Conclusion of the Strategic Review

Digital 9 Infrastructure PLC

29 January 2024

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK'S MARKET ABUSE REGULATION. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, SUCH INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

29 January 2024

DIGITAL 9 INFRASTRUCTURE PLC

("D9" or the "Company" and, together with its subsidiaries, the "Group")

Conclusion of the Strategic Review, Proposed Change to D9's Investment Policy and other Company Updates

Outcome of the Strategic Review

Further to the announcement on 27 November 2023, the Board of Directors of D9 (the "Board") has concluded its strategic review in respect of the Company (the "Strategic Review").

Managed Wind-Down

Following careful consideration of the options available to the Company and after consultation with its financial advisers, as well as taking into account feedback received from a large number of shareholders and institutional investors, the Board has determined that it would be in the best interests of shareholders as a whole to put forward a proposal for a managed wind-down of the Company (the "Managed Wind-Down").

The Board intends to publish a circular to shareholders (the "Circular") in the coming weeks in order to convene a general meeting at which it will seek approval from shareholders to amend the Company's investment objective and policy. If approved, the Board will then endeavour to realise all of the Company's assets in a manner that maximises value to shareholders.

Next steps for the wholly-owned assets (Aqua Comms, EMIC-1, Elio Networks and SeaEdge UK1)

The Board intends to immediately commence sale preparations for the Company's wholly-owned assets ahead of launching competitive processes later this year. The Board is mandating advisers to assist with the preparation of these sale processes.

Next steps for Arqiva

As part of the Strategic Review, various options for realising the stake in Arqiva have been considered on a preliminary basis by the Board. After careful consideration of Arqiva's business plans and current market conditions, the Board believes that the maximisation of the value of D9's stake in Arqiva is likely to take longer to realise than the other investments held by the Company. As such, while D9 will continue to consider and be open to all options for Arqiva which are value-accretive to shareholders, the Board has decided to defer a sale process for D9's stake in Arqiva for the time being. The Board will continue to explore various options including capital markets alternatives.

Amendments to Investment Objective and Policy

The implementation of the Managed Wind-Down will require amendments to the Company's investment objective and investment policy ("Investment Policy"). Such amendments are subject to the approvals of the Financial Conduct Authority (the"FCA"), shareholders pursuant to Listing Rule 15 and the revolving credit facility (the "RCF") lenders. The RCF lenders and FCA have been notified of the proposed new Investment Policy. The Board intends to publish the Circular by the end of February (or as soon as possible thereafter following receipt of approvals from the RCF lenders and FCA) to convene a general meeting at which it will seek approval from shareholders of the proposed new Investment Policy by way of ordinary resolution.

The proposed new Investment Policy will be one of effecting an orderly wind-down of the Company with a view to maximising the value received from the Company's assets and making any returns to shareholders, once the RCF has been repaid. The Company will not make any new investments save that investments may be made in existing portfolio companies when considered appropriate to maximise value for shareholders.

Shareholders should note that during the Managed Wind-Down, the Company intends to maintain its investment trust status and listing. Maintaining the listing would allow Shareholders to continue to trade Shares during the Managed Wind-Down.

The Board could reconsider the listing status of the Company following completion of the Managed Wind-Down depending on the actions chosen for Arqiva and the Verne Global earn-out at that time.

Shareholder returns

The Board expects to use the proceeds from the Managed Wind-Down to repay the amount of the RCF that will be outstanding following completion of the sale of the Verne Global group of companies ("Verne Transaction")[1].  

Once the RCF has been repaid, the Board will review the potential allocation of any remaining proceeds between the repayment of the indebtedness to the vendor in respect of the Company's acquisition of its interest in Arqiva in October 2022 and distribution to shareholders. No further dividend distributions are planned in respect of the year ended 31 December 2023 and none are foreseen in the medium term. To the extent possible, it is intended that any cash distributions to shareholders will take the form of returns of capital.

Further, the Company's liquidity constraints prevent it from being able to give consideration to the implementation of a program to buy back shares in the market at this stage.

Consequences of the amendments to the Investment Policy not being approved

The Board considers the Managed Wind-Down as likely to provide the best opportunity to maximise value for shareholders going forward. However, in the event that the amendments to the Company's Investment Policy which are required to facilitate the Managed Wind-Down are not approved by shareholders:

·      the Board and the Investment Manager will continue to comply with the Company's current Investment Policy; and

·      the Board will work with its financial advisers to identify alternative options for the future of the Company.

Charlotte Valeur, Interim Independent Chair of D9, said:

"Throughout the strategic review process, the Board's primary objective has always been to maximise shareholder value going forward. Having carefully considered a number of options, we have ultimately concluded that a Managed Wind-Down of the Company is likely the best route to achieve this objective and seek to address the discount to NAV that impacts our shareholders.

The Board will assess the progress of the proposed asset sales on an ongoing basis and will continue to monitor other potential opportunities to realise income and capital value for shareholders as they arise. We will also continue to engage in active dialogue with our shareholders throughout this process."

A further announcement will be made when the Circular is published.

Relationship with Triple Point Investment Management LLP ("TP")

The company is party to an investment management agreement (the "IMA") with TP, which supports the management of the Company's portfolio of investments and the provision of certain other ancillary services to the Company. The terms of the IMA include a provision that "The Company or the Investment Manager shall be entitled to terminate this Agreement upon giving to the other party not less than twelve (12) months' prior written notice of termination, such notice not to expire before the fourth anniversary of the date of Admission (the "Initial Period")". The fourth anniversary of the date of admission is 31 March 2025. The Company has advised TP that, subject to any required consents, it presently intends to give notice to terminate the IMA under the above provision, with any such notice of termination to be issued on the later of 31st March 2024 or the closing of the Verne transaction (the "Notice Date"). The Verne transaction is scheduled to receive all the required approvals by the end of Q1 2024. Pending the Notice Date, the Company is actively exploring with TP whether the Company and TP might agree revised commercial terms that would be in the best interests of the Company and its shareholders given its future needs in the context of the other matters set out in this announcement.

Verne Global update

Verne Global Transaction

The Verne Global sale, announced on 27^th November, 2023, is progressing towards completion with all required approvals expected to be received by the end of Q1 2024. The unconditional Finnish merger control clearance from the Finnish Competition and Consumer Authority has been received. All other completion workstreams, including those related to financing, are being advanced and on track within the expected timeline.

A further update will be provided in due course.

Deferred Consideration Payment

The new power agreement is being progressed and on track with the expected timeline. The US$25 million (approximately £20 million) deferred consideration payment will be payable on the earlier of (i) 15 business days after a new power agreement is entered into (subject to closing) and (ii) the later of 26 April 2024 and four weeks after closing.

Portfolio Update

The Board will release a trading update in the coming weeks, ahead of the publication of full year results for the year ended 31 December 2023.

As part of its reporting of the results for the year ended 31 December 2023, the Board has mandated an independent valuer to guide the Directors' assessment of the fair value of its assets under International Financial Reporting Standards, including the Verne Global potential earn-out payment of up to $135m.

Shareholder Webinar

A webinar will be held on Monday 5 February 2024 at 12 noon GMT. Further details will be provided closer to the date. Questions can be submitted by email to: [e-mail] up to 5.00pm on the day prior to the webinar.

ENDS.

FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:

Triple Point Investment Management LLP (Investment Manager) Diego Massidda Ben Beaton Arnaud Jaguin Goldman Sachs International (Lead Financial Adviser) Alexandre Lucas Owain Evans Fabrice Francois Alexander Tingle	[phone] [phone]
J.P. Morgan Cazenove (Financial Adviser and Joint Corporate Broker) William Simmonds Jérémie Birnbaum Jonty Edwards	[phone]
Peel Hunt (Joint Corporate Broker) Luke Simpson Huw Jeremy	[phone]

The person responsible for making this notification is Helen Richardson, Company Secretary.

About Digital 9 Infrastructure plc:

Digital 9 Infrastructure plc (DGI9) is an investment trust listed on the London Stock Exchange and a constituent of the FTSE All-Share, with the ticker DGI9. The Company invests in the infrastructure of the internet that underpins the world's digital economy: digital infrastructure.

The Investment Manager is Triple Point Investment Management LLP ("Triple Point") which is authorised and regulated by the Financial Conduct Authority, with extensive experience in infrastructure, real estate, and private credit, while keeping ESG principles central to its business mission. Triple Point's Digital Infrastructure team has over $300 billion in digital infrastructure transaction experience and in-depth relationships across global tech and global telecoms companies.

The number 9 in Digital 9 Infrastructure comes from the UN Sustainable Development Goal 9, which focuses the fund on investments that increase connectivity globally and improve the sustainability of digital infrastructure. The assets DGI9 invests in typically comprise scalable platforms and technologies including (but not limited to) subsea fibre, data centres, terrestrial fibre and wireless networks.

Since IPO in March 2021, DGI9 has invested in the following data centres, subsea fibre and wireless network assets (other than Verne Global):

n Aqua Comms, a leading owner and operator of 20,000km of the most modern subsea fibre systems - the backbone of the internet - with a customer base comprising global tech and global telecommunications carriers;

n Arqiva, the only UK national terrestrial television and radio broadcasting network in the United Kingdom - providing data, network and communications services, as well as a national IoT connectivity platform;

n Elio Networks (previously Host Ireland) a leading enterprise broadband provider that owns and operates Fixed Wireless Access networks;

n EMIC-1, a partnership with Meta on a 10,000km fibre system from Europe to India;

n SeaEdge UK1, a data centre and landing station for the North Sea Connect subsea cable, part of the North Atlantic Loop subsea network, improving connectivity between the UK, Ireland, Scandinavia and North America.

The Company's Ordinary Shares were admitted to trading on the Specialist Fund Segment of the Main Market of the London Stock Exchange on 31 March 2021. The Company's ordinary shares were admitted to the premium listing segment of the Official List of the Financial Conduct Authority and to trading on the premium segment of the Main Market on 30 August 2022.

For more information on the Investment Manager please visit www.triplepoint.co.uk. For more information, please visit www.d9infrastructure.com.

Important Notices

Goldman Sachs International, which is authorised by the PRA and regulated by the FCA and the PRA in the United Kingdom, is acting exclusively for D9 and no one else in connection with the matters referred to in this announcement and will not be responsible to anyone other than D9 for providing the protections afforded to clients of Goldman Sachs International, or for providing advice in relation to the matters referred to in this announcement.

J.P. Morgan Securities plc, which conducts its UK investment banking business as J.P. Morgan Cazenove ("J.P. Morgan Cazenove") and which is authorised in the United Kingdom by the PRA and regulated in the United Kingdom by the PRA and the FCA, is acting as financial adviser exclusively to Digital 9 Infrastructure plc and no one else in connection with the Strategic Review and will not regard any other person as its client in relation to the Strategic Review and will not be responsible to anyone other than Digital 9 Infrastructure plc for providing the protections afforded to clients of J.P. Morgan Cazenove or its affiliates, nor for providing advice in relation to the Strategic Review or any other matter or arrangement referred to herein, including, but not limited to, the Verne Transaction.

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[1] Please refer to the Company's announcement on 27 November 2023 regarding the Board's intended use of proceeds from the Verne Transaction and related matters.

 

END