Restructure Proposals

RNS Number : 5481M

Marwyn Value Investors Limited

27 August 2013

 



This announcement is not for release, publication, or distribution, directly or indirectly, in whole or in part, to US persons or into or within the United States (including its territories and possessions, any state of the United States and the District of Columbia), Australia, Canada, Japan, the Republic of Ireland, the Republic of South Africa, or any other jurisdiction where to do so would constitute a violation of the relevant laws or regulations of such jurisdiction.

27 August 2013

MARWYN VALUE INVESTORS LIMITED
(THE "COMPANY")

PROPOSALS REGARDING THE COMPANY'S ORDINARY SHARES (THE "ORDINARY SHARES")

Summary

Having consulted a range of existing and potential new investors in the Ordinary Shares, the Company's directors (the "Directors") are pleased to announce, in relation to the Ordinary Shares, the following proposals (the "Proposals"):

·           to amend the investment policy of Marwyn Value Investors L.P. (the "Master Fund"), relating to investments on behalf of holders of Ordinary Shares ("Ordinary Shareholders"), by creating a new class of interests in the Master Fund permitted to make new investments ("New Class G");

·           to introduce a distribution policy (the "Distribution Policy") which will result in at least 50% of net capital gains (as defined below) made on each profitable realisation being used to fund tender offers, share buy-backs, returns of capital or other distributions to Ordinary Shareholders; 

·           introducing regular redemption opportunities, commencing in September 2016 and five-yearly thereafter, for up to 100% of the Ordinary Shares at net asset value less costs  (the "Redemption Opportunities"); and

·           cancelling the exchange procedure for investors in the Ordinary Shares (the "Exchange Procedure").

The Directors believe that the principal benefits of the Proposals for Ordinary Shareholders will be:

·           enabling the Master Fund to take advantage of new investment opportunities identified by Marwyn Investment Management LLP ("Marwyn") using the investment strategy which, to date, has created significant value for Ordinary Shareholders;

·           a clearly defined distribution policy, which should reduce the cash drag on Ordinary Shareholders' returns following substantial realisations and pending re-investment and create increased liquidity for Ordinary Shareholders;

·           regular opportunities commencing in September 2016 and five-yearly thereafter for Ordinary Shareholders to guarantee all or part of their investment will be realised in a manner that aims to maximise the investment returns and at a value close to its net asset value irrespective of any discount to net asset value at which the Ordinary Shares may trade in the secondary market in the future or the liquidity of the Ordinary Shares in the secondary market; and

·           simplifying the Company's capital structure by removing the Exchange Procedure for investors in the Ordinary Shares.

The Directors believe that these benefits should, over time, enhance the appeal of the Ordinary Shares to investors and, accordingly, should attract market support for the Ordinary Shares over the medium to long term.  In turn, this should lead to an improvement in the rating and liquidity of the Ordinary Shares.

The Proposals are subject to the approval of shareholders and the Company expects to send a circular to shareholders in due course to convene the required extraordinary general meeting to approve them. 

Marwyn has agreed that, if the Proposals are approved by shareholders and as long as the Ordinary Shares continue to trade a discount to net asset value of greater than 10%, 20% of any incentive allocation (net of tax) realised by Marwyn's partners and employees and attributable to the investments in the Master Fund will be used to acquire Ordinary Shares in the secondary market. Amounts distributed to shareholders or reinvested in the New Class G will be treated as returns for the purpose of the incentive allocation on the Master Fund's class F ("Class F"), being the existing class through which investments attributable to the Ordinary Shares are held. 20% of returns above the NAV appreciation on an investment (after taking management fees and other expenses into account), after Class F Investors have received a 7.5 per cent. per annum preferred return, will also be payable as an incentive allocation on Class F. Class G will also operate the same incentive allocation, from the date of investment in Class G. The Directors believe that Marwyn's investment commitment creates a closer alignment of the respective interests of the Ordinary Shareholders with regard to the rating and liquidity of the Ordinary Shares.

Finally, as previously announced, Cantor Fitzgerald Europe ("Cantor Fitzgerald") was appointed as the Company's sole financial adviser and corporate broker in July 2013.  As an initial remit, the Directors requested Cantor Fitzgerald to use its reasonable endeavours to identify buyers of Ordinary Shares, representing 44% of the issued Ordinary Shares, held by an institutional investor who was known to be an interested seller.  The Directors are pleased to report that Cantor Fitzgerald has identified interest in buying all of those shares from more than 10 institutional investors and wealth managers.

Background to, and Reasons for, the Proposals

The Company's investment strategy, which will continue to be implemented through its investment in New Class G interests in the Master Fund, is to identify, support, invest in and work alongside experienced operational managers with strong and demonstrable track records for building and managing small and mid-cap European and North American businesses, combining the optimal mix of private equity and public market disciplines to create investment value.

Marwyn looks for businesses with minimum levels of operating profitability and cash generation and prefers sectors undergoing structural, cultural or regulatory change where the climate of change creates commercial opportunities for management with proven track records to create significant investment returns as the remainder of the market continues to overlook these opportunities. 

As shown in the table below, the Company's investment strategy has created significant value for Ordinary Shareholders, with the Ordinary Share net asset value outperforming the FTSE Small Cap (ex-ICs) Index and the FTSE All-Share Index by significant margins on a total return basis. 

Total Return from Company's Inception to 9 August 20131
NAV per Ordinary Share	191.5%2
FTSE SmallCap (ex-ICs) Index	30.4%
FTSE All-Share Index	53.0%

Notes:

¹ The latest date in respect of which the Company has published the NAV per Ordinary Share.  

² From the launch of the original Marwyn Value Investors Limited on 23 February 2006, with the Company's returns from inception to 9 August 2013 based on the combined weighted average net asset value of the two original companies prior to their amalgamation using the conversion ratio published on 17 April 2008 (for further details see the "Note to Editors" below). 

Marwyn is currently working with a number of highly qualified management teams to explore acquisition opportunities in their sectors of expertise.  However, the Company is not able, at present, to take advantage of new investment opportunities identified by Marwyn.  The price at which the Company's shares traded relative to their net asset value was severely and adversely impacted at the time of the financial crisis as investors sought to raise cash.  Accordingly, in 2009, the Company's shareholders approved the Board's proposal that the Company should make no further investments (other than follow-on investments in the existing portfolio companies) and that the existing portfolio of investments attributable to the Company is managed with a view to maximising the investment returns, by realising investments and making distributions to investors as realisations are made. 

The Directors believe that:

·           based on analyst consensus target share prices for the Company's existing investments held through the Master Fund, there is potential for further material growth in the net asset value of the Ordinary Shares;

·           the Company offers a unique and attractive proposition for investing in acquisition-led growth strategies where significant value can be created in selected industries through a process of timely consolidation; and

·           accordingly, the Company is well placed to continue to deliver significant investment returns to Ordinary Shareholders.

The Proposals

The Proposals, which are subject to shareholder approval at an extraordinary general meeting of the Company, comprise the following:

·           Creating a new class of interests in the Master Fund with a new investment policy: The Directors are proposing that the New Class G will have an investment policy which permits the Master Fund to make new investments (in addition to follow-on investments in the existing portfolio companies) in accordance with the Company's investment strategy on behalf of Ordinary Shareholders. In addition, the investment policy of Class F will be amended so that no follow-on investments can be made in it (new investments in Class F are already prohibited). Upon any realisation of investments held through Class F, the net proceeds from such disposal, after deduction of amounts distributed to Ordinary Shareholders will be invested in New Class G interests.

·           Introducing a clearly defined distribution policy: The Directors are proposing that at least 50% of net capital gains made on each profitable realisation whether from Class F interests or the New Class G interests will be used to fund tender offers, share buy-backs, returns of capital or other distributions to Ordinary Shareholders.  For the purpose of the Distribution Policy, "net capital gains" means for investments made in New Class G the sale proceeds received by the Master Fund on realisation of any investment attributable to the Ordinary Shares less the original cost of that investment (or, in the case of existing investments in Class F, the latest value of that investment prior to the adoption of the Distribution Policy).  There will be no offset or adjustment of net capital gains for any investments realised at a loss.

The Directors will have discretion to determine the mechanics and timing for deploying the distributable net capital gains, once such net capital gains have been received from the Master Fund, and they will endeavour to make the distributions in a timely manner. Upon a profitable realisation, the Master Fund will promptly distribute capital to the Company.

·           Introducing regular redemption opportunities, commencing in September 2016 and five-yearly thereafter: Commencing on 30 September 2016, and thereafter at five-yearly intervals, Ordinary Shareholders will have an unfettered choice to continue with all or some of their existing investment in Ordinary Shares or to convert all or some of their Ordinary Shares into realisation shares ("Realisation Shares").

At each Redemption Opportunity, the assets (including cash) and liabilities of New Class G and Class F interests in the Master Fund will be allocated pro rata (based on the number of Ordinary Shares and Realisation Shares in issue immediately following the relevant Redemption Opportunity), into two separate pools, namely an ordinary pool remaining in the existing classes and a new realisation pool in a new class of Master Fund interests. 

The Ordinary Share pool will continue to be managed in accordance with the Master Fund's investment policy at that time, and the Distribution Policy will continue to apply to the Ordinary Shares then in issue.

The realisation pool will be managed with a view to maximising the investment returns, realising its investments and making distributions to the holders of Realisation Shares as realisations are made. The realisation pool will only be permitted to invest its cash in follow-on investments into its existing portfolio. For the avoidance of doubt, cash generated on the sale of an investment in the realisation pool shall not be re-invested. Distributions to shareholders holding Realisation Shares will be by way of pro rata redemptions of the Realisation Shares or a tender offer at NAV less expenses.

There will be no exit penalties for those Ordinary Shareholders electing to convert all or some of their investment into Realisation Shares. 

·           Cancelling the monthly exchange procedure for the Ordinary Shares:  The Exchange Procedure was introduced in 2009 and was designed to enable investors to move from an investment in the Ordinary Shares to a direct investment in the Master Fund or an unlisted company (which has a direct investment in the Master Fund) and back so that, subject to certain restrictions and consents, they may choose at any time how their investment is held.  Since it was introduced, the Exchange Procedure has been used by investors on very few occasions.  The Exchange Procedure introduces complexity to the Company's capital structure and, in view of its low utilisation, the Directors believe that the Company's capital structure should be simplified by removing the Exchange Procedure for investors.

Enquiries

Robert Ware, Chairman	Marwyn Value Investors Limited	T:  [phone]
Sue Inglis / Andrew Davey	Cantor Fitzgerald Europe	T:  [phone] / [phone]

Note to Editors

Marwyn Value Investors Limited provides access to the investment strategy pursued by the Marwyn Value Investors L.P. (the "Master Fund").  The Master Fund invests in a concentrated portfolio of small and mid-cap opportunities, typically pursuing "buy and build" strategies in sectors impacted by structural or regulatory change.  The Master Fund focuses on sourcing, supporting and working alongside experienced operational management teams with strong, demonstrable track records for building and managing businesses across a range of sectors, including media, leisure, consumer, support services, and environmental services, with the aim of combining private equity and public market best practice and disciplines to deliver strong investment returns. 

Marwyn Value Investors Limited was created on 18 April 2008 by the amalgamation of an investment company then named Marwyn Value Investors Limited (which was launched on 23 February 2006) and ceased to exist following the amalgamation) with Marwyn Value Investors II Limited (which was launched on 6 October 2006 and was the surviving company following the amalgamation, when it changed its name to Marwyn Value Investors Limited).

The shares of Marwyn Value Investors Limited are traded on the London Stock Exchange's Specialist Fund Market (LSE MVI).

Important Notices

Cantor Fitzgerald Europe, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting solely for the Company and for no one else in connection with the Proposals and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Cantor Fitzgerald Europe or for affording advice in relation to the Proposals or any other matter referred to in this announcement.

This announcement does not constitute or form part of, and should not be construed as, any offer for sale of, or solicitation of any offer to buy or subscribe for, any share in the Company or securities in any other entity, in any jurisdiction, including the United States Australia, Canada or Japan, nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with, any contract or investment decision whatsoever, in any jurisdiction.  This announcement does not constitute a recommendation regarding any securities.

This announcement, and the information contained in it, is not for viewing, release, distribution or publication in or into the United States, Canada, Australia, Japan, the Republic of Ireland or the Republic of South Africa or any other jurisdiction where applicable laws prohibit its release, distribution or publication, and will not be made available to any national, resident or citizen of the United States, Canada, Australia, Japan, the Republic of Ireland or the Republic of South Africa.  The distribution of this announcement in other jurisdictions may be restricted by law and persons into whose possession this announcement comes must inform themselves about, and observe, any such restrictions.  Any failure to comply with the restrictions may constitute a violation of the federal securities law of the United States, Canada, Australia, Japan, the Republic of Ireland, the Republic of South Africa or other jurisdictions.

All investments are subject to risk, including the loss of the principal amount invested.  Past performance is no guarantee of future returns.  All investments held by the Company involve a substantial degree of risk, including the risk of total loss.  Investors should always seek expert legal, financial, tax and other professional advice before making any investment decision.

None of the Company, Cantor Fitzgerald Europe, their affiliates or any other person (including, without limitation, the directors, officers, employees, partners, agents, representatives, members and advisers of the Company, Cantor Fitzgerald Europe or their affiliates) undertakes any obligation to update or revise any statement made in this announcement (including, without limitation, any forward looking statements), whether as a result of new information, future events or otherwise.

The information in this announcement contains forward-looking statements (being any statement other than a statement of historical fact).  Actual results may differ materially from those expressed or implied by any forward-looking statement.  Investors should not place undue reliance on any forward-looking statement, which speaks only as of the date of this announcement.

 

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