4 Aug 2008 18:08
4 August 2008
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, THE REPUBLIC OF IRELAND, THE REPUBLIC OF SOUTH AFRICA OR JAPAN.
ADVENT CAPITAL (HOLDINGS) PLC
("ADVENT" OR THE "COMPANY")
FORMAL RESPONSE TO THE OFFER ("OFFER") MADE BY FAIRFAX FINANCIAL HOLDINGS LIMITED ("FAIRFAX") FOR THE COMPANY
The following is the text of a letter sent to shareholders today:
"4 August 2008
Dear Shareholder,
Advent Capital (Holdings) PLC ("Advent" or the "Company")
Formal response to cash offer of 165 pence per Advent share from Fairfax Financial Holdings Limited ("Fairfax")
Background
I am writing to you as the Chairman of your Board, the largest individual shareholder in our Company and its longest serving member of staff with a formal response from your Board to the offer for the entire issued share capital of our Company by Fairfax.
Offer from Fairfax
We recommend that you take NO ACTION at this point or on receipt of the Fairfax offer document. We will write to you again with your Board's formal response to the Fairfax offer document.
Fairfax's offer materially undervalues our Company
Your Board has given careful consideration to the cash offer of 165 pence per Advent share made by Fairfax in their offer announcement of Tuesday 29 July 2008. I have also had a discussion with Prem Watsa of Fairfax in an attempt to better understand Fairfax's motivation in making this offer, particularly as the Fairfax announcement was made without any kind of meaningful dialogue between us.
In considering the offer, your Board has taken into account the current net tangible asset value of our business, the prices paid in takeovers of Lloyd's businesses recently, and the business prospects of Advent. Your Board notes that the Fairfax offer not only represents no premium to the closing mid-market price of the Company's shares of 165 pence per share as at 28 July 2008, being the last business day prior to the date of the offer, but also a significant discount to the Company's net tangible assets of 240 pence per share as at 30 June 2008 (as announced in the interim results on 28 July 2008). Your Board further notes that the average closing mid-market price of the Company's shares over the 30 days prior to 28 July 2008 was 177 pence per share and that the average closing mid-market price of the Company's shares over the six months prior to 28 July 2008 was 231 pence per share.
We are surprised that Fairfax chose not to engage in a more constructive dialogue prior to making their announcement; however, Fairfax's motivations are not our main concern at this point. Your Board believes that Advent has a good future ahead of it. We are well positioned in our specialist areas through dual underwriting platforms in London and Bermuda. Insurance market conditions may be softening at present, but experience tells us that cycles turn and your Board believes that we have the people, brand and customer loyalty to take advantage of any market correction. If our future is as a listed entity, then the Board believes that the longer term prospects for the business and the value of Advent's franchise should, over time, be reflected in our share price. Stock market conditions may not be at their best at present but (speaking as your Chairman and a founder shareholder) that is not a reason to sell at a price which cannot be considered reasonable, and thereby yield to an opportunistic approach at a mere 69 per cent. of net tangible assets per share.
If our future lies as part of a larger organisation then our shareholders would expect that anyone wishing to acquire this business should pay a proper price. It is a matter of public record that a multiple of net asset value, not a discount to net asset value, represents fair value in such takeovers.
I have today written to Prem Watsa of Fairfax expressing the concerns of your Board at the course of action being pursued.
Your Board firmly believes that it has a strategy in place that can deliver real long term shareholder value and, therefore, 165 pence in cash is an offer which is inadequate and is one which this Board will not recommend to shareholders as representing the fair value of the Company.
In view of the fact that Trevor Ambridge is an employee of Fairfax, he is deemed as being non-independent and he is therefore excluded from this recommendation from your Board in relation to the offer from Fairfax.
Your Board (other than Trevor Ambridge), who have been so advised by Kinmont, consider that Fairfax's offer materially undervalues the Company and urge shareholders to take NO ACTION at this point or on receipt of the Fairfax offer document. We expect that Fairfax will publish a formal offer document in the coming days and we will then write again to you with a formal response to that document.
Yours sincerely,
Brian F Caudle
Chairman
The Directors of the Company (other than Trevor Ambridge) accept responsibility for the information contained in this letter. To the best of the knowledge and belief of the Directors of the Company (other than Trevor Ambridge), who have taken all reasonable care to ensure that such is the case, the information contained in this letter for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information.
Kinmont Limited, which is regulated in the United Kingdom by the Financial Services Authority, is acting as financial adviser to the Company in relation to the matters referred to in this letter and no one else and will not be responsible to any other person for providing the protections afforded to clients of Kinmont Limited or for providing advice in relation to the matters referred to in this letter."
ENDS
Contact
| Advent Capital Holdings Keith Thompson Chief Operating Officer | +44 (0) 20 7743 8200 | |
| Kinmont Gavin Kelly John O Malley | +44 (0) 20 7087 9100 | |
| Fox-Pitt, Kelton Simon Law Jonny Franklin-Adams | +44 (0) 20 7663 6000 | |
| Pelham PR Polly Fergusson Damian Beeley | + 44 (0) 20 7743 6362 |
The Directors of the Company (other than Trevor Ambridge) accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the Directors of the Company (other than Trevor Ambridge), who have taken all reasonable care to ensure that such is the case, the information contained in this announcement for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information.
Kinmont Limited, which is regulated in the United Kingdom by the Financial Services Authority, is acting as financial adviser to the Company in relation to the matters referred to in this announcement and no one else and will not be responsible to any other person for providing the protections afforded to clients of Kinmont Limited or for providing advice in relation to the matters referred to in this announcement.
Dealing Disclosure Requirements
Under the provisions of Rule 8.3 of the City Code on Takeovers and Mergers (the "Code"), if any person is, or becomes, 'interested' (directly or indirectly) in one per cent. or more of any class of 'relevant securities' of Advent, all 'dealings' in any 'relevant securities' of Advent (including by means of an option in respect of, or a derivative referenced to, any such 'relevant securities') must be publicly disclosed by no later than 3.30 pm (London time) on the London business day following the date of the relevant transaction. This requirement will continue until the date on which any offer becomes, or is declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the 'offer period' otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an 'interest' in 'relevant securities' of Advent, they will be deemed to be a single person for the purpose of Rule 8.3 of the Code.
Under the provisions of Rule 8.1 of the Code, all 'dealings' in 'relevant securities' of Advent by Fairfax or Advent, or by any of their respective 'associates', must be disclosed by no later than 12.00 noon (London time) on the London business day following the date of the relevant transaction.
A disclosure table, giving details of the companies in whose 'relevant securities' 'dealings' should be disclosed, and the number of such securities in issue, can be found on the Takeover Panel's website at www.thetakeoverpanel.org.uk.
'Interests in securities' arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an 'interest' by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities.
Terms in quotation marks are defined in the Code, which can also be found on the Panel's website. If you are in any doubt as to whether or not you are required to disclose a 'dealing' under Rule 8 of the Code, you should consult the Panel (whose telephone number in the UK is 020 7638 0129).