Last checked at 26 Feb 2009 13:29
Date: 26 February 2009
On behalf of: Infrastructure India plc ("Infrastructure India" or "the Company")
Immediate release
Infrastructure India plc
Proposed acquisition of Infrastructure India's investment adviser, Bloomsbury Asset Management Advisors
Infrastructure India plc (LSE: IIP - Ordinary Shares, IIPW - Warrants), the investment company focusing on Indian infrastructure assets, is pleased to announce that it will be posting an offer document, offering to acquire the entire issued share capital of Bloomsbury Asset Management Advisors ("BAMA"), the investment adviser to the Group, to all of BAMA's shareholders.
A circular to the Company's shareholders convening an extraordinary general meeting to approve the acquisition of BAMA and to approve the revision to the investment advisory agreement dated 23 June 2008 between BAMA and Infrastructure India HoldCo, a subsidiary of the Company (the "Circular") will be sent to shareholders.
The Circular is also available on the Company's website: http://www.iiplc.com.
The text of the Chairman's letter from the Circular setting out further details of the proposed acquisition, as well as the text of Part II of the Circular setting out information relating to BAMA, is set out below.
The Directors believe that, as a result of the acquisition, the Company will be in a stronger position as regards potential future fund raising or other positive acquisition opportunities. Further, the Directors believe that the new, more streamlined Enlarged Group structure that will result from the proposed acquisition will be more attractive to potential new investors and partners with whom discussions will be sought following the completion of the acquisition.
All definitions contained herein are as set out in the Circular.
-Ends-
Further Enquiries:
| Infrastructure India plc | www.iiplc.com |
| Rupert Cottrell | Via Redleaf Communications |
| Bloomsbury Asset Management Advisors (BAMA) | 07867 906377 |
| Gary Neville | |
| Akur Partners | 020 7955 1514 |
| Andrew Dawber / Tom Frost | |
| Smith & Williamson Corporate Finance Limited | 020 7131 4000 |
| Azhic Basirov / Siobhan Sergeant | |
| Redleaf Communications | 020 7566 6700 |
| Emma Kane / Adam Leviton / Henry Columbine | iif@redleafpr.com |
Proposed acquisition of a significant controlling interest in the issued share capital of Bloomsbury Asset Management Advisors, revision of the Investment Advisory Agreement and Notice of Extraordinary General Meeting.
On 26 February 2009, the Company announced that it would be sending out the Offer Document to all BAMA Shareholders, conditionally offering to acquire the entire issued share capital of BAMA, the Group's investment adviser, from the BAMA Shareholders in consideration of the payment of approximately £1.15 million in cash and the issue of the Consideration Shares which, if the Offer is accepted by all BAMA Shareholders, in aggregate amounts to a maximum total consideration value of approximately £2 million. Information on BAMA is set out in Part II of this document.
As previously announced, most recently in the Company's results for the period ended 30 September 2008 on 28 November 2008, the Company is continuing to explore and evaluate all appropriate funding options to allow it to sustain future developments and to enable it to take full advantage of investment opportunities. The Directors believe that the opportunities for the Group going forward can be achieved more efficiently and cost-effectively for Shareholders with the BAMA management team being employed directly by the Enlarged Group and that, as a result of the Acquisition, the Company will be in a stronger position as regards potential future fund raising or other positive acquisition opportunities. Further, the Directors believe that the new, more streamlined Enlarged Group structure that will result from the proposed Acquisition will be more attractive to potential new investors and partners.
The Company has received irrevocable undertakings to accept, or procure the acceptance of, the Offer from certain BAMA Shareholders in respect of their beneficial interests in BAMA Shares amounting, in aggregate, to 13,044 BAMA Shares, representing approximately 81.5 per cent. of the entire issued share capital of BAMA.
Kaupthing Bank hf and Kaupthing Bank Luxembourg S.A. (in Administration) are substantial shareholders in the Company and also shareholders in BAMA. Therefore, they are considered to be related parties of IIP under the Listing Rules. The consideration payable to Kaupthing Bank hf and Kaupthing Bank Luxembourg S.A. (in Administration), should they accept the Offer, is a "smaller related party transaction" under the Listing Rules and the FSA has been informed of the details of the Acquisition pursuant to Listing Rule 11.1.10. Further, under the Listing Rules, BAMA is also deemed to be a related party of the Company by virtue of it being the investment adviser of Infrastructure India HoldCo, a wholly owned subsidiary of the Company.
As a result, the Directors consider it appropriate to seek the approval of Shareholders to the Acquisition and the Revision.
Accordingly, I am writing to Shareholders to set out the reasons for the Acquisition and the Revision, to provide further details of both of the proposed transactions and to explain why the Directors recommend that you vote in favour of the Resolutions to be put to Shareholders at the Extraordinary General Meeting to be held on 16 March 2009, notice of which is set out at the end of this document, as the Directors intend to do in respect of their own beneficial holdings.
Assuming Resolution 1 to be proposed at the Extraordinary General Meeting is passed, the Company will declare the Offer unconditional following receipt of acceptances from BAMA Shareholders holding not less than 80 per cent. of the issued share capital of BAMA and reserves the right to declare the Offer closed at any time after 3.30 p.m. on 19 March 2009, notwithstanding that it may not have received acceptances for the whole of the issued share capital of BAMA. Completion of the Acquisition is conditional upon the Admission of the Consideration Shares.
On completion of the Acquisition, Gary Neville, currently a director and indirect shareholder of BAMA, as well as other members of the BAMA management team will become employees of the Enlarged Group. However, Gary Neville, and Nimar Sehmi will be permitted to undertake other activities or advisory services for third parties provided that they shall not undertake any activities or advise any third parties investing in, or intending to invest in, investment opportunities which would fall within the investment objectives of the Enlarged Group, and specifically investments in infrastructure projects in India. Natalia Poupard will be permitted to undertake other activities or advisory services for other third parties, only with the prior written consent of the board of directors of BAMA.
The Directors do not believe that the risk profile of the Group will significantly change as a result of the Acquisition and the Revision and, as such, they do not believe that there are any risks specifically associated with the Acquisition or the Revision.
Background to and reasons for the Acquisition and the Revision
The Company currently has an external investment adviser, BAMA, which assists in identifying, structuring and monitoring investments and advising on exit strategies in respect of the Group's investments. In consideration of these services, BAMA is entitled to receive both an advisory fee and a performance fee, further details of which are set out in paragraph 4.1 of Part III of this document. Infrastructure India HoldCo and BAMA have entered into an agreement pursuant to which, if the Resolutions are passed and the Acquisition is completed, the Investment Advisory Agreement will be replaced by a new agreement so that the advisory fees and the performance fees will no longer be payable to BAMA, but instead the Enlarged Group will pay BAMA a fee sufficient to cover its operating costs and expenses, which will include the salaries of the BAMA management team.
The Acquisition and the Revision will allow the Enlarged Group to retain the advisory fees and performance fees that would otherwise have been payable to BAMA under the Investment Advisory Agreement over approximately the next four and a half years. The Directors therefore believe that the Acquisition and the Revision represent a highly cost-effective way of ensuring future potential returns to the Enlarged Group are for the full benefit of Shareholders.
Further, the Directors believe that the Enlarged Group would provide greater visibility and transparency as well as be more efficient and focused as an internally advised investment group, as opposed to operating as an externally advised group. The successful completion of the Acquisition and the Revision should maintain the alignment of interests between the Group, BAMA and the Shareholders.
Summary of the Offer:
The Acquisition will be effected by way of the Offer, the terms of which are set out in the Offer Document. If Resolution 1 is passed and the Offer declared unconditional, those BAMA Shares in respect of which valid forms of acceptance have been received by 19 March 2009 will be acquired on the following basis:
for each BAMA Share: £71.82 in cash and 228 Consideration Shares
The consideration payable pursuant to the Offer will be the same for each BAMA Share, irrespective of which class.
Overall, the maximum consideration payable by the Company will be satisfied by the payment of approximately £1.15 million in cash and the issue of the Consideration Shares which, if the Offer is accepted by all BAMA Shareholders, in aggregate amounts to a consideration value of approximately £2 million, based on the average mid-market closing price of the Ordinary Shares for the 10 business days prior to the publication of this document.
The Offer Document contains certain warranties to be given to the Company by the BAMA Shareholders that the Directors feel are appropriate for an acquisition of this size and type.
Application will be made to the UKLA and the London Stock Exchange for the Consideration Shares to be admitted to the Official List and to trading on the London Stock Exchange's main market for listed securities. Subject to Resolution 1 being passed, it is expected that Admission will become effective and that dealings for normal settlement in the Consideration Shares will commence on 23 March 2009. The Consideration Shares will rank pari passu in all respects with the existing Ordinary Shares.
Trading History and Investments of the Company
Since the Company's incorporation, the Group, with the assistance of BAMA, has made two investments, in the energy and transportation sectors, respectively.
The first investment of approximately £13.5 million was made in Shree Maheshwar Hydel Power Corporation Limited ("SMHPCL"), representing a 6.23 per cent. equity interest, post all dilution effects. SMHPCL was specifically established to solely own and develop the Shree Maheshwar Project, a 400MW run-of-the-river hydroelectric power project in Maheshwar, in Central India. The project is expected to be one of the largest privately owned hydroelectric schemes to be commissioned in India within the next two years and power generating operations are anticipated to commence in the third quarter of 2009, in line with expectations at the time of that acquisition.
The second investment of approximately £11.3 million was made in August 2008, in Western MP Infrastructure & Toll Roads Private Limited, which has been awarded the contract to implement the Lebad-Jaora Project, a toll road in Central India with a 25-year concession. The toll road is part of the local State Government sponsored road upgrade programme and is a single 125 km four-lane divided carriageway toll road that is now ten months into construction. Tolling operations are anticipated to commence around April 2010. The investment represents a 26 per cent. shareholding.
The two investments together represent a total investment of approximately £24.8 million, which in turn represents nearly 75 per cent. of the IPO Net Proceeds.
On 28 November 2008, the Company released consolidated financial information for the period ended 30 September 2008, reporting a loss for the period of £1.21 million consisting, primarily, of start up costs and costs associated with the making of the first two investments. As at 16 February 2009, the Company had cash balances of £6.1 million. The Company expects to announce in July 2009 its preliminary results for the financial period ending 31 March 2009.
The Extraordinary General Meeting
At the Extraordinary General Meeting, the Resolutions, relating to: (i) the proposed acquisition of BAMA; and (ii) the revision of the Investment Advisory Agreement, will be proposed. If passed, the Resolutions will approve the Acquisition and the Revision and authorise the directors of the Company and any relevant members of the Group to implement and complete the Acquisition in accordance with the terms set out in the Offer Document, subject in each case to such amendments or variations thereto (which will not be material in nature) as the Directors may in their absolute discretion think fit.
Action to be taken
A Form of Proxy for use at the Extraordinary General Meeting is enclosed with this document. Whether or not you propose to attend the Extraordinary General Meeting in person, Shareholders are requested to complete and return the Form of Proxy so as to be received at the offices of the Company's registrars, Capita Registrars (Isle of Man) Limited, 3rd Floor, Exchange House, 54-62 Athol Street, Douglas, Isle of Man IM1 1JD as soon as possible and, in any event, not later than 10.00 a.m. on 14 March 2009. Completion and return of a Form of Proxy will not preclude you from attending the Extraordinary General Meeting and voting in person if you wish to do so (and are so entitled).
Additional information
Your attention is drawn to the additional information in Parts II and III of this document.
Recommendation
The Board considers the Acquisition and the Revision to be in the best interests of the Shareholders as a whole and, accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolutions, as the Directors intend to do in respect of their own beneficial holdings amounting in aggregate to 75,000 Ordinary Shares, representing approximately 0.2 per cent. of the Issued Ordinary Share Capital.
Yours faithfully,
Patrick Rupert CottrellChairman
PART II
INFORMATION RELATING TO BLOOMSBURY ASSET
MANAGEMENT ADVISORS
BAMA was incorporated in Mauritius on 7 March 2008 and is licensed as a Category 1 Global Business Company to operate as an investment adviser under the Mauritius Securities Act 2005 and is regulated by the Financial Services Commission in Mauritius. Under the Investment Advisory Agreement, BAMA provides investment advice to Infrastructure India HoldCo to assist it in identifying, structuring and monitoring investments and advising on exit strategies in respect of the Group's investments.
Since its incorporation BAMA has assisted Infrastructure India HoldCo in identifying a number of potential investments in Indian infrastructure assets and has also assisted in completing investments in the Shree Maheshwar Project and the Lebad-Jaora Project, summary details of which are set out in Part I of this document.
In addition to a number of directors resident in Mauritius, the management team of BAMA comprises Gary Neville, Nimar Sehmi, Tim Cavanagh and Natalia Poupard. The team is headed by Gary Neville, who was previously a main board director of John Laing plc, and was responsible for managing and growing the infrastructure assets of John Laing plc - one of the largest publicly quoted infrastructure investors in the UK, before it was acquired by Henderson Infrastructure HoldCo Limited in December 2006 for just over £1 billion. John Laing plc delivered approximately a 45 per cent. IRR (internal rate of return) for investors from October 2001 to the date of its acquisition. Nimar Sehmi was a senior portfolio manager at John Laing plc for four years prior to joining BAMA, being responsible for managing and reporting the portfolio valuation to internal and external stakeholders. Tim Cavanagh was formerly COO for Kaupthing Bank's Global Investment Banking activities having been appointed in February 2007 and prior to that, held various positions during a nine year career at Deutsche Bank. Natalia Poupard was previously a senior analyst at John Laing plc, with over six years of banking and PPP/PFI experience.
In terms of strategic partners, BAMA has a strong network of contacts in India, derived in part through BCR, and, with its management team, has been active in the Indian market since early 2007 and has developed a considerable pipeline of potential investment opportunities for the Company.
BAMA has entered into an agreement with Cornerstone, a subsidiary of BCR for the provision of certain services to assist BAMA in meeting its obligations under the Investment Advisory Agreement. As BCR will remain involved with the Enlarged Group following the Acquisition, the Enlarged Group will continue to benefit from its relationship with BCR. Further details of the agreement with Cornerstone are set out in paragraph 4.3 of Part III of this document.
BCR is an independent financial services firm and is focused on Indian real estate and infrastructure asset management. BCR has specific experience in the infrastructure market in India and a network of contacts across the country. It has an established track record of deploying capital in India for large international investors. BCR has formed a joint venture with one of the top investment banks in the world to invest in industrial warehouses in India. BCR has demonstrated capability in originating deals in the infrastructure sector through its network of contacts. BCR's team is comprised of qualified and globally experienced professionals with experience in capital raising and M&A.
The gross assets of BAMA as at 30 September 2008 were estimated to be approximately £90,000 with a loss before tax of approximately £50,000 for the period from its incorporation to 30 September 2008, based on the management accounting information available for that period.