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Artemis Alpha Tst (ATS)

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Thursday 11 November, 2010

Artemis Alpha Tst

Further re. Proposed Merger

RNS Number : 0571W
Artemis Alpha Trust PLC
11 November 2010
 



NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN OR INTO AUSTRALIA, CANADA, JAPAN, new zealand, the republic of south africa OR THE UNITED STATES OF AMERICA or any jurisdiction in which the same could be unlawful OR TO US PERSONS.  the information contained herein does not constitute an offer of securities for sale in any jurisdiction, including in australia, canada, japan, new zealand, the republic of south africa or the united states of america. 

ARTEMIS ALPHA TRUST PLC

11 NOVEMBER 2010

RECOMMENDED PROPOSALS FOR THE MERGER OF ARTEMIS ALPHA TRUST PLC & GARTMORE GROWTH OPPORTUNITIES PLC AND RELATED MATTERS

Introduction

The boards of the Company and GGO announced on 27 September 2010 that they reached agreement in principle in respect of a recommended merger of the assets of the two companies through a scheme of reconstruction and winding up of GGO.  The Company announces that it has today published a Prospectus and a Circular in connection with the recommended proposals for the reconstruction and winding up of GGO. The Circular and Prospectus and GGO Circular provide further details of the Proposals, which, inter alia, are conditional on the approval by both Shareholders and GGO Shareholders. 

The Board believes that the Scheme represents an opportunity to:

·           acquire a high quality investment portfolio which is complementary to the Company's existing portfolio;

·           increase the size of the Company significantly in a cost efficient manner;

·           further increase the Company's market capitalisation, thereby enabling the Company to attract a wider range of investors which, in turn, should improve the liquidity in the Ordinary Shares; and

·           reduce the Company's fixed operating costs as a percentage of Shareholders' funds.

The Scheme

Pursuant to the terms of the Scheme, GGO Shareholders may elect for one, or a combination, of the following options:

·           The Rollover Option 

GGO Shareholders  may choose to receive new Ordinary Shares issued by the Company.  A GGO Shareholder electing for this option shall receive such number of New Ordinary Shares with a FAV per Ordinary Share equal to 98.5% of the FAV per GGO Share of their GGO Shares. 

The New Ordinary Shares will rank equally in all respects with the existing issued Ordinary Shares (save that the New Ordinary Shares will not qualify for the Interim Dividend in respect of the six months to 31 October 2010 to be paid by the Company in February 2011) and holders of the New Ordinary Shares will be entitled to participate in the bonus issue of Subscription Shares referred to under the heading "The Bonus Issue" below.

·           The Cash Option

GGO Shareholders who were on GGO's register of members as at the close of business on 24 September 2010 may choose to receive an immediate cash exit at 95% of the FAV per GGO Share, subject to cash elections not exceeding 30% of GGO's issued share capital, in which event such elections for cash (other than in respect of certain overseas GGO Shareholders) will be scaled back. 

GGO Shareholders who do not make a valid election under the Scheme will be deemed to have elected for the Rollover Option other than certain overseas GGO Shareholder and participants in the Gartmore ISAit Savings Scheme who will be deemed to have elected for the Cash Option.  

Under the Proposals, the Company will acquire substantially all of GGO's assets (apart from those retained in a separate liquidation fund by the GGO Liquidators to meet certain liabilities of GGO), primarily comprising investments in quoted UK smaller companies (which are in accordance with the Company's investment policy), cash and near-cash assets.  As at 9 November 2010, GGO had unaudited total assets of £55.1 million, of which 86.7% was invested in quoted securities, 0.4% was invested in unquoted equities and the balance was held in cash and near-cash assets.  

The FAV per Ordinary Share and the FAV per GGO Share will be calculated as at 5.00 p.m. on 7 December 2010 using each company's respective accounting policies (which are substantially similar), save that, for the purpose of the FAV per Ordinary Share, the Company's holding of GGO Shares (representing 2.7% of GGO's issued share capital as at the date of this announcement) will be valued at 98.5% of the FAV per GGO Share rather than at the closing bid price per GGO Share.

For illustrative purposes only, had the Calculation Date been 8 November 2010 (being the latest practicable date prior to this announcement) and assuming that the maximum level of elections for the Cash Option are made and adjusting for the exercise of the Manager Warrants and payment of a special dividend by GGO (both of which will occur prior to the Calculation Date), the FAV per Ordinary Share and FAV per GGO Share would have been 290.46p and 493.14p respectively.  On that basis and having regard to the Company's holding in GGO as at the date of this announcement, the Proposals would have resulted in the issue of 11,499,058 New Ordinary Shares to GGO Shareholders, representing approximately 23.9% of the issued Ordinary Share capital of the Company upon completion of the Proposals (excluding treasury shares), and payment of £14.4 million in cash.

The Company will fund elections for the Cash Option in part through the exercise of all of the outstanding Manager Warrants to subscribe for Ordinary Shares in the Company to raise approximately £7.9 million (as described under the heading "Exercise of the Manager Warrants" below).  The balance of any cash required to fund the Cash Option will be provided from the Company's existing cash resources, augmented as required by a new debt facility of up to £15 million to be provided by The Royal Bank of Scotland plc (which has agreed to provide this facility, subject only to the entering into of a definitive facility agreement with the Company).

The Company will not elect for the Cash Option pursuant to the Scheme in respect of any of its holding of GGO Shares.  However, under company law, the Company cannot hold its own Ordinary Shares.  The Company will therefore waive its entitlement to receive New Ordinary Shares under the Scheme and will instead receive assets to the value of 98.5% of the aggregate FAV of its holding of GGO Shares.

The Bonus Issue

The Company is proposing to issue Subscription Shares, by way of a bonus issue, to each Qualifying Shareholder on the basis of one Subscription Share for every seven Qualifying Shares held by such Qualifying Shareholder. 

Each Subscription Share will confer the right (but not the obligation) to subscribe for one Ordinary Share on the last Business Day in each of June and December each year between 31 December 2010 and 31 December 2017 (both dates inclusive), after which the Subscription Share Rights will lapse.  Each Subscription Share will be capable of conversion into one Ordinary Share upon exercise of the Subscription Share Rights and on payment of the Conversion Price, being an amount equal to 110% of the unaudited NAV per Ordinary Share as at close of business on the Effective Date (rounded up to the nearest penny).  

The Board believes that the Bonus Issue of Subscription Shares will have the following advantages:

·           Qualifying Shareholders will receive readily tradable securities with financial value which they may convert into Ordinary Shares in order to benefit from the Company's future growth or realised for cash;

·           Qualifying Shareholders will receive securities which are qualifying investments for the purposes of the stocks and shares component of an individual savings account and permitted investments for the purposes of a self invested personal pension;

·           on any exercise of the Subscription Share Rights, the capital base of the Company will increase, allowing operating costs to be spread across a larger number of Ordinary Shares and hence the total expense ratio to fall; and

·           following the exercise of any Subscription Share Rights, the Company will have an increased number of Ordinary Shares in issue, which may in due course improve the liquidity in the market for the Ordinary Shares.

No Subscription Shares will be issued to certain overseas Shareholders pursuant to the Bonus Issue.  The Board will allot any Subscription Shares which would have otherwise been issued to certain overseas Shareholders to a market maker who will sell such Subscription Shares promptly at the best price obtainable.  The proceeds of sale will be paid to the overseas Shareholders entitled to them, save that entitlements of less than £5 per overseas Shareholder will be retained by the Company for its own account.

Exercise of Manager Warrants

To incentivise the Investment Manager, Manager Warrants were issued to persons connected to the Investment Manager in three tranches between 2003 and 2006.  Partners of the Investment Manager (including the fund managers with principal responsibility for the Company's investment portfolio), members of their families and a former employee of the Investment Manager currently hold 6,533,982 Manager Warrants (representing 21.8% of the current issued share capital of the Company, excluding treasury shares).  Each Manager Warrant entitles the holder to subscribe for one Ordinary Share on the last Business Day of March and September each year up to and including September 2013 (at various subscription prices representing the NAV of an Ordinary Share at the time of the approval by Shareholders of the grant of the relevant Manager Warrants).

To help fund the Company's acquisition of the Cash Fund, it is proposed that the Manager Warrants be exercised upon the Scheme becoming effective.  The holders of the Manager Warrants have irrevocably undertaken to exercise their Manager Warrants in such circumstances.  The terms of the Manager Warrants require to be amended to allow their exercise other than on their normal exercise dates.  No other amendments are to be made to the terms of the Manager Warrants.

Introduction of Performance Fee

The Board believes that, conditional upon the Proposals becoming effective, a performance fee arrangement incorporating a "high water mark" principle should be introduced so as to ensure the continued incentivisation of the Investment Manager following the exercise of all of the Manager Warrants.  It is therefore proposed to amend the investment management fee arrangements with the Investment Manager by introducing a new performance fee whereby the Investment Manager will be entitled to a receive an amount equal to 15% of any outperformance by the Company's share price (on a total return basis) against the FTSE All Share Index (on a total return basis) plus 2% per annum, measured over a rolling three year period.  In view of the Effective Date of the Proposals and the remainder of the period to the Company's next year end, it is proposed that until the three year rolling period from 1 May 2012 to 30 April 2015, the initial performance periods be set as follows:

·           Effective Date to 30 April 2012; followed by

·           Effective Date to 30 April 2013; followed by

·           Effective Date to 30 April 2014.

The performance fee has a "high water mark" principle such that it will only be payable if the Company's share price (on a total return basis) ends the relevant measurement period higher than at the start and is higher than the last share price level (on a total return basis) at which a performance fee was last paid.

The performance fee payable each year cannot exceed 2.5% of the Company's market capitalisation at the end of the measurement period (calculated as the average market capitalisation of the Company over the last 10 Business Days of such period).  However, outperfomance above the level of this cap is able to be carried forward and given credit in later measurement periods in which positive outperformance has been achieved (subject always to the high water mark and payment cap in such later periods).

Directors

It is intended that Ian Dighé (a director of GGO) will join the Board, and that Charles Peel will resign from the Board, on or around the Effective Date.  Mr Dighé (aged 55) will be a non-executive director and is independent of the Investment Manager.  He was appointed as a non-executive Director of GGO on 27 April 2010.  He has over 24 years of direct market experience in the financial services industry and specifically the investment banking and corporate banking sectors, notably as a director of Singer & Friedlander until 2000 and then as a founder of Bridgewell Group plc.  He is currently a director of Strategic Equity Capital plc and a number of private companies.

Mr Peel has been a director of the Company since 2003, when Artemis Investment Management took over the management of its assets. The Board thanks Mr Peel for his service and acknowledges the significant contribution to the success of the Company that he has made over these years.

Continuation Vote

Under its Articles, the Company is required to propose a continuation vote as an ordinary resolution at its annual general meeting in 2013 and at every fifth annual general meeting of the Company thereafter.  If a continuation vote is not passed, the Directors are required to convene a general meeting within 90 days of the relevant annual general meeting of the Company, at which proposals for the winding up or other reconstruction of the Company will be considered by the Shareholders.  In view of the final exercise date of the Subscription Shares, it is proposed that the Articles be amended to require the first continuation vote be held at the annual general meeting of the Company in 2018 (being the first annual general meeting after the last date for exercise of the Subscription Share Rights) and at every fifth annual general meeting of the Company thereafter.

Adoption of the New Articles

The Directors are proposing that the Company adopts new articles of association, which will , in particular, incorporate the rights of the Subscription Shares and reflect the proposed change to the timing of the Company's first continuation vote.  

General Meeting

A general meeting of the Company at which the resolutions required to enable the Company to implement the Proposals has been convened for 9.00 a.m. on 7 December 2010 and will be held at the offices of Artemis Investment Management LLP, 42 Melville Street, Edinburgh EH3 7HA.

Admission and Dealings

Applications have been made to the UK Listing Authority for the New Ordinary Shares to be admitted to the premium segment of the Official List and for the Subscription Shares to be admitted to the standard segment of the Official List.  Applications have also been made to the London Stock Exchange for the New Ordinary Shares and Subscription Shares to be admitted to trading on the Main Market.  If the Proposals become effective, it is expected that the New Ordinary Shares and Subscription Shares will be admitted to the Official List on, and the first day of dealings in such shares on the Main Market will be, 13 December 2010.

Costs and Expenses of the Proposals

The aggregate costs and expenses to be incurred by the Company in connection with the Proposals are estimated to be approximately £655,000, excluding VAT and stamp duty (and approximately £995,000 including VAT and stamp duty).  It is expected that most of such costs and expenses will be offset by the value transfer under the terms of the Scheme (as the entitlements of holders of GGO Shares under the Scheme will be lower than the value of the assets acquired by the Company pursuant to the Scheme). 

The Investment Manager has agreed to make a contribution towards the costs and expenses incurred, or to be incurred, by the Company in connection with the Proposals.  The amount of this contribution is linked to, and increases proportionately with, the aggregate value of elections made for the Rollover Option.  As a minimum, the Investment Manager will meet any costs and expenses incurred or to be incurred by the Company in connection with the Proposals not offset by the value transfer under the Scheme. 

If the Scheme does not become effective, the Company will bear abort costs of approximately £110,000 (plus VAT) which will be reimbursed to the Company by the Investment Manager. 

GGO will meet its own costs associated with the Scheme (including fees payable on the early termination of the management agreement with Gartmore Investment Limited).

Conditions to Implementation of the Proposals

The Proposals are conditional upon:

·           passing of resolutions to approve the Scheme at the class meeting of GGO Shareholders and the general meetings of GGO Shareholders and the Scheme becoming unconditional;

·           passing of resolutions, inter alia, to approve the issue of the New Ordinary Shares and the Subscription Shares and the adoption of the New Articles at the General Meeting which has been convened for 7 December 2010;

·           admission of the New Ordinary Shares to the Official List with a Premium Listing and the Main Market of the London Stock Exchange, subject only to the allotment of such shares; and

·           admission of the Subscription Shares to the Official List with a Standard Listing and the Main Market of the London Stock Exchange, subject only to the allotment of such shares.

If any of these conditions is not satisfied by 31 January 2011 no part of the Proposals will become effective and no New Ordinary Shares or Subscription Shares will be issued.  In addition, the introduction of the performance fee payable to the Investment Manager is conditional on the passing of an ordinary resolution at the General Meeting (neither the Investment Manager nor its associates will be entitled to vote on that resolution).

Expected Timetable

 

2010

Record date for the Interim Dividend

26 November

Class meeting of the holders of GGO Shares

10.00 a.m. on 29 November

First general meeting of GGO

10.05 a.m. on 29 November

Latest time and date for receipt of forms of proxy for the General Meeting

9.00 a.m. on 3 December

Record Date for the Bonus Issue

6.00 p.m. on 3 December

General Meeting of the Company

9.00 a.m. on 7 December

Calculation Date

5.00 p.m. on 7 December

Second general meeting of GGO

10.00 a.m. on 10 December

Effective Date of the Scheme

10 December

Admission and dealings commence in the New Ordinary Shares and the Subscription Shares and CREST accounts credited in respect of New Ordinary Shares and Subscription Shares issued in uncertificated form

8.00 a.m. on 13 December

Conversion Price of Subscription Shares announced

13 December

Certificates despatched in respect of New Ordinary Shares and Subscription Shares issued in certificated form

Week commencing 20 December

Payment date for the Interim Dividend

4 February 2011

Notes:

1.         The dates set out in the expected timetable above may be adjusted by the Company, in which event details of the new dates will be notified to the UK Listing Authority and the London Stock Exchange and an announcement will be made through a regulatory information service that is on the list of regulatory information services maintained by the Financial Services Authority.

2.         All references to time in this announcement are to London time.

Availability of the Circular and Prospectus

A copy of the Circular and the Prospectus will be available for inspection at the National Storage Mechanism, which is located at www.hemscott.com/nsm.do.

Enquiries

Simon Miller

Artemis Alpha Trust plc

07768 794 182

Gordon Neilly/
Rishi Zaveri

Canaccord Genuity Limited

020 7050 6778/
020 7050 6780

Mark Tyndall

Artemis Investment Management LLP

0131 225 7300

Notes

Canaccord Genuity Limited, which is authorised and regulated in the United Kingdom by the FSA, is acting 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 customers of Canaccord Genuity Limited or for providing advice to any other person in relation to the Proposals or any other matter referred to in this announcement.

This announcement is for information purposes only and does not purport to be full or complete and any decision regarding the Proposals should be made only on the basis of the Circular and the Prospectus. 

This announcement does not constitute or form part of any offer to issue or sell, or any solicitation of any offer to subscribe or purchase, any investment in any jurisdiction, nor shall it (or the fact of its distribution) form the basis of, or be relied on in connection with, any contract therefor. 

The Issue and the distribution of this announcement and the Prospectus in certain jurisdictions may be restricted by law and persons into whose possession any document or other information referred to this announcement, the Circular or the Prospectus 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.

Definitions

The definitions set out below apply in this announcement unless the context requires otherwise.

"Articles"

the existing articles of association of the Company

"Board" or "Directors"

the directors of the Company

"Bonus Issue"

the allotment to Qualifying Shareholders of Subscription Shares on the basis of one Subscription Share for every seven Qualifying Shares held

"Business Day"

any day on which banks are open for business in London (excluding Saturday, Sundays and public holidays)

"Calculation Date"

the time and date on which the value of GGO's assets and the Company's assets will be calculated for the purposes of the Scheme and the Proposals (which is expected to be 5.00 p.m. on 7 December 2010)

"Cash Option"

the option for GGO Shareholders to elect to receive cash in respect of some or all of their holding of GGO Shares under the Scheme

"Circular"

the circular to Shareholders dated 11 November 2010

"Company"

Artemis Alpha Trust plc

"Conversion Price"

an amount equal to 110% of the unaudited NAV per Ordinary Share as at close of business on the Effective Date (rounded up to the nearest penny)

"Effective Date"

the date on which the Scheme becomes effective (which is expected to be 10 December 2010)

"FAV"

the formula asset value of GGO and the Company respectively on the Calculation Date, calculated in accordance with the Scheme

"General Meeting"

the general meeting of the Company convened for 9.00 a.m. on 7 December 2010 or any adjournment of that meeting

"GGO"

Gartmore Growth Opportunities plc

"GGO Liquidators"

the liquidators of GGO to be appointed pursuant to a resolution to be passed by GGO Shareholders at a general meeting to be held on 10 December 2010

"GGO Shareholders"

holders of GGO Shares

"GGO Shares"

ordinary shares of 0.025p each in the capital of GGO

"Interim Dividend"

the interim dividend in respect of the six months to 31 October 2010 to be paid by the Company on 4 February 2011

"Investment Manager"

Artemis Investment Management LLP

"Issue"

the allotment and issue of New Ordinary Shares and Subscription Shares

"London Stock Exchange"

London Stock Exchange plc

"Main Market"

the London Stock Exchange's main market for listed securities

"Manager Warrants"

the warrants to subscribe for Ordinary Shares that have been issued by the Company to persons associated with the Investment Manager

NAV" 

in relation to a share, means its net asset value on the relevant date calculated on the basis of the relevant company's normal accounting policies

"New Articles"

the proposed new articles of association of the Company to be adopted at the General Meeting

"New Ordinary Shares"

new ordinary shares of 1p each in the capital of the Company

"Official List"

the official list of the UK Listing Authority

"Ordinary Shares"

ordinary shares of 1p each in the capital of the Company

"Proposals"

the proposals for (i) the issue of New Ordinary Shares pursuant to the Scheme, (ii) the exercise of the Manager Warrants, (iii) the Bonus Issue, (iv) the adoption of the New Articles, including the change to the Company's continuation vote, (v) the introduction of the performance fee described under the heading "Introduction of Performance Fee" and (vi) related matters

"Prospectus"

the prospectus published by the Company in connection with the issue of the New Ordinary Shares and the Subscription Shares dated 11 November 2010

"Qualifying Shareholders"

(i) Shareholders whose names are entered on the Company's register of members at the close of business on the Record Date, (ii) GGO Shareholders who validly elect, or are deemed to have elected, for New Ordinary Shares under the Scheme and (iii) the holders of New Ordinary Shares issued pursuant to the exercise of the Manager Warrants

"Qualifying Shares"

(i) the Ordinary Shares in issue at the Record Date, (ii) the New Ordinary Shares to be issued to GGO Shareholders under the Scheme and (iii) the New Ordinary Shares to be issued pursuant to the exercise of the Manager Warrants

"Record Date"

6.00 p.m. on 3 December 2010 (or such other date as determined at the sole discretion of the Directors)

"Rollover Option"

the option for GGO Shareholders to roll-over their investment into the Company in accordance with the Scheme

"Scheme"

the scheme of reconstruction and voluntary winding up of GGO under section 110 of the Insolvency Act 1986

"Shareholders"

holders of Ordinary Shares

"Subscription Share Rights"

the right conferred by each Subscription Shares to subscribe for one Ordinary Share on any Subscription Date at the Conversion Price per Ordinary Share

"Subscription Shares"

the subscription shares of 1p each in the capital of the Company

"Subscription Date"

the last Business Day in each of June and December each year between 31 December 2010 and 31 December 2017 (both dates inclusive)

"UK Listing Authority"

the Financial Services Authority acting in its capacity as the competent authority for listing for the purposes of Part VI of the Financial Services and Markets Act 2000 (as amended)

"VAT"

value added tax

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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