Last checked at 22 May 2015 07:00
22 May 2015
Aseana Properties Limited
("Aseana" or the "Company")
Proposals regarding the future of the Company - posting of EGM Circular, 2014 Annual Report and Notice of AGM
Aseana Properties Limited (LSE: ASPL), a property developer in Malaysia and Vietnam, listed on the Main Market of the London Stock Exchange, announces that it has today posted to the Company's shareholders ("Shareholders") a circular (the "EGM Circular") putting forward recommended Proposals regarding the future of the Company to be considered at an Extraordinary General Meeting to be held immediately prior to the 2015 Annual General Meeting, together with its 2014 Annual Report and a letter to Shareholders containing the notice of Annual General Meeting.
The Extraordinary General Meeting and the Annual General Meeting will be held at 12 Castle Street, St. Helier, Jersey, JE2 3RT, Channel Islands on Monday, 22 June 2015 at 9.00 a.m. and 9.30 a.m. respectively.
1. Introduction and background to the Proposals
As highlighted in the Chairman's statement in the Company's 2014 Annual Report & Accounts, when the Company was launched in 2007 the Board considered it desirable that Shareholders should have an opportunity to review the future of the Company at appropriate intervals. Accordingly, and as required under the Company's Articles, at the Company's 2015 Annual General Meeting the Company must propose an ordinary resolution for it to cease trading as presently constituted (the "Discontinuation Resolution").
However, the Board firmly believes that ceasing to trade and placing the Company in liquidation at this time would have a significant adverse effect upon Shareholder value. Whilst the Board is obliged to put forward the Discontinuation Resolution at the AGM, it does not consider that ceasing to trade at this time is in the best interests of Shareholders. Instead, the Board believes that a policy of orderly realisation of the Company's assets over a period of up to three years is a more appropriate approach in order to maximise the value of the Company's assets and returns to Shareholders, both up to and upon eventual liquidation of the Company.
Accordingly, in the letter to Shareholders containing the notice of the AGM, which has been posted today together with the EGM Circular, the Board is recommending that Shareholders vote against the Discontinuation Resolution to be proposed at the AGM.
Instead, the Chairman has written to Shareholders to outline details of proposals (the "Proposals") to amend the Company's investment policy to enable a realisation of its assets in a controlled, orderly and timely manner, with the objective of achieving a balance between periodically returning cash to Shareholders and maximising the realisation value of the Company's investments (the "Divestment Investment Policy").
The adoption of the Divestment Investment Policy constitutes a material change to the investment policy of the Company; accordingly, the approval of the Shareholders by ordinary resolution is required. The Resolution will be proposed at an EGM to be held at 9.00 a.m. on 22 June 2015. The AGM will then be held following the EGM.
If Shareholders approve the Proposals then, as assets are realised, the Board will seek to return cash to Shareholders over time. Further detail on the expected timing and method for returns of capital to Shareholders is set out below. If the Proposals are adopted, the Board aims to complete the disposal of the Company's assets by June 2018.
2. The Proposals
2.1. The Divestment Investment Policy
The Board is proposing that the investment policy be restated as follows:
"The Company will seek to realise the Company's assets in a controlled, orderly and timely manner with a view to achieving a balance between (i) returning cash to Shareholders at such times and from time to time and in such manner as the Board may (in its absolute discretion) determine; and (ii) maximising the realisation value of the Company's investments.
The Board aims to complete the disposal of the Company's assets by June 2018.
The strategy for realising individual investments will be flexible and may need to be altered to reflect changes in the circumstances of a particular investment or in the prevailing market conditions. All disposals of assets to be made by the Company will be approved by the Board.
The Company will not make new investments save that the Company may make further investments in the RuMa Project in order to optimise value and assist in its eventual realisation. This restriction will not apply to capital expenditure on existing operating assets, incurred in the ordinary course of business.
Subject to any decision by the Board to make further investments into the RuMa Project or to incur capital expenditure on existing projects in line with this investment policy, the net proceeds of portfolio realisations will be returned to Shareholders at such times and from time to time and in such manner as the Board may determine (in its absolute discretion). The Board will take into consideration the Company's working capital requirements (including debt servicing and repayments), the cost and tax efficiency of returns of capital and the requirements of Jersey law.
To the extent that the Company has not disposed of all of its assets by the time of the AGM in 2018, in accordance with the Articles, Shareholders will be provided with an opportunity to review the future of the Company. To that end, an ordinary resolution will be proposed at the AGM in 2018 that the Company shall cease as presently constituted. For so long as the Management Agreement has not been terminated, neither the Manager nor any member of the Ireka Group nor any of their respective directors, officers, agents or employees (including, for the avoidance of doubt, Legacy Essence Limited) shall exercise votes attached to Shares held by any of them at the time of any such vote.
Any cash received by the Company as part of the realisation process but prior to its distribution to Shareholders will be held by the Company as cash on deposit and/or as cash equivalents."
If the Resolution to be proposed at the Extraordinary General Meeting is passed, the Company's existing investment policy will be replaced and the Company will adopt and adhere to the Divestment Investment Policy stated above. The existing Management Agreement will remain in force.
2.2. Return of capital
Timing
Conditional upon approval by Shareholders of the Divestment Investment Policy, the Board and the Manager are committed to realising the Company's assets in a controlled, orderly and timely manner with a view to achieving a balance between returning cash to Shareholders and maximising the realisation value of the Company's investments.
The Board intends to make distributions of not less than US$20 million in 2015. These anticipated distributions are based on the Board's analysis of the Company's current cash balances and expected receivables from investments that have been contractually sold at the date of the EGM Circular.
The Company currently anticipates a first distribution in the third quarter of 2015, subject to lenders' consent, the receipt of confirmatory certificates from the Company's reporting accountants and/or auditors to support the Directors' statement of solvency and any necessary Shareholder authorities.
The Board will target additional cash distributions of US$20 million in 2015, which are predicated on the completion of certain planned additional asset disposals before the end of the year. This additional targeted amount is also subject to lenders' consents, the receipt of confirmatory certificates from the Company's reporting accountants and/or auditors to support the Directors' statement of solvency and any necessary Shareholder authorities.
Thereafter, the Board will regularly review progress in implementing the Company's Divestment Investment Policy. The Board proposes a periodic half-yearly review of the Company's working capital requirements, in conjunction with the Company's reporting accountants, and an assessment of the level of possible distributions to Shareholders. If, following this review, the Board determines that there is a cash surplus above the working capital requirements of the Company, then that surplus cash will be distributed to the Shareholders, less a buffer to be held back in order to account for forecasting tolerances. The buffer shall be calculated as 20 per cent. of the working capital requirements of the Company at the time of such distribution, as determined by the Board in conjunction with the Company's reporting accountants. All such distributions will also be subject to lenders' consents, the receipt of confirmatory certificates from the Company's reporting accountants and/or auditors to support the Directors' statement of solvency and any necessary Shareholder authorities.
By way of illustration, if the Company's reporting accountants or auditors (as applicable) determine that the working capital requirements of the Company are US$20 million at that particular point in time, and the cash balance held by the Company is US$45 million, then US$21 million would be distributed to Shareholders, being US$45 million less US$24 million (US$20 million x 1.2).
In addition to the half-yearly working capital review, the Board may at any time conduct an additional working capital assessment which may lead to a distribution to Shareholders. This may be in circumstances where a sizeable disposal has given rise to surplus cash during the intervening period.
Although there will be no set period for the realisation of the Company's entire portfolio, assuming normal or favourable market conditions the Manager believes that it will be possible to complete the disposal of the Company's assets by June 2018.
In determining the timing of any return of cash to Shareholders, the Board will take into account the amount of cash available and the costs associated with such return of cash.
Method of distribution
The Board shall consider with its advisers the most appropriate mechanism for returning surplus cash equitably to Shareholders. The Board intends to seek the most efficient method of returning cash to Shareholders over time, which may include proposing to Shareholders to convert the existing issued Shares into shares which can be redeemed at the option of the Company, in order to facilitate the return of cash to Shareholders by way of a compulsory redemption mechanism. The Company may also consider making tender offers to purchase Shares. It is intended that all Shareholders will be treated equally under any return of cash.
The introduction of a compulsory redemption mechanism, and any subsequent compulsory redemption of Shares, or other return of cash to Shareholders may be subject, amongst other things, to (i) Shareholder approval; and (ii) lenders' consents.
The Board expects to write to Shareholders shortly after the EGM to provide further detail on the methodology of cash distributions and to seek any necessary Shareholder approvals. The Board will also liaise with the Group's lenders to seek the necessary lender consents.
3. Appointment of additional Directors
If Shareholders approve the Proposals at the EGM and the Discontinuation Resolution is not passed at the AGM, the Board intends to appoint Nicholas Paris and a representative of Legacy Essence Limited as additional Directors, with immediate effect after the AGM. Nicholas Paris is a representative of LIM Advisors Limited. Each of LIM Advisors Limited and Legacy Essence Limited is a substantial Shareholder of the Company and has given its irrevocable undertaking to vote in favour of the Proposals at the EGM. In addition, LIM Advisors Limited has given its irrevocable undertaking to vote against the Discontinuation Resolution at the AGM. Legacy Essence Limited will notify the Company of its proposed candidate in due course.
Nicholas Paris has agreed, and the Legacy Essence Limited representative will agree, to waive their entitlement to be paid a fee by the Company in respect of such directorship.
Biographical details of Nicholas Paris are set out below. The biographical details of the Legacy Essence Limited representative will be disclosed in the announcement of the results of the EGM and AGM.
Nicholas Paris (aged 54)
Nicholas Paris is a portfolio manager for LIM Advisors Limited ("LIM"), an Asian-focused investment management firm which is headquartered in Hong Kong, and he specialises in investing in closed ended investment funds. He is based in London and graduated from Newcastle University with a Bachelor of Science degree with Honours in Agricultural Economics. He is also a Chartered Accountant and a Chartered Alternative Investment Analyst. He worked with Rothschild Asset Management from 1986 until 1994, launching specialist investment products before becoming a corporate adviser and broker in closed ended investment funds with a particular focus on those investing in emerging markets. In this role, he worked between 1994 and 2001 at Baring Securities, Peregrine Securities and then Credit Lyonnais Asia Securities. He then joined the hedge fund industry in a series of sales roles before founding Purbeck Advisers in 2006, which is his own advisory and sales business. He has been advising LIM on investing in Asian closed end funds for five years and is a director of their London-based investment management subsidiary.
Nicholas is currently a non-executive director of Global Resources Investment Trust plc (a fund investing in a diverse portfolio of primarily small and mid-capitalisation natural resources and mining companies which is traded on the main market of the London Stock Exchange) and has been a non-executive director of The India IT Fund Limited (a fund investing in Indian software companies which was listed on the Channel Islands Stock Exchange) and TAU Capital plc (a fund investing in public and private equity in Kazakhstan which is traded on AIM).
4. Additional considerations
The Board believes that the Proposals would offer the following benefits to Shareholders:
● | commencing a policy of the orderly realisation of the Company's assets, rather than placing the Company in liquidation immediately or seeking an immediate sale of the portfolio:
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● | may enable the Company to increase the value realised on the sale of such portfolio investments; and
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● | is less likely to prejudice the Company's negotiation position by enabling it to negotiate realisations over time; and
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● | certain investments may be matched with best buyers in an expedient manner whilst other investments may be positioned for a sale over time | |
A managed and orderly realisation programme will permit the Shares to continue to be listed on the Official List and admitted to trading on the main market of the London Stock Exchange. The Board believes that maintaining the Company's listing and the ability of Shareholders to trade in the Shares is in the best interests of Shareholders as it will allow for the continuation of a daily market price to be quoted for the Shares, as required by certain Shareholders, and maintain the option for Shareholders to exit their investment through the market from time to time.
As a result of the Proposals, Shareholders should be aware of the following additional considerations:
● | There is no guarantee that the change to the Company's investment policy will provide the returns or realise the capital sought by Shareholders.
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● | Some of the Company's investments are illiquid. Accordingly, there may not be immediately identifiable buyers for certain investments of the Company and it could take considerable time for the Company to dispose of its investments or they may be disposed of at a discount to their current valuations. The eventual disposal price of the Group's assets is unknown and it is possible that the Company may not be able to realise some investments at any value.
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● | The maintenance of the Company as an ongoing listed vehicle will entail administrative and legal costs, which will decrease the amount ultimately distributed to Shareholders.
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● | As a result of the orderly realisation of the Company's portfolio, the number of assets held by the Company will reduce over time and, as a consequence, the aggregate return on the remaining portfolio will become increasingly exposed to the performance, favourable or unfavourable, of the remaining individual investments.
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● | Returns of cash will be made at the Directors' sole discretion, as and when they deem that the Company has sufficient assets available to return cash to Shareholders and subject to applicable Jersey law. Shareholders will therefore have little certainty as to when their capital will be returned.
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● | Returns of cash may in certain circumstances be subject, amongst other things, to the Company obtaining the consent of one or more lenders to the Group.
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● | As the Company enters into an orderly realisation programme, the discount to Net Asset Value per Share at which the Shares are traded may vary, as the market price for the Shares is determined by many external factors, including the supply and demand in the market place. In addition, upon adoption of the Proposals, the Board does not intend to actively manage the discount to Net Asset Value per Share at which the Shares may trade or to utilise any ability of the Company to make market purchases of its Shares.
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● | The Company's total expense ratio will increase as its investments are realised.
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● | Distributions pursuant to the orderly realisation programme are subject, amongst other things, to the Board being able to give the necessary certificate(s) of solvency required by Jersey law. Distributions under the orderly realisation programme are subject to the Board continuing to be satisfied, on reasonable grounds, that the Company will, at the time of distribution and for a period of 12 months thereafter, in respect of each distribution, continue to satisfy the statutory solvency test.
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● | In the event that the Resolution relating to the Proposals is not passed, the Company will continue to operate under its current investment objective and policy. The Discontinuation Resolution will be proposed at the AGM and at every third annual general meeting thereafter. |
Potential conflicts of interest
The Manager and other members of the Ireka Group may provide similar management services to third parties and may make investments for its own account that are similar to those of the Company. In the event of a conflict of interest arising, for example, where the Manager determines that a portfolio investment of the Company constitutes an investment opportunity for a third party whose investments it or another member of the Ireka Group manages or for its own account, the Manager shall disclose all material conflicts of interest to the Board and seek the consent of the Board prior to effecting any sale to other funds for which the Manager has management responsibilities. The activities of the Manager, in its capacity as the Company's manager, will remain subject to the overall policies, supervision and review of the Directors and disposals made by the Company under the orderly realisation programme will be subject to approval by the Board.
5. Extraordinary General Meeting
The Proposals are subject to Shareholder approval at an Extraordinary General Meeting of the Company, which is to be held at 9.00 a.m. on 22 June 2015. At the EGM, the Resolution will be proposed to sanction the adoption of the Divestment Investment Policy. Under the Companies Law, the Resolution requires a vote in favour by Shareholders holding a majority of the Shares represented at the EGM, either in person or by proxy, and voting on the resolution, to be validly passed.
6. Irrevocable undertakings
Shareholders holding, in aggregate, 172,024,012 Shares as at the date of the EGM Circular (representing 81.1 per cent. of the total voting rights of the Company and including Ireka Corporation Berhad and Legacy Essence Limited) have given their irrevocable undertaking to vote the Shares held in their name at the time of the EGM in favour of the Proposals.
Shareholders holding, in aggregate, 84,024,012 Shares as at the date of this document (representing 67.7 per cent. of Shares held by persons entitled to vote on the Discontinuation Resolution and excluding Ireka Corporation Berhad and Legacy Essence Limited, who may not vote the Shares held in their name in respect of the Discontinuation Resolution) have given their irrevocable undertaking to vote the Shares held in their name at the time of the AGM against the Discontinuation Resolution to be proposed at the AGM.
7. Directors' voting intentions and recommendation
The Directors consider that the Proposals are in the best interests of the Company and Shareholders as a whole. Accordingly, the Directors unanimously recommend that Shareholders vote in favour of the Resolution to be proposed at the Extraordinary General Meeting as they intend to do in respect of their own beneficial holdings which amount, in aggregate, to 2,483,000 Shares representing 1.2 per cent. of the total voting rights of the Company. The Directors have given their irrevocable undertaking to vote the Shares held in their name at the time of the EGM in favour of the Proposals and, at the AGM, against the Discontinuation Resolution.
8. Expected timetable of principal events
Latest time and date for receipt of forms of proxy for the EGM
| 9.00 a.m. on 19 June 2015 |
Latest time and date for receipt of forms of proxy for the AGM
| 9.30 a.m. on 19 June 2015 |
EGM record date
| 9.00 a.m. on 21 June 2015 |
AGM record date
| 9.30 a.m. on 21 June 2015 |
Time and date of Extraordinary General Meeting
| 9.00 a.m. on 22 June 2015 |
Time and date of Annual General Meeting
| 9.30 a.m. on 22 June 2015 |
Announcement of results of Extraordinary General Meeting and Annual General Meeting
| 22 June 2015 |
If any of the above times and/or dates change, the revised times and/or dates will be notified to Shareholders by announcement through a Regulatory Information Service.
Words and expressions defined in the EGM Circular have the same meanings when used in this announcement unless the context requires otherwise. The EGM Circular, 2014 Annual Report and Notice of AGM have also been submitted to the National Storage Mechanism and will shortly be available for public inspection at http://www.morningstar.co.uk/uk/nsm.
For further information:
Aseana Properties Limited | Tel: 603 6411 6388 |
Chan Chee Kian | Email: cheekian.chan@ireka.com.my |
N+1 Singer | Tel: 020 7496 3000 |
James Maxwell (Corporate Finance)/Sam Greatrex (Sales) | |
Tavistock | Tel: 020 7920 3150 |
Jeremy Carey / James Verstringhe | Email: jcarey@tavistock.co.uk |
Notes to Editors:
London-listed Aseana Properties Limited (LSE: ASPL) is a property developer investing in Malaysia and Vietnam.
Ireka Development Management Sdn Bhd ("IDM") is the exclusive Development Manager for Aseana. It is a wholly-owned subsidiary of Ireka Corporation Berhad, a company listed on the Bursa Malaysia since 1993, which has over 45 years of experience in construction and property development. IDM is responsible for the day-to-day management of Aseana's property portfolio and the introduction and facilitation of new investment opportunities.