TIDMHONY TIDMPSSL
RNS Number : 4272V
Honeycomb Investment Trust PLC
06 August 2020
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD
CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH
JURISDICTION.
THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN ANNOUNCEMENT OF A FIRM
INTENTION TO MAKE AN OFFER UNDER RULE 2.7 OF THE CITY CODE ON
TAKEOVERS AND MERGERS (THE "CODE") AND THERE CAN BE NO CERTAINTY
THAT AN OFFER WILL BE MADE.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
6 August 2020
For immediate release
Possible Combination of Honeycomb Investment Trust plc ("HIT")
and
Pollen Street Secured Lending plc ("PSSL")
HIT today announces that it has made a proposal to PSSL
regarding a possible merger of HIT and PSSL (together the "Enlarged
Group"). As described further below, under the terms of the merger
PSSL shareholders would receive new ordinary shares in HIT on a NAV
for NAV basis (the "Possible Merger").
The board of HIT believes that there is an opportunity for
shareholder value creation from the combination of HIT and PSSL to
create the leading listed investment trust dedicated to providing
finance to the specialty finance market. The HIT board considers
that the combination of PSSL and HIT would be in the best long term
interests of both companies and their respective shareholders.
HIT has consulted with certain of its largest shareholders who
have indicated they are, in principle, supportive of the Possible
Merger. These investors also hold shares representing, in
aggregate, 30.7 per cent of the PSSL total number of outstanding
shares(1) .
Key terms of the Possible Merger
The possible offer for the entire issued and to be issued share
capital of PSSL has been made on the basis of an unaudited "NAV for
NAV" combination. Based on HIT's and PSSL's unaudited NAV per share
(post recent share buybacks) of 1,016.4p and 948.8p at 30 June 2020
respectively, PSSL shareholders would be entitled to receive:
0.9335 new HIT ordinary shares in exchange for each PSSL
ordinary share.
Further information on the assumptions underlying our proposal
is outlined in the Appendix to this announcement.
Under the terms of the Possible Merger, PSSL shareholders would
also be entitled to receive the dividends, if any, declared by PSSL
in respect of the three month period to 30 June 2020 and the three
month period to 30 September 2020, provided that the aggregate of
the dividends for each such period does not exceed 12.0 pence per
PSSL ordinary share and is covered by income for the period. The
terms of the Possible Merger would not be adjusted for the
dividends, if any, declared by HIT in respect of both the three
month periods to 30 June 2020 and 30 September 2020 (and PSSL
shareholders would not be entitled to receive such dividends),
provided that the aggregate of the dividends for each such period
does not exceed 20.0 pence per HIT ordinary share.
The Possible Merger would result in PSSL shareholders owning
approximately 65.3 per cent of the Enlarged Group on a fully
diluted basis.
In addition, subject to consultation with shareholders, HIT is
considering alternative structures including either a partial cash
alternative, subject to certain limits, or a share buyback
programme post completion of a transaction.
(1) Supportive shareholders comprise: Quilter Investors Limited
(14,603,993 shares), Standard Life Aberdeen plc (4,740,501 shares),
Thesis Asset Management Limited (1,669,314 shares) and AXA
Investment Managers (1,640,000 shares)
Rationale for a combination of HIT and PSSL
HIT believes the creation of the leading UK specialty finance
investment trust has a number of benefits for both PSSL and HIT
shareholders:
-- Scale: The Enlarged Group would have combined investment
assets of approximately GBP1.5bn enabling it to continue to
capitalise on attractive investment opportunities, while ensuring a
stable NAV return to shareholders.
-- Diversity: The Enlarged Group would have a more diversified
portfolio, better positioning it for changing economic cycles.
-- Liquidity: The Enlarged Group will seek confirmation from the
Financial Conduct Authority and London Stock Exchange that it is
eligible for a transfer to the premium segment of the main market
of the London Stock Exchange. HIT's enhanced scale is expected to
support inclusion in the FTSE 250 Index following any transfer to
the premium segment, resulting in a broader and deeper potential
investor base for both entities. The Enlarged Group is expected to
enjoy an elevated market profile including increased analyst
coverage, which should enhance the liquidity of the Enlarged
Group's shares in the secondary market.
-- Synergies: The combination is expected to lead to a reduction
in operating costs for the Enlarged Group given potential
de-duplication benefits. In addition, HIT has agreed with Pollen
Street Capital Limited ("PSC"), its investment manager, that in the
event a formal offer on the terms of the Possible Merger was made
and was successful, the fee arrangement in the existing investment
management agreement between HIT and PSC would be reduced to
reflect the increased scale of the Enlarged Group. The exact terms
of the reduced fees would form part of any announcement of a firm
intention to make an offer for PSSL, if such an announcement were
to be made.
-- Financial impacts: Given the potential benefit from a
reduction in investment manager fees and other cost savings, the
combination is expected to result in compelling value creation for
both sets of shareholders, with enhanced overall shareholder
dividend potential relative to their respective standalone dividend
prospects.
-- Active discount management policy: Given the impact of recent
market volatility on the share prices of both HIT and PSSL, HIT
believes the proposal provides an opportunity for both sets of
shareholders to realise NAV over time in more normalised
markets.
Following the combination, HIT would seek to operate an active
discount management policy as well as proactively seeking to manage
any investor specific liquidity demands. This would include, inter
alia, periodic return of capital to shareholders via the use of
selective share buybacks and/or tender offers as well as potential
strategic placements with new investors. HIT has already
implemented such measures effectively as highlighted most recently
by the share buyback announced on 2 June 2020.
The pro forma borrowings of the Enlarged Group will leave
sufficient headroom relative to the current leverage targets of HIT
and PSSL.
-- Positioning: Both PSSL and HIT, managed by entities
affiliated with PSC, have a long track record of consistent credit
performance and dividends. In particular, the prudent approach over
the course of the COVID-19 related macroeconomic downturn has
preserved capital and the manager expects increased investment
opportunities in the coming months. The Enlarged Group will have
the scale and resources to take full advantage of any improvement
in the market environment.
Other matters
This announcement does not constitute an announcement of a firm
intention to make an offer under Rule 2.7 of the Code. Any offer
will be made solely by formal offer documentation, which will set
out the full terms and conditions of any offer. There can be no
certainty that any offer will ultimately be made.
In accordance with Rule 2.6(a) of the Code, HIT is required, by
no later than 5.00pm on 3 September 2020, either to announce a firm
intention to make an offer for PSSL in accordance with Rule 2.7 of
the Code or to announce that it does not intend to make an offer,
in which case the announcement will be treated as a statement to
which Rule 2.8 of the Code applies. This deadline can be extended
with the consent of the Takeover Panel in accordance with Rule
2.6(c) of the Code.
Pursuant to Rule 2.5 of the Code, HIT reserves the right to:
1. Amend the terms of any offer (including making an offer on
less favourable terms than those set out in this announcement):
a. with the agreement or recommendation of the board of PSSL;
b. if a third party announces a firm intention to make an offer
for PSSL which, at that date, is of a value less than the value
implied by the Possible Merger;
c. following an announcement by PSSL of a whitewash transaction pursuant to the Code; or
d. to take account of the value of any dividend or other
distribution which is announced, declared, made or paid by PSSL or
HIT after the date of this announcement, other than the dividends,
if any:
i. declared by PSSL in respect of the three month period to 30
June 2020, provided that such dividend does not exceed 12.0 pence
per PSSL ordinary share in aggregate and is covered by income for
the period;
ii. declared by PSSL in respect of the three month period to 30
September 2020, provided that such dividend does not exceed 12.0
pence per PSSL ordinary share in aggregate and is covered by income
for the period;
iii. declared by HIT in respect of the three month period to 30
June 2020, provided that such dividend does not exceed 20.0 pence
per HIT ordinary share in aggregate; and/or
iv. declared by HIT in respect of the three month period to 30
September 2020, provided that such dividend does not exceed 20.0
pence per HIT ordinary share in aggregate.
2. Vary the form of consideration as set out above and/or
introduce other forms of consideration such as cash in substitution
for all or part of the share consideration.
A further announcement will be made in due course.
The person responsible for arranging for the release of this
announcement on behalf of HIT is Robert Sharpe, Chairman.
Enquiries:
Greenbrook (PR adviser to HIT) +44 (0) 207 952 2000
Andrew Honnor honeycomb@greenbrookpr.com
Alex Jones
Matthew Goodman
Goldman Sachs International (Joint Financial Adviser to HIT) +44 (0) 207 774 1000
John Brennan
Chris Emmerson
Ken Hayahara
Ronan Breen
Jefferies International Limited (Joint Financial Adviser to HIT) +44 (0) 207 029 8000
Graham Davidson +44 (0) 207 029 8076
Paul Bundred +44 (0) 207 548 4226
Neil Winward +44 (0) 207 029 8140
Disclaimer
Goldman Sachs International, which is authorised by the
Prudential Regulation Authority ("PRA") and regulated by the PRA
and the Financial Conduct Authority ("FCA") in the United Kingdom,
is acting exclusively for HIT and for no one else in connection
with the possible offer and will not be responsible to anyone other
than HIT for providing the protections afforded to its clients or
for providing advice in relation to the possible offer, the
contents of this announcement or any other matters referred to in
this announcement.
Jefferies which is authorised and regulated in the UK by the
FCA, is acting exclusively as financial adviser to HIT and no one
else in connection with the possible offer and shall not be
responsible to anyone other than HIT for providing the protections
afforded to clients of Jefferies nor for providing advice in
connection with the possible offer or any matter referred to
herein. Neither Jefferies, nor any of its affiliates, subsidiaries
or branches owes or accepts any duty, liability or responsibility
whatsoever (whether direct or indirect, whether in contract, in
tort, under statute or otherwise) to any person other than HIT in
connection with this Announcement, any statement contained herein
or otherwise.
Disclosure requirements of the Code
Under Rule 8.3(a) of the Code, any person who is interested in 1
per cent or more of any class of relevant securities of an offeree
company or of any securities exchange offeror (being any offeror
other than an offeror in respect of which it has been announced
that its offer is, or is likely to be, solely in cash) must make an
Opening Position Disclosure following the commencement of the offer
period and, if later, following the announcement in which any
securities exchange offeror is first identified. An Opening
Position Disclosure must contain details of the person's interests
and short positions in, and rights to subscribe for, any relevant
securities of each of (i) the offeree company and (ii) any
securities exchange offeror(s). An Opening Position Disclosure by a
person to whom Rule 8.3(a) applies must be made by no later than
3.30 pm (London time) on the 10th business day following the
commencement of the offer period and, if appropriate, by no later
than 3.30 pm (London time) on the 10th business day following the
announcement in which any securities exchange offeror is first
identified. Relevant persons who deal in the relevant securities of
the offeree company or of a securities exchange offeror prior to
the deadline for making an Opening Position Disclosure must instead
make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes,
interested in 1 per cent or more of any class of relevant
securities of the offeree company or of any securities exchange
offeror must make a Dealing Disclosure if the person deals in any
relevant securities of the offeree company or of any securities
exchange offeror. A Dealing Disclosure must contain details of the
dealing concerned and of the person's interests and short positions
in, and rights to subscribe for, any relevant securities of each of
(i) the offeree company and (ii) any securities exchange
offeror(s), save to the extent that these details have previously
been disclosed under Rule 8. A Dealing Disclosure by a person to
whom Rule 8.3(b) applies must be made by no later than 3.30 pm
(London time) on the business day following the date of the
relevant dealing.
If two or more persons act together pursuant to an agreement or
understanding, whether formal or informal, to acquire or control an
interest in relevant securities of an offeree company or a
securities exchange offeror, they will be deemed to be a single
person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree
company and by any offeror and Dealing Disclosures must also be
made by the offeree company, by any offeror and by any persons
acting in concert with any of them (see Rules 8.1, 8.2 and
8.4).
Details of the offeree and offeror companies in respect of whose
relevant securities Opening Position Disclosures and Dealing
Disclosures must be made can be found in the Disclosure Table on
the Takeover Panel's website at www.thetakeoverpanel.org.uk,
including details of the number of relevant securities in issue,
when the offer period commenced and when any offeror was first
identified. You should contact the Takeover Panel's Market
Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as
to whether you are required to make an Opening Position Disclosure
or a Dealing Disclosure.
Rule 2.9 Information
HIT confirms that as at the close of business on 5 August 2020,
its issued share capital consisted of 36,514,919 ordinary shares of
1p each in issue, excluding treasury shares. The International
Securities Identification Number of the ordinary shares is
GB00BYZV3G25.
Publication of this announcement
A copy of this announcement will be available on HIT's website
at https://www.honeycombplc.com/announcements. The content of the
website referred to in this announcement is not incorporated into
and does not form part of this announcement.
Cautionary note regarding forward-looking statements
This announcement contains certain forward-looking statements
with respect to the financial condition, results of operations and
business of the Enlarged Group and certain plans and objectives of
HIT with respect thereto. These forward-looking statements can be
identified by the fact that they do not relate only to historical
or current facts. Forward-looking statements often use words such
as "anticipate", "target", "expect", "estimate", "intend", "plan",
"goal", "believe", "hope", "aims", "continue", "will", "may",
"should", "would", "could", or other words of similar meaning.
These statements are based on assumptions and assessments made by
HIT in light of its experience and its perception of historical
trends, current conditions, future developments and other factors
it believes appropriate. By their nature, forward-looking
statements involve risk and uncertainty, because they relate to
events and depend on circumstances that will occur in the future
and actual results and developments could differ materially from
those expressed in or implied by such forward-looking statements.
Although it is believed that the expectations reflected in such
forward-looking statements are reasonable, no assurance can be
given that such expectations will prove to have been correct and
you are therefore cautioned not to place undue reliance on these
forward-looking statements which speak only as at the date of this
announcement. HIT does not assume any obligation to update or
correct the information contained in this announcement (whether as
a result of new information, future events or otherwise), except as
required by applicable law.
There are several factors which could cause actual results to
differ materially from those expressed or implied in
forward-looking statements. Among the factors that could cause
actual results to differ materially from those described in the
forward-looking statements are changes in the global, political,
economic, business, competitive, market and regulatory forces,
future exchange and interest rates, changes in tax rates and future
business combinations or dispositions.
Additional information
This announcement is not intended to, and does not, constitute
or form part of any offer, invitation or the solicitation of an
offer to purchase, otherwise acquire, subscribe for, sell or
otherwise dispose of, any securities whether pursuant to this
announcement or otherwise.
The distribution of this announcement in jurisdictions outside
the United Kingdom may be restricted by law and therefore persons
into whose possession this announcement comes should inform
themselves about, and observe, such restrictions. Any failure to
comply with the restrictions may constitute a violation of the
securities law of any such jurisdiction.
Appendix: Sources and bases
Key metrics stated in this announcement have been based on
published sources as summarised below:
Metric Ref. Data Source
======================================= ===== ========== ======================
HIT NAV reported (cum income A GBP371.1m Company newsletter
basis) 30 June 2020
HIT current number of shares B 36.5m Company newsletter
outstanding at the latest practicable 30 June 2020
date
-----
HIT NAVps (ex income basis) 1,016.4p Company newsletter
30 June 2020
PSSL NAV reported (cum income C GBP700.8m Company newsletter
basis) 30 June 2020
PSSL share buybacks since 30 D GBP0.9m 1 July 2020 to 5
June 2020 factsheet August 2020
(announced 6 August
2020)
PSSL NAV (adj. buyback basis) E GBP699.9m Calculation (C -
D)
PSSL current number of shares F 73.8m Company announcement,
outstanding at the latest practicable 06 August 2020
date
PSSL NAVps (ex income basis) 948.8p Calculation (E /
F x 100)
Exchange ratio (No. HIT shares G 0.9335 Calculation (PSSL
per 1 PSSL share) NAVps / HIT NAVps)
Number of HIT shares issued to H 68.9m Calculation (F x
PSSL G)
Pro forma share count I 105.4m Calculation (B +
H)
PSSL ownership of Enlarged Group 65.35% Calculation (H /
I)
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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