Tender Offer Posting of Circular

RNS Number : 1652G

Gulf Investment Fund PLC

23 November 2020

 

Legal Entity Identifier: 2138009DIENFWKC3PW84

THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO, 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

23 November 2020

Gulf Investment Fund PLC  

("GIF" or the "Company")

Tender Offer

Posting of circular

Further to the Company's final results announcement on 28 September 2020, a circular setting out the terms of a tender offer for up to 100 per cent. of each Shareholders holding in the issued Share Capital of the Company (the "Tender Offer") has today been posted to Shareholders (the "Circular"), together with a notice of an Extraordinary General Meeting to be held on 10 December 2020.

Capitalised terms and expressions shall have the same meanings as those attributed to them in the Circular.

Background

In December 2017, the Board made a commitment to Shareholders to implement a 100 per cent. tender offer in 2020. At that time, the Company also made a number of changes, including to broaden its Investment Policy from a largely Qatar-focussed investment strategy to a broader Gulf Cooperation Council ("GCC") focussed investment strategy, in order to capture the opportunities for growth by the expanding GCC economies by investing in listed (or soon to be listed) companies on one of the GCC exchanges. Since then, the Company's Net Asset Value per Share has increased by 42.4 per cent., from US$1.0145 at 7 December 2017 to US$1.4443 (unaudited) as at 12 November 2020 (being the date of the latest available unaudited NAV per Share). This compares to the 14.9 per cent. increase in the Company's benchmark, the S&P GCC Index, over the same period. In addition, the Company has paid dividends totalling 9 cents per Share during the same period. Including dividends, Shareholders have enjoyed a total return of 53.5 per cent. compared to 29.0 per cent. from the S&P GCC Index. The Company's return of 53.5 per cent. compares to the peer-group's average return of 21.9 per cent. The Company's share price currently trades at a 9.3 per cent. discount to NAV.

The Board and the Investment Adviser continue to believe the GCC offers attractive growth opportunities for investors and continue to view the future of the Company with confidence, expecting healthy growth in the region as a whole. 

The Investment Adviser believes that investing in the GCC is not just about oil; investment in the GCC is about diversification, infrastructure spending, expansion of the non-oil and gas sector, privatisation and economic, social and capital market reforms. The Investment Adviser continues to see significant opportunity in the region going forward. Expansion of the North Field in Qatar will increase Qatar's hydrocarbon production by approximately 64 per cent. by 2027. The upcoming FIFA World Cup will generate a lot more opportunities for the region, and specifically Qatar. Socio-economic and capital market reforms in Saudi Arabia continue to throw up opportunities for long term investors. Valuations in the region, and especially in the United Arab Emirates (despite the current challenges being faced), are very attractive and difficult to overlook. The Investment Adviser considers that these opportunities are compelling when compared to investment opportunities in other parts of the world, which are diminishing following the recent strong rally in the global equity markets. Additionally, investors should not ignore the dollar-linked superior dividend yield in the region. The Investment Adviser believes that oil prices will recover by next year on the back of economic recovery and that the regional narrative will change from austerity to growth, with economic momentum being clear from 2021 onwards. GCC markets typically outperform global/emerging markets during risk-off periods, after the initial sharp recovery period. This is a result of their defensive qualities, which include higher local participation, US$-pegged currencies, low betas versus emerging markets and low correlation.

If there is sufficient Shareholder support for the Company following the implementation of the Tender Offer, the Board and the Investment Adviser intend to implement the following proposals which will be put to Shareholders in Q1 2021:

· the introduction of a semi-annual 100 per cent. liquidity mechanism;

· the introduction of an enhanced dividend policy, targeting an annual dividend equivalent to 4 per cent. of its Net Asset Value at the end of the preceding year, barring any unforeseen circumstances, to be paid semi-annually;

· the introduction of a cost reduction program effective from 1 January 2021, which will include a reduction in the fees payable to the Investment Adviser, from 0.9 per cent. of net assets to 0.8 per cent. of net assets and a 30 per cent. reduction in the annual fees paid to each Director; and

· the deferral of the continuation vote that is required to be put to Shareholders at the annual general meeting to be held in 2021, deferring such vote to 2023;

each subject to the requirements of the Companies Acts and regulatory approvals. 

The Tender Offer

Shareholders on the Register at the Record Date are invited to either (i) continue their full investment in the Company; or (ii) save for Restricted Shareholders, tender some or all of their Shares held at the Record Date.

The Company's assets and liabilities will be valued on the Calculation Date and, subject to the number of Tendered Shares, the Board may be required to split the Company's assets into two pools - the Continuing Pool and the Tender Pool - and the Investment Adviser will be instructed to realise the assets allocated to the Tender Pool as soon as practicable and the proceeds (after payment of tender costs) used to repurchase the Tendered Shares. 

The Tender Price will be determined once the Company's assets have been allocated between the Continuing Pool and the Tender Pool, the assets contained in the Tender Pool have been fully realised and all the liabilities (including the costs of the proposals) to be borne by the Tender Pool have been accounted for. The Tender Price will be paid to Shareholders in US Dollars. Further details on the terms and conditions of the Tender Offer are set out in Part 4 of the Circular.

The Tender Offer is being made by Panmure Gordon who will, as principal, on the terms and subject to the conditions of the Tender Offer being satisfied, purchase at the Tender Price the Shares validly tendered ("Tendered Shares") by means of on-market purchases and, following the completion of those purchases, sell the Tendered Shares on to the Company at the Tender Price by way of an on-market transaction in accordance with the terms of the Repurchase Agreement. All transactions will be carried out on the London Stock Exchange. The Company has entered into a Repurchase Agreement with Panmure Gordon to give effect to this, subject to the Tender Offer becoming wholly unconditional.

Any Tendered Shares tendered will be cancelled, subject to the Board's discretion to hold in treasury such number of Shares as is equal to up to 10 per cent. of the Company's issued share capital.

The Board believes it would not be in the interests of Shareholders to be invested in a sub-scale, illiquid fund. Accordingly, the Tender Offer is conditional on, inter alia, the Post Tender Offer Share Capital being not less than 41,542,616 Shares (the "Minimum Size Condition"). The Minimum Size Condition has been set by reference to the latest available unaudited Net Asset Value per Share prior to the publication of the Circular calculated as at 12 November 2020. In the event that applications are received in respect of the Tender Offer such that the Post Tender Offer Share Capital will be less than 41,542,616 Shares, meaning that the Minimum Size Condition could not be met, the Tender Offer shall not proceed. The Company will announce via a Regulatory Information Service on the Confirmation Date whether the Minimum Size Condition has been met and, accordingly, whether the Tender Offer will proceed. In the event that the Tender Offer does not proceed, the Directors will put forward proposals to Shareholders within three months for the Company to be wound up with a view to returning cash to Shareholders or to enter into formal liquidation. 

The Tender Offer is conditional, inter alia, on the passing of the Resolutions to be proposed at the Extraordinary General Meeting. The Tender Offer is also conditional on the Company satisfying the distributable profits requirements under Isle of Man law at the time of the Tender Offer.

Panel Waiver 

The Investment Adviser held 17,319,759 Shares representing 18.7 per cent. of the voting rights in the Company as at the Latest Practicable Date and has indicated to the Board that it does not intend to tender any of its Shares pursuant to the Tender Offer.

Subject to the final size of the Tender Offer and the other assumptions set out in Part 5 of the Circular, the Investment Adviser could hold up to approximately 41.69 per cent. of the share capital of the Company following completion of the Tender Offer, which would exceed the 30 per cent. threshold above which the Investment Adviser will be required to make a Rule 9 Offer in cash to the remaining Shareholders to acquire their Shares pursuant to the Takeover Code. 

However, the Panel has agreed to waive such obligation to make a Rule 9 Offer, subject to the approval of the Whitewash Resolution, to be proposed at the Extraordinary General Meeting, by Independent Shareholders voting on a poll. The Tender Offer is conditional on, inter alia, the Whitewash Resolution being passed. 

Extraordinary General Meeting

The Extraordinary General Meeting has been convened for 11.00 a.m. on 10 December 2020 to take place at the offices of the Company's Administrator, Mainstream Fund Services (IOM) Limited, at Millennium House, 46 Athol Street, Douglas, Isle of Man IM1 1JB. At the Extraordinary General Meeting, Shareholders will be asked to consider and, if thought fit, pass the following resolutions: 

Resolution 1

Resolution 1 (the Whitewash Resolution) is an ordinary resolution to be taken on a poll by the Independent Shareholders to waive the obligation on the Investment Adviser which would otherwise arise under Rule 9 as a result of the implementation of the Tender Offer. The Investment Adviser has undertaken not to vote on the Whitewash Resolution.

Resolution 2

Resolution 2 (the Tender Offer Resolution), which is conditional on the Tender Offer becoming wholly unconditional in accordance with its terms (such terms including the condition that the Whitewash Resolution is passed), is an ordinary resolution requiring, on a show of hands, more than 50 per cent. of Shareholders voting to vote in favour of the Tender Offer Resolution in order to be passed or, on a poll, votes in favour of the Tender Offer Resolution to be cast by holders of more than 50 per cent. of the Shares that are voted on the Tender Offer Resolution.

Shareholders are advised that, given current restrictions imposed by the Isle of Man Government in response to the global COVID-19 pandemic, it may not be possible to attend the Extraordinary General Meeting in person. Shareholders are therefore strongly encouraged to complete and return the Form of Proxy accompanying the Circular appointing the chairman of the Extraordinary General Meeting as their proxy.

Irrevocable Undertaking

The Investment Adviser has provided an irrevocable undertaking to the Company that it will vote in favour of the Tender Offer Resolution at the Extraordinary General Meeting. The Investment Adviser will not be permitted to vote on the Whitewash Resolution and has undertaken to the Company that it will not do so.

In connection with the Company's future proposals described above and in more detail in the Circular, the Investment Adviser has also irrevocably undertaken to the Company that for so long as it holds the right to exercise voting rights attaching to 30 per cent. or more of the issued share capital of the Company it shall exercise such voting rights in favour of any resolution proposed in order to give effect to such proposals.

Expected Timetable of Principal Events

The expected timetable for the Tender Offer is as follows:

Record Date for participation in the Tender Offer	5.30 p.m. on 25 November 2020
Latest time and date for receipt of Forms of Proxy in respect of the Extraordinary General Meeting	11.00 a.m. on 8 December 2020
Extraordinary General Meeting	11.00 a.m. on 10 December 2020
Results of Extraordinary General Meeting announced¹	10 December 2020
Latest time and date for receipt of Tender Forms and/or for settlement of TTE Instructions in respect of the Tender Offer	1.00 p.m. on 11 December 2020
Confirmation Date and announcement regarding the Minimum Size Condition²	14 December 2020
If the Minimum Size Condition is satisfied:
Calculation Date	5.30 p.m. on 14 December 2020
Establishment of Tender Pool and Continuing Pool	15 December 2020
Realisation of the Tender Pool commences	16 December 2020
Realisation of the final assets in the Tender Pool announced; Tender Price announced; cheque despatched and CREST accounts credited with proceeds in respect of successfully Tendered Shares; balancing certificates despatched and CREST accounts credited in respect of unsold Shares	as soon as practicable after commencement of the realisation of the Tender Pool

Notes:

1 If the Whitewash Resolution is not passed at the Extraordinary General Meeting the Tender Offer will not proceed and the Company will make a further announcement on alternative proposals.

2 The Company will announce via a Regulatory Information Service provider on the Confirmation Date whether the Minimum Size Condition has been met. If the Minimum Size Condition is not met the Tender Offer will not proceed and the Company will make a further announcement on alternative proposals. 

Each of the times and dates in the expected timetable 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 Shareholders by an announcement through a Regulatory Information Service provider.

All references to times are to London times.

A copy of the Circular will shortly be available for inspection on the National Storage Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism and is available for download from the Company's website www.gulfinvestmentfundplc.com/publications .

Legal Entity Identifier: 2138009DIENFWKC3PW84

For further information:

Nicholas Wilson  [phone]

Gulf Investment Fund plc

Ian Dungate/Suzanne Jones   [phone]

Mainstream Fund Services (IOM) Limited

Sapna Shah/Alex Collins/Atholl Tweedie  [phone]

Panmure Gordon

William Clutterbuck  [phone]

Maitland

 

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