Kings Arms Yard Regulatory News (KAY)

20 May 2005 13:24

QUESTER VCT PLC20 May 2005NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTOAUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF IRELAND, SOUTH AFRICA OR THE UNITEDSTATES OF AMERICA OR TO US PERSONS. THIS ANNOUNCEMENT DOES NOT CONSTITUTE ORFORM PART OF AN OFFER TO SELL, PURCHASE, EXCHANGE OR SUBSCRIBE FOR ANYSECURITIES OR SOLICITATION OF SUCH AN OFFER IN THE UNITED STATES OF AMERICA ORANY OTHER JURISDICTION. THE SECURITIES REFERRED TO IN THIS ANNOUNCEMENT HAVENOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF1933, AS AMENDED, AND WILL NOT BE OFFERED OR SOLD IN THE UNITED STATES EXCEPTPURSUANT TO AN APPLICABLE EXEMPTION FROM REGISTRATION20 May 2005 RECOMMENDED PROPOSALS FOR A MERGER BETWEEN QUESTER VCT PLC, QUESTER VCT 2 PLCAND QUESTER VCT 3 PLC SummaryThe boards of Quester VCT plc ("Quester VCT"), Quester VCT 2 plc ("VCT2") andQuester VCT 3 plc ("VCT3") announce agreement on recommended proposals for themerger of Quester VCT, VCT2 and VCT3 on a formula asset value basis. The boardsof Quester VCT, VCT2 and VCT3 further announce that they are today writing totheir respective shareholders with full details of the proposed merger. The merger will be effected by means of a Scheme of Arrangement of VCT2 andVCT3 under section 425 of the Companies Act 1985. The scheme will be conditional, among other things, on the approval of QuesterVCT Shareholders, VCT2 shareholders and VCT3 shareholders and the approval ofthe Court and will result in Quester VCT, as the continuing company, beingsubstantially enlarged (the "Enlarged Quester VCT"). Expected summary timetable: Shareholder meeting of Quester VCT and Shareholder meetingsand court-convened meetings of VCT2 and VCT3 13 June 2005 Formula asset value calculation date 23 June 2005 Court hearing to consider sanctioning scheme 28 June 2005 Effective date of merger 29 June 2005 Dealings commence in the Enlarged Quester VCT shares 29 June 2005 IntroductionThe boards of Quester VCT, VCT2 and VCT3 today announce that they have agreedthe terms and conditions of a proposed merger of Quester VCT, VCT2 and VCT3(the "Merger") to form the Enlarged Quester VCT, which is to be effected by wayof a Scheme of Arrangement under section 425 of the Companies Act 1985 ("theScheme"). The boards of Quester VCT, VCT2 and VCT3 have written to theirshareholders with full details of the proposals and to convene the necessaryshareholder and court meetings. The Merger is subject, amongst otherconditions, to the approval of the shareholders of Quester VCT, VCT2 and VCT3.Quester VCT, VCT2 and VCT3 are all listed venture capital trusts, have similarinvestment objectives with a substantial proportion of their portfoliosoverlapping, and are each managed by Quester Capital Management Limited (the"Manager"), who will continue to manage the Enlarged Quester VCT but on revisedterms that include a reduced investment management fee. The Manager hasindicated its support for the Merger.The Merger will be effected on a formula asset value ("FAV") basis. Under theterms of the Merger, VCT2 shareholders and VCT3 shareholders will receive newshares in Quester VCT ("New VCT1 Shares"), the number of which will bedetermined according to detailed calculations set out in the Scheme. Inessence, for every ‚£1 worth of net asset value that VCT2 shareholders or VCT3shareholders currently have in VCT2 shares or VCT3 shares, they will receiveNew VCT1 shares with an equivalent net asset value, adjusted for the expensesof the Merger.Quester VCT will act as the continuing company following the Merger. It isexpected that, if all necessary conditions are met, the Merger will becomeeffective on 29 June 2005.The boards of Quester VCT, VCT2 (with the exception of Tom Scruby who, as adirector of both Quester VCT and VCT2, has not participated in therecommendations relating to the Merger of the board of VCT2) and VCT 3 arepleased to recommend the Merger to their respective shareholders.Benefits of the MergerUpon completion of the Merger, it is expected that the net assets of theEnlarged Quester VCT, after the costs of the Merger, will be ‚£53.8 million.The boards of Quester VCT, VCT2 and VCT3 consider that the principal benefitsof the Merger will be: * an increase in the range and diversity of the investment portfolio and an improved spread of risk and opportunity; * a reduction in the annual running costs as a percentage of net assets; and * the potential for a smoother flow of dividends as realisations are made from a wider portfolio. The Merger and its Financial ImpactThe Merger is to be effected by means of a Scheme of Arrangement under Section425 of the Companies Act 1985. As a result of the Merger, Quester VCT will actas the survivor company and will acquire VCT2's and VCT3's portfolios of assetspursuant to a transfer agreement to be entered into following the Merger.The Scheme involves the cancellation of VCT2's and VCT3's issued share capital(save for one VCT2 share and one VCT3 share to be issued to Quester VCT, whichwill, for technical reasons, remain in issue throughout the process) and theissue of new VCT2 shares and new VCT3 shares to Quester VCT in considerationfor which New VCT1 Shares will be issued to the former VCT2 shareholders andthe former VCT3 shareholders. VCT2 and VCT3 will become wholly-ownedsubsidiaries of Quester VCT.The actual FAVs are expected to be determined for the purpose of the Scheme onor shortly following 23 June 2005, but before the Scheme becomes effective(expected to be on 29 June 2005). It is therefore not possible until then tospecify the actual number of New VCT1 Shares to which the holders of VCT2shares and VCT3 shares respectively will become entitled.Costs of the ProposalsThe costs of the proposals relating to the Merger are estimated to amount toapproximately ‚£680,000 (inclusive of VAT). If the Merger is successful, thecosts of the Merger will be split between Quester VCT, VCT2 and VCT3 inproportion to their respective net assets (before deduction of such costs). Itis expected that the costs associated with the Merger will be recouped by theEnlarged Quester VCT from savings in annual running costs which, on anannualised basis, are estimated to amount to approximately ‚£500,000 (inclusiveof estimated savings in irrecoverable VAT).If the Merger should, for any reason, not successfully complete, each ofQuester VCT, VCT2 and VCT3 would bear its abort costs in respect of the Merger.Dividend PolicyFollowing the Merger, the board of the Enlarged Quester VCT intends to declarean interim dividend of 1.0p per Quester VCT share as a special dividend inSeptember 2005 which will be paid out of surplus liquid assets in the EnlargedQuester VCT following the Merger.Thereafter, the directors of the Enlarged Quester VCT intend to resume thepayment of dividends where possible, reflecting the progress of the venturecapital portfolio. In pursuing this policy, the directors will take account ofa number of factors including the realisation of investments, the availabilityof distributable reserves, the movement in net asset value per share and therequirements for investment in fresh venture capital opportunities and forreserving for follow-on investments. Subject to balancing these considerations,it is the intention to distribute a significant proportion of any gains oninvestment realisations.The New VCT1 Shares issued as part of the Merger will rank pari passu in allrespects with existing shares of Quester VCT and will be entitled to any futuredividends payable on the shares of Enlarged Quester VCT, including the specialdividend referred to above.This is an estimate of dividends only and is not intended to be, nor should itbe taken as, a forecast of profits. Changes to the BoardsIt has been agreed that if the Merger becomes effective, Tom Scruby will remainas initial Chairman and Tom Sooke will continue to be a Director. Following theMerger, the chairman of VCT2, Jock Birney, and the chairman of VCT3, DavidQuysner, will be appointed as directors of Quester VCT. It is proposed that ifthe Merger becomes effective the fees payable to the Directors will be set at ‚£15,000 per annum (‚£20,000 for the current Chairman) as compared with thecurrent ‚£12,000 per annum (‚£15,000 for the Chairman). A search is under way toidentify and recruit a new director for the Enlarged Quester VCT so as to add afresh aspect to the Board.Following the Merger, Simon Bakewell has agreed to retire from the Board ofQuester VCT, Howard Rudebeck, Tom Scruby and Peter Roberts will retire from theboard of VCT2 and George Hayter and Michael Brooke will retire from the boardof VCT3. Jock Birney will remain on the board of VCT2 with a representative ofthe Manager and David Quysner will remain on the board of VCT3 with arepresentative of the Manager for administrative purposes.Investment Management AgreementThe Enlarged Quester VCT will continue to be managed by the Manager. An amendedand restated management agreement has been entered into between Quester VCT andthe Manager which will, conditional upon the Merger becoming effective, amendthe existing management agreement principally as follows:¢â‚¬¢ the annual management fee will be reduced by 0.5% to 2.0% of net assets; and¢â‚¬¢ a new performance incentive arrangement will be put in place such that, ifthe Enlarged Quester VCT achieves an average annual dividend payout of 5% perannum over four years (the percentage being calculated by reference to theopening net asset value of the Enlarged Quester VCT at the effective date ofthe Merger), the Manager will receive a performance fee equivalent to 0.5% perannum of the opening net asset value (plus VAT if applicable) for such fouryear period, and if an average annual dividend payout of 10% per annum of theopening net asset value over four years is achieved, the Manager will receivean additional performance fee equivalent to 0.25% per annum (plus VAT ifapplicable) for such four year period, such performance fee in either event tobe paid in cash once the performance target has been met.The agreement will continue to be terminable by Enlarged Quester VCT or theManager on 12 months' notice given at any time.The Manager has agreed with VCT2 and VCT3 that, upon the Merger becomingeffective, its investment management and secretarial agreements with VCT2 andVCT3 will terminate without compensation.Transfer AgreementFollowing the Merger becoming effective, Quester VCT, VCT2 and VCT3 will enterinto a transfer agreement pursuant to which Quester VCT will agree to acquireand VCT2 and VCT3 will agree to transfer their investment portfolio interestsand any other net assets (including cash), subject to any necessary consents,waivers of pre-emption rights and other requisite documents being entered intoor obtained. Transfers of individual investments or assets to Quester VCT maytake place as and when such consents, waivers and other requisite documents inrelation to those investments or assets have been entered into or obtained.Transfers under the transfer agreement may be made by means of a distributionin specie by VCT2 and VCT3 to Quester VCT or for cash. Any cash considerationfor the assets acquired by Quester VCT is intended to be left outstanding as aninter-company loan. No part of this consideration for these transactions willbe payable to shareholders of the Enlarged Quester VCT.Shareholder meetingsGeneral meetings of Quester VCT, VCT2 and VCT3 shareholders and court convenedmeetings of VCT2 and VCT3 shareholders will be held on 13 June 2005 in orderfor shareholders to consider resolutions to approve the Merger. The Mergerrequires the approval of the shareholders of all three companies at therelevant meetings.Illustrative Merger TermsThe actual FAVs are expected to be determined for the purpose of the Scheme onor shortly following 23 June 2005, but before the Scheme becomes effective(expected to be on 29 June 2005). It is therefore not possible until then tospecify the actual number of New VCT1 Shares to which the holders of VCT2shares and VCT3 shares will become entitled.Using the figures in the audited accounts for the financial year ended 28February 2005 Quester VCT's FAV would be 43.54p per Share, VCT2's FAV would be45.16p per VCT2 Share and VCT3's FAV would be 43.03p per VCT3 Share. Forillustrative purposes only, based on these FAVs, a VCT2 shareholder wouldreceive 1,037 New VCT1 Shares for every 1,000 VCT2 Shares held and a VCT3shareholder would receive 988 New VCT1 Shares for every 1,000 VCT3 shares held.The total net assets of the Enlarged Quester VCT would be approximately ‚£53.8million. The aggregate value of the New VCT1 Shares to be issued to VCT2shareholders and VCT3 shareholders (if the Merger was being effected inmonetary terms) would be approximately ‚£39.3 million. The actual number of NewVCT1 Shares issued will depend on the value of assets and liabilities ofQuester VCT, VCT2 and VCT3 as at 28 February 2005 adjusted as provided in theScheme. Conditions and approvalsThe conditions which need to be satisfied (or waived, if applicable) for theScheme and the Merger to be implemented are set out below: 1. The Merger is conditional upon the Scheme becoming unconditional and becoming effective by not later than 31 December 2005 or such later date as Quester VCT, VCT2 and VCT3 and the Court may agree. 2. The Scheme will be conditional upon: 3. a. approval of the Scheme by a majority in number representing at least three-fourths in value of the holders of the VCT2 Shares present and voting, either in person or by proxy, at the VCT2 Court convened meeting; b. approval of the Scheme by a majority in number representing at least three-fourths in value of the holders of VCT3 Shares present and voting, either in person or by proxy, at the VCT3 Court convened meeting; c. the resolution required to implement the Scheme and the associated reduction of capital being passed at the VCT2 extraordinary general meeting; d. the resolution required to implement the Scheme and the associated reduction of capital being passed at the VCT3 extraordinary general meeting; e. the resolution to approve the Merger and to authorise the allotment of New VCT1 Shares pursuant to the Scheme being passed at the Quester VCT annual general meeting; f. (i) the admission to the Offical List of the New VCT1 Shares becoming effective in accordance with the Listing Rules or the UK Listing Authority agreeing to admit such shares to the Offical List and (ii) the admission to trading of the New VCT1 Shares becoming effective in accordance with the rules of the London Stock Exchange or the London Stock Exchange agreeing to admit such shares to trading; g. no notice having been received by Quester VCT before close of business on the Scheme Record Date from the Inland Revenue which indicates that VCT2 and VCT3 may not remain approved as venture capital trusts pursuant to the VCT Rules (as defined); or h. the sanction (with or without modification) of the Scheme and confirmation of the reductions of capital involved therein by the Court, an office copy of the Court order being delivered for registration to the Registrar of Companies in England and Wales and registration of the Court order confirming the reductions of capital involved in the Scheme with the Register of Companies in England and Wales. 3. Subject as stated in 4 below, the Merger will be conditional upon, and accordingly the necessary action to make the Scheme effective will not be taken, unless the following conditions are satisfied or waived on or prior to the Scheme Record Date (as defined in the Scheme) as referred to below: 4. a. no notification having been received by any of Quester VCT, VCT2 and VCT3 from the Office of Fair Trading in the United Kingdom indicating that it is the intention of the Secretary of State for Trade and Industry to refer the proposed Merger or any matter arising therefrom or related thereto to the Competition Commission; b. no governmental authority, regulatory body, court or other person having instituted or threatened any action, proceedings or investigation, or enacted or proposed any statute, regulation or order, which would or might make the implementation of the Scheme and the other steps involved in the Merger void or illegal, or restrict or prohibit the implementation of the Merger, or impose material additional conditions in relation to that implementation, or otherwise adversely affect in any material respect the business of Quester VCT, VCT2 or VCT3; c. since 28 February 2005, being the date to which the latest audited report and accounts of Quester VCT, VCT2 and VCT3 were made up, or as disclosed in the latest audited report and accounts of Quester VCT, VCT2 or VCT3 (as the case may be): a. there being no material pending or threatened litigation, arbitration proceedings, prosecution or other legal proceedings against Quester VCT, VCT2 or VCT3; and b. i. there having been no material adverse change in the business, financial or trading position or prospects or profits of Quester VCT, VCT2 or VCT3, in either case, which cannot be accounted for through an adjustment to therelevant FAV pursuant to the Scheme. 4. Quester VCT, VCT2 and VCT3 acting together, may waive all or any of the conditions contained in 3(a), (b) and (c) in whole or in part on or before the Scheme Record Date (as defined in the Scheme). It is anticipated that the Scheme will become effective on 29 June 2005. If ithas not become effective by 31 December 2005 (or such later date as the Courtmay allow and each of Quester VCT, VCT2 and VCT3 may agree), the Mergerproposals will lapse, the Merger will not take place, and VCT2 shareholders andVCT3 shareholders will remain shareholders in VCT2 and VCT3 respectively, whichwould then continue as independent listed companies.On 1 July 2005, new listing rules published by the UK Listing Authority (the"New Listing Rules") will come into effect, which will apply in respect of alladmissions to the Official List of the UK Listing Authority with effect from 1July 2005. If the effective date of the Scheme and admission of the New VCT1Shares does not occur before 1 July 2005, admission of the New VCT1 Shares willbe delayed while Quester VCT prepares listing particulars relating to theadmission of the New VCT1 Shares which comply with the requirements of the NewListing Rules.Documents and ApprovalsVCT2 and VCT3 shareholders will receive a circular in relation to the scheme ofarrangement under section 425 of the Companies Act 1985, together with ListingParticulars in respect of the New VCT1 Shares to be issued in connection withthe Merger.The approval of VCT2 Shareholders will be sought at a court-convened meetingand an extraordinary general meeting, each of which will be held on 13 June2005.The approval of VCT3 Shareholders will be sought at a court-convened meetingand an extraordinary general meeting, each of which will be held on 13 June2005.Quester VCT shareholders will also receive the Listing Particulars and acircular convening an annual general meeting to be held on 13 June 2005 atwhich Quester VCT shareholders will be invited to approve the Merger proposals,together with the usual business to be conducted at an annual general meetingof Quester VCT.Copies of the Listing Particulars and the circular of Quester VCT have beensubmitted to the UK Listing Authority and will shortly be available forinspection at the UK Listing Authority's Document Viewing Facility, which issituated at:Financial Services Authority25 The North ColonnadeCanary WharfLondon E14 5HS(Telephone number 020 7066 1000)EnquiriesQuester Capital Management Limited John Spooner 020 7222 5472 Andrew Holmes Martin Williams Nabarro Wells & Co. Limited Robert Lo 020 7710 7400 Nigel Atkinson AGM Corporate Finance LLP John Ayton 01223 422 390 Allan Treacy Noble & Company Limited Ben Thomson 0131 225 9677 John Philipsz 020 7763 2200 The directors of Quester VCT accept responsibility for the information relatingto Quester VCT and its directors contained in this document. To the best of theknowledge and belief of such directors (who have taken all reasonable care toensure that such is the case), the information relating to Quester VCT and itsdirectors contained in this document, for which they are solely responsible, isin accordance with the facts and does not omit anything likely to affect theimport of such information.The directors of VCT2 accept responsibility for the information relating toVCT2 and its directors contained in this document. To the best of the knowledgeand belief of such directors (who have taken all reasonable care to ensure thatsuch is the case), the information relating to VCT2 and its directors containedin this document, for which they are solely responsible, is in accordance withthe facts and does not omit anything likely to affect the import of suchinformation.The directors of VCT3 accept responsibility for the information relating toVCT3 and its directors contained in this document. To the best of the knowledgeand belief of such directors (who have taken all reasonable care to ensure thatsuch is the case), the information relating to VCT3 and its directors containedin this document, for which they are solely responsible, is in accordance withthe facts and does not omit anything likely to affect the import of suchinformation.Noble & Company Limited, Nabarro Wells & Co. Limited and AGM Corporate FinanceLLP are acting exclusively for Quester VCT, VCT2 and VCT3 respectively and forno one else in connection with the matters described herein and will not beresponsible to anyone other than Quester VCT, VCT2 and VCT3 respectively forproviding the protections afforded to clients of Noble & Company Limited,Nabarro Wells & Co. Limited and AGM Corporate Finance LLP, nor for providingadvice in relation to the matters described herein.END81915/doc/2.5announcement/draft2ENDQUESTER VCT PLC