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Victoria PLC (VCP)

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Thursday 22 October, 2020

Victoria PLC

Proposed £175m Investment & Share Buyback

RNS Number : 9670C
Victoria PLC
22 October 2020
 

For Immediate Release

 

22 October 2020

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

 

Victoria PLC

('Victoria', the 'Company', or the 'Group')

 

Proposed £175 million Preferred Share investment and Conditional Ordinary Share purchase by an affiliate of Koch Equity Development, LLC

and

Conditional Ordinary Share Buyback by the Company

 

 

Koch Equity Development Preferred Equity investment

 

Victoria PLC (LSE: VCP) the international designers, manufacturers and distributors of innovative flooring, is pleased to announce that the Company has today signed a commitment letter with KED Victoria Investments, LLC ("KED"), an affiliate of Koch Equity Development, LLC ("Koch Equity Development"), a wholly owned subsidiary of Koch Industries, Inc. ("Koch Industries"). KED has committed to invest £175 million by way of convertible preferred shares to be issued by Victoria (the "Preferred Equity Investment"), subject to definitive agreements being entered into and conditional upon the approval of Victoria's shareholders, to support the Company's continued growth.

 

Transaction Background and Terms

 

The events of the last few months have revealed some potentially exceptional acquisition possibilities in Europe and the UK to grow Victoria substantially and the purpose of raising the £175 million of new preferred equity capital is to enable Victoria to move quickly and decisively to capitalise on these potential opportunities.

 

The key proposed terms of KED's investment in Preferred Shares are as follows:

 

· An initial investment of £75 million in the Company from KED by way of Preferred Shares (which have no voting rights), to be received upon the satisfaction of all conditions necessary for the funding to proceed (the "Initial Investment");

· At the Company's option, and for a period of up to 18 months following close of the Initial Investment, a further investment by KED in the Company of up to £100 million by way of Preferred Shares (subject to certain conditions);

· The Preferred Shares will attract an initial dividend of 9.35% per annum if paid in cash (or 9.85% per annum if paid in kind). Following the fifth anniversary of the Initial Investment, the dividend will be subject to gradual escalation on a pre-agreed basis;

· For the duration any Preferred Shares remain outstanding, KED shall have the right, but not the obligation, to appoint one director to the Board of the Company (subject to customary regulatory approvals);

· The Company has the right to redeem the Preferred Shares at its option, subject to certain provisions;

· At Completion of the Initial Investment, KED will be granted warrants to subscribe for a maximum of 12,402,000 ordinary shares in the ordinary share capital of the Company (representing 9% of the current share capital). These warrants will have an exercise price of £3.50 each, however the number of ordinary shares that will be issued upon exercise of the warrants is subject to downwards adjustment based on certain metrics, that depend on the following factors: a) the amount and time of subsequent draws on the £175 million Preferred Equity Investment and the proceeds of the Preferred Equity Investment; b) the date of repayment; and c) the Company's share price at the time of exercise of the warrants. The Company additionally has the right to 'net settle' the warrants, which settlement mechanism would reduce the number of shares to be issued upon their exercise; and

· From and after the sixth anniversary of the Initial Investment, KED may elect to convert some or all of the Preferred Shares into the Company's ordinary shares at a price based on the share price at that time.

 

The net proceeds from the initial tranche of the preferred equity will be held as additional cash on the balance sheet until such time that it is deployed to generate growth. 

 

The Board believes that the investment from KED will have significant positive attributes for shareholders and lenders. In particular, the future M&A transactions that the proposed investment will finance, and the consequent anticipated growth in EBITDA, are expected to reduce the Company's senior leverage ratio and improve the Company's credit rating over time.

 

KED Proposed Purchase of Ordinary Shares

 

KED has also entered into discussions with Invesco Asset Management Limited ("Invesco", acting as agent for certain of its discretionary managed funds) to purchase off-market 12,500,000 ordinary shares (being 9.97% of the issued share capital of the Company) from Invesco at £3.50 per share (the "KED Purchase").

 

Proposed Buy-Back of Ordinary Shares from Invesco by the Company

 

The Board, on behalf of the Company, has also entered into discussions with Invesco to conditionally purchase off-market 8,546,095 of its ordinary shares (being 6.82% of the issued share capital of the Company) at £3.50 per share (the "Company Buyback").

 

The Company Buyback would be financed using the Company's existing cash resources and the Company intends to transfer any purchased shares into treasury.

 

Proposed Purchase of Ordinary Shares by Spruce House Partnership LLC

 

Spruce House Partnership LLC, an existing 14.8% shareholder of Victoria, has also entered into discussions with Invesco Asset Management Limited ("Invesco", acting as agent for certain of its discretionary managed funds) to purchase off-market 3,600,000 ordinary shares (being 2.87% of the issued share capital of the Company) from Invesco at £3.50 per share (the "Spruce House Purchase").

 

Shareholder Approval

 

Shareholders should note, the Company Buyback, the KED Purchase, the Spruce House Purchase, and the completion of the Preferred Equity Investment are conditional upon certain resolutions necessary to complete the transactions described above being adopted at a general meeting of the Company's ordinary shareholders.

 

The directors who are shareholders will all be voting their shares in favour of the various resolutions.

 

A further announcement in respect of the above matters will be made as and when appropriate.

 

There will be a conference call for equity investors and analysts held at 9.30am BST tomorrow, Friday 23 October. If you wish to join the call, please register with Buchanan via [email protected]by 8.30am BST tomorrow to request the dial in details. Please note that any registrants after this time may not be allowed on the call.

 

There will be a separate call for credit analysts and bond investors held at 12.00pm BST tomorrow. If you wish to join the call, please register with INCOMM via https://www.incommglobalevents.com/registration/client/6014/victoria/by 11:00am BST tomorrow. The details for this call will also be provided via Bloomberg.

 

A presentation will be uploaded to the Company's investor relations website at www.victoriaplc.com/reports/ at 7.00am BST tomorrow.

 

About Koch Equity Development and Koch Industries

 

With offices in Wichita and London, KED focuses its efforts on traditional merger and acquisition activity and industry agnostic principal investments. Significant recent non-controlling principal investments completed include Getty Images, MI Windows and Doors, Global Medical Response, and Meredith/Time Inc. Since 2012, KED has invested approximately US$30 billion of equity capital.

 

Koch Industries is one of the largest privately held companies in the United States, with estimated annual revenues as high as US$115 billion (according to Forbes) and has a presence in over 70 countries with about 130,000 employees worldwide across the Koch companies. Founded in 1940, Koch Industries owns a diverse group of companies. With their long-term investment horizon and existing interest in segments of the flooring industry in which Victoria does not operate, the Board believes that Koch Equity Development and Koch Industries are the ideal long-term partners for Victoria bringing the possibility of opportunities for international growth as well as the additional capital to be provided through the Preferred Equity Investment. Further information about Koch Equity Development and Koch Industries can be found on their websites, www.kochequity.com; www.kochind.com.

 

About Victoria

 

Established in 1895 and listed since 1963 and on AIM since 2013 (VCP.L), Victoria PLC, is an international manufacturer and distributor of innovative flooring products. The Group, which is headquartered in Kidderminster, UK, designs, manufactures and distributes a range of carpet, flooring underlay, ceramic tiles, LVT (luxury vinyl tile), artificial grass and flooring accessories.

 

Victoria has operations in the UK, Spain, Italy, Belgium, the Netherlands and Australia and employs approximately 3,400 people across more than 20 sites. Victoria is the UK's largest carpet manufacturer and the second largest in Australia, as well as the largest manufacturer of underlay in both regions. 

 

The Group's strategy is designed to create value for its shareholders and is focused on consistently increasing earnings and cash flow per share via acquisitions and sustainable organic growth. (Further information about Victoria can be found on its website, www.victoriaplc.com.)

 

 

For more information contact:

Victoria PLC

Geoff Wilding, Executive Chairman

Philippe Hamers, Group Chief Executive

Michael Scott, Group Finance Director

+44 (0) 1562 749 610

 

N+1 Singer (Nominated Adviser and Joint Broker)

Rick Thompson, Phil Davies, Alex Bond

 

 

+44 (0) 207 496 3095

Berenberg (Joint Broker)

Ben Wright, Mark Whitmore

Peel Hunt (Joint Broker)

Adrian Trimmings, Andrew Clark

Buchanan Communications (Financial PR)

Charles Ryland, Chris Lane, Tilly Abraham

+44 (0) 203 207 7800

 

+44 (0) 207 418 8900

 

+44 (0) 20 7466 5000

 

 

 

 

 

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