Assetco Regulatory News (ASTO)

AssetCo plc

("AssetCo" or the "Company")

Tender Offer for up to 6,532,942 Ordinary Shares at £4.11 per share

Issue of Ordinary Shares to Cadoc Limited

Waiver of Rule 9 of the Code

Current Trading

AssetCo is pleased to announce a Tender Offer pursuant to which up to 6,532,942 Ordinary Shares held by Qualifying Shareholders will be purchased at a price of £4.11 per Ordinary Share, being the mid-market closing price of an Ordinary Share as at the close of business on 30 November 2020. If the maximum number of Ordinary Shares under the Tender Offer is acquired, this will result in an amount of approximately £26.9 million being returned by the Company to Qualifying Shareholders.

A circular including Notice of General Meeting and a Tender Offer application form has been sent to Shareholders and this will set out the background to and reasons for the Tender Offer and why the Directors believe the Tender Offer to be in the best interests of the Company and its Shareholders as a whole. The Circular will also contain details on the procedure that should be followed by those Qualifying Shareholders who wish to participate in the Tender Offer. The Company is seeking Shareholders' approval of the Tender Offer at a General Meeting to be held at 10.00 am on 17 December 2020.

Resolutions are also being proposed at the General Meeting to authorise the Directors to allot and issue Ordinary Shares to Cadoc Limited, a company associated with Tudor Davies and which, as previously disclosed in the Company's annual accounts, is entitled to a success fee of 15 per cent. of the funds realised from the litigation (excluding litigation costs awarded) with Grant Thornton UK LLP (Grant Thornton). The success fee is proposed to be satisfied by the issue of Ordinary Shares as set out in paragraph 6 below.

The Board has consulted with the Panel which has agreed that it will waive any obligation on Cadoc or Harwood to make a general offer under Rule 9 of the Takeover Code as a result of the Tender Offer and Proposed Allotment, provided that the holders of a majority of the issued Ordinary Shares held by Independent Shareholders, confirm in writing that they would approve the Rule 9 Waiver, if a resolution to approve the Rule 9 Waiver were put to the Independent Shareholders at the General Meeting.

Current Trading, Prospects and Future Strategy

The Company's focus has continued to be on regaining and developing new business in the Middle East, and releasing the cash in receivables and bonds, and completing the action against the former auditors, Grant Thornton.

Whilst the activities in the Middle East have been slowed by the COVID-19 pandemic, the Company has been able to successfully conclude the litigation against Grant Thornton. The total award after the Court of Appeal ruling as announced on 2 October 2020 amounted to £28.6 million including litigation costs recovered, £4.5 million of which has been released and the remainder, the Company expects to be released by the Court in the near future.

Related Party Transactions

The irrevocable undertakings from the Company's existing substantial shareholders to participate in the Tender Offer as set out in paragraph 7 below are each considered a related-party transaction for the purposes of Rule 13 of the AIM Rules. The Directors (excluding Christopher Mills by virtue of his association with Harwood Capital) consider, having consulted with Arden, the Company's Nominated Adviser, that the above participation in the Tender Offer is fair and reasonable in so far as Shareholders are concerned.

Should the authority be granted to the Directors at the General Meeting, the allotment of 854,722 Ordinary Shares to Cadoc is considered a related party transaction for the purposes of Rule 13 of the AIM Rules. The Directors (excluding Tudor Davies by virtue of his association with Cadoc) consider, having consulted with Arden, the Company's Nominated Adviser, that the allotment of the New Ordinary Shares is fair and reasonable in so far as Shareholders are concerned.

Furthermore, the conditional irrevocable undertaking from Cadoc to participate in the Tender Offer is considered a related-party transaction for the purposes of Rule 13 of the AIM Rules. The Directors (excluding Tudor Davies by virtue of his association with Cadoc) consider, having consulted with Arden, the Company's Nominated Adviser, that the participation by Cadoc in the Tender Offer is fair and reasonable in so far as Shareholders are concerned.

Further Information

1. Introduction

The Board announces that the Company intends to launch a tender offer pursuant to which up to 6,532,942 Ordinary Shares held by Qualifying Shareholders would be purchased at a price of £4.11 per Ordinary Share, being the mid-market closing price of an Ordinary Share as at the close of business on 30 November 2020. If the maximum number of Ordinary Shares under the Tender Offer is acquired, this will result in an amount of approximately £26.9 million being returned by the Company to Qualifying Shareholders.

The Circular sets out the background to and reasons for the Tender Offer and why the Directors believe the Tender Offer to be in the best interests of the Company and its Shareholders as a whole. The Circular also contains details on the procedure that should be followed by those Qualifying Shareholders who wish to participate in the Tender Offer. The Company is seeking Shareholders' approval of the Tender Offer at a General Meeting to be held at 10.00 a.m. on 17 December 2020.

Resolutions are also being proposed at the General Meeting to authorise the Directors to allot and issue Ordinary Shares to Cadoc Limited, a company associated with Tudor Davies and which, as previously disclosed in the Company's annual accounts, is entitled to a success fee of 15 per cent. of the funds realised from the litigation (excluding litigation costs awarded) with Grant Thornton. The success fee is proposed to be satisfied by the issue of Ordinary Shares as set out in paragraph 6 below.

The Board has consulted with the Panel which has agreed that it will waive any obligation on Cadoc or Harwood to make a general offer under Rule 9 of the Takeover Code as a result of the Tender Offer and proposed allotment to Cadoc, provided that the holders of a majority of the issued Ordinary Shares held by Independent Shareholders, confirm in writing that they would approve the Rule 9 Waiver, if a resolution to approve the Rule 9 Waiver were put to the Independent Shareholders at the General Meeting.

2. Tender Offer

Background

On 10 June 2020 the Board announced that it considered that a large proportion of the cash balances which at that time amounted to £26 million were surplus to current requirements and it may be appropriate to return surplus cash to shareholders.

The Board proposed a capital reduction to eliminate the deficit of distributable reserves and generate a surplus of £27.15 million which was approved by the Court on 4 August 2020.

As at 30 November 2020, the last practicable date before the publication of the Circular, the Company had approximately £33.8 million in cash. Subject to the passing of the Tender Offer Resolution by Shareholders at the General Meeting, the Directors' current intention is to give Qualifying Shareholders the opportunity to tender their Ordinary Shares through the Tender Offer for cash. The Tender Offer Resolution will give the Directors authority to distribute £26.9 million to Shareholders through the Tender Offer.

Benefits of the Tender Offer

The Board considered the various options for returning cash to Shareholders and determined that the Tender Offer would be the most appropriate method. In particular, the Tender Offer:

(i) provides Qualifying Shareholders with the choice of whether or not they wish to tender all, part, or none of their respective Basic Entitlements; and

(ii) will allow the Company to broaden the return of cash to include those Qualifying Shareholders whose Ordinary Shares might not otherwise be purchased by the Company through a general on-market buy back.

Structure of the Tender Offer

The Tender Offer will be implemented on the basis of Arden acquiring, as principal, the successfully tendered Ordinary Shares at the Tender Price. It is expected that Qualifying Shareholders who successfully tender their Ordinary Shares will receive payment for such Ordinary Shares by 11 January 2021. In turn, Arden has the right to require the Company to purchase such Ordinary Shares from it at the same price under the Option Agreement, details of which are set out in paragraph 1.3 of Part IV of the Circular. If Arden does not exercise its right to require the Company to purchase such Ordinary Shares, the Company has the right - and intends to exercise such right if Arden has not exercised its right by 11.00 a.m. on the date the results of the Tender Offer have been announced - to require Arden to sell such Ordinary Shares to it at the same price. The Company intends to cancel any repurchased Ordinary Shares.

The Tender Offer will be open to all Shareholders on the Register on the Tender Offer Record Date, save for those who are Shareholders subject to the securities laws of a Restricted Jurisdiction.

Qualifying Shareholders may participate in the Tender Offer by tendering either all or a proportion of their registered holdings of Ordinary Shares. Each Qualifying Shareholder will be entitled to sell their Basic Entitlement under the Tender Offer (subject only to any scaling back as a result of shareholdings of 100 or fewer Ordinary Shares being accepted as referred to in paragraph 2.18 of Part IV of the Circular). The Tender Offer will also present tendering Qualifying Shareholders with an opportunity to sell an Individual Excess Tender to the extent that other Shareholders tender less than their Basic Entitlement.

The Tender Offer is subject to, amongst other things, the passing of the Tender Offer Resolution.

To the extent that any Shareholders have tendered less than their Basic Entitlement under the Tender Offer, Individual Excess Tenders will be accepted in proportion to the Total Excess Tenders so that the total number of Ordinary Shares purchased pursuant to the Tender Offer does not exceed 6,532,942. The process by which Individual Excess Tenders will be scaled back, if necessary, is described further in paragraph 2.18 of Part IV of the Circular.

As at 30 November 2020, being the latest practicable date before the publication of the Circular, there are 12,211,163 Ordinary Shares in issue. Subject to approval of resolutions 3 and 4, a further 854,722 Ordinary Shares will be issued to Cadoc Limited before the Tender Offer Record Date making a total of 13,065,885 Ordinary Shares in issue. Should the maximum number of Ordinary Shares be validly tendered, up to 6,532,942 Ordinary Shares may be purchased under the Tender Offer for a maximum aggregate consideration of approximately £26.9 million.

The Tender Price for Ordinary Shares tendered by Qualifying Shareholders under the Tender Offer is £4.11 (being the closing mid-market price of an Ordinary Share on 30 November 2020).

The Tender Offer will close at 1.00 p.m. on 21 December 2020 and tenders received after that time will not be accepted (unless the Tender Offer is extended).

Number of Ordinary Shares to be purchased

Successfully tendered Ordinary Shares will be purchased by Arden free of commission and dealing charges.

Any Ordinary Shares repurchased by the Company from Arden following the purchase by Arden will be cancelled. Any rights of Shareholders who do not participate in the Tender Offer will be unaffected by the Tender Offer.

Circumstances in which the Tender Offer may not proceed

The Tender Offer is conditional on, among other things, the passing of the Tender Offer Resolution as set out in the Notice of General Meeting and on satisfaction of the other conditions specified in Part IV of the Circular.

The Tender Offer is also conditional on there not arising any material adverse change or certain other force majeure events prior to the closing of the Tender Offer. Further details of these conditions are set out in paragraph 2 of Part IV of the Circular.

Full terms and conditions of the Tender Offer

Full details of the Tender Offer, including the terms and conditions on which it is made, are set out in Part IV of the Circular. Some questions and answers related to the Tender Offer are set out in Part VI of the Circular.

3. Ongoing Authority to buy back Ordinary Shares

Should the number of Ordinary Shares validly tendered under the Tender Offer be less than the maximum permitted under the terms of the Tender Offer, and subject to circumstances prevailing following completion of the Tender Offer, the Board intends to return any such balance to Shareholders by means of market purchases through the London Stock Exchange. Shareholders should be aware that the price which may be paid for an Ordinary Share pursuant to the Buy Back Resolution, if utilised, may be lower than the Tender Price. Accordingly, the Board is also proposing the Buy Back Resolution which will give the Company authority to buy back Ordinary Shares in the market through the London Stock Exchange following completion of the Tender Offer, as permitted by the Companies Act 2006. The authority limits the number of Ordinary Shares that could be purchased to the lower of:

(i) a maximum of 1,831,675 Ordinary Shares (representing approximately 15 per cent. of the Issued Ordinary Share Capital as at 30 November 2020 (the latest practicable date before publication of the Circular); and

(ii) a maximum of such number of Ordinary Shares as equals 15 per cent. of the Company's Issued Ordinary Share Capital immediately following completion of the Tender Offer.

The authority also sets minimum and maximum prices (with the latter being linked to the market value of an Ordinary Share at the relevant time) and will expire at the conclusion of the annual general meeting of the Company in 2021.

It is the Board's current intention to cancel any Ordinary Shares that it may purchase pursuant to the Buy Back Resolution.

If the maximum amount is returned to Shareholders under the Tender Offer, whilst the Board has no current intention of using the Buy Back Resolution, if passed by Shareholders, it reserves the right to buy back Ordinary Shares in the market should it determine that it would be in the best interests of Shareholders as a whole to do so at the relevant time.

4. General Meeting to approve the Tender Resolutions and the Buy Back Resolutions

In order to comply with applicable company law, the Tender Offer requires the approval of Shareholders at a general meeting of the Company. The Company is convening a General Meeting for 10.00 a.m. on 17 December 2020 to consider and, if thought fit, pass:

(i) the Tender Offer Resolution to authorise and to approve the terms under which the Tender Offer will be effected; and

(ii) the Buy Back Resolution to authorise the Company to make market purchases of the Ordinary Shares following completion of the Tender Offer.

The Board believes that it is in Shareholders' best interests to conduct this meeting, and if approved, confirm the results of the Tender Offer as soon as possible. Both the Tender Offer Resolution and the Buy Back Resolution must be passed by a majority of at least 75 per cent. of the votes cast at the General Meeting. The Company will not purchase Ordinary Shares pursuant to the Tender Offer unless the Tender Offer Resolution is duly passed.

Shareholders will find enclosed with the Circular a Form of Proxy for use in connection with the General Meeting. Whether or not you intend to tender any of your Ordinary Shares under the Tender Offer you are requested to complete and return the Form of Proxy as soon as possible and, in any event, so as to be received by Computershare Investor Services, Corporate Actions Projects, Bristol, BS99 6AH no later than 10.00 a.m. on 15 December 2020.

Whilst the completion and return of a Form of Proxy will not preclude Shareholders from attending the General Meeting and voting in person should they wish to do so, Shareholders are reminded that, given the current government restrictions with regard to the COVID 19 pandemic, the Board has decided to prohibit Shareholders attending the General Meeting in person with the exception of the minimum number of Directors as Shareholders/proxy holders needed to form a quorum. Any Shareholder who attempts to attend the General Meeting in person will be refused entry. As such, voting on the Resolutions at the General Meeting shall be decided by way of a poll and not by a show of hands. The Notice of General Meeting is set out in Part VIII of the Circular.

5. The Takeover Code

Waiver of the obligation to make a general offer under Rule 9 of the Takeover Code

Harwood Capital LLP is currently interested in 5,905,779 Ordinary Shares representing 48.4 per cent. of the current issued share capital of the Company. Christopher Mills, as chief executive and a member of Harwood Capital LLP is deemed to have an interest in these shares, which are held on a discretionary management basis for a number of private clients who remain the ultimate beneficial owners. Tudor Davies, as a private client of Harwood Capital LLP, has an interest in 32,813 of those shares.

Subject to the passing of the Resolutions at the General Meeting, the Company will have 13,065,885 issued Ordinary Shares of which Harwood Capital LLP will be interested in 5,905,779 Ordinary Shares (including the Ordinary Shares held on behalf of Tudor Davies) and Cadoc Limited will be interested in 854,722 Ordinary Shares, representing 45.2 per cent. and 6.5 per cent. respectively of the then issued voting share capital of the Company.

Both Cadoc and Harwood Capital have entered into irrevocable undertakings to tender Ordinary Shares equal to their Basic Entitlement pursuant to the Tender Offer, details of which are included in paragraph 10 of Part II of the Circular. Assuming the maximum number of Ordinary Shares is purchased pursuant to the Tender Offer, the Company will have 6,532,943 issued Ordinary Shares of which Harwood Capital LLP will be interested in 2,952,890 Ordinary Shares and Cadoc Limited will be interested in 427,361 Ordinary Shares, representing 45.2 per cent. and 6.5 per cent. respectively of the then issued share capital of the Company.

Due to the relationship between Christopher Mills and Tudor Davies, and the relationship between Tudor Davies and Cadoc and Christopher Mills and Harwood, they and their respective concert parties are presumed to be acting in concert for the purposes of the Takeover Code ("Concert Party"). Their aggregate holding of 51.7 per cent. gives rise to certain considerations under the Takeover Code. Brief details of the Takeover Code and the protection this affords Ordinary Shareholders are described below.

The Takeover Code is issued and administered by the Panel. The Takeover Code and the Panel operate to ensure fair and equal treatment of shareholders in relation to takeovers, and also provides an orderly framework within which takeovers are conducted. The Takeover Code applies to all takeovers and merger transactions, where the offeree company is, among others, a listed or unlisted public company with its registered office in the United Kingdom, the Channel Islands or the Isle of Man or falls within certain categories of private limited companies. The Company is such a company and accordingly its Shareholders are entitled to the protection afforded by the Takeover Code.

Under Rule 9 of the Takeover Code, where any person acquires, whether by a series of transactions over a period of time or by one specific transaction, an interest (as defined in the Takeover Code) in shares which (taken together with shares in which he is already interested and in which persons acting in concert with him are interested) carry 30 per cent. or more of the voting rights of a company that is subject to the Takeover Code, that person is normally required by the Panel to make a general offer to all remaining shareholders of that company to acquire their shares.

Similarly, where any person, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights of a company, but does not hold shares carrying more than 50 per cent. of the voting rights of that company and such person or any such person acting in concert with him acquires an interest in any other shares which increases the percentage of shares carrying voting rights in which he is interested, such person or persons acting in concert with him will normally be required to make a general offer to all remaining shareholders to acquire their shares.

An offer under Rule 9 must be made in cash and at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares of the company during 12 months prior to the announcement of the offer.

As noted above, the Concert Party might, as a result of the Tender Offer and the Proposed Allotment, acquire Ordinary Shares which carry more than 50 per cent. of the voting rights of the Company. The Tender Offer and Proposed Allotment might therefore, absent the Rule 9 Waiver, give rise to an obligation on the Concert Party to make a general offer for the entire issued share capital of the Company.

Waiver of Rule 9 obligations

Under Note 1 on the Notes on the Dispensations from Rule 9, the Panel will normally waive the requirement for a general offer to be made in accordance with Rule 9 (a "Rule 9 offer") if, inter alia, those shareholders of the company who are independent of the person who would otherwise be required to make an offer and any person acting in concert with him do not have any interest which may compromise their independence (the "Independent Shareholders") pass an ordinary resolution on a poll at a general meeting (a "Whitewash Resolution") approving such a waiver. The Panel may waive the requirement for a Whitewash Resolution to be considered at a general meeting (and for a circular to be prepared in accordance with Section 4 of Appendix 1 to the Takeover Code) if Independent Shareholders holding more than 50 per cent. of the company's shares capable of being voted on such a resolution confirm in writing that they would vote in favour of the Whitewash Resolution were one to be put to the shareholders of the company at a general meeting.

Confirmations and Acknowledgements

Independent Shareholders holding more than 50 per cent. of the Company's Ordinary Shares capable of being voted on a resolution to approve a Whitewash Resolution have confirmed the following:

1. they are the beneficial owner or discretionary manager of the beneficial owners of 5,189,565 Ordinary Shares in the issued share capital of the Company representing at the date hereof 42.5 per cent. of the Company's Issued Ordinary Share Capital carrying voting rights and have absolute discretion over the manner in which these shares are voted. These Ordinary Shares are held free of all liens, pledges, charges and encumbrances;

2. that (a) there is no connection between (1) any Independent Shareholder and (2) the Concert Party, (b) they do not have any interest or potential interest (other than in their capacity as a Shareholder), whether commercial, financial or personal, in the outcome of the Tender Offer and proposed allotment to Cadoc Limited, and (c) they are an Independent Shareholder of the Company as defined above; and

3. that, in connection with the Tender Offer and Proposed Allotment: (a) they consent to the Panel granting a waiver from the obligation for the Concert Party to make a Rule 9 offer to the Shareholders; (b) they consent to the Panel dispensing with the requirement that the waiver from such obligation be conditional on a Whitewash Resolution being approved by Independent Shareholders of the Company at a general meeting; and (c) they would vote in favour of a Whitewash Resolution (to waive the obligation for the Concert Party to make a Rule 9 offer upon completion of the Tender Offer and Proposed Allotment) were one to be put to the Independent Shareholders of the Company at a general meeting:

In giving the confirmations referred to above, the Independent Shareholders have acknowledged:

1. that the Panel will approve the waiver from the obligation for the Concert Party to make a Rule 9 offer without the requirement for the waiver having to be approved by Independent Shareholders of the Company at a general meeting;

2. that if no general meeting is held to approve the Whitewash Resolution to waive the obligation for the Concert Party to make a Rule 9 offer:

(a) there will not be an opportunity for any other person to make any alternative proposal to the Company conditional on such Whitewash Resolution not being approved by Independent Shareholders of the Company;

(b) there will not be an opportunity for other Shareholders to make known their views on the Tender Offer and the Proposed Allotment; and

(c) there will be no requirement for the Company either (i) to obtain and make known to its Shareholders competent independent advice under Rule 3 of the Takeover Code on the Tender Offer and the Proposed Allotment and the waiver of the obligation for the Concert Party to make a Rule 9 offer or (ii) to publish a circular to Shareholders of the Company in compliance with Appendix 1 of the Takeover Code in connection with this matter.

The Board has consulted with the Panel which has agreed that it will waive any obligation on the Concert Party to make a general offer under Rule 9 of the Takeover Code as a result of the Tender Offer and Proposed Allotment, provided that the holders of a majority of the issued Ordinary Shares, held by Independent Shareholders, confirm in writing that they would approve the Rule 9 Waiver, if a resolution to approve the Rule 9 Waiver were put to the Independent Shareholders at the General Meeting.

The holders of a majority of Ordinary Shares, held by Independent Shareholders, have given that confirmation and the Board has also now received the Panel's confirmation that the Panel has granted a waiver of the obligation on the Concert Party to make a general offer under Rule 9 of the Takeover Code to the extent that such obligation would otherwise arise as a result of the Tender Offer and Proposed Allotment.

6. Allotment and Issue of Ordinary Shares to Cadoc

Under the existing arrangements with Cadoc, as previously noted in the Company's annual accounts, Cadoc is entitled to a success fee of 15 per cent. of sums recovered by the Company (excluding litigation costs awarded) pursuant to the now settled litigation with Grant Thornton. The sum recovered by the Company excluding litigation costs awarded was £23.5 million and accordingly the sum due to Cadoc is £3.53 million which it has been agreed will be satisfied by the allotment and issue of 854,722 new Ordinary Shares to Cadoc at £4.13 per share.

Cadoc is wholly owned and controlled by members of Tudor Davies' family and accordingly the issue of the New Ordinary Shares to Cadoc constitutes a related party transaction under the AIM Rules.

The Directors currently do not have sufficient authority to allot the New Ordinary Shares. Accordingly, resolutions 3 and 4, summarised below, are being proposed at the General Meeting to ensure that the Directors have sufficient authority to allot all the New Ordinary Shares on a non-pre-emptive basis.

· to grant authority to the Directors under section 551 of the Companies Act 2006 to allot the New Ordinary Shares to Cadoc. (Resolution 3)

· subject to and conditional upon the passing of resolution 3, to empower the Directors, pursuant to section 570(1) of the Companies Act 2006, to allot the New Ordinary Shares to Cadoc on a non-pre-emptive basis. Such power shall expire at the conclusion of the next annual general meeting of the Company. (Resolution 4)

Resolution 3 is an ordinary resolution and requires a majority of more than 50 per cent. of the votes cast to be passed. Resolution 4 is a special resolution and requires approval of not less than 75 per cent. of the votes cast to be passed. Given the current government restrictions with regard to the COVID 19 pandemic the Board has decided to prohibit Shareholders attending the General Meeting in person with the exception of the minimum number of Directors as Shareholders/proxy holders needed to form a quorum. As such, voting on the Resolutions shall be decided by way of a poll and not by a show of hands.

The Notice of General Meeting is contained in the Circular and sets out the Resolutions in full. The General Meeting is to be held at 10.00 a.m. on 17 December 2020.

7. Irrevocable Undertakings and intentions of the Directors relating to the Tender Offer

The Company has received an irrevocable undertaking from each of Harwood Capital LLP, Harwood Capital Management (Gibraltar) Limited, Lombard Odier Asset Management (Europe) Limited, Somers Limited, UIL Limited and Henderson Global Investors Limited to:

(i) vote in favour of the Resolutions; and

(ii) tender 5,839,504 Ordinary Shares under the Tender Offer, representing 50 per cent. of their beneficial holding of Ordinary Shares, and approximately 47.82 per cent. of the Issued Ordinary Share Capital as at the date of the Circular.

The Company has received an irrevocable undertaking from Cadoc limited, subject to passing of the resolutions at the General Meeting, to tender 427,361 Ordinary Shares under the Tender Offer, representing 50 per cent. of their beneficial holding of Ordinary Shares once issued.

Further details of these irrevocable undertakings are set out in paragraph 3 of Part VII of the Circular.

Definitions

The following definitions apply throughout this Announcement, unless stated otherwise: