Placing and Open Offer

RNS Number : 4293I

HG Capital Trust PLC

11 March 2010

 



THIS ANNOUNCEMENT IS NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE IN, OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, NEW ZEALAND OR SOUTH AFRICA.

HgCapital Trust plc announces Firm Placing and Placing and Open Offer of New Ordinary Shares (with Subscription Shares attached) at 845 pence per New Ordinary Share to raise £50 million, and Bonus Issue of Subscription Shares.

London, 11 March 2010: Further to the announcement on 17 February 2010, HgCapital Trust plc (the "Company") has today published a prospectus (the "Prospectus") in relation to a Firm Placing and Placing and Open Offer of New Ordinary Shares (with Subscription Shares attached) at 845 pence per New Ordinary Share, to raise £50 million, and the issue of Subscription Shares to existing Shareholders by way of a Bonus Issue.

The Company has received commitments to subscribe for £35.1 million comprising the Firm Placing, from a range of new investors and existing Shareholders, and commitments from Conditional Placees to subscribe for £14.9 million, subject to clawback to satisfy valid applications by existing Shareholders under the Open Offer.

RBS Hoare Govett Limited is acting as Sponsor, Bookrunner and Broker in connection with the Offer.

Roger Mountford, Chairman of HgCapital Trust, said: "We are very pleased to be announcing this fundraising which has attracted strong support from both existing shareholders and new investors. These funds will enable the trust to take full advantage of the investment opportunities the Board sees opening up at this stage in the economic cycle."

The Company

The Company has been a listed investment trust since 1989 and has an investment objective of providing shareholders with long-term capital appreciation in excess of the FTSE All-Share Index by investing in unquoted companies. The Company provides investors with exposure to a diversified portfolio of private equity investments, primarily in the UK and Continental Europe.

The Company announced its 2009 annual results on 5 March 2010, the financial highlights of which are as follows:

·     Positive net asset growth (assuming historic dividends are reinvested) of 3.6 per cent.;

·     Increase in share price of 30 per cent.;

·     £30 million of funds deployed during 2009 including £17.2 million in two new buyouts and £7.6 million invested in renewable energy projects through Hg Renewable Power Partners LP;

·     Average annual EBITDA profit growth of 18 per cent. for the Company's top 10 investments over 2009;

·     Ten year total return per annum of 14.4 per cent. versus 1.6 per cent. per annum from the FTSE All-Share Index; and

·     >3.8x growth in value of the Company's shares over 10 years.

At the same time, the Company also announced an unaudited NAV per Share as at 28 February 2010 of 926.6p which reflected the realisation of the Company's investment in Hoseasons and provision for an interim dividend of 25p per Share announced by the Company on 17 February 2010 (payable to Shareholders on the register on 26 February 2010). As at 28 February 2010, the Company held £91.8 million in liquid assets available for deployment in new investment opportunities (representing 39 per cent. of net assets and adjusted to take into account the dividend and proceeds received from the sale of Hoseasons).

As shown above, the Company has delivered attractive returns to Shareholders over the medium to long term. Its total return (defined as share price growth with dividends reinvested) has outperformed the FTSE All Share Index in the periods of 5, 7 and 10 years to 31 December 2009 by approximately 9.3, 15.1 and 12.8 percentage points respectively (on an annual basis). The Board considers that one reason for this outperformance is that the Manager has taken a patient and long term approach to deploying capital and to creating and realising value within the portfolio, and has prudently taken account of economic cycles in planning both investments and realisations.

The Investment Opportunity

The Board believes that the Company is now in the early stages of the next significant cycle for deployment of capital, with the opportunity to make attractive new investments over the medium term. In 2009 the Company committed to invest alongside the Manager's latest buyout fund HgCapital 6 which is in the final stages of its fundraising programme with aggregate commitments (including the Company's) exceeding £1.88 billion. The Company's commitment to HgCapital 6 is now approximately £280 million and in 2009 the Company deployed £17.2 million into its first two buyout investments under this commitment. The Board believes that market conditions promise to provide the best conditions for new investment for some time.

In addition, the Board is currently in discussions with the Manager with respect to making a commitment to HgCapital's second renewable energy fund, Hg Renewable Power Partners 2 LP, in addition to the Company's existing commitment of approximately £18.7 million in Hg Renewable Power Partners LP, the Manager's first dedicated renewable energy fund which is close to being fully invested.

The Company's investment strategy has consistently involved the retention of sufficient liquidity on-balance sheet through each investment cycle for deployment in new opportunities at attractive points in the cycle and to support the continued growth of the existing portfolio. Similarly, it seeks to ensure that investments offering potential for further growth in value do not need to be realised prematurely in order to raise liquid assets.

Market opportunity

Experience of past business cycles demonstrates that the best returns are made by private equity funds raised at the bottom of cycles and invested over the following three to four years. The availability of opportunities is expected to be driven by the continuing process of deleverage, especially from banks looking to divest attractive but overleveraged companies that have fallen under their control. A large volume of potential refinancings amongst private equity backed companies, particularly those reaching the end of their bank facilities' term, may also lead to opportunities for the Company. With some return in levels of business confidence, the Board expects the rate of corporate divestment to pick up, if the recovery follows the pattern of earlier cycles. An increase in divestments of owner managed businesses can also be expected as they recover from the downturn. In addition, possible changes to the fiscal regime may also encourage the sale of owner managed businesses. Such market conditions highlight the potential opportunities for further equity investment.

Reasons for the Offer and the Bonus Issue

The funds raised under the Offer and upon exercise of the Subscription Shares are expected to provide the Company with flexibility to take full advantage of such opportunities as they arise, following the same investment approach as it has to date, with a view to continuing to deliver attractive returns to Shareholders.

The Offer

Up to 5,917,160 New Ordinary Shares, ranking pari passu with the Existing Ordinary Shares, will be issued under the Offer, at an Offer Price of 845 pence per New Ordinary Share. Subscription Shares will be attached to the New Ordinary Shares on a one for five basis. The Offer Price represents a 0.1 per cent. premium to the closing mid-market share price of the Existing Ordinary Shares as at 10 March 2010 and an 8.8 per cent. discount to the unaudited NAV as at 28 February 2010.

The Offer comprises a Firm Placing of 4,154,088 New Ordinary Shares (with Subscription Shares attached) and a Placing and Open Offer of up to 1,763,072 New Ordinary Shares (with Subscription Shares attached), in each case at the Offer Price of 845 pence per New Ordinary Share.

The Firm Placing provides the Company with flexibility to raise the target amount of equity from certain new investors, alongside existing Shareholders, which has the benefit of broadening the Company's investor base and facilitating secondary market liquidity. The Company has received commitments to subscribe for 4,154,088 New Ordinary Shares comprising the Firm Placing from a range of new investors and existing Shareholders.

The Open Offer allows Qualifying Shareholders to participate in the Offer by subscribing for their Open Offer Entitlements on a pre-emptive basis, alongside an ability to subscribe for an amount in excess of their Open Offer Entitlement under the Excess Application Facility where other Qualifying Shareholders do not take up their Open Offer Entitlements in full. To the extent that Qualifying Shareholders do not take up their Open Offer Entitlements and apply for further Open Offer Shares under the Excess Application Facility, such New Ordinary Shares will be available under the Placing.

The Company has received commitments from Conditional Placees to subscribe for 1,763,072 New Ordinary Shares under the Placing, subject to clawback to satisfy valid applications by existing Shareholders under the Open Offer.

As evidence of their commitment to the Company's strategy, partners and employees of HgCapital have committed to subscribe for 639,835 New Ordinary Shares under the Placing, representing an aggregate commitment of £5.4 million at the Offer Price, subject to clawback to satisfy valid applications by existing Shareholders under the Open Offer.

The Directors have also confirmed their intention to subscribe for 3,275 New Ordinary Shares at the Offer Price, representing their combined Open Offer Entitlement.

The Bonus Issue

The Company is also proposing to issue to Qualifying Bonus Issue Shareholders, by way of the Bonus Issue, one Subscription Share for every five Ordinary Shares held. Qualifying Bonus Issue Shareholders are holders of Ordinary Shares whose names are on the Register as at the close of business on the Bonus Issue Record Date (with the exclusion of Excluded Shareholders).

Each Subscription Share will confer the right (but not the obligation) to subscribe for one Ordinary Share upon exercise of the Subscription Right and payment of the Subscription Price in cash. The first opportunity to exercise such right will be on 31 May 2011. Thereafter, exercise dates will arise on 31 May and 31 October in each year, with the final exercise date being 31 May 2013.

The Subscription Prices will be as follows:

·     if exercised in 2011 or 2012 - a Subscription Price of £9.50 per Ordinary Share; and

·     if exercised on 31 May 2013 - a Subscription Price of £10.25 per Ordinary Share.

After 31 May 2013, the Subscription Rights will lapse.

General Meeting

The Board is seeking Shareholder approval of the Resolutions at the General Meeting of the Company on 6 April 2010, in order to give effect to the Offer and Bonus Issue and, among other things, to adopt the New Articles to facilitate the issue of Subscription Shares and to make certain updates in respect of current legislation.

Dealings

Application has been made to the UK Listing Authority for the New Ordinary Shares and the Subscription Shares to be admitted to the Official List. Application has also been made for such New Ordinary Shares and the Subscription Shares to be admitted to trading on the main market of the London Stock Exchange. It is expected that such admissions will become effective and dealings in the New Ordinary Shares and the Subscription Shares on the London Stock Exchange will commence on 7 April 2010.

The ISIN number and SEDOL code for the Ordinary Shares are GB0003921052 and 0392105 respectively.

The ISIN number and SEDOL code for the Subscription Shares are GB00B62CQW90 and B62CQW9 respectively.

Expected timetable of key events

Event	2010
Record Date for the Open Offer	close of business on 10 March
Publication of Prospectus and despatch of the Prospectus, Forms of Proxy and Application Forms to Qualifying Non-CREST Shareholders	11 March
Ex-entitlement date for the Open Offer	8.00 a.m. on 12 March
Open Offer Entitlements and Excess CREST Open Offer Entitlements credited to stock accounts of Qualifying CREST Shareholders	8.00 a.m. on 12 March
Recommended latest time for requesting withdrawal of Open Offer Entitlements and Excess CREST Open Offer Entitlements from CREST	4.30 p.m. on 24 March
Latest time and date for depositing Open Offer Entitlements and Excess CREST Open Offer Entitlements into CREST	3.00 p.m. on 25 March
Latest time and date for splitting Application Forms (to satisfy bona fide market claims only)	3.00 p.m. on 26 March
Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer and settlement of the CREST instructions (as appropriate)	11.00 a.m. on 30 March
Announcement of results of the Offer	1 April
Latest time and date for receipt of Forms of Proxy and receipt of electronic proxy appointments by registered Shareholders for the General Meeting	3.00 p.m. on 4 April
General Meeting	3.00 p.m. on 6 April
Announcement of results of the General Meeting	6 April
Bonus Issue Record Date	close of business on 6 April
Admission and commencement of dealings in New Ordinary Shares and Subscription Shares, fully paid, on the London Stock Exchange	8.00 a.m. on 7 April
New Ordinary Shares and Subscription Shares credited to CREST stock accounts (uncertificated holders only)	8.00 a.m. on 7 April
Despatch of definitive share certificates for the New Ordinary Shares and Subscription Shares in certificated form (to Qualifying Non- CREST Shareholders only)	By 14 April

Terms used in this announcement shall, unless the context otherwise requires, bear the meanings given to them in the Prospectus dated 11 March 2010.

RBS Hoare Govett Limited, which is authorised and regulated by the Financial Services Authority, is acting exclusively for the Company and no one else in connection with the Offer and is not advising any person or treating any person as its customer in relation to the Offer and will not be responsible to anyone other than the Company for providing the protections afforded to clients of RBS Hoare Govett or for providing advice in relation to the Offer or any matter referred to herein.

Copies of the Prospectus are available for inspection at the Document Viewing Facility, the Financial Services Authority, 25 North Colonnade, Canary Wharf, London E14 5HS.

For further details:

HgCapital Trust                      Roger Mountford                   [phone]

HgCapital                               Ian Armitage                          [phone]

RBS Hoare Govett Limited    Gary Gould                             [phone]

                                                Stuart Klein

Maitland                                 Neil Bennett                            [phone]

                                                Rowan Brown

About HgCapital Trust plc

HgCapital Trust plc is an investment trust whose shares are listed on the London Stock Exchange. The trust gives investors exposure to a portfolio of high-growth private companies, through a liquid vehicle.  This portfolio is managed by HgCapital, an experienced and well-resourced private equity firm with a long-term track record of delivering superior risk-adjusted returns for its investors.

The Trust has won the Investment Week Private Equity Investment Trust of the Year every year since 2005.

IMPORTANT INFORMATION

This announcement is not a prospectus and it does not constitute an offer to sell or a solicitation of an offer to buy any securities described herein in the United States or in any other jurisdiction, nor shall it, by the fact of its distribution, form the basis if, or be relied upon, in connection with any contract therefor.  No offer, invitation or inducement to acquire shares or other securities in the Company ("Shares") is being made by or in connection with this announcement. Any offer, invitation or inducement to acquire Shares in the Company will be made solely by means of a prospectus published in connection with any offering (the "Prospectus") and any decision to buy Shares in the Company should be made solely on the basis of the information contained in the Prospectus. The Prospectus will supersede all information provided before the date of the Prospectus and any investment decision must be made only on the basis of the information contained therein.

The information presented herein is not an offer for sale within the United States of any equity shares or other securities of the Company. The Company has not been and will not be registered under the US Investment Company Act of 1940, as amended (the Investment Company Act"). In addition, the Shares have not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act") or any other applicable law of the United States. Consequently, the Shares may not be offered or sold or otherwise transferred within the United States, or to, or for the account or benefit of, US Persons, except pursuant to an exemption from the registration requirements of the Securities Act and under circumstances which will not require the Company to register under the Investment Company Act.  No public offering of the Shares is being made in the United States. The Shares may only be resold or transferred in accordance with the restrictions set forth in the Prospectus to be published in connection with any proposed offering and related subscription documents. This communication should not be distributed, forwarded, transferred, reproduced, or otherwise transmitted, directly or indirectly, to any persons within the United States or to any US Persons unless it is lawful to do so.

The promotion of the Company and the distribution of this document in the United Kingdom is restricted by law.  Accordingly, this communication is directed only at (i) persons outside the United Kingdom to whom it is lawful to communicate it, or (ii) persons having professional experience in matters relating to investments who fall within the definition of "investment professionals" in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended), or (iii) high net worth companies, unincorporated associations and partnerships and trustees of high value trusts as described in Article 49(2) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) and persons who receive this communication who do not fall within (i), (ii) or (iii) above should not rely on or act upon this communication. 

Certain statements contained in this announcement may be forward-looking statements.  By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements.  These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. The Company undertakes no obligation to update its view of such risks and uncertainties or to publicly announce the result of any revisions to the forward-looking statements made herein, except where it would be required to do so under applicable law. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements.

No representation or warranty, express or implied, is made or given by or on behalf of the Company or HgCapital or any of their respective affiliates or any of such person's directors, officers or employees or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this announcement and no responsibility or liability is accepted for any such information or opinions.

This announcement does not constitute a recommendation concerning the Shares. All investments risk the loss of capital and the value of shares may go down as well as up. There is no guarantee or assurance that an investment in the Company will achieve its investment objective. An investment in the Company is speculative and should form only part of a complete investment program, and an investor must be able to bear the loss of its entire investment. Shares may involve a high degree of risk. Prospective investors are advised to seek expert legal, financial, tax and other professional advice before making any investment decision.

The release, publication or distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published or distributed should inform themselves about and observe such restrictions.

This announcement and the information contained herein is not for publication, distribution or release in, or into, directly or indirectly, the United States, Canada, Australia, Japan, New Zealand, South Africa or any other jurisdiction in which such publication, distribution or release would be contrary to applicable law or regulation, or to US persons.  The information contained herein does not constitute an offer of securities for sale including in the United States, Australia, Canada, Japan, New Zealand, South Africa or any other jurisdiction in which such offer would be contrary to applicable law or regulation, or to US Persons.

 

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