Publication of Circular and Notice of General Meeting
Caledonia Investments plc (“Caledonia” or “the Company“) announces a proposal to refresh the Company’s existing authority to make market purchases of Ordinary Shares and at the same time seek approval from Independent Shareholders of a waiver of the mandatory offer requirements set out in the Takeover Code that may otherwise apply to the Concert Party (as defined below), which does not include a cap on the percentage of the Ordinary Shares that the Concert Party can hold following the exercise by the Company of the new Authority to Make Market Purchases.
The following documents will today be posted or otherwise made available to shareholders:
- a circular containing a notice of a general meeting (the “General Meeting”) to be held at Cayzer House, 30 Buckingham Gate, London SW1E 6NN at 2.00pm on 18 December 2024 and outlining further information on the proposals (the “Circular”); and
- a form of proxy (the “Proxy”).
Background to the Proposals
The Company’s aim is to generate long-term compounding real returns that outperform inflation by 3 per cent. to 6 per cent. over the medium to long term, and the FTSE All-Share index over 10 years. Whilst the Company’s approach has delivered long-term real returns with an average NAVTR of 9.6 per cent. per annum over the 10 years to 30 September 2024, the investment trust sector continues to face a number of headwinds which have weighed on the share price performance of trusts across the market, including the Company’s. As at 31 October 2024, the Ordinary Shares traded in the market at a 39.4 per cent. discount to the Net Asset Value per Ordinary Share. The Board believes the Company’s share price undervalues the Company’s high quality and diverse portfolio, its long-term track record and its future prospects.
Addressing the discount is a priority for the Board and the Company’s management team. Alongside continuing to deliver long-term real returns, to help ensure the Company’s investment proposition is recognised by the market, over the past year the Company has improved disclosure, expanded press engagement, revitalised its approach to investor relations and focused on increasing engagement with retail investors. These efforts will continue to be enhanced and, among other things, will include a series of events spotlighting each of the Company’s investment pools, commencing with Private Capital in early 2025.
The Board believes that making market purchases of Ordinary Shares at a significant discount to Net Asset Value per Ordinary Share is a good investment and capital allocation decision, as it is accretive to Net Asset Value per Ordinary Share and therefore in the best interests of Ordinary Shareholders as a whole. As a result of recent market purchases of Ordinary Shares by the Company, the Concert Party’s percentage of shares carrying voting rights of the Company as at the Latest Practicable Date was approximately 49.49 per cent. Accordingly, the Company’s ability to buy back any further shares is severely constrained by the existing cap of 49.9 per cent. on the Concert Party’s current maximum potential percentage interest (as detailed below).
Following regular discussion with Independent Shareholders, the Board has been carefully considering the possibility of taking steps to ensure that the Company can continue to make market purchases of Ordinary Shares. This proposal seeks to remove the cap constraining the Company’s ability to buy back any further shares.
Overview of the Proposals
Under Rule 9 of the Takeover Code, when any person, together with persons acting in concert with that person, is interested in shares carrying in aggregate at least 30 per cent., but does not hold shares carrying more than 50 per cent., of the voting rights of a company which is subject to the Takeover Code, and such person or any person acting in concert with that person increases the percentage of voting rights in which that person is interested, such person is normally required to make an offer to all the remaining shareholders to acquire their shares. Rule 37 of the Takeover Code extends the principle in Rule 9 of the Takeover Code so that, when a company purchases its own shares, any resulting increase in the percentage of shares carrying voting rights which a person or group of persons acting in concert is interested will be treated as an acquisition for the purposes of Rule 9.
Historically, the Company has requested from the Panel on Takeovers and Mergers (the “Panel“) and Independent Shareholders at its annual general meeting the approval of a waiver from this obligation (a “Rule 9 Waiver“) in connection with its ordinary course annual authority to make market purchases of Ordinary Shares. It has requested this Rule 9 Waiver on the basis that the maximum percentage of Ordinary Shares in which the Concert Party could become interested as a result of the Company’s market purchases of Ordinary Shares will not exceed 49.9 per cent.
As at the Latest Practicable Date, the Concert Party’s interest in Ordinary Shares represented approximately 49.49 per cent. of the shares carrying voting rights of the Company. Accordingly, the Company’s ability to buy back any further shares is severely constrained by the existing cap on the Concert Party’s maximum potential percentage interest.
Having consulted with the Panel, the Company is seeking from Independent Shareholders the approval of a new Waiver Resolution that does not include a 49.9 per cent. cap on the Concert Party’s maximum interest in Ordinary Shares. This would allow optionality for the Company to make additional market purchases of Ordinary Shares when the Board believes it is in the best interests of the Company to do so.
The Concert Party has confirmed that it remains fully supportive of the Company’s management and has no intention to make any changes to the future business or the strategic direction of the Company. If this proposal is approved by a majority of Independent Shareholders, it is not expected to affect the running of the Company, its inclusion in the FTSE 250 index or remove any rights of an Ordinary Shareholder. The Board and the management team would remain focused on the same objective of delivering long-term, compounding returns for all Ordinary Shareholders.
Alongside the Waiver Resolution, the Board is seeking authorisation from Ordinary Shareholders for the Company to purchase up to a maximum of 2,681,322 ordinary shares of 5p each, or such other number of ordinary shares as may represent a total nominal value of £134,066, which represents approximately 5 per cent. of the issued Ordinary Shares as at the Latest Practicable Date. The Authority to Make Market Purchases will only be utilised if the Board believes that purchases of Ordinary Shares will be in the best interests of Caledonia and Ordinary Shareholders as a whole and will result in an increase in Net Asset Value per Ordinary Share. In considering whether to exercise the Authority to Make Market Purchases, the Board will take into account both the longer-term investment opportunities available to Caledonia and any discount at which the Ordinary Shares are trading in the market relative to the Net Asset Value per Ordinary Share.
The Authority to Make Market Purchases and the Waiver Resolution are each conditional upon the other being approved.
The Circular explains the resolutions to be proposed at the General Meeting and why the Non-Concert Party Directors are unanimously recommending that Independent Shareholders vote in favour of the Waiver Resolution.
Shareholder consultation
The Company has carried out a consultation exercise with a significant proportion of Independent Shareholders who have historically voted at previous general meetings. During this process, the possibility of seeking approval of a new Waiver Resolution that does not include a 49.9 per cent. cap on the Concert Party’s maximum interest in Ordinary Shares was discussed.
Summary
The Board believes that it is in the best interests of the Company and Ordinary Shareholders as a whole to ensure that the Company is able to continue to make market purchases of Ordinary Shares. Therefore, the Board is proposing resolutions to: (a) authorise the Company to purchase up 5 per cent. of the issued Ordinary Shares as at the Latest Practicable Date; and (b) approve a new Waiver Resolution that does not include a 49.9 per cent. cap on the Concert Party’s maximum interest in Ordinary Shares.