Pre-Annual General Meeting Information • Nov 27, 2015
Pre-Annual General Meeting Information
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THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about its contents, you should seek professional advice from an appropriately qualified independent financial adviser. Shareholders are advised to consult their professional advisers regarding their personal tax position.
If you have sold or otherwise transferred all of your Ordinary Shares, you should forward this Circular (but not the accompanying Tender Form or Form of Proxy) to the purchaser, transferee or agent through whom the sale or transfer was effected. However, this Circular should not be sent to any Restricted Jurisdiction.
J.P. Morgan Securities plc, which conducts its UK investment banking business as J.P. Morgan Cazenove, is authorised by the Prudential Regulation Authority and regulated by the Prudential Regulation Authority and the Financial Conduct Authority and is acting for the Company and no one else in connection with the Tender Offer and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in connection with the Tender Offer.
J.P. Morgan Limited is authorised and regulated by the Financial Conduct Authority and is acting for the Company and no one else in connection with the Waiver and the Rule 9 Waiver Resolution and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in connection with the Waiver and the Rule 9 Waiver Resolution.
Apart from the responsibilities and liabilities, if any, which may be imposed on J.P. Morgan Cazenove or J.P. Morgan Limited by FSMA, the FS Act, or the regulatory regimes established thereunder, neither J.P. Morgan Cazenove nor J.P. Morgan Limited accepts any responsibility whatsoever for the contents of this Circular and disclaims all and any liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this Circular.
The availability of the Tender Offer to Shareholders who are not resident in the United Kingdom may be affected by the laws of the relevant jurisdiction in which they are located. Persons who are not resident in the United Kingdom should read the paragraph headed ''Overseas Shareholders'' set out in Part 3 of this Circular.
This Circular does not constitute an offer to purchase, or solicitation of an offer to sell, Ordinary Shares in any jurisdiction in which, or to or from any person to or from whom, it is unlawful to make such offer or solicitation under applicable securities laws.
Accordingly, unless otherwise determined by J.P. Morgan Cazenove and permitted by applicable law and regulation, the accompanying Tender Form is not being, nor may it be, directly or indirectly, mailed, transmitted or otherwise forwarded, distributed, or sent in, into or from any Restricted Jurisdiction, and persons receiving the Tender Form (including, without limitation, trustees, nominees or custodians) must not mail or otherwise forward, distribute or send it in, into or from such Restricted Jurisdiction, as to do so may invalidate any purported acceptance of the Tender Offer. Any person (including, without limitation, trustees, nominees or custodians) who would or otherwise intends to, or who may have a contractual or legal obligation to, forward the accompanying Tender Form to any jurisdiction outside the United Kingdom, should seek appropriate advice before taking any action.
The delivery of this Circular shall not under any circumstances create any implication that the information contained herein is correct as of any time subsequent to the date hereof, or that there has been no change in the information set forth herein or in the affairs of the Company since the date hereof. No dealer, salesperson or other person is authorised to give any information or to make any representations with respect to the Tender Offer other than such information or representations contained herein and, if given or made, such information or representations must not be relied upon as having been authorised by the Company or by J.P. Morgan Cazenove.
This Circular is dated 27 November 2015
| Definitions | 3 |
|---|---|
| Part 1 Letter from the Chairman of LMS Capital plc | 6 |
| Part 2 Possible risks associated with the Tender Offer (and the associated Repurchase) | 10 |
| Part 3 Terms and Conditions of the Tender Offer | 11 |
| Part 4 Taxation in relation to the Tender Offer | 22 |
| Part 5 Further information | 24 |
| Part 6 Trading update | 34 |
| Part 7 Notice of General Meeting | 36 |
| Announcement of the Tender Offer | 27 November 2015 |
|---|---|
| Tender Offer opens | 27 November 2015 |
| Latest time and date for receipt of Tender Forms and share certificates in relation to the Tender Offer |
1.00 p.m. on 10 December 2015 |
| Latest time and date for receipt of TTE instructions in relation to the Tender Offer |
1.00 p.m. on 10 December 2015 |
| Tender Offer Record Date | 6.00 p.m. on 10 December 2015 |
| Latest time and date for receipt of Forms of Proxy | 10.00 a.m. on 11 December 2015 |
| General Meeting | 10.00 a.m. on 14 December 2015 |
| Announcement of results of the General Meeting | 14 December 2015 |
| Announcement of Tender Offer Price and Basic Entitlement | 7.00 a.m. on 15 December 2015 |
| Announcement of results of the Tender Offer | 7.00 a.m. on 15 December 2015 |
| CREST accounts credited in respect of Tender Offer proceeds for uncertificated Ordinary Shares |
from 18 December 2015 |
| Cheques despatched in respect of Tender Offer proceeds for certificated Ordinary Shares |
from 21 December 2015 |
| Despatch of balancing share certificates for revised, certificated holdings of Ordinary Shares |
from 21 December 2015 |
| ''Act'' | the Companies Act 2006; |
|---|---|
| ''Agent'' | has the meaning given on page 18 of this Circular; |
| ''Attorney'' | has the meaning given on page 17 of this Circular; |
| ''Band Limit'' | has the meaning given on page 22 of this Circular; |
| ''Basic Entitlement'' | has the meaning given on page 7 of this Circular; |
| ''Board'' or ''Directors'' | the board of directors of the Company; |
| ''Business Day'' | any day other than a Saturday, Sunday or public holiday on which banks are open in the City of London for the transaction of general commercial business; |
| ''Capita Asset Services'' | Capita Asset Services (the trading name of Capita Registrars Limited), Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU; |
| ''certificated form'' or ''certificated'' |
Ordinary Shares not recorded on the Register as being in uncertificated form in CREST; |
| ''CGT'' | has the meaning given on page 22 of this Circular; |
| ''Company'' | LMS Capital plc; |
| ''Concert Party'' | members of the extended Rayne family and associated trusts together holding 35.01% of the Ordinary Shares and who are treated by the Panel as ''acting in concert'' for the purposes of the Takeover Code; |
| ''CREST'' | the relevant system (as defined in the Regulations) in respect of which Euroclear is the Operator (as defined in the Regulations); |
| ''CREST Member'' | a person who has been admitted by Euroclear as a system member (as defined in the Regulations); |
| ''CREST Participant'' | a person who is, in relation to CREST, a system-participant (as defined in the Regulations); |
| ''CREST Proxy Instruction'' | has the meaning given on page 37 of this Circular; |
| ''CREST Sponsor'' | a CREST Participant admitted to CREST as a CREST sponsor; |
| ''CREST Sponsored Member'' | a CREST Member admitted to CREST as a CREST sponsored member; |
| ''Deferred Share Bonus Plan'' | the Company's deferred share bonus plan entitling certain key executives to receive awards of shares in the Company; |
| ''Disclosure and Transparency Rules'' |
the Disclosure and Transparency Rules of the Financial Conduct Authority; |
| ''Electronic Tender'' | an electronic tender of Ordinary Shares in accordance with paragraphs 3.4 and 4.2 of Part 3 of this Circular; |
| ''Euroclear'' | Euroclear UK & Ireland Limited; |
| ''Executive Share Option Plan'' | the Company's executive share option plan entitling certain key executives to receive awards of shares in the Company |
| ''Financial Conduct Authority'' or ''FCA'' |
the Financial Conduct Authority established under the FS Act and acting in its capacity as the competent authority for the purposes of Part 6 of FSMA; |
| ''Form of Proxy'' | the form of proxy for the General Meeting which accompanies this Circular; |
| ''FS Act'' | the Financial Services Act 2012; |
| ''FSMA'' | the Financial Services and Markets Act 2000; |
| ''General Meeting'' | the general meeting of the Company to be held at LMS Capital, 100 George Street, London W1U 8NU at 10.00 a.m. on 14 December 2015, or any adjournment thereof; |
| ''Independent Directors'' | all of the members of the Board other than the Non-Independent Director; |
|---|---|
| ''Independent Shareholders'' | all Shareholders other than the members of the Concert Party; |
| ''Individual Excess Tender'' | has the meaning given on page 13 of this Circular; |
| ''J.P. Morgan Cazenove'' | J.P. Morgan Securities plc and J.P. Morgan Limited; |
| ''Listing Rules'' | the Listing Rules of the Financial Conduct Authority; |
| ''London Stock Exchange'' | London Stock Exchange plc; |
| ''Nominated Person'' | has the meaning given on page 37 of this Circular; |
| ''Non-Independent Director'' | Robert Rayne; |
| ''Option Agreement'' | the agreement dated 27 November 2015 between the Company and J.P. Morgan Cazenove, further details of which are set out in Part 3 of this Circular; |
| ''Options'' | awards made under the Deferred Share Bonus Plan, the Executive Share Option Plan and the Performance Share Plan and any awards made under any other employees' share scheme or long-term incentive scheme (as such terms are defined in the Listing Rules) made by the Company in respect of Ordinary Shares from time to time; |
| ''Ordinary Shares'' | the issued ordinary shares of 10 pence each in the share capital of the Company; |
| ''Overseas Shareholder'' | a Shareholder who is resident in, or a citizen of, a jurisdiction outside the United Kingdom; |
| ''Panel'' | the Panel on Takeovers and Mergers; |
| ''Participant ID'' | the identification code or membership number used in CREST to identify a particular CREST Member or other CREST Participant; |
| ''Performance Share Plan'' | the Company's performance share plan entitling certain employees to receive awards of shares in the Company; |
| ''Prudential Regulation Authority'' or ''PRA'' |
the Prudential Regulation Authority established under the FS Act; |
| ''Qualifying Shareholders'' | Shareholders entitled to participate in the Tender Offer, being those who are on the Register on the Tender Offer Record Date and who are not Restricted Shareholders; |
| ''Receiving Agent'' | Capita Asset Services; |
| ''Register'' | the Company's register of members; |
| ''Regulations'' | the Uncertificated Securities Regulations 2001 (SI 2001/3755); |
| ''Regulatory Information Service'' |
any of the services set out on the FCA's list of regulated information services (as set out on the FCA's website) from time to time; |
| ''Repurchase'' | the purchase by the Company of Ordinary Shares from J.P. Morgan Cazenove in connection with the Tender Offer pursuant to the authority granted under the Repurchase Resolution, and ''Repurchased'' shall be construed accordingly; |
| ''Repurchase Resolution'' | has the meaning given on page 8 of this Circular; |
| ''Resolutions'' | the Repurchase Resolution and the Rule 9 Waiver Resolution; |
| ''Restricted Jurisdiction'' | each of Australia, Canada, Japan, New Zealand, the United States, South Africa and any other jurisdiction where the mailing of this Circular or the accompanying documents into or inside such jurisdiction would constitute a violation of the laws of such jurisdiction; |
| ''Restricted Shareholder'' | a Shareholder subject to the securities laws of a Restricted Jurisdiction; |
|---|---|
| ''Rule 9 Waiver Resolution'' | has the meaning given on page 8 of this Circular; |
| ''SDRT'' | stamp duty reserve tax; |
| ''Shareholders'' | holders of Ordinary Shares; |
| ''Takeover Code'' | the City Code on Takeovers and Mergers as issued by the Panel, as amended from time to time; |
| ''tender'' or ''tendered'' | refers to tenders by Qualifying Shareholders of Ordinary Shares pursuant to the Tender Offer; |
| ''Tender Conditions'' | has the meaning given on page 11 of this Circular; |
| ''Tender Form'' | the tender form issued with this Circular to Qualifying Shareholders for use in respect of Ordinary Shares held in certificated form; |
| ''Tender Offer'' | the invitation by J.P. Morgan Cazenove to Qualifying Shareholders to tender Ordinary Shares for sale to J.P. Morgan Cazenove on the terms and subject to the conditions set out in this Circular and, in the case of Ordinary Shares held in certificated form only, using the Tender Form; |
| ''Tender Offer Price'' | the price per Ordinary Share payable under the Tender Offer which will be set on 14 December 2015 by reference to the net asset value of the Company as at 30 September 2015 adjusted on the basis set out in paragraph 3 of Part 1 of this Circular; |
| ''Tender Offer Record Date'' | 6.00 p.m. on 10 December 2015; |
| ''TFE instruction'' | a transfer from escrow instruction (as defined by the CREST manual issued by Euroclear); |
| ''Total Available Shares'' | has the meaning given on page 13 of this Circular; |
| ''Total Excess Tenders'' | has the meaning given on page 13 of this Circular; |
| ''Total Taxable Gains and Income'' |
has the meaning given on page 22 of this Circular; |
| ''TTE instruction'' | a transfer to escrow instruction (as defined by the CREST manual issued by Euroclear); |
| ''UK'' or ''United Kingdom'' | the United Kingdom of Great Britain and Northern Ireland; |
| ''uncertificated'' or ''in uncertificated form'' |
Ordinary Shares which are recorded on the register of members of the Company as being held in uncertificated form in CREST and title to which, by virtue of the Regulations, may be transferred by means of CREST; |
| ''United States'' | the United States of America; |
| ''VAT'' | value added tax; and |
| ''Waiver'' | has the meaning given on page 8 of this Circular; and |
(Incorporated in England and Wales with registered number 05746555)
Directors: Registered Office: Martin Knight (Chairman) Bernard Duroc-Danner Nicholas Friedlos Neil Lerner Robert Rayne Antony Sweet
LMS Capital plc 100 George Street London W1U 8NU
27 November 2015
Dear Shareholder,
On 30 November 2011, Shareholders approved an orderly realisation of the assets of the Company in a manner that seeks to achieve a balance between an efficient return of cash to Shareholders and maximising the value of the Company's investments. As part of this strategy, the Company returned £40,000,000 to Shareholders in November 2012, £35,000,000 to Shareholders in July 2013 and £40,000,000 in June 2014, each by way of tender offer and associated repurchase, bringing to £115,000,000 the total returned to Shareholders since the commencement of the Company's realisation strategy.
The Company is now proposing to return up to a further £40,000,000 to Shareholders through a repurchase of up to 29.98% of the Ordinary Shares following a tender offer by J.P. Morgan Cazenove as detailed in Part 3 of this Circular. If the Tender Offer (and associated Repurchase) is completed, it will bring to £155 million the total returned to Shareholders since the commencement of the Company's realisation strategy.
The Repurchase requires the approval of Shareholders by special resolution. In addition, the Waiver (as described in further detail at paragraph 4 below) requires the approval of the Independent Shareholders by ordinary resolution. The purpose of this Circular is, therefore, to set out the terms of the Tender Offer (and associated Repurchase) and the Waiver and to convene a general meeting of the Company to consider and, if thought fit, pass the Resolutions.
The Company has received irrevocable undertakings to vote in favour of the Repurchase Resolution and to tender a number of Ordinary Shares not less than their Basic Entitlement from members of the Concert Party holding 49,409,694 Ordinary Shares, representing 97.18% of the total number of Ordinary Shares held by the Concert Party as at 25 November 2015 (being the latest practicable date prior to the publication of this Circular).
The Company's investment portfolio is being managed with a view to returning funds to Shareholders over a period of time. Accordingly, no investments have been or will be made in new opportunities; follow-on investments will be made in existing assets to honour commitments made at the time of the initial investment and/or to which the Company is legally obligated, or where the investment is made to protect or enhance the value of an existing asset or to facilitate its orderly realisation.
As at 30 September 2015 the Company's cash balances were £47.4 million compared to £35.3 million as at 30 June 2015.
The Company's outstanding undrawn commitments to funds were £4.0 million as at 30 September 2015.
An update on the Company's performance for the three months to 30 September 2015 is included in Part 6 of this Circular.
In determining the size of the Tender Offer (and the associated Repurchase), the Board has had regard to the Company's overall cash position and availability of other liquid assets together with its outstanding commitments and other cash requirements. The Board expects to see continued progress with the realisation of assets and aims to make further returns of cash as the realisation strategy progresses.
The return of cash is to take the form of a tender offer (to be implemented by J.P. Morgan Cazenove, acting as principal) and the subsequent repurchase of Ordinary Shares from J.P. Morgan Cazenove by the Company. Full details of the Tender Offer and subsequent Repurchase are set out in Part 3 of this Circular. The total amount that the Company is proposing to return (which is subject to the Basic Entitlement not exceeding 29.98% of the Company's issued share capital as at the Tender Offer Record Date) is £40,000,000.
Whilst the total value of the Tender Offer is set in advance, the price per share at which Ordinary Shares will be repurchased and the number of Ordinary Shares to which the Tender Offer will apply will be determined only after the Tender Offer has closed (and, with respect to holders of certificated shareholdings and uncertificated shareholdings, the closure date is 10 December 2015).
On 14 December 2015, the Company will calculate the Tender Offer Price based on the unaudited net asset value of the Company as at 30 September 2015 adjusted, in a manner consistent with the Company's accounting policies, to take into account price movements in quoted investments, changes in foreign currency rates of exchange and purchases and sales of investments between 30 September 2015 and the close of business on 11 December 2015.
The Tender Offer Price will be calculated by dividing this adjusted net asset value by the number of Ordinary Shares in issue as at the close of business on 11 December 2015.
The number of Ordinary Shares subject to the Tender Offer (and the associated Repurchase) will be calculated by dividing £40,000,000 by the Tender Offer Price, which will be announced on 15 December 2015. This number, as a percentage of all Ordinary Shares in issue at the Tender Offer Record Date, represents the ''Basic Entitlement'' under the Tender Offer and each Qualifying Shareholder is entitled to tender a percentage of his/her holding equal to (or less than, if they so choose) this Basic Entitlement. The Basic Entitlement will not be known until the Tender Offer has closed but will not exceed 29.98% of the Company's issued share capital as at the Tender Offer Record Date.
By way of example, based on the Company's net asset value of £139.2 million as at 30 September 2015 and 145,251,258 Ordinary Shares in issue, the Tender Offer Price would be 96 pence per Ordinary Share. The number of Ordinary Shares subject to the Tender Offer would be 41,666,667 (£40,000,000 divided by 96 pence), representing 28.69% of the Company's issued share capital. A Qualifying Shareholder with 100 Ordinary Shares would therefore be entitled to tender 28 Ordinary Shares at a price of 96 pence per Ordinary Share.
Alternative courses of action for Qualifying Shareholders
If you do not wish to tender any of your Ordinary Shares, you do not need to take any action.
The Board considers the Tender Offer and the subsequent Repurchase to be in the best interests of the Company and Shareholders as a whole and is, therefore, recommending that Shareholders vote in favour of the Repurchase Resolution. However, the Board is not making any recommendation to Shareholders as to whether tendering Ordinary Shares pursuant to the Tender Offer is in their own individual best interests. Whether or not Qualifying Shareholders decide to tender all or any of their Ordinary Shares is a decision for individual Qualifying Shareholders.
Qualifying Shareholders should take into account their tax position when deciding whether or not to participate in the Tender Offer. A summary of material UK taxation considerations in connection with the Tender Offer is set out in Part 4 of this Circular. Qualifying Shareholders are advised to take independent advice in relation to the tax implications for them of selling Ordinary Shares pursuant to the Tender Offer.
The Board reserves the right to require that J.P. Morgan Cazenove does not proceed with the Tender Offer (and the subsequent Repurchase) if it concludes, at any time prior to the announcement of the results of the Tender Offer, that the implementation of the Tender Offer (and the associated Repurchase) is no longer in the interests of the Company and the Shareholders as a whole.
You are recommended to read Part 3 of this Circular which sets out the full terms and conditions of the Tender Offer and how applications can be made under the Tender Offer.
For the reasons fully explained at paragraph 3 of Part 5 of this Circular, the Company applied to the Panel for a waiver of Rule 9 of the Takeover Code in order to permit the Tender Offer (and the subsequent Repurchase) to occur without triggering an obligation on the part of the Concert Party to make a general offer to Shareholders for all the Ordinary Shares in the Company which it does not own if the Concert Party's aggregate percentage holding of Ordinary Shares increases from 35.01% as a result of the Tender Offer (and the associated Repurchase). The Panel has agreed, subject to the approval of Independent Shareholders on a poll vote, to waive the requirement for the Concert Party to make a general offer to all Shareholders where such an obligation would arise as a result of the Tender Offer (and subsequent Repurchase) (the ''Waiver'').
The Waiver relates only to any increase in the percentage of Ordinary Shares held by the Concert Party as a result of the Tender Offer (and subsequent Repurchase) and is conditional on the passing of the Rule 9 Waiver Resolution by the Independent Shareholders of the Company on a poll. As the Concert Party is interested in the outcome of the Rule 9 Waiver Resolution, all members thereof will be precluded from voting on that resolution. Approval of the Rule 9 Waiver Resolution will not restrict the Concert Party from making a future offer for the Company. Confirmation of the Concert Party's intentions in relation to the Company following any increase in the percentage interest of the Concert Party in Ordinary Shares as a result of the Tender Offer (and subsequent Repurchase) is contained at paragraph 4 of Part 5 of this Circular.
J.P. Morgan Cazenove has provided advice to the Independent Directors, in accordance with the requirements of paragraph 4(a) of Appendix 1 to the Takeover Code, in relation to the granting of the waiver by the Panel of the obligation that could arise on the Concert Party to make an offer under Rule 9 of the Takeover Code in relation to the Tender Offer (and subsequent Repurchase). This advice was provided by J.P. Morgan Cazenove to the Independent Directors only and, in providing such advice, J.P. Morgan Cazenove has taken into account the Independent Directors' commercial assessment as well as the confirmations of the Concert Party's future intentions that have been provided to the Company as set out in Part 5 of this Circular.
Additional information on the Concert Party and the Waiver is set out in Part 5 of this Circular.
A general meeting is being convened at 10.00 a.m. on 14 December 2015 to consider and, if thought fit, pass:
Completion of the Tender Offer (and the associated Repurchase) is conditional on, among other things, the passing of both of the above Resolutions.
The Notice of Meeting is set out at the end of this Circular. The Repurchase Resolution is a special resolution, requiring 75% of the votes cast at the General Meeting to be cast in favour in order to be passed. The Rule 9 Waiver Resolution is an ordinary resolution, requiring a majority of the votes cast at the General Meeting by Independent Shareholders to be cast in favour in order to be passed. As required by the Takeover Code, voting on the Rule 9 Waiver Resolution will be by means of a poll of the Independent Shareholders.
Shareholders will find enclosed a Form of Proxy for the General Meeting. Whether you propose to attend the General Meeting or not, and whether or not you propose to tender any of your Ordinary Shares in the Tender Ofer, please complete the Form of Proxy and return it to Capita Asset Services, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU as soon as possible and, in any event, so as to be received by no later than 10.00 a.m. on 11 December 2015. Completing and returning a Form of Proxy will not preclude you from attending and voting in person at the General Meeting should you wish to do so.
You may also submit your proxies electronically at www.capitashareportal.com using your Investor Code on the Form of Proxy. If you hold Ordinary Shares in CREST, you may appoint a proxy by completing and transmitting a CREST Proxy Instruction to Capita Asset Services so that it is received by no later than 10.00 a.m. on 11 December 2015.
You are advised to read all of the information contained in this Circular before deciding on the course of action you will take in respect of the General Meeting, the Tender Offer and the Waiver.
The Board considers the Tender Offer (and the associated Repurchase) to be in the best interests of Shareholders as a whole. Accordingly, the Board recommends that Shareholders vote in favour of the Repurchase Resolution at the General Meeting, as the Directors intend to do in respect of their own beneficial holdings of, in aggregate, 4,733,460 Ordinary Shares, representing approximately 3.26% of the Ordinary Shares currently in issue.
The Independent Directors, who have been so advised by J.P. Morgan Cazenove, consider the Waiver to be fair and reasonable and in the best interests of the Independent Shareholders as a whole. In providing advice to the Independent Directors, J.P. Morgan Cazenove has taken into account, among other things, the Independent Directors' commercial assessments. The Independent Directors also consider the Rule 9 Waiver Resolution to be in the best interests of the Company as a whole. Accordingly, the Independent Directors unanimously recommend that the Independent Shareholders vote in favour of the Rule 9 Waiver Resolution at the General Meeting, as the Independent Directors intend to do in respect of their own beneficial holdings of, in aggregate, 419,379 Ordinary Shares, representing approximately 0.29% of the Ordinary Shares currently in issue.
Yours sincerely,
Martin Knight Chairman
The Board considers the above risks to be material for Shareholders to consider in connection with the Tender Offer (and subsequent Repurchase). However, those risks may not comprise all of the relevant risks and are not set out in any order of priority.
Qualifying Shareholders on the Register on the Tender Offer Record Date are being invited to tender some, all or none of their Ordinary Shares for purchase by J.P. Morgan Cazenove on the terms and subject to the conditions set out in this Circular and, in the case of certificated Ordinary Shares, in the Tender Form. Shareholders who do not wish to participate in the Tender Offer need take no action. The rights of Shareholders who choose not to tender their Ordinary Shares will be unaffected.
J.P. Morgan Cazenove will not purchase the Ordinary Shares pursuant to the Tender Offer unless all the Tender Conditions have been satisfied. The Tender Conditions may not be waived by J.P. Morgan Cazenove or the Company. If any of the above conditions is not satisfied by 7.00 a.m. on 15 December 2015 (or such later time and date as the Company and J.P. Morgan Cazenove may agree), the Tender Offer will lapse.
put option, or the exercise by the Company of the call option, in each case in accordance with the terms and subject to the conditions of the Option Agreement, Ordinary Shares successfully tendered under the Tender Offer (or a corresponding number of Ordinary Shares) will be sold by J.P. Morgan Cazenove to the Company through the facilities of the London Stock Exchange and will subsequently be cancelled and will not rank for any dividends, distribution or other equity-related rights declared by the Company after that date.
If a Qualifying Shareholder validly tenders a number of Ordinary Shares less than or equal to his/her Basic Entitlement, the tender will be satisfied in full (subject to the Tender Offer not being terminated or lapsing prior to its completion and satisfaction of the other terms and conditions set out in this Part 3 and (where relevant) the Tender Form).
If:
any such Individual Excess Tender will be scaled-back by application of the following ratio, such that the Total Available Shares that may be allocated between the Individual Excess Tenders and the total percentage of Ordinary Shares purchased pursuant to the Tender Offer does not exceed the Basic Entitlement:
2.23 The terms of the Tender Offer shall have effect subject to such non-material modifications as the Company and J.P. Morgan Cazenove may from time to time approve in writing. The times and dates referred to in this Circular may be amended by agreement in writing between the Company and J.P. Morgan Cazenove.
If you hold Ordinary Shares in certificated form, you may tender such Ordinary Shares only by completing and returning the Tender Form in accordance with the instructions printed thereon and set out in paragraph 3.2 below. If you hold Ordinary Shares in certificated form, but under different designations, you should complete a separate Tender Form for each designation. Additional copies of the Tender Form can be obtained from the Receiving Agent or by calling the Shareholder Helpline, details of which are set out in paragraph 3.3 below.
If you hold Ordinary Shares in uncertificated form (that is, in CREST) you may tender such Ordinary Shares only by TTE instruction in accordance with the procedure set out in paragraph 3.4 below and, if those Ordinary Shares are held under different member account IDs, you should send a separate TTE instruction for each member account ID.
To participate in the Tender Offer, Qualifying Shareholders holding Ordinary Shares in certificated form must complete, sign, have witnessed and return the Tender Form in accordance with these instructions and the instructions on the Tender Form.
Completed, signed and witnessed Tender Forms, together with the relevant valid share certificate(s) and/or other document(s) of title, should be sent either by post in the accompanying reply-paid envelope (for use in the UK only) or (during normal business hours only) delivered by hand to the Receiving Agent, at Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU as soon as possible and, in any event, so as to be received by no later than 1.00 p.m. on 10 December 2015. Tenders received after that time will be accepted only at the sole discretion of J.P. Morgan Cazenove (with the consent of the Company).
Duly completed Tender Forms sent by any of the means set out above and received signed and complete in all respects by the prescribed time will be treated as tenders of Ordinary Shares in accordance with the terms and conditions of the Tender Offer. No acknowledgement of receipt of documents will be given.
The completed and signed Tender Form should be accompanied, where possible, by the relevant share certificate(s) and/or other document(s) of title.
If your share certificate(s) and/or other document(s) of title are not readily available (for example, if they are with your stockbroker, bank or other agent) or are lost, the Tender Form should nevertheless be completed, signed and returned as described above so as to be received by the Receiving Agent, Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU by no later than 1.00 p.m. on 10 December 2015, together with any share certificate(s) and/or document(s) of title that you may have available.
In respect of those Ordinary Shares for which your share certificate(s) and/or other document(s) of title is/are unavailable and you have been sent a Tender Form, a letter of indemnity can be obtained by writing to Capita Asset Services or contacting them on the Shareholder Helpline (the details of which are set out in paragraph 3.3 below). If a separate letter of indemnity is completed, this should be returned with the Tender Form as described above so as to be received by the Receiving Agent, Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU by no later than 1.00 p.m. on 10 December 2015. A fee may be payable by the Qualifying Shareholder in respect of each letter of indemnity.
Where you have completed and returned a letter of indemnity in respect of unavailable share certificate(s) and/or other document(s) of title and you subsequently find or obtain the relevant share certificate(s) and/or other document(s) of title, you should immediately send the certificate(s) and/or other document(s) of title by post or (during normal business hours only) by hand to the Receiving Agent, Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU.
3.3 If you are in any doubt as to the procedure for participating in the Tender Offer, please contact Capita Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am – 5.30 pm, Monday to Friday excluding public holidays in England and Wales. Different charges may apply to calls from mobile telephones and calls may be recorded and randomly monitored for security and training purposes. The helpline cannot provide advice on the merits of the Tender Offer (and subsequent Repurchase) nor give any financial, legal or tax advice.
By signing and returning a Tender Form, you will be deemed to have appointed J.P. Morgan Cazenove as your agent in respect of the tender process. J.P. Morgan Cazenove will therefore issue a contract note on behalf of all Qualifying Shareholders whose Ordinary Shares are so purchased under the Tender Offer and will remit the cash consideration to Capita Asset Services with instructions that such consideration be remitted to Qualifying Shareholders in accordance with the instructions set out on their respective Tender Forms.
If your Ordinary Shares are in uncertificated form, to tender such shares under the Tender Offer you should take (or procure the taking of) the action set out below to transfer (by means of a TTE instruction) the number of Ordinary Shares you wish to tender under the Tender Offer to the relevant escrow account specifying Capita Asset Services (in its capacity as a CREST Participant under the relevant Participant ID(s) and member account ID(s) referred to below) as the escrow agent, as soon as possible and in any event so that the TTE instruction settles by no later than 1.00 p.m. on 10 December 2015. Please note that settlement cannot take place on weekends or bank holidays (or other times at which the CREST system is non-operational) and you should therefore ensure you time the input of any TTE instructions accordingly.
The input and settlement of a TTE instruction in accordance with this paragraph shall constitute an offer to J.P. Morgan Cazenove to sell to it the number of Ordinary Shares at the price indicated on the terms of the Tender Offer by transferring such Ordinary Shares to the relevant escrow account as detailed below.
If you are a CREST Sponsored Member, you should refer to your CREST Sponsor before taking any action. Your CREST Sponsor will be able to confirm details of your Participant ID and the member account ID under which your Ordinary Shares are held. In addition, only your CREST Sponsor will be able to send the TTE instruction to Euroclear in relation to the Ordinary Shares which you wish to tender. The Corporate Action Number is allocated by Euroclear and can be found by viewing the relevant corporate action details in CREST.
After settlement of the TTE instruction, you will not be able to access in CREST the Ordinary Shares concerned for any transaction or charging purposes, notwithstanding that they will be held by Capita Asset Services as the escrow agent until completion or lapse of the Tender Offer. If the Tender Offer becomes unconditional by 7.00 a.m. on 15 December 2015, or such later time and date as the Company and J.P. Morgan Cazenove may agree, Capita Asset Services will transfer the successfully tendered Ordinary Shares to itself as the agent of J.P. Morgan Cazenove, transferring any Ordinary Shares not successfully tendered to the original available balances to which those Ordinary Shares relate.
You are recommended to refer to the CREST manual published by Euroclear for further information on the CREST procedures outlined below.
You should note that Euroclear does not make available special procedures in CREST for any particular corporate action. Normal system timings and limitations will therefore apply in connection with a TTE instruction and its settlement. You should therefore ensure that all necessary action is taken by you (or by your CREST Sponsor) to enable a TTE instruction relating to your Ordinary Shares to settle prior to 1.00 p.m. on 10 December 2015. In this connection you are referred in particular to those sections of the CREST manual concerning practical limitations of the CREST system and timings.
To tender Ordinary Shares in uncertificated form you should send (or, if you are a CREST Sponsored Member, procure that your CREST Sponsor sends) a TTE instruction to Euroclear in relation to such Ordinary Shares. The TTE instruction will differ depending on whether you elect to tender your Basic Entitlement or a specific number of Ordinary Shares representing more or less than your Basic Entitlement.
The TTE instruction must be properly authenticated in accordance with Euroclear's specifications for transfers to escrow and must contain, in addition to the other information that is required for the TTE instruction to settle in CREST, the following details:
The Company and/or J.P. Morgan Cazenove will make an appropriate announcement through a Regulatory Information Service if any of the details contained in this paragraph relating to settlement in CREST are materially altered.
Normal CREST procedures (including timings) apply in relation to any Ordinary Shares that are, or are to be, converted from uncertificated to certificated form or vice versa during the course of the Tender Offer (whether such conversion arises as a result of a transfer of Ordinary Shares or otherwise). Shareholders who are proposing to convert any Ordinary Shares are recommended to ensure that the conversion procedures are implemented in sufficient time to enable the person holding or acquiring the Ordinary Shares as a result of the conversion to take all necessary steps in connection with such person's participation in the Tender Offer (in particular, as regards delivery of share certificate(s) and/or other document(s) of title or transfers to an escrow balance as described above) prior to 1.00 p.m. on 10 December 2015.
J.P. Morgan Cazenove reserves the right to treat as valid only Tender Forms which are received entirely in order by 1.00 p.m. on 10 December 2015 and which are accompanied by the relevant share certificate(s) and/or other document(s) of title or a satisfactory indemnity in lieu thereof in respect of the entire number of Ordinary Shares tendered.
(b) Validity of Electronic Tenders
A Tender Form which is received in respect of Ordinary Shares held in uncertificated form will not constitute a valid tender and will be disregarded. Shareholders holding Ordinary Shares in uncertificated form who wish to tender such shares should note that a TTE instruction will be a valid tender as at 10 December 2015, only if it has settled on or before 1.00 p.m. on that date.
An appropriate announcement will be made through a Regulatory Information Service if any of the details contained in this paragraph 3.6 are altered.
(c) General
Notwithstanding the completion of a valid Tender Form or settlement of a TTE instruction, as applicable, the Tender Offer may be terminated or lapse in accordance with the conditions set out above.
The decision of J.P. Morgan Cazenove as to which Ordinary Shares have been validly tendered shall be conclusive and binding on all Shareholders.
If you are in any doubt as to how to complete the Tender Form or as to the procedure for making an Electronic Tender please contact the Receiving Agent, Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU or on the Shareholder Helpline. You are reminded that, if you are a CREST Sponsored Member, you should contact your CREST Sponsor before taking any action.
Shareholders should note that, once tendered, Ordinary Shares may not be sold, transferred, charged or otherwise disposed of.
Please contact Capita Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00 am – 5.30 pm, Monday to Friday excluding public holidays in England and Wales. Different charges may apply to calls from mobile telephones and calls may be recorded and randomly monitored for security and training purposes. The helpline cannot provide advice on the merits of the Tender Offer (and subsequent Repurchase) nor give any financial, legal or tax advice.
Each Qualifying Shareholder by whom or, as applicable, on whose behalf, a Tender Form is executed and lodged, including a Tender Form which is treated by J.P. Morgan Cazenove as valid, irrevocably undertakes, represents, warrants and agrees to and with J.P. Morgan Cazenove (so as to bind him, his personal representatives, heirs, successors and assigns) that:
(ii) deliver such instrument(s) of transfer and/or other document(s) or form(s) at the discretion of the Attorney, together with the share certificate(s) and/or other document(s) of title relating to such Ordinary Shares, for registration within six months of the Tender Offer becoming unconditional and to do all such other acts and things as may in the opinion of such Attorney be necessary or expedient for the purpose of, or in connection with, the Tender Offer and to vest in J.P. Morgan Cazenove or its nominee(s) or such other person(s) as J.P. Morgan Cazenove may direct such Ordinary Shares;
(c) such Qualifying Shareholder holding Ordinary Shares in certificated form will deliver to the Receiving Agent his share certificate(s) and/or other document(s) of title in respect of the Ordinary Shares referred to in sub-paragraph (a) above, or an indemnity acceptable to J.P. Morgan Cazenove in lieu thereof, or will procure the delivery of such document(s) to such person(s) as soon as possible thereafter and, in any event, by no later than 1.00 p.m. on 10 December 2015;
A reference in this paragraph to a Qualifying Shareholder includes a reference to the person or persons executing a Tender Form and in the event of more than one person executing a Tender Form, the provisions of this paragraph will apply to them jointly and severally.
4.2 Electronic Tenders
Each Qualifying Shareholder by whom, or on whose behalf, a TTE instruction which is treated by J.P. Morgan Cazenove as valid is made irrevocably undertakes, represents, warrants and agrees to and with J.P. Morgan Cazenove (so as to bind him, his personal representatives, heirs, successors and assigns) that:
(c) if, for any reason, any Ordinary Shares in respect of which a TTE instruction has been made are prior to 1.00 p.m. on 10 December 2015, converted into certificated form, the Electronic Tender in respect of such Ordinary Shares shall cease to be valid and the Shareholder will need to comply with the procedures for tendering Ordinary Shares in certificated form as set out in this Part 3 in respect of the Ordinary Shares so converted, if he wishes to make a valid tender of such Ordinary Shares pursuant to the Tender Offer;
(d) the creation of a payment obligation in favour of such Qualifying Shareholder's payment bank in accordance with the CREST payment arrangements as referred to in paragraph 5 of this Part 3 headed ''Settlement'' will discharge fully any obligation of J.P. Morgan Cazenove to pay to such Qualifying Shareholder the consideration to which he is entitled under the Tender Offer; and
Each Shareholder who submits a tender irrevocably undertakes, represents, warrants and agrees to and with J.P. Morgan Cazenove (so as to bind him, his personal representatives, heirs, successors and assigns) that:
Each Shareholder to which paragraphs 4.1 or 4.2 apply hereby consents to the assignment by J.P. Morgan Cazenove of all such benefit as J.P. Morgan Cazenove may have in any covenants, representations and warranties in respect of the Ordinary Shares which are successfully tendered under the Tender Offer.
Settlement of the consideration to which any Qualifying Shareholder is entitled pursuant to valid tenders accepted by J.P. Morgan Cazenove will be made by the dispatch of cheques or the creation of CREST payment obligations as follows:
Where an accepted tender relates to Ordinary Shares held in certificated form, cheques for the consideration due will be despatched by the Receiving Agent (on behalf of J.P. Morgan Cazenove) from 21 December 2015 by first class post to the person or agent whose name and address (outside a Restricted Jurisdiction) is set out in section 1 or section 3 of the Tender Form or, if none is set out, to the registered address of the tendering Shareholder or, in the case of joint holders, the registered address of the first named Shareholder. All payments will be made in pounds sterling by cheque, drawn on a branch of a UK clearing bank.
Where an accepted tender relates to Ordinary Shares held by Qualifying Shareholders in uncertificated form, the consideration due will be paid from 18 December 2015 through CREST by the Receiving Agent (on behalf of J.P. Morgan Cazenove) procuring the creation of a payment obligation in favour of the payment banks of accepting Shareholders in accordance with the CREST payment arrangements.
Accordingly, copies of this Circular, the Tender Form and any related documents are not being and must not be mailed or otherwise distributed or sent in, into, or from a Restricted Jurisdiction, including to Shareholders with registered addresses in a Restricted Jurisdiction, or to persons who are custodians, nominees or trustees holding Ordinary Shares for persons in a Restricted Jurisdiction.
The following comments do not constitute tax advice and are intended only as a guide to current United Kingdom law and H.M. Revenue & Customs' published practice (which are both subject to change at any time, possibly with retrospective effect). They relate only to certain limited aspects of the United Kingdom tax treatment of Shareholders who are resident in the United Kingdom for United Kingdom tax purposes, who are, and will be, the beneficial owners of their Ordinary Shares and who hold, and will hold, their Ordinary Shares as investments (and not as assets to be realised in the course of a trade, profession or vocation). They may not relate to certain Shareholders, such as dealers in securities or Shareholders who have (or are deemed to have) acquired their Ordinary Shares by virtue of an office or employment. Shareholders are advised to take independent advice in relation to the tax implications for them of selling Ordinary Shares pursuant to the Tender Offer.
The sale of Ordinary Shares by a Shareholder to J.P. Morgan Cazenove pursuant to the Tender Offer should be treated as a disposal of those shares for United Kingdom tax purposes. This may, subject to the Shareholder's individual circumstances and any available exemption or relief, give rise to a chargeable gain (or allowable loss) for the purposes of United Kingdom taxation of chargeable gains (''CGT'').
The amount of CGT payable by a Shareholder who is an individual as a consequence of the sale of Ordinary Shares, if any, will depend on his or her own personal tax position. Broadly, a Shareholder whose total taxable gains and income in a given tax year, including any gains made on the sale of Ordinary Shares (''Total Taxable Gains and Income''), are less than or equal to the upper limit of the income tax basic rate band applicable in respect of that tax year (the ''Band Limit'') (£31,785 for 2015/2016) will normally be subject to CGT at a rate of 18% in respect of any gain arising on the sale of his or her Ordinary Shares. A Shareholder whose Total Taxable Gains and Income are more than the Band Limit will normally be subject to CGT at a rate of 18% in respect of any gain arising on the sale of his or her Ordinary Shares (to the extent that, when added to the Shareholder's other taxable gains and income, the gain is less than or equal to the Band Limit) and at a rate of 28% in respect of the remainder of the gain arising on the sale of his or her Ordinary Shares. However, no tax will be payable on any gain arising on the sale of Ordinary Shares if the amount of the chargeable gain realised by a Shareholder in respect of the sale, when aggregated with other chargeable gains realised by that Shareholder in the year of assessment (and after taking into account aggregate losses), does not exceed the annual exemption (£10,600 for 2015/2016).
A corporate Shareholder is normally taxable on all of its chargeable gains, subject to any reliefs and exemptions. Corporate Shareholders should be entitled to indexation allowance up to the date which is treated for CGT purposes as the date of disposal.
Under the provisions of Part 15 of the Corporation Tax Act 2010, H.M. Revenue & Customs can in certain circumstances counteract corporation tax advantages arising in relation to a transaction or transactions in securities. If these provisions were to be applied by H.M. Revenue & Customs to the Tender Offer, Shareholders who are subject to corporation tax might be liable to corporation tax as if they had received an income amount rather than a capital amount.
These rules apply only in certain circumstances and do not apply where it can be shown that the transaction in question was entered into for genuine commercial reasons or in the ordinary course of making or managing investments and did not involve as one of its main objects the obtaining of a corporation tax advantage. In view of these restrictions on the application of the anti-avoidance provisions, no application has been made to H.M. Revenue & Customs for clearance in respect of the application of Part 15 of the Corporation Tax Act 2010 to the Tender Offer. Shareholders who are within the charge to corporation tax are advised to take independent advice as to the potential application of the above provisions in light of their own particular motives and circumstances.
The sale of Ordinary Shares pursuant to the Tender Offer will not give rise to any liability to stamp duty or SDRT for the selling Shareholder.
Stamp duty at a rate of 0.5% on the Ordinary Shares repurchased, rounded up to the nearest £5 if necessary, will be payable by the Company on its purchase of Ordinary Shares from J.P. Morgan Cazenove.
The Company trades under the name LMS Capital plc and is a public limited company incorporated under the laws of England and Wales with company number 05746555. The Company is domiciled in England and Wales and its registered and head office is at 100 George Street, London W1U 8NU (telephone number +44 (0)207 935 3555). The principal legislation under which the Company operates, and under which the Ordinary Shares were created, is the Act and the regulations made thereunder. The Company is an investment company focused on small to medium sized companies in its preferred sectors of consumer, energy and business services. Following a General Meeting held on 30 November 2011, the Company is undertaking a realisation strategy which aims to achieve a balance between an efficient return of cash to Shareholders and optimising the value of the Company's investments.
The Directors accept responsibility for the information contained in this Circular, save that:
To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this Circular for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information.
Rule 9 of the Takeover Code applies when (i) any person 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 he and persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company subject to the Takeover Code, or (ii) any person who, together with persons acting in concert with him, is interested in shares which in 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 the shares carrying voting rights in which he is interested. In either case, that person is normally required to make a general offer in cash for all the remaining equity share capital of the Company at the highest price paid by him, or any persons acting in concert with him, for shares in the Company within the 12 months prior to announcement of the offer.
Under Rule 37 of the Takeover Code, when a company purchases its own voting shares, any resulting increase in the percentage of shares carrying voting rights in which a person or group of persons acting in concert is interested will be treated as an acquisition for the purpose of Rule 9 (although a shareholder who is neither a director nor acting in concert with a director will not normally incur an obligation to make a Rule 9 offer).
Accordingly, if the Concert Party's aggregate percentage holding of Ordinary Shares increases from 35.01% as a result of the Tender Offer (and the associated Repurchase), it will be obliged to make a general offer to Shareholders for all the Ordinary Shares in the Company which it does not own. This situation could come about, for example, if the Concert Party does not take up its Basic Entitlement in full in circumstances where all other Shareholders do so. As described in paragraph 4 below, certain members of the Concert Party have irrevocably undertaken to take up their Basic Entitlement in full.
On the basis that the issued share capital of the Company as at 25 November 2015 (being the latest practicable date prior to the publication of this Circular) is 145,251,258 Ordinary Shares and assuming a Tender Offer Price of 96 pence, that no Options or other rights to subscribe for Ordinary Shares are exercised, that the maximum number of Ordinary Shares are Repurchased and that 14,173,627 Ordinary Shares are Repurchased from the Concert Party (on the basis of irrevocable commitments to tender not less than their Basic Entitlement received from members of the Concert Party holding 49,409,694 Ordinary Shares), the Concert Party's interest in Ordinary Shares would increase to 35.40% of the voting share capital of the Company. A table analysing the maximum interests of the members of the Concert Party is set out in paragraph 6 below. Accordingly, the Company applied to the Panel for a waiver of Rule 9 of the Takeover Code in order to permit the Tender Offer (and the subsequent Repurchase) to occur without triggering an obligation on the part of the Concert Party to make a general offer to Shareholders of the kind described above.
The Panel has deemed that the interests in relevant securities of Withers Trust Corporation Limited (as trustees of the Lord Rayne Will Trust), Lady Rayne, Robert Rayne and other Rayne family members comprise a Concert Party for the purposes of the Takeover Code. The Concert Party holds 50,845,523 Ordinary Shares, representing a 35.01% interest in the total share capital of the Company as at 25 November 2015 (being the latest practicable date prior to the publication of this Circular). A detailed analysis of the Concert Party is provided at paragraph 6 below.
Robert Rayne (who is a non-executive director of the Company) was appointed as a director on 6 April 2006. His current letter of appointment, dated 1 October 2013, is terminable upon one month's notice by either party. Robert Rayne is up for re-election to the Board by rotation at the Company's next Annual General Meeting. As a non-executive director, Robert Rayne is entitled to a fee of £40,000 per annum. He is also entitled to cover under the Company's various insurance policies.
Robert Rayne also has a consulting agreement with the Company to provide advice in connection with the Company's realisation plans. He is entitled to a fee of £60,000 per annum under this consultancy agreement.
Until the end of 2011, Robert Rayne was entitled to participate in the Company's long-term incentive plans, including the Performance Share Plan and the Company's carried interest plans.
As at 25 November 2015, being the latest practicable date prior to the publication of this Circular, the beneficial interest of the Non-Independent Director in the Ordinary Shares of the Company was as follows:
| Percentage | ||
|---|---|---|
| of issued | No. of | |
| share capital |
Ordinary Shares |
|
| Robert Rayne | 2.97% | 4,314,081 |
In addition, Robert Rayne had a non-beneficial interest in 11,311,585 Ordinary Shares held in trust.
In January 2011, the Company moved office to 100 George Street, London W1U 8NU, of which Derwent London plc is the landlord. Under the terms of its lease, the Company pays an annual rent of £289,000 to Derwent London plc plus certain service charges. Robert Rayne is the nonexecutive Chairman of Derwent London plc.
The members of the Concert Party have confirmed to the Company that it is not proposing, following any increase in the percentage interest of the Concert Party in Ordinary Shares as a result of the Tender Offer (and the subsequent Repurchase), to seek any change in the composition of the Board or to the general nature or any other aspect of the Company's business or strategy.
The Concert Party has also confirmed that its intentions regarding:
will not be altered as a result of the proposals set out in this Circular, and there will not be any redeployment of the fixed assets of the Company (or any of its subsidiaries) as a result of such proposals.
The Company has received irrevocable undertakings to:
from members of the Concert Party holding 49,409,694 Ordinary Shares, representing 97.18% of the total number of Ordinary Shares held by the Concert as at 25 November 2015, being the latest practicable date prior to the publication of this Circular.
Under the current circumstances and notwithstanding any increase in the Concert Party's holding of Ordinary Shares, the Directors confirm that they intend to continue to conduct the business of the Company in the same manner as it is currently conducted and that there are no plans to introduce any substantial change in the business of the Group or in employees' terms of employment.
As at 25 November 2015 (being the latest practicable date prior to the publication of this Circular), the interests, rights to subscribe and short positions of the Directors, their immediate families and persons connected with them, within the meaning of Part 22 of the Act, in Ordinary Shares were as follows.
| Percentage of issued share capital |
No. of Ordinary Shares |
|
|---|---|---|
| Martin Knight | 0.06% | 90,292 |
| Bernard Duroc-Danner | 0.10% | 139,009 |
| Nicholas Friedlos | 0.05% | 69,391 |
| Neil Lerner | 0.07% | 96,182 |
| Robert Rayne | 2.97% | 4,314,081 |
| Antony Sweet | 0.02% | 24,505 |
In addition, Antony Sweet holds Options over 33,333 Ordinary Shares.
The Panel has deemed that the interests in relevant securities of Withers Trust Corporation Limited, Lady Rayne, Robert Rayne and other Rayne family members comprise a Concert Party for the purposes of the Takeover Code.
The following members of the Concert Party have significant interests in relevant securities:
(a) Withers Trust Corporation Limited (as trustees of the Lord Rayne Will Trust). The beneficiaries of such Ordinary Shares are members of the extended Rayne family;
As at the close of business on 25 November 2015 (being the latest practicable date prior to the publication of this Circular), the interests, rights to subscribe and short positions of the members of the Concert Party in Ordinary Shares were as set out below. The maximum potential holdings of the members of the Concert Party following the Tender Offer (and the subsequent Repurchase) are also set out below (assuming that the total issued share capital of the Company is 145,251,258, that no Options or other rights to subscribe for Ordinary Shares are exercised, that the maximum number of Ordinary Shares are Repurchased, that 14,173,627 Ordinary Shares are Repurchased from the Concert Party and that the Tender Offer Price is 96 pence).
| Percentage of issued share capital as at 25November 2015 |
No. of Ordinary Shares at 25 November 2015 |
Maximum percentage of issued Ordinary Shares |
Maximum number of issued Ordinary Shares |
|
|---|---|---|---|---|
| Withers Trust Corporation Limited (as trustees of the Lord Rayne Will |
||||
| Trust) | 11.24% | 16,329,591 | 11.24% | 16,329,591 |
| Rayne Foundation | 5.35% | 7,776,622 | 5.35% | 7,776,622 |
| Robert Rayne | 2.97% | 4,314,081 | 2.97% | 4,314,081 |
| The Rayne Trust | 2.43% | 3,534,963 | 2.43% | 3,534,963 |
| Alexander Rayne | 2.40% | 3,490,923 | 2.40% | 3,490,923 |
| Tamara Wood | 2.16% | 3,144,028 | 2.16% | 3,144,028 |
| Susan Rubin | 1.62% | 2,350,731 | 1.62% | 2,350,731 |
| Lady Jane Rayne | 1.51% | 2,193,660 | 1.51% | 2,193,660 |
| Madeleine Rayner | 1.01% | 1,471,272 | 1.01% | 1,471,272 |
| Jonathan Rayner | 0.95% | 1,376,962 | 0.95% | 1,376,962 |
| Damian Rayne | 0.93% | 1,345,764 | 0.93% | 1,345,764 |
| Other Concert Party interests in relevant securities under 1,000,000 Ordinary Shares |
||||
| (22 individuals) | 2.42% | 3,516,926 | 2.82% | 2,919,944 |
| Total Concert Party | 35.01% | 50,845,523 | 35.40% | 36,671,896 |
The Concert Party made the following dealings in Ordinary Shares during the period beginning 12 months preceding the date of this Circular and ending on 25 November 2015 (being the latest practicable date prior to the publication of this Circular):
| Number of Ordinary Shares | Description of dealing |
Date of dealing | Price per Ordinary Share (pence) |
|---|---|---|---|
| 8,702 | Sale | 17 March 2015 | 76.58 |
| 993,933 | Sale | 3 December 2014 | 75.00 |
| 125,000 | Sale | 2 December 2014 | 77.35 |
As at the close of business on 25 November 2015 (being the latest practicable date prior to the publication of this Circular), J.P. Morgan Cazenove nor any other connected advisor of the Company (including any person controlling, controlled by or under the same control as them, except in the capacity of an exempt fund manager or exempt principal trader) has any interests, rights to subscribe or short positions in relevant Company securities.
Insofar as it is known to the Company as at 25 November 2015 (being the latest practicable date prior to the publication of this Circular), the following persons have an interest in the Ordinary Shares which is notifiable under DTR5 of the Disclosure and Transparency Rules.
| Percentage of issued share capital |
No. of Ordinary Shares |
|
|---|---|---|
| Asset Value Investors | 14.59% | 21,184,977 |
| Withers Trust Corporation Limited as trustees of the Lord Rayne Will | ||
| Trust(1) | 11.24% | 16,329,591 |
| FFP Asset Management Limited(1) | 11.24% | 16,329,591 |
| Robert Rayne(2) | 10.76% | 15,625,666 |
| Lady Jane Rayne(3) | 9.34% | 13,566,084 |
| Schroders plc | 7.86% | 11,416,112 |
| CG Asset Management Limited | 3.37% | 4,892,336 |
Note:
There are common interests in certain of these shares.
Robert Rayne holds a non-beneficial interest in 11,311,585 Ordinary Shares held in trust and a personal interest in 4,314,081 ordinary shares.
Lady Jane Rayne holds a non-beneficial interest in 11,372,424 ordinary shares held in trust and a personal interest in 2,193,660 Ordinary Shares.
Trend information on the Company is set out in Part 6 of this Circular.
The table below sets out the total number of outstanding Options, the percentage of Ordinary Shares that they represent and the percentage of Ordinary Shares that they will represent if the maximum number of Ordinary Shares are Repurchased:
| Percentage | ||
|---|---|---|
| Percentage | of issued | |
| of | Ordinary | |
| issued | Shares if the | |
| Ordinary | maximum | |
| Shares | number of | |
| as at | Ordinary | |
| 25 November | Shares is | |
| Number of Options | 2015 | Repurchased |
| 78,531 | 0.05% | 0.08% |
(Note: Information in the table above is provided as at 25 November 2015, being the latest practicable date prior to the publication of this Circular.)
The above Options, which were awarded pursuant to the Performance Share Plan and the Deferred Share Bonus Plan, were fully vested as of 25 November 2015.
As at 25 November 2015 (being the latest practicable date prior to the publication of this Circular), there were no outstanding warrants to subscribe for Ordinary Shares.
As at 25 November 2015 (being the latest practicable date prior to the publication of this Circular), the Company held no Ordinary Shares in treasury.
The Directors' current service agreements and letters of appointment will be available for inspection as set out in paragraph 18 below and are summarised below. There are no other service contracts between the Directors and the Company or any of its subsidiaries and, save as disclosed herein, no other service contracts have been entered into or amended during the period of six months prior to the date of this Circular.
| Date appointed director |
Notice period | Basic salary/ current fee |
|
|---|---|---|---|
| Martin Knight | 4 January 2012 | One month | £60,000 |
| Bernard Duroc-Danner | 7 April 2006 | One month | £40,000 |
| Nicholas Friedlos | 9 February 2012 | Six months | £220,000 |
| Neil Lerner | 4 January 2012 | One month | £45,000 |
| Robert Rayne | 6 April 2006 | One month | £40,000 |
| Twelve months by the | |||
| Company and six months by | |||
| Antony Sweet | 6 April 2006 | the director | £215,000 |
Under their service contracts, executive directors are entitled to a base salary (reviewed annually), pension contributions and benefits-in-kind, which includes private healthcare, life assurance and income protection and gym membership. Executive directors may also participate in the carried interest plan and will receive a bonus linked to the outcome of the realisation strategy. The maximum bonus amount for each of the current Executive directors is £2 million for Mr Friedlos and £1 million for Mr Sweet. The Company's Remuneration Committee may approve annual performance bonus payments. Any such payments will be deducted from any payment due at the end of the realisation strategy. In addition, Mr Sweet is entitled to a payment in connection with his duties as Company Secretary up to a maximum of 15% of his base salary per annum.
Under their letters of appointment, non-executive directors are entitled to fees (reviewed annually). Mr Rayne, who was previously an executive director, is entitled to cover under the Company's various insurance policies. The Company will also provide a car, driver and secretary if required in the future, but does not currently do so.
The Company's general policy is that all executive directors should have rolling contracts of employment. Mr Sweet has a notice period of 12 months from the Company and 6 months if Mr Sweet wishes to terminate, and Mr Friedlos has a notice period of 6 months from the Company and 6 months from himself. Each contract terminates on the Director reaching age 65. The service contracts enable the Company to elect to terminate employment without notice by making a payment equivalent to base salary, allowances and benefits and pension contributions attributable to the notice period from the Company. The annual bonus may be payable as at the date of termination on the basis that total returns to Shareholders equal actual value returned to date plus the net asset value of the Company as at the termination date, such amount to be payable as returns are made to Shareholders. Following a change of control, there is provision for the Company to terminate the employment of Mr Sweet upon payment of 95% of annual salary and benefits, pension contribution of 15% of the amount calculated for the base salary and an amount equal to the average annual payment of cash bonus paid to him in the previous 3 years.
Under their letters of appointment, all non-executive directors have fixed dates of expiry for their current terms. Both non-executive directors and the Company are required to give one month's notice to terminate appointments. Non-executive directors are subject to re-election requirements under the Company's Articles of Association (as described below). The appointment letters do not contain provisions for non-executive directors to receive compensation on early termination.
In accordance with the UK Corporate Governance Code and Article 73 of the Company's Articles of Association, all Directors are subject to election by Shareholders at the first Annual General Meeting following their appointment. Thereafter at least a third of the Directors on the Board must retire and offer themselves for re-election. If any one or more Directors were last appointed or reappointed three years or more prior to the Annual General Meeting or at the time of the Annual General Meeting will have served more than eight years as a non-executive director (excluding the Chairman) then they must retire and offer themselves for re-election.
Full details of the Directors' emoluments and other benefits are set out on pages 13 to 20 and 25 to 33 of the Company's 2014 Annual Report and Accounts.
No contracts have been entered into by the Company or any of its subsidiaries, other than in the ordinary course of business, within the period of two years prior to the publication of this Circular which are or may be material.
The Directors are not aware of any agreement, arrangement or understanding having any connection with or dependence upon the proposals set out in this Circular between any member of the Concert Party and J.P. Morgan Cazenove (or any person who is, or is presumed to be, acting in concert with J.P. Morgan Cazenove.
No member of the Concert Party has entered into any agreement, arrangement or understanding with any of the Directors which has any connection with or dependence upon the proposals set out in this Circular. In addition, the Directors are not aware of any agreement, arrangement or understanding having any connection with or dependence upon the proposals set out in this Circular between any member of the Concert Party and any person interested or recently interested in Ordinary Shares, or any other recent Director.
Save as disclosed in the Company's half-year results published on 24 July 2015 and in Part 6 of this Circular, there has been no significant change in the financial or trading position of the Group since 31 December 2014, being the date to which the last audited financial statements of the Company were prepared.
The middle market quotations for the Ordinary Shares of the Company, as derived from the Daily Official List, for the first Business Day of each of the six months immediately preceding the date of this Circular and on 25 November 2015 (being both the latest practicable and available date prior to the date of this Circular) were:
| Date | Price per Ordinary Shares (pence) |
|---|---|
| 1 May 2015 | 75.50 |
| 1 June 2015 | 76.75 |
| 1 July 2015 | 76.00 |
| 3 August 2015 | 72.75 |
| 1 September 2015 | 71.75 |
| 1 October 2015 | 74.38 |
| 2 November 2015 | 72.50 |
| 25 November 2015 | 71.50 |
The Company will announce the results of the Repurchase through a Regulatory Information Service as soon as possible and, in any event, by no later than the Business Day following the date on which the Repurchase occurs.
J.P. Morgan Cazenove has given and have not withdrawn its written consent to the inclusion in this Circular of the references to its names and the form and context in which they appear.
As of close of business on 25 November 2015 (being the latest practicable date prior to the date of this Circular), and save as disclosed in Part 5 of this Circular:
has as at 25 November 2015 (being the latest practicable date prior to the date of this Circular) any interest in, right to subscribe in respect of or short position in relation to any relevant securities; and
(E) there are no relevant securities which any person acting in concert with the Company has borrowed or lent (excluding any borrowed relevant securities which have either been on lent or sold).
In this paragraph 17 reference to:
(C) ''short position'' means a short position, whether conditional or absolute and whether in the money or otherwise, and includes any short position under a derivative, any agreement to sell or any delivery obligation or right to require another person to purchase or take delivery;
(D) ''associated company'' means in relation to any company, that company's parent subsidiaries and fellow subsidiaries, and their associated companies, and companies of which such companies are associated companies.
For the purposes of this paragraph 17 a person is treated as ''interested'' in securities if he or she has long economic exposure, whether absolute or conditional, to changes in the price of those securities (and a person who only has a short position in securities is not treated as interested in those securities). In particular, a person is treated as ''interested'' in securities if:
There is no agreement or arrangement or understanding by which the beneficial ownership of any Ordinary Shares acquired by the Company pursuant to the Repurchase will be transferred to any other person. Such shares will be cancelled and the issued share capital of the Company reduced by the nominal amount of those Ordinary Shares so purchased.
As the Concert Party is a collection of individuals and entities rather than a single offeror, the Company or the Directors do not have any interests in the Concert Party of the kind described at Rule 25.4 of the Takeover Code.
Copies of the following documents will be available for inspection during normal business hours on any Business Day, free of charge, at the offices of Slaughter and May, One Bunhill Row, London, EC1Y 8YY, from the date of this Circular up to and including the date of the Repurchase:
With the exception of items (c) and (d), copies of these documents will also be available on the Company's website, http://www.lmscapital.com/Home/tabid/36/Default.aspx, from the date of this Circular.
The annual report and accounts of the Company for each of the two financial years ended 31 December 2013 and 31 December 2014 and the Half Year Results for the six months ended 30 June 2015 are incorporated by reference into this Circular and are available for inspection and on the Company's website as set out in paragraph 18 above.
Any Shareholder, person with information rights or other person to whom this Circular is sent may request a copy of each of the documents set out above, or a copy of this Circular, in hard copy form. Hard copies will be sent only where valid requests are received from such persons. Requests for hard copies are to be submitted to the Company Secretary, either by post to LMS Capital plc, 100 George Street, London W1U 8NU, England, or by calling Capita Asset Services on 0371 664 0321. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. The helpline is open between 9.00am – 5.30pm, Monday to Friday excluding public holidays in England and Wales. Different charges may apply to calls from mobile telephones and calls may be recorded and randomly monitored for security and training purposes. The helpline cannot provide advice on the merits of the Proposals nor give any financial, legal or tax advice.
In the three months to 30 September 2015, the Company received proceeds from realisations of £14.2 million, including £10.6 million on the sale of Wesupply Limited (after costs but before carried interest) and £2.0 million from San Francisco Equity Partners (following the sale of The Guild, one of its portfolio companies). In the same period calls from the Company's outstanding fund commitments were £0.2 million and the Company provided £0.4 million to Nationwide Energy Partners as part funding for an acquisition.
Total realisations in the first nine months of the year were £40.8 million, with fund calls of £0.4 million. The Company had cash of £47.4 million as at 30 September 2015; uncalled commitments to funds were £4.0 million.
The Company's unaudited net asset value per share as at 30 September 2015 was 96 pence, up 2 pence (2%) from 94 pence as at 30 June 2015. The principal factors in this increase were the gain on the sale of Wesupply and the strengthening of the US dollar against £ sterling which resulted in unrealised currency gains of £2.6 million in the third quarter. These two positive factors were partially offset by the weakening of the share price of Weatherford International. Since the end of September the Weatherford International share price has improved and, as at 25 November 2015, the estimated net asset value per share has increased by 1p to 97 pence per share.
The Company's unaudited consolidated statement of financial position as at 30 September 2015 (and 30 June 2015) was as follows:
| £'000 | £'000 | |
|---|---|---|
| 30 September | 30 June | |
| 2015 | 2015 | |
| Non-current assets | ||
| Property, plant and equipment | 292 | 324 |
| Investments | 100,363 | 110,235 |
| Non-current assets | 100,655 | 110,559 |
| Current assets | ||
| Operating and other receivables | 445 | 346 |
| Cash and cash equivalents | 47,387 | 35,311 |
| Current assets | 47,832 | 35,657 |
| Total assets | 148,487 | 146,216 |
| Current liabilities | ||
| Operating and other payables | (6,640) | (7,380) |
| Current tax liabilities | (471) | (492) |
| Current liabilities | (7,111) | (7,872) |
| Non-current liabilities | ||
| Provisions and other long-term liabilities | (2,217) | (2,217) |
| Non-current liabilities | (2,217) | (2,217) |
| Total liabilities | (9,328) | (10,089) |
| Net assets | 139,159 | 136,127 |
| Equity | ||
| Share capital | 14,525 | 14,525 |
| Share premium | 508 | 508 |
| Capital redemption reserve | 18,497 | 18,497 |
| Merger reserve | 27,386 | 27,386 |
| Foreign exchange translation reserve | 827 | 830 |
| Retained earnings | 77,416 | 74,381 |
| Equity attributable to owners of the parent | 139,159 | 136,127 |
The carrying value of the investment portfolio at 30 September 2015 is based on the valuation of the Company's investments as at 30 June 2015 with adjustments for transactions in the three months ended 30 September 2015 including price movements on quoted securities, movements in foreign currency exchange rates, cash calls and distributions from funds and purchases and sales of quoted and unquoted securities. The next full valuation of the portfolio will be for our full year results as at 31 December 2015.
The Company's investment portfolio as at 30 September 2015 (and 30 June 2015) was as follows:
| 30 September 2015 |
30 June 2015 |
|
|---|---|---|
| £'000 | £'000 | |
| US | ||
| Quoted | 8,081 | 11,235 |
| Unquoted | 34,359 | 32,722 |
| Funds | 22,163 | 23,011 |
| US total | 64,603 | 66,968 |
| UK | ||
| Quoted | 1,882 | 1,987 |
| Unquoted | 12,347 | 20,490 |
| Funds | 21,531 | 20,790 |
| UK total | 35,760 | 43,267 |
| Total | 100,363 | 110,235 |
The above constitutes a general description of the financial position and performance of the Company for the period from 1 July 2015 to 25 November 2015. It does not contain any profit forecast or forward looking information. Future net asset value and share price performance are likely to be affected by a number of factors, including (but not limited to) general economic and market conditions and specific factors affecting the financial performance or prospects of individual investments within the Company's portfolio.
NOTICE is hereby given that a General Meeting of LMS Capital plc (the ''Company'') will be held at 10.00 a.m. on 14 December 2015 at LMS Capital plc, 100 George Street, London W1U 8NU to consider and, if thought fit, pass the following resolutions, of which Resolution 1 will be proposed as a special resolution and Resolution 2 will be proposed as an ordinary resolution which may be voted on only by the Independent Shareholders. Capitalised terms not otherwise defined within this notice shall have the meanings given to them in the circular dated 27 November 2015 of which this notice forms part (the ''Circular'').
THAT the Company be and is hereby generally authorised for the purposes of section 701 of the Companies Act 2006 (the ''Act'') to make one or more market purchases (within the meaning of section 693(4) of the Act) of ordinary shares of 10p each (the ''Ordinary Shares'') in the capital of the Company, in connection with a tender offer for Ordinary Shares, provided that:
THAT approval is granted for the waiver by the Panel on Takeovers and Mergers of any obligation which may otherwise arise, pursuant to Rule 9 of the City Code on Takeovers and Mergers, for the Concert Party (as defined in the Circular to Shareholders of the Company dated 27 November 2015) (or any member thereof) to make a general offer for all the issued share capital of the Company following any increase in the percentage of shares of the Company carrying voting rights in which the Concert Party (or any member thereof) is interested as a result of the tender offer for Ordinary Shares proposed to be authorised by the Shareholders of the Company on 14 December 2015 and the subsequent Repurchase.
27 November 2015
By order of the Board
Antony Sweet Company Secretary
Registered office: LMS Capital plc 100 George Street London W1U 8NU Registered in England and Wales No. 05746555
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