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Octopus Apollo VCT (OAP3)

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Monday 02 November, 2015

Octopus Apollo VCT

Octopus Apollo VCT plc : Publication of a Prospectus and Circulars in respect of proposals to merge with Octopus VCT 2 plc and an Offer for Subscription by Octopus Apollo VCT plc

Octopus Apollo VCT plc : Publication of a Prospectus and Circulars in respect of proposals to merge with Octopus VCT 2 plc and an Offer for Subscription by Octopus Apollo VCT plc

Octopus Apollo VCT plc ("Apollo")
Octopus VCT 2 plc ("OVCT2") 

(together the "Companies")

2 November 2015

Publication of a Prospectus (the "Prospectus") and Circulars (the "Circulars") in connection with recommended proposals to merge the Companies (to be completed pursuant to a scheme of reconstruction (the "Scheme" or "Merger") under section 110 Insolvency Act 1986) and an offer for subscription by Apollo.  

On 6 October 2015, the boards of Apollo and OVCT2 (the "Boards") announced that they had entered into discussions to merge the Companies into one company (the "Enlarged Company") and the Apollo Board announced that it also intended to raise further funds into Apollo pursuant to an offer for subscription (the "Offer") at the same time. The Boards are pleased to advise that discussions have now concluded and that the Companies have today issued the Circulars to set out the proposals for the Merger for consideration by their respective shareholders and a Prospectus relating to the Offer and Merger. Each of the Companies is managed by Octopus Investments Limited ("Octopus").

The Merger will be completed by OVCT2 being placed into members' voluntary liquidation pursuant to a scheme of reconstruction under Section 110 of the Insolvency Act 1986. Shareholders should note that the Merger will be outside the provisions of the City Code on Takeovers and Mergers.

OVCT2 shareholders will receive one D ordinary share of 1p in the capital of Apollo ("Scheme Shares" or "D Ordinary Shares") for every ordinary share of 1p held in OVCT2 and the benefits will be shared by each set of shareholders, with the costs being split proportionately based on the  net asset values of the Companies. The Merger requires the approval of resolutions by the Companies' shareholders.

Apollo is seeking to raise £30 million under an offer for subscription for new ordinary shares ("Offer Shares"), with an over allotment facility of a further £10 million. The Offer is subject to the approval of the Apollo shareholders.

Background

Since launch in 2006, Octopus Apollo VCT has been managed, with on the aim of providing shareholders with a stable, regular income. OVCT2 was launched in January 2011 with a similar investment mandate and is managed by the same Octopus team as Apollo.  Octopus was founded in March 2000.

The latest unaudited NAV of Apollo, as at 21 August 2015, was 83.4p per ordinary share and the latest unaudited NAV of OVCT2, as at 30 June 2015, was 100.0p per ordinary share. The table below sets out the unaudited NAVs of the Companies and provides further detail on the venture capital investments in their portfolios.

Company Net Assets (unaudited) (£'m) NAV per share (unaudited) (p) Number of venture capital investments Carrying value of the venture capital investments (£'m) NAV plus cumulative dividends paid* (p)

 
Apollo 105 83.4 30 91.5 113.4
OVCT2 19 100.0 14 14.3 105.0

* the sum of (i) the unaudited NAV per share and (ii) all distributions per share paid since the first admission of the shares to the Official List

Each of the Companies has an investment objective and policy of providing shareholders with a stable, regular income and capital return by investing their funds in a broad spread of unquoted UK companies which meet the relevant criteria for VCTs.

VCTs are required to be traded on a European Union/European Economic Area regulated market. The Companies are listed on the premium segment of the Official List, which involves a significant level of listing costs, as well as related fees to ensure they comply with all relevant legislation. The Enlarged Company should be better placed to spread such running costs across a larger asset base and facilitate better liquidity management and, as a result, may be able to maximise investment opportunities and sustain a higher level of dividends to shareholders over its life.

In September 2004, the Merger Regulations were introduced allowing VCTs to be acquired by, or merge with, each other without prejudicing the VCT tax reliefs obtained by their shareholders. A number of VCTs have taken advantage of these regulations to create larger VCTs.

With the above in mind, the Boards entered into discussions with Octopus to consider a merger of the Companies to create a single, larger VCT. The aim of the Boards is to improve shareholder value while also creating liquidity for those current investors of OVCT2 who wish to exit after their 5 year qualifying holding period has been reached.  The Boards also expect to achieve, among other things, strategic and scale benefits through the creation of an enlarged VCT.

The Scheme
The mechanism by which the Merger will be completed is as follows:

  • OVCT2 will be placed into members' voluntary liquidation pursuant to a scheme of reconstruction under Section 110 IA 1986;
  • all of the assets and liabilities of OVCT2 will be transferred to Apollo in consideration for the issue of Scheme Shares; and
  • the assets and liabilities of OVCT2 transferred to Apollo will constitute a separate share fund.

The effect of the Scheme will be that OVCT2 shareholders will receive one Scheme Share in Apollo for each OVCT2 share held.

The Scheme is conditional upon its approval by the Apollo shareholders and by the OVCT2 shareholders, as well as the other conditions set out in the Prospectus and Circulars.

As the Companies have a similar investment objective and policy, the same investment manager and other common advisers, the proposed Merger should be achievable without major additional cost or disruption to the Companies and their combined portfolio of investments.

The aggregate anticipated cost of undertaking the Merger is approximately £290,000, including VAT, legal and professional fees, stamp duty and the costs of winding up OVCT2. The costs of the Merger will be split proportionately between the Companies by reference to their respective NAVs immediately prior to the Merger.

Shareholders and investors should note that the merger by way of the Scheme will be outside the provisions of the City Code on Takeovers and Mergers.

The portfolio of assets which will be transferred from OVCT2 to Apollo as part of the Scheme is all considered to be in keeping with Apollo's investment policy. The extent of the liabilities (if any) which will be transferred from OVCT2 to Apollo as part of the Scheme will be those which are incurred in the ordinary course of business and merger costs which remain unpaid at the time of transfer. Any such liabilities are expected to be nominal in comparison to the value of the assets.

OVCT2 shareholders who do not vote in favour of the resolution to be proposed at OVCT2's first general meeting, as referred to in the timetable below, are entitled to dissent and have their shareholding purchased by the liquidators of OVCT2 (the "Liquidators") at a price agreed between the dissenting OVCT2 shareholders and the Liquidators (or by arbitration), which would be expected to be at a significant reduction to the net asset value of an OVCT2 share. If the conditions of the Scheme are not satisfied, the Companies will continue in their current form and the Boards will continue to review all options available to them regarding the future of the Companies.

Clearance has been requested from HMRC that the Scheme meets the requirements of the Merger Regulations and, therefore, that the implementation of the Scheme should not affect the status of Apollo as a VCT. It is the intention of the Apollo Board to continue to comply with the requirements of Income Tax Act 2007 following the Merger so that Apollo continues to qualify as a VCT.

Exit opportunity for OVCT2 Shareholders

After 30 June 2016, once the VCT qualifying period for the current OVCT2 shareholders has been achieved, an opportunity will be provided for the holders of D Ordinary Shares to exit their investment in Apollo or, should they wish to continue their investment, to have their D Ordinary Shares converted into Ordinary Shares on a relative NAV basis in accordance with Apollo's articles of association.

EXPECTED TIMETABLE, OFFER STATISTICS AND COSTS

Expected Timetable for the Scheme

Apollo

Latest time and date for receipt of Forms of Proxy for the General Meeting 11 am on 26 November 2015
General Meeting 11 am on 30 November 2015
Scheme Calculation Date after 5.00 pm on 26 January 2016
Scheme Effective Date for the transfer of the assets and liabilities of OVCT2 to the Company and the issue of Scheme Shares 27 January 2016
Announcement of the results of the Scheme 27 January 2016
Admission of, and dealings in, Scheme Shares issued to commence 28 January 2016
CREST accounts credited (if applicable) 28 January 2016
Certificates for Scheme Shares despatched to OVCT2 Shareholders Week commencing 15 February 2016

OVCT2

Latest time for receipt of forms of proxy for the
OVCT2 First General Meeting

 
 3.00 pm on 14 January 2016
OVCT2 First General Meeting

 
3.00 pm on 18 January 2016

 
Latest time for receipt of forms of proxy for the
OVCT2 Second General Meeting

 
9.30 am on 25 January 2016

 
Final expected date of trading of the OVCT2 Shares 26 January 2016
Scheme Record Date for OVCT2 Shareholders'
entitlements under the Scheme
5.00 pm on 26 January 2016
Scheme Calculation Date after 5.00 pm on 26 January 2016
Dealings in OVCT2 Shares suspended* 7.30 am on 27 January 2016
OVCT2 register of members closed  

9.30 am on 27 January 2016

 
OVCT2 Second General Meeting

 
9.30 am on 27 January 2016

 
Scheme Effective Date for the transfer of the
assets and liabilities of OVCT2 to the Company and
the issue of Scheme Shares
27 January 2016

 
Announcement of the results of the Scheme 27 January 2016

 
Cancellation of the OVCT2 Shares' listing 8.00 am on 28 January 2016

 

(*The final expected date of trading of the OVCT2 Shares will be 26 January 2015. See the timetable for Apollo with regard to admission, CREST accounts being credited and certificates being despatched in respect of the Scheme Shares)

Expected Timetable for the Offer

Launch date of the Offer  2 November 2015

 
First allotments under the Offer 11 December 2015
Deadline for receipt of applications for final allotment in 2015/16 tax year 12 noon on 5 April 2016
Deadline for receipt of applications for final allotment in 2016/17 tax year 12 noon on 1 November 2016
Closing date of the Offer 12 noon on 1 November  2016

             

  •  

      The Offer will close earlier if fully subscribed. The Apollo Board reserves the right to close the Offer earlier and to accept Applications and issue Offer Shares at any time following the receipt of valid applications.
     
  • The results of the Offer will be announced to the London Stock Exchange through a Regulatory Information Service provider authorised by the Financial Conduct Authority.
     
  • Dealing is expected to commence in Offer Shares within ten business days of allotments and share and tax certificates are expected to be despatched within 14 business days of allotments.
     
  • The dates set out in the expected timetable above may be adjusted by Apollo, in which event details of the new dates will be notified through a Regulatory Information Service.

Offer Statistics

Costs of Offer Up to 7.0% of gross proceeds of Offer
Initial adviser charge or intermediary commission Up to 4.5% of gross proceeds of Offer
Ongoing adviser charge or annual ongoing charge Up to 0.5% per annum of the latest NAV of gross sums invested in the Offer for up to 9 years
  • The cost of the Offer is capped at 7.0%. Octopus has agreed to indemnify Apollo against the costs of the Offer in excess of this amount.

Copies of the Prospectus and Circulars will shortly be available for inspection at the National Storage Mechanism, which is located at:

http://www.morningstar.co.uk/uk/NSM

and on the Company's website:

http://www.octopusinvestments.com

For further information please contact:

Nicola Board
Company Secretary
0207 776 8663




This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Octopus Apollo VCT plc via Globenewswire

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