9 June 2023
The Investment Company plc
(the “Company”)
LEI: 2138004PBWN5WM2XST62
Update regarding Proposals
Further to its announcement on 30 March 2023, the Board of The Investment Company plc is pleased to announce that the Company shortly expects to publish a circular addressed to the Company’s Shareholders to explain the rationale, and seek the required Shareholder approval, for the proposed:
(i) appointment of Chelverton Asset Management Limited (“Chelverton“) as external investment manager to the Company;
(ii) amendment to the Company’s investment objective and policy in order to maximise capital growth over the long term by investing in high quality Small and Mid-cap Companies listed on the Main Market, AQSE and AIM;
(iii) Tender Offer for up to 100% of the Company’s issued share capital so as to provide those Shareholders who wish to do so with a liquidity opportunity at a price reflective of the NAV of the Company;
(iv) Issue, comprising a Placing, Offer for Subscription and Intermediaries Offer, of up to 6 million Ordinary Shares to allow existing Shareholders and new investors to acquire Ordinary Shares in the capital of the Company;
(v) appointment of David Horner as a non-independent non-executive Director;
(vi) amendment to the Company’s articles of association in relation to the timing of the Company’s next continuation vote;
(vii) sub-division of the Company’s Ordinary Shares with a nominal value of £0.50 each into ordinary shares with a nominal value of £0.10 each, following Completion of the Tender Offer and the Issue; and
(viii) cancellation of the amounts standing to the credit of the Company’s share premium account and capital redemption reserve in order to increase the Company’s distributable reserves to fund the Tender Offer in full,
(together, the “Proposals“).
The Company is also intending to publish a Prospectus in connection with the Proposals.
The Proposals are subject to Shareholder approval and the Directors intend to convene a general meeting at which 3 resolutions will be proposed. Resolutions 1 and 2 will seek approval for the cancellation of the Company’s share premium account and capital redemption reserve. Resolution 3 will seek approval for the amendment to the Company’s investment objective, the amendment to the Company’s articles of association, the repurchase by the Company of Ordinary Shares pursuant to the Tender Offer, the allotment of Ordinary Shares otherwise than on a pre-emptive basis for the purposes of the Issue and the subsequent sub-division of Ordinary Shares. As the Proposals set out in Resolution 3 will be inter-conditional, Shareholder approval is being sought by way of a single resolution. The Proposals are also subject to the satisfaction of certain conditions including, in particular, the “Minimum Participation Condition” (being that the Company receives valid tender requests pursuant to the Tender Offer up to an amount which, taken together with valid commitments received by the Company to purchase or subscribe for Ordinary Shares pursuant to the Placing, would result in the Company having sufficient distributable reserves to implement the Tender Offer). The Minimum Participation Condition will be calculated based on the Company’s position immediately following the completion of the Proposals and therefore following the Company’s proposed cancellation of its share premium account and capital redemption reserve (if approved by Shareholders and the Court).
If Shareholder approval is not obtained and/or the conditions (including the Minimum Participation Condition) are not satisfied, the Proposals will not proceed and the Company is expected to be wound up at or before the Company’s 2023 annual general meeting as outlined in the Company’s half-year report for the period ended 31 December 2022.
A further announcement will be made upon publication of the Circular and Prospectus.
Background to the Proposals
On 4 November 2020, Shareholders approved a new investment objective to protect the purchasing power of the Company’s capital in real terms. Following this, the Board disposed of the Company’s portfolio of preference shares, fixed-income securities and other income-oriented investments and made investments in companies which demonstrated good financial health and avoided unnecessary risk. The remainder of the Portfolio was kept in the form of gold bullion.
Whilst the Board is satisfied with the Company’s performance since 2020, it has, however, been mindful for some time of the size of the Company, together with the illiquid nature of the Ordinary Shares, and the impact of these factors on the discount to NAV at which the Ordinary Shares trade, which has persisted despite the performance. Accordingly, the Board announced in February 2023 that it was actively considering credible opportunities to grow the size and increase the liquidity of the Company while also providing an immediate complete liquidity option for all Shareholders who wish to realise their shareholding.
Benefits of the Proposals
The Proposals are the result of a detailed review of the options available to the Company. The Board believes that the Proposals will provide Shareholders with the opportunity to remain in a vehicle managed by an award-winning asset manager with a strong track record of creating value for its investors whilst increasing investment funds size. For those Shareholders who wish to realise their investment, the Proposals enable Shareholders to receive a full cash alternative (through a process which is comparable in terms of cost, but more timely, than a liquidation of the Company).
In particular, the Proposals are intended to offer the following benefits to Shareholders:
· the option to continue their investment in the Company and to benefit from the expertise of Chelverton, an award-winning asset manager with a strong record of creating value for its investors, as the Proposed Manager of the Company with a new investment objective and policy;
· the expertise of David Horner, the founder of Chelverton, who has 30 years’ experience specialising in UK small to mid-cap quoted investments and SME unquoted investments, as a member of the Board;
· a medium-term objective of growing the size of the Company, which it is intended will increase the liquidity of the Ordinary Shares and narrow the discount at which the Ordinary Shares currently trade; and
· the opportunity for Shareholders who no longer wish to remain invested in the Company to realise their investment, in whole or in part, at the Tender Price.
In light of the above, the Board considers that implementing the Proposals is in the best interests of the Company and the Shareholders as a whole.
Appointment of Chelverton Asset Management Limited
Conditional on, and with effect from, Completion of the Tender Offer, the Company has appointed Chelverton to provide portfolio advice and day-to-day portfolio management services, including the origination and evaluation of investment opportunities and the execution of transactions.
Chelverton commenced trading in 1998 and was formed by David Horner, who has considerable experience of analysing investments and working with smaller companies. Chelverton is largely owned by its employees. Chelverton is a specialist fund manager, focused on UK Small and Mid-cap Companies, and has a successful track record.
As at the Latest Practicable Date, the Proposed Manager had total funds under management of approximately £1.53 billion, including two investment trusts and three OEICs.
The MI Chelverton UK Equity Growth Fund (an open-ended fund) has a similar investment policy to the Company’s proposed investment policy. MI Chelverton UK Equity Growth Fund looks to achieve long-term capital growth by investing primarily in a portfolio of UK Small and Mid-cap Companies listed on the Main Market and AIM.
The following table shows the investment performance record of the MI Chelverton UK Equity Growth Fund NAV total return data relative to IA UK All Companies funds (being funds which invest at least 80 per cent. of their assets in UK equities with the primary objective of achieving capital growth) and the Numis Smaller Companies Plus AIM Ex Investment Trusts (which covers all stocks making up the smallest 10 per cent. by value of the UK fully listed equity market excluding investment trusts).
| 1 year | 3 years | 5 years | Since launch | |
| Chelverton UK Equity Growth Fund | -8.0% | 31.9% | 49.5% | 222.1% |
| Numis Smaller Companies plus AIM ex Inv Trust | -7.5% | 17.2% | 12.0% | 65.3% |
| IA Sector – UK All Companies | 3.1% | 19.8% | 19.7% | 64.6% |
| Sector ranking | 203/222 | 34/214 | 7/204 | 1/183 |
| Quartile | 4 | 1 | 1 | 1 |
Changes to the investment objective and policy
In connection with the appointment of the Proposed Manager and its strategy, the Board proposes to change the investment objective and policy, in order to maximise capital growth over the long term by investing in high quality quoted Small and Mid-cap Companies.
A full comparison of the existing and proposed investment objectives and policies of the Company will be set out in the Circular.
The amendment to the Company’s investment objective and policy requires the approval of Ordinary Shareholders by ordinary resolution in accordance with the Listing Rules. As the Proposals (other than the cancellation of the Company’s share premium account and capital redemption reserve) are inter-conditional, Shareholder approval for the changes to the investment objective and policy will be sought by tabling Resolution 3 at the General Meeting, which will be proposed as a special resolution.
Details of the Tender Offer
The Company is proposing a Tender Offer to be made for up to 100 per cent. of the Ordinary Shares in issue on the Tender Offer Record Date (excluding treasury Ordinary Shares) at the Tender Price to enable those Qualifying Shareholders who wish to realise their investment in the Company to do so (in whole or in part).
The price at which Qualifying Shareholders may tender their Ordinary Shares is not known at this date and will be calculated based on the Post-Completion NAV once the results of the Issue and the Tender Offer are known. The Post-Completion NAV will be calculated using the NAV on the Calculation Date, adjusted by adding: (i) the proceeds of new Ordinary Shares issued pursuant to the Placing, Offer for Subscription and Intermediaries Offer; less (ii) any payment made by the Company to repurchase Ordinary Shares pursuant to the Tender Offer; and less (iii) the Transaction Costs. The Tender Price will be equal to the Post-Completion NAV divided by the number of Ordinary Shares in issue following Completion of the Tender Offer and the Issue.
The Transaction Costs will be shared amongst the pools of capital value represented by Tendering Shareholders, Remaining Shareholders and Incoming Shareholders, each as a proportion of the NAV on the Calculation Date.
The Tender Price will be determined as at the Calculation Date, which is expected to be 18 July 2023. As at the close of business on 7 June 2023 (being the Latest Practicable Date), the Tender Price would have been 349.80 pence (rounded to two decimal places) as at that date, on the assumption that 70 per cent. of existing Shareholders participate in the Tender Offer and demand for Ordinary Shares pursuant to the Issue equates to £10 million.
As at the close of business on 7 June 2023 (being the Latest Practicable Date), the mid-market price of the Ordinary Shares on the London Stock Exchange was 340.00 pence and the most recently announced NAV per Ordinary Share was 357.06 pence (rounded to two decimal places). Accordingly, the Tender Price would have represented a premium of 2.9 per cent. to the mid-market price on such date and a discount of 2.0 per cent. to the most recently announced NAV.
None of the continuing Directors intend to tender of their Ordinary Shares pursuant to the Tender Offer.
The Tender Offer is not being made to Shareholders who are resident in, or citizens of, Restricted Territories. In particular, Restricted Shareholders are being excluded from the Tender Offer in order to ensure compliance with applicable local laws relating to the implementation of the Tender Offer.
Details of the Issue
The Company is implementing the Issue of up to 6 million Ordinary Shares by way of a Placing, an Offer for Subscription and an Intermediaries Offer.
The price at which the Company will issue new Ordinary Shares pursuant to the Issue will be the NAV per Ordinary Share (before deducting any accrued or paid Transaction Costs) on the Calculation Date. The Issue Price will be notified to Shareholders and investors by way of RIS as soon as is practicable after the Calculation Date.
The Issue is being undertaken in conjunction with the Tender Offer. Pursuant to the Tender Offer, where there are investors willing to acquire Ordinary Shares, all or some of the Ordinary Shares which are the subject of acceptances by Tendering Shareholders will not be repurchased by the Company pursuant to the Repurchase Agreement but instead shall be sold to Incoming Shareholders pursuant to the Placing by way of a Matched Bargain Facility. To the extent that the Company receives commitments from investors to acquire Ordinary Shares under the Placing in excess of the number of Ordinary Shares available to purchase from Tendering Shareholders, such excess demand shall be satisfied by the issue of new Ordinary Shares. Investors may also subscribe for new Ordinary Shares pursuant to the Offer for Subscription and/or the Intermediaries Offer.
The Directors intend to use the net proceeds of the Issue to acquire investments in accordance with the Company’s proposed new investment objective and investment policy. It is expected that the net proceeds of the Issue will be substantially invested within one month of Admission.
Proposed Manager Participation
The Proposed Director and the following employees of the Proposed Manager or members of their family intend to subscribe for Ordinary Shares with an aggregate value of approximately £1.5 million pursuant to the Issue
Smaller Related Party Transaction
David Horner’s participation will be regarded as a smaller related party transaction under the Listing Rules and a separate announcement will be made upon completion of the Issue.
Notice of GM
A notice convening a General Meeting of the Company will be set out at the end of the Circular. The General Meeting has been convened for 11.00 a.m. on 26 June 2023 at the offices of Stephenson Harwood LLP, 1 Finsbury Circus, London, EC2M 7SH.
Further details of the Proposals will be set out in the Prospectus. When published, a copy of the Prospectus will be submitted to the National Storage Mechanism and will shortly thereafter be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism . A copy of the Prospectus and Circular will, when published, be available on the Company’s website at https://theinvestmentcompanyplc.co.uk/. Full details of the Terms and Conditions of the Tender Offer and the Issue will be made available in the Circular and the Prospectus.
Capitalised terms used but not defined in this announcement shall have the meanings set out in the Prospectus.
Expected Timetable
| Issue | 2023 |
| Publication of the Circular, the Prospectus and the Issue opens | on or around 9 June |
| Latest time and date for receipt of Forms of Proxy for the General Meeting | 11.00 a.m. on 22 June |
| General Meeting | 11.00 a.m. on 26 June |
| Latest time and date for receipt of Tender Forms and TTE Instructions in CREST for the Tender Offer | 11.00 a.m. on 14 July |
| Latest time and date for receipt of completed applications in respect of the Offer for Subscription | 11.00 a.m. on 14 July |
| Latest time and date for receipt of completed applications from the Intermediaries in respect of the Intermediaries Offer | 1.00 p.m. on 14 July |
| Latest time and date for commitments under the Placing | 5.00 p.m. on 14 July |
| Tender Offer Record Date to participate in the Tender Offer | 6.00 p.m. on 14 July |
| Announcement of the results of the Tender Offer and the Issue (subject to the passing of the Resolutions at the General Meeting) | 17 July |
| Calculation Date | 6.00 p.m. on 18 July |
| Announcement of the Tender Price and Issue Price and confirmation of the cancellation of the share premium account and capital redemption reserve, if approved, by the Court | 19 July |
| Repurchase of Ordinary Shares pursuant to the Tender Offer and issue of Ordinary Shares pursuant to the Issue | 26 July |
| Admission and dealings in new Ordinary Shares commence | 8.00 a.m. on 26 July |
| CREST accounts credited with uncertificated Ordinary Shares in respect of the Issue | 26 July |
| Where applicable, definitive Ordinary Share certificates in respect of the Ordinary Shares issued pursuant to the Issue despatched by post in the week commencing* | 31 July |
| * Underlying Applicants who apply to Intermediaries for Ordinary Shares under the Intermediaries Offer will not receive Ordinary Share certificates. | |
The dates and times specified in the timetable above are subject to the passing of the Resolutions at the General Meeting and the satisfaction of the Continuation Conditions and are subject to change without further notice. All references to times in this Prospectus are to London time unless otherwise stated. Any changes to the expected Issue timetable will be notified by the Company through a Regulatory Information Service.
Enquiries
| The Investment Company Ian Dighé, Chairman | +44 (0) 20 3934 6630 info@theinvestmentcompanyplc.co.uk |
| Singer Capital Markets – Corporate Broker | +44 (0)20 7496 3000 |
| James Moat / Alex Bond / James Fischer | |
| ISCA Administration Services LimitedCompany Secretary | +44 (0) 1392 487056 |