Re. Proposed Merger
04 Junho 2003 - 4:00AM
UK Regulatory
RNS Number:8814L
AIM Trust PLC
04 June 2003
4 June 2003
This announcement is not for release, publication or distribution in or into the
United States, Canada, Australia, Japan or the Republic of Ireland
Recommended Proposals
for the Merger of
THE AIM TRUST PLC
and
3PC INVESTMENT TRUST PLC
by way of a Scheme of Arrangement
(under section 425 of the Companies Act 1985)
Summary
* The boards of The AIM Trust plc ("AIM Trust") and 3PC Investment Trust plc
("3PC") announce recommended proposals for the merger of 3PC and AIM Trust
on a formula asset value basis.
* The Merger will be effected by means of a scheme of arrangement under
section 425 of the Companies Act 1985.
* The Scheme will be conditional on the approval of shareholders and the
sanction of the Court and will result in 3PC, as the survivor company from
the Scheme, being enlarged substantially.
* Both companies are expected to obtain significant benefits under the
Merger in respect of:
* Reduction in aggregate ongoing costs;
* Lower management fees through change to invested assets basis;
* Single larger investment trust with prospect of greater liquidity in
share dealings;
* Improved investment capability through changes to investment objective
and policy;
* Effective use of AIM Trust's term debt.
* The Scheme has low direct costs, estimated to be considerably less than
one per cent. of 3PC and AIM Trust's total assets (before debt costs).
* The cancellation of AIM Trust's holding in 3PC will result in an uplift in
valuation from market to net asset value for the holding.
* 3PC's name will be changed to Active Capital Trust plc.
* The Proposals have written support from 50.6 per cent. of shareholders in
AIM Trust and from 74.9 per cent. of shareholders in 3PC (including the 9.3
per cent. held by AIM Trust).
THE ABOVE SUMMARY SHOULD BE READ IN CONJUNCTION WITH THE FULL TEXT OF THE
FOLLOWING ANNOUNCEMENT.
Enquiries:
ISIS Asset Management plc
Bill Brown 020 7506 1100
Gordon Humphries 020 7506 1100
Expected Timetable
2003
Court Meeting of AIM Trust Shareholders 8 July
Extraordinary General Meetings of AIM Trust and 3PC 8 July
Court hearing to consider sanctioning the Scheme 28 July
Dealings in AIM Trust Ordinary Shares suspended 29 July
Effective Date of the Merger and commencement of dealings in New
Ordinary Shares 29 July
4 June 2003
This announcement is not for release, publication or distribution in or into the
United States, Canada, Australia, Japan or the Republic of Ireland
Recommended Proposals
for the Merger of
THE AIM TRUST PLC
and
3PC INVESTMENT TRUST PLC
by way of a Scheme of Arrangement
(under section 425 of the Companies Act 1985)
1. Introduction
The boards of The AIM Trust plc ("AIM Trust") and 3PC Investment Trust plc
("3PC") announce recommended proposals for a merger of the two companies (the
"Proposals"). Both companies are investment trusts, have similar investment
objectives, insofar as they invest in UK small companies, and are managed by the
same investment team within ISIS Asset Management plc ("ISIS" or the "Manager").
3PC will act as the surviving company following the Merger and will be renamed
as Active Capital Trust plc.
The Merger will be subject to shareholder and Court approval and will be
conducted on a formula asset value basis, taking into account the costs of the
Scheme. The Scheme is expected to become effective in late July.
Following the Merger, Enlarged 3PC will adopt the following investment
objective:
"To provide shareholders with medium to long term capital growth by investing in
a portfolio of predominantly UK smaller companies which have the potential to
increase their value either by delivering on a growth business plan or by
structural, corporate or shareholder change."
Shareholders representing 50.6 per cent. of the issued share capital in AIM
Trust and 74.9 per cent. of the issued share capital in 3PC (including the 9.3
per cent. held by AIM Trust) have indicated in writing that they intend to vote
in favour of the Proposals.
2. Benefits of the Merger
Both companies will benefit from lower investment management fees through a
change to the basis of charging management fees, namely from total assets to
invested assets, with no fees payable on uninvested assets. The fixed costs of
running both companies will be spread over a larger asset base with total
expenses (excluding interest) expected to fall to approximately 1.6 per cent. of
total assets (currently 3PC: 2.0 per cent; and AIM Trust: 1.8 per cent.).
The Merger and proposed change in investment objective for 3PC should improve
the company's investment capability through greater diversification in the
investment portfolio and increased scale for exploiting investment
opportunities. The new investment objective should be more suited to the current
investment environment. 3PC, as enlarged, should have greater liquidity in its
shares as a result of a wider spread of shareholders. The Merger will also
provide for a more focussed marketing effort on a single trust and should be
viewed by the marketplace as a constructive initiative by both boards and the
Manager.
There are also specific benefits for both companies:
AIM Trust
* 3PC is ungeared and is expected to assume a significant proportion of AIM
Trust's term debt, thereby reducing the level of gearing against AIM Trust's
portfolio and freeing up AIM Trust's available cash for investment in
accordance with the investment objective.
* The Merger allows AIM Trust to obtain a significant asset value uplift in
its holding in 3PC as the holding will be accounted for at net asset value
rather than market value in the FAV calculation for the purposes of the
Scheme.
* AIM Trust Ordinary Shares have had a consistently below average rating for
some time, exacerbated by the adverse impact of high gearing after a
significant decline in asset values. The rating for AIM Trust Shareholders
is expected to improve following the Merger.
3PC
* 3PC will assume borrowing at market rate at what is believed to be an
opportune time in the market cycle to make investments in UK smaller
companies.
* AIM Trust's portfolio contains considerable cash resources which can be
invested over the forthcoming months by Enlarged 3PC.
* 3PC Shareholders will suffer no dilution to net asset value from the
Merger and any excess in the asset value uplift arising from the
cancellation of the cross-holding in 3PC held by AIM Trust over and above
the costs of the Scheme will be taken for the benefit of 3PC Shareholders.
ISIS is contributing to the Proposals by changing the investment management fee
basis from "total" to "invested" assets for both companies (with immediate
effect for AIM Trust) and is waiving termination fees on management and
secretarial contracts for AIM Trust.
3. The Merger and its Financial Impact
The Scheme involves, inter alia, the cancellation of AIM Trust's issued share
capital and the issue of New Ordinary Shares to AIM Trust Shareholders. Under
the terms of the Scheme the number of New Ordinary Shares to be issued to AIM
Trust Shareholders will be based on the relative Formula Asset Values of 3PC and
AIM Trust.
The actual FAVs of AIM Trust and 3PC will be determined for the purpose of the
Scheme around the time the Scheme becomes effective (expected to be 29 July
2003) and it is therefore not possible prior to that date to specify the actual
number of New Ordinary Shares to which AIM Trust Shareholders will become
entitled.
All of the costs of the Scheme will be borne by AIM Trust, including the effect
of adjusting the value of AIM Trust's debt to be transferred to Enlarged 3PC to
current market rates. Under the Scheme, AIM Trust expects to repay such amount
of debt as would ensure that, as at the Effective Date, the Enlarged Company
would have no requirement for cash offset arrangements and the costs of any
early repayment of debt will be borne by AIM Trust.
AIM Trust will benefit from any uplift in the value of its holding in 3PC which
will be taken into account in the FAV calculation. 3PC Shareholders' net assets
will not be diluted by the Scheme. All of the assets in each company's portfolio
will be valued in accordance with the normal accounting principles applied for
each company.
Set out below, by way of example, are illustrations of the financial effects of
the Scheme on AIM Trust Shareholders:
(a) Effect on Market Value:
Market value of 1,000 AIM Trust Ordinary Shares (Note 1) #610.00
Market value of New Ordinary Shares received (Notes 1 and 3) #629.20
Increase in market value #19.20
Representing an increase of 3.1%
(b) Effect on NAV:
NAV of 1,000 AIM Trust Ordinary Shares (Note 2) #864.80
FAV of 1,000 AIM Trust Ordinary Shares (Note 5) #786.80
Decrease of #78.00
Representing a decrease of 9.0%
NAV of New Ordinary Shares received (Notes 3, 5 and 6) #816.87
Decrease of #47.93
Representing a decrease in NAV of 5.5%
Notes and Assumptions:
(1) Pricing: The closing middle-market quotations for AIM Trust and
3PC Ordinary Shares as at 30 May 2003 were 61.00p and 60.50p
respectively. It is assumed that the New Ordinary Shares issued by 3PC
have the same middle-market value as the existing 3PC Ordinary Shares.
(2) Net asset values: The unaudited Net Asset Values of AIM Trust
Ordinary Shares and 3PC Ordinary Shares, which include accruals for
income and expenditure for the years to date, have been extracted from
the records of AIM Trust and 3PC and as at 30 May 2003 and were 86.48p
and 75.64p respectively.
(3) FAV ratio: The number of New Ordinary Shares that an AIM Trust
Shareholder will receive has been based on the relative FAVs of 3PC and
AIM Trust estimated as at 30 May 2003, from which it is assumed that
1,040 New Ordinary Shares are received for every 1,000 AIM Trust
Ordinary Shares.
(4) Debt transferred to 3PC: Based on current asset values of both
companies it is assumed that #30 million of term debt is transferred to
3PC (on the same terms that it could itself achieve) and #10 million of
term debt is repaid prior to the Merger at an estimated cost to AIM
Trust of #800,000. This penalty to AIM Trust will be taken into account
in determining the AIM Trust FAV insofar as this cost has not already
impacted against AIM Trust's Net Asset Value before the Scheme is
implemented.
(5) FAV calculation: The FAV of an AIM Trust Ordinary Share is
estimated to be 78.68p as at 30 May 2003 and assumes the following:
(i) Estimated Scheme costs of #600,000 (inclusive of VAT);
(ii) AIM Trust's shareholding in 3PC will be included in the AIM Trust
FAV at net asset value as opposed to market value currently resulting in
an estimated uplift of #600,000 for the cancellation of AIM Trust's
holding in 3PC at net asset value; and
(iii) Costs of #2,340,000 for marking to market AIM Trust debt to be
transferred to Enlarged 3PC (based on market rates as at 30 May 2003).
(6) NAV of 3PC following the Merger: The Net Asset Value of 3PC
increases following the implementation of the Scheme as a result of AIM
Trust debt being transferred at market value but being recorded at par
value in the accounts of the company. The increased assets credited to
3PC through the FAV calculation reflect the "marking to market" debt
adjustment being made. 3PC's Net Asset Value is otherwise unaffected by
the Scheme, save to the extent that there is any excess arising through
the cancellation of AIM Trust's cross-holding in 3PC compared to the
direct costs of the Scheme. Any such excess would be credited to 3PC
shareholders in calculating the FAV.
4. The Companies
AIM Trust
AIM Trust was launched in May 1996 with the objective of providing long term
capital growth for shareholders by investing in a portfolio of AiM companies.
AIM Trust has a capital structure comprising ordinary shares and term debt. It
currently has total assets of approximately #75 million which includes #40
million of long term debt. Approximately #22 million of the company's portfolio
is required to be held in cash and fixed interest stocks to meet debt covenant
requirements. A management fee of 1.25 per cent. of total assets less current
liabilities is currently payable. AIM Trust has a holding of 9.3 per cent. of
the issued share capital of 3PC, valued at #2.4 million as at 30 May 2003. AIM
Trust has not paid dividends in either of the last two financial years.
3PC
3PC was launched in May 2001 and aims to provide its shareholders with long term
capital growth by seeking out and investing predominantly in public and private
Primary Capital issues by companies which are at an early stage of their
development and which have the potential to increase their value dramatically.
3PC currently has total assets of approximately #33 million and its share
capital comprises ordinary shares and founder shares. 3PC has not paid any
dividends since launch.
It is intended that, once 3PC's portfolio has been realised, shareholders will
receive 99.9p (the "Capital Return") together with a return of 7.5 per cent
compounded annually, based on an issue price of 100p (the "Hurdle Return")
(together the "Targeted Return") which 3PC will seek to pay on or before 31 May
2007. The 3PC Founder Shares carry the right to convert into 3PC Ordinary Shares
comprising 20 per cent. of the issued share capital of 3PC once the Targeted
Return due to 3PC Ordinary Shareholders has been paid. The 3PC Founder Shares
are held by the Manager and members of the investment team as a performance
incentive.
This special feature will be preserved following the Merger and the New Ordinary
Shares to be issued to AIM Trust Shareholders as part of the Scheme will rank
pari passu with the 3PC Ordinary Shares issued at the time of 3PC's launch.
5. Revised Investment Objective
Given the proposed transaction and the changes in both the smaller companies and
Primary Capital markets, the Manager believes that the investment objective of
3PC should now evolve to enable the company to take better advantage of the
opportunities being presented by the market.
The investment objective of Enlarged 3PC will be to provide its shareholders
with medium to long term capital growth by investing in a portfolio of
predominantly UK smaller companies which have the potential to increase their
value either by delivering on a growth business plan or by structural, corporate
or shareholder change.
The proposed change to 3PC's investment objective is subject to approval by the
shareholders of 3PC.
6. Revised Investment Policy
The two major markets for small companies in the UK are the AiM Market and the
Official List of the London Stock Exchange. Following the general fall in the
stock market indices over the past two years, there are now over 1,600 companies
traded on AiM and the Official List capitalised at less than #100 million.
This sector is suffering from a reduction in the level of interest from brokers,
analysts and investors. Partly as a result of this decline in interest, many
companies are trading at low valuations. These valuations are unlikely to change
without changes in the scale of the business, probably demonstrated by changes
in profitability or changes in the capital structure of the companies or their
shareholder base.
The Manager perceives two types of investment opportunity in the markets at
present (emerging investments and mature investments), both of which have the
potential to grow in value and can from time to time exhibit major one off
changes in value; most likely when they attract the attention of a trade buyer
or financial acquirer; are taken private by management; or undertake a
re-organisation of capital and return capital to shareholders:
Emerging Investments
Companies with a business plan for growth which, either through some
technological advantage, having a new business concept or possessing good
entrepreneurial management, can grow at a faster rate than the general economy.
Mature Investments
More mature companies that for differing reasons have become out of favour or
operate in sectors which are generally out of favour with the market.
These companies will need to demonstrate some of the following characteristics:
* Trading at a discount to their net asset value
* Trading on a single figure price earnings ratio
* Generating a good level of cash flow per share
Enlarged 3PC's investment process will involve identifying both Emerging and
Mature Investments with a view to growing the value of the investment through
either longer-term support for the company or through constructive suggestions
as to how capital can be better employed.
It is anticipated that once fully invested, the portfolio will comprise up to
100 individual holdings with the intention to manage this number downwards over
time. No investment will represent more than 5 per cent. of Enlarged 3PC's total
assets at the time of investment.
7. Borrowings
3PC is currently ungeared whilst AIM Trust is constrained by covenants imposed
by the bank on its borrowings as its net assets have fallen with the decline in
the markets. The covenants currently provide that borrowings (after offsetting
cash and gilts by arrangement) may not represent more than 60 per cent. of
adjusted net assets (excluding unquoted investments). If all the debt were to be
transferred to 3PC as part of the Merger, cash offset arrangements would need to
continue. It is proposed therefore (based on the current asset values of the two
companies) that approximately #10 million of the existing debt of AIM Trust be
repaid and that the balance of the debt, being approximately #30 million, is
assumed by 3PC as part of the Merger. All the costs in relation to the repayment
of the debt are to be borne by AIM Trust and the costs of revaluing the debt
transferred to market value will be taken into account in determining the AIM
Trust FAV. The actual borrowing to be transferred will be determined according
to the financial circumstances of the companies when the Scheme becomes
effective in late July.
It is anticipated that available cash will be substantially invested into new or
existing investment opportunities in the forthcoming months.
It is intended that total borrowings net of cash and near cash assets held,
expressed as a percentage of total assets, shall not exceed 33 per cent.
8. Cancellation of AIM Trust's Holding in 3PC
AIM Trust currently holds 4,000,000 3PC Ordinary Shares (9.3 per cent.). It is
proposed that 3PC cancels the 3PC Ordinary Shares held by AIM Trust without
making any payment to AIM Trust in respect of the cancellation of the 3PC
Ordinary Shares. AIM Trust's stake in 3PC is to be included at net asset value
under the Scheme. At the close of business on 30 May 2003 AIM Trust's stake was
valued at a "market value" of approximately #2.4 million although attributable
net asset value represented approximately #3.0 million. If AIM Trust has its 3PC
Shares cancelled and the full net asset value entitlement is taken into account
in the AIM Trust FAV, there is an immediate uplift of approximately #0.6 million
to AIM Trust's FAV. There is no asset dilution to 3PC. The total assets in 3PC
as enlarged by the Scheme are less, to the extent of the cancelled
cross-holding.
9. Changes to the Board
Jon Pither, AIM Trust's Chairman, Jock Green-Armytage and Lord Gordon of
Strathblane have accepted an invitation to join the board of Enlarged 3PC,
shortly after the Merger has become effective. Audrey Baxter has agreed to
resign as a director of AIM Trust and Graham Eves has agreed to resign as a
director of 3PC. Brian Holford shall then retire as Chairman and Jon Pither will
be appointed as Chairman of Enlarged 3PC. As a result of the Merger becoming
effective, the board of Enlarged 3PC will comprise three current 3PC directors
and three current AIM Trust directors.
10. Transfer Agreement and Debt Novation
Under the Transfer Agreement to be entered into between, inter alia, AIM Trust
and 3PC shortly before the Scheme becomes effective, 3PC will agree to acquire
AIM Trust's investment portfolio and certain other assets for a consideration
payable in cash on completion. 3PC will also agree to assume certain debt
obligations currently residing in AIM Trust. The debt provider has indicated in
principle that the debt obligations in AIM Trust can be novated to 3PC.
11. Revised Investment Management Arrangements
The Manager has agreed with AIM Trust that, conditional upon the Transfer
Agreement completing, its management agreement and secretarial agreement with
AIM Trust will terminate without compensation.
The investment management agreement between 3PC and the Manager will be amended
so that the Manager's fee will be calculated on the funds invested by the
Company following implementation of the Scheme. The investment management
agreement between AIM Trust and the Manager has been amended in this respect
with immediate effect.
Enlarged 3PC will continue to be managed by ISIS and by the same investment team
within ISIS.
12. Change of 3PC's Name
In order to reflect the change to the investment objective of 3PC, upon the
Merger becoming effective, it is proposed that 3PC changes its name to Active
Capital Trust plc.
13. Dividend Policy
AIM Trust has not paid dividends in the last two years and 3PC has not paid
dividends since inception. It is anticipated that 3PC will not pay dividends in
the future.
14. Change of 3PC's Articles of Association
The Articles of Association will require minor amendment in order to enact the
Scheme, inter alia, in relation to the assumption of borrowings.
15. Conditions and Approvals
The principal conditions of the Scheme and the Merger are:
(i) the approval by a majority in number representing three-fourths
in value of the holders of AIM Trust Ordinary Shares at the Court
Meeting of holders of AIM Trust Ordinary Shares;
(ii) the passing at an Extraordinary General Meeting of AIM Trust
Shareholders of the special resolution required to implement the Scheme;
(iii) the approval, at an Extraordinary General Meeting of 3PC, of
resolutions to approve the Merger and Transfer Agreement, to approve the
reduction of capital by the cancellation of AIM Trust's holding of 3PC
Shares, to authorise the allotment of New Ordinary Shares pursuant to
the Scheme and to amend 3PC's Articles of Association;
(iv) the UK Listing Authority admitting all of the New Ordinary
Shares to the Official List of the London Stock Exchange; and
(v) the sanction of the Court to the Scheme and the reduction of
capital in 3PC.
16. Shareholder Support
AIM Trust Shareholders holding 50.6 per cent. of the AIM Trust Ordinary Shares
in issue have indicated in writing their intention to vote in favour of the
resolutions to be proposed at the Court Meeting of AIM Trust Shareholders and at
the Extraordinary General Meeting.
3PC Ordinary Shareholders holding 74.9 per cent. of the 3PC Ordinary Shares in
issue (including the 9.3 per cent. held by AIM Trust) have indicated in writing
their intention to vote in favour of the Proposals at an Extraordinary General
Meeting of 3PC Ordinary Shareholders.
Full Scheme documentation is expected to be despatched to AIM Trust and 3PC
shareholders in the near future.
17. Responsibility for Information in this Announcement
The directors of AIM Trust and 3PC accept responsibility for the information
contained in this announcement, relating to AIM Trust and 3PC and their
respective directors. To the best of the knowledge and belief of the directors
of AIM Trust and 3PC (who have taken all reasonable care to ensure that such is
the case) such information contained in this announcement is in accordance with
the facts and does not omit anything likely to affect the import of such
information.
Intelli Corporate Finance Limited ("Intelli") and Cazenove & Co. Ltd
("Cazenove") are both authorised and regulated by the Financial Services
Authority. Intelli is acting exclusively for AIM Trust and Cazenove is acting
exclusively for 3PC. Neither Intelli nor Cazenove is acting for anyone else in
connection with the Merger nor will Intelli or Cazenove be responsible to anyone
other than AIM Trust and 3PC respectively for providing the protections afforded
to clients of Intelli and Cazenove nor for giving advice in relation to the
Merger, the contents of this announcement or any arrangements referred to
herein.
Enquiries:
ISIS Asset Management plc
Bill Brown 020 7506 1100
Gordon Humphries 020 7506 1100
APPENDIX I
Definitions
The following definitions apply throughout this announcement, unless the context
otherwise requires:
"3PC Founder Shares" founder shares of 0.5p each in the capital of 3PC;
"3PC Ordinary Shareholders" holders of 3PC Ordinary Shares;
"3PC Ordinary Shares" ordinary shares of 0.1p each in the capital of 3PC;
"3PC Shareholders" holders of 3PC Ordinary Shares or 3PC Founder Shares;
"3PC Shares" 3PC Ordinary Shares and 3PC Founder Shares;
"AiM" the Alternative Investment Market of the London Stock Exchange;
"AIM Trust Ordinary Shares" ordinary shares of 25p each in the capital of AIM Trust;
"AIM Trust Shareholders" holders of AIM Trust Ordinary Shares;
"Court" The High Court of Justice of England and Wales;
"Court Meeting" the Court Meeting of AIM Trust shareholders;
"Effective Date" the date on which the Scheme becomes effective (expected to be 29 July
2003);
"Enlarged 3PC" 3PC as enlarged after the implementation of the Scheme and the Merger
has been effected;
"Extraordinary General Meeting" the Extraordinary General Meeting of AIM Trust or 3PC as the context
or "EGM" may so require expected to be convened for 8 July 2003;
"FAV" or "Formula Asset Value" the formula asset value to be calculated pursuant to the Scheme as at
the FAV Calculation Date in respect of 3PC Ordinary Shares and AIM
Trust Ordinary Shares as set out in the Schedule to the Scheme, and
"3PC FAV" and "AIM Trust FAV" shall be construed accordingly;
"FAV Calculation Date" the date at the close of business of which the 3PC FAV and the AIM
Trust FAV are to be calculated, being a business day as agreed by the
Board of 3PC and the Board of AIM Trust, as close as is reasonably
practical to the Effective Date;
"Merger" the proposed merger between AIM Trust and 3PC by means of the Scheme;
"NAV" or "Net Asset Value" unaudited net asset value calculated in accordance with normal
accounting policies;
"New Ordinary Shares" fully-paid new ordinary shares of 0.1p each in the capital of 3PC to
be issued pursuant to the Scheme;
"Primary Capital" funds raised by a company, the majority of the proceeds of which go to
the company, not to the existing shareholders;
"Proposals" the Merger and other proposals set out in this announcement;
"Scheme" the Scheme of Arrangement of AIM Trust under Section 425 of the
Companies Act 1985, as amended with any modification thereof or
addition thereto or condition approved or imposed by the Court.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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