Foresight 3 VCT PLC Foresight 3 Vct Plc : Recommended Proposals For A Merger

 
TIDMFTD 
 
 
   JOINT ANNOUNCEMENT 
 
   19 May 2017 
 
   FORESIGHT 3 VCT PLC ("F3") 
 
   FORESIGHT 4 VCT PLC ("F4") 
 
   (together the "Companies" and each a "Company") 
 
   TIDM: FTD and FTF 
 
   RECOMMED PROPOSALS FOR: 
 
 
   -- A MERGER BETWEEN F3 AND F4 TO BE COMPLETED BY WAY OF A SCHEME OF 
      RECONSTRUCTION UNDER SECTION 110 OF THE INSOLVENCY ACT 1986; AND 
 
   -- OFFER FOR SUBSCRIPTION BY F4 TO RAISE FURTHER FUNDS 
 
 
   SUMMARY 
 
   On 12 September 2016, the board of the Companies (together the "Boards" 
and each a "Board") announced that they had entered into discussions 
regarding the merger of the Companies ("Merger"). Both Companies are 
managed by Foresight Group CI Limited ("Foresight"). In light of 
comments received by the F4 Board from certain of its shareholders, it 
was decided to first seek views from shareholders of both Companies 
through an on-line advisory vote. 
 
   The results of the advisory vote in each Company were materially in 
favour of proceeding with the Merger (97% to 98% of those who responded 
in each Company). Each Board has continued to consider a number of 
options and, in particular taking into account the advisory vote, remain 
of the view that a Merger remains the preferred option. 
 
   The Boards are, therefore, pleased to announce that they have reached 
agreement on recommended proposals for the Merger to create a single 
enlarged VCT. The Merger is conditional upon certain conditions 
(including the approval of each Company's shareholders) being satisfied 
as further set out in the circulars being posted to the Companies' 
respective shareholders today ("Circulars") alongside a prospectus 
published by F4 in connection with, amongst other things, the Merger 
(the "Prospectus"). 
 
   The Merger will be effected by F3 being placed into members' voluntary 
liquidation pursuant to a scheme of reconstruction under section 110 of 
the Insolvency Act 1986 ("Scheme").  The assets and liabilities of F3 
will then be transferred to F4 in exchange for the issue of new F4 
shares to existing F3 shareholders ("F4 Consideration Shares"). The 
Merger will be effected on a relative net asset basis and is expected to 
become effective on 22 June 2017. 
 
   The Merger is expected to deliver cost savings and other benefits to 
both sets of shareholders which each Board believes is in line with the 
strategy to expand the size of its Company and be better positioned to 
improve shareholder value. The Boards also believe that there will be 
other benefits for shareholders arising from participating in a larger 
company with an increased net asset base, including the ability to 
sustain a significantly wider spread of investments which will 
facilitate risk management and a reduced need to maintain liquid assets 
allowing the enlarged entity to consider making additional returns to 
shareholders. 
 
   As a result, the F4 Board is pleased to advise that it has declared a 
special dividend of 4.0p per F4 share, conditional on the Merger 
becoming effective ("F4 Special Dividend"). In addition, the F4 Board 
intends to make available a tender offer of up to GBP5 million if the 
Merger becomes effective ("Tender Offer"). 
 
   The F4 Board are also taking the opportunity to make available an offer 
for subscription ("F4 Offer") to raise up to GBP50 million (with an 
over-allotment facility to raise a further GBP50 million) through the 
issue of new F4 shares ("F4 Offer Shares"). As part of the Offer 
arrangements, Foresight Group Limited ("Foresight Group") will be paid a 
promoter's fee, which constitutes a related party transaction and 
requires the approval of F4 shareholders. 
 
   The approval of resolutions in connection with the Merger, the F4 Offer 
and related proposals will be proposed at a general meeting of F4 to be 
held on 14 June 2017 ("F4 Meeting"). The approval of resolutions in 
connection with the Merger will be proposed at general meetings of F3 to 
be held on 14 June 2017 and 22 June 2017 ("F3 Meetings"). 
 
   Further details of the Merger, the F4 Offer and related proposals are 
set out below. 
 
   THE MERGER 
 
   Benefits and features 
 
   Each Board reviews the costs of managing its respective Company on a 
regular basis. A larger company is able to spread the fixed elements of 
running costs across a wider asset base and, as a result, can reduce 
these costs as a percentage of net assets. 
 
   In recommending the Merger, the principal benefits and features that the 
Boards have taken into account are set out below: 
 
 
   -- an enlarged entity ("Enlarged Company") with assets immediately post 
      Merger of approximately GBP72.78 million taking into account the Special 
      Dividend (GBP115.03 million assuming full subscription under the Offer, 
      but ignoring the over-allotment facility, and taking into account the 
      Tender Offer); 
 
   -- A portfolio of over 25 companies, many of which are making good progress 
      and are profitable and which have delivered the recent improvements in 
      NAV of both F3 and F4. 
 
   -- A payback period of under 12 months based on the estimated Merger costs 
      and annual cost savings post Merger. 
 
   -- A reduction in the aggregate number of directors. 
 
   -- A reduction in Foresight's annual investment management fee from 2.25% of 
      net assets to 2% of net assets. 
 
   -- A reduction in the annual expenses cap from 3.5% of net assets to 2.95% 
      of net assets. 
 
   -- An enlarged entity better positioned to raise further funds and continue 
      with the current investment strategy. 
 
   -- The ability to consider investment realisations and create liquidity 
      events for Shareholders and support dividend payments. 
 
 
   Merger and cost savings 
 
   The estimated total Merger costs are GBP400,000 (including professional 
fees, UKLA fees, stamp duty, VAT and the costs of winding up F3). The 
costs of the Merger will be split proportionately between the Companies 
by reference to their respective Merger net assets (ignoring the Merger 
costs). 
 
   The projected annual running costs (these being normal expenses and 
ignoring exceptional items, performance incentive fees and trail 
commission) of the Enlarged Company are estimated to be GBP2.04 million 
(2.80% of the expected net assets of the Enlarged Company of GBP72.78 
million immediately post Merger and taking into account the Special 
Dividend, but ignoring the Offer and the Tender Offer). This compares to 
GBP2.52 million in aggregate for the Companies (3.4% of their aggregate 
unaudited net assets as at 31 December 2016) based on the unaudited 
annual running costs for the 12 month period ended 31 December 2016 for 
each of the Companies. 
 
   The reduction in Foresight's annual investment management fee from an 
amount equal to 2.25% of net assets to 2% of net assets will reduce its 
fee by approximately GBP182,000 per annum across the Companies. As the 
Foresight's annual administration fees for the Enlarged Company will 
remain the same as currently for the Company, this will result in a 
further reduction of GBP129,000 per annum in its fees. Foresight will 
also make an additional cash contribution to the Merger costs of 
GBP100,000. This will effectively enable the Merger to take place 
entirely at Foresight's expense within one year as the total Foresight 
annual cost savings and the additional contribution of approximately 
GBP411,000 are expected to be greater than the estimated Merger costs of 
GBP400,000. 
 
   On the basis of the expected annual cost savings of approximately 
GBP480,000 and the Foresight contribution of GBP100,000, the estimated 
Merger costs of GBP400,000 would be recovered in just over eight months. 
 
   The Scheme 
 
   The mechanism by which the Merger will be completed is as follows: 
 
 
   -- F3 will be placed into members' voluntary liquidation pursuant to a 
      scheme of reconstruction under section 110 of the Insolvency Act 1986; 
 
   -- all of the assets and liability of F3 will be transferred to F4 in 
      consideration for the issue of new shares in F4 directly to the 
      shareholders of F3; and 
 
   -- F3 will subsequently be wound up. 
 
 
   Implementation of the Merger will require resolutions being approved by 
each Company's shareholders. 
 
   Whilst there will only be one general meeting of F4, at which 
shareholders will be invited to consider and vote in favour of the 
Merger and authorise the issue of new shares pursuant to the Merger, 
there will be two general meetings for F3. At F3's first general meeting, 
the shareholders will be invited to approve the Merger and authorise the 
liquidators to implement the Scheme and, at the second general meeting, 
the shareholders will be invited to pass a special resolution to wind up 
F3 and cancel the listing of the F3 shares. 
 
   If a shareholder in F3 does not vote in favour of the Merger and 
expresses his dissent in writing then he may require the liquidators to 
purchase his shares at their break-value price (this being an estimate 
of the amount he would receive in an ordinary winding up of F3 if all of 
the assets had to be realised). The break-value price is expected to be 
significantly below the net asset value of F3. 
 
   In addition to the approval of shareholders being sought at the F4 
Meeting and the F3 Meetings, the Scheme is conditional upon: 
 
 
   -- notice of dissent not being received from shareholders of F3 who hold 
      more than 10% in nominal value of the issued share capital of F3; 
 
   -- F4 confirming to F3 and F3 confirming to F4 that, in each case, it has 
      not received any notice of any claims, proceedings or actions of whatever 
      nature threatened or commenced, as relevant, against F4 which the F3 
      Board regard as material or against F3 which the F4 Board regard as 
      material; and 
 
   -- the Companies maintaining their VCT status. 
 
 
   Subject to the above, the Scheme shall proceed and become effective 
immediately after the passing of the special resolution for the winding 

up of F3 to be proposed at the F3 second general meeting and will be 
binding on all F3 shareholders, including dissenting F3 shareholders, 
and all persons claiming through or under them. 
 
   If the conditions have not been fulfilled by 31 July 2017, the Scheme 
will not proceed. 
 
 
 
   The Enlarged Company board 
 
   The Boards have considered the size and composition of the Enlarged 
Company board and it has been agreed that, subject to completion of the 
Merger, Peter Dicks will step down as a director of F4 and Raymond 
Abbott will be appointed as a director to the Enlarged Company board. 
Raymond Abbott will also, on Merger, take over as chairman of the 
Enlarged Company. The Enlarged Company board will then comprise Raymond 
Abbott, Simon Jamieson and Michael Gray. 
 
   Merger illustration 
 
   In terms of the proposed number of consideration shares to be issued if 
the Merger proceeds, this will be calculated based on a relative net 
assets basis, by reference to the formulas contained in the Circulars. 
 
   Had the Merger been completed on the basis of the Scheme examples set 
out in the Circulars (which are based on the unaudited net assets of the 
Companies as at 31 December 2016, but adjusting for the recent F3 top up 
offer for subscription), the number of consideration shares which would 
be issued for each existing F3 share would be 0.8674, representing 
approximately 45.4% of the Enlarged Company. 
 
   Special Dividend 
 
   The Boards believe that a larger VCT would provide the ability to 
consider realisations and the creation of liquidity events for 
shareholders. The Boards have discussed the expected position of the 
Enlarged Company and believe that the Merger would reduce the need to 
retain certain investments and liquid assets. 
 
   The F4 Board has, therefore, declared the Special Dividend of 4.0p per 
F4 share conditional on the Merger becoming effective and payable to F4 
shareholders on the register on 30 June 2017 (this being after the date 
on which the F4 Consideration Shares are expected to be issued pursuant 
to the Merger thereby allowing the F3 shareholders to participate in the 
dividend). The Special Dividend, if it becomes payable, will be paid on 
17 July 2017. 
 
   F4 OFFER 
 
   The F4 board has decided to take the opportunity to raise further funds 
through the Offer. This will provide shareholders and new investors with 
the opportunity to invest in F4 and benefit from the tax reliefs 
available to qualifying investors. The Offer is conditional on the 
approval of F4 shareholders being sought at the F4 Meeting, but is not 
conditional on the Merger. 
 
   Foresight Group is acting as the promoter to the Offer and will be paid 
a fee equal to 2.5% (as reduced by any relevant discounts) of the amount 
subscribed by Retail Client Investors, Professional Client Investors and 
Execution-Only Investors (as each term in defined in the F4 Circular) 
and 5.5% (as reduced by any relevant discounts) of the amount subscribed 
by Direct Investors (as defined in the F4 Circular) ("Promoter's Fee 
Arrangement"). In consideration of the promoter's fee, Foresight Group 
has agreed to meet all costs, expenses and charges of, or incidental to, 
the Offer (other than intermediary commissions and adviser charges). All 
up-front costs and intermediary charges and commissions will be borne by 
the investor through the price which the investor pays for the offer 
shares as more particularly described in the Prospectus. The F4 Board 
considers the Promoter's Fee Arrangement to be in line with market 
practice. 
 
   Foresight Group, as a subsidiary undertaking of Foresight (the 
investment manager to the Company), is a related party of the Company 
for the purposes of the Listing Rules. The Promoter's Fee Arrangement is, 
therefore, a related party transaction for the purposes of the Listing 
Rules. Assuming full subscription under the Offer utilising the 
over-allotment facility (i.e. raising GBP100 million) and assuming that 
all investors are Direct Investors and no discounts apply, the maximum 
Promoter's Fee Arrangement would be GBP5.5 million. It is likely that 
the majority of the investors will be Retail Client Investors, 
Professional Client Investors and Execution-Only Investors and, as a 
result, the actual fee to Foresight Group is expected to be much lower 
(in particular taking into account the discounts being made available by 
Foresight Group for early investment and shareholder loyalty as set out 
in the Prospectus). The Listing Rules, however, require the maximum 
possible fee amount to be taken into account when assessing related 
party transaction requirements and, as a result, the approval of 
shareholders is required for the Promoter's Fee Arrangement. Should the 
F4 shareholders not approve the Promoters Fee Arrangement at the F4 
Meeting, the aggregate fee payable to Foresight Group under this 
agreement will be limited to GBP1.6 million, which will constitute a 
smaller related party transaction for the purposes of the Listing Rules. 
 
   The price at which the offer shares are being made available is the net 
asset value of an F4 share at the time of allotment plus associated 
Offer costs directly or indirectly incurred by an investor (including 
the Foresight Group promoter's fee). As a result, the Offer is not 
expected to have any material dilution effect on existing Shareholders. 
Full details of the Offer are set out in the Prospectus. The Offer opens 
today and will close on 30 April 2018 (unless closed earlier or extended 
by the F4 Board). The offer shares will rank pari passu with the 
existing F4 shares from issue. 
 
   F4 TER OFFER 
 
   Alongside the Special Dividend, the Boards believe that the Enlarged 
Company should be in the position to provide a partial or full exit 
event for shareholders by way of the F4 Tender Offer of up GBP5 million. 
The Tender Offer will only be made if the Merger becomes effective, F4 
has the ability to implement the Tender Offer and the F4 Board continues 
to believe it to be in the best interests of F4. 
 
   A summary of the expected terms of the F4 Tender Offer is set out below 
(subject to further consideration and agreement by the F4 Board): 
 
 
   -- F4 ender Offer period - mid-July 2017 to mid-September 2017. 
 
   -- F4 Tender Offer price - NAV per F4 share less 7.5% (to take into account 
      the costs of making the F4 Tender Offer and what the F4 Board believes to 
      be an appropriate discount). 
 
   -- Availability - all F4 shareholders (other than certain overseas 
      shareholders). 
 
   -- F4 Tender Offer record date - occurring after the Merger and the payment 
      of the F4 Special Dividend, but before the first allotment of offer 
      shares. 
 
   -- F4 shares will be purchased on-market through F4's broker, Panmure Gordon 
      (UK) Limited. 
 
 
   F4 shares purchased by F4 under the F4 Tender Offer will be cancelled 
and not re-issued. 
 
   The actual number of Shares to be purchased will depend on the level of 
take-up and on the NAV per Share at the time of implementation of the 
Tender Offer. For illustrative purposes only, based on a NAV per Share 
of 69.2p (this being the example Merger Value per Share of 73.2p) 
reduced by the Special Dividend, which would give a Tender Offer price 
of 64.01p, the maximum number of Shares which would be purchased is 
approximately 7.8 million if fully subscribed. 
 
   Details of the Tender Offer (including application forms for 
participation) will be provided to F4 shareholders in separate 
documentation following the Merger in mid-July 2017 (i.e after the 
Merger is expected to become effective allowing F3 shareholders to 
participate). 
 
   EXPECTED TIMETABLE 
 
 
 
 
Expected Timetable for F3 
Latest time for receipt of forms of proxy for the             11.00 a.m. on 12 
 F3 First General Meeting                                            June 2017 
F3 First General Meeting                                      11.00 a.m. on 14 
                                                                     June 2017 
Latest time for receipt of forms of proxy for the             11.00 a.m. on 20 
 F3 Second General Meeting                                           June 2017 
Calculation Date                                                  21 June 2017 
Register of members closed and Record Date for Shareholders'   6.00 p.m. on 21 
 entitlements under the Scheme                                       June 2017 
Dealings in Shares suspended                                   7.30 a.m. on 22 
                                                                     June 2017 
F3 Second General Meeting                                     11.00 a.m. on 22 
                                                                     June 2017 
Effective Date for the transfer of the assets and                 22 June 2017 
 liabilities of the Company to F4 and the issue of 
 F4 Consideration Shares pursuant to the Scheme 
Announcement of the results of the Scheme                         22 June 2017 
Cancellation of the Shares' listing                            8.00 a.m. on 20 
                                                                     July 2017 
Expected Timetable for F4 
Merger with the Company and F4 Special Dividend 
Latest time for receipt of forms of proxy for the             11.30 a.m. on 12 
 F4 General Meeting                                                  June 2017 
F4 General Meeting                                            11.30 a.m. on 14 
                                                                     June 2017 
Calculation Date                                                  21 June 2017 
Effective Date for the transfer of the assets and                 22 June 2017 
 liabilities of the Company to F4 and the issue of 
 F4 Consideration Shares pursuant to Scheme* 
Announcement of the results of the Scheme                         22 June 2017 
Admission of and dealings in F4 Consideration Shares              23 June 2017 
 issued pursuant to the Scheme to commence 

CREST accounts credited with F4 Consideration Shares              23 June 2017 
 issued pursuant to the Scheme 
F4 Special Dividend Record Date                                   30 June 2017 
F4 Special Dividend Payment Date                                  17 July 2017 
Certificates for F4 Consideration Shares issued pursuant          17 July 2017 
 to the Scheme dispatched 
F4 Offer 
F4 Offer opens                                                     19 May 2017 
First allotment of F4 Offer Shares                               end-September 
                                                                          2017 
Subsequent allotments of F4 Offer Shares                               monthly 
Admission of, and dealings in, F4 Offer Shares to              3 business days 
 commence                                                            following 
                                                                     allotment 
F4 Offer Share certificates and tax certificates to           10 business days 
 be dispatched                                                       following 
                                                                     allotment 
F4 Offer Closes                                               12.00 noon on 30 
                                                                    April 2018 
 
 
   DOCUMENTS AND APPROVALS 
 
   F4 shareholders will receive the F4 Circular convening the F4 Meeting to 
be held on 14 June 2017, at which F4 shareholders will be invited to 
approve various resolutions in connection with the Merger, the Offer and 
the Tender Offer. 
 
   F3 shareholders will receive the F3 Circular convening the F3 Meetings 
on 14 June 2017 and 22 June 2017 at which F3 shareholders will be 
invited to approve the various resolutions in connection with the 
Merger. 
 
   Copies of the F3 Circular, the F4 Circular and the F4 Prospectus have 
been submitted to the UK Listing Authority and shall shortly be 
available for download from the Foresight website 
(www.foresightgroup.eu) and the national storage mechanism 
(www.morningstar.co.uk/uk/NSM). 
 
   FURTHER INFORMATION 
 
   For further information, please contact: 
 
   Company Secretary 
 
   Foresight Fund Managers Limited 
 
   Contact: Gary Fraser Tel: [phone] 
 
   Solicitors to F3 and F4 
 
   Shakespeare Martineau LLP 
 
   Contact: Kavita Patel Tel: [phone] 
 
   The directors of F4 accept responsibility for the information relating 
to F4 and its directors and proposed director contained in this 
announcement.  To the best of the knowledge and belief of such directors 
and proposed director (who have taken all reasonable care to ensure that 
such is the case), the information relating to F4 and its directors and 
proposed director contained in this announcement, for which they are 
solely responsible, is in accordance with the facts and does not omit 
anything likely to affect the import of such information. 
 
   The directors of F3 accept responsibility for the information relating 
to F3 and its directors contained in this announcement. To the best of 
the knowledge and belief of such directors (who have taken all 
reasonable care to ensure that such is the case), the information 
relating to F3 and its directors and proposed director contained in this 
announcement, for which they are solely responsible, is in accordance 
with the facts and does not omit anything likely to affect the import of 
such information. 
 
   Shakespeare Martineau LLP is acting as joint legal advisers for F3 and 
F4 and for no one else in connection with the matters described herein 
and will not be responsible to anyone other than F3 and F4 for providing 
the protections afforded to clients of Shakespeare Martineau LLP or for 
providing advice in relation to the matters described herein. 
 
   BDO LLP, which is authorised and regulated in the United Kingdom by the 
Financial Conduct Authority, is acting as sponsor for F4 and no one else 
and will note be responsible to any other person for providing the 
protections afforded to clients of BDO LLP or for providing advice in 
relation to the matters described herein. 
 
   -END- 
 
   This announcement is distributed by Nasdaq Corporate Solutions on behalf 
of Nasdaq Corporate Solutions clients. 
 
   The issuer of this announcement warrants that they are solely 
responsible for the content, accuracy and originality of the information 
contained therein. 
 
   Source: Foresight 3 VCT PLC via Globenewswire 
 
 
  http://www.foresightgroup.eu/ 
 

(END) Dow Jones Newswires

May 19, 2017 09:38 ET (13:38 GMT)

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