Greenko Group plc Proposed Initial Cash Return (8805G)

TIDMGKO

RNS Number : 8805G

Greenko Group plc

25 November 2015

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, WITHIN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION

FOR IMMEDIATE RELEASE

25 November 2015

Greenko Group plc

("Greenko" or the "Company")

Proposed Initial Cash Return

Adoption of New Articles of Association

Notice of Annual General Meeting

Notice of Extraordinary General Meeting

and

Proposed Delisting

As announced on 20 November 2015, the Disposal has now completed and the consideration received from GEH amounted to approximately GBP162.8 million. The Company is pleased to announce that it posted a circular to Shareholders yesterday evening outlining details of the Initial Cash Return to Shareholders, the adoption of New Articles, Delisting and Notice of Annual General Meeting and Notice of Extraordinary General Meeting (the "Circular").

Terms used and not defined in this announcement bear the meaning given to them in the Circular.

The Company is now pleased to announce that the Company proposes to make an Initial Cash Return to Shareholders of 98 pence per Ordinary Share.

Completion of the Initial Cash Return will require, inter alia, the approval of Shareholders. The level of Shareholder approval required is not less than 75 per cent. of votes cast by Shareholders voting in respect of the resolutions proposed at the Extraordinary General Meeting.

Following the completion of the Disposal, the Company does not have any assets other than its bank balances. Accordingly, the Board is focused on minimising costs with a view to returning as much cash to Shareholders as is possible within the timing constraints imposed by its legal obligations.

As outlined in the Circular, the Board believes that once the Initial Cash Return has been completed it will be in the best interests of the Company and its Shareholders if the admission of the Ordinary Shares to trading on AIM is cancelled.

The Circular includes details of the Notice of the Annual General Meeting (which the Company is required to convene and hold no later than 31 December 2015) and the Notice of the Extraordinary General Meeting to be convened at 12:00 pm and 12:30 pm respectively on 18 December 2015 at Merchants House, 24 North Quay, Douglas, Isle of Man IM1 4LE, at which the proposed resolutions set out in each notice will be put to Shareholders for approval.

The chairman's letter regarding the Initial Cash Return, the Delisting, and the expected timetable of principal events, contained in the Circular are set out below.

Enquiries:

 
 Greenko Group plc                               [phone] 
 Keith Henry/Mahesh Kolli/Anil Chalamalasetty 
 
 
   Arden Partners plc                              [phone] 
 Jonathan Keeling/Steve Douglas/James 
  Felix 
 
 
   Investec Bank plc                               [phone] 
 Jeremy Ellis/Nigel Robinson 
 
 
   Tavistock Communications                        [phone] 
 Matt Ridsdale/Mike Bartlett/Niall Walsh 
 

Introduction

On 19 October 2015, the Board of the Company announced that it had entered into an agreement with GEH for the sale of all the Company's shares in Greenko Mauritius. The Sale and Purchase Agreement provided that GEH would acquire the Company's shares in Greenko Mauritius, the Cash and the Share Application Monies, subject to certain conditions, for an aggregate cash consideration of approximately GBP162.8 million.

As announced on 20 November 2015, the Disposal has now completed and the consideration received from GEH amounted to approximately GBP162.8 million. This cash consideration is now the only asset of the Company.

The Company is pleased to propose an Initial Cash Return to Shareholders of 98 pence per Ordinary Share subject to Shareholder approval at the Extraordinary General Meeting and satisfaction of the conditions referred to in paragraph 1 of Part IV of the Circular.

The Initial Cash Return will be made by way of the B Share Scheme which will allow Shareholders (other than Restricted Shareholders) to make an election as to whether to receive the Initial Cash Return as dividend by way of the B Share Dividend or as a capital return by way of the B Share Purchase Offer, or a combination of both.

The Company also proposes to cancel the admission of the Ordinary Shares to trading on AIM. The proposed Delisting requires Shareholder approval pursuant to the AIM Rules and Shareholders are accordingly being asked to vote in favour of the proposed Delisting (which will be conditional on Shareholder approval at the Extraordinary General Meeting for the Initial Cash Return).

In due course, the Company proposes to convene a further extraordinary general meeting at which Shareholders will be requested to authorise the Board to commence a members' voluntary winding-up of the Company and to take such steps, including but not limited to the payment of interim dividends and the appointment of the liquidator, as the Board in their absolute discretion deem necessary to effect the summary winding-up of the Company.

The purpose of the Circular is to provide further details of the alternative options available to Shareholders and how Shareholders may elect to choose one of them. In addition, as Shareholder approval is being sought for the Initial Cash Return and for the Delisting at the Extraordinary General Meeting, Shareholders will find at the end of the Circular, a Notice of Extraordinary General Meeting, which has been convened for 12.30 p.m. on 18 December 2015 at which the Requisite Resolutions will be put to Shareholders. Shareholders will also find at the end of the Circular a Notice of Annual General Meeting which has been convened for 12.00 noon on the same date. Both the Annual General Meeting and the Extraordinary General Meeting will be held at Merchants House, 24 North Quay, Douglas, Isle of Man, IM1 4LE. It is important that Shareholders complete, sign and return the Forms of Proxy for use at the Annual General Meeting and the Extraordinary General Meeting enclosed with the Circular, whether or not they intend to attend the Annual General Meeting or the Extraordinary General Meeting. The completion and return of the Forms of Proxy will not preclude Shareholders from attending the Annual General Meeting or the Extraordinary General Meeting and voting in person, should they so wish.

ACMK, a company in which Anil Kumar Chalamalasetty and Mahesh Kolli have a controlling interest, holds approximately 18.77 per cent. of the issued Ordinary Shares. Anil Kumar Chalamalasetty and Mahesh Kolli are therefore not considered independent and, accordingly, neither of them has participated in any Board vote regarding the Initial Cash Return.

Summary of the B Share Scheme

The Board has proposed a flexible method by which the Initial Cash Return is to be effected in light of the Company's diverse shareholder base. Accordingly, the Initial Cash Return will be by way of the B Share Scheme under which Shareholders will receive a bonus issue of a newly created class of shares, B Shares, pro rata to their holding of Ordinary Shares. Each Shareholder (other than a Restricted Shareholder) will then be able to elect for the Initial Cash Return to be through either the payment of a dividend in respect of the B Shares (the B Share Dividend), acceptance of an offer by the Company to purchase the B Shares (the B Share Purchase Offer) or a combination of both. In the absence of an election being made, Shareholders will be deemed to have elected to receive their return by way of the B Share Dividend.

The Initial Cash Return will amount to approximately GBP155.8 million in aggregate. The Company has potential liabilities under the Sale and Purchase Agreement in respect of: (i) claims for breach of warranties provided by the Company (notified within 6 months of the date of Completion); and (ii) any CGT Liability (notified within the earlier of two years of the date of Completion and the date on which the shareholders of the Company resolve to wind-up the Company). In light of this the Company is retaining a provision of approximately GBP2.5 million from the consideration received from GEH for the Disposal. The Board has also decided to retain a further provision of approximately GBP4.5 million from the consideration received from GEH for the Disposal: (i) in order to settle the costs associated with the Disposal (including the ongoing running expenses of the Company up to Completion); (ii) for the estimated costs of running the Company up to the date on which Shareholders resolve to wind-up the Company and; (iii) as a prudent reserve for additional costs that may be incurred. To the extent these provisions and reserves are not utilised they will be returned to Shareholders at the time of a members' voluntary winding-up or other restructuring of the Company.

Regardless of which election Shareholders make, each Shareholder will receive the same amount per Ordinary Share of 98 pence.

The main features of the B Shares, and the alternative options available to Shareholders, are summarised in the paragraph below.

The B Share Scheme

Under the Initial Cash Return, Shareholders will receive one B Share for every one Ordinary Share held on the Record Date.

Shareholders will have the following alternative options in relation to their B Shares. Shareholders should read Part VII of the Circular headed 'Taxation' before determining their elections since each will have different tax consequences.

Shareholders who are in any doubt as to their tax position or who are subject to tax in a jurisdiction other than the United Kingdom should consult an appropriate professional adviser.

Restricted Shareholders should be aware that a choice for the receipt of their Initial Cash Return cannot be offered. Accordingly, Restricted Shareholders will only be entitled to receive the B Share Dividend.

Option 1: B Share Dividend

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If you choose this option in respect of your B Shares, you will receive a single dividend of an amount equal to the Initial Cash Return per B Share in respect of those B Shares. Following receipt of the B Share Dividend, your B Shares will automatically convert into Deferred Shares with extremely limited rights and of negligible value.

It is expected that the B Share Dividend will be treated as income for United Kingdom tax purposes.

If you wish to choose Option 1: B Share Dividend in respect of all of your B Shares you do not need to complete and return the personalised Form of Election (if you are a Shareholder who holds a share certificate or share certificates in respect of your Ordinary Shares (a "certificated Shareholder")) or send a TTE Instruction in CREST (if you are a Shareholder who holds their Ordinary Shares in CREST (an "uncertificated Shareholder")).

Option 2: B Share Purchase Offer

If you choose this option in respect of your B Shares, the Company will buy back those B Shares for an amount equal to the Initial Cash Return per B Share. All B Shares bought back by the Company will immediately be cancelled.

It is expected that the proceeds from the B Share Purchase Offer will be treated as capital for United Kingdom tax purposes.

Restricted Shareholders will not be eligible for the B Share Purchase Offer and so will be deemed to have elected for Option 1: B Share Dividend in respect of their B Share Entitlement.

If you wish to choose Option 2: B Share Purchase Offer in respect of some or all of your B Shares you need to complete and return a valid Form of Election for certificated Shareholders (Shareholders are not required to return their share certificates with the Form of Election) or submit a valid TTE Instruction in CREST for uncertificated Shareholders. Details of how to complete and return your Form of Election are set out in Part II of the Circular and details of how to send a valid TTE Instruction through CREST are set out in Part III of the Circular.

If you do not properly complete and return your Form of Election or if you are a CREST holder and you do not send a valid TTE Instruction, you will be deemed to have elected for Option 1: B Share Dividend in respect of all of your B Shares.

Further information on each of the B Share Alternatives is set out in Part IV of the Circular.

Delisting

Following Completion, the Company does not have any assets other than its bank balances. Accordingly, the Board is focused on minimising costs with a view to returning as much cash to Shareholders as is possible within the timing constraints imposed by its legal obligations.

With this in mind the Board has also considered the benefit of the Ordinary Shares continuing to be traded on AIM following completion of the Initial Cash Return and consulted its advisers, including the Company's nominated adviser and joint broker, Arden, in this regard. The Board has taken into account the fact that, after the Initial Cash Return has been completed, the Company will have significantly reduced bank balances and no ongoing requirement to access public markets for capital, and that the Company has undertaken to GEH in the Sale and Purchase Agreement not to carry on any business after Completion. The Board also expects that, as the underlying cash value remaining for Shareholders after the completion of the Initial Cash Return will be very low, there will be limited liquidity in the Ordinary Shares.

The Board believes that, once the Initial Cash Return has been completed, it will be in the best interests of the Company and its Shareholders if the admission of the Ordinary Shares to trading on AIM is cancelled. The Delisting is also expected to help the Company to make cost savings whilst continuing to minimise the Company's liabilities pending a winding-up of the Company.

Delisting Process

Rule 41 of the AIM Rules requires an AIM company that wishes to cancel admission of its securities to trading on AIM to notify such intended cancellation to the public and separately to inform the London Stock Exchange of its preferred cancellation date. That rule also requires that, unless the London Stock Exchange otherwise agrees, the Delisting must be conditional upon the consent of not less than 75 per cent. of votes cast by the Shareholders given in a general meeting.

Subject to Shareholder approval at the Extraordinary General Meeting and completion of the Initial Cash Return, it is expected that the admission of the Ordinary Shares to trading on AIM will be cancelled with effect from 7.00 a.m. on 19 January 2016. Accordingly, trading in Ordinary Shares on AIM will cease at the close of business on 18 January 2016.

The Delisting may have taxation consequences for Shareholders. Shareholders who are in any doubt about their tax position should consult an appropriate professional adviser.

Upon cancellation of the Ordinary Shares to trading on AIM, Arden will cease to be the Company's nominated adviser and joint broker and the Company will no longer be required to comply with the AIM Rules.

Risks associated with the Delisting

There are certain risks associated with the Delisting. The Board considers the principal risks that Shareholders should consider to be as follows:

   (a)    Lack of an ongoing trading platform 

Once the Delisting has taken place, there will no longer be a formal market mechanism for Shareholders to trade in the Ordinary Shares and no price will be publicly quoted for the Ordinary Shares. Shareholders will be able to buy and sell their Ordinary Shares "off market" although this will be more difficult than trading "on market". It will therefore be more difficult for Shareholders to realise their Ordinary Shares than when the Company had an AIM quotation and, where a buyer is identified, it will be difficult to place a fair value on any such sale.

   (b)   Corporate governance and regulation 

After the Delisting, the AIM Rules will no longer apply to the Company and levels of corporate governance and transparency, including those that require the Company to announce material events or transactions, will no longer be dictated by those rules. The Company will continue as a company limited by shares under the Act.

Notwithstanding the cancellation of the Ordinary Shares to trading on AIM, the Company will continue to publish annual reports and accounts and hold annual general meetings and other general meetings in accordance with the applicable statutory requirements and the Company's articles of association. Where the Board considers it to be in the interests of the Company to do so, it will continue to post certain additional information relating to the Company on its website. Shareholders will also be able to contact the Company to request information.

Although the Company is incorporated, and has its registered office, in the Isle of Man, the Directors consider that the Company's place of central management and control is outside the United Kingdom, the Channel Islands and the Isle of Man, and accordingly after the Delisting the Company will no longer be subject to the provisions of the Takeover Code. Shareholders will therefore not have the protections afforded by the Takeover Code, which regulate the way in which takeovers are conducted in the UK, in the event of a takeover offer for the Company or in circumstances where the Company would be an offeree company for the purposes of the Takeover Code.

If circumstances change, the Company will consult with the Takeover Panel to ascertain whether this will affect the place of central management and control of the Company. If the Takeover Panel determines that, as a result of such changes, the place of central management and control of the Company is located in the United Kingdom, the Channel Islands or the Isle of Man, then the Takeover Code will become applicable to the Company and Shareholders will be informed at that time.

Adoption of New Articles

As the Current Articles need to be updated in order to implement the B Share Scheme, it is proposed that the New Articles are adopted in substitution for the Current Articles. The New Articles reflect the following key changes to the Current Articles:

   (a)     the following new definitions have been added to article 2.1 (Definitions): 
 
 "B Shares"          the non-cumulative, non-redeemable, 
                      limited voting preference shares 
                      of 0.000001 pence each in the 
                      capital of the Company with the 
                      rights and restrictions described 
                      in Article 5A; 
 "Deferred Shares"   the non-voting redeemable deferred 
                      shares of 0.000001 pence each 
                      in the capital of the Company 
                      with the rights and restrictions 
                      described in Article 5B; 
 

(b) in article 4 (Authorised Share Capital), the amount of share capital of the Company available for issue has been increased by GBP159.011606, divided into 159,011,606 B Shares, to enable the Company to issue the B Shares in connection with the B Share Scheme;

(c) the power of the Board to allot and issue the B Shares, by way of a bonus issue, and the rights and restrictions attaching to the B Shares (as more particularly summarised in Part V of the Circular) are set out in a new article 5A (B Shares);

(d) the rights and restrictions attaching to the Deferred Shares (as more particularly summarised in Part VI of the Circular) are set out in a new article 5B (Deferred Shares); and

(e) the requirement to obtain prior Shareholder authority in relation to a capitalisation of reserves (under article 141) and a reduction of capital (under article 12) has been qualified to the extent that the new articles 5A and 5B respectively contain appropriate authorisations in connection with the same in order to help implement the B Share Scheme.

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Copies of the New Articles together with a comparison of the New Articles against the Current Articles are available for review from the Company's registered office at any time before the Extraordinary General Meeting; in addition, copies of the New Articles will be available on the Company's website at www.greenkogroup.com and at the Extraordinary General Meeting.

Additional Returns of Capital and Future of the Company

As set out in the circular dated 19 October 2015, the Company intends to make cash returns to Shareholders in the period from Completion up to the time at which the Company enters a members' voluntary winding-up or other restructuring. The aggregate cash returns were estimated at that time to be up to approximately 100 pence per Ordinary Share, based on a number of assumptions, and such amount would be reduced to the extent of, inter alia:

(a) Any claims by the Purchaser under the warranties or the Company's undertakings in the Sale and Purchase Agreement

In the event that there are any such claims by the Purchaser, these will need to be notified within a period of not more than 6 months from Completion. The Company is therefore retaining an amount of approximately GBP2 million in relation to contingent liabilities under the warranties or the Company's undertakings under the Sale and Purchase Agreement, being the maximum amount of the Company's liability in respect of such matters under the Sale and Purchase Agreement and a provision for associated costs.

   (b)     Any taxation liability resulting from the Disposal 

There has been no change to the taxation advice received by the Board prior to the announcement of the Disposal, namely that the sale of the Company's shares in Greenko Mauritius is not expected to result in a tax liability for the Company in either India or Mauritius. The Withholding Tax Amount for the purposes of the Sale and Purchase Agreement is therefore nil.

The Company is, however, required to file a tax return in India after the end of the current tax year on 31 March 2016 and the Board has decided, conservatively, to retain an amount of approximately GBP500,000 until such time as the Shareholders resolve to wind up the Company (being the quantum and term of the potential CGT Liability pursuant to the Sale and Purchase Agreement). In light of the advice that no tax liability is expected to result from the Disposal, it is therefore anticipated that this sum, less associated filing and adviser costs, should ultimately be capable of being returned to Shareholders.

(c) Any differences between actual costs and the estimated running expenses of the Company until the final return of capital to Shareholders

The Company currently estimates that the costs associated with the Disposal (including the running expenses of the Company to Completion) and running expenses of the Company in the period from November 2015 up to the Company entering a members' voluntary winding-up or other restructuring, after making a prudent provision for additional costs that may be incurred, will amount to approximately GBP4.5 million.

To the extent the amount retained by the Company to meet its estimated running expenses as outlined above exceeds the actual costs of the Company, it will be returned to Shareholders at the time of the members' voluntary winding-up or other restructuring of the Company.

Following Completion, the Company's cash balances net of the provision for the Disposal transaction costs and future running costs of the Company in the period up to the Company entering a members' voluntary winding-up or other restructuring and the retentions referred to above, amounted to approximately GBP155.8 million (approximately 98 pence per Ordinary Share).

The Company's Investing Policy, as approved by Shareholders on 9 November 2015, is to return capital to Shareholders. It is expected that at the end of this process the Company will enter a members' voluntary winding-up or other restructuring and this is likely to take place before the end of 2016.

Taxation

A guide to certain UK tax consequences of the B Share Scheme under current UK law and HM Revenue & Customs' practice is set out in Part VII of the Circular.

Overseas Shareholders

Overseas Shareholders' attention is drawn to paragraph 8 of Part IV of the Circular. In particular, Overseas Shareholders (other than Restricted Shareholders) should note that, by making a valid election for the B Share Purchase Offer, such Shareholders will be deemed to represent, warrant, undertake and/or agree (as applicable) in the terms set out in paragraph 8 of Part IV of the Circular. Restricted Shareholders will be deemed to have elected for the B Share Dividend in respect of all of their B Share Entitlement. The tax consequences of the B Share Scheme may vary for Overseas Shareholders and, accordingly, Overseas Shareholders should consult their own independent professional adviser without delay.

Annual General Meeting

The Company is required to convene and hold an annual general meeting for a date not later than 31 December 2015. Shareholders will find at pages 33 to 36 of the Circular the notice convening an Annual General Meeting, to be held at Merchants House, 24 North Quay, Douglas, Isle of Man IM1 4LE at 12.00 noon on 18 December 2015.

At the Annual General Meeting:

a) Ordinary Resolutions (as defined in the Current Articles) will be proposed (i) to receive, consider and adopt the Company's Annual Report and Accounts and attached documentation for the financial year ended 31 December 2014; (ii) to re-elect those Directors who are retiring by rotation but, being eligible, have offered themselves for re-election (being Anil Kumar Chalamalasetty and Vasudeva Rao Kaipa);and (iii) to re-appoint Grant Thornton as the independent auditor of the Company and to authorise the Directors to determine their remuneration;

b) Special Resolutions (as defined in the Current Articles) will be proposed (i) to authorise the Company to make open-market purchases of up to 5 per cent. of the Ordinary Shares on the terms set out in the resolution concerned, including the price and number of shares to be purchased; and (ii) to authorise the Directors to allot Ordinary Shares up to the limits specified in the resolution concerned as if the pre-emption rights contained in the Current Articles did not apply.

Notwithstanding the proposed Initial Cash Return, Delisting and eventual members' voluntary winding-up of the Company, the Directors consider the authorities above are necessary to preserve maximum flexibility for the period between the date of the Annual General Meeting and Delisting or winding-up, as appropriate.

Shareholders are referred to the notes and explanatory notes to the notice convening the Annual General Meeting at pages 35 and 36 of the Circular.

Extraordinary General Meeting

Shareholders will find at pages 37 and 38 of the Circular a notice convening an extraordinary general meeting of the Company, to be held at Merchants House, 24 North Quay, Douglas, Isle of Man, IM1 4LE at 12.30 p.m. on 18 December 2015.

At the Extraordinary General Meeting, the Requisite Resolutions will be proposed to approve, amongst other things, the adoption of the New Articles, the B Share Scheme and the Delisting.

Shareholders are referred to the notes to the notice convening the Extraordinary General Meeting at page 38 of the Circular.

Action to be Taken

Action Shareholders should take in relation to the Annual General Meeting and the Extraordinary General Meeting

Shareholders will find enclosed with the Circular Forms of Proxy for use at the Annual General Meeting and the Extraordinary General Meeting. Whether or not you intend to be present at the Annual General Meeting or the Extraordinary General Meeting, you are requested to complete and return the Forms of Proxy so as to reach the Company's registered office at Merchants House, 24 North Quay, Douglas, Isle of Man, IM1 4LE, either by personal delivery, post, facsimile transmission ([phone]) or email ([e-mail]), as soon as possible and, in any event, not later than 12.00 noon on 16 December 2015 in respect of the Annual General Meeting and not later than 12.30 p.m. on 16 December 2015 in respect of the Extraordinary General Meeting, in both cases, being not less than 48 hours before the time appointed for the Annual General Meeting and the Extraordinary General Meeting respectively.

Completion and return of the Forms of Proxy will not, however, prevent you from attending at the Annual General Meeting and the Extraordinary General Meeting and voting in person if you should wish to do so.

Action Shareholders should take in relation to the B Share Scheme

The procedure for making elections under the B Share Scheme depends on whether your existing Ordinary Shares are held in certificated or uncertificated form and is summarised below.

Shareholders (other than Restricted Shareholders) may elect for any combination of the B Share Alternatives provided that the total number of Ordinary Shares in respect of which an election is made does not exceed a Shareholder's total holding of Ordinary Shares as at the Record Date.

Shareholders need to make their own decision regarding any election(s) they make under the B Share Scheme between the B Share Alternatives and are recommended to consult their own independent professional adviser.

   (a)    Ordinary Shares held in certificated form 

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