Placing and Open Offer

RNS Number : 0296X

Electra Private Equity PLC

30 November 2010

 



THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND IS NOT A PROSPECTUS FOR THE PURPOSES OF THE PROSPECTUS RULES OF THE UNITED KINGDOM FINANCIAL SERVICES AUTHORITY.  INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY SECURITIES REFERRED TO IN THIS ANNOUNCEMENT EXCEPT ON THE BASIS OF THE INFORMATION CONTAINED IN THE PROSPECTUS WHICH IS EXPECTED TO BE PUBLISHED BY THE COMPANY IN DUE COURSE. THE PROSPECTUS, WHEN PUBLISHED, WILL BE AVAILABLE ON THE COMPANY'S WEBSITE WWW.ELECTRAEQUITY.COM/CONVERTIBLE.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, CANADA, JAPAN, AUSTRALIA OR NEW ZEALAND.

Electra Private Equity PLC

30 November 2010

For Immediate Release

ELECTRA PRIVATE EQUITY PLC

PLACING AND OPEN OFFER OF UP TO £100,000,000 AGGREGATE PRINCIPAL AMOUNT OF SUBORDINATED CONVERTIBLE BONDS
 

The Board of Electra Private Equity PLC (the "Company") announces today proposals for a Placing and Open Offer of up to £100 million aggregate principal amount of 5 per cent. Subordinated Convertible Bonds due 2017 (the "Bonds").

Key Highlights

·      The Company is proposing to raise up to £100 million (before expenses) through an issue of Bonds at an issue price of 100 per cent.

·      The Bonds will carry a coupon of 5 per cent. per annum payable semi-annually in arrear.

·      The initial Conversion Price will be 2,050 pence, equal to the NAV per Ordinary Share as at 30 September 2010.

·      The Board believes that recent macroeconomic and market events provide significant private equity investment opportunities with attractive potential investment returns over the current business cycle. It believes that it is an opportune time to expand the capital base of the Company.

·      The Company had Net Liquid Resources of £48 million as at 30 September 2010, but when the ZDP Liability is also considered, the Company is geared (£2 million) on a long term basis as at that date.

·      The Company has also today published its audited results for the year ended 30 September 2010, details of which are set out in a separate announcement.

·      Institutional investors may apply to participate in a conditional placing of the Bonds today subject to clawback under an Open Offer.

·      Under the terms of the Open Offer, Qualifying Shareholders will be able to subscribe for Bonds at the Issue Price pro-rata to their current holdings of Ordinary Shares. The Open Offer is expected to close on 21 December 2010.

·      A prospectus, also comprising a shareholder circular, containing details of the Placing and Open Offer and an associated shareholder resolution to be proposed at a General Meeting (the "Prospectus") is expected to be posted to shareholders today and will be available on the Company's website, www.electraequity.com/convertible.

·      A General Meeting to approve the Placing and Open Offer is expected to be held at 10.00am on 23 December 2010 at Paternoster House, 65 St Paul's Churchyard, London EC4M 8AB.

J.P. Morgan Cazenove is acting as Sole Global Co-ordinator and Sole Bookrunner.

For further information:

Electra Private Equity PLC

Nick Miles / Kate Ruck Keene (M:Communications)

Tel: [phone]

J.P. Morgan Cazenove

Michael Wentworth-Stanley

William Simmonds

Tel: [phone]

Neither this announcement nor any of the information contained in it forms or constitutes an offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities, nor will it form the basis of any contract for the purchase of or subscription for such securities.

None of the Company, J.P. Morgan Cazenove or any of their respective directors, officers, employees, agents or advisers or any other person makes any representation or warranty, express or implied, as to the accuracy or completeness of the contents of this announcement. In particular, but without prejudice to the generality of the foregoing, no representation or warranty is given as to the achievement or reasonableness of, and no reliance should be placed on, any assumptions, targets, forecasts, projections, estimates or prospects with regard to the anticipated future performance of the Company. No responsibility or liability is accepted by any such person for any errors, misstatements or omissions in this announcement.

This announcement contains certain forward-looking statements with respect to financial markets, the sectors in which the Company invests and the business of the Company. These statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Many of these risks and uncertainties relate to factors that are beyond the Company's ability to control or estimate precisely. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. The Company expressly disclaims any obligation or undertaking to release any updates or revisions to these forward-looking statements to reflect any changes in expectations with regard thereto or any change in events or circumstances on which any statement is based after the date of this announcement. Nothing in this announcement should be construed as a profit or dividend forecast.

The information contained in this announcement is restricted and is not for release, publication, or distribution, directly or indirectly, in or into the United States, Canada, Japan, Australia or New Zealand. The information in this announcement does not constitute an offer of securities for sale in the United States, Canada, Japan, Australia or New Zealand or any other jurisdiction where such distribution or offer is unlawful. Any failure to comply with these restrictions may constitute a violation of the securities laws of the United States, Canada, Japan, Australia or New Zealand. No information contained in this announcement shall form the basis of, or be relied upon in connection with, any contract or commitment or investment decision whatsoever in any jurisdiction. The offer and distribution of this announcement and other information in connection with the Placing and Open Offer in certain jurisdictions may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

The Company has not registered and does not intend to register any securities in the United States or to conduct a public offer of any securities in the United States. The Bonds may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons (as such term is defined in Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act")), absent registration under the Securities Act or an available exemption from such registration.

Further Information

Introduction

The Board believes that recent macroeconomic and market events provide significant private equity investment opportunities with attractive potential investment returns over the current business cycle. As such, it believes that it is an opportune time to expand the capital base of the Company.

These opportunities principally stem from both a lack of flexible capital following a severe economic recession and credit crisis, and a recovery in corporate profitability.

The credit crisis that started in late 2007, and spread throughout the financial system during 2008 and 2009, undermined confidence in both debt and equity capital markets, leading to a severe economic recession. UK gross domestic product contracted at the fastest rate since 1980, and the world fell into a recession from which Western economies are still emerging.

During the last three years we have seen significant stock market volatility, the collapse of the bank leverage loan market and significant reductions in European M&A and private equity transaction volumes.  While there is evidence of a return to growth in some of these markets, the financial crisis has changed, and continues to change, the financial environment; both increasing the cost and decreasing the availability of debt finance.  This is due to increased regulatory capital requirements for banks, a reduced number of market participants, and underperforming loan books.  The Board agrees with the Manager (based both on its experience in the early 1990's recession and its current experience) that, despite a cautious outlook for the general economy there will be a need for flexible equity capital to help mid-market businesses grow and profit from opportunities in their respective markets, resulting in increased investment opportunity.

The Manager is well-positioned to deliver strong returns from fresh capital as it has a long track record of exploiting investment opportunities in the European mid-market across business cycles, and has materially increased its investment rate as opportunities have been found in the current market. During the year to 30 September 2010, £183 million of capital has been invested, a material increase on the previous year.

The Board believes the Bond is attractive to investors offering both participation in the potential future growth of NAV and the share price, whilst being protected on the downside by a significant NAV cover and cash yield.

The Board therefore believes that the Placing and Open Offer will have the key benefit of enlarging the Company's capital for investment at the appropriate time, whilst also broadening the investor base and improving the liquidity in its Ordinary Shares. 

Reasons for the Placing and Open Offer and Use of Proceeds

As a consequence of the events in global capital markets described above, the private equity market dynamics started to, and are continuing to, adjust to a number of medium term developments. In particular, the Board, following discussions with the Manager, believes that:

•              distressed sellers exist across the capital structure;

•              the corporate and leveraged loan overhang requires significant de-gearing, resulting in a need for replacement equity;

•              competition for deals is reduced as the shake-out of private equity managers continues;

•              in the mid-market there is a shortage of flexible capital to pursue opportunities; and

•              as a consequence of the above dynamics investment opportunities are becoming more attractive.

These developments, together with the Company's flexible investment mandate, will enable the Manager to target a number of opportunities, including:

•              bolt-on acquisitions to existing investments;

•              capital for restructuring, including buyouts;

•              private equity into public companies;

•              secondary investments, including debt; and

•              development capital.

With a proven track record of actively managing its capital structure over the cycle, the Company believes it will be well positioned, following the Placing and Open Offer, to benefit from these opportunities.

The Board, following discussions with the Manager and the Company's advisers, has decided to increase the capital available to the Company through the Placing and Open Offer in order to provide further funds for investment purposes because whilst the Company had Net Liquid Resources of £48 million, when the ZDP Liability is also considered, the Company is already geared (£2 million) on a long term basis as at 30 September 2010. 

The Placing and Open Offer will diversify the Company's sources of funding and the maturity of that funding and enhance the operational flexibility of its debt facilities.

The net proceeds of the Placing and Open Offer will be managed in accordance with the Company's investment policy for further investments and general corporate purposes.

The Placing and Open Offer of Bonds

The Company is proposing to raise up to £100 million (before expenses) by the issue of the Bonds pursuant to a Placing and Open Offer.

The Open Offer is an opportunity for all Qualifying Shareholders to subscribe for Bonds (being in aggregate £100 million principal amount of Bonds) pro rata to their current holdings of Ordinary Shares at the Issue Price, in accordance with the terms of the Open Offer. J.P. Morgan Cazenove, as sole bookrunner for the Company, is making arrangements to conditionally place the Bonds with institutional investors at the Issue Price, subject to clawback in respect of valid applications made by Qualifying Shareholders under the Open Offer.

The initial Conversion Price upon issue of the Bonds is 2,050 pence. This represents a premium of approximately 27.7 per cent. to the closing price of 1,605 pence per Ordinary Share on 29 November 2010, the last Business Day prior to the date of this announcement.

The Board considers the initial Conversion Price to be appropriate as it is equal to the NAV per Ordinary Share as at 30 September 2010

The Bonds are being offered to Qualifying Shareholders, subject to the Conditions, on the basis of:

1 Bond (with a denomination of £1,000) for every 354 Ordinary Shares

registered in the name of each Qualifying Shareholder at the close of business on Friday, 26 November 2010, and so in proportion for any other number of Ordinary Shares then registered. Entitlements of Qualifying Shareholders will be rounded down to the nearest £1,000 aggregate principal amount of Bonds and any resulting fractional entitlements of Qualifying Shareholders arising under the Open Offer will be aggregated and placed for the benefit of the Company. Qualifying Shareholders holding fewer than 354 Ordinary Shares will have no entitlement to subscribe for Bonds under the Open Offer.

The Placing and Open Offer are conditional on the approval of the Resolution, Admission and the Placing Agreement becoming unconditional in all respects. If the conditions to the Placing Agreement are not fulfilled, the Placing and Open Offer will not proceed and application monies in relation to the Open Offer will be returned to applicants without interest as soon as possible thereafter.

The Placing and Open Offer are not being underwritten by J.P. Morgan Cazenove or by any other person.

Qualifying Shareholders may apply for any principal amount of Bonds up to their maximum entitlement which, in the case of Qualifying Non-CREST Shareholders, is equal to the principal amount of Open Offer Entitlements as shown in their Application Form, or, in the case of Qualifying CREST Shareholders, is equal to the principal amount of Open Offer Entitlements standing to the credit of their stock account in CREST.

No application in excess of a Qualifying Shareholder's pro rata entitlement will be met and any Qualifying Shareholder so applying will be deemed to have applied for his or her maximum entitlement. Qualifying Shareholders with holdings of existing Ordinary Shares in both certificated and uncertificated form will be treated as having separate holdings for the purpose of calculating entitlements under the Open Offer. Valid applications up to Qualifying Shareholders' pro rata entitlements will be satisfied in full.

The Ordinary Shares to be issued on conversion of the Bonds will, on the Delivery Date, rank pari passu with the Ordinary Shares then in issue (save for any dividends or other distributions declared, made or paid on the Ordinary Shares by reference to a record date prior to the Delivery Date of the relevant Ordinary Shares).

If valid applications are not received for all of the Bonds, the aggregate principal amount of Bonds not so applied for are expected to be subscribed at the Issue Price by institutional placees procured by J.P. Morgan Cazenove, as sole bookrunner for the Company, pursuant to the terms of the Placing Agreement.

Qualifying Shareholders should be aware that the Open Offer is not a rights issue. Qualifying Non-CREST Shareholders should also note that the Application Form is not a negotiable document and cannot be traded. Bonds not applied for under the Open Offer will not be sold in the market for the benefit of those who do not apply under the Open Offer and those Qualifying Shareholders who do not apply to take up Bonds will have no rights under the Open Offer.

To be valid, completed Application Forms and payment in full must be received by the Receiving Agent no later than 11.00 a.m. on 21 December 2010 or, for Shareholders who have their Ordinary Shares held in uncertificated form, a valid USE instruction must settle on or before 11.00 a.m. on 21 December 2010.

Further details of the Open Offer will be set out in the Prospectus.

Admission and Dealings of the Bonds

The Bonds will be in registered form and may be issued either in certificated or uncertificated form.

Applications will be made for the Bonds to be admitted to the Official List and to trading on the regulated market of the London Stock Exchange. It is expected that Admission will occur, and that dealings will commence, at 8.00 a.m. on 29 December 2010.

Overseas Shareholders

Bonds

The Bonds are not being made available in whole or in part to the public except under the terms of the Open Offer. The Open Offer is not being made, subject to certain exceptions, to Overseas Shareholders and, accordingly, Application Forms are not being sent to and Open Offer Entitlements are not being credited to such Overseas Shareholders. However, the Company reserves the right to accept an Application Form received from an Overseas Shareholder (or an acceptance by submission of a USE instruction by an Overseas Shareholder holding his Ordinary Shares in uncertificated form) where it has received proof satisfactory to it that the Overseas Shareholder is able to accept the invitation by the Company free of any requirement which it (in its sole and absolute discretion) regards as unduly burdensome.

Net Proceeds from Bonds

If the Placing and Open Offer proceeds, the Company will raise net proceeds of approximately £95.4 million, assuming the Bonds are subscribed in full. 

Impact on NAV per Ordinary Share

The Conversion Price of the Bonds on issue (2,050 pence) will be equal to the NAV per Ordinary Share as at 30 September 2010.

If the NAV per Ordinary Share at the time of exercise of the Conversion Rights exceeds the applicable Conversion Price, the issue of the Ordinary Shares upon such exercise will have a dilutive effect on the NAV per Ordinary Share. The extent of such dilution will depend on the number of Bonds in respect of which the Conversion Rights are exercised on each occasion and the difference between the applicable Conversion Price and the NAV per Ordinary Share prevailing at the time the new Ordinary Shares are issued.

General Meeting

Implementation of the Placing and Open Offer requires Shareholders to approve the Resolution to be proposed at the General Meeting. If passed, the Resolution will:

(a)    authorise the grant of the rights to convert into Ordinary Shares conferred by the terms and conditions of the Bonds up to a maximum nominal amount of £1,219,600 for the purposes of the Placing and Open Offer. This authorisation is in addition to any existing authority and will expire at the conclusion of the Company's Annual General Meeting to be held in 2011; and

(b)   waive statutory pre-emption rights in relation to the grant of the rights to convert into Ordinary Shares conferred by the Bonds up to a maximum nominal amount of £1,219,600 for the purposes of the Placing and Open Offer. This authorisation is in addition to any existing authority and will expire at the conclusion of the Company's Annual General Meeting to be held in 2011.

A General Meeting of the Company has been convened for 10.00am on 23 December 2010 at Paternoster House, 65 St Paul's Churchyard, London EC4M 9AB at which the Resolution will be proposed.

Shareholders should read the full text of the Resolution contained in the Notice of General Meeting in the Prospectus when published.

The Board is recommending that Shareholders vote in favour of the Resolution. In order to be passed, the Resolution requires at least 75 per cent of the votes cast to be in favour.

All Shareholders are entitled to attend and vote at the General Meeting.

Copies of the Prospectus containing the Notice of General Meeting will be available on the Company's website at www.electraequity.com/convertible and will be forwarded to the Financial Services Authority and submitted to the National Storage Mechanism and will shortly be available for inspection at: http://www.Hemscott.com/nsm.do. 

Expected Timetable of Principal Events

Each of the times and dates is indicative only and subject to change. References to a time of day are to London time. Any changes to the timetable will be notified by publication of a notice through a RIS.

Record Date for entitlement under the Open Offer	5.00 p.m. on Friday 26 November 2010
Announcement of the Placing and Open Offer and publication of the Prospectus and Application Forms	Tuesday 30 November 2010
Ex-entitlement Date for the Open Offer	8.00 a.m. on Tuesday 30 November 2010
Open Offer Entitlements credited to stock accounts of Qualifying CREST Shareholders in CREST	By 8.00 a.m. on Wednesday 1 December 2010
Recommended latest time for requesting withdrawal of Open Offer Entitlements from CREST (i.e. if your Open Offer Entitlements are in CREST and you wish to convert them to certificated form)	4.30 p.m. on Tuesday 14 December 2010
Latest time and date for depositing Open Offer Entitlements into CREST	3.00 p.m. on Thursday 16 December 2010
Latest time and date for splitting Application Forms (to satisfy bona fide market claims only)	3.00 p.m. on Friday 17 December 2010
Latest time and date for receipt of Forms of Proxy/CREST proxy instructions	10.00 a.m. on Tuesday 21 December 2010
Latest time and date for receipt of completed Application Forms and payment in full or settlement of relevant CREST instructions under the Open Offer (as appropriate)	11.00 a.m. on Tuesday 21 December 2010
General Meeting	10.00 a.m. on Thursday 23 December 2010
Closing Date	Wednesday 29 December 2010
Creation and issue of the Bonds	By 7.00 a.m. on Wednesday 29 December 2010
CREST accounts expected to be credited with the Uncertificated Bonds	By 7.00 a.m. on Wednesday 29 December 2010
Admission and dealings in the Bonds to commence on the London Stock Exchange	8.00 a.m. on Wednesday 29 December 2010
Certificates dispatched for the Certificated Bonds	By 5.00 p.m. on Thursday 6 January 2011
If you have any questions on the procedure for acceptance and payment, please telephone the Shareholder Helpline on 0871 384 2887 from within the UK or on [phone] if calling from outside the UK. Calls to the helpline on 0871 384 2887 cost 8 pence per minute from a BT landline. Other network providers' costs may vary. Lines are open from 8.30 a.m. to 5.30 p.m. (London time) Monday to Friday (except UK public holidays). Calls to the helpline from outside the UK will be charged at the applicable international rate. Different charges may apply to calls from mobile telephones and calls may be recorded and randomly monitored for security and training purposes. Please note that for legal reasons, the Shareholder Helpline is only able to provide you with information contained in this announcement and information relating to the Company's register of members and is unable to give advice on the merits of the Placing and Open Offer or provide legal, financial, tax or investment advice.

Definitions
Admission	Admission to Listing and Admission to Trading and a reference to Admission becoming "effective" is to be construed in accordance with the Listing Rules or the Standards (as applicable).
Application Form	the personalised application form on which Qualifying Non- CREST Shareholders may apply for Bonds under the Open Offer.
Board	The board of directors of the Company.
Bonds	5% convertible bonds due 29 December 2017.
Business Day	any day on which banks are generally open in London for the transaction of normal business other than a Saturday or Sunday or public holiday in England and Wales.
Certificated Bonds	Bonds held in certificated form.
Closing Date	The date of issue of the Bonds, expected to be 29 December 2010.
Company	Electra Private Equity PLC.
Conditions	the terms and conditions of the Bonds, as set out in Part 6 of the Prospectus (Terms and Conditions of the Bonds).
Conversion Price	2,050 pence (subject to adjustments in accordance with the Conditions).
Conversion Right	in respect of any Bond, the right of the holder (or, in the circumstances described in Condition 9 (Trustee's Discretion to Convert Before Redemption), the Trustee) to convert the Bond into Ordinary Shares in accordance with the Conditions.
CREST	the system for the paperless settlement of trades in securities and the holding of uncertificated securities in accordance with the Regulations operated by Euroclear UK.
Delivery Date	Has the meaning given in Part 6 of the Prospectus (Terms and Conditions of the Bonds).
Ex-entitlement Date	30 November 2010.
General Meeting	the general meeting of the Company to consider the Resolution, convened for 23 December 2010 at 10.00 a.m. or any adjournment thereof.
Issue Price	100 per cent.
J.P. Morgan Cazenove	J.P. Morgan Securities Ltd., which conducts its investment banking activities as J.P. Morgan Cazenove.
Liquid Resources	comprises cash at bank, short term deposits with a maturity of less than three months, money market funds and floating rate notes.
London Stock Exchange	London Stock Exchange plc.
Manager	Electra Partners LLP, being the investment manager of the Company.
NAV	Net asset value.
Net Liquid Resources	Liquid Resources less bank borrowings (but excluding the ZDP Liability).
Official List	The Official List of the FSA.
Open Offer	the invitation by the Company to certain Qualifying Shareholders to apply for Bonds on the terms and conditions set out in the Prospectus and, in the case of Qualifying Non-CRESTShareholders, the Application Form.
Open Offer Entitlements	entitlements to apply to subscribe for Bonds allocated to a Qualifying Shareholder pursuant to the Open Offer.
Ordinary Shares	The ordinary shares of 25 pence each in the capital of the Company.
Overseas Shareholders	shareholders with registered addresses outside the EEA or who are citizens of, incorporated in, registered in or otherwise resident in, or located in, countries outside the EEA.
Placees	The persons with whom the Bonds are placed pursuant to the Placing.
Placing	the placing of up to £100 million in aggregate principal amount of Bonds to Placees, as described in Part 5 of the Prospectus (The Placing and Open Offer).
Placing Agreement	the placing agreement entered into between the Company, J.P. Morgan Cazenove and the Manager in relation to the Placing and Open Offer, as described in paragraph 13.5 Material Contracts - Placing Agreement) of Part 13 of the Prospectus (Additional Information).
Qualifying CREST Shareholder	Qualifying Shareholders holding Ordinary Shares in uncertificated form.
Qualifying Non-CREST Shareholder	Qualifying Shareholders holding Ordinary Shares in certificated form.
Qualifying Shareholders	Shareholders whose names are entered on the Register at the close of business on the Record Date.
Receiving Agent	Equiniti Limited.
Record Date	the date on which Qualifying Shareholders' entitlements to the Open Offer will be assessed against the Shareholder Register, expected to be 5.00 p.m. on 26 November 2010.
Resolution	the special resolution to be proposed at the General Meeting relating to the Placing and Open Offer.
Securities Act	the United States Securities Act of 1933 (as amended).
Shareholders	holders of Ordinary Shares.
UK or United Kingdom	the United Kingdom of Great Britain and Northern Ireland.
US or United States	United States of America, its territories and possessions, any state of the United States and the District of Columbia.
ZDP Liability	The accrued liability pursuant to the ZDP Shares.
ZDP Shares	The zero dividend preference shares of 0.01 pence each in the capital of the ZDP Company.

 

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