6 Kean Street
London WC2B 4AS
Tel +44 (0)20 3457 0000
Fax +44 (0)20 3457 0009
For immediate release 18 October 2016
Sale of 100% of the investment portfolio and wind down of the Company
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION
SVG Capital signs asset transfer deed with HarbourVest for the sale of its investment portfolio
· The Company has signed an asset transfer deed for the sale of 100% of its investment portfolio (the "Asset Purchase Transaction") to HarbourVest Structured Solutions III L.P. ("HarbourVest Bidco") for approximately £807 million1
§ This represents a 0.6% premium to the £802 million value of the investment portfolio as at 31 July 2016
§ Including the Company's current net cash resources2, and net of all estimated costs3, this equates to an approximate aggregate value per share of 715p4
§ The Asset Purchase Transaction is conditional on HarbourVest Bidco announcing that its final cash offer of 650p a share for the Company (the "Offer") has lapsed
· The Board expects approximately £1,118 million5 to be returned to shareholders through a series of tender offers (the "Tender Offer Series") and the winding up of the Company. It is currently expected that the following amounts will be returned via the Tender Offer Series6:
§ Up to £350 million tender offer before year end at 715p per share
§ Up to £350 million tender offer in February 20177 at 715p per share
§ Up to £350 million tender offer in March/April 2017 at 715p per share
§ Final capital distribution in the winding up process expected to be in Q2/Q3 2017
· HarbourVest Bidco has committed to announce today that it will not be extending its Offer for the Company beyond 1.00pm today, which is accordingly expected to lapse at such time (provided the Offer has not become unconditional as to acceptances at or before such time)
· The Board has throughout this process been focused on maximising value for shareholders. The Asset Purchase Transaction and wind down of the Company will generate superior value when compared with the final 650p a share cash Offer from HarbourVest Bidco and the previously announced proposed sale of the investment portfolio to funds managed by Goldman Sachs Asset Management's Alternative Investments & Manager Selection Group (the "Goldman Sachs AIMS Group") and certain investment entities managed by Canada Pension Plan Investment Board ("CPPIB"), which equated to an approximate aggregate value per share of 680p
1As at 31 July 2016 and subject to adjustment for certain calls and distributions from 31 July 2016 to closing. At 14 October 2016, this adjustment is a decrease of £4m. HarbourVest Bidco is expected to fund the purchase price from its existing available capital. The Board expects the £17m direct investment in a UK software company, which was acquired after 31 July 2016 and announced in the interim results released on 16 September 2016, to be sold separately, with proceeds returned to shareholders through the Tender Offer Series
2£341m cash balances plus other assets less other liabilities is as at 14 October 2016 translated at foreign exchange rates on the same date
3Based on the Company's estimates of wind down costs of approximately £36m, including advisory fees, staff costs, tender offer costs, lease costs, non-utilisation fees, liquidation costs and other contingencies. In addition, aggregated break fees and costs of approximately £7m are payable to Pomona Capital and Pantheon Ventures and Goldman Sachs AIMS Group and CPPIB
4Based on 156,416,473 shares in issue on a fully diluted basis as at 31 July 2016 (as sourced from the Company's interim financial statements for the period to 31 July 2016, adjusted for subsequent buybacks)
5Calculated as the sum of £807m of proceeds from the sale of the investment portfolio; plus £341m of net cash (cash balances plus other assets less other liabilities) as at 14 October 2016; less £4m of net distributions from 31 July 2016 to 14 October 2016 (applying foreign exchange rates as at 14 October 2016); plus the £17m direct investment in a UK software company; less £36m of estimated wind down costs and £7m aggregated break fees and costs payable to Pomona Capital and Pantheon Ventures and Goldman Sachs AIMS Group and CPPIB. The final figure may be adjusted depending on gains/losses on the Company's £17m direct investment in a UK software company and other non-material residual assets
6Assuming the General Meeting is held prior to 15 December 2016 and the relevant shareholder approvals are obtained at that meeting
7Following the publication of special purpose accounts
· The Board has confirmed to HarbourVest Bidco that it will be recommending the Asset Purchase Transaction to shareholders, and no longer intends to recommend the previously proposed sale to Goldman Sachs AIMS Group and CPPIB
· Completion of the Asset Purchase Transaction will be conditional on the requisite shareholder approvals having been obtained, further details of which are set out in the appendix. Accordingly, the Company will be writing to shareholders shortly. HarbourVest Bidco has undertaken to vote in favour of the relevant shareholder resolutions, subject to applicable law and regulation
· The Board of SVG Capital, which has been so advised by J.P. Morgan Cazenove and Lazard as to the financial terms of the Asset Purchase Transaction, believes that the terms of the Asset Purchase Transaction are fair and reasonable. In providing their advice to the Board, J.P. Morgan Cazenove and Lazard have taken into account the Board's commercial assessments
Andrew Sykes, Chairman of SVG Capital commented: "Since HarbourVest Bidco's announcement of its final cash offer of 650p on 12 September 2016, the Board has pursued a number of options in order to maximise shareholder value. The Company has a high quality portfolio with real scarcity value and through this process a number of highly credible and seasoned private equity investors have made offers for some or all of the investment portfolio."
"The Board of SVG Capital is committed to delivering optimum value for all its shareholders. Accordingly, after careful consideration, we are recommending HarbourVest Bidco's asset purchase transaction to acquire the Company's investment portfolio, since we believe it provides the most compelling combination of value and certainty of deliverability of any of the proposals submitted to the Company."
"The SVG Capital management team, led by Lynn Fordham, has worked tirelessly to maximise shareholder value and on behalf of the Board, I would like to acknowledge the outstanding professionalism and hard work of the team."
"We will now seek to secure shareholder approval with minimal delay so that we can begin the process of returning cash to shareholders as soon as possible."
Disclosure pursuant to Rule 2.6(e) of the City Code on Takeovers and Mergers (the "Code")
An unnamed potential offeror previously referred to in prior announcements of the Company (the "Potential Offeror") has confirmed to the Company, pursuant to Rule 2.6(e) of the Code, that it does not intend to make an offer for the Company. Accordingly, the Potential Offeror will be bound by the restrictions in Rule 2.8 of the Code to the extent required by that Rule. The Potential Offeror has consented to the inclusion of these confirmations in this announcement. Accordingly, if HarbourVest Bidco announces that the Offer has lapsed, the offer period in respect of the Company will end upon that announcement.
For further information please contact:
Alice Kain or Mervyn Douglas
020 3457 0000
J.P. Morgan Cazenove
Conor Hillery, Mike Collar, Dwayne Lysaght or Adam Laursen
020 7777 2000
Melanie Gee, Nicholas Millar or Denis Martin
020 7187 2000
020 7260 1000
Neil Bennett or Tom Eckersley
020 7379 5151
About SVG Capital
SVG Capital invests across the private equity asset class, through the cycle, to access the most compelling investment opportunities. SVG Capital is a long-term scale investor, with a focused investment strategy, and its core portfolio offers shareholders exposure to eight leading private equity managers across Europe and the U.S. The value of the assets which are the subject of the Asset Purchase Transaction was £763 million as at 31 January 2016 and £802 million as at 31 July 2016. Profit before tax in respect of such assets was £92 million for the 12 months ended 31 January 2016 and £120 million for the six months ended 31 July 20168. SVG Capital's Chief Executive Officer is Lynn Fordham.
This announcement has been released by the Company on behalf of the Board. It is for information purposes only, and is not intended to and does not constitute, or form part of, an offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of any securities, or the solicitation of any vote or approval in any jurisdiction.
J.P. Morgan Limited, which conducts its UK investment banking business as J.P. Morgan Cazenove ("J.P. Morgan Cazenove"), is authorised and regulated in the United Kingdom by the Financial Conduct Authority. J.P. Morgan Cazenove is acting as financial adviser exclusively for SVG Capital and no one else in connection with the matters set out in this announcement and will not regard any other person as its client in relation to the matters set out in this announcement and will not be responsible to anyone other than SVG Capital for providing the protections afforded to clients of J.P. Morgan Cazenove, nor for providing advice in relation to any matter referred to herein.
Lazard & Co., Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively as financial adviser to SVG Capital and no one else in connection with the matters referred to in this announcement and will not regard any other person as its client in relation to the matters referred to in this announcement and will not be responsible to anyone other than SVG Capital for providing the protections afforded to clients of Lazard & Co., Limited, nor for providing advice in relation to any matter referred to herein. Neither Lazard & Co., Limited nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard & Co., Limited in connection with any statement contained herein or otherwise.
Numis Securities Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority is acting as joint financial adviser and broker exclusively for SVG Capital and no one else in connection with the matters set out in this announcement and will not regard any other person as its client in relation to the matters set out in this announcement and will not be responsible to anyone other than SVG Capital for providing the protections afforded to clients of Numis Securities Limited, nor for providing advice in relation to any matter referred to herein.
Disclosure requirements of the Code
Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of the offeree or of any securities exchange bidder (being any bidder other than a bidder in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange bidder is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree and (ii) any securities exchange bidder(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange bidder is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange bidder prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.
8Figures for the twelve months ended 31 January 2016 are sourced from the audited financial statements contained within SVG Capital's 2016 annual report and accounts. Figures for the six months ended 31 July 2016 are sourced from the unaudited financial statements contained within SVG Capital's 2016 interim results announcement
Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange bidder must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange bidder. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange bidder, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.
If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of the offeree company or a securities exchange bidder, they will be deemed to be a single person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree company and by any bidder and Dealing Disclosures must also be made by the offeree company, by any bidder and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).
Details of the offeree and bidder companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any bidder was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.
Publication on a website
A copy of this announcement and any documents required to be published pursuant to Rule 26 of the Code will be made available, subject to certain restrictions relating to persons resident in restricted jurisdictions, on SVG Capital's website at http://www.svgcapital.com/ by no later than 12 noon (London time) on the Business Day following the date of this announcement until the end of the offer period. For the avoidance of doubt, the contents of that website are not incorporated into, and do not form part of, this announcement.
Summary of Asset Transfer Deed between the Company and HarbourVest Bidco
Assets and consideration
· Proposed sale of the entire investment portfolio for £806,600,000 to HarbourVest Bidco
· Subject to adjustment for certain calls and distributions from 31 July 2016
· HarbourVest Bidco will assume all unfunded obligations under the relevant fund documents associated with the investments acquired
· HarbourVest Bidco has committed that the Company will have received the following aggregate amounts of consideration by the following dates:
· At least £403.3 million by 30 December 2016, provided the conditions summarised below (other than receipt of third party consents) have been satisfied by 15 December 2016
· At least £604.95 million by 31 January 2017 (or by 28 February if the conditions (other than third party consents) are satisfied after 15 December 2016)
· £806.6 million by 28 April 2017 (or by 15 May 2017 if the conditions (other than third party consents) are satisfied after 15 December 2016)
Lapsing of the Offer and effectiveness of the Asset Transfer Deed
· Asset Transfer Deed is not effective unless and until HarbourVest Bidco's final cash Offer has lapsed
· HarbourVest Bidco is contractually obliged to announce that it will not extend its Offer after 1.00 p.m. on 18 October 2016, provided the Offer has not become unconditional as to acceptances at or before such time
· If the Offer does become unconditional as to acceptances at or before 1.00 p.m. on 18 October 2016, the Asset Transfer Deed will terminate with immediate effect
Conditions to the sale of the Company's investment portfolio
· Completion of transfers would occur subject to and conditional upon relevant third party consents being obtained, once the other conditions to the Asset Purchase Transaction (listed below) are satisfied
· Other conditions are:
· The Company not signing binding documentation regarding, or having announced, any competing transaction prior to the proposed general meeting of the Company
· Unanimous and unconditional recommendation from the Board that the Company's shareholders vote in favour of resolutions to adopt a revised investment policy and to approve the Asset Purchase Transaction (in the latter case, to the extent required by the Listing Rules and/or the Code)
· Receipt of shareholder approval of resolutions to approve the Asset Purchase Transaction (to the extent required by the Listing Rules and/or the Code) and revised investment policy, and to grant authority to the Company to purchase shares (thereby enabling it to conduct the Tender Offer Series)
· If the conditions (other than receipt of relevant consents) are not satisfied by 5.00 p.m. on 31 January 2017, the Asset Transfer Deed, unless extended by agreement between the parties, will terminate
1Other than the £17m direct investment announced by the Company in its interim results, which is expected to be sold separately by the Company
· Initial closing will take place 5 business days following the satisfaction of the conditions (other than the condition in respect of third party consents) and will involve transfer of those interests for which the relevant consents have been obtained. All other interests in the portfolio will transfer as soon as reasonably practicable following the relevant consents having been obtained
· The Company has committed not to commence a winding-up prior to 31 May 2017 or to recommend a competing transaction to shareholders (save, in the latter case, where the Board determines, acting reasonably, that not making such a recommendation would be inconsistent with their fiduciary duties)
· Where a portfolio interest is acquired by a third party pursuant to a pre-emption right, first offer right or other compulsory sale process, HarbourVest Bidco is entitled to the sale proceeds, subject to its general obligation to pay to the Company the allocated amount of consideration in respect of that interest
· HarbourVest Dover Street IX Investment L.P. (the "Guarantor") is guaranteeing the performance of HarbourVest Bidco's obligations under the Asset Transfer Deed
· The Company is prohibited from entering into an agreement, having discussions regarding, or soliciting any proposal to sell any part of the investment portfolio to any other person or any proposal in relation to the acquisition of the Company (excepting certain unsolicited proposals), and from supplying any information or due diligence to a third party in respect of any such transaction
· HarbourVest Bidco and the Guarantor have provided a number of customary warranties, including in relation to capacity and authorisation, breach of law, solvency and availability of funds
· The Company has also provided a number of customary warranties, including in relation to capacity and authorisation, solvency and title to the investment portfolio being sold. Certain warranties for capacity and authorisation, solvency and title are repeated at each closing
Costs and expenses
· The Company, HarbourVest Bidco and the Guarantor each bear their own costs except in relation to costs incurred in connection with the obtaining of consents and preparation of transfer documentation, which are to be shared equally between the Company and HarbourVest Bidco, and transfer duties, which HarbourVest Bidco shall bear
Registered in England: No.3066856
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