Possible Offer for Osprey Smaller Cos Inc Fund

 

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RNS Number : 5830P 
Manchester & London Inv Tst PLC 
27 March 2009 
 

Manchester & London Investment Trust PLC 
 
 
Possible merger with 
 
 
Osprey Smaller Companies Income Fund Limited 
 
 
For immediate release 
27 March 2009 
 
 
The boards of Manchester and London Investment Trust PLC ("MLIT") and 
Osprey Smaller Companies Income Fund Limited ("Osprey) announce that they are 
considering proposals which may lead to a merger of MLIT and Osprey to be 
effected by way of a recommended offer by MLIT for Osprey.  Under the Offer it 
is expected that accepting Osprey Shareholders will receive new MLIT Shares, the 
number of which will be determined by reference to a formula based on net assets 
per share. 
 
 
The formula to be used to determine the value of the Offer is summarised in the 
appendix to this announcement. 
 
 
Both MLIT and Osprey are managed by Midas Investment Management Limited 
("Midas"). 
 
 
Midas and the Board of MLIT believe the proposed Offer allows the two investment 
companies to increase their respective scale which in turn could lead to the 
following benefits: 
  *  cost reductions as a proportion of net assets through economies of scale; 
  *  the increased size of the merged Group which may provide more liquidity for 
  shareholders; and 
  *  the increased Net Asset Value may increase the probability that the Group can 
  gain access to loan finance if required, particularly in the current climate 
  where smaller companies may struggle to find lending solutions. 
 
 
 
Certain major shareholders in Osprey have been approached and have signed 
letters indicating that if an Offer based on the relative formula asset value of 
MLIT and Osprey were to be made, they would accept it in respect of 5,564,047 
Osprey Shares owned by them or under their discretionary management representing 
52.7% of its issued share capital as follows: 
 
 
 
Name Osprey Shares % 
Manchester & Metropolitan Investment Ltd 4,047,000 38.3% 
Brewin Dolphin Ltd 541,030                       5.1% 
Philip J Milton & Company Plc 476,025                       4.5% 
Cenkos Channel Islands Nominee Company Ltd                          193,000 
                     1.8% 
Rathbone Investment Management Limited 159,100                       1.5% 
Adam & Company Investment Management Ltd147,8721.4% 
Total 5,564,047 52.7% 
 
 
It is emphasised that the letters of intent are not legally binding and that it 
is possible that no offer or other proposals will be made to the shareholders of 
either MLIT or Osprey.  MLIT and Osprey reserve the right to implement the 
proposed merger by way of a scheme (instead of by an Offer) and the letters of 
intent state the signatories' intention to vote in favour of such a scheme.  In 
addition to the Osprey Shares held in funds under discretionary management shown 
above, Rathbone Investment Management Limited and Brewin Dolphin Ltd hold 50,000 
and 115,081 Osprey Shares respectively on behalf of advisory clients and have 
stated their intention to advise such clients to accept the Offer in respect of 
such 165,081 Osprey Shares representing 1.6% of Osprey's issued share capital. 
 
 
A further announcement will be made in due course. 
 
 
Rule 2.10 of the City Code on Takeovers and Mergers requires the announcement of 
the number of shares in issue of MLIT and Osprey. MLIT has 13,946,338 
Ordinary Shares of 25p each in issue and admitted to trading on the London Stock 
Exchange under ISIN code GB0002258472 and Osprey has 10,554,612 Ordinary Shares 
of 10p each in issue and admitted to trading on the London Stock Exchange and 
the Channel Island Stock Exchange under ISIN code GB0031797698. 
 
 
Dealing Disclosure Requirements 
Under the provisions of Rule 8.3 of the Takeover Code (the "Code"), if any 
person is, or becomes, "interested" (directly or indirectly) in 1% or more of 
any class of "relevant securities" of MLIT or of Osprey, all "dealings" in any 
"relevant securities" of that company (including by means of an option in 
respect of, or a derivative referenced to, any such "relevant securities") must 
be publicly disclosed by no later than 3.30 pm (London time) on the London 
business day following the date of the relevant transaction. This requirement 
will continue until the date on which the offer becomes, or is declared, 
unconditional as to acceptances, lapses or is otherwise withdrawn or on which 
the "offer period" otherwise ends. If two or more persons act together pursuant 
to an agreement or understanding, whether formal or informal, to acquire an 
"interest" in "relevant securities" of MLIT or Osprey, they will be deemed to be 
a single person for the purpose of Rule 8.3. 
 
 
Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevant 
securities" of MLIT or Osprey by 
MLIT or Osprey, or by any of their respective "associates", must be disclosed by 
no later than 12.00 noon (London time) on the London business day following the 
date of the relevant transaction. 
 
 
A disclosure table, giving details of the companies in whose "relevant 
securities" "dealings" should be disclosed, and the number of such securities in 
issue, can be found on the Takeover Panel's website at 
www.thetakeoverpanel.org.uk. 
 
 
"Interests in securities" arise, in summary, when a person has long economic 
exposure, whether conditional or absolute, to changes in the price of 
securities. In particular, a person will be treated as having an "interest" by 
virtue of the ownership or control of securities, or by virtue of any option in 
respect of, or derivative referenced to, securities. 
 
 
Terms in quotation marks are defined in the Code, which can also be found on the 
Panel's website. If you are in any doubt as to whether or not you are required 
to disclose a "dealing" under Rule 8, you should consult the Panel. 
The Directors of MLIT and of Osprey accept responsibility for the information 
contained in this announcement. To the best of the knowledge and belief of the 
Directors of MLIT and Osprey (who have taken all reasonable care to ensure that 
such is the case), the information contained in this announcement is in 
accordance with the facts and does not omit anything likely to affect the import 
of such information. 
This Announcement does not constitute, or form part of, an offer or invitation 
to purchase any securities. 
 
 
                                    Appendix 
 
                    CALCULATION OF THE FORMULA ASSET VALUES 
 
Each of Osprey and MLIT is, unless the context otherwise requires, referred to 
as the "Relevant Company". Each of the FAV per Osprey Share and the FAV per MLIT 
Share shall be calculated as at the close of business on the Calculation Date 
(being the date on which the Offer becomes or is declared unconditional as to 
acceptances) and shall be the amount in pence which is the result of the 
following formula, rounded to four decimal places (with 0.00005p being rounded 
upwards): 
 
FAV per share of the Relevant Company = A - B 
        C 
where "A" is the aggregate of: 
 
(i) the value of those investments of the Relevant Company which are listed, 
traded, quoted or dealt in on a recognised stock exchange or on AIM, a market of 
the London Stock Exchange, calculated by reference to the bid quotations or, if 
not available, prices or the last trade prices for those investments as at the 
close of business on the Calculation Date as derived from the relevant 
exchange's recognised method of publication of prices for such investments (any 
CFD accounts containing cash and positions to be valued using the statement from 
the independent CFD administrator as at the close of business on the Calculation 
Date); 
 
(ii)      the value of those investments of the Relevant Company which are dealt 
in or traded on any publicly-available exchange or market (including any "over 
the counter" market but excluding any exchange or market referred to in 
sub-paragraph A(i) above), calculated by reference to the average of the daily 
average of the prices marked for such investments on each of the five business 
days up to and including the Calculation Date on which there were dealings or 
trading in such investments as derived from the relevant market's recognised 
method of publication of prices for such investments; 
 
(iii)     the value of those investments of the Relevant Company which are units 
in unit trust or shares in open-ended investment companies, calculated by 
reference to the prices or, in the case of units or shares in respect of which 
cancellation and bid prices are quoted, the lower of the cancellation and bid 
prices quoted as at the close of business on the Calculation Date by the manager 
of the relevant unit trust or open-ended investment company for holdings of the 
size held by the Relevant Company (and, for the avoidance of doubt, any such 
investments which are listed, traded, quoted or dealt in on a recognised stock 
exchange shall be valued under this sub-paragraph (iii) and not under 
sub-paragraph A(i) above); 
 
(iv)     the value of those traded uncovered options and futures contracts to 
which the Relevant Company is a party as at the close of business on the 
Calculation Date which are traded on a stock, commodities, financial futures or 
other securities exchange, calculated by reference to the official middle-market 
closing prices on the Calculation Date as derived from the relevant exchange's 
recognised method of publication of prices for such traded options and futures 
contracts; 
 
(v)     the value of traded call options contracts to which the Relevant Company 
is a party as at the close of business on the Calculation Date which are traded 
on a stock held in the portfolio of the Relevant Company shall be valued at zero 
unless the premium is still due in which case the position will be valued at the 
premium value due; 
 
(vi)     the value of those investments of the Relevant Company which have 
unexpired call options sold against an underlying stock held in the portfolio of 
the Relevant Company shall be valued at the strike price of the call if the bid 
price of the investment is above the strike price as at the close of business on 
the Calculation Date; 
 
(vii)    the value of all other investments of the Relevant Company, calculated 
as being their fair realisable values as at the close of business on the 
Calculation Date as determined by agreement between the Company Secretary of 
MLIT, on behalf of MLIT, and Elysium on behalf of Osprey (or, failing such 
agreement within seven days after the Calculation Date, as determined by an 
independent expert); 
 
(viii)   the amount as at the close of business on the Calculation Date of any 
sums due from debtors (including, for this purpose, any dividends or 
distributions receivable on investments quoted ex-dividend or ex-distribution on 
the Calculation Date and any interest accrued on any debt securities as at the 
Calculation Date and any recoverable tax credit in relation thereto, but 
excluding any dividend, distribution or interest not yet received which has been 
taken into account in the value of any of the investments referred to in 
sub-paragraphs A (i) to (vii) (inclusive) above or is unlikely to be received), 
cash and deposits with or balances at banks, bills receivable and any money 
market instruments of the Relevant Company (together with, in each case, any 
accrued interest at that date less an accrual for any associated tax) and the 
fair realisable value of any other tangible assets of the Relevant Company not 
otherwise accounted for in sub-paragraphs A (i) to (vii) (inclusive) above, less 
any provision for diminution of value which may be appropriate in respect of any 
of sub-paragraphs A (i) to (vii) (inclusive) above (including provisions for bad 
or doubtful debts), in each case as determined by agreement between the Company 
Secretary of MLIT, on behalf of MLIT, and Elysium, on behalf of Osprey (or, 
failing such agreement within seven days after the Calculation Date, as 
determined by an independent expert); and 
 
(ix)     in the case of the FAV per MLIT Share only, (a) the value of its 
Wimbledon debentures will be valued at GBP110,000 which was the last valuation 
as provided by the All England Lawn tennis Ground plc; and (b) the value of its 
outstanding claim for VAT and interest repayable from HM Customs which shall be 
valued at GBP45,017.23. 
 
"B" is the aggregate of: 
 
(i)      in respect of each Relevant Company, the principal amounts as at the 
close of business on the Calculation Date of any outstanding borrowings plus any 
accrued but unpaid interest, commitment fees and other charges up to and 
including that date and the higher of any premiums or penalties payable on 
either early or final repayment if required; 
 
(ii)      the cost of closing as at the close of business on the Calculation 
Date any open foreign exchange or other forward purchase or sale contract to 
which the Relevant Company is a party on that date (save to the extent otherwise 
taken into account in calculating the FAV per share of the Relevant Company); 
 
(iii)     in the case of the FAV per Osprey Share only, the cost of termination 
as at the close of business on the Calculation Date of any investment advisory 
(Midas have agreed that no termination fee will be due in the event the Offer 
becomes unconditional), advisory, custody and administrative arrangements in 
force on that date, including, but not limited to, any compensation or other 
payments to be made to any investment manager, investment adviser, 
administrator, secretary, director or employee of Osprey, such amount to include 
irrecoverable value added tax (where applicable) but to exclude any tax relief; 
 
(iv)     in the case of the FAV per Osprey Share only, the cost of terminating 
as at the close of business on the Calculation Date any other contracts or 
arrangements whatsoever in force on that date to which Osprey is a party, but 
excluding, for the purpose of this sub-paragraph B (iv), any investment 
management, advisory and administrative arrangements in force at the close of 
business on the Calculation Date; 
 
(v)     the total cost of any dividend or other distribution of the Relevant 
Company declared on or before the Calculation Date, so far as not previously 
paid; 
 
(vi)     in the case of the FAV per Osprey Share only, the costs, expenses and 
fees of any independent expert appointed in connection with determining the 
Formula Asset Values (of either/or both Relevant Companies), as well as any 
additional accrued but unpaid costs and expenses to the Relevant Companies 
arising directly as a result of and specifically in connection with the 
appointment of an independent expert and the performance of its function, such 
amount to include irrecoverable value added tax (where applicable) but to 
exclude any tax relief; 
 
(vii)    the aggregate of the amount of any POTM fees or UKLA fees to be borne 
equally by each Relevant Company in respect of the Offer (including any VAT 
chargeable); 
 
(viii)   the amount of all stamp duty or stamp duty reserve tax as may be 
payable by MLIT in respect of the transfer of the Osprey Shares pursuant to the 
Offer (assuming full acceptance of the Offer), as estimated by agreement between 
the Company Secretary of MLIT, on behalf of MLIT, and Elysium, on behalf of 
Osprey (or, failing such agreement within seven days after the Calculation Date, 
as determined by an independent expert) to be borne equally by each Relevant 
Company; 
 
(ix)     the aggregate of the amount of all accrued but unpaid professional, 
advisory, legal and other fees and other advertising costs and expenses incurred 
by the Relevant Company in connection with the Offer, such amount to include 
irrecoverable value added tax (where applicable) but to exclude any tax relief 
including all such fees, costs and expenses relating to or in connection with 
the determination of the Formula Asset Values (excluding any amounts arising 
under sub-paragraph B (vi) above) but excluding for the purpose of this 
sub-paragraph B (ix) all stamp duty and stamp duty reserve tax already provided 
for in accordance with sub-paragraph B (viii) above, such amount to include 
irrecoverable value added tax (where applicable) but to exclude any tax relief; 
 
(x)     the aggregate of the amount of any accrued but unpaid professional, 
advisory, legal and other fees and advertising and other costs and expenses 
whatsoever incurred by the Relevant Company otherwise than in connection with 
the Offer, such amount to include irrecoverable value added tax (where 
applicable) but to exclude any tax relief; and 
 
(xi)     an amount which fully reflects all other liabilities and obligations of 
the Relevant Company whatsoever, including a fair provision for any contingent 
liabilities (including any additional liabilities to taxation, whether or not 
deferred, and any liabilities arising on liquidation) or losses (including 
disputed claims), as at the close of business on the Calculation Date determined 
by agreement between the Company Secretary of MLIT, on behalf of MLIT, and 
Elysium, on behalf of Osprey (or, failing such agreement within seven days after 
the Calculation Date, as determined by an independent expert); and 
 
"C" is the aggregate of: 
 
(i)      the number of shares in the Relevant Company in issue as at the close 
of business on the Calculation Date. 
 
Notes: 
 
1.       For the purpose of the above calculations, the value of any 
investments, other assets or liabilities denominated or valued in currencies 
other than sterling shall be converted into sterling at the closing mid-point 
spot rate of exchange between sterling and such other currencies in London as at 
the close of business on the Calculation Date as published in the Financial 
Times or, failing which, as certified by Midas (acting as an expert and not as 
an arbiter). 
 
2.       In the case of sub-paragraphs A(i), (ii), (iii), (iv), (v) and (vi) 
above, if there has been any general suspension of trading on the relevant 
stock, commodities, financial futures or other securities exchange or market, or 
if it was closed for business on the Calculation Date, the value of the relevant 
investments, traded options or futures contracts shall be taken as at the close 
of business on the immediately preceding date on which there was trading on such 
exchange or market, provided that such date is not more than seven days prior to 
the Calculation Date and save that, if there has been a material adverse change 
in the financial position of any such underlying investment, traded option or 
futures contract since the date by reference to which its value is calculated 
but prior to the close of business on the Calculation Date, a fair provision (as 
determined by agreement between the Company Secretary of MLIT, on behalf of 
MLIT, and Elysium, on behalf of Osprey (or, failing such agreement within seven 
days after the Calculation Date, as determined by an independent expert)) shall 
be made to take account of such adverse change in the value of the relevant 
investment, traded option or futures contract. 
 
3.       Subject to note 2 above, in the case of sub-paragraphs A (i) to (vi) 
(inclusive) above: 
 
(i)      where any such investment, traded option or futures contract is subject 
to restrictions on transfer or a suspension of dealings or if no such published 
or quoted prices are available in respect of any such investment, traded option 
or futures contract, in each case as at the close of business on the Calculation 
Date, the value of such investment, traded option or futures contract will be 
calculated as at the close of business on the Calculation Date in accordance 
with sub-paragraph A (vii) above; and 
(ii)      where any such investment, traded option or futures contract is, at 
the close of business on the Calculation Date, subject to any right of any 
person to acquire the same or any obligation on the Relevant Company to dispose 
of the same, whether as a result of the Offer being made or becoming or being 
declared unconditional or otherwise, at a price more or less than would 
otherwise be determined in accordance with sub-paragraphs A (i) to (vi) 
(inclusive) above, such investment, traded option or futures contract shall be 
valued at such greater or lesser price unless such right or obligation is 
unconditionally and irrevocably waived or lapses prior to the calculation of the 
FAV per share of the Relevant Company otherwise being agreed or determined. 
 
4.       Subject to note 5 below, with regard to sub-paragraphs A (vii) and 
(viii) above, the Company Secretary of MLIT and Elysium and, if appointed, any 
independent expert shall have regard, inter alia, to the following when 
determining the value of any investment or other asset (which shall be 
calculated on the basis of a notional sale by a willing seller to a willing 
buyer, without regard to any additional value that might be attributed to such 
investment or other asset by any special category of potential purchaser): 
 
(i)      the existence or exercise of any pre-emption rights or obligations in 
respect of such investment or other asset or any other restrictions on the 
transfer or disposal of the same which may exist or which may arise as a 
consequence of the proposed acquisition by MLIT of Osprey or any Osprey Shares 
or of the transfer of such investment or other asset to any party or of the 
winding up of Osprey; 
(ii)      the terms and volumes of any recent dealings in, and marketability of, 
such investment or other asset; and 
(iii)     the amount of any bona fide offer to acquire such investment or other 
asset which may be made by any person and brought to the attention of the 
Company Secretary of MLIT and Elysium or, if appointed, any independent expert. 
5.       With regard to sub-paragraphs A (vii) and (viii) above, the Company 
Secretary of MLIT and Elysium and, if appointed, any independent expert shall, 
except in the case of debtors and tangible assets, be bound by the actual amount 
of cash items and, in the case of debtors and tangible assets, shall adopt the 
accounting policies used by the Relevant Company in its latest audited financial 
statements. 
 
6.       If any liability referred to in sub-paragraphs B(i) to (xi) (inclusive) 
above has not been determined by the date on which the calculations and 
adjustments otherwise necessary to determine the FAV per share of the Relevant 
Company have been made, there shall be included in "B" such amount in respect of 
any such liability as shall be considered to be an appropriate estimate by 
agreement between the Company Secretary of MLIT and Elysium (or, failing such 
agreement within seven days after the Calculation Date, as determined by an 
independent expert). 
 
7.       In agreeing any fair realisable value (in the case of sub-paragraphs A 
(vii) and (viii) above) or estimating or determining the amount of any 
liabilities, obligations or losses (in the case of sub-paragraphs B(viii) or 
B(xi) above), or in making any determination under notes 2 and 6 above, the 
Company Secretary of MLIT and Elysium shall act as experts and not as arbitrator 
and any such determination shall be final and binding on all persons and neither 
of them shall be under any liability to any person by reason thereof or by 
reason of anything done or omitted to be done by them for the purposes thereof 
or in connection therewith. 
 
8.       The independent expert referred to herein shall be a member of the 
London Investment Banking Association (not connected with any of the parties 
providing advice to Osprey or MLIT in connection with the Offer) selected by the 
Company Secretary of MLIT and Elysium or, in default of such selection within 14 
days after the Calculation Date, by the chairman for the time being of the 
London Investment Banking Association on the application of either the Company 
Secretary of MLIT or Elysium.  Such member shall act as an expert and not as an 
arbitrator and his determination shall (subject to any agreement to the contrary 
between MLIT and Osprey) be final and binding on all persons and such member 
shall not be under any liability to any person by reason of his appointment or 
by anything done or omitted to be done by him for the purposes of such 
appointment or in connection therewith. 
 
9.       Notwithstanding any of the above provisions, in the event that the 
valuation of any investment or other asset of the Relevant Company in accordance 
with any of such provisions, or the amount of any deduction made in accordance 
with sub-paragraphs B (i) to (xi) (inclusive) above, is, in the opinion of the 
Company Secretary of MLIT and Elysium, incorrect or unfair they may, if they so 
agree, adopt an alternative method of valuation or deduction, as the case may 
be. 
 
 
 
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