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BlackRock Emerging Europe (BEEP)

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Wednesday 23 May, 2018

BlackRock Emerging Europe

Tender Offer

THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO, AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, THE REPUBLIC OF SOUTH AFRICA AND THE UNITED STATES OR ANY OTHER JURISDICTION WHERE TO DO SO MAY RESULT IN THE CONTRAVENTION OF ANY REGISTRATION OR OTHER LEGAL REQUIREMENT OF SUCH JURISDICTION

 23 May 2018

BlackRock Emerging Europe plc

(LEI: 549300OGTQA24Y3KMI14)

Publication of Tender Offer Circular

BlackRock Emerging Europe plc (the “Company”) has today published a circular (the “Circular”) in connection with a tender offer to purchase up to 100 per cent. of the Company’s ordinary shares (the “Tender Offer”).

Shareholders should note however that they are not obliged to tender any ordinary shares. The Directors will not tender any of their own ordinary shares under the Tender Offer.

Background

In June 2013, the Company committed to submit proposals to the Company’s shareholders (the “Shareholders”) prior to 21 June 2018 to provide an opportunity for Shareholders to realise the value of their investment in the Company at net asset value (“Net Asset Value” or “NAV”) less applicable costs should they no longer wish to remain fully invested in the Company.

In the Company’s 2018 annual report, the Board stated that it believes the most appropriate method to enable those Shareholders that may wish to exit all or part of their investment, is to allow Shareholders to tender up to 100 per cent. of their ordinary shares.  Accordingly, Company has today published the Circular containing proposals to implement the Tender Offer.

The Board has also taken the opportunity to consult with Shareholders and its advisers on the Company's ongoing discount control measures and dividend policy.

The Company has enjoyed narrower discounts than its emerging market peers since implementing its current discount control measures and, following discussions with Shareholders, the Board has determined to continue with the current discount control policy of: (i) allowing Shareholders the opportunity to exit for cash at five year intervals, together with a performance based tender offer in the interim period; and (ii) share buybacks by which the Board seeks to maintain the share price discount to NAV at below 10 per cent. in normal market conditions. Furthermore, to demonstrate confidence in its proposals, the Board intends to move from triennial continuation votes to annual continuation votes.

Additionally, following discussions with Shareholders, the Board has determined to continue with the Company's existing dividend policy which is to retain no more than 15 per cent. of eligible investment income and to only pay dividends to the extent that revenue is available for this purpose. The Board will keep the dividend policy under review.

Background to the Tender Offer

The Board is of the view that the Company's mandate remains relevant and in particular the unconstrained, focused approach of the Investment Manager, as approved by Shareholders in June 2013, has assisted performance. Since the introduction of the revised investment policy, absolute performance has been somewhat volatile but relative performance has been very strong: the NAV total return has exceeded the benchmark index, the MSCI Emerging Europe 10-40 Index, in the period since the change of investment policy on 21 June 2013 to 18 May 2018 (the latest practicable date prior to the publication of the Circular) by 24.3 per cent.. In particular, more recently, Shareholders have benefitted from very strong absolute performance: since the start of the Company's 2016 financial year (being 1 February 2016) to 18 May 2018 (the latest practicable date prior to the publication of the Circular), the Company has delivered NAV total return of 58.0 per cent. and share price total return of 76.7 per cent. against the benchmark total return of 47.0 per cent. (all performance data in US Dollar terms). 

Further, the Board, as advised by the Investment Manager, remains convinced that stock markets in the region covered by the Company's investment policy can continue to provide attractive opportunities for active investors. Although the region has now made up part of the ground lost against developed markets over the last decade, there still remains considerable potential for growth. Further, company valuations are approximately half those of their western peers; dividend yields are higher, supported by strong free cash flow; the region has experienced strong earnings growth; and the correlation of the benchmark countries with global markets is low, helping to diversify portfolios.

While some Shareholders may decide to exit some or all of their investment for cash, in light of the Company's strong performance and the attractive medium to long-term outlook for the region, the Board and the Investment Manager believe that the long-term prospects of the Company remain compelling and that the Company will remain a viable entity following the Tender Offer. However, if the number of ordinary shares tendered is such that the Board is of the view that the continuance of the Company is not in the best interests of Shareholders, it reserves the right to terminate the Tender Offer.   It is the Board's intention to withdraw the Tender Offer if the assets of the Company were to fall below approximately £75 million. If the Board exercises this right it will put forward revised proposals as soon as practicable, which will include a full cash exit at Net Asset Value less applicable costs.

Key Points of the Tender Offer

The key points of the Tender Offer are as follows:

  • the Tender Offer is for up to 100 per cent. of the Company’s issued ordinary share capital (excluding any shares held in treasury) as at the Record Date;

  • Shareholders (other than Restricted Shareholders) will be able to decide whether to tender none, some or all of their ordinary shares;

  • after accounting for the realisation of the Tender Pool, Tendering Shareholders shall receive the Tender Price in cash in consideration of the purchase of ordinary shares tendered by them; and

  • the Tender Price shall be the Final Tender Offer Asset Value of the Tender Pool divided by the total number of Exit Shares expressed in Sterling, rounded down to two decimal places.

Shareholders (other than Restricted Shareholders) on the Company’s register on the Record Date will be invited to tender for sale some or all of their ordinary shares held on the Record Date to Winterflood Securities (“Winterflood”) who will, as principal, purchase at the Tender Price the ordinary shares validly tendered.

Shareholders should note that, once tendered, ordinary shares may not be sold, transferred, charged or otherwise disposed of other than in accordance with the Tender Offer.

Tender Pool

Save as set out below, all of the Company’s assets and liabilities will, following valuation on the Calculation Date, be allocated between the Continuing Pool and the Tender Pool on the basis set out under paragraph 10 of Part 1 of the Circular. The net value of the assets and liabilities allocated on the establishment of the Tender Pool will equal the Tender Offer FAV (calculated in accordance with paragraph 8 of Part 1 of the Circular). The Tender Pool assets (other than cash) will be realised and the liabilities settled and the net cash proceeds paid to Shareholders who successfully tendered their ordinary shares in satisfaction of the Tender Price.

The Tender Pool will bear the costs of implementing the Tender Offer and realising the assets in the Tender Pool and the amount of stamp duty or stamp duty reserve tax payable on the repurchase by the Company of the ordinary shares acquired from Winterflood. Shareholders who successfully tender their ordinary shares will receive a pro rata share of the net proceeds of the Tender Pool. The assets of the Tender Pool will be fully realised as soon as practicable after the commencement of the realisation of the Tender Pool such that final cash payments can be made to the tendering Shareholders as soon as practicable thereafter. The Board may at its discretion make interim distributions from the Tender Pool. However, under the Tender Offer the Company reserves the right to defer the Tender Pool realisations and/or cash payments if the Board believes this to be in the best interests of Shareholders as a whole.

Shareholders shall note that the Tender Price will only be determined finally once all the assets of the Tender Pool have been realised.

The Board retains the discretion to allocate only cash and near cash assets of the Company to the Tender Pool. In such circumstances there will be no or minimal costs of realising the assets in the Tender Pool. It is the Board’s current intention only to exercise such discretion where the number of ordinary shares that the Company is required to repurchase pursuant to the Tender Offer is such that allocating only cash and near cash to the Tender Pool is in the best interests of Shareholders as a whole.

Restricted Shareholders and Other Overseas Shareholders

The Tender Offer is not being made to Shareholders who are resident in, or citizens of, Restricted Territories. Restricted Shareholders are being excluded from the Tender Offer in order to avoid offending applicable local laws relating to the implementation of the Tender Offer. It is the responsibility of all Overseas Shareholders to satisfy themselves as to the observance of any legal requirements in their jurisdiction, including, without limitation, any relevant requirements in relation to the ability of such holders to participate in the Tender Offer.

General Meeting

The implementation of the Tender Offer is subject to Shareholder approval. A notice convening the General Meeting to be held at 12 Throgmorton Avenue, London EC2N 2DL on 20 June 2018 at 12.20 p.m. (or, if later, as soon as the annual general meeting convened for noon the same day has concluded) is set out at the back of the Circular.

At the General Meeting, at which Shareholders may attend, speak and vote, a resolution will be proposed to give the Company authority to make market purchases pursuant to the Tender Offer. Should the Resolution fail to be passed, the Tender Offer will not proceed.

In order to be passed, the Resolution, which is to be proposed as a special resolution, will require the approval of Shareholders representing at least 75 per cent. of the votes cast at the General Meeting. The Articles provide that at the General Meeting each Shareholder present in person or by proxy or who (being a corporation) is present by a representative shall on a show of hands have one vote and on a poll shall have one vote for each ordinary share of which he is a holder.

The quorum for the General Meeting shall be two persons entitled to attend and to vote, each being a Shareholder or a proxy of a Shareholder or a duly authorised representative of a corporation which is a Shareholder. In the event that the General Meeting is adjourned and the above-mentioned quorum is not present, at such adjourned General Meeting the quorum shall be one.

Recommendation

The Board considers that the terms of the Tender Offer are fair and reasonable and in the best interests of the Company and its Shareholders as a whole. Accordingly, the Board recommends unanimously that the Shareholders vote in favour of the Resolution to be proposed at the General Meeting.

The Directors intend to vote in favour, or procure the vote in favour, of the Resolution at the General Meeting in respect of their beneficial holdings of ordinary shares which, in aggregate, amount to 207,492 ordinary shares representing approximately 0.58 per cent. of the issued ordinary share capital of the Company as at the date of this announcement (excluding any shares held in treasury).

The Directors will not tender any of their own ordinary shares under the Tender Offer. The Directors make no recommendation to Shareholders as to whether or not they should tender all or any of their ordinary shares in the Tender Offer. Whether or not Shareholders decide to tender their ordinary shares will depend, amongst other factors, on their view of the Company’s prospects and their own individual circumstances, including their own tax position.

Expected Timetable

Posting of the Circular, Tender Form and Form of Proxy as soon as practicable after
23 May 2018
Tender Closing Date: latest time and date for receipt of Tender Forms and TTE Instructions in CREST 2.00 p.m. on 13 June 2018
Record Date for participation in the Tender Offer 6.00 p.m. on 13 June 2018
Latest time and date for receipt of Forms of Proxy or transmission of CREST Proxy Instructions for the General Meeting 12.20 p.m. on 18 June 2018
General Meeting 12.20 p.m. (or, if later, as soon as the annual general meeting convened for noon the same day has concluded) on 20 June 2018
Results of General Meeting announced 20 June 2018
Results of Tender Offer announced no later than 20 June 2018
Calculation Date close of business on 20 June 2018
Tender Offer FAV announced no later than 22 June 2018
Establishment of Tender Pool and Continuing Pool no later than 22 June 2018
Realisation of the Tender Pool commences no later than 22 June 2018
Tender Price announced; final distribution under the Tender Offer of assets in the Tender Pool announced; cheques despatched and payments through CREST made as soon as practicable after
commencement of the
realisation of the Tender Pool

All references are to London time unless otherwise stated.

Dates and times are indicative only and may be subject to change. Any changes will be notified via an RIS.

Defined terms used in this announcement have the meanings given in the Circular unless the context otherwise requires.

Enquiries:

BlackRock Investment Management (UK) Limited
Simon White
Sarah Beynsberger
020 7743 3000
Winterflood Securities
Joe Winkley
Neil Langford
020 3100 0000

Important Information

The content of this announcement has been prepared by, and is the sole responsibility of, BlackRock Emerging Europe plc. The information contained in this announcement is given at the date of its publication (unless otherwise marked) and is subject to updating, revision and amendment from time to time. Neither the content of the Company's website nor any website accessible by hyperlinks to the Company's website is incorporated in, or forms part of, this announcement.

The making of the Tender Offer in, or to persons who are citizens or nationals of, or resident in, jurisdictions outside of the United Kingdom or to custodians, nominees or trustees for citizens, nationals or residents of jurisdictions outside the United Kingdom may be prohibited or affected by the laws of the relevant overseas jurisdiction. Persons who are not resident in the United Kingdom should read the paragraph headed "Overseas Shareholders" set out in paragraph 9 of Part 2 of the Circular and should inform themselves about, and observe, any applicable legal requirements.

This announcement does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase or subscribe for any ordinary shares nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefore. The Tender Offer is made only pursuant to the Circular and the related Tender Form with respect to the ordinary shares. The Tender Offer is not being made to holders of ordinary shares residing in any jurisdiction in which the making of the Tender Offer would not be in compliance with the laws of that jurisdiction. 

The full terms and conditions of the Tender Offer are set out in the Circular, which should be read in full in conjunction with this announcement.

Winterflood Securities Limited, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, acting through its division, Winterflood Investment Trusts ("Winterflood"), is acting exclusively for the Company and no-one else in connection with the Tender Offer and will not be responsible to anyone other than the Company for providing the protections afforded to customers of Winterflood or for providing advice in relation to the Tender Offer. Nothing in this paragraph shall serve to exclude or limit any responsibilities which Winterflood may have under the FSMA or the regulatory regime established thereunder.

Apart from the responsibilities and liabilities, if any, which may be imposed on Winterflood by the FSMA or the regulatory regime established thereunder, Winterflood accepts no responsibility whatsoever for the contents of this announcement or for any other statement made or purported to be made by it or on its behalf in connection with the Company or the Tender Offer. Winterflood accordingly disclaims all and any liability whether arising in tort or contract or otherwise (save as referred to above) which it might otherwise have in respect of this announcement or any such statement.

This announcement contains (or may contain) certain forward-looking statements with respect to the Company's current expectations and projections about future events. These statements, which sometimes use, but are not limited to, words such as 'anticipate', 'believe', 'intend', 'estimate', 'expect' and words of similar meaning, reflect the Directors' beliefs and expectations and involve a number of risks, uncertainties and assumptions that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward looking statement. Statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The information contained in this announcement is subject to change without notice and, except as required by applicable law, neither the Company nor Winterflood assumes any responsibility or obligation to update publicly or review any of the forward looking statements contained herein. You should not place undue reliance on forward-looking statements, which speak only as of the date of this announcement.


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