Notice of GM

RNS Number : 5661Q

Tavistock Investments PLC

01 March 2021

 

Tavistock Investments Plc

("Tavistock" or the "Company")

                                                                   Notice of General Meeting

1 March 2021

Tavistock announces that it is convening a general meeting of the Company's Shareholders (the "GM") at 11.30 am on Thursday, 25 March 2021 at the Company's offices at 1 Bracknell Beeches, Old Bracknell Lane, Bracknell RG12 7BW.

A full copy of the Chairman's letter, forming a part of a circular that is to be sent to Shareholders today, is attached to this announcement.

Background

The Board considers it very important to have in place an arrangement that enables the Company to attract, retain, incentivise and reward the Company's leadership team (the "Leadership Team") together with certain other senior management, while at the same time ensuring that these rewards are completely aligned with the creation of long term value for Shareholders.

Historically, this has been done through the issue of share options with the largest number of such options being issued to members of the Leadership Team (which includes Brian Raven and Oliver Cooke as the Company's Executive Directors). However, the accounting treatment of share options results in the Company incurring substantial share-based payment charges in its profit and loss account, which reduce the level of the Company's reported pre-tax profit, and thus adversely impact its share price.

For this reason, the Board has concluded that the use of share options as an incentive for members of the Leadership Team is no longer fit for purpose and Brian Raven and Oliver Cooke have agreed to surrender, with immediate effect, all the share options that have been issued to them. The impact of this surrender will be to reverse the historic share-based payment charges relating to these options and to enhance the level of pre-tax profit reported by the Company in the current financial year by approximately £400,000.

The Board believes that there is a clear need to put in place an alternative, more suitable, arrangement to reward the Leadership Team, but only in circumstances where they have first succeeded in delivering material incremental value to Shareholders.

The Company wrote to Shareholders last November to seek their support for the introduction of a new incentive arrangement for the Company's Leadership Team (the "Proposal").

The Proposal envisaged participants subscribing for a new class of growth shares that would offer them the potential to be rewarded for the delivery of incremental shareholder value.

Shareholders were invited to submit any questions or comments that they had regarding the Proposal to a dedicated email address established specifically for that purpose.  

A small number of Shareholders contacted the Board, in the manner requested, to raise queries and concerns in relation to the Proposal. It became apparent that certain aspects of the Proposal would inadvertently favour the interests of the Leadership Team over those of Shareholders, particularly in the event of there being a change in the control of the Company (a "Change of Control") prior to June 2025. In such circumstances, the Proposal could have resulted in the Leadership Team receiving benefit before, or potentially even without, first delivering value to Shareholders.

This was NOT the intention of the Board, who immediately postponed the General Meeting to allow for a reappraisal of the Proposal.

The Board thanks those Shareholders for their input and apologises for this oversight.  Having consulted those Shareholders who contacted the Company, the Board is now reverting to all Shareholders with an amended Proposal (the "Amended Proposal").

The Amended Proposal has been designed to ensure that:

1.  any potential reward for the Leadership Team is directly linked to the prior delivery of value to the Shareholders - in any circumstances;

2.  a one-off assessment of the value delivered to Shareholders by the Leadership Team will be made at 30 June 2025 by reference to the price per Ordinary Share; and

3.  in the event of a Change of Control before 30 June 2025, the one-off assessment of the value delivered by the Leadership Team will be made by reference to the bid price payable for each Ordinary Share.

In particular, this Amended Proposal is intended to ensure that the interests of Shareholders and the Leadership Team remain fully aligned in all circumstances.

The GM is to be held in place of the General Meeting of the Company that was postponed on 4 December 2020, and its purpose is to seek Shareholders' approval for the Amended Proposal.

A circular, containing details of the new incentive proposal and a formal notice convening the GM, is being sent to Shareholders. A copy of the circular, together with a copy of the form of proxy, can be found on the Company's website at: https://tavistockinvestments.com/announcements .

Due to the current COVID-19 measures implemented by the Government in the United Kingdom SHAREHOLDERS WILL NOT BE PERMITTED TO ATTEND THE GM. The Company will ensure that the meeting is quorate and that the legal requirements are met.

SHAREHOLDERS WISHING TO VOTE ON THE RESOLUTION ARE STRONGLY URGED TO DO SO THROUGH COMPLETION OF THE FORM OF PROXY THAT IS BEING SENT TO THEM.

If Shareholders have any questions or comments relating to the business of the meeting that they would like to put to the Board then they are asked to submit those questions in writing via email to [e-mail] no later than 11.30 am on 23 March 2021.

Ends

Enquiries

Tavistock Investments Plc Oliver Cooke Brian Raven	Tel: [phone]
Allenby Capital Limited (Nominated adviser and broker) Corporate Finance: Nick Naylor, Nick Athanas, Liz Kirchner Sales and Corporate Broking: Tony Quirke	Tel: [phone]
Powerscourt Gilly Lock Chloe Retief	Tel: [phone]   020 7250 1446

PART III: LETTER FROM THE CHAIRMAN OF THE COMPANY

Tavistock Investments plc

(incorporated and registered in England and Wales under number 05066489)

Directors: Oliver Cooke (Chairman) Brian Raven (Chief Executive) Peter Dornan (Non-executive Director) Roderic Rennison (Non-executive Director)

Registered office: 1 Bracknell Beeches Old Bracknell Lane Bracknell Berkshire RG12 7BW 1 March 2021

Dear Shareholder,

PROPOSED ADOPTION OF A NEW GROWTH SHARE PLAN (BY WAY OF THE CREATION OF A NEW SHARE CLASS) AND OTHER AMENDMENTS TO THE COMPANY'S ARTICLES OF ASSOCIATION

AND

NOTICE OF GENERAL MEETING

1   Introduction

The Board considers it very important to have in place an arrangement that enables the Company to attract, retain, incentivise and reward the Company's leadership team (the "Leadership Team") together with certain other senior management, while at the same time ensuring that these rewards are completely aligned with the creation of long term value for our Shareholders.

Historically, this has been done through the issue of share options with the largest number of such options being issued to members of the Leadership Team (which includes Brian Raven and myself as the Company's Executive Directors). However, the accounting treatment of share options results in the Company incurring substantial share-based payment charges in its profit and loss account, which reduce the level of the Company's reported pre-tax profit, and thus adversely impact its share price.

For this reason, the Board has concluded that the use of share options as an incentive for members of the Leadership Team is no longer fit for purpose and Brian Raven and I have agreed to surrender, with immediate effect, all the share options that have been issued to us. The impact of this surrender will be to reverse the historic share-based payment charges relating to the options and to enhance the level of pre-tax profit reported by the Company in the current financial year by approximately £400,000.

The Board believes that there is a clear need to put in place an alternative, more suitable, arrangement to reward the Leadership Team, but only in circumstances where they have first succeeded in delivering material incremental value to Shareholders.

Background

I wrote to you last November to seek your support for the introduction of a new incentive arrangement for the Company's Leadership Team (the "Proposal").

The Proposal envisaged participants subscribing for a new class of growth shares that would offer them the potential to be rewarded for the delivery of incremental shareholder value.

Shareholders were invited to submit any questions or comments that they had regarding the Proposal to a dedicated email address established specifically for that purpose.

A small number of shareholders contacted the Board, in the manner requested, to raise queries and concerns in relation to the Proposal. It became apparent that certain aspects of the Proposal would inadvertently favour the interests of the Leadership Team over those of Shareholders, particularly in the event of there being a change in the control of the Company (a "Change of Control") prior to June 2025. In such circumstances, the Proposal could have resulted in the Leadership Team receiving benefit before, or potentially even without, first delivering value to Shareholders.

This was NOT the intention of the Board, who immediately postponed the General Meeting to allow for a reappraisal of the Proposal.

The Board thanks those Shareholders for their input and apologises for this oversight.  Having consulted those Shareholders who contacted the Company, the Board is now reverting to all Shareholders with an amended Proposal (the "Amended Proposal").

The Amended Proposal has been designed to ensure that:

4.  any potential reward for the Leadership Team is directly linked to the prior delivery of value to the Shareholders - in any circumstances;

5.  a one-off assessment of the value delivered to Shareholders by the Leadership Team will be made at 30 June 2025 by reference to the price per Ordinary Share; and

6.  in the event of a Change of Control before 30 June 2025, the one-off assessment of the value delivered by the Leadership Team will be made by reference to the bid price payable for each Ordinary Share.

In particular, this Amended Proposal is intended to ensure that the interests of Shareholders and the Leadership Team remain fully aligned in all circumstances.

Rationale

The Amended Proposal seeks to introduce an alternative approach whereby members of the Leadership Team subscribe for a new class of growth shares, the A Ordinary Shares, which removes from the Company the burden of any cost or tax charge (including employer's national insurance).

The A Ordinary Shares require a demanding performance hurdle to be met before they can achieve any increase in their value. The Company's share price must reach at least 4p, which is more than double the current share price and which, based upon the current number of shares in issue, would equate to an enhanced market capitalisation of £24.3m. 

The subscription price of an A Ordinary Share, at £1.00 per share, has been set at a level more than fifty times the current market price of an Ordinary Share. This introduces an element of risk (loss of value) for the Leadership Team should it fail to achieve the performance hurdles attached to the A Ordinary Shares.

Any value enhancement achieved by the A Ordinary Shares benefits the A Ordinary Share class as a whole. Any dilutive impact on Ordinary Shareholders as a result of the performance hurdles being achieved will be unaffected by the number of A Ordinary Shares in issue. Nonetheless, it is proposed to limit the number of A Ordinary Shares that can be issued to 200,000.

The purpose of this document is to provide you with information about the Amended Proposal and to explain why the Board considers the Amended Proposal to be in the best interests of the Company and its Shareholders as a whole. The Independent Directors unanimously recommend that you vote in favour of the Resolution to be proposed at the General Meeting.

Shareholders should note that unless the Resolution is approved at the General Meeting the new share class will not be created and the Amended Proposal will not be implemented. In this event the Board will be obliged to give consideration to an alternative incentive arrangement which may, or may not, offer similar advantages to the Company.

2  The Amended Proposal

Part II of this document contains definitions of words and terms that have been used throughout it. Please refer to Part II as you review this document.

The Board proposes to create a new class of shares - the A Ordinary Shares.  Each A Ordinary Share will have a nominal value of £1.00.  The terms of the A Ordinary Shares will be set out in the Company's amended Articles of Association and are summarised as follows:

· an initial subscription price of £1.00 per share - over fifty times higher than the current market price of the Ordinary Shares;

· the A Ordinary Shares will not be admitted to trading on AIM or on any other market;

· the equivalent equity value of the Company attributable to the A Ordinary Share class, as a whole, will be formally determined by the Board in conjunction with the Company's Remuneration Committee as at 30 June 2025 by reference to the applicable share price (calculated on the basis set out below) and to the table below; and

· this equity value will be determined as being equivalent to that of a specific number of Ordinary Shares and that number will not vary thereafter.

The applicable share price, rounded to the nearest 1/10^th of a penny, will be the higher of:

1.  the average quoted mid-market price of an Ordinary Share on the last five business days prior to 30 June 2025; and

2.  the average mid-market price per share over the six-month period prior to 30 June 2025. 

Mid-market share price	Increase relative to a mid-market price of 1.75p	A Ordinary Share class participation in the Equity Value of the Company
<4p	-	-
4p	229%	4%
5p	286%	7%
6p	343%	10%
7p	400%	13%
8p	457%	16%
9p and above	514%	19%

The mid-market share price referred to in the table above would be adjusted as appropriate in the event of there being either a share consolidation or a share split.

Unless the Leadership Team delivers incremental value to Shareholders in terms of growth in the Company's share price no growth share reward will be achieved by the Leadership Team at any point.

The equivalent equity value attributed in this one-off exercise will be reflected in the voting, dividend and distribution rights attaching to the A Ordinary Shares rather than by way of any conversion of A Ordinary Shares into Ordinary Shares. Prior to any attribution of value at 30 June 2025, the voting, dividend and distribution rights of an A Ordinary Share will be the same as those of an Ordinary Share.

By way of an example:

Were the number of shares in issue at 30 June 2025 to be 1,000,000,000 and the applicable share price to be 7p; the market capitalisation of the Company would be £70 million. Shareholders would have benefited from a significant increase in the value of an Ordinary Share, and the A Ordinary Shareholders would collectively have voting, dividend and distribution rights equivalent to those of an equity holding of 149,000,000 shares, being 13% of the enlarged share capital. This number would not vary thereafter, regardless of any subsequent increase in the number of shares in issue or increase in the share price.

Change of Control

A Change of Control could occur prior to 30 June 2025, in the event of Shareholders accepting an offer for the Company. This would happen during the period within which participating members of the Leadership Team would have subscribed for A Ordinary Shares, but not yet have had the opportunity to derive any benefit from the Amended Proposal.

In such circumstances, the Board considers it reasonable that the Leadership Team should instead be rewarded for the value delivered to Shareholders at that point in time.  The measure of such value would be the price per Ordinary Share to be paid by the offeror in an offer for the Company that becomes or is declared wholly unconditional.

Any such offer for the Company must be a valid arm's length transaction involving either a full cash offer, or a cash and/or share offer from a public company where the share element of the bid represented no more than 30% of the bidding company's issued share capital.

In the event of such a Change of Control the A Ordinary Share class' participation in the equity value of the Company will be determined by reference to the table above.

The Amended Proposal set out in this document is conditional upon the approval of 75 per cent of the Ordinary Shares voting at the General Meeting.

Should the Amended Proposal be approved by Shareholders at the General Meeting it is anticipated that Brian Raven and I will be offered the opportunity by the Remuneration Committee to subscribe for a minimum of 100,000 A Ordinary Shares. The remaining A Ordinary Shares would be held in reserve for subscription by participants at a later date.

Any subscription for A Ordinary Shares by members of the Leadership Team may be treated as related party transactions under Rule 13 of the AIM Rules for Companies and, accordingly would require the independent directors (for the purposes of the transaction) to state that, having consulted with the Company's nominated adviser, they consider the terms of the subscription for A Ordinary Shares to be fair and reasonable insofar as the Company's Shareholders are concerned.

3  Benefits of the Amended Proposal

For the Company:

The replacement of the current, increasingly costly, long-term incentive arrangement for management with an alternative that imposes no cost or tax liability on the Company, and which increases working capital as a consequence of the subscription for A Ordinary Shares.

For Shareholders:

The proposed new growth share arrangement provides a significant incentive for the Leadership Team to increase the price of an Ordinary Share, thereby delivering incremental value to Shareholders.

It also provides an assurance that any reward achieved by the Leadership Team at any time is directly linked to the prior delivery of value to Shareholders, either in the form of an increased share price, or in the event of a Change of Control, in the form of the offer price payable for each Ordinary Share.

Shareholders are not constrained from selling their shares at any time and therefore could, if they so wish, crystallise any enhanced value by selling some or all of their shareholding before 30 June 2025, the date at which the equivalent equity value attributable to the A Ordinary Share class will be formally determined.

For the Leadership Team:

Participants will initially be disadvantaged by having to subscribe for A Ordinary Shares at a high price. However, they will have an opportunity to achieve potentially significant reward, provided that they first deliver increased value to Shareholders.

4  General Meeting

Shareholder approval is being sought to create the A Ordinary Shares as a new share class and to make a small number of other amendments to the Company's Articles of Association to update them generally.

The creation of the A Ordinary Shares is conditional upon the Company obtaining Shareholder approval at a General Meeting. Part IV of this document contains Notice of a General Meeting that is being convened, in place of the General Meeting of the Company that was postponed on 4 December 2020, at 11.30am on 25 March 2021 at 1 Bracknell Beeches, Old Bracknell Lane, Bracknell, RG12 7BW. At the General Meeting, the Resolution set out in Part IV of this document will be proposed to Shareholders.

However, based on current COVID-19 measures implemented by the UK Government, Shareholders will not be permitted to attend the meeting. If Shareholders have any questions or comments relating to the business of the meeting that they would like to put to the Board then they are asked to submit those questions in writing via email to [e-mail] no later than 11.30 am on 23 March 2021.

The Company will ensure that the meeting is quorate and that the legal requirements are met.

SHAREHOLDERS WISHING TO VOTE ON ANY OF THE MATTERS OF BUSINESS ARE STRONGLY URGED TO DO SO THROUGH COMPLETION OF A FORM OF PROXY which must be completed and submitted in accordance with the instructions.

As for all of the Company's meetings, the Company's registrars, Share Registrars Limited, will collate and count the proxy votes received before the cut-off point and will provide a certified summary to the Board for use in the meeting.

The Resolution being proposed is a Special Resolution and will be passed if 75 per cent. or more of the votes cast at the General Meeting are in favour of it.

5  Action to be taken in respect of the General Meeting

A Form of Proxy is enclosed for use in respect of the General Meeting. To be valid, the Form of Proxy must be completed and returned as soon as possible and received by the Registrars by no later than 11.30 am on 23 March 2021. You can return your Form of Proxy by post to the Registrars, Share Registrars Limited, The Courtyard, 17 West Street, Farnham, Surrey GU9 7DR.

6  Recommendation

The Independent Directors consider that the Amended Proposal will be beneficial for the Company and its Shareholders as a whole. Accordingly, the Independent Directors unanimously recommend that you vote in favour of the Resolution to be proposed at the General Meeting.

The Directors intend to vote in favour of the Resolution in respect of their aggregate shareholdings of 97,236,629 Ordinary Shares representing approximately 16% of the Ordinary Shares in issue at the date of this document.

Yours faithfully

Oliver Cooke

Chairman

 

END

 

 

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