Proposed Revised Terms of Man

RNS Number : 0382Z

Spark Ventures PLC

15 September 2009

 



SPARK Ventures plc

('SPARK' or the 'Company')

Proposed revised terms of Management Buyout of Fund Management Business

At the general meeting of the Company held on 7 August 2009, the resolutions to approve the alteration of the Company's investing strategy and the £8.2 million return of cash were duly approved. A resolution to adjourn the general meeting was passed prior to the tabling of the various resolutions required to implement a management buyout of the Company's fund management businesses.

The Board of SPARK today announces the convening of the General Meeting for 10.00 a.m. on 2 October 2009 and the posting of a further Circular to Shareholders setting out the improved terms which have been obtained for the Management Buyout.

The Independent Non-Executive Directors have worked to review further and improve the position for the Company and believe that all Shareholders should vote in favour of all of the Resolutions required to implement the improved terms of the Management Buyout to be proposed at the General Meeting.

For further information, please contact:

SPARK Ventures plc	David Potter	020 7851 7777
Collins Stewart Europe Limited (Nomad)	Hugh Field Stewart Wallace	020 7523 8350
Capital MS&L	Annabel O'Connor Nick Donaldson Wendy Svirakova	020 7307 5330

15 September 2009

Collins Stewart Europe Limited ('Collins Stewart'), which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for SPARK Ventures plc (the 'Company') and is acting for no-one else in connection with the matters described in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Collins Stewart nor for providing advice in connection with the matters described in this announcement or any other matter referred to herein.

The definitions used in this announcement are set out at the end of this announcement.

Copies of the Circular will be made available later today on the Company's website at www.sparkventures.com. The July Circular is available on the Company's website.

  Introduction 

On 21 July 2009 SPARK issued a circular (the 'July Circular') seeking the approval of Shareholders to:

• alter the Company's investing strategy to realise the Existing Investments over the period to 31 March 2014;

• implement a return of cash of equivalent to two pence per Ordinary Share (£8.2 million); and

• implement a management buyout of the Company's fund management businesses by the Executive Directors (the 'Original MBO').

At the general meeting of the Company held on 7 August 2009, the resolutions to approve the alteration of the Company's investing strategy and the return of cash were duly approved and a resolution to adjourn the general meeting was then passed prior to the tabling of the various resolutions required to approve the Original MBO. 

Shareholders will, by now, have received the return of cash due to them. 

After the general meeting of the Company held on 7 August 2009, the Independent Non-Executive Directors sought alternative proposals from six fund management companies as well as improvements to the terms of the Original MBO. Neither of the two proposals actually received from other companies represented, in the opinion of the Independent Non-Executive Directors, an improvement overall to Shareholder value. The terms of the Original MBO have been improved as described below.

Revised terms of Management Buyout

The Management Buyout remains for the contracts to manage the assets of SPARK and Querist Limited. The headline changes secured to the terms of the Original MBO are as follows:

• the New Initial Target for distributions to Shareholders, before management incentives become payable, of £49.3 million is £4.1 million higher than under the Original MBO. This is now equivalent to 12 pence per Ordinary Share (net of Ordinary Shares held in treasury); and

• the Company will own 30 per cent. of the new management company (the 'Manager') at no extra cost. This is an improvement of 10 percentage points over the terms of the Original MBO.

The other terms of the Management Buyout, except for the Cash Incentive Scheme referred to below and the extension of the completion backstop date to 31 October 2009, remain unchanged.

The Existing Investments of SPARK remain in 100 per cent. ownership of the Company and are not being transferred as part of the Management Buyout.

The Independent Non-Executive Directors remain convinced that the Executive Directors are best placed to maximise the sale proceeds as the SPARK portfolio is realised over the next five years and that the Management Buyout structure:

• gives the best available assurance that these managers will remain in place as the assets are disposed; and

• minimises costs and risks to SPARK that would arise if they all remained employed by SPARK.

All SPARK employees will transfer to the Manager, and SPARK will have no employees (apart from the Independent Non-Executive Directors) following completion of the Management Buyout.

Having received and considered alternative proposals, the Independent Non-Executive Directors consider that the revised terms of the Management Buyout represent the best proposal put forward.  Completion of these Proposals will end a lengthy period of uncertainty for investors, investee companies, the boards of our VCTs and other clients, as well as the management and staff of SPARK.

Cash Incentive Scheme

As part of the Original MBO, the Executive Directors were to receive incentives through the D Share incentive scheme in the event that other Shareholders had first received returns of cash of £45.2 million in aggregate. As mentioned above, this target has now been revised upwards (to the benefit of Shareholders) to £49.3 million. It should be noted that, as under the terms of the Original MBO, the £8.2 million return of cash to Shareholders in August 2009 referred to above counts towards this amount.

In the event that the D Share incentive scheme is not approved by the requisite 75 per cent. majority of Shareholders the Cash Incentive Scheme will instead be adopted by the Company.  The Cash Incentive Scheme replicates by way of cash bonus the terms of the D Shares. In the event of distributions in excess of the targets, then rather than receive a capital gain through an uplift in the value of their D Shares, the Executive Directors would receive income. The cost to the Company will be exactly the same in either case.

The Board 

David Potter will take up the role of non-executive Chairman of the Company on the conclusion of the Annual General Meeting convened for 25 September 2009. As previously announced, upon completion of the Proposals, Thomas Teichman and Andrew Betton will resign as directors of the Company. The Directors believe that the Board will, as a whole, be independent of the Manager and any substantial shareholders.

It is intended that a further independent non-executive director will be appointed in due course.

General Meeting

The General Meeting is to be convened at the offices of Nabarro LLP, Lacon House, 84 Theobald's Road, London WC1X 8RW at 10.00 a.m. on 2 October 2009 in order to consider and vote on each of the Resolutions.

Details of each of the Resolutions required to implement the Management Buyout are set out in the Circular.

Related party transactions

As the Manager is principally owned and controlled by the Executive Directors, the entry by the Company into the Related Party Transactions also constitutes related party transactions for the purposes of Rule 13 of the AIM Rules.

The Independent Non-Executive Directors consider, having consulted with the Company's nominated adviser, Collins Stewart, that the terms of the Related Party Transactions are fair and reasonable insofar as Shareholders are concerned. In giving its advice to the Independent Non-Executive Directors, Collins Stewart has taken into account the Independent Non-Executive Directors' commercial assessments of the Related Party Transactions.

The Related Party Transactions will also require the approval of Shareholders at the General Meeting for the purposes of the 2006 Act as they constitute arrangements for the transfer of substantial non-cash assets of the Company to the Manager, which is a company connected to the Executive Directors.

Recommendation

The Independent Non-Executive Directors consider the revised terms of the Management Buyout and the terms of the Related Party Transactions required to give effect to the Management Buyout to be fair and reasonable insofar as Shareholders are concerned. Accordingly, the Independent Non-Executive Directors unanimously recommend that all Shareholders vote in favour of all the Resolutions at the General Meeting.

The Directors intend to vote in favour of all of the Resolutions at the General Meeting in respect of their own beneficial holdings, amounting in aggregate to 44,308,091 Ordinary Shares (representing approximately 10.8 per cent. of the shares of the Company in issue at the date of this document and which can vote at the General Meeting).

  DEFINITIONS

'2006 Act'	the Companies Act 2006, as amended
'AIM'	a market operated by the London Stock Exchange
'AIM Rules'	the AIM rules for companies and the AIM rules for investing companies issued by the London Stock Exchange, as amended from time to time
'Articles' or 'Articles of Association'	the articles of association of the Company from time to time
'Board' or 'Directors'	the board of Directors present at a duly convened and quorate meeting of Directors or a duly authorised committee of the Directors as the context requires
'Cash Incentive Scheme'	the cash incentive scheme proposed to be implemented by the Company pursuant to the Cash Incentive Scheme Agreement
'Cash Incentive Scheme Agreement'	the agreement proposed to be entered into between, inter alia, (1) the Company, (2) the Manager and (3) the Executive Directors
'Capita Registrars'	a trading name of Capita Registrars Limited (incorporated in England and Wales with company number 2605568)
'Circular'	the Circular to Shareholders dated 15 September 2009 describing the Management Buyout
'Collins Stewart'	Collins Stewart Europe Limited, the Company's nominated adviser and broker, a member of the London Stock Exchange and which is authorised and regulated by the FSA
'Company' or 'SPARK'	SPARK Ventures plc (incorporated in England and Wales with company number 03813450)
'CREST'	the relevant system (as defined in the Uncertificated Securities Regulations 2001) in respect of which Euroclear is the Operator (as defined in such regulations)
'CREST Proxy Instruction'	a properly authenticated CREST message appointing and instructing a proxy to attend and vote in place of a Shareholder at the General Meeting and containing the information required to be contained in the manual published by Euroclear
'D Share Subscription Agreements'	the subscription agreements proposed to be entered into on completion of the Management Buyout between (1) the Company, (2) the Manager and (3) each subscriber respectively setting out the terms and conditions of subscription for the D Shares
'D Shares'	the unlisted preference shares of 0.5 pence each in the capital of the Company carrying the rights and restrictions set out in the Articles
'Deferred Shares'	the deferred shares of 0.5 pence each in the capital of the Company carrying the rights and restrictions set out in the Articles
'Euroclear'	Euroclear UK & Ireland Limited, the operator of CREST
'Executive Directors'	Thomas Teichman, Andrew Carruthers, Andrew Betton and Jayesh Patel
'Existing Investments'	the investments held by the Company in investee companies as at 21 July 2009 (including unlisted securities or equivalent received in relation to any disposal of such existing investment(s) but excluding either (i) cash or (ii) securities which are listed on a recognised investment exchange)
'Form of Proxy'	the form of proxy enclosed with this document for use by Shareholders in connection with the General Meeting
'FSA'	the Financial Services Authority
'General Meeting'	the general meeting of the Company (or any adjournment thereof) to be held at the offices of Nabarro LLP, Lacon House, 84 Theobald's Road, London WC1X 8RW at 10.00 a.m. on 2 October 2009
'Independent Non-Executive Directors'	David Potter, Charles Berry and Michael Whitaker
'Investment Protection Agreement'	the investment protection agreement proposed to be entered into on completion of the Management Buyout between the (1) Company (2) the Manager and (3) the Executive Directors setting out the terms of the Company's subscription for shares in the Manager and the operation of the business of the Manager
'July Circular'	the Circular to Shareholders dated 21 July 2009
'London Stock Exchange'	London Stock Exchange plc
'Management Agreement'	the conditional management agreement entered into on 20 July 2009 between (1) the Company and (2) the Manager as varied by a deed of variation dated 15 September 2009 pursuant to which the Manager will provide certain management and administrative services
'Management Buyout'	the proposed externalisation of the existing management team and acquisition of certain assets by the Manager, to be effected in accordance with the terms of the Sale Agreement, the Investment Protection Agreement and the Management Agreement
'Manager'	SPARK Venture Management Holdings Limited (incorporated in England and Wales with company number 06906082)
'New Initial Target'	in respect of any financial year, means a level of Distributions (as defined in the July Circular) equal to 'C', to be calculated in accordance with the following formula: C = A - (B x £820,000) where: 'A' = £49,300,000; 'B' = (i) the level of Distributions in respect of the relevant financial year or, if earlier, the financial year ending 31 March 2012 divided by (ii) £4,100,000, rounded down to the nearest whole number, provided that the New Initial Target may be increased to such number in excess of 'C' with the written approval of (i) the Board and (ii) a majority in number of the holders of D Shares
'Ordinary Shares'	the ordinary shares of 0.5 pence each in the capital of the Company
'Original MBO'	the original terms of the proposed Management Buyout as described in section 6 of Part 1 and in Part 2 of the July Circular
'Property Licence'	the property licence proposed to be entered into on completion of the Management Buyout between (1) the Company and (2) the Manager pursuant to which the Manager will occupy the Company's premises at 33 Glasshouse Street, London W1B 5DG
'Proposals'	the revised terms of the Management Buyout (incorporating the revised D Share incentive scheme or Cash Incentive Scheme (as applicable))
'Querist Limited'	a wholly-owned subsidiary of the Company (incorporated in England and Wales with company number 02944008), the ownership of which will be transferred to the Manager under the terms of the Sale Agreement
'Regulatory Information Service'	a Regulatory Information Service on the list of Regulatory Information Services maintained by the FSA
'Related Party Transactions'	the entry into and completion of the Sale Agreement, the Management Agreement, the Investment Protection Agreement, the Property Licence, the D Share Subscription Agreements and the Cash Incentive Scheme Agreement
'Resolutions'	the resolutions set out in the notice of General Meeting contained in Part 3 of this document
'Sale Agreement'	the conditional agreement entered into on 20 July 2009 between (1) the Company and (2) the Manager and as varied by a deed of variation dated 15 September 2009 for the sale of certain assets of the Company
'Shareholders'	holders of Ordinary Shares, D Shares or Deferred Shares, as the context may require
'SPARK Share Option Schemes'	the NewMedia SPARK 2001 Unapproved Share Option Plan and the NewMedia SPARK 2005 Executive Share Option Scheme

 

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