Pre-Annual General Meeting Information • Aug 30, 2017
Pre-Annual General Meeting Information
Open in ViewerOpens in native device viewer
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to any aspect of the proposals referred to in this document or as to the action you should take, you should seek your own advice from a stockbroker, solicitor, accountant, or other professional advisor.
If you have sold or otherwise transferred all your Shares, please send this Circular at once to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. However, such documents should not be forwarded or transmitted in or into any Restricted Jurisdiction. Investors who wish to participate in the Tender Offer must hold Shares at the latest by 6.00 p.m. on 5 October 2017.
Liberum Capital Limited, which is authorised and regulated by the Financial Conduct Authority, is acting exclusively for the Company and for no one else in connection with the Non-US Tender Offer and Liberum, its affiliates and its and their respective directors, officers, employees and agents are not, and will not, be responsible to anyone other than the Company for providing the protections afforded to customers of Liberum nor for providing advice in relation to the Non-US Tender Offer. For the avoidance of doubt, none of Liberum, its affiliates and its and their respective directors, officers, employees and agents will be responsible for, or liable in relation to, the US Tender Offer, or any other transaction, arrangement or other matter referred to in the Circular, other than the Non-US Tender Offer.
Apart from the responsibility and liabilities, if any, which may be imposed on Liberum by the Financial Services and Markets Act 2000 (as amended), the Financial Services Act 2012, or the regulatory regimes established thereunder, Liberum does not accept any responsibility or liability whatsoever nor makes any representation or warranty, express or implied, concerning the contents of this Circular, including its accuracy, completeness or verification, or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company, the Non-US Tender Offer or this Circular. Each of Liberum, its affiliates and their respective directors, officers, employees and agents accordingly disclaims all and any responsibility or liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this Circular or any such statement.
(incorporated and registered in England and Wales under number 09395163)
Proposed return of up to £140 million of cash to Shareholders by way of Tender Offer at a price of at least £2 per share
and
Notice of a General Meeting of the Company to be held at the offices of Travers Smith LLP, 10 Snow Hill, London, EC1A 2AL at 11.00 a.m. on 22 September 2017 is set out at the end of this Circular. Whether or not you propose to attend the General Meeting, please complete and submit a proxy form in accordance with the instructions printed on the enclosed green form.
To be valid, the Form of Proxy must be received by the Company's registrars at Capita Asset Services, PXS, 34 Beckenham Road, Beckenham, BR3 4TU by no later than 11.00 a.m. on 20 September 2017, together with any power of attorney under which it is executed. Completion and return of a form of proxy will not preclude you from attending and voting in person at the General Meeting, should you so wish.
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 section headed ''Overseas Shareholders'' set out in paragraph 4 of Part I of this Circular and paragraph 6 of Section A of Part IV of this Circular.
This Circular does not constitute an offer to purchase, or solicitation of an offer to sell, 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 Liberum and the Company 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 Liberum.
Your attention is drawn to the sections headed ''Action to be taken'' on page 5, and ''Part II Risk Factors'' on pages 18 and 19, of this Circular.
This Circular is dated 30 August 2017.
| Contents | 2 |
|---|---|
| Important information | 3 |
| Action to be taken | 5 |
| Expected timetable of events | 6 |
| Definitions | 7 |
| Part I Letter from the Chairman of the Company | 11 |
| Part II Risk Factors | 18 |
| Part III Questions and answers on the Tender Offer | 20 |
| Part IV Terms and conditions of the Tender Offer | 27 |
| Part V Taxation | 47 |
| Part VI Additional information | 54 |
| Part VII Notice of General Meeting | 60 |
The US Tender Offer is made solely by the Company. While the US Tender Offer is being made available to US Shareholders, the right to tender Shares is not being made available in any jurisdiction in the United States in which the making of the US Tender Offer or the right to tender Shares would not be in compliance with the laws of such jurisdictions.
The US Tender Offer is being made for the securities of a UK company and is subject to UK disclosure requirements, which are different from those of the United States. The settlement procedure with respect to the US Tender Offer will be consistent with UK practice, which differs from US domestic tender offer procedures in certain material respects, particularly with regard to date of payment. US Shareholders should note that the Shares are not listed on a US securities exchange and the Company is not subject to the periodic reporting requirements of the Exchange Act and is not required to, and does not, file any reports with the US Securities and Exchange Commission thereunder. The US Tender Offer is not subject to the disclosure and other procedural requirements of Regulation 14D under the Exchange Act. The US Tender Offer will be made in accordance with the requirements of Regulation 14E under the US Exchange Act to the extent applicable. Accordingly, the US Tender Offer will be subject to disclosure and other procedural requirements, including with respect to withdrawal rights, offer timetable, settlement procedures and timing of payments that are different from those applicable under US domestic tender offer procedures and law.
The Company has not been, and will not be, registered in the United States as an investment company under the Investment Company Act. In order to avoid being required to register under, or otherwise violating, the Investment Company Act, the Company has implemented restrictions on the ownership and transfer of its Shares. As such, the US Tender Offer will be made solely to US Shareholders that are both QIBs and QPs, and any US Shareholder that was not both a QIB and a QP at the time it acquired any Shares or any such beneficial interest therein should notify the Company immediately.
The receipt of cash pursuant to the US Tender Offer by a US Shareholder may be a taxable transaction for US federal income tax purposes and under applicable US state and local, as well as foreign and other tax laws. Each Shareholder is urged to consult his independent professional adviser immediately regarding the tax consequences of acceptance of the US Tender Offer.
It may be difficult for US Shareholders to enforce their rights and any claim arising out of the US federal securities laws, since the Company is located in a foreign country, and all of its officers and directors are residents of a foreign country. US Shareholders may not be able to sue a foreign company or its officers or directors in a foreign court for violations of the US securities laws. Further, it may be difficult to compel a foreign company and its affiliates to subject themselves to a US court's judgement. Whether located in the US or elsewhere, US Shareholders will receive their cash consideration in pounds sterling.
In accordance with normal UK practice and pursuant to Rule 14e-5(b) of the Exchange Act, the Company or its nominees, or its brokers (acting as agents) may from time to time make certain purchases of, or arrangements to purchase, Shares outside the United States, other than pursuant to the US Tender Offer, before or during the period in which the US Tender Offer remains open for acceptance. These purchases may occur either in the open market at prevailing prices or in private transactions at negotiated prices. Any information about such purchases will only be disclosed as required in the UK, will be reported to a Regulatory Information Service of the UK Listing Authority and will be available on the London Stock Exchange website, www.londonstockexchange.com.
This Circular includes statements that are, or may be deemed to be, ''forward-looking statements''. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms ''believes'', ''estimates'', ''envisages'', ''plans'', ''anticipates'', ''targets'', ''aims'', ''continues'', ''expects'', ''intends'', ''hopes'', ''may'', ''will'', ''would'', ''could'' or ''should'' or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include matters that are not facts. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation: the assessment of Telecable's working capital and net debt pursuant to the SPA could result in an adjustment to the cash consideration payable to the Company's subsidiary, Zegona Limited; the tax credits which are required to be proven to generate the contingent consideration under the SPA may not arise or be usable; equity market conditions for the Company and Euskaltel; the market position of Euskaltel; earnings, financial position, cash flows, return on capital and operating margins of Euskaltel; anticipated investments and capital expenditures of Euskaltel; changing business or other market conditions; and general economic conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this Circular.
Forward-looking statements contained in this Circular based on past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The Company is not obliged, and does not intend, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by any applicable law or regulation. Accordingly, Shareholders should not place undue reliance on forwardlooking statements, which speak only as of the date of this Circular.
You are not under any obligation to tender your Shares but to the extent that you do wish to participate in the Tender Offer, you may only tender your whole Tender Offer Entitlement of Shares, being 35.706095 per cent. of your Shares on the Record Date (rounded down to the nearest whole number of Shares).
Enclosed with this document are a green Form of Proxy and either a blue Non-US Tender Form or a pink US Tender Form. If you do not wish to tender any of your Shares, do not complete and return any Tender Form.
Whether or not you wish to tender your Tender Offer Entitlement of Shares under the Tender Offer, you are requested to complete and return your Form of Proxy in accordance with the instructions therein so as to be received as soon as possible and, in any event, not later than the times and dates specified on page 6 of this Circular.
Full details of the actions to be taken are set out in this Circular and in the instructions on the respective forms. You should read the whole of this Circular which contains the terms of the Tender Offer. The attention of Overseas Shareholders is drawn to the sections headed ''Overseas Shareholders'' in paragraph 4 of Part I of this Circular and in paragraph 6 of Section A of Part IV of this Circular.
If you have any queries in relation to your shareholding(s) or how you can participate in the Tender Offer, please call 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 a.m. and 5.30 p.m., Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.
Please note that, for legal reasons, the Shareholder helpline is only able to provide information contained in this Circular, information relating to the Company's register of members and information regarding completion of forms and is unable to give advice on the merits of the Tender Offer or to provide legal, financial, tax or investment advice.
If you are in any doubt about what action to take you should seek your own personal financial advice from your independent financial adviser, stockbroker, solicitor, accountant, bank manager or from an appropriately qualified independent adviser authorised pursuant to the Financial Services and Markets Act 2000.
| All dates 2017 | |
|---|---|
| Publication of this Circular | 30 August |
| Tender Offer opens | 30 August |
| Latest time and date for receipt of Forms of Proxy | 11.00 a.m. on 20 September |
| Time and date of General Meeting | 11.00 a.m. on 22 September |
| Outcome of General Meeting announced by | 22 September |
| Publication of interim results | 29 September |
| Latest time and date for receipt of Tender Forms and TTE Instructions from CREST Shareholders (i.e. close of Tender Offer) |
1.00 p.m. on 5 October |
| Record date for the Tender Offer | 6.00 p.m. on 5 October |
| Outcome of Tender Offer and Tender Price announced by | 6 October |
| Purchase of Shares under the Tender Offer | 9 October |
| Cheques despatched for certificated Shares purchased pursuant to the Tender Offer, payment through CREST for uncertificated Shares purchased pursuant to the Tender Offer, despatch of balance share certificates for unsold certificated Shares and CREST accounts credited with uncertificated |
By 16 October |
Notes:
Shares being returned to Shareholders
1. References to times in this Circular are to London times.
2. Each of the above times and dates is based on the Company's expectations as at the date of this Circular. If any of the above times or dates should change, the revised times and/or dates will be notified to Shareholders by an announcement through a Regulatory Information Service.
3. All events relating to the Tender Offer in the above timetable following the General Meeting are conditional upon approval by Shareholders of the Tender Offer Resolution to be proposed at the General Meeting.
The following definitions apply throughout this Circular and the accompanying Tender Form unless the context otherwise requires:
| ''Act'' | the Companies Act 2006, as amended; |
|---|---|
| ''Articles'' | the articles of association of the Company; |
| ''Basic Tender Offer Entitlement'' |
a Qualifying Shareholder's Tender Offer Entitlement prior to any adjustment as a result of the Tender Price increasing; |
| ''Board'' | the board of directors of the Company as constituted from time to time; |
| ''Business Day'' | any day other than a Saturday, Sunday or bank holiday in England; |
| ''Capita Asset Services'' | a trading name of Capita Registrars Limited; |
| ''certificated'' or ''in certificated form'' |
a Share which is not in uncertificated form; |
| ''Circular'' | this document, including the notice of General Meeting and the Tender Form; |
| ''Company'' | Zegona Communications plc; |
| ''Core Investor'' | any entity controlled, managed or advised now or in the future by Marwyn Investment Management LLP, Marwyn Capital LLP or Marwyn Asset Management Limited; |
| ''Core Investor Shares'' | B ordinary shares of 0.00001p each in the capital of Zegona Limited; |
| ''CREST'' | the relevant system (as defined in the CREST Regulations) in respect of which Euroclear is the Operator (as defined in the CREST Regulations); |
| ''CREST Manual'' | the CREST manual published by Euroclear; |
| ''CREST member'' | a person who has been admitted by Euroclear as a system member (as defined in the CREST Regulations); |
| ''CREST Regulations'' | Uncertificated Securities Regulations 2001 (SI 2001 No. 3755); |
| ''CREST sponsor'' | a CREST participant admitted to CREST as a CREST sponsor; |
| ''CREST sponsored member'' | a CREST member admitted to CREST as a sponsored member; |
| ''Directors'' | the directors of the Company as at the date of this Circular; |
| ''Distribution in Specie Resolution'' |
the special resolution to be proposed at the General Meeting to amend the Articles to authorise the Company to make distributions in specie where such distributions consist solely of Euskaltel Shares; |
| ''Engagement Letter'' | the engagement letter from Liberum to the Company dated 22 August 2017; |
| ''Equity Interest'' | has the meaning ascribed to it in the Prospectus; |
| ''Escrow Agent'' | HSBC Bank plc; |
| ''Escrow Agreement'' | the escrow agreement dated 29 August 2017 between the Company, Liberum and the Escrow Agent; |
| ''Escrow Amount'' | the maximum amount required to be paid by the Company: |
| (a) to Liberum in order to effect the Repurchase of Shares following the Non-US Tender Offer; and |
|
| (b) to US Shareholders in order to effect the US Tender Offer; |
|
| ''Euroclear'' | Euroclear UK & Ireland Limited; |
| ''Euskaltel'' | Euskaltel, S.A.; |
| ''Euskaltel Shares'' | the ordinary shares in the capital of Euskaltel, having a nominal value of e3.00 each; |
|---|---|
| ''Exchange Act'' | the United States Securities Exchange Act of 1934, as amended; |
| ''FCA'' | the Financial Conduct Authority; |
| ''Form of Proxy'' | the green form of proxy enclosed with this Circular and relating to the notice of General Meeting; |
| ''General Meeting'' | the general meeting of the Company to be held at the offices of Travers Smith LLP, 10 Snow Hill, London, EC1A 2AL at 11.00 a.m. on 22 September 2017, or any adjournment thereof; |
| ''Group'' | the Company and its subsidiary undertakings (as defined in section 1162 of the Act); |
| ''Investment Company Act'' | the United States Investment Company Act of 1940, as amended; |
| ''Irrevocable Undertaking'' | the irrevocable undertaking granted by MAML in favour of the Company dated 29 August 2017 (further details of which are set out in paragraph 4.2 of Part VI of this Circular); |
| ''IRS'' | the Internal Revenue Service of the United States federal government; |
| ''ISA'' | an individual savings account; |
| ''Liberum'' | Liberum Capital Limited; |
| ''Listing Rules'' | the listing rules made by the FCA under Part VI of the Financial Services and Markets Act 2000, as amended from time to time; |
| ''Management'' | the holders of the Management Shares from time to time, being at the date of this Circular, Eamonn O'Hare, Robert Samuelson, Howard Kalika and Menno Kremer; |
| ''Management Shares'' | A ordinary shares of 0.00001p each in the capital of Zegona Limited; |
| ''MAML'' | Marwyn Asset Management Limited; |
| ''MAR'' | Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse; |
| ''Member account ID'' | the identification code or number attached to any member account in CREST; |
| ''MLTI'' | Marwyn Long Term Incentive LP, the holder of the Core Investor Shares; |
| ''Net Invested Capital'' | has the meaning ascribed to it in the Prospectus; |
| ''Non-US Shareholder'' | any Qualifying Shareholder who is neither located in nor a citizen of the United States of America and is not a US Person; |
| ''Non-US Tender Conditions'' | as defined in paragraph 2.1 of Section A of Part IV of this Circular; |
| ''Non-US Tender Form'' | the blue tender form accompanying this Circular issued for use by Non-US Shareholders in connection with the Non-US Tender Offer; |
| ''Non-US Tender Offer'' | the invitation by Liberum to Shareholders who are Non-US Shareholders to tender Shares on the terms and subject to the conditions set out in this Circular and, in the case of Shares held in certificated form only, using the Non-US Tender Form; |
| ''Official List'' | the Official List maintained by the FCA; |
| ''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; |
| ''Preferred Return'' | has the meaning ascribed to it in the Prospectus; |
|---|---|
| ''Prospectus'' | the prospectus published by the Company on 25 September 2015; |
| ''Prospectus Rules'' | the prospectus rules made by the FCA under Part VI of the Financial Services and Markets Act 2000, as amended from time to time; |
| ''Put and Call Option Agreement'' |
the agreement dated 30 August 2017 between the Company and Liberum, (further details of which are set out in paragraph 4.1 of Part VI of this Circular) pursuant to which the Company granted Liberum an option to require the Company to repurchase all Shares purchased by Liberum pursuant to the Non-US Tender Offer; |
| ''QIB'' | a qualified institutional buyer as defined in Rule 144A; |
| ''QP'' | a qualified purchaser as defined in Section 2(a)(51) of the Investment Company Act; |
| ''Qualifying Shareholders'' | Shareholders entitled to participate in the Tender Offer, being those who are on the Register on the Record Date and who are not Shareholders subject to the securities laws of a Restricted Jurisdiction; |
| ''Receiving Agent'' | Capita Asset Services; |
| ''Record Date'' | 6.00 p.m. on 5 October 2017; |
| ''Register'' | the Company's register of members; |
| ''Registrars'' | Capita Asset Services; |
| ''Regulatory Information Service'' |
any of the regulatory information services set out in Appendix B of the Listing Rules; |
| ''Repurchase'' | the purchase by the Company of Shares from Liberum in connection with the Non-US Tender Offer pursuant to the authority granted under the Tender Offer Resolution, and ''Repurchased'' shall be construed accordingly; |
| ''Resolutions'' | the Tender Offer Resolution and the Distribution in Specie Resolution; |
| ''Restricted Jurisdiction'' | each of Australia, Canada, Japan, New Zealand, South Africa and any other jurisdiction where the mailing of a Tender Form or accompanying documents into or inside such jurisdiction would constitute a violation of the laws of such jurisdiction; |
| ''Rule 144A'' | Rule 144A under the Securities Act; |
| ''Securities Act'' | the United States Securities Act of 1933, as amended; |
| ''Share Pledge Agreement'' | the pledge agreement dated 26 July 2017 between the Company, Zegona Limited and Euskaltel pursuant to which the Company and Zegona Limited have pledged 2,189,474 Euskaltel Shares in favour of Euskaltel as security over the Company's and certain of Zegona Limited's obligations including under the Tax Indemnity Agreement; |
| ''Shareholders'' | holders of Shares from time to time; |
| ''Shares'' | the issued ordinary shares in the capital of the Company, having a nominal value of £0.01 each; |
| ''SPA'' | the sale and purchase and share exchange agreement dated 15 May 2017 between the Company, Zegona Limited and Euskaltel (further details of which are set out in paragraph 4.4.1 of Part VI of this Circular) pursuant to which Euskaltel agreed to purchase the entire issued share capital of Telecable; |
| ''Takeover Code'' | the City Code on Takeovers and Mergers; |
| ''Tax Indemnity Agreement'' | the indemnity agreement dated 15 May 2017 between the Company, Zegona Limited and Euskaltel (further details of which are set out in Paragraph 4.4.2 of Part VI of this Circular) pursuant to which Zegona Limited and the Company agreed to indemnify certain potential tax liabilities that may arise to the enlarged Euskaltel group following completion of the SPA; |
|---|---|
| ''Telecable'' | Telecable de Asturias, S.A.U., its parent company, Telecable Capital Holding, S.A.U., and its parent company, Parselaya, S.L.U., and their respective subsidiary undertakings; |
| ''Tender Conditions'' | the Non-US Tender Conditions and the US Tender Conditions; |
| ''Tender Forms'' | the Non-US Tender Form and the US Tender Form; |
| ''Tender Offer'' | the Non-US Tender Offer and the US Tender Offer; |
| ''Tender Offer Entitlement'' | in relation to each Qualifying Shareholder, the number representing 35.706095 per cent. of the aggregate number of Shares registered in the Register in his or its name on the Record Date, rounded down to the nearest whole number of Shares as adjusted in accordance with sub-paragraph 4.1.2 of Part IV of this Circular; |
| ''Tender Offer Resolution'' | the special resolution to be proposed at the General Meeting to implement the Tender Offer; |
| ''Tender Price'' | the tender price of £2 per Share, or such higher amount calculated in accordance with paragraph 3.1 of Part I of this Circular; |
| ''TFE Instruction'' | a transfer from escrow instruction (as defined by the CREST Manual); |
| ''TTE Instruction'' | a transfer to escrow instruction (as defined by the CREST Manual); |
| ''uncertificated'' or ''in uncertificated form'' |
recorded on the Register as being held in uncertificated form in CREST and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST; |
| ''US Person'' | a US person as defined in Regulation S under the Securities Act; |
| ''US Shareholder'' | any Qualifying Shareholder who is located in or a citizen of the United States of America or otherwise a US Person; |
| ''US Tender Conditions'' | as defined in paragraph 2 of Section B of Part IV of this Circular; |
| ''US Tender Form'' | the pink tender form accompanying this Circular issued for use by US Shareholders in connection with the US Tender Offer; and |
| ''US Tender Offer'' | the invitation by the Company to certain US Shareholders that are both QIBs and QPs to tender Shares on the terms and subject to the conditions set out in this Circular and, in the case of Shares held in certificated form only, using the US Tender Form. |
(Incorporated and registered in England No. 09395163)
Directors: Registered and Head Office:
Eamonn O'Hare (Chairman and Chief Executive Officer) Robert Samuelson (Chief Operating Officer) Mark Brangstrup Watts (Non-executive Director) Ashley Martin (Independent non-executive Director) Murray Scott (Independent non-executive Director) Richard Williams (Independent non-executive Director)
20 Buckingham Street London England WC2N 6EF
30 August 2017
Following the announcement made by the Company on 26 July 2017 that it intends to return up to £140 million to Qualifying Shareholders by way of a tender offer, the Board confirms today the launch of the Tender Offer, pursuant to which up to £140 million will be returned to Qualifying Shareholders by way of a tender offer at a price of at least £2 per Share.
The Directors have sought to structure the Tender Offer in such a way as to ensure that all Qualifying Shareholders will receive a pro-rata distribution of cash proceeds resulting from the sale of Telecable. Accordingly, each Qualifying Shareholder may only tender their Tender Offer Entitlement.
The Tender Price will be subject to upwards adjustment as described in paragraph 3.1 of Part I of this Circular. If the Tender Price is determined to be £2 per Share, each Qualifying Shareholder will be permitted to tender approximately 36 per cent. of their Shares. If all Shareholders participate, £140 million will be returned to Shareholders and 70 million Shares will be repurchased in aggregate. This represents 42 per cent. of the Company's market capitalisation of £330 million1 .
If the Tender Price is determined to be above £2 per Share, each Qualifying Shareholder's Tender Offer Entitlement will be reduced, meaning each participating Shareholder will still receive the same amount of cash but will sell fewer Shares. If all Shareholders participate, £140 million will still be returned but fewer Shares will be repurchased. The reduction to each Qualifying Shareholder's Tender Offer Entitlement is described in paragraph 4.1.2 of Sections A and B of Part IV of this Circular (for the Non-US Tender Offer and the US Tender Offer respectively).
As explained in further detail in paragraph 2 below, the Company was established with the aim of delivering attractive returns to Shareholders. The Directors believe that the Tender Offer represents a successful validation of that original strategy and are excited about sourcing future acquisitions that will provide the opportunity to achieve further returns to Shareholders.
Assuming Shareholders participate fully in the Tender Offer and the Company meets its target dividend of 5 pence per Share2 for the financial year ending 31 December 2017, as the Board expects it to do, total cash returned to Zegona Shareholders (including dividends paid in previous years) will be up to £158.6 million, which represents 55 per cent. of the initial equity invested by Shareholders since the Company's inception.
1 As at 29 August 2017, being the latest practicable date prior to the publication of this Circular and based on a share price of 168.5p as at market close on that date.
2 Based on the number of Shares outstanding as at 29 August 2017. The Company intends to adjust the dividend per Share following the Tender Offer such that a total dividend of £9.8 million is paid in respect of 2017.
The purpose of this Circular is to:
This letter is not a recommendation for Shareholders to tender their Shares under the Tender Offer. Whether or not Shareholders tender their Shares will depend on, among other things, their view of the Company's prospects and their own individual circumstances, including their tax position, on which they should seek their own independent advice.
However, the Board recommends that Shareholders vote in favour of the Resolutions to approve the Tender Offer and the amendment of the Articles and to enable those Shareholders who wish to do so to realise part of their investment in the Company through the Tender Offer.
The Company was established in January 2015 with the objective of acquiring businesses in the European telecommunications, media and technology sector with a ''Buy-Fix-Sell'' strategy to deliver attractive Shareholder returns. The Company made its first acquisition in furtherance of this objective in August 2015 through the purchase of Telecable, which the Directors believed represented a compelling investment because of (amongst other reasons) its market position, cash generation and opportunity for consolidation, as well as the attractive dynamics in the Spanish telecommunications market and Spanish economy.
The Company completed the sale of Telecable to Euskaltel on 26 July 2017 for a cash consideration of e186.5 million3 and a 15 per cent. stake in the enlarged Euskaltel group (comprising 26.8 million Euskaltel shares).
Further details of the SPA entered into between the Company and Euskaltel in respect of the sale of Telecable are set out in paragraph 4.4.1 of Part VI of this Circular. As noted in the announcement dated 30 August 2017, the Company continues to see good potential to drive further value growth through its Euskaltel ownership and potential new investments. Euskaltel has a very strong market position, is highly cash generative and will benefit from the input and experience of Zegona management.
As noted in its announcement on 26 July 2017, the Company has a strong commitment to return cash to Shareholders quickly and tax efficiently. After having considered a number of different methods of returning cash to Shareholders and considering the business's ongoing working capital needs, the Board has resolved to carry out the Tender Offer in order to return up to £140 million.
The Tender Offer is comprised of the Non-US Tender Offer (which is being conducted by Liberum) and the US Tender Offer (which is being conducted by the Company). Although the Non-US and US Tender Offers are being conducted on substantially the same terms, certain specific details relating to each are set out below.
Each Qualifying Shareholder will be entitled to sell all, but not part, of their Tender Offer Entitlement (subject to scaling back if the Tender Price exceeds £2 per Share) under the Tender Offer.
3 Prior to adjustments at completion of the transaction. A cash payment was made on completion which represents e176.7 million after initial net debt adjustments, other permitted leakage and certain transactional costs.
The Tender Price will be increased if the value of a Euskaltel Share, denominated in pounds sterling, on the closing date of the Tender Offer is greater than £7.99, which is the equivalent value on the date this Circular is published.
Under the adjustment mechanism, the tender price will be increased by 14p for every £1 increase in the value of a Euskaltel share, up to a maximum of £4. There is no reduction to the price if the value of Euskaltel shares falls and the adjustment will be calculated in accordance with the formula below:
£EKT is the closing price of one Euskaltel Share (as quoted in the Bolsa de Madrid Stock Exchange), converted into Sterling using the UK Pound Sterling/Euro FX Cross Rate quoted by the Financial Times at the close of business on the closing date of the Tender Offer.
Provided always that:
The procedure to accept the Tender Offer is set out in paragraph 9.2 below.
To the extent that any Shareholders choose not to participate in the Tender Offer, that portion of the surplus cash proposed to be returned to Shareholders pursuant to the Tender Offer shall continue to be held by the Company. The Directors will consider how to utilise any such funds in due course, depending on the relevant amount and other conditions.
The Tender Offer will close at 1.00 p.m. on 5 October 2017 and tenders received after that time will not be accepted unless otherwise approved by both Liberum and the Company.
It is expected that Qualifying Shareholders who successfully tender their Shares will receive payment for such Shares on or before 16 October 2017.
The Tender Offer is subject to, amongst other things, the passing of the Tender Offer Resolution.
Full details of the Tender Offer, including the terms and conditions on which it is made, are set out in Part IV of this Circular. Some questions and answers related to the Tender Offer are set out in Part III of this Circular.
Subject to certain conditions (including the Tender Offer Resolution being passed at the General Meeting), the Non-US Tender Offer will be implemented on the basis of Liberum, acting as principal and not as agent, nominee or trustee, acquiring the successfully tendered Shares under the Non-US Tender Offer and a subsequent Repurchase of the tendered Shares from Liberum by the Company by way of an on-market transaction on the London Stock Exchange, in both cases at the Tender Price.
Shares will be purchased under the Tender Offer free of all commissions and dealing charges save if you own your Shares through a bank, broker, dealer, trust company or other nominee and such nominee tenders your Shares on your behalf, in which case such nominee may charge you a fee for doing so. You should consult with your bank, broker, dealer, trust company or other nominee to determine whether any charges will apply.
To give effect to these arrangements, Liberum has entered into a Put and Call Option Agreement with the Company (details of which are set out in paragraph 4.1 of Part VI of this Circular). Shares Repurchased in connection with the Non-US Tender Offer will be cancelled.
The Non-US Tender Offer will be open to all Non-US Shareholders on the Register on the Record Date, save for those who are subject to the securities laws of a Restricted Jurisdiction (i.e. Qualifying Shareholders).
Subject to certain conditions (including the Tender Offer Resolution being passed at the General Meeting), the US Tender Offer will be implemented directly by the Company (or an agent of the Company), by way of an on-market transaction on the London Stock Exchange at the Tender Price.
Shares successfully tendered to it in connection with the US Tender Offer will be cancelled.
The US Tender Offer will be open solely to those US Shareholders on the Register on the Record Date who are both QIBs and QPs.
The US Tender Offer in the United States is made solely by the Company. While the US Tender Offer is being made available to US Shareholders, the right to tender Shares is not being made available in any jurisdiction in the United States in which the making of the Tender Offer or the right to tender Shares would not be in compliance with the laws of such jurisdiction.
The receipt of cash pursuant to the US Tender Offer by a US Shareholder may be a taxable transaction for US federal income tax purposes and under applicable US state and local, as well as foreign and other tax laws. Each US Shareholder is urged to consult his independent professional adviser immediately regarding the tax consequences of acceptance of the US Tender Offer.
The Tender Offer is not available to Shareholders in Australia, Canada, Japan or South Africa or any other jurisdiction where the mailing of a Tender Form or accompanying documents into or inside such jurisdiction would constitute a violation of the laws of such jurisdiction.
Further information relating to the terms and conditions of the Tender Offer is set out in Part IV of this Circular.
A significant number of the Company's Shares are held on behalf of investors in the US and Spain so the Company has taken specific advice relating to making the Tender Offer available in those jurisdictions.
The attention of Qualifying Shareholders who are citizens, residents or nationals of countries other than the UK, Spain or the US who wish to participate in the Tender Offer is drawn to paragraph 6 of Section A of Part IV of this Circular.
The Tender Offer is not being made in or into, and is not capable of acceptance in or from the Restricted Jurisdictions. Custodians, nominees and trustees should observe these restrictions and should not send or distribute documents in or into the Restricted Jurisdictions. Any persons (including nominees, trustees and custodians) who may have a legal or contractual obligation to forward this document, the Tender Form and any related documents to any jurisdiction outside the United Kingdom, the United States or Spain should seek appropriate advice and read paragraph 6 of Section A of Part IV of this Circular before doing so.
A summary of the tax consequences of the Tender Offer for UK, US and Spanish resident Shareholders is set out in Part V of this Circular.
It should be noted that this refers to the current system of taxation in each of these jurisdictions. Shareholders are strongly advised to obtain independent tax advice regarding their own tax position.
The table below sets out the interests of Shareholders with significant shareholdings in the Company as at 29 August 2017 (being the latest practicable date prior to the publication of this Circular):
| Number of Shares |
% of current issued Shares |
|
|---|---|---|
| Marwyn Asset Management Limited1 | 50,608,567 | 25.81 |
| Invesco Asset Management | 33,429,168 | 17.06 |
| Fidelity Investments Limited | 19,596,852 | 10.00 |
| Capital Research & Management Company | 15,386,666 | 7.85 |
| Legal & General Investment Managers | 14,000,000 | 7.14 |
| AXA Investment Managers | 13,371,555 | 6.82 |
| Taconic Capital Advisers | 9,541,666 | 4.87 |
| Hargreave Hale | 8,773,331 | 4.48 |
| Tekne Capital Management LLC | 6,722,445 | 3.43 |
Note
1 In its capacity as agent for and on behalf of its discretionary managed clients.
The Company's largest shareholder, MAML, has irrevocably undertaken to participate in full in the Tender Offer with respect to its Tender Offer Entitlement. As a consequence, there will be no increase in its holding of Shares as a result of the Tender Offer and Rule 9 of the Takeover Code will not apply in relation to its shareholding.
Further information on the Irrevocable Undertaking provided to the Company is set out in paragraph 3 of Part VI (Additional Information) of this Circular.
Notice of a General Meeting of the Company to be held at the offices of Travers Smith LLP, 10 Snow Hill, London, EC1A 2AL on 22 September 2017 at 11.00 a.m. is set out at Part VII of this Circular, together with a green Form of Proxy for use at the meeting.
Whilst the Company has existing authority to purchase up to 19,604,496 Shares pursuant to a resolution passed at the annual general meeting held on 17 May 2017, the Company requires a fresh authority from Shareholders in connection with the proposed Tender Offer and Repurchase since the existing authority was subject to different parameters than those currently proposed. Accordingly, the Tender Offer Resolution proposes the purchase of up to 70 million Shares at a maximum Tender Price of £4 per share. The authority to purchase shares pursuant to the Tender Offer Resolution will expire on the date which is 12 months from the date on which the resolution is passed, being 21 September 2018.
Resolution 2 proposes to amend the Company's Articles to permit the Board to satisfy the payment of any dividends declared by the Company wholly or partly by the distribution of shares in Euskaltel or any successor entity of Euskaltel, from time to time. At present, Article 119 of the Articles requires the Company's Shareholders to pass an ordinary resolution permitting the distribution of non-cash assets to satisfy any dividend that has been declared, but the proposed changes would allow the Board more flexibility to return value from its investment in Euskaltel to Shareholders.
Each Shareholder registered on the Register at 5 p.m. on 20 September 2017 will be entitled to vote on the resolutions contained in the Notice of General Meeting. Both the Tender Offer Resolution and the Distribution in Specie Resolution are being proposed as special resolutions. This means that, for the resolutions to be passed, at least three-quarters of the votes cast must be in favour.
As a public company incorporated in England and Wales whose Shares are listed, the Company is subject to the Takeover Code.
Under Rule 9 of the Takeover Code, any person who acquires an interest (as defined in the Takeover Code) in shares which, taken together with shares in which he is already interested and which persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company which is subject to the Code, is normally required to make a general offer to all the remaining shareholders to acquire their shares.
MAML, acting as agent for and on behalf of its discretionary managed clients, currently holds 50,608,567 Shares, representing 25.81 per cent. of the Company's current issued share capital. If the Company were to acquire all Tender Offer Entitlements but MAML did not tender its Tender Offer Entitlement, MAML would remain interested in 50,608,567 Shares, but those Shares would then represent approximately 35.1 per cent. of the reduced issued share capital of the Company. In these circumstances, MAML would therefore be required to make a mandatory offer for the Company under Rule 9 of the Code.
The Company has, however, received an Irrevocable Undertaking from MAML to tender (or procure that the registered holder tenders) its Tender Offer Entitlement of 18,070,342 Shares under the Tender Offer, thus ensuring that its interest will not exceed 30 per cent. of the issued share capital following the Tender Offer. MAML has also undertaken to vote (or procure that the registered holder votes) in favour of the Resolutions at the General Meeting. As consideration for such undertakings, the Company has undertaken to procure that a further tender offer is made to Shareholders as soon as reasonably practicable if the Company exercises its rights to terminate the Tender Offer. Further details of this Irrevocable Undertaking are set out in paragraph 3 of Part VI (Additional Information) of this Circular.
Under the Non-US Tender Offer, Liberum will purchase, as principal and not as agent, nominee or trustee, voting shares in the Company which could result in Liberum coming to have an interest in such Shares carrying 30 per cent. or more of the voting rights of the Company. Liberum has indicated its intention that, promptly following such purchase, it will sell all those Shares acquired pursuant to the Non-US Tender Offer, to the Company for cancellation, and the Company has agreed to buy all such Shares, in both cases on the terms of the Put and Call Option Agreement. Accordingly, a waiver has been obtained from the Panel in respect of the application of Rule 9 of the Takeover Code to the purchase by Liberum of the Shares under the Non-US Tender Offer.
Shareholders will find enclosed with this Circular a green Form of Proxy for use at the General Meeting. Whether or not you intend to be present at the General Meeting, you are requested to complete and return the Form of Proxy (together with any power of attorney under which it is executed) in accordance with the instructions printed on the form, so as to reach the Company's Registrars, Capita Asset Services, PXS, 34 Beckenham Road, Beckenham, BR3 4TU as soon as possible and in any event not later than 11.00 a.m. on 20 September 2017.
Completion and return of a form of proxy will not, however, prevent you from attending the General Meeting and voting in person if you should wish to do so.
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message must be properly authenticated in accordance with the specifications of Euroclear and must contain the information required for such instruction, as described in the CREST Manual. In order to be valid, the message must be transmitted so as to be received by the issuer's agent (ID RA10) by 11.00 a.m. on 20 September 2017. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.
If you hold Shares in certificated form and wish to participate in the Tender Offer, tenders may only be made on the relevant accompanying Tender Form, which is personal to the Shareholder(s) named on it and may not be assigned or transferred. You must complete and return your Tender Form to Capita Asset Services, Corporate Actions, 34 Beckenham Road, Beckenham, BR3 4TU as soon as possible but, in any event so as to arrive no later than 1.00 p.m. on 5 October 2017. Details of how to complete and return your Tender Form are set out in paragraph 3.2 of Part IV of this Circular.
If you hold Shares in uncertificated form and wish to participate in the Tender Offer, tenders may only be made by way of an electronic tender. If you wish to tender your Tender Offer Entitlement of Shares, you must send a valid TTE Instruction which must settle by 1.00 p.m. on 5 October 2017 as described in paragraph 3.4 of Part IV of this Circular. To be valid, Tender Forms and/or electronic tenders must be received by the Receiving Agent no later than 1.00 p.m. on 5 October 2017.
Shareholders who do not wish to participate in the Tender Offer should not complete the Tender Form and will not be required to make a TTE Instruction.
The Directors are making no recommendation as to whether or not you should accept the Tender Offer.
The Directors consider that the Tender Offer and the Resolutions to be put to the General Meeting are in the best interests of the Company and its Shareholders as a whole. The Directors intend to vote in favour of the Resolutions and unanimously recommend that you do as well.
The Company's interim financial statements for the six month period ended 30 June 2017 are scheduled to be published on 29 September 2017. Since the Company is currently in a close period for the purposes of MAR relating to its interim financial statements, the Company has not received any irrevocable undertakings from its Directors to tender their respective Tender Offer Entitlements in the Tender Offer. However, Shareholders should note that all of the Directors who themselves hold Shares intend to tender their respective Tender Offer Entitlements under the Tender Offer (representing 1,072,545 Shares in aggregate at the minimum Tender Price of £2 per Share) and to grant irrevocable undertakings to that effect following the expiry of the close period (upon the publication of the Company's interim financial statements).
Whether or not Qualifying Shareholders decide to tender their Shares will depend, amongst other things, on their view of the Company's prospects and their own individual circumstances (including their own tax position).
If you are in any doubt as to the action you should take, you are recommended to seek your own independent advice.
Yours sincerely
Eamonn O'Hare Chairman and Chief Executive Officer
Shareholders considering whether to tender their Shares should read this Circular carefully. In particular, Shareholders should have regard to the following risk factors. The risk factors below are those considered by the Board to be material to the Tender Offer at the date of this document; additional risks and uncertainties that are not currently known or are not currently considered material may emerge or become material.
2.4 The Company is exposed to foreign currency translation risk as a result of its functional currency and Shares being denominated in pounds sterling while its holding in Euskaltel is denominated in euros. The principal ongoing risk is to the Company's ability to re-translate dividends distributed by Euskaltel in euro into pounds sterling for the purposes of returning it to Shareholders. As a result, any significant fluctuations in the pounds sterling/euro exchange rate could have a material adverse effect on the value of any euro-denominated dividends from Euskaltel that the Company distributes to Shareholders in pounds sterling.
3.1 The agreements relating to the sale of Telecable contain certain contingent liabilities which remain uncertain in terms of timing and amount. Although the Group has taken out insurance in respect of some of these liabilities, if any or all of the contingent liabilities relating to the sale of Telecable are realised, this could have an adverse effect on the financial condition and results of operation of the Group. The agreements relating to the sale of Telecable are described in further detail in paragraph 4.4 of Part VI of this Circular.
For additional risks relating to the business and operations of the Group as well as other risks, including those relating to the industry in which the Group operates and the strategy, management and operations of the Company, please read pages 17 to 37 of the Prospectus.
To help explain what is involved in the Tender Offer, the Company has prepared a summary and some questions and answers. You should read the whole of this Circular and not rely solely on the summary information in this Part III.
Section A of Part IV of this Circular sets out the detailed terms and conditions of the Non-US Tender Offer and Section B of Part IV of this Circular sets out the detailed terms and conditions of the US Tender Offer. In the event of any inconsistency between the contents of this Part III and the terms and conditions set out in Sections A and B of Part IV of this Circular, the terms and conditions set out in Sections A and B of Part IV of this Circular shall prevail.
A list of defined terms is set out from page 7 of this Circular, in the Section entitled ''Definitions''.
The Board has arranged to provide Non-US Shareholders with the opportunity to sell a portion of their Shares (known as their Tender Offer Entitlement) under the Non-US Tender Offer and for the Company to provide US Shareholders with the opportunity to sell a portion of their Shares (known as their Tender Offer Entitlement) under the US Tender Offer.
If you have not received any of the documents listed above please call the Shareholder Helpline, details of which are set out at paragraph 2.31 of Part III of this Circular.
* In order to participate in the Tender Offer, you must complete your Tender Form and return your share certificates (if you hold your shares in certificated form) or complete your TTE Instruction (if you hold your shares in CREST) by no later than 1.00 p.m. on 5 October 2017.
The Board is committed to providing Shareholders with ongoing cash returns quickly and tax efficiently. As further described in paragraph 4.4 of Part VI of this Circular, the Company recently completed the sale of Telecable to Euskaltel for a cash consideration of e186.5 million4 and a 15 per cent. stake in the enlarged Euskaltel group (comprising 26.8 million Euskaltel shares).
Accordingly, the Board intends to return up to £140 million to Qualifying Shareholders, comprising surplus cash of the Company following the sale of Telecable.
To the extent that Shareholders choose not to participate in the Tender Offer, the surplus cash that is not returned to Shareholders will be held by the Company. The Board will consider how to utilise the surplus cash in due course, depending on the relevant amount and other conditions.
After careful consideration, the Board considers the Tender Offer, together with the subsequent Repurchase pursuant to the Non-US Tender Offer, to be the most appropriate means of returning capital to the Shareholders as it is quicker than some of the other methods of distributing cash to Shareholders which were considered by the Board, it allows Shareholders individually to choose whether or not to participate, and it provides certain Shareholders with preferable tax treatment.
The Non-US Tender Offer is being conducted by Liberum, acting as principal and not as agent, nominee or trustee. It is not possible for US Shareholders to participate in the Non-US Tender Offer. As such, the Company is separately conducting the US Tender Offer to enable US Shareholders to participate in the Tender Offer on identical terms (save to the extent of Liberum's involvement) to Non-US Shareholders.
All Qualifying Shareholders are eligible to participate in the Tender Offer.
Shareholders who are citizens, residents or nationals of countries other than the UK, Spain or the US, should read the information for Overseas Shareholders set out in Section A of Part IV of this Circular.
US Shareholders that are both QIBs and QPs should read the information set out in Section B of Part IV of this Circular.
No, you are not obliged to sell your Shares.
If you choose not to sell any Shares, your holding will be unaffected, save for the fact that you will (assuming the Tender Offer is completed) end up owning a greater percentage of the Shares of the Company after the Tender Offer than you did before as there will be fewer shares in issue after completion of the Tender Offer process than before.
4 Prior to adjustments at completion of the transaction. A cash payment was made on completion which represents e176.7 million after initial net debt adjustments, other permitted leakage and certain transactional costs.
The maximum number of Shares that could be acquired under the Tender Offer is 70 million (representing approximately 35.7 per cent. of the Company's current issued ordinary share capital), so the increase in the percentage of your holding could be significant.
You can only offer to tender your Tender Offer Entitlement of Shares, no more and no less. Your Tender Offer Entitlement is calculated by taking the number of Shares held by you on the Record Date and multiplying that number by 35.706095 per cent., then rounding the result down to the nearest whole number.
The Tender Price is a minimum of £2 per Share. The price is subject to upward adjustment if the value of Euskaltel's shares increases after this Circular is published.
The Tender Price will be increased if the value of a Euskaltel Share, denominated in pounds sterling, on the closing date of the Tender Offer is greater than £7.99, which is the equivalent value on the date this Circular is published.
Under the adjustment mechanism, the Tender Price will be increased by 14p for every £1 increase in the value of a Euskaltel Share, up to a maximum of £4. There is no reduction to the price if the value of Euskaltel Shares falls and the adjustment will be calculated in accordance with the formula below:
£EKT is the closing price of one Euskaltel Share (as quoted in the Bolsa de Madrid Stock Exchange), converted into Sterling using the UK Pound Sterling/Euro FX Cross Rate quoted by the Financial Times at the close of business on the closing date of the Tender Offer.
Provided always that:
If the Tender price after the adjustment described in paragraph 2.12 above is above £2 per share then your Tender Offer Entitlement will be reduced (''scaled back''), however the result will always be that you will receive the same amount of cash as you would have received had the Tender Price been £2 per Share. In practice, this will mean that for every share you own today, you will receive 71p of cash.
If your Tender Offer Entitlement is scaled back, you will have tendered more Shares than you are ultimately entitled to. In such circumstances, any excess Shares tendered will be returned to you as soon as reasonably practicable. This is illustrated in the following examples:
Assumed Tender Offer Entitlement = 10,000 Shares
Assumed Tender Price = £2
From the above example, it is clear that 10,000 Shares tendered at £2 per Share would generate proceeds of £20,000. The following example demonstrates how this £20,000 would be applied if the Tender Price exceeded £2 per Share after the same Shareholder had offered to tender their 10,000 Shares.
Worked example assuming Tender Price exceeds £2 per Share
Assumed Tender Price = £2 + the Additional Amount, where:
the Additional Amount is (£EKT – £7.99) x 0.13670, rounded to the nearest 1p
Assumed £EKT = £8.10
Additional Amount = (£8.10 – £7.99) x 0.13670 = £0.02
In this example, the Shareholder tendering 10,000 Shares would receive £19,998 for 9,900 Shares and 100 Shares would be returned to the Shareholder.
The Tender Price will be calculated as soon as possible following the close of business on 5 October 2017.
What you receive will depend on the action that you take. If you decide to participate and your Shares are successfully tendered in the Tender Offer, you will sell your Tender Offer Entitlement (subject to scaling back if the Tender Price exceeds £2) of Shares and will receive cash proceeds for them.
As demonstrated in the worked examples at paragraph 2.13 above, if the Tender Price is determined to be above £2 per Share, you will receive the same amount of cash as if you had received £2 per Share for all of your Tender Offer Entitlement, but for a correspondingly smaller number of Shares. Any excess Shares will be returned to you as soon as reasonably practicable following the close of the Tender Offer.
If you decide to keep your Shares, you will not receive any money under the Tender Offer but, assuming successful completion of the Tender Offer and the subsequent cancellation of Shares tendered under the Tender Offer, you will end up owning a greater percentage of the issued ordinary share capital of the Company after the Tender Offer than you did before, as explained in paragraph 2.10 above.
If you hold your Shares in certificated form and you wish to tender your Tender Offer Entitlement of Shares, you should complete the relevant Tender Form in accordance with the instructions printed on it and set out in Part IV of this Circular. You should return your completed Tender Form by post in the accompanying reply-paid envelope (for use in the UK only) or by hand to Capita Asset Services, Corporate Actions, 34 Beckenham Road, Beckenham, BR3 4TU, together with your share certificate(s) in respect of the Shares tendered.
If you hold your Shares in uncertificated form and you wish to tender your Tender Offer Entitlement of Shares, you should send a TTE Instruction for your Basic Tender Offer Entitlement and follow the procedures set out in Part IV of this Circular in respect of tendering uncertificated Shares.
Completed Tender Forms and/or TTE Instructions (as appropriate) must be received by Capita Asset Services by no later than 1.00 p.m. (UK time) on 5 October 2017 after which time Tender Forms and/or TTE Instructions (as appropriate) will be rejected.
The Tender Offer will close at 1.00 p.m. (UK time) on 5 October 2017 and tenders received after that time will not be accepted.
You should complete the Tender Form and send it, together with a letter of explanation to Capita Asset Services in accordance with the instructions in the relevant Tender Form. You should then phone the Shareholder helpline or write to Capita Asset Services asking for a letter of indemnity to be sent to you, which you should then complete in accordance with the instructions given and send back to Capita Asset Services immediately.
Depending on the terms under which such Shares are held, your Shares may only be tendered if you provide instructions to your broker or other nominee to do so. You should follow the directions provided by your broker or other nominee regarding how to instruct your broker or other nominee to tender your Shares. Without your specific instructions, your Tender Offer Entitlement will not be tendered for purchase under the Tender Offer.
You can withdraw or amend your tender of Shares up until 1.00 p.m. (UK time) on 5 October 2017, which is the closing date for the Tender Offer. If you wish to do so, please contact Capita Asset Services on the Shareholder Helpline (details of which are set out in paragraph 2.31 below).
As explained under the section entitled ''Expected timetable of events'' on page 6 of this Circular, it is anticipated that, for holders of Shares in certificated form, a cheque would be despatched to you for the proceeds of any sale by 16 October 2017. CREST account holders would have their CREST accounts credited on 16 October 2017.
Neither the Company nor Liberum is imposing any fees on Shareholders in connection with the Tender Offer. If you own your Shares through a bank, broker, dealer, trust company or other nominee and such person tenders your Shares on your behalf, such person may charge you a fee for doing so. You should consult with your bank, broker, dealer, trust company or other nominee to determine whether any charges will apply.
For information on certain UK, US and Spanish taxation consequences of the Tender Offer please see Part V of this Circular. This information is for guidance only and does not constitute tax advice. If you are in any doubt as to your tax position, or if you are subject to tax in a jurisdiction other than the UK, the US or Spain, you should consult an independent professional adviser.
You may trade your Shares in the normal way during the Tender Offer period.
If you have sold or otherwise transferred all of your Shares, please forward this Circular (but not the accompanying personalised Tender Form) at once to the purchaser or transferee or the agent through whom the sale or transfer was effected, for onward delivery to the purchaser or transferee (but not if such purchaser, transferee or agent is resident in a Restricted Jurisdiction). If you have sold part of your holding of Shares, please retain these documents and contact the bank, stockbroker or other agent through whom the sale or transfer was effected as to the actions you should take.
You should contact your plan manager. We expect that you will be written to separately by your plan manager about the implications of the Tender Offer on your ISA holding.
No. Shares may not be tendered in the Tender Offer by guaranteed delivery.
Shareholders resident outside the UK, or who are nationals or citizens of jurisdictions other than the UK, should read the additional information set out in paragraph 6 of Section A of Part IV of this Circular.
Yes there is a general meeting to approve the Tender Offer, but you do not need to attend. Although the Company is authorised to purchase up to 19,604,496 Shares pursuant to a resolution passed at the annual general meeting held on 17 May 2017, the Company requires a fresh authority from Shareholders in connection with the proposed Tender Offer and Repurchase since the existing authority was subject to different parameters and applied to a smaller number of Shares. Accordingly, the Company is holding the General Meeting on 22 September 2017 at the offices of Travers Smith LLP, 10 Snow Hill, London, EC1A 2AL, to seek authority for the purchase of up to 70 million Shares at a maximum Tender Price of £4 per share pursuant to the Tender Offer.
The Company is also proposing to make an amendment to its articles of association at the General Meeting. Details of the proposed changes are set out in the Notice of General Meeting at Part VII of this Circular.
Although there is no requirement to attend the General Meeting, Shareholders are very welcome to attend and should, in any event, ensure that they complete and return their Form of Proxy by no later than 11.00 a.m. on 20 September 2017 to ensure their vote on the Resolutions is counted.
If the Shares are held in in certificated form, you should complete the Non-US Tender Form in respect of Non-US Shareholders and the US Tender Form in respect of US Shareholders. You should follow the procedure for tendering as set out in paragraph 3.2 of Section A of Part IV of this Circular in respect of Shares held on behalf of Non-US Shareholders and paragraph 3.2 of Section B of Part IV of this Circular in respect of Shares held on behalf of US Shareholders.
If the Shares are held in uncertificated form, you should send two TTE Instructions to Euroclear, one in respect of Shares held on behalf of Non-US Shareholders and the other in respect of Shares held on behalf of US Shareholders. You should follow the procedure for tendering as set out in paragraph 3.4 of Section A of Part IV of this Circular and paragraph 3.4 of Section B of Part IV of this Circular, respectively.
Assuming that one or more of the beneficial owners of Shares on behalf of whom you hold Shares does not instruct you, as nominee, to participate in the Tender Offer on its behalf, you will be permitted to tender a smaller number of Shares than your full Basic Tender Offer Entitlement, provided that this number of Shares tendered represents the aggregate of the Basic Tender Offer Entitlements of the underlying beneficial owner(s) that has/have provided instructions to participate in the Tender Offer.
We have set up a Shareholder helpline. Accordingly, you can call 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 a.m. and 5.30 p.m., Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.
Please note that, for legal reasons, the Shareholder Helpline is only able to provide information contained in this Circular, information relating to the Company's register of members and information regarding completion of forms and is unable to give advice on the merits of the Tender Offer or to provide legal, financial, tax or investment advice. If you are in any doubt about what action to take you should seek your own personal financial advice from your independent financial adviser, stockbroker, solicitor, accountant, bank manager or from an appropriately qualified independent adviser authorised pursuant to the Financial Services and Markets Act 2000.
We are unable to give an exact number at this stage, as it will depend on how many of the Shares are successfully tendered and the final Tender Price. Following the purchase of Shares by the Company from US Shareholders and from Liberum pursuant to the Put and Call Option Agreement and the subsequent cancellation of such Shares, up to 70 million Shares may be tendered and cancelled. The Company's issued ordinary share capital would therefore be reduced by up to approximately 35.7 per cent. assuming the Tender Offer is fully subscribed and that the Shares which are purchased by Liberum under the Non-US Tender Offer are Repurchased by the Company pursuant to the Put and Call Option Agreement. If the Tender Offer is not fully subscribed, then fewer Shares may be tendered and cancelled as a result of the Tender Offer and associated Repurchase and cancellation of Shares.
The Tender Offer is conditional upon the satisfaction of the Tender Conditions set out in paragraph 2.1 of Section A and paragraph 2.1 of Section B Part IV of this Circular. Should the Tender Conditions not be satisfied or waived by Liberum or the Company, as the case may be, then the Tender Offer will not proceed.
The Company may also resolve to withdraw the Tender Offer in the event of a material change in the Company's circumstances and will withdraw the Tender Offer if it becomes aware that a takeover offer or approach in relation to such an offer has been or will be made for the Company or Euskaltel.
The Non-US Tender Offer is being made by Liberum, acting as principal and not as agent, nominee or trustee. Liberum and the Company have entered into the Put and Call Option Agreement pursuant to which Liberum has the right to require the Company to purchase from Liberum the Shares purchased by it under the Non-US Tender Offer and the Company has the right to require Liberum to sell the Shares purchased by it under the Non-US Tender Offer, at a price per Share equal to the Tender Price.
The Company will cancel the Shares that are successfully tendered to Liberum pursuant to the Non-US Tender Offer and subsequently Repurchased by the Company pursuant to the Put and Call Option Agreement. Shares that are successfully tendered to the Company pursuant to the US Tender Offer will be repurchased by the Company and will also be cancelled.
Non-US Shareholders on the Register on the Record Date are being invited to tender all, but not a part, of their Tender Offer Entitlement (subject to scaling back if the Tender Price exceeds £2 per Share) of their Shares for purchase by Liberum on the terms and subject to the conditions set out in this Circular and, in the case of certificated Shares, in the Non-US Tender Form.
Shareholders who do not wish to participate in the Non-US Tender Offer need take no action. The rights of Shareholders who choose not to tender their Shares will be unaffected.
All Shares that are Repurchased pursuant to the Put and Call Option Agreement will be cancelled.
Liberum will not purchase the Shares pursuant to the Non-US Tender Offer unless all the Non-US Tender Conditions have been satisfied. The Non-US Tender Conditions under 2.1.3 and 2.1.4 above may be waived by Liberum, but the other Non-US Tender Conditions may not be waived by Liberum or the Company. If any of the above conditions are not satisfied or waived (as applicable) by 6.00 p.m. on 5 October 2017 (or such later time and date as the Company and Liberum may agree), the Non-US Tender Offer will lapse.
otherwise required under applicable law). None of the Company, Liberum, the Receiving Agent or any other person is or will be obliged to give notice of any defects or irregularities and none of them will incur any liability for failure to give such notice.
2.15 Under the Non-US Tender Offer and subject to the terms and conditions set out in this Section A of Part IV, and (where relevant) the Non-US Tender Form, Non-US Shareholders will be entitled to sell to Liberum their Tender Offer Entitlement.
2.16 If a Non-US Shareholder validly tenders a number of Shares which is equal to their Basic Tender Offer Entitlement, the tender will be satisfied in full (subject to (i) adjustment if the Basic Tender Price exceeds £2 per Share; (ii) the Non-US Tender Offer not being terminated or lapsing prior to its completion; and (iii) satisfaction of the other terms and conditions set out in this Part IV and (where relevant) the Non-US Tender Form).
If you hold Shares in certificated form, you may tender such Shares only by completing and returning the Non-US Tender Form in accordance with the instructions printed thereon and set out in paragraph 3.2 below. If you hold Shares in certificated form, but under different designations, you should complete a separate Non-US Tender Form for each designation. Additional copies of the Non-US 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 Shares in uncertificated form (that is, in CREST) you may tender such Shares only by TTE Instruction in accordance with the procedure set out in paragraph 3.4 below and, if those Shares are held under different member account IDs, you should send a separate TTE Instruction for each member account ID.
To participate in the Non-US Tender Offer, Non-US Shareholders holding Shares in certificated form must complete, sign, have witnessed and return the Non-US Tender Form in accordance with these instructions and the instructions on the Non-US Tender Form.
Completed, signed and witnessed Non-US 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, 34 Beckenham Road, Beckenham, BR3 4TU as soon as possible and, in any event, so as to be received by no later than 1.00 p.m. on 5 October 2017. Tenders received after that time will be accepted only at the sole discretion of Liberum and the Company, acting jointly.
Duly completed Non-US 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 Shares in accordance with the terms and conditions of the Non-US Tender Offer. No acknowledgement of receipt of documents will be given.
The completed and signed Non-US 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 Non-US 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, 34 Beckenham Road, Beckenham, BR3 4TY by no later than 1.00 p.m. on 5 October 2017, together with any share certificate(s) and/or document(s) of title that you may have available.
In respect of those Shares for which your share certificate(s) and/or other document(s) of title is/are unavailable and you have been sent a Non-US 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, 34 Beckenham Road, Beckenham, Kent, BR3 4TU by no later than 1.00 p.m. on 5 October 2017. A fee may be payable by the Non-US 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, 34 Beckenham Road, Beckenham, BR3 4TU.
3.3 If you are in any doubt as to the procedure for participating in the Non-US 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 a.m. and 5.30 p.m., Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.
By signing and returning a Non-US Tender Form, you will be deemed to have instructed Liberum to remit the cash consideration to the Receiving Agent with instructions that such consideration be remitted in accordance with the instructions set out in the Non-US Tender Form.
If your Shares are in uncertificated form, to tender such shares under the Non-US 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 Shares you wish to tender under the Non-US 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 5 October 2017. 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 Liberum to sell to it the number of Shares (or such lower number as is your Tender Offer Entitlement) at the Tender Price by transferring such 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 Shares are held. In addition, only your CREST sponsor will be able to send the TTE Instruction to Euroclear in relation to the 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 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 Non-US Tender Offer. If the Non-US Tender Offer becomes unconditional by 6.00 p.m. on 5 October 2017, or such later time and date as the Company and Liberum may agree, Capita Asset Services will transfer the successfully tendered Shares to itself as the agent of Liberum, transferring any Shares not successfully tendered to the original available balances to which those Shares relate.
You are recommended to refer to the CREST Manual 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 Shares to settle prior to 1.00 p.m. on 5 October 2017. 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 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 Shares.
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 Liberum 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 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 Shares or otherwise). Shareholders who are proposing to convert any Shares are recommended to ensure that the conversion procedures are implemented in sufficient time to enable the person holding or acquiring the Shares as a result of the conversion to take all necessary steps in connection with such person's participation in the Non-US 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 5 October 2017.
Liberum reserves the right (with the agreement of the Company) to treat as valid only Non-US Tender Forms which are received entirely in order by 1.00 p.m. on 5 October 2017 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 Shares tendered.
A Non-US Tender Form which is received in respect of Shares held in uncertificated form will not constitute a valid tender and will be disregarded. Shareholders holding Shares in uncertificated form who wish to tender such shares should note that a TTE Instruction will be a valid tender as at 5 October 2017, 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.
Notwithstanding the completion of a valid Non-US Tender Form or settlement of a TTE Instruction, as applicable, the Non-US Tender Offer may be terminated or lapse in accordance with the conditions set out above.
The decision of Liberum as to which 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 Non-US Tender Form or as to the procedure for making an electronic tender please contact the Receiving Agent, Capita Asset Services, Corporate Actions, 34 Beckenham Road, Beckenham, 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, 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 a.m. and 5.30 p.m., Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.
Each Non-US Shareholder by whom or, as applicable, on whose behalf, a Non-US Tender Form is executed and lodged, including a Non-US Tender Form which is treated by Liberum as valid, irrevocably undertakes, represents, warrants and agrees to and with Liberum (so as to bind him, his personal representatives, heirs, successors and assigns) that:
Each Qualifying Shareholder's Tender Offer Entitlement shall be the aggregate number of Shares registered in the Register in his or its name on the Record Date multiplied by the Tender Proportion (rounded to 8 decimal places) and then rounded down to the nearest whole number of Shares, where:
the ''Tender Proportion'' is the Maximum Tendered Shares divided by the Total Issued Share Capital;
the ''Maximum Tendered Shares'' is £140 million divided by the final Tender Price, rounded down to the nearest whole number; and
the ''Total Issued Share Capital'' is the number of Shares in issue on the Record Date;
4.1.8 the execution of the Non-US Tender Offer shall constitute a submission by the Non-US Shareholder to all matters in connection with the creation, validity, effect, interpretation or performance of, or the legal relationships established by, the Non-US Tender Offer and the Non-US Tender Form, whether contractual or non-contractual, being governed by, and construed in accordance with, the laws of England and Wales and the delivery of a Tender Form will constitute submission to the jurisdiction of the courts of England and Wales.
A reference in this paragraph to a Non-US Shareholder includes a reference to the person or persons executing a Non-US Tender Form and in the event of more than one person executing a Non-US Tender Form, the provisions of this paragraph will apply to them jointly and severally.
Each Non-US Shareholder by whom, or on whose behalf, a TTE Instruction which is treated by Liberum as valid and made irrevocably undertakes, represents, warrants and agrees to and with Liberum and the Company (so as to bind him, his personal representatives, heirs, successors and assigns) that:
Each Qualifying Shareholder who submits a tender pursuant to the Non-US Tender Offer irrevocably undertakes, represents, warrants and agrees to and with Liberum and the Company (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 Liberum of all such benefits as Liberum may have in any covenants, representations and warranties in respect of the Shares which are successfully tendered under the Non-US Tender Offer.
Settlement of the consideration to which any Non-US Shareholder is entitled pursuant to valid tenders accepted by Liberum will be made by the dispatch of cheques or the creation of CREST payment obligations as follows:
Where an accepted tender relates to Shares held in certificated form, cheques for the consideration due will be despatched by the Receiving Agent (on behalf of Liberum) by 16 October 2017 by first class post to the person or agent whose name and address (outside a Restricted Jurisdiction) is set out in section 4A or section 4B of the Non-US 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 at the risk of the persons entitled thereto. 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 Shares held by Non-US Shareholders in uncertificated form, the consideration due will be paid by 16 October 2017 through CREST by the Receiving Agent (on behalf of Liberum) procuring the creation of a payment obligation in favour of the payment banks of accepting Shareholders in accordance with the CREST payment arrangements.
Each Overseas Shareholder will be responsible for any such transfer or other taxes or other requisite payments by whomsoever payable and the Company, Receiving Agent and Liberum and any person acting on their behalf shall be fully indemnified and held harmless by such Shareholder on an after-tax basis for any such transfer or other taxes or other requisite payments such person may be required to pay. No steps have been taken to qualify the Non-US Tender Offer or to authorise the extending of the Non-US Tender Offer or the distribution of the Non-US Tender Form in any territory outside the United Kingdom other than Spain.
6.3 In particular, the Non-US Tender Offer is not being made directly or indirectly in, into or from or by use of the mail or by any means or instrumentality (including, without limitation, facsimile transmission, telex and telephone) of interstate or foreign commerce, or of any facility of a national securities exchange, of a Restricted Jurisdiction and the Non-US Tender Offer cannot be accepted by any such use, means, instrumentality or facility or from within a Restricted Jurisdiction.
Accordingly, copies of the Non-US Tender Form 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 Shares for persons in a Restricted Jurisdiction.
6.4 If, in connection with making the Non-US Tender Offer, notwithstanding the restrictions described above, any person (including, without limitation, custodians, nominees and trustees), whether pursuant to a contractual or legal obligation or otherwise, forwards the Non-US Tender Form in, into or from a Restricted Jurisdiction or uses the mails of, or any means or instrumentality (including, without limitation, facsimile transmission, telex and telephone) of interstate or foreign commerce, or any facility of a national securities exchange, of a Restricted Jurisdiction in connection with such forwarding, such persons should:
6.4.1 inform the recipient of such fact;
US Shareholders who are (i) on the Register on the Record Date and (ii) both QIBs and QPs (''Qualifying US Shareholders'') are being invited to tender all, but not part, of their Tender Offer Entitlement (subject to scaling back if the Tender Price exceeds £2 per Share) of their Shares for purchase by the Company on the terms and subject to the conditions set out in this Circular and, in the case of certificated Shares, in the US Tender Form.
Shareholders who do not wish to participate in the US Tender Offer need take no action. The rights of Shareholders who choose not to tender their Shares will be unaffected.
The Company will not purchase the Shares pursuant to the US Tender Offer unless all the Tender Conditions have been satisfied. If any of the above conditions are not satisfied or waived (as applicable) by 6.00 p.m. on 5 October 2017 (or such later time and date as determined by the Company), the US Tender Offer will lapse.
2.9 All tenders of Shares held in certificated form must be made on the accompanying US Tender Form, duly completed in accordance with the instructions set out below and on the US Tender Form, as applicable (which constitute part of the terms of the US Tender Offer). Such tenders will be valid only when the procedures contained in this Circular and in the US Tender Form are complied with.
2.10 All tenders of Shares held in uncertificated form (that is, in CREST) must be made by the input and settlement of an appropriate TTE Instruction in CREST in accordance with the instructions set out below and the relevant procedures in the CREST manual which together constitute part of the terms of the US Tender Offer. Such tenders will be valid only when the procedures contained in this Section B of Part IV of the Circular and in the relevant parts of the CREST Manual are complied with.
Receiving Agent, the Company or any other person is or will be obliged to give notice of any defects or irregularities in any tender and none of them will incur any liability for failure to give any such notice.
If you hold Shares in certificated form, you may tender such Shares only by completing and returning the US Tender Form in accordance with the instructions printed thereon and set out in paragraph 3.2 below. If you hold Shares in certificated form, but under different designations, you should complete a separate US Tender Form for each designation. Additional copies of the US 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 Shares in uncertificated form (that is, in CREST) you may tender such Shares only by TTE Instruction in accordance with the procedure set out in paragraph 3.4 below and, if those Shares are held under different member account IDs, you should send a separate TTE Instruction for each member account ID.
To participate in the US Tender Offer, US Shareholders who are Qualifying US Shareholders holding Shares in certificated form must complete, sign, have witnessed and return the US Tender Form in accordance with these instructions and the instructions on the US Tender Form.
Completed, signed and witnessed US 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, 34 Beckenham Road, Beckenham, BR3 4TU as soon as possible and, in any event, so as to be received by no later than 1.00 p.m. on 5 October 2017. Tenders received after that time will be accepted only at the sole discretion of the Company.
Duly completed US 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 Shares in accordance with the terms and conditions of the US Tender Offer. No acknowledgement of receipt of documents will be given.
The completed and signed US 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 US 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, 34 Beckenham Road, Beckenham, BR3 4TU by no later than 1.00 p.m. on 5 October 2017, together with any share certificate(s) and/or document(s) of title that you may have available.
In respect of those Shares for which your share certificate(s) and/or other document(s) of title is/are unavailable and you have been sent a US 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, 34 Beckenham Road, Beckenham, Kent, BR3 4TU by no later than 1.00 p.m. on 5 October 2017. A fee may be payable by the Qualifying US 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, 34 Beckenham Road, Beckenham, BR3 4TU.
3.3 If you are in any doubt as to the procedure for participating in the US 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 a.m. and 5.30 p.m., Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.
By signing and returning a US Tender Form, you will be deemed to have appointed the Company or any agent acting on its behalf as your agent in respect of the tender process. The Company (or an agent acting on its behalf) will therefore issue a contract note on behalf of all Qualifying US Shareholders whose Shares are so purchased under the US Tender Offer and will remit the cash consideration to Capita Asset Services with instructions that such consideration be remitted to the Qualifying US Shareholders entitled thereto in accordance with the instructions set out on their respective US Tender Forms.
If your Shares are in uncertificated form, to tender such shares under the US 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 Shares you wish to tender under the US 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 5 October 2017. 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 the Company to sell to it the number of Shares (or such lower number as is your Tender Offer Entitlement) at the Tender Price by transferring such 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 Shares are held. In addition, only your CREST sponsor will be able to send the TTE Instruction to Euroclear in relation to the 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 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 US Tender Offer. If the US Tender Offer becomes unconditional by 6.00 p.m. on 5 October 2017, or such later time and date as determined by the Company, Capita Asset Services will transfer the successfully tendered Shares to itself as the agent of the Company, transferring any Shares not successfully tendered to the original available balances to which those 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 Shares to settle prior to 1.00 p.m. on 5 October 2017. 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 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 Shares.
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 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 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 Shares or otherwise). Shareholders who are proposing to convert any Shares are recommended to ensure that the conversion procedures are implemented in sufficient time to enable the person holding or acquiring the Shares as a result of the conversion to take all necessary steps in connection with such person's participation in the US 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 5 October 2017.
The Company reserves the right to treat as valid only US Tender Forms which are received entirely in order by 1.00 p.m. on 5 October 2017 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 Shares tendered.
A US Tender Form which is received in respect of Shares held in uncertificated form will not constitute a valid tender and will be disregarded. Shareholders holding Shares in uncertificated form who wish to tender such shares should note that a TTE Instruction will be a valid tender as at 5 October 2017, 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.
Notwithstanding the completion of a valid US Tender Form or settlement of a TTE Instruction, as applicable, the US Tender Offer may be terminated or lapse in accordance with the conditions set out above.
The decision of the Company as to which Shares have been validly tendered shall be conclusive and binding on all US Shareholders.
If you are in any doubt as to how to complete the US Tender Form or as to the procedure for making an electronic tender please contact the Receiving Agent, Capita Asset Services, Corporate Actions, 34 Beckenham Road, Beckenham, 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, 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 a.m. and 5.30 p.m., Monday to Friday excluding public holidays in England and Wales. Please note that Capita Asset Services cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security and training purposes.
Each US Shareholder who is a Qualifying US Shareholder by whom or, as applicable, on whose behalf, a US Tender Form is executed and lodged, including a US Tender Form which is treated by the Company as valid, irrevocably undertakes, represents, warrants and agrees to and with the Company (so as to bind him, his personal representatives, heirs, successors and assigns) that:
Each Qualifying Shareholder's Tender Offer Entitlement shall be the aggregate number of Shares registered in the Register in his or its name on the Record Date multiplied by the Tender Proportion (rounded to 8 decimal places) and then rounded down to the nearest whole number of Shares, where:
the ''Tender Proportion'' is the Maximum Tendered Shares divided by the Total Issued Share Capital;
the ''Maximum Tendered Shares'' is £140 million divided by the final Tender Price, rounded down to the nearest whole number; and
the ''Total Issued Share Capital'' is the number of Shares in issue on the Record Date;
A reference in this paragraph to a Qualifying US Shareholder includes a reference to the person or persons executing a US Tender Form and in the event of more than one person executing a US Tender Form, the provisions of this paragraph will apply to them jointly and severally.
Each US Shareholder who is a Qualifying US Shareholder and by whom, or on whose behalf, a TTE Instruction which is treated by the Company as valid and made irrevocably undertakes, represents, warrants and agrees to and with the Company (so as to bind him, his personal representatives, heirs, successors and assigns) that:
at the Agent's discretion in relation to the Shares referred to in sub-paragraph 4.2.1 above in favour of the Company or such other person or persons as the Company may direct and to deliver any documents or input any instructions into Euroclear relating to such Shares, for registration within six months of the US Tender Offer becoming unconditional and to do all such other acts and things as may in the opinion of such Agent be necessary or expedient for the purpose of, or in connection with, the US Tender Offer and to vest in the Company or its nominee(s) or such other person(s) as the Company may direct, such Shares;
Each Qualifying US Shareholder who submits a tender pursuant to the US Tender Offer irrevocably undertakes, represents, warrants and agrees to and with the Company (so as to bind him, his personal representatives, heirs, successors and assigns) that:
4.3.1 Such US Shareholder is both a QIB and a QP;
equitable interests, rights of pre-emption or other third party rights of any nature and together with all rights attaching thereto, including the right to receive all dividends and other distributions declared, paid or made after that date;
Each Shareholder to which paragraphs 4.1 or 4.2 apply hereby consents to the assignment by the Company of all such benefits as the Company may have in any covenants, representations and warranties in respect of the Shares which are successfully tendered under the US Tender Offer.
Settlement of the consideration to which any Qualifying US Shareholder is entitled pursuant to valid tenders accepted by the Company will be made by the dispatch of cheques or the creation of CREST payment obligations as follows:
Where an accepted tender relates to Shares held in certificated form, cheques for the consideration due will be despatched by the Receiving Agent (on behalf of the Company) by 16 October 2017 by first class post to the person or agent whose name and address (outside a Restricted Jurisdiction) is set out in section 4A or section 4B of the US 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 at the risk of the persons entitled thereto. 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 Shares held by Qualifying US Shareholders in uncertificated form, the consideration due will be paid by 16 October 2017 through CREST by the Receiving Agent (on behalf of the Company) procuring the creation of a payment obligation in favour of the payment banks of accepting Shareholders in accordance with the CREST payment arrangements.
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 Shares and who hold, and will hold, their 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 Shares by virtue of an office or employment.
The sale of Shares by a Shareholder to Liberum pursuant to the Non-US Tender Offer should be treated as a disposal of those shares giving rise solely to capital proceeds 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 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 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'') (£33,500 for 2017/2018) will normally be subject to CGT at a rate of 10 per cent. in respect of any gain arising on the sale of his or her 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 10% in respect of any gain arising on the sale of his or her 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 20 per cent. in respect of the remainder of the gain arising on the sale of his or her Shares. However, no tax will be payable on any gain arising on the sale of 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 (£11,300 for 2017/2018).
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.
Similar rules exist in Part 13 Income Tax Act 2007 in relation to income tax advantages. These will only be in point if the Company is a ''close company'' as defined by the relevant legislation. The Company has been advised that on the basis of its current shareholder profile it is not, and it is not anticipated that it will at any material time become, a close company. However, if material trades in the Company's Shares take place prior to implementation of the Tender Offer, the Company's close company status could change. Shareholders who are within the charge to income 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 Shares pursuant to the Tender Offer will not give rise to any liability to stamp duty or SDRT for the selling Shareholder.
However, stamp duty at a rate of 0.5 per cent. on the Shares repurchased, rounded up to the nearest £5 if necessary, will be payable by the Company both on its Repurchase of Shares from Liberum in connection with the Non-US Tender Offer and on its purchase of Shares from US Shareholders in connection with the US Tender Offer.
The following is a summary of certain US federal income tax considerations of the tendering of the Shares by a US Shareholder (as defined below) pursuant to the Tender Offer. This summary deals only with beneficial owners of the Shares that are US Shareholders and that hold the Shares as ''capital assets'' as defined in the U.S. Internal Revenue Code of 1986, as amended (the ''Code''). This summary does not address non-US, state or local tax considerations. In addition, this summary does not address all tax considerations applicable to investors that own (directly, indirectly or by attribution) 10 per cent. or more of the Company's voting power, nor does this summary discuss all of the tax considerations that may be relevant to certain types of investors subject to special treatment under US federal income tax laws (such as financial institutions, insurance companies, regulated investment companies, investors liable for the alternative minimum tax, certain US expatriates, individual retirement accounts and other tax-deferred accounts, real estate investment trusts, partnerships or other pass-through entities, tax-exempt organisations, dealers in securities or currencies, securities traders that elect mark-to-market tax accounting, investors that will hold the Shares as part of constructive sales, straddles, hedging, integrated or conversion transactions for US federal income tax purposes or investors whose ''functional currency'' is not the US dollar).
For the purposes of this paragraph 2 of Part V of the Circular, the term ''US Shareholder'' means a beneficial owner of the Shares that is either:
2.1.1 an individual who is a citizen or resident of the United States;
The Company believes that it historically has not been a ''controlled foreign corporation'' or a ''passive foreign investment company'' under the Code, and this summary assumes that the Company currently is neither a controlled foreign corporation nor a passive foreign investment company.
A sale of all or part of the Shares held by a US Shareholder for cash pursuant to the Tender Offer will be a taxable transaction. A US Shareholder that participates in the Tender Offer will be treated either:
2.2.1 as recognising gain or loss from the sale of the Shares; or
2.2.2 as receiving a distribution from the Company with respect to the Shares.
Sale or exchange treatment. A US Shareholder will generally recognise a gain or loss on a sale of Shares for cash if the sale results in a ''complete termination'' of such US Shareholder's equity interest in the Company, results in a ''substantially disproportionate'' redemption with respect to such US Shareholder, or is ''not essentially equivalent to a dividend'' with respect to the US Shareholder. Each of these tests, referred to herein as the ''Section 302 tests'', is explained in more detail below.
Substantially disproportionate test. The sale of a US Shareholder's Shares pursuant to the Tender Offer generally will result in a ''substantially disproportionate'' redemption with respect to the US Shareholder if, among other things, the percentage of the then-outstanding Shares that is actually and constructively owned by the US Shareholder after the sale is less than 80 per cent. of the percentage of the Shares that were actually and constructively owned by the US Shareholder prior to the sale.
Not essentially equivalent to a dividend test. The sale of a US Shareholder's Shares pursuant to the Tender Offer will be treated as ''not essentially equivalent to a dividend'' if the reduction in the US Shareholder's proportionate interest in the Company as a result of the sale constitutes a ''meaningful reduction'' of the US Shareholder's proportionate interest in the Company, given the US Shareholder's particular circumstances. In general, the question of whether a US Shareholder's sale of Shares represents a ''meaningful reduction'' in the US Shareholder's proportionate interest will depend on the extent of the US Shareholder's rights to participate in dividends, to receive proceeds upon a liquidation, and to vote and exercise control prior to the sale and the extent to which such rights are reduced as a result of the sale. Contemporaneous dispositions or acquisitions of stock by a shareholder may be deemed to be part of a single integrated transaction and, if so, may be taken into account in determining whether any of the Section 302 tests are satisfied.
Complete termination test. The sale of a US Shareholder's Shares pursuant to the Tender Offer will result in a ''complete termination'' of the US Shareholder's equity interest in the Company if all of the Shares that are actually owned by the US Shareholder are sold, and all of the Shares that are constructively owned by the US Shareholder, if any, are sold (or, with respect to Shares owned by certain related individuals, the US Shareholder satisfies special conditions set forth in the Code, which, if satisfied, prevents attribution of ownership of certain Shares to the US Shareholder).
In applying each of the Section 302 tests explained above, US Shareholders must take into account not only the Shares that they actually own but also the Shares that they are treated as owning under the constructive ownership rules of the Code. Under the constructive ownership rules, a US Shareholder is treated as owning any Shares that are owned (actually and in some cases constructively) by certain related individuals and entities as well as Shares that the US Shareholder has the right to acquire by exercise of an option or by conversion or exchange of a security. Due to the factual nature of the Section 302 tests, US Shareholders should consult their tax advisors to determine whether the tender of their Shares under the Tender Offer qualifies for sale treatment in their particular circumstances.
If a US Shareholder satisfies any of the Section 302 tests above, the US Shareholder will be treated as recognising gain or loss from the sale of the Shares for cash. Such gain or loss will be equal to the difference between the amount of cash received and such US Shareholder's tax basis in the Shares exchanged therefor. Gain or loss must be determined separately for each ''block'' of Shares (meaning Shares acquired at the same cost in a single transaction) that is sold to the Company by a US Shareholder.
Distribution Treatment. If a US Shareholder does not satisfy any of the Section 302 tests described above, the US Shareholder will be treated as receiving a distribution from the Company. Distributions out of current and accumulated earnings and profits will be treated as dividends, distributions in excess of current and accumulated earnings and profits will be treated as a non-taxable return of capital to the extent of the US Shareholder's basis in the Shares and thereafter distributions will be treated as a sale or exchange generating capital gain. The Company does not maintain calculations of its earnings and profits in accordance with US federal income tax accounting principles. As a result, US Shareholders should therefore assume, if they do not satisfy any of the Section 302 tests listed above, that any distribution received with respect to the purchase of its Shares under the Tender Offer will constitute ordinary dividend income. To the extent that a purchase of a US Shareholder's Shares under the Tender Offer is treated as the receipt by the US Shareholder of a dividend, the US Shareholder's remaining adjusted tax basis in the purchased Shares will be added to the basis of any Shares retained by the US Shareholder. Amounts treated as dividends paid pursuant to the Tender Offer paid in sterling will be included in a US Shareholder's income in a US dollar amount calculated by reference to the exchange rate in effect on the date the amounts are received by such US Shareholder, regardless of whether the payment is in fact converted into US dollars. If the amounts treated as dividends are converted into US dollars on the date of receipt, a US Shareholder generally should not be required to recognise foreign currency gain or loss in respect of the dividend income.
Information returns may be filed with the US Internal Revenue Service (the ''IRS'') in connection with Tender Offer proceeds unless a US Shareholder establishes that it is exempt under the information reporting rules. A US Shareholder that does not establish this may be subject to backup withholding on these payments if the US Shareholder fails to provide its taxpayer identification number or otherwise comply with the relevant certification forms or procedures. The amount of any backup withholding from a payment to a US Shareholder will be allowed as a credit against its US federal income tax liability and may entitle the US Shareholder to a refund, provided that the required information is timely furnished to the IRS. Certain US Shareholders (including, among others, corporations) are not subject to backup withholding. US Shareholders should consult their advisers regarding any additional tax reporting or filing requirements they may have as a result of participating in the Tender Offer. Failure to comply with certain reporting obligations could result in the imposition of substantial penalties.
The Company is incorporated in England and Wales. Its Directors are residents of countries other than the United States. As a result it may not be possible for Shareholders to affect service of process within the United States upon the Company or such Directors or to enforce against any of them judgments of the United States predicated upon the civil liability provisions of the federal securities laws of the United States.
As a result of the Tender Offer, the ownership percentage of certain Shareholders may increase or decrease. If after the Tender Offer:
then the Company may be treated as a CFC for United States federal income taxpurposes. Shareholders should consult with their tax advisors regarding the risk that the Company is or could be a CFC and the potential consequences of it being a CFC.
The Company believes that it has not historically been a PFIC for United States federal income tax purposes. A passive foreign investment company is a foreign corporation that meets either of the following two tests:
(a) the income test, where at least 75 per cent. of the corporation's income is passive income; or
(b) the assets test, where least 50 per cent. of the corporation's assets are passive assets.
Based on the Company's income from the recent sale of Telecable and its currently held assets, there is risk that the Company currently may be a PFIC and/or may be a PFIC going forward. Notwithstanding its current income and assets, the Company might not be a PFIC under an exception for a company that recently disposed of an active business and establishes or acquires a new active business. Under this exception, the Company will avoid PFIC classification if the following requirements are met:
There can be no assurance that the Company will qualify for this exception. If a US Person is treated as owning an interest in a PFIC, that person may be subject to tax at the highest ordinary income rates in effect during such person's holding period and interest charges upon the event of an excess distribution, meaning distributions and gain from the disposition of stock in the PFIC. Shareholders should consult with their tax advisors regarding the risk that the Company is or could be a PFIC and the potential consequences of it being a PFIC.
The above summary of US federal income tax consequences is for general information only. All Shareholders should consult their tax advisers as to the particular tax consequences to them of participating in the Tender Offer, including the applicability and effect of state, local, non-US, and other tax laws.
The following comments do not constitute tax advice and are intended only as a guide to current Spanish tax law and Spanish tax authorities' published practice (which are both subject to change at any time, possibly with retrospective effect). They relate only to certain limited aspects of the Spanish tax treatment of individual Shareholders who are resident in Spain for Spanish tax purposes, who are, and will be, the beneficial owners of their Shares and who hold, and will hold, their 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 Shares by virtue of an office or employment.
In addition, the present description does not take into account Spanish regional tax regimes in force in the Basque Country and Navarra.
The applicable rules are found in Law 35/2006, dated November 28, 2006, of the Personal Income Tax and its implementing regulations, approved by Royal Decree 439/2007, dated March 30, 2007. All of the above is understood to be without prejudice to changes which may be made in the future to the applicable law.
The sale of Shares by a Shareholder to Liberum pursuant to the Non-US Tender Offer should be treated as a disposal of those shares giving rise to a capital gain (or loss) for Spanish tax purposes. This may give rise to a chargeable gain (or allowable loss) for the purposes of Personal Income Tax (''ganancias o pe´rdidas patrimoniales'').
Such capital gain (or loss) shall be computed into the ''savings income taxable base'' (''base imponible del ahorro'') as long as it derives from the transfer of assets.
When the capital gain (or loss) arises from the transfer for a consideration of securities listed on any of the regulated securities markets defined in Directive 2004/39/EC of 21 April 2004 of the European Parliament and the Council, representing the equity of companies or entities (such as the Shares), the gain or loss shall be calculated as the difference between the acquisition value (tax basis) and the transfer value, determined by the quotation on these markets on the date on which the transfer takes place or by the price agreed by the parties if higher than the quoted price.
In order to determine the tax basis, each shareholder must calculate the acquisition value taking into account any costs incurred in the acquisition of the shares (e.g. brokerage fees) but not including management, custody or advisory fees.
For part disposals of shares owned by any Shareholder please note that the Spanish Personal Income Tax Law provides for a FIFO (first in -first out) system in order to compute the capital gain applicable to the shares sold.
Capital gains and losses derived from the transfer of assets classified as savings income may only be offset against income of the same basket. If there is a net loss, it may be used to offset other savings income (i.e. ''rendimientos del capital mobiliario'' as dividends, interest and income obtained on the transfer of non-equity financial assets such as bonds and other debt securities) up to a limit of 20 per cent. in 2017 (25 per cent. in 2018) of such savings income (''rendimientos del capital mobiliario''). If the latter offset results in a loss, it may be carried forward for 4 years in order to offset it against future net capital gains (or even other savings income under the same limits). Carry-back of losses is not allowed.
It is relevant to note that losses from the transfer of quoted shares on a qualifying EU stock exchange shall be deferred and not offset, if the taxpayer acquired similar shares or participations in a period of 2 months before or after the transfer. The deductibility, through its inclusion in the taxable base, is deferred in proportion to the number of shares still held by the taxpayer.
In the case of capital gains subject to taxation, the applicable tax rate to the net income corresponding to the savings income taxable base shall be
3.1.1 19 per cent. for the first e6,000;
3.1.2 21 per cent. between e6,000.01 and e50,000; and
3.1.3 23 per cent. for amounts exceeding e50,000.
The effective tax rate shall depend on the particular circumstances at hand for each individual, such as personal reliefs, deductions, family allowances or other tax credits applicable in each case.
Capital gains arising from the transfer of shares are not subject to withholding tax.
As a general rule, all individuals resident in Spain must file a tax return with respect to their taxable income and simultaneously pay the tax. The Minister of Finance may allow payment by instalments such that the taxpayer pays 60 per cent. of the tax due when he submits the tax return (from April to June both of the following year to which the return refers to) and the remaining 40 per cent. later (usually in November that year) without late payment interest.
The tax return must be filed in the prescribed manner (that is, electronically from 2017) by the due date (usually 30 June) and on the forms that are defined and published every year.
Finally, natural persons who become resident in Spain as a result of a contract of employment or as administrator of a company in which the taxpayer has less than a 25 per cent. equity interest, may have opted between the Personal Income Tax and the Non-Resident Income Tax for the tax period in which the change of residence occurs and for the five years following so long as they comply with the requirements contained in Article 93 of the Personal Income Tax Law. Under the special regime, if the individual has opted for the application of the Non-Resident Income Tax rules, the capital gain obtained on the transfer of the Shares would not be subject to Spanish taxation.
Royal Decree 1558/2012 of 15 November 2012 implemented an obligation to disclose assets and rights located abroad over which the taxpayer has the power of disposal.
Taxpayers are obliged to disclose information about their investments abroad in relation to particular types of assets on a yearly basis. This obligation includes, among others, securities or rights representing the capital stock, equity or assets of foreign entities which are held or located abroad.
Taxpayers must record the above information in Form 720. This form must be filed with the Spanish tax authorities in the period between 1 January and 31 March of the year following the tax year subject to the information. Late or incomplete filing may be subject to administrative penalties.
In general terms, this return does not need to be filed when the aggregate value of a particular type of asset, as classified in the Royal Decree 1558/2012, does not exceed e50,000 on 31 December of a given year. If the taxpayer has already been obliged to file this form in previous years disclosing against the Shares, the transfer of the Shares pursuant to the Tender Offer would need to be informed to the Spanish tax authorities by filing a subsequent Form 720 corresponding to the year when the transfer takes place. In any case, the particular circumstances at hand should be confirmed on a case by case basis in order to completely ascertain the information to be disclosed in this Form 720 on the relevant year.
The sale of Shares pursuant to the Tender Offer will not give rise to any liability to stamp duty (''Actos Jurı´dicos Documentados'') or transfer tax (''Transmisiones Patrimoniales Onerosas'') for the selling Shareholder.
The names and principal functions of the Directors are as follows:
| Name | Position |
|---|---|
| Eamonn Francis O'Hare | Chairman and Chief Executive Officer |
| Robert Walter Samuelson | Executive Director and Chief Operating Officer |
| Mark Irvine John Brangstrup Watts | Non-Executive Director |
| Murray John Scott | Independent Non-Executive Director |
| Ashley Graham Martin | Independent Non-Executive Director |
| Richard James Williams | Independent Non-Executive Director |
The Company was incorporated and registered in England and Wales as a limited company with company number 09395163 on 19 January 2015 under the Companies Act 2006 under the name of Zegona Communications Limited. On 26 February 2015, the Company re-registered as a public company limited by shares under the name of Zegona Communications plc. The Company's registered office is at 20 Buckingham Street, London, WC2N 6EF, United Kingdom.
As at 29 August 2017 (being the latest practicable date prior to the publication of this Circular), the interests of the Directors in the issued share capital of the Company (all of whose interests are beneficial) which have been notified by each Director to the Company pursuant to the Disclosure and Transparency Rules were as follows:
| Shareholder | Number of Shares |
% of issued share capital |
|---|---|---|
| Eamonn Francis O'Hare | 2,123,870 | 1.08 |
| Robert Walter Samuelson | 801,502 | 0.41 |
| Murray John Scott | 50,000 | 0.03 |
| Ashley Graham Martin | 15,867 | 0.008 |
| Richard James Williams | 12,5785 | 0.006 |
| Other senior management | 281,736 | 0.15 |
The Company has received an Irrevocable Undertaking from MAML, in its capacity as agent for and on behalf of its discretionary managed clients, to tender its Tender Offer Entitlement of Shares under the Tender Offer, details of which are below.
| Shareholder | Number of Shares held |
Number of Shares to be tendered |
|---|---|---|
| MAML | 50,608,567 | 18,070,342 |
The Directors who hold Shares (listed in the table at paragraph 2 above) intend to tender their respective Tender Offer Entitlements under the Tender Offer (representing 1,072,545 Shares in aggregate at the minimum Tender Price of £2 per Share) and to grant irrevocable undertakings to that effect following the publication of the Company's interim financial statements when the Company is no longer in a close period, expected to be 29 September 2017.
5 In addition, Richard Williams also holds a long position equivalent to 56,000 Shares through a contract for difference.
On 30 August 2017, the Company entered into the Put and Call Option Agreement with Liberum. Pursuant to the terms of the Put and Call Option Agreement, and conditional on the Non-US Tender Offer becoming unconditional in all respects and not lapsing or terminating in accordance with its terms and to Liberum being registered as the holder of the Shares purchased by Liberum pursuant to the Non-US Tender Offer, the Company has granted a put option to Liberum which, on exercise, obliges the Company to purchase from Liberum at the Tender Price, all the Shares purchased by Liberum pursuant to the Non-US Tender Offer. Also under the Put and Call Option Agreement, Liberum has granted the Company a call option which, on exercise, obliges Liberum to sell to the Company, at the Tender Price, all the Shares purchased by Liberum pursuant to the Non-US Tender Offer.
Under the Put and Call Option Agreement, the Company has the right to compel Liberum at any time before the announcement of the results of the Tender Offer to terminate the Tender Offer if it concludes that:
MAML has provided an irrevocable undertaking to the Company in connection with the Tender Offer dated 29 August 2017 pursuant to which MAML has undertaken to tender its Tender Offer Entitlement under the Tender Offer and to vote in favour of the Resolutions at the General Meeting. As consideration for such undertakings, the Company has undertaken to procure that a further tender offer is made to Shareholders as soon as reasonably practicable if the Company exercises its rights to terminate the Tender Offer.
The Company has appointed HSBC Bank plc to act as the escrow agent in connection with the Tender Offer and subsequent repurchase of Shares pursuant to an escrow agreement dated 29 August 2017. Under the terms of the Escrow Agreement the Company will pay the Escrow Amount into an escrow account held by the Escrow Agent. Funds may only be released from the escrow account upon receipt by the Escrow Agent of a joint payment instruction authorised by both the Company and Liberum. The Escrow Agent will receive customary compensation for its services, will be reimbursed by the Company for reasonable out-of-pocket expenses and will be indemnified against certain liabilities in connection with the Tender Offer, including certain liabilities in connection with the Escrow Agreement.
Each of the agreements described in this paragraph 5.4 is governed by Spanish law and the parties thereto have submitted to the jurisdiction of the courts of the city of Madrid.
The Company and its wholly-owned subsidiary, Zegona Limited, entered into a conditional sale and purchase and share exchange agreement with Euskaltel dated 15 May 2017 and a share transfer deed dated 26 July 2017 to effect the sale by Zegona Limited of Parselaya, S.L.U., the holding company of the Telecable group. The Company has guaranteed the obligations of Zegona Limited under the SPA. The sale was subject to certain conditions which were satisfied or waived and it completed on 26 July 2017.
Cash consideration of approximately e176.7 million was paid at completion but the amount is subject to adjustment depending on the assessed or agreed level of Telecable's working capital and net debt at 30 June 2017. Up to a further e15 million of contingent cash consideration is payable by Euskaltel to Zegona Limited upon certain tax credits arising and being proven to be useable (the ''Tax Credits''). In relation to certain of those Tax Credits, the parties have agreed to jointly apply for a ruling from the tax authorities. Zegona Limited has agreed to indemnify Euskaltel for its losses up to the level of the contingent cash consideration to the extent such Tax Credits are later declared void or incapable of being used for any purpose.
In addition to the cash consideration paid by Euskaltel:
The SPA contained representations, warranties and indemnities from all parties given at signing and repeated at completion, including in relation to the information provided by each party to the other during the negotiation of the transaction. In addition, the Company and Zegona Limited have entered into the Tax Indemnity Agreement to indemnify Euskaltel against certain tax liabilities, including the Tax Credit Indemnity, which is described in further detail in paragraph 5.4.2 below.
The SPA also contains restrictive covenants which restrict the Company's potential to operate in Spain currently and for a period of twelve months from the date on which Zegona Limited's holding in Euskaltel represents less than 8.3 per cent. of Euskaltel's issued ordinary share capital.
Pursuant to the agreement, for so long as Zegona Limited holds at least 8.3 per cent. of the issued ordinary share capital of Euskaltel, Zegona Limited has the right to appoint one director to the board of directors of Euskaltel. The parties have also agreed that Zegona Limited will not acquire more than 16.5 per cent. of the voting rights in Euskaltel during the twelve months from the date of completion of the transaction, unless such acquisition is from a shareholder holding more than 10% of the issued shares in Euskaltel.
Zegona Limited has agreed to standard lock-in provisions in respect of those Euskaltel Shares issued to it as consideration under the SPA. Notwithstanding such lock-in arrangements, the Company is permitted, on 15 Business Days' notice to Euskaltel, to distribute Euskaltel Shares in specie pro-rata to its own Shareholders at any time.
The Company, Zegona Limited and Euskaltel entered into a tax indemnity agreement dated 15 May 2017 pursuant to which Zegona Limited has agreed to indemnify Euskaltel in respect of any losses arising from the Spanish tax authorities declaring the Tax Credits void or unusable, whether in whole or in part. The Company has been advised that the risk in relation to the vast majority of such Tax Credits being void or unusable is low.
Zegona Limited's liabilities under the Tax Indemnity Agreement are capped in respect of one set of Tax Credits (which has been fully insured by Zegona Limited) and in respect of the other set of Tax Credits, Zegona Limited has granted security to Euskaltel by a share pledge over 1,663,158 Euskaltel Shares.
Zegona Limited's obligations under the Tax Indemnity Agreement are guaranteed by the Company.
The Share Pledge Agreement provides security for certain of Zegona Limited's obligations including under the Tax Credit Indemnity. The pledge is over 2,189,474 of the Euskaltel Shares (representing approximately 8.2 per cent. of the Euskaltel Shares owned by Zegona Limited).
The net proceeds returned to Qualifying Shareholders pursuant to the Tender Offer will be treated as a distribution for the purposes of the Company's Management incentive arrangements and Core Investor incentive arrangements, each of which are described in further detail below.
Management have been issued shares in Zegona Limited pursuant to their employee arrangements with the Group. These shares give Management the right, subject to certain provisions, to receive upon exercise up to a maximum of 15 per cent. of the growth in value of the Company.
The Management incentive arrangements are subject to Shareholders achieving a Preferred Return of five per cent. per annum on a compounded basis on their Net Invested Capital. The rights attached to the Management Shares may be exercised by Management in the period from 14 August 2018 to 14 August 2020. Management are required to exercise all their rights at a single time during this period. The rights may be exercised prior to that period under certain specific conditions, including a takeover or change of control of the Company, as originally described in the Prospectus.
After an exercise of Management Shares, the Management incentive mechanism will be renewed on a similar basis such that Management will continue to have rights to 15 per cent. of the future growth in value of the Company, subject to Shareholders achieving their Preferred Return of five per cent. per annum. On renewal, Shareholders' Preferred Return will be calculated from a starting baseline of the market capitalisation of the Company on the last date the Management Shares were exercised (provided this is not below the Net Shareholder Invested Capital). Renewal of the Management incentive mechanism is subject to Shareholder approval at the annual general meeting immediately following the date of renewal.
Further details of the Management incentive arrangements are set out in the Prospectus.
In recognition of the Core Investor's significant capital commitment to the Company at 19 March 2015, MLTI was issued Core Investor Shares in Zegona Limited shortly after the Company's formation. These shares give MLTI the right, subject to certain provisions, to receive upon exercise up to a maximum of five per cent. of the growth in value of the Company.
The Core Investor incentive arrangements are subject to Shareholders achieving a Preferred Return of 5 per cent. per annum on a compounded basis on their Net Invested Capital. Like the rights attaching to the Management Shares, the rights attached to the Core Investor Shares may be exercised by MLTI in the period from 14 August 2018 to 14 August 2020. The rights may be exercised within the first three years under certain specific conditions, including a takeover or change of control of the Company.
If, on the date that MLTI exercises its Core Investor Shares, the Core Investor holds an Equity Interest in which it has invested in aggregate an amount less than five times the investment cost of the Equity Interest it held at 19 March 2015 (ignoring the effects of the Tender Offer), MLTI will only be entitled to a maximum of three per cent. of the growth in value of the Company.
Further details of the Core Investor incentive arrangements are set out in the Prospectus.
Save as set out below, there has been no significant change in the financial or trading position of the Group since 31 December 2016, being the date to which the Company's last audited consolidated financial statements were prepared:
6.1 on 17 March 2017 the Company paid an interim dividend of 2.25p on the Shares to holders of Shares on the register on 24 February 2017; and
6.2 on 26 July 2017 the Company completed the sale of Telecable to Euskaltel for a cash consideration of e186.5 million6 and a 15 per cent. stake in the enlarged Euskaltel group (comprising 26.8 million Euskaltel Shares). The sale resulted in surplus cash on the Company's balance sheet of approximately £140 million (after allowances for ongoing operating costs and working capital). Further details of the terms of the Telecable sale are set out in paragraph 4.4 of this Part VI.
Under Rule 9 of the Takeover Code, any person or group of persons deemed to be acting in concert who acquires 30 per cent. or more of the voting shares of a company to which the Takeover Code applies is normally required by the Panel to make a general offer to shareholders of that company to acquire their shares. Rule 9 of the Takeover Code also provides that any person or group of persons deemed to be acting in concert who own between 30 per cent. and 50 per cent. of the voting shares of a company to which the Takeover Code applies will be unable, without the Panel's consent, to acquire, either individually or together, any further voting rights in the company without being required to make a general offer to shareholders of that company to acquire their shares.
Under Rule 37.1 of the Takeover Code, when a company purchases its own voting shares, a resulting increase in the percentage of voting rights carried by shareholdings of the Directors and persons acting in concert with them is treated as an acquisition for the purpose of Rule 9. A shareholder not acting in concert with the Directors will not normally incur an obligation to make a general offer under Rule 9, if, as a result of the purchase of its own shares by a company, he comes to exceed the percentage limits set out in Rule 9. However, this exception will not apply when a shareholder not acting in concert with the Directors has purchased shares at a time when he had reason to believe that such a purchase of its own shares by the company would take place.
A Shareholder of the Company not acting in concert with the Directors may, therefore, incur an obligation under Rule 9 to make a general offer to Shareholders to acquire their Shares if, as a result of the purchase by the Company of its own Shares from other Shareholders, he comes to hold or acquire 30 per cent. or more of the Shares in issue following the Tender Offer and he has purchased Shares after 26 July 2017, being the date when he had reason to believe that the Company would purchase its own Shares under the Tender Offer.
Under the Non-US Tender Offer, Liberum will purchase, as principal and not as agent, nominee or trustee, voting shares in the Company which could result in Liberum coming to have an interest in such Shares carrying 30 per cent. or more of the voting rights of the Company. Liberum has indicated its intention that, promptly following such purchase, it will sell all those Shares, acquired pursuant to the Non-US Tender Offer, to the Company for cancellation, and the Company has agreed to buy all such Shares, in both cases on the terms of the Put and Call Option Agreement. Accordingly, a waiver has been obtained from the Panel in respect of the application of Rule 9 of the Takeover Code to the purchase by Liberum of the Shares under the Non-US Tender Offer.
6 Prior to adjustments at completion of the transaction. A cash payment was made on completion which represents e176.7 million after initial net debt adjustments, other permitted leakage and certain transactional costs.
There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Company is aware) relating to the Company or the Tender Offer.
Liberum has given, and not withdrawn, its consent to the inclusion in this Circular of the references to its name in the form and context in which they are included.
Incorporated and registered in England and Wales under number 09395163 (the ''Company'')
NOTICE IS HEREBY GIVEN that a General Meeting of the Company will be held at the offices of Travers Smith LLP, 10 Snow Hill, London, EC1A 2AL on 22 September 2017 at 11.00 a.m.. You will be asked to consider and, if thought fit, to pass the following resolutions, which will be proposed as special resolutions:
''119. DIVIDENDS NOT IN CASH
BY ORDER OF THE BOARD
Date: 30 August 2017
Company Secretary: Axio Capital Solutions Limited
Registered Office: 20 Buckingham Street, London WC2N 6EF
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.