which value is created through restructuring and recovery rather than through financial engineering.

The Company will continue to target the following types of investments:

(i)         Special situations where the Investment Adviser believes that assets are undervalued due to specific, event-driven circumstances. Target companies may or may not be distressed as a result of the situation. The Investment Adviser will aim to use its restructuring and refinancing expertise to resolve the situation and achieve a controlling position in the target company.

(ii)         Distressed companies where asset-backing may be available and the opportunity exists for recovery and significant upside. These transactions may involve target companies with a substantial asset base providing the Company with considerable downside protection. The Company seeks to acquire distressed debt, undervalued equity or the assets of target businesses in solvent or insolvent situations.

(iii)        Public companies either backing management to acquire and de-list the company or buying ordinary equity in a listed business. The Company may consider making investments in a number of smaller companies, primarily ones whose shares are admitted to AIM, being companies with a market capitalisation in the region of £1 million to £5 million.  It is anticipated that these transactions would involve the acquisition of the entire issued share capital of such companies.  The Company may offer Ordinary Shares as all or part of the consideration for such investments.

Following the Acquisition and when sufficient financial resources are available, the Company intends to expand its current investment strategy by also targeting investment in growth, buyout and pre-IPO opportunities, in order to fully utilise EPE's investment experience, contacts and ability.

Any new investments (other than follow-on investments in the Combined Portfolio) made in the future by ESO will be through ESO Investments in which ESO is the sole investor.  On realisation of the Fund and any future investments held in ESO Investments, ESO may seek to return capital to shareholders.

8.         Arrangements with EPE

As part of the Proposals, the arrangements with the Investment Adviser, EPE, will be updated to reflect the revised structure through which the Company holds its investments.

Further details of these changes are set out in the Admission Document which will be posted to Shareholders later today and is available on the Company's website at the address referred to above.

9.         Details of new Fund and structure

Present investment structure

At present, the Company holds its equity investments in Morada and Past Times directly whilst its debt investments in the two companies are held indirectly through EPIC Structured Finance Limited ("ESF"), a wholly-owned subsidiary of the Company. ESF also holds the Group's debt and equity interests in Process Components Limited.

ESO Investments LLP, a limited liability partnership of which the Company is a member, currently holds the equity and debt investments in Whittard of Chelsea.

Additionally, EPIC Reconstruction Property Company II Limited ("ERPC"), a wholly-owned subsidiary of the Company, currently holds one commercial property, with a value of £484,310. The property is secured by a mortgage of £484,310 in favour of Commercial First Mortgage Limited and accordingly, the investment is held by ERPC at a net book value of zero.

Investment structure following Completion

It is envisaged that, pursuant to an intra-group transfer agreement, ESF will transfer its assets (including its debt and equity investments in Process Components Limited but excluding its debt investments in Morada and Past Times) and liabilities to the Company.

As part of the Reorganisation it is proposed that the Company contributes to the Fund, as part consideration for its limited partner interest in the Fund:

(i)         its entire shareholding and debt investments in ESF to the Fund; and

(ii)         its equity interests in Past Times, Morada and ESO Investments LLP.

ERPC will remain a wholly-owned subsidiary of the Company following Completion.

The Company also proposes to transfer its equity and debt investments in Process Components Limited to ESO Investments in which the Company is a member and through which all future investments (other than follow-on investments in companies in the Combined Portfolio) will be made by the Company.

The transfer of the Combined Portfolio to the Fund reduces the Board's level of control over individual investments in the Fund, including control over any decision on follow-on investments in the Combined Portfolio and realisation of such investments, from that which the Board has previously exercised.  However, the Board believes that, having regard to the controls retained by ESO, it still maintains sufficient control over its investment in the Fund to properly exercise its duties. The Board further believes that the advantages flowing from the formation of the Fund and the ESD Investment should outweigh this reduction of control. The Board's control over its investments held outside the Fund (for example, Process Components Limited and any investments to be made through ESO Investments) will be unaffected by the changes.

10.        Dividend policy

The Board did not recommend a dividend for the financial year ended on 31 January 2010. The Board will review its dividend policy periodically and also evaluate distributing excess capital by way of share buy backs and/or special dividends as and when capital is returned to the Company.

11.        Valuation methodology

The Company currently values its investments with reference to the BVCA guidelines which state that portfolio companies should be valued on an EBITDA multiple basis using publicly quoted comparables and/or transaction comparables, then discounting the equity value by an appropriate percentage to account for marketability considerations. Cost may be considered as fair value in some cases but assets will always be held at fair value and the value of such assets will be reviewed periodically to ensure that such is the case.

The Company intends to announce estimated NAV per Ordinary Share on a monthly basis following a review of the valuation of the Company's investments by the Board. The Company has always endeavoured to comply with industry-standard guidelines and, as the Fund will be applying the International Private Equity and Venture Capital Valuation Guidelines, for consistency the Board will consider adopting those guidelines going forward. The Company believes that there is unlikely to be any material effect on valuation as a result of such a change.

12.        Corporate governance

As an Isle of Man registered company and under the AIM Rules, the Company is not required to comply with the Corporate Governance Code. The Directors, however, place a high degree of importance to ensuring that the Company maintains high standards of corporate governance and have therefore adopted the spirit of the Corporate Governance Code to the extent that they consider appropriate, taking into account the size of the Company and nature of its operations.

The Company's corporate governance framework is set out in its most recent Annual Report and Accounts dated 24 May 2010. In summary, the Board holds at least four meetings annually and has established audit and investment committees, members of which include all the Directors. The Board does not intend to establish remuneration and nomination committees given the current composition of the Board and the nature of the Company's operations. The Board reviews the remuneration of the Directors annually and agrees on the level of Directors' fees.

13.        Current trading and future prospects

The Company announced its audited results for the year ended 31 January 2010 on 24 May 2010. For the full financial year ended 31 January 2010 the Company had total gross income of £1.4 million which translated into a net loss for the Company of £0.3 million. NAV per Ordinary Share was 72.89 pence as at 31 January 2010.

The Company had an unaudited cash balance of £4.0 million as at 30 June 2010.

The Company's existing portfolio continues to perform much in line with expectations, with certain investments demonstrating the prospect for significant upside. The Fund and the Company will seek to exit the smaller investments and continue to identify potential bolt-on opportunities for the remainder of the Combined Portfolio. All portfolio companies are subject to the vagaries of the market place and the Directors have applied a write-down policy as appropriate. The ongoing challenging economic conditions are expected to provide interesting opportunities for possible new investments.

14.        Duration of the Company

Private equity is a long term asset class historically having a typical average holding period of around five years per portfolio company. The types of investments which the Company makes typically need some time to develop and create shareholder value, particularly in current market conditions. Therefore, if the Proposals are approved by the Shareholders, the Board considers it appropriate for the Company to provide a period of certainty for the build-up, development and realisation of the Combined Portfolio to be held in the Fund.  The initial term of the Fund agreed with ESD is five years, with a possibility of extension for up to a further two years subject to the agreement of the General Partner and limited partners holding 75 per cent. or more of the Fund.

To align the duration of the Company with the Fund, the Board proposes that an ordinary resolution be proposed to Shareholders in September 2015 for the Company to continue in existence for a further five years.  If that resolution is not passed, the Board will be required to submit proposals for the winding up of the Company by no later than 31 December 2016.  Assuming continuation is approved, a similar resolution will be proposed every five years after 30 September 2015.

15.        Extraordinary General Meeting

The Admission Document which will be posted to shareholders today contains the Notice convening the Extraordinary General Meeting to be held at IOMA House, Hope Street, Douglas, Isle of Man IM1 1AP on 27 August 2010 at 10 a.m. at which the Resolutions described below will be proposed:

1.         An ordinary resolution to approve the Proposals.

2.         An ordinary resolution to increase the authorised share capital of the Company from £1,650,000 to £2,250,000 by the creation of 12,000,000 new Ordinary Shares of 5 pence each.

3.         A special resolution to grant the Company authority to make market purchases of up to 7,722,915 Ordinary Shares of 5 pence each (representing up to 25 per cent. of the Enlarged Issued Ordinary Share Capital).

4.         A special resolution to approve the cancellation of the amount standing to the credit of the Company's share premium account following the allotment and issue of the New Ordinary Shares and subject to approval by the Court.

16.        Re-admission

Application will be made for the Enlarged Issued Ordinary Share Capital to be admitted to trading on AIM in accordance with the AIM Rules for Companies. Following shareholder approval of the Proposals, trading in the existing Ordinary Shares on AIM will be cancelled. It is expected that Admission will be effective and dealings in the Existing Ordinary Shares will re-commence on 31 August 2010 and in the New Ordinary Shares on 31 August 2010.

As AIM is primarily a market for equity securities, the Convertible Loan Notes are unlikely to be admissible to trading on that market. However, having consulted with PLUS, an independent recognised investment exchange, the Directors believe that the Convertible Loan Notes would be eligible for admission to the "PLUS-quoted" segment of PLUS if there is a market for the Convertible Loan Notes to be floated freely. This will not be the case upon Completion as EPIC will hold 100 per cent. of the Convertible Loan Notes. The Directors therefore intend to seek such admission of the Convertible Loan Notes to PLUS or another appropriate investment exchange on or before 31 July 2011, being the termination date of EPIC.

17.        Related party transactions

Under the Acquisition Agreement, the Fund is acquiring minority interests in EPIC 1 and EPIC 2 from EPIC Carry LLP and EPIC Carry 2 LLP (representing carried interest entitlements of up to 20 per cent. of the income and gains of EPIC 1 and EPIC 2, subject to satisfaction of certain performance conditions) both of which are limited liability partnerships in which members of the Investment Adviser's team are participants. As consideration for their minority interests, each of EPIC Carry LLP and EPIC Carry 2 LLP will be entitled to receive nominal cash consideration of 2 pence.

EPE Carry LP, a limited liability partnership in which members of the Investment Adviser's team are participants, will make a capital contribution of £50 for a founder partner interest in the Fund. EPE Carry LP will be entitled to receive, in respect of its founder partner interest, certain income and realisation proceeds received by the Fund on the disposal of investments in the Combined Portfolio.

Similarly, ESO Carry LP, a limited liability partnership in which members of the Investment Adviser's team are participants, will make a capital contribution of £50 for a founder partner interest in ESO Investments. Under the members' agreement constituting ESO Investments, EPE Carry LP will be entitled to receive Carried Interest equivalent to 20 per cent. of the income and gains from the realisation of the portfolio of investments in ESO Investments, subject to satisfaction of a hurdle rate of return.

The Investment Adviser will also be issued the EPE Shares, comprising 769,781 new Ordinary Shares, in respect of its services to the structuring of the Acquisition and formation of the Fund.

In light of the above, EPE, as the Company's Investment Adviser, is considered a related party under the AIM Rules by virtue of its interests in EPIC Carry LLP, EPIC Carry 2 LLP and EPE Carry LP, and therefore, the Acquisition, the Reorganisation and issue of EPE Shares constitute related party transactions. In this regard, the Directors consider, having consulted with Numis, that the terms of the Acquisition, the Reorganisation and the issue of EPE Shares are fair and reasonable so far as Shareholders are concerned.

EPIC has been a shareholder since the Company was formed and is currently the holder of 2,612,178 Ordinary Shares, which represent approximately 9.84 percent of the Existing Ordinary Shares of the Company.  Although EPIC is not currently a related party, it will be considered to be so upon the issue of the Consideration Shares as it will then hold approximately 20.11 per cent. of the Enlarged Issued Ordinary Share Capital.

EPIC has irrevocably agreed to exercise its votes attaching to the Ordinary Shares currently held by it in favour of the Resolutions. 

Mr. Giles Brand is currently the holder of 2,400,000 Ordinary Shares representing approximately 9.04 per cent. of the Existing Ordinary Shares of the Company. Mr. Brand also holds the majority of membership interests in EPE and as a result, upon the issue of EPE Shares, he will be interested in approximately 10.26 per cent. of the Enlarged Issued Ordinary Share Capital of the Company. Under the AIM Rules, Mr. Brand will only be regarded as a related party upon issue of the EPE Shares.

Mr. Brand has agreed to exercise all votes attaching to the Ordinary Shares currently held by him in favour of the Resolutions.

Further details of EPE's arrangements in respect of ESO Investments and the Fund will be provided in the Admission Document which will be posted to shareholders today.

18.        Irrevocable undertakings

The Company has received irrevocable undertakings and letters of intent to vote in favour of the Resolutions to be proposed at the Extraordinary General Meeting from certain shareholders holding, in aggregate, 15,013,208 Ordinary Shares representing approximately 56.6 per cent. of the Company's existing issued ordinary share capital.

EPIC has received irrevocable undertakings to vote in favour of the resolution to approve the Acquisition from certain Capital Shareholders holding, in aggregate, 20,863,000 Capital Shares representing approximately 51.8 per cent. of EPIC's existing issued Capital Shares.

19.        Recommendation

The Directors consider, having consulted with Numis, the terms of the Acquisition and other Proposals to be fair and reasonable insofar as the Shareholders are concerned and, accordingly, unanimously recommend Shareholders to vote in favour of the Resolutions to be proposed at the Extraordinary General Meeting.

Mr. Vero and Mr. Wilson, who are Directors, intend to exercise their voting rights in favour of the Resolutions in respect of their shareholdings in the Company totalling 60,000 Ordinary Shares representing approximately 0.2 per cent of the Company's existing issued ordinary share capital.

20.        Definitions

The following definitions and terms apply throughout this announcement unless the context otherwise requires:

"Act"	the Isle of Man Companies Acts 1931 to 2004
"Acquisition"	the proposed acquisition by the Fund of the EPIC Private Equity Portfolio
"Acquisition Agreement"	the agreement dated 4 August 2010 by and among EPIC, EPIC Carry LLP, EPIC Carry 2 LLP and EPE (collectively referred to as the Vendors), the Fund, the Fund GP (collectively with the Fund, referred to as the Purchasers) and ESO relating to the Acquisition
"Admission"	admission of the Enlarged Issued Ordinary Share Capital of the Company to trading on AIM becoming effective in accordance with Rule 6 of the AIM Rules
"AIM"	the AIM Market operated by the London Stock Exchange
"AIM Rules"	the AIM Rules for Companies and/or, where applicable, the AIM Rules for Nominated Advisers
"Articles"	the articles of association of the Company
"Board"	the Board of Directors of the Company
"BVCA"	the British Venture Capital Association
"Capital Shares"	capital shares of 10 pence each in the capital of EPIC
"Carried Interest"	means the right of EPE Carry LP to receive payments representing carried interest under the limited partnership agreement constituting the Fund and the right of ESO Carry LLP to receive payments representing carried interest under the limited liability partnership agreement constituting ESO Investments
"Combined Portfolio"	the ESO Portfolio together with the EPIC Private Equity Portfolio
"Company" or "ESO"	EPE Special Opportunities plc, a company incorporated in the Isle of Man with registered number 108834C
"Completion"	completion of the Acquisition
"Consideration Shares"	The 3,580,379 Ordinary Shares to be issued to EPIC in accordance with the terms of the Acquisition Agreement
"Convertible Loan Notes"	the 10,000,000 convertible loan notes of £1 each to be issued by the Company to EPIC in accordance with the terms of the Acquisition Agreement, to be constituted by the Deed Poll
"Corporate Governance Code"	The UK Corporate Governance Code published by the Financial Reporting Council in June 2010
"Court"	the Isle of Man High Court
"Directors"	the directors of the Company as listed in the Admission Document which will be posted to shareholders today
"Enlarged Issued Ordinary Share Capital"	the ordinary share capital of the Company as enlarged by the issue of the Consideration Shares and the EPE Shares
"EPE Shares"	769,781 Ordinary Shares to be issued to the Investment Adviser
"EPIC"	The Equity Partnership Investment Company plc
"EPIC 1"	EPIC Investments LLP, a limited liability partnership through which debt and equity investments in certain of the companies which comprise the EPIC Private Equity Portfolio are held
"EPIC 2"	EPIC Investments 2 LLP, a limited liability partnership through which debt and equity investments in certain of the companies which comprise the EPIC Private Equity Portfolio are held
"EPIC Private Equity Portfolio"	the portfolio of equity investments to be acquired by the Fund through the acquisition of EPIC 1 and EPIC 2 pursuant to the Acquisition Agreement
"ESD"	DES Holdings IV (A) LLC, a limited liability company formed under the laws of the State of Delaware by European Secondary Development Fund IV, LP
"ESD Investment"	the investment by ESD of £10 million of cash in the Fund as consideration for a minority interest in the Fund
"ESO Investments"	ESO Investments 2 LLP, a limited liability partnership incorporated in England and Wales with registered number OC356809
"ESO Portfolio"	the portfolio of debt and equity investments held by the Company, directly and/or indirectly, in Morada, Past Times and Whittard of Chelsea, except for any interest accrued but unpaid on such debt investments on the date of Admission
"Existing Ordinary Shares"	the 26,541,501 Ordinary Shares in issue at the date of this announcement
"Extraordinary General Meeting"	the Extraordinary General Meeting of the Company convened for 10 a.m on 27 August 2010 (and any adjournment thereof), notice of which is set out in the Admission Document posted to shareholders today
"Fund" or "Fund LP"	ESO Investments 1 LP, a limited partnership with registered number LP014043 which is majority owned by ESO and to which it is proposed the EPIC Private Equity Portfolio and the ESO Portfolio be transferred
"Group"	the Company and its subsidiaries (including any limited partnership and limited liability partnership in which the Company and/or its subsidiaries have a majority interest)
"Investment Adviser" or "EPE"	EPIC Private Equity LLP, of 7th Floor, Billiter Street, London EC3M 2RY, investment adviser to the Company
"London Stock Exchange" "Morada"	London Stock Exchange plc Laneside Holdings Limited, which trades under the name of "Morada"
"NAV"	the total of the consolidated share capital and reserves from time to time of EPIC or the Company (as relevant) calculated in accordance with EPIC's or the Company's (as relevant) accounting policies
"NAV per Share"	the NAV divided by the total number of Ordinary Shares in issue at the relevant time
"New Ordinary Shares"	the Consideration Shares and the EPE Shares
"Numis"	Numis Securities Limited, the Company's nominated adviser and broker
"Ordinary Shares"	ordinary shares of 5 pence each in the capital of the Company
"Proposals"	the proposals described in this announcement, including the Reorganisation, the ESD Investment, the Acquisition, Admission, the issue of EPE Shares, the changes to the Company's investment strategy and revised arrangements relating to EPE and the duration of the Company
"Reorganisation"	the transfer of the ESO Portfolio to the Fund as part consideration for a majority interest in the Fund
"Resolutions"	the resolutions as set out in the notice of EGM provided in the Admission Document posted to shareholders today
"Shareholders"	holders of Ordinary Shares
"United Kingdom" or "UK"	the United Kingdom of Great Britain and Northern Ireland
"Whittard of Chelsea"	Hamsard 3145 Limited, which trades under the name of "Whittard of Chelsea"

 

END

 

 

MSCMMGGRKDGGGZM