Publication of a Prospectus re 2022 ZDPs

RNS Number : 6371Y

UIL Limited

18 May 2016

 

For release on 18 May 2016

UIL Limited
("UIL" or the "Company")

Publication of Circular

The Company announces that it has today published a circular (the "Circular"), relating to the proposed purchase by the Company of 2.45 million shares in Somers Limited, a financial services company which is listed on the Bermuda Stock Exchange, from Permanent Investment Limited. The proposed transaction constitutes a related party transaction for the purposes of the Listing Rules.

The text of the Chairman's letter, extracted from the Circular which contains details of the related party transaction, is set out below.

A copy of the Circular will be submitted to the National Storage Mechanism and will shortly be available for inspection at: www.morningstar.co.uk/uk/NSM and on the Company's website: www.uil.limited.

Terms used and not defined in this announcement bear the meaning given to them in the Circular to be published today.

Chairman's Letter

"To the holders of Ordinary Shares and Depositary Interests

Recommended proposal for further investment in Somers Limited

1. Introduction

I am writing to you in relation to the proposed purchase by the Company of 2.45 million shares in Somers Limited (Somers), a financial services investment holding company which is listed on the Bermuda Stock Exchange (BSX). The Company currently owns 5.94 million shares representing 49.6 per cent. of the existing issued share capital of Somers and the proposed further investment by the Company would increase its interest in Somers to approximately 70.1 per cent.

The Proposed Investment will constitute a related party transaction for the purposes of the Listing Rules and accordingly is conditional on Independent Shareholder approval. The resolution to approve the Proposed Investment, which is to be proposed at the Special General Meeting as an ordinary resolution, is set out in the Notice of the Special General Meeting at the end of this document. The purpose of this letter is to outline the reasons for the Proposed Investment, and explain why the Board considers the Proposed Investment to be in the best interests of the Company and Shareholders as a whole and why the Board recommends that you vote in favour of the Resolution. Since Warren McLeland is the Chairman of Somers he is not considered to be independent and has therefore not taken part in the Board's consideration of the Proposed Investment.

2. Information on Somers and rationale for the Proposed Investment

Somers is an investment holding company specialising in the financial services sector. It currently has investments in the banking, asset financing and stockbroking sectors. Somers' primary investments include its 100 per cent. owned subsidiary, Bermuda Commercial Bank Limited (BCB), one of Bermuda's four licensed banks and a 62.5 per cent. holding in Waverton Investment Management, a UK wealth manager with $6.5 billion in assets under management. Somers is listed on the BSX and based on a share price of US$13.00 per share as at 16 May 2016 had a market capitalisation of US$155.5 million. As at 30 September 2015, Somers' audited net assets amounted to US$209.2 million (US$17.74 per share) and as at 31 March 2016 Somers' unaudited net assets amounted to US$203.8 million (US$17.03 per share).

UIL has had a significant shareholding in Somers since it was established in 2012 as a new investment holding company for BCB, its subsidiaries and investments in certain other financial services companies and UIL's current shareholding amounts to 49.6 per cent. of Somers. Somers' primary objective is to deliver superior total shareholder returns through both capital and income by investing in undervalued companies within the financial services and related sectors and markets. Somers believes that there will continue to be a number of opportunities for investment in such companies arising, for example, due to a limited number of buyers, the paucity of bank lending to smaller financial services companies and a number of financial services companies for sale as banks continue to deleverage in response to the global financial crisis. In addition, continuing regulatory changes and the ongoing drive for consolidation is expected to also lead to potential for investment.

The Board proposes to increase its interest in Somers since, in light of the proposed 2016 ZDP Share Rollover Offer and placing of 2020 ZDP Shares and 2022 ZDP Shares under the Placing Programme (including the Initial Placing), following Completion the Proposed Investment will increase UIL's Gross Assets and will thereby provide increased ZDP Cover for the ZDP Shares. Furthermore, the increased investment in Somers will enable the Company to benefit commensurately from future uplifts in the value of Somers' underlying investments.

The Proposed Investment will be satisfied through the issue of Ordinary Shares in UIL to Permanent Investments Limited at a price per Ordinary Share based on the most recently published unaudited UIL NAV prior to Completion. In consideration for this issue Permanent Investments Limited will transfer to UIL 2.45 million Somers' ordinary shares, at a price per Somers' ordinary share calculated using the most recently published unaudited Somers' NAV prior to Completion.

Based on the latest published unaudited UIL NAV per Ordinary Share of 203.55 as at 10 May 2016 and the unaudited Somers NAV per share of $17.03 as at 31 March 2016, the Proposed Investment would result in the Company issuing approximately 14.2 million new Ordinary Shares. The exact number of new Ordinary Shares to be issued will only be determined following the publication of the unaudited UIL NAV prior to Completion. Completion will only take place following satisfaction of the Conditions set out in paragraph 4 of Part 2.

Based on the current share price and latest published net asset value for Somers, since the Somers shares trade at a discount to net asset value the UIL NAV per Ordinary Share will be diluted immediately following Completion of the Proposed Investment. Based on the issue of 14.2 million new Ordinary Shares and the current share price of US$13.00 per Somers share, UIL's latest published net asset value per Ordinary Share of 203.55p would be reduced to 197.01p on a pro forma basis. The Board believes that the benefits of the Proposed Investment will outweigh the initial pro forma dilution in the UIL NAV per Ordinary Share.

Following the Proposed Investment the Company's interest in Somers would represent approximately 17.3 per cent. of UIL's Gross Assets based on the latest UIL NAV reported by the Company as at 10 May 2016.

Shareholders should also note that, although Somers is listed on the BSX, the investment may not be readily tradeable and the Company will hold a significant investment position in Somers which may represent a significant multiple of the normal trading volumes of Somers and this may make it difficult for the Company to sell its investment. Shareholders should not expect that the Company will necessarily be able to realise, within a period which they would otherwise regard as reasonable, its investment and any such realisation may be at a considerably lower price than the prevailing indicative market price of Somers.

3. Related Party Transaction

The vendor of the Somers' ordinary shares, Permanent Investments Limited is an Associate of ICM Limited, the joint portfolio manager of UIL. Permanent Investments Limited is therefore classed as a related party of the Company in accordance with the Listing Rules and the Proposed Investment in Somers constitutes a related party transaction for the purposes of the Listing Rules.

The Listing Rules require that a related party transaction of a listed company must be approved by its shareholders other than the related party, unless certain exemptions apply. Since none of the exemptions are applicable in relation to the Proposed Investment, the investment is subject to the passing of the Resolution, which will be proposed as an ordinary resolution and will require the approval of a majority of the Independent Shareholders voting on the Resolution. ICM has undertaken not to vote the Ordinary Shares in which it is interested in respect of the Resolution and it will take all reasonable steps to ensure that its Associates, which include Permanent Mutual Limited whose holding of Ordinary Shares is disclosed in paragraph 2 of Part 3 of this document, will also abstain from voting on the Resolution.

The Board, having been so advised by Dickson Minto W.S., considers the terms of the Proposed Investment to be fair and reasonable insofar as Shareholders are concerned. In providing advice to the Board, Dickson Minto W.S. has taken into account the Board's commercial assessments.

4. Shareholder support

The Company has received an irrevocable undertaking from General Provincial Life Pension Fund (L) Limited to vote in favour of the Resolution to approve the Proposed Investment in respect of a total of 56,001,533 Ordinary Shares, representing approximately 61.8 per cent. of the Ordinary Shares.

5. The Special General Meeting

A notice convening the SGM, to be held at Hamilton Princess, 76 Pitts Bay Road, Hamilton, HM08, Bermuda at 9.00 a.m. (Bermuda time) on Friday, 10 June 2016 is set out at the end of this document at which the Resolution to approve the Proposed Investment will be proposed.

6. Action to be taken

Independent Shareholders who hold Ordinary Shares in certificated form

Independent Shareholders who hold their Ordinary Shares in certificated form will find enclosed with this document a Form of Proxy for use in relation to the SGM. Whether or not you intend to be present at the SGM, Independent Shareholders are requested to complete and return the Form of Proxy so as to be received by the Company's Registrars, Computershare Investor Services (Bermuda) Limited, c/o The Pavilions, Bridgwater Road, Bristol BS99 6ZY not less than 1.00 p.m. (London time), on 8 June 2016.

Submitting a Form of Proxy will not preclude an Independent Shareholder from attending the Special General Meeting and voting in person should they so wish.

Independent Shareholders who hold Ordinary Shares through Depositary Interests

Independent Shareholders who hold their Ordinary Shares through Depositary Interests will find enclosed a Form of Instruction for use in respect of the SGM to instruct the DI Depositary how to vote on their behalf. Such Independent Shareholders are requested to complete and return the Form of Instruction so as to be received by the Depositary, Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY by not later than 1.00 p.m. (London time) on 7 June 2016.

Savings Plan Participants

Savings Plan Participants will find enclosed a Form of Direction for use at the SGM to indicate the way in which they wish their votes to be cast at the SGM.

Savings Plan Participants are requested to complete and return a Form of Direction so as to be received by Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY by not later than 1.00 p.m. (London time) on 31 May 2016.

6. Recommendation

The Board considers the Proposed Investment to be in the best interests of the Company and its Shareholders as a whole. Accordingly, the Board unanimously recommends that Independent Shareholders vote in favour of the Resolution to be proposed at the SGM, as the Independent Directors and Warren McLeland intend to do in respect of their own personal beneficial holdings which amount to 620,289 Ordinary Shares (representing 0.68 per cent. of the existing issued Ordinary Share capital of the Company as at 17 May 2016, being the latest practicable date prior to the publication of this document). Warren McLeland has not taken part in the Board's consideration of the Proposed Investment and has refrained from voting on any Board decisions with regard to it.

Yours faithfully,

Peter Burrows
Chairman"

Expected Timetable

Event	2016
Latest time and date for receipt of Forms of Direction from Savings Plan Participants	1.00 p.m. on 31 May
Latest time and date for receipt of Forms of Instruction from holders of Depositary Interests	1.00 p.m. on 7 June
Latest time and date for receipt of Forms of Proxy	1.00 p.m. on 8 June
Special General Meeting to approve the Proposed Investment	9.00 a.m. (Bermuda time) on 10 June

All references to time in this document are to London time, except for the time of the Special General Meeting, which is a reference to Bermuda time.

For further information please contact:

ICM Investment Management Limited

Charles Jillings                                                                                           01372 271486

Stockdale Securities Limited

Alastair Moreton/Rose Ramsden                                                      0207 601 6118

 

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