Alpha Real Trust Limited Tender Offer (1056D)

TIDMARTL

RNS Number : 1056D

Alpha Real Trust Limited

05 October 2018

5 October 2018

LEI: 213800BMY95CP6CYXK69

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

Alpha Real Trust Limited

("ARTL" or the "Company")

Tender Offer for up to 5,000,000 Ordinary Shares at 138p per Ordinary Share

A circular explaining the terms of a Tender Offer for up to 5,000,000 Ordinary Shares at 138 pence per Ordinary Share has today been posted to Shareholders (the "Circular").

Capitalised terms and expressions shall have the same meanings as those attributed to them in the Circular.

   1.     Introduction 

On 5 January 2018, Ordinary Shareholders and Class A Shareholders approved the Share Purchase Resolution to enable the Company to buy back up to 17,117,376 Ordinary Shares, representing a maximum of 24.99 per cent. of the Voting Share Capital as at the latest practicable date prior to the publication of the 2017 Circular, being 11 December 2017.

The Share Purchase Authority was expressed to be conditional on the approval given by the Panel Waiver Resolution which was also passed on 5 January 2018 and so therefore has the benefit of the Panel Waiver (see paragraph 2.4 of the Circular for further details).

Subsequent to 5 January 2018, whilst the Company has not realised any significant disposals, it has maintained a strong cash position and remains cautious in the deployment of funds in new investments. Since 5 January 2018, the Company has bought back a total of 10,000 Ordinary Shares under its share buyback programme. Given this position, the Board believes a return of capital by way of tender offer is appropriate.

The Tender Offer will be conducted at a fixed price of 138 pence per Ordinary Share, being the Tender Offer Price which represents a premium of 5.2 per cent. to the average closing price of an Ordinary Share for the 30 days prior to the Latest Practicable Date and a discount of 21.1 per cent. to the unaudited NAV per Ordinary Share as at 30 June 2018 of 174.8 pence. The Tender Price is also equal to the highest closing price for the Company's Ordinary Shares in the past 12 months prior to the Latest Practicable Date (source: Datastream).

On 4 October 2018 the Company announced that additional planning consent had been obtained in respect of the Company's private rented sector development at Monk Bridge in Central Leeds (the Monk Bridge Asset) and consequently that it has been advised that this additional planning consent will result in a material increase in the carrying value of the Monk Bridge Asset. This updated valuation will be reflected in the NAV per Ordinary Share for the period ending 30 September 2018 which is expected to be announced on or around 16 November 2018.

   2.     Background 

In light of the fact that the Company's Ordinary Shares are currently trading at a discount to the unaudited net asset value of the Company (such discount being approximately 22.8 per cent. as at the Latest Practicable Date, based on the unaudited NAV per Ordinary Share as at 30 June 2018 of 174.8 pence), the Board believes that it is in the Company's interests, and in the interest of Shareholders, to provide Qualifying Shareholders who wish to realise part or all of their investment in the Company with an opportunity to access liquidity which might otherwise not be available in the market.

The Board therefore wishes the Company to make a return of capital to Qualifying Shareholders by way of a tender offer for up to 5,000,000 Ordinary Shares, representing approximately 7.3 per cent. of the Voting Share Capital.

The Board has sought to ensure that as many Shareholders as possible can participate in the return of capital whilst allowing Shareholders individually to choose whether to participate in the Tender Offer or not (without incurring disproportionate costs in making the Tender Offer to persons other than Qualifying Shareholders). Qualifying Shareholders can decide whether to tender all or any of their Ordinary Shares under the Tender Offer or to continue to hold them.

The terms of the Share Purchase Authority permits the purchase by the Company of up to 17,117,376 Ordinary Shares pursuant to one or more market acquisitions (within the meaning of section 316 of the Companies Law). As the Class A Shares are unlisted and are not traded on a recognised investment exchange, it is not possible for the Class A Shares to be tendered under the Tender Offer and subsequently repurchased by the Company pursuant to the Repurchase Agreement.

However, Qualifying Class A Shareholders who wish to participate in the Tender Offer may do so if they convert some or all of their Class A Shares into Ordinary Shares prior to the Record Date. Ordinary Shares arising on conversion of any Class A Shares prior to the Record Date may be tendered by Qualifying Class A Shareholder under the Tender Offer on the same basis as the existing Ordinary Shares. Further details of the action to be taken by Qualifying Class A Shareholders who wish to participate in the Tender Offer are set out under the paragraph headed "Action to be taken" in Part 1 of the Circular.

Qualifying Shareholders tendering all of their Ordinary Shares (including any Ordinary Shares arising on conversion of Class A Shares) may be subject to scaling back (but not below their Basic Entitlement) and in this event they will still retain Ordinary Shares in the Company.

As referred to above, the Company is authorised to buy back up to 17,117,376 Ordinary Shares pursuant to the Share Purchase Authority which was approved by Shareholders on 5 January 2018 and any purchases made by the Company pursuant to that authority will benefit from the Panel Waiver which was also approved by the Independent Shareholders on 5 January 2018. Since 5 January 2018, the Company has bought back a total of 10,000 Ordinary Shares under its share buyback programme.

The Tender Offer will be financed from the Company's existing cash resources. As at 3 October 2018, the Company had cash and units in Freehold Income Authorised Fund (which offers a monthly redemption facility) totalling GBP21 million. The Tender Offer is conditional upon the Directors being satisfied that the Company will satisfy the solvency test as prescribed by the Companies Law. The solvency test will be satisfied if, immediately after the completion of the Tender Offer:

   --     the Company will be able to pay its debts as they become due; 
   --     the value of the Company's assets is greater than the value of its liabilities; and 

-- the Company satisfies any other requirements as to solvency imposed pursuant to its authorisation as an authorised closed-ended collective investment scheme.

Following the proposed Tender Offer, your Board believes that the Company will remain in a net cash position with a strong balance sheet.

   3.     Summary information on the Tender Offer 

Full details of the Tender Offer, including the terms and conditions on which it is being made, are set out in Part 4 of the Circular and, in the case of Ordinary Shares held in certificated form, on the Tender Form.

The Tender Offer is only available to Qualifying Shareholders on the register of members of the Company on the Record Date in respect of the Ordinary Shares (including the Ordinary Shares arising on conversion of the Class A Shares) held by them on the Record Date.

Qualifying Shareholders can choose whether they wish to tender all or any of their Ordinary Shares under the Tender Offer. Qualifying Shareholders are not obliged to tender any of their Ordinary Shares if they do not wish to do so. Qualifying Class A Shareholders who wish to participate in the Tender Offer may do so, if and to the extent that they convert some or all of their Class A Shares into Ordinary Shares prior to the Record Date. In accordance with the Articles, Class A Shares will convert into Ordinary Shares on a "one for one" basis.

The Tender Offer involves the following:

-- Panmure Gordon, acting as principal, has irrevocably committed to purchase up to 5,000,000 Ordinary Shares (including any Ordinary Shares arising on conversion of Class A Shares) at the Tender Offer Price on and subject to the terms and conditions of the Tender Offer and to sell such tendered Ordinary Shares to the Company pursuant to the Repurchase Agreement.

-- the Company will acquire all of the tendered Ordinary Shares (including any Ordinary Shares arising on conversion of Class A Shares) from Panmure Gordon pursuant to the existing Share Purchase Authority and such Ordinary Shares will then be cancelled.

-- 5,000,000 Ordinary Shares represent approximately 7.3 per cent. of the current Voting Share Capital of the Company (excluding Ordinary Shares held in treasury).

-- All Qualifying Shareholders (including Qualifying Class A Shareholders who choose to convert some or all of their Class A Shares into Ordinary Shares prior to the Record Date) are being given the opportunity to participate in the Tender Offer.

-- Qualifying Shareholders may tender such number of Ordinary Shares (including Ordinary Shares arising on conversion of the Class A Shares) under the Tender Offer as they choose.

-- Qualifying Shareholders do not have to tender any of their Ordinary Shares if they do not wish to do so.

-- All Ordinary Shares (including any Ordinary Shares arising on conversion of Class A Shares) tendered by any Qualifying Shareholder up to their Basic Entitlement (which represents such Qualifying Shareholder's pro rata share of the maximum number of Ordinary Shares to be acquired under the Tender Offer) will be accepted in full on and subject to the terms and conditions of the Tender Offer set out in Part 4 of the Circular and, in the case of Ordinary Shares held in certificated form, the Tender Form.

-- Each Qualifying Shareholder's Basic Entitlement will be calculated by the Registrars as at the Record Date by reference to the Qualifying Shareholder's holding of Ordinary Shares as at that date.

-- If the number of Ordinary Shares (including any Ordinary Shares arising on conversion of Class A Shares) validly tendered is 5,000,000 or less, all such Ordinary Shares (including any Ordinary Shares arising on conversion of Class A Shares) will be purchased under the Tender Offer on and subject to the terms and conditions of the Tender Offer set out in Part 4 of the Circular.

-- If the number of Ordinary Shares (including any Ordinary Shares arising on conversion of Class A Shares) validly tendered is more than 5,000,000, tenders will be accepted in the order set out below:

(a) all Ordinary Shares (including any Ordinary Shares arising on conversion of Class A Shares) tendered by Qualifying Shareholders up to their Basic Entitlement will be accepted in full; and

(b) tenders of Ordinary Shares (including any Ordinary Shares arising on conversion of Class A Shares) in excess of the Qualifying Shareholders' Basic Entitlements will be satisfied pro rata in proportion to the amount tendered in excess of Basic Entitlements (rounded down to the nearest whole number of Ordinary Shares) or otherwise at the discretion of Panmure Gordon, in consultation with the Board.

-- Ordinary Shares (including any Ordinary Shares arising on conversion of Class A Shares) will be purchased without commissions and dealing charges.

-- Qualifying Shareholders are able to tender their Ordinary Shares until 3.00 p.m. on the closing date of the Tender Offer, which is 26 October 2018. In order to participate in the Tender Offer:

- Qualifying Class A Shareholders who wish to participate in the Tender Offer must convert some or all of their Class A Shares into Ordinary Shares prior to the Record Date by completing and returning a Conversion Notice, together with any share certificate(s) and/or other document(s) of title in respect of the Class A Shares to be converted in accordance with the instructions printed thereon by no later than 5.00 p.m. on 16 October 2018;

- Qualifying Shareholders (including Qualifying Class A Shareholders who have submitted a Conversion Notice as described above) holding Ordinary Shares in certificated form as at the Record Date must return the accompanying personalised Tender Form together, except in the case of Qualifying Class A Shareholders who have submitted a Conversion Notice, with any share certificate(s) and/or other document(s) of title in accordance with the instructions set out on the Tender Form by 3.00 p.m. on 26 October 2018; and

- Qualifying Shareholders holding Ordinary Shares in uncertificated form (that is, in CREST) are directed to paragraph 3.2 of Part 4 of the Circular which details specific procedures for those holders.

Qualifying Shareholders who choose not to participate in the Tender Offer and who therefore do not tender their Ordinary Shares (including any Ordinary Shares arising on conversion of Class A Shares) will not receive any cash proceeds in respect of their Ordinary Shares under the Tender Offer but will benefit from owning a greater percentage of the Voting Share Capital as there will be fewer Shares in issue after completion of the Tender Offer and the subsequent repurchase of the tendered Ordinary Shares by the Company pursuant to the Repurchase Agreement.

Ordinary Shares may be traded in the normal way during the period in which the Tender Offer remains open, but Qualifying Shareholders should note that, once tendered, their Ordinary Shares (including any Ordinary Shares arising on conversion of Class A Shares) may not be sold, transferred, charged or otherwise disposed of other than in accordance with the Tender Offer.

The purchase from Qualifying Shareholders and the subsequent sale of the tendered Ordinary Shares to the Company will be effected by Panmure Gordon, as principal, "On Exchange" in accordance with the Rules of the London Stock Exchange.

The Tender Offer is only available to Qualifying Shareholders and is not available to Shareholders in Australia, Canada, Japan, the Republic of South Africa or the United States of America or to Shareholders who are otherwise within a Restricted Territory.

Any rights of Qualifying Shareholders who choose not to tender their Ordinary Shares, and Class A Shareholders who choose not to convert any of their Class A Shares in order to participate in the Tender Offer, will be unaffected by the Tender Offer.

The Directors reserve the right, at any time prior to the announcement that the Tender Offer has become unconditional in all respects, to decline from proceeding with the Tender Offer if they conclude that its implementation is no longer in the interests of the Company and/or Shareholders as a whole.

Full details of the Tender Offer, including the terms and conditions on which it is made, are set out in Part 4 of the Circular.

   4.     Status of the Class A Shares 

The Company's investment in Romulus High Income Trust plc (Romulus) was acquired as part the Company's acquisition of the Property Investment Portfolio plc (PIP) portfolio in 2012. The Company ascribed no value to Romulus for the purposes of its acquisition of the PIP portfolio, with any realised value from Romulus being passed to former PIP shareholders by way of the Class A Shares. Romulus represents the final asset from the PIP portfolio in respect of which Class A Shareholders have separate rights to Ordinary Shareholders.

Romulus was put into liquidation on 12 February 2018 and the liquidation is ongoing. The Company expects to receive a further sum from the liquidators in respect of its investment in Romulus.

A further distribution is therefore currently anticipated. Based on the current number of Class A Shares this distribution is expected to be less than 1 pence per Class A Share.

In view of the above the Board does not intend to exercise its right to give a Compulsory Conversion Notice in accordance with the Articles, which would convert some or all the outstanding Class A Shares into Ordinary Shares on a "one for one" basis until such time as the liquidation of Romulus has been completed and a final distribution is made.

As all the Class A Shares are unlisted and do not trade on a recognised investment exchange, the acquisition of Class A Shares by the Company in connection with the Tender Offer and the subsequent repurchase of such shares pursuant to the Repurchase Agreement would not fall within the scope of the existing Share Purchase Authority as such acquisitions would not be "market acquisitions" as prescribed by the terms of the Share Purchase Authority. However, Qualifying Class A Shareholders who wish to participate in the Tender Offer may do so if they convert their Class A Shares into Ordinary Shares on a "one for one" basis prior to the Record Date. Qualifying Class A Shareholders who wish to do so should complete and return a Conversion Notice specifying the number of Class A Shares they wish to convert and submit a Tender Form in respect of some or all of the Ordinary Shares arising on such conversion. Further details of the action to be taken by Qualifying Class A Shareholders who wish to participate in the Tender Offer are set out under the paragraph headed "Action to be taken" in this Part 1.

   5.     The City Code and the Panel Rule 9 Waiver 

Under Rule 9 of the City Code (Rule 9) any person who acquires, whether by a series of transactions over a period of time or not, an interest in shares which (taken together with shares in which persons acting in concert with him are interested) carry 30 per cent. or more of the voting rights of a company; or any person, together with persons acting in concert with him, is interested in shares which in the aggregate carry not less than 30 per cent. of the voting rights of a company but does not hold shares carrying more than 50 per cent. of such voting rights and such person, or any person acting in concert with him, acquires an interest in any other shares which increases the percentage of shares carrying voting rights in which he is interested, such person shall extend offers, on the basis set out in Rules 9.3, 9.4 and 9.5 of the City Code, to the holders of any class of security whether voting or non-voting and also to the holders of any other class of transferable securities carrying voting rights.

An offer under Rule 9 must be in cash and at the highest price paid within the twelve months prior to the announcement of the offer for any interest in shares in the Company by the person required to make the offer or any person acting in concert with him.

Under the City Code, the partners in ARC are deemed to be acting in concert with ARC.

The aggregate shareholding of ARC and the ARC Concert Parties in the Company as at the Latest Practicable Date was 26,890,731 Ordinary Shares and nil Class A Shares, being approximately 39.26 per cent. of the Voting Share Capital as set out in the table below. The table below also sets out details of the maximum number of Ordinary Shares and the percentage of Voting Share Capital of the Company which would be held by ARC and the ARC Concert Parties were the maximum number of Ordinary Shares to be tendered under the Tender Offer and subsequently repurchased by the Company from Panmure Gordon, assuming that neither ARC nor any of the ARC Concert Parties tender any of their Ordinary Shares under the Tender Offer:

 
                 As at the Latest Practicable      In the event the Tender 
                             Date                    Offer is fully taken 
                                                              up 
 Shareholder     Number of       % of Voting     Number of      % of Voting 
                  Ordinary      Share Capital     Ordinary     Share Capital 
                   Shares                          Shares      of the Company 
               -------------  ----------------  -----------  ---------------- 

 ARC             22,550,000         32.93        22,550,000        35.52 
               -------------  ----------------  -----------  ---------------- 
 ARC Concert 
  Parties        4,340,731          6.34         4,340,731         6.84 
               -------------  ----------------  -----------  ---------------- 
 Total           26,890,731         39.26        26,890,731        42.36 
               -------------  ----------------  -----------  ---------------- 
 

The Panel agreed in December 2017 to waive the obligation to make a general offer that would otherwise arise as a result of any exercise of the Share Purchase Authority, and this was approved by the Shareholders (other than ARC and the ARC Concert Parties who, in accordance with the City Code, did not vote on Panel Waiver Resolution) on 5 January 2018. Accordingly, any increase in the percentage of Voting Share Capital held by ARC and the ARC Concert Parties as a result of the implementation of the Tender Offer and the subsequent repurchase of the tendered Ordinary Shares by the Company will not require ARC and the ARC Concert Parties to make an Offer under Rule 9 in continuing reliance on the Panel Waiver.

Further information on ARC and the ARC Concert Parties can be found in paragraph 3 of Part 6 of the Circular.

   6.     Overseas Shareholders 

The attention of Shareholders who are not resident in the United Kingdom is drawn to paragraph 9 of Part 4 of the Circular headed "Restricted Shareholders and other Overseas Shareholders".

   7.     Recommendation 

The Board is making no recommendation to Qualifying Shareholders in relation to participation in the Tender Offer itself or in relation to the conversion of any Class A Shares into Ordinary Shares in order to participate in the Tender Offer. Whether or not Qualifying Shareholders decide to tender all or any of their Ordinary Shares or, in the case of Qualifying Class A Shareholders, to convert some or all or any of the Class A Shares into Ordinary Shares in order to participate in the Tender Offer, will depend, among other things, on their view of the Company's prospects and their own individual circumstances, including their tax position. Qualifying Shareholders are recommended to consult their duly authorised independent advisers and make their own decision.

None of the Directors nor ARC nor any of the ARC Concert Parties intends to tender any of their Ordinary Shares pursuant to the Tender Offer.

If you are in any doubt about the contents of the Circular or the action you should take, you should seek your own independent financial or legal advice immediately.

   8.     Expected Timetable of Principal Events 

The expected timetable for the Tender Offer is as follows:

 
 Latest time and date for receipt          5.00 p.m. on 16 October 2018 
  of Conversion Notices, accompanied 
  by the relevant share certificate(s) 
  or other document(s) of title, for 
  Class A Shareholders wishing to 
  participate in the Tender Offer 
 Conversion of Class A Shares into                      25 October 2018 
  Ordinary Shares in respect of which 
  a Conversion Notice has been given 
 Admission to the SFS of Ordinary          8.00 a.m. on 26 October 2018 
  Shares arising on conversion of 
  Class A Shares in respect of which 
  a Conversion Notice has been given 
 Latest time and date for receipt          3.00 p.m. on 26 October 2018 
  of Tender Forms or for settlement 
  of TTE Instructions in respect of 
  the Tender Offer 
 Record Date for participation in          6.00 p.m. on 26 October 2018 
  the Tender Offer 
 Results of the Tender Offer announced                  29 October 2018 
 Settlement date: cheques despatched               from 5 November 2018 
  and CREST accounts credited with 
  proceeds in respect of successfully 
  tendered Ordinary Shares (including 
  Ordinary Shares arising on conversion 
  of Class A Shares) 
 Balancing certificates despatched          week commencing 12 November 
  and CREST accounts credited in respect                           2018 
  of unsold Ordinary Shares (including 
  Ordinary Shares arising on conversion 
  of Class A Shares) 
 

Capitalised terms and expressions shall have the same meanings as those attributed to them in the Circular.

A copy of the Circular will shortly be available for inspection on the National Storage Mechanism at www.hemscott.com/nsm.do and is available for download from the Company's website http://www.alpharealtrustlimited.com/.

For further information:

Alpha Real Trust Limited

   David Jeffreys, Chairman, Alpha Real Trust                         [phone] 
   Brad Bauman, Joint Fund Manager, Alpha Real Trust       [phone] 

Panmure Gordon, Broker to the Company

   Richard Gray/Andrew Potts/Atholl Tweedie                       [phone] 

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 [e-mail] or visit www.rns.com.

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