Baronsmead VCT 2 PLC Publication of Prospectus & Offer for Subscription (4714L)

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RNS Number : 4714L

Baronsmead VCT 2 PLC

11 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 plc

Baronsmead VCT 2 plc

11 January 2016

Publication of a Prospectus and Circulars in connection with recommended proposals for the merger of Baronsmead VCT plc and Baronsmead VCT 2 plc (the "Companies") and an offer for subscription to raise up to GBP10 million

The boards of the Companies (the "Boards") announced on 11 November 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 plc ("Baronsmead VCT") under section 110 of the Insolvency Act 1986 (the "Scheme"). The Scheme provides for the undertaking, assets and liabilities of Baronsmead VCT to be transferred to the Company in consideration for the issue of new shares (the "New Shares") in Baronsmead VCT 2 plc ("Baronsmead VCT 2") of an equivalent value to Baronsmead VCT shareholders ("BVCT 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 GBP170 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"). The Offer is exclusively available for the existing shareholders of the Companies. The full terms and conditions of the Offer are set out in the prospectus which was published by Baronsmead VCT 2 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 the Boards and 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 combined costs savings of approximately GBP300,000 per annum for the shareholders of the Companies following the Merger. In addition over the last year there has been increasing demand from shareholders to have fewer Baronsmead VCTs. For these reasons the directors of the Companies believe that their respective shareholders' interests will be best served by the Merger of the Companies.

Performance track record

Both of the Companies have been managed by Livingbridge and its predecessor businesses since their respective launches in 1995 and 1998. Since its launch, Baronsmead VCT 2 has paid an average annual dividend of 6.9 pence per share (equivalent to 9.2 pence per share to investors who are higher rate tax payers). Over the last five years Baronsmead VCT 2 has paid an average annual dividend of 8.6 pence per share (equivalent to 11.5 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 
                                       Average       annual 
                                        annual       dividends 
                                        dividends    paid per    NAV total 
                                        paid per     share        return 
                                        share        in the       per share 
                                        since        past 5       since 
               Launch                   launch*      years*       launch 
 Company        date       NAV* GBPm    (p)          (p)          *++ 
------------  ----------  ----------  -----------  -----------  ----------- 
 Baronsmead    November 
  VCT           1995       83.7        7.0          7.0          390.5 
------------  ----------  ----------  -----------  -----------  ----------- 
 Baronsmead    April 
  VCT 2         1998       87.2        6.9          8.6          361.5 
------------  ----------  ----------  -----------  -----------  ----------- 
 

* As at 30 November 2015

++ 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.

 
               NAV total return per Share (p) 
------------------------------------------------------------ 
 Period             1year   3 years   5 years   Since launch 
  to 30 November 
  2015 
-----------------  ------  --------  --------  ------------- 
 Baronsmead 
  VCT               115.6   141.6     165.1     390.5 
-----------------  ------  --------  --------  ------------- 
 Baronsmead 
  VCT 2             116.0   139.8     168.8     361.5 
-----------------  ------  --------  --------  ------------- 
 

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 Baronsmead VCT 2 to be issued to BVCT Shareholders under the Scheme will be based on the adjusted net asset value of an ordinary share in Baronsmead VCT 2 (the "FAV per BVCT2 Share") and the adjusted net asset value of an ordinary share in Baronsmead VCT (the "FAV per BVCT Share"). The FAV per BVCT2 Share and the FAV per BVCT Share will be calculated as at 31 January 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 BVCT2 Share will be the net asset value of an ordinary share in Baronsmead VCT 2 adjusted to add back the costs and expenses of the Scheme already incurred by Baronsmead VCT 2 prior to the effective date of the Scheme, expected to be 8 February 2016 (the "Effective Date"). The FAV per BVCT Share will be calculated in accordance with the Scheme and will be the net asset value of an ordinary share in Baronsmead VCT adjusted to add back the costs and expenses of the Scheme already incurred by Baronsmead VCT prior to the Effective Date.

Shareholders in Baronsmead VCT will be issued such number of New Shares with a FAV per BVCT2 Share equal to 100 per cent. of the FAV per BVCT Share of their shareholding in Baronsmead VCT. The New Shares issued pursuant to the Scheme will rank equally in all respects with the existing issued ordinary shares of Baronsmead VCT 2.

The Offer

The Offer will be open exclusively to satisfy subscriptions from existing shareholders in the Companies. 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. 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 Baronsmead VCT 2 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.

The number of New Shares to be issued under the Offer will be rounded down to the nearest whole number (fractions of New Shares will not be allotted).

Costs and expenses

Costs and expenses of participation in the Scheme

The aggregate costs and expenses to be incurred by the Companies in connection with the Scheme are expected to be approximately GBP415,000 (including VAT and stamp duty). It has been agreed that all costs of implementing the Scheme will be met by the Enlarged Company following the completion of the Scheme (including the costs of purchasing the interests of any dissenting shareholders of Baronsmead VCT). Should the Scheme be implemented, it is expected that the costs of the Merger will be recouped from cost savings achieved by the Enlarged Company within 18 months of the Effective Date.

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