Baronsmead VCT 4 PLC Publication of Prospectus & Offer for Subscription (2232N)

TIDMBNS

RNS Number : 2232N

Baronsmead VCT 4 PLC

27 January 2016

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR SOUTH AFRICA OR ANY JURISDICTION WHICH THE SAME COULD BE UNLAWFUL. THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION, INCLUDING IN THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR SOUTH AFRICA

Baronsmead VCT 3 plc

Baronsmead VCT 4 plc

27 January 2016

Publication of a Prospectus and Circulars in connection with recommended proposals for the merger of Baronsmead VCT 3 plc and Baronsmead VCT 4 plc (the "Companies") and an offer for subscription to raise up to GBP10 million

The boards of the Companies (the "Boards") announced on 10 December 2015 that they had entered into discussions regarding a possible merger of the Companies (the "Merger"). The Boards are pleased to announce that they have reached agreement in respect of the Merger and that the Companies have today issued circulars to set out the proposals for the Merger for consideration by their respective shareholders (the "Circulars"). Both of the Companies are managed by Livingbridge VC LLP ("Livingbridge").

The Merger will be completed pursuant to a scheme of reconstruction and winding up of Baronsmead VCT 4 plc ("BVCT4") under section 110 of the Insolvency Act 1986 (the "Scheme"). The Scheme provides for the undertaking, assets and liabilities of BVCT4 to be transferred to the Company in consideration for the issue of new shares (the "New Shares") in Baronsmead VCT 3 plc ("BVCT3") of an equivalent value to BVCT4 shareholders ("BVCT4 Shareholders"). The Scheme is subject to, amongst other conditions, approval by the shareholders of the Companies. The Merger will create a larger merged company with net assets of GBP157 million (the "Enlarged Company").

Subject to the Merger completing the Enlarged Company will carry out an offer for subscription to raise up to GBP10 million (before costs) (the "Offer"). Until close of business on 15 February 2016 the Offer will be open exclusively to existing shareholders of the Companies. Should the Offer not be fully subscribed before this time, the remaining New Shares to be issued under the Offer will be used to satisfy subscriptions from shareholders in the Baronsmead VCTs until close of business on 3 March 2016. If the Offer is not fully subscribed by close of business on 3 March 2016, the balance, if any, will be used to satisfy the subscriptions of any other investors. The full terms and conditions of the Offer are set out in the prospectus which was published by BVCT3 today (the "Prospectus").

Background to and reasons for the Scheme

Prior to April 2012, the VCT rules restricted the amount a VCT could invest in a portfolio company to GBP1 million per annum. This led to investment managers, such as Livingbridge, establishing numerous VCTs that pursued the same investment strategy allowing larger investments to be made in VCT qualifying companies. With effect from 6 April 2012, the VCT rules were amended and the annual investment limit was increased to GBP5 million per investee company. As a result there is no longer as significant an advantage in having multiple VCTs pursuing the same investment strategy.

Since 2012 Livingbridge have been reviewing the merits of merging the Baronsmead VCTs. In April 2014 changes to the stamp duty rules significantly reduced the overall cost of a merger. As a result, the Boards now believe that there is a compelling argument for a merger from a cost savings point of view, with shareholders of the Companies benefitting from estimated aggregate costs savings of the Enlarged Company of approximately GBP355,000. In addition, the Directors believe that the size of the Enlarged Company will give it greater presence in the market for making investments. For these reasons the directors of the Companies believe that their respective shareholders' interests will be best served by the Merger.

Performance track record

Both of the Companies have been managed by Livingbridge and its predecessor businesses since their respective launches in 2001. Since its launch, BVCT3 has paid an average annual dividend of 6.9 pence per share (equivalent to 9.1 pence per share to investors who are higher rate tax payers). Over the last five years BVCT3 has paid an average annual dividend of 9.4 pence per share (equivalent to 12.5 pence per share to investors who are higher rate tax payers). Summaries of the track records of the Companies are set out in the table below.

 
                                                 Average 
                                                  annual 
                                  Average         dividends 
                                   annual         paid per    NAV total 
                                   dividends      share        return 
                                   paid per       in the       per share 
                                   share          past 5       since 
            Launch      NAV*       since          years**      launch 
 Company     date        (GBPm)    launch**(p)    (p)          *++ 
---------  ----------  --------  -------------  -----------  ----------- 
            January 
 BVCT3       2001       82.1      6.9            9.4          286.8 
---------  ----------  --------  -------------  -----------  ----------- 
            December 
 BVCT4       2001       75.1      5.9            8.2          232.3 
---------  ----------  --------  -------------  -----------  ----------- 
 

Notes:

* As at 30 November 2015.

** As at 31 December 2015. These figures include the interim dividend that was paid on 18 December 2015.

++ AIC methodology: NAV total return to the investor, including the original amount invested (rebased to 100p) from launch, assuming dividends paid were reinvested at the NAV of the Companies at the time the shares were quoted ex-dividend.

 
                NAV total return per Share (p) 
------------------------------------------------------------- 
 Period             1 year   3 years   5 years   Since launch 
  to 30 November 
  2015 
-----------------  -------  --------  --------  ------------- 
 BVCT3              114.0    135.0     161.5     286.8 
-----------------  -------  --------  --------  ------------- 
 BVCT4              113.3    129.3     152.3     232.3 
-----------------  -------  --------  --------  ------------- 
 

Note: AIC methodology: NAV total return to the investor, including the original amount invested (rebased to 100p) from launch, assuming dividends paid were reinvested at the NAV of the Companies at the time the shares were quoted ex-dividend.

The past performance of the Companies is not a guide to the future performance of the Enlarged Company.

The Scheme

The number of New Shares in BVCT3 to be issued to BVCT4 Shareholders under the Scheme will be based on the adjusted net asset value of an ordinary share in BVCT3 (the "FAV per BVCT3 Share") and the adjusted net asset value of an ordinary share in BVCT4 (the "FAV per BVCT4 Share"). The FAV per BVCT3 Share and the FAV per BVCT4 Share will be calculated as at 10 March 2016 (the "Calculation Date") using each company's respective accounting policies (which are identical). The investments held by the Companies which are listed, quoted or traded on a recognised stock exchange will be valued by reference to the bid price on the principal stock exchange where the relevant investment is listed, quoted or dealt. Unquoted investments held by the Companies will be valued at their fair value as at the Calculation Date as determined by the Boards respectively.

The FAV per BVCT3 Share will be the net asset value of an ordinary share in BVCT3 adjusted to add back the costs and expenses of the Scheme already incurred by BVCT3 prior to the effective date of the Scheme, expected to be 11 March 2016 (the "Effective Date"). The FAV per BVCT4 Share will be calculated in accordance with the Scheme and will be the net asset value of an ordinary share in BVCT4 adjusted to add back the costs and expenses of the Scheme already incurred by BVCT4 prior to the Effective Date.

Shareholders in BVCT4 will be issued such number of New Shares with a FAV per BVCT3 Share equal to 100 per cent. of the FAV per BVCT4 Share of their shareholding in BVCT4. The New Shares issued pursuant to the Scheme will rank equally in all respects with the existing issued ordinary shares of BVCT3.

The Offer

The Offer will be open exclusively to existing shareholders of the Companies until close of business on 15 February 2016. Should the Offer not be fully subscribed before this time, the remaining New Shares to be issued under the Offer will be used to satisfy subscriptions from shareholders in the Baronsmead VCTs until close of business on 3 March 2016. If the Offer is not fully subscribed by close of business on 3 March 2016, the balance, if any, will be used to satisfy the subscriptions of any other investors. Applications will be processed on a "first come, first served" basis by the Registrar, subject to the Scheme becoming effective.

The minimum subscription under the Offer is GBP3,000 and thereafter in multiples of GBP1,000. There is no maximum investment. However, potential investors should be aware that tax relief is only available on a maximum of GBP200,000 in each tax year. Potential investors should consult their professional or financial advisers before deciding whether and, if so, how much they should invest under the Offer.

The number of New Shares to be allotted under the Offer will be determined by dividing the subscription amount by an offer price calculated on the basis of the following Pricing Formula:

Latest published net asset value of an existing ordinary share in BVCT3 at the time of allotment divided by 0.97 (to allow for the costs of the Offer of 3.0 per cent.) rounded up to the nearest 0.1 pence per share.

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