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
Neither the United States Securities and Exchange Commission nor any United States securities commission or regulatory authority has approved or disapproved of the Offer or passed upon the fairness or merits of the Offer or determined whether this announcement is accurate or complete. Any representation to the contrary is a criminal offence in the United States
FOR IMMEDIATE RELEASE
5 October 2016
FULL AND FINAL CASH OFFER
HARBOURVEST STRUCTURED SOLUTIONS III L.P. ("HARBOURVEST BIDCO")
SVG CAPITAL PLC ("SVG CAPITAL" OR THE "COMPANY")
Response to SVG Capital Proposals
The SVG Capital Proposals are uncertain, highly conditional, complex, prolonged and subject to significant market and execution risk
Commenting on the SVG Capital Proposals, David Atterbury, Managing Director of HarbourVest, said:
"The SVG Capital proposals begin and end with complexity and conditionality, offer little clarity as to value, are non-binding and carry significant market and execution risk.
Many of SVG Capital's assumptions are not borne out through precedent transactions nor do they reflect the commercial realities of the private equity secondaries market. In particular, no assurance can be given as to the initial sale of the investment portfolio or the value of the residual portfolio, which contains a significant proportion of immature investments whose value, both to shareholders and in the secondaries market, is far from certain.
Our 650 pence per share full and final cash offer provides superior cash value in the immediate term and certainty. It also offers shareholders a single 'clean break', with HarbourVest absorbing the risks and uncertainties attendant in winding down SVG Capital. We urge shareholders to accept our offer without delay."
HarbourVest Partners, LLC ("HarbourVest") notes the release of SVG Capital's statement on 4 October 2016 referring to the non-binding and highly conditional proposal of a partial sale of its investment portfolio and wind down of the Company (the "SVG Capital Proposals"). HarbourVest notes SVG Capital's own statement that: 'there can be no certainty that the proposals described in the statement will be effected or as to their terms if any such proposals are so effected'.
· The SVG Capital Proposals are predicated on selling a significant proportion of SVG Capital's investment portfolio to a consortium in a highly conditional and uncertain transaction, the final and binding terms of which have not yet been, and may never be, entered into and which involves the risk of adverse foreign exchange movements and other market risks;
· in the event the above transactions were to be completed on the proposed terms, Shareholders could expect a conditional return of 288 pence per SVG Capital Share in the first tender offer and potentially 192 pence per SVG Capital Share in the second tender offer, an aggregate of 480 pence per share, with any additional returns being subject to further execution risk and market uncertainty;1
· there can also be no certainty as to the value or marketability of the residual assets within the SVG Capital portfolio following the proposed asset sale, nor the timing of Shareholder returns through the disposal of such assets;
· in HarbourVest's experience, the costs and timing of executing an orderly winding-up of a vehicle such as SVG Capital would be significantly greater than those set out in the SVG Capital Proposals; and
· in recent weeks, SVG Capital has spoken to a number of different parties regarding a variety of potential transactions. However, SVG Capital has been unable to propose a transaction which affords Shareholders a certainty of value and execution which is in any way comparable to HarbourVest's firm Offer.
1 Based on 156,109,970 SVG Capital Shares being in issue as sourced from SVG Capital's Regulatory Information Service announcement of 12 September 2016.
Uncertainty of outcome of proposed disposal to a consortium of Pomona Capital ("Pomona") and Pantheon Ventures ("Pantheon")
HarbourVest believes the SVG Capital Proposals create complexity and uncertainty for Shareholders:
· there is no legally binding agreement in place with Pomona and Pantheon to effect the proposed asset sale, nor is one expected for a number of weeks. The parties would need to agree on mutually satisfactory documentation and, until then, Pomona or Pantheon could pull out of the proposed deal at any time and for any reason;
· the proposed deal is subject to a number of pre-conditions which are outside the control of SVG Capital, including completion of due diligence satisfactory to Pomona and Pantheon, completion of a satisfactory tax analysis of the assets by Pomona and Pantheon and the receipt of all requisite general partner consents in respect of the assets in question. It therefore remains a real possibility that no sale of assets to Pomona and Pantheon materialises, or that Pomona and Pantheon purchase only some of the indicated assets, or negotiate for a lower price following due diligence and once the pressure of a competing firm offer may have fallen away (in the event HarbourVest's Offer lapses);
· should Pomona and Pantheon choose to purchase less than all the indicated assets, or agree a lower price, or should any of the general partner consents required to transfer the assets fail to be obtained, the amount of cash which SVG Capital would be able to distribute to Shareholders through the proposed tender offers would be reduced below the indicative figures stated by SVG Capital;
· the sale to Pomona and Pantheon would need to complete before the proposed first tender offer could be executed, and so there can be no certainty whatsoever as to the timing or quantum of the first, or subsequent, distributions of cash to Shareholders;
· SVG Capital's Board has itself stated that the proposed asset sale (as well as subsequent tender offers and the final winding down of SVG Capital) is subject to execution and market risks and, in particular, the risk of foreign exchange movements between 4 October 2016 to the date of any completed asset sale; and
· if the SVG Capital Proposals do not complete and HarbourVest's Offer lapses, the loss of value could be substantial.
Uncertain and conditional proposed tender offers
· In relation to the conditional £450 million tender offer:
o this would represent a conditional return to Shareholders of, in aggregate, 288 pence per SVG Capital Share;2
o it is proposed to be launched in November 2016, with closing expected to take place no earlier than December 2016; by contrast, under HarbourVest's Offer Shareholders will receive payment of cash consideration within 14 days of the Offer becoming or being declared unconditional in all respects;
o the announced price of 700 pence per share is cosmetic and has no bearing on the total level of cash distributed to Shareholders (i.e. the more paid per share, the fewer shares will be acquired);
o the proposed asset sale required to effect the first tender offer could take more than 6 months to complete; and
o Shareholders either bear the foreign exchange risk between now and the end of the tender offer being completed or face significant additional costs to prudently hedge the currency risk.
2 Based on 156,109,970 SVG Capital Shares being in issue as sourced from SVG Capital's Regulatory Information Service announcement of 12 September 2016.
· In relation to the conditional £300 million tender offer, proposed to be launched 'at or close to the prevailing NAV per share' in Q1 2017:
o this deferred and conditional second tender offer would equate to 192 pence per SVG Capital Share, proposed to be paid in Q1 2017; 3
o the proposed asset sale required to effect the second tender offer could take more than 6 months to complete and the value which might be obtained for the portfolio remains uncertain;
o SVG Capital notes that, after adjustment for the first proposed tender offer, pro forma cash balances are expected to be approximately £265 million which will in itself be insufficient to cover the £300 million tender offer. This implies that part of the Company's residual portfolio may need to be monetised to allow the second tender offer to take place, reducing in turn the value of the residual portfolio;
o together with the first conditional tender offer, the Company may have returned 480 pence per SVG Capital Share to Shareholders in 2017;4 and
o Shareholders either bear the foreign exchange risk between now and the end of the tender offer being completed or face significant additional costs to prudently hedge the currency risk.
3 Based on 156,109,970 SVG Capital Shares being in issue as sourced from SVG Capital's Regulatory Information Service announcement of 12 September 2016.
4 Based on 156,109,970 SVG Capital Shares being in issue as sourced from SVG Capital's Regulatory Information Service announcement of 12 September 2016.
Complexity and costs of an orderly winding up of SVG Capital
· In relation to the proposed final liquidation of SVG Capital and return of cash to Shareholders, there can be no certainty as to the value of the residual assets within the SVG Capital portfolio and the timing of Shareholder returns due to:
o the possible adverse movements in foreign exchange rates in the interim;
o the uncertain price in the secondary market for the remaining portfolio at the time of its disposal;
o the uncertain performance of those underlying funds with vintage years of 2014 or later. As noted in HarbourVest's Offer Document dated 15 September 2016, in HarbourVest's experience portfolios of funds tend to experience flat or negative performance during their initial years;
o in HarbourVest's opinion, SVG Capital has significantly underestimated the time required to liquidate and wind down the Company and finalise payments to Shareholders, as well as the costs involved in this transaction given its complex nature;
o HarbourVest has completed several similar transactions including the purchase of Conversus Capital's investment portfolio in 2012:
§ in the case of Conversus Capital, the process required over six months for shareholders to receive the first proceeds from the sale of the portfolio and nearly 18 months for the vehicle to be fully wound down. It is HarbourVest's view that, given the relative complexity of SVG Capital's multiple vehicles and assets, the portfolio realisation and vehicle restructuring timetable could require a longer timeframe to complete than Conversus Capital and be more costly to investors than that liquidation process (in which costs to Conversus Capital equated to 5% of the headline unit price, equivalent to 35 pence per share in the case of SVG Capital); and
§ HarbourVest notes that SVG Capital only plans to start selling its residual portfolio in 2017, suggesting that Shareholders could be waiting until 2019 to receive their final cash proceeds; and
o by SVG Capital publicly declaring itself a seller of these assets, the value of this portfolio may already have been prejudiced.
HarbourVest's Offer provides value and certainty
· In contrast to the SVG Capital Proposals, HarbourVest's Offer provides 650 pence per SVG Capital Share in cash in a clear and certain transaction, with Shareholders receiving payment in full of cash consideration within 14 days of HarbourVest's Offer becoming or being declared unconditional in all respects.
· The Financial Conduct Authority (the "FCA") has notified HarbourVest that its application for consent to acquire control of SVG Capital is complete and is currently in the statutory assessment period, and the FCA will endeavour to process the application as quickly as possible. HarbourVest's subsidiary HarbourVest Partners (Europe) Limited is already an alternative investment fund manager authorized by the FCA. HarbourVest thus believes it will be able to complete its Offer, with FCA consent, well before the anticipated closing date of the proposed first tender offer.
Unless otherwise stated, terms used in this announcement have the same meanings as given to them in the Offer Document dated 15 September 2016. The Offer Document and Form of Acceptance are available, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, on HarbourVest's website at http://www.harbourvest.com/offer-2016.
HarbourVest Partners, LLC
Tel: +44 (0) 20 7151 4211
Jefferies International Limited
Tel: +44 (0) 20 7029 8000
(Sole Financial Adviser)
FTI Consulting LLP
Ed Berry/Ed Bridges
Tel: +44 (0) 20 3727 1067
+44 (0) 20 3727 1046
Important Notice Relating to the Financial Adviser
Jefferies International Limited ("Jefferies"), which is authorised and regulated in the United Kingdom by the FCA, is acting as exclusive financial adviser to HarbourVest and HarbourVest Bidco and no one else in connection with the Offer and will not be responsible to anyone other than HarbourVest and HarbourVest Bidco for providing the protections afforded to clients of Jefferies or for providing advice in relation to the contents of this announcement, in connection with the Offer or any other matter referred to herein or in the Offer Document.
This announcement is for information purposes only. It is not intended to and does not constitute, or form part of, an offer or invitation or the solicitation of any offer to sell or purchase any securities or the solicitation of any offer to otherwise acquire, subscribe for, sell or otherwise dispose of any securities, or the solicitation of any vote or approval of an offer to buy securities in any jurisdiction, pursuant to the Offer or otherwise. The Offer is being made solely by means of the Offer Document and, in respect of SVG Capital Shares held in certificated form, the Form of Acceptance, which contains the full terms and conditions of the Offer, including details of how the Offer may be accepted. Any decision in respect of, or other response to, the Offer should be made only on the basis of the information contained in those documents. Shareholders are advised to read the formal documentation in relation to the Offer carefully.
This announcement does not constitute a prospectus or prospectus equivalent document.
The Offer is subject to the applicable rules and regulations of the FCA, the London Stock Exchange and the City Code on Takeovers and Merger (the "City Code").
The release, publication or distribution of this announcement in, and the availability of the Offer to persons who are residents, citizens or nationals of, jurisdictions other than the United Kingdom may be restricted by laws and/or regulations of those jurisdictions. Therefore any such persons should inform themselves about and observe any applicable legal or regulatory requirements in their jurisdiction. Any failure to comply with the applicable requirements may constitute a violation of the laws and/or regulations of any such jurisdiction. Further details in relation to overseas shareholders are contained in the Offer Document.
In particular, copies of this announcement and any formal documentation relating to the Offer are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in or into or from Australia, Canada or Japan or any other Restricted Jurisdiction and persons receiving such documents (including, without limitation, any agents, custodians, nominees and trustees) must not mail or otherwise forward, distribute or send them in or into or from Australia, Canada or Japan or any other Restricted Jurisdiction. Unless otherwise determined by the Offeror or required by the City Code, and permitted by applicable law and regulation, the Offer is not being, and will not be, made, directly or indirectly, in or into or from, or by the use of mails or any means or instrumentality (including, but not limited to, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of, Australia, Canada or Japan or any other Restricted Jurisdiction and the Offer may not be capable of acceptance by any such use, means, instrumentality or facilities.
The receipt of cash pursuant to the Offer by SVG Capital Shareholders may be a taxable transaction under applicable national, state or local, as well as foreign and other, tax laws. Each SVG Capital Shareholder is urged to consult its independent professional adviser regarding the tax consequences of accepting the Offer.
This announcement has been prepared in compliance with English law, the rules of the London Stock Exchange and the City Code and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions outside of England and Wales.
Notice to US Investors
The Offer is being made to holders of SVG Capital Shares resident in the United States in reliance on, and compliance with, Section 14(e) of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Regulation 14E thereunder. The Offer is being made in the United States by the Offeror and no one else.
The Offer is subject to disclosure requirements, which are different from certain United States disclosure requirements.
Furthermore, the payment and settlement procedure with respect to the Offer will comply with the relevant United Kingdom rules, which differ from US payment and settlement procedures, particularly with regard to the date of payment of consideration.
To the extent permissible under applicable securities laws, Jefferies and its affiliates may from time to time purchase, or enter into arrangements to purchase, SVG Capital Shares either as principal or agent before and during the period when the Offer remains open for acceptance. Pursuant to Rule 14e-5(b) of the Exchange Act, any affiliate of a financial adviser to the HarbourVest Group may from time to time make purchases of, or arrangements to purchase, SVG Capital Shares outside of the United States, other than pursuant to the Offer, before or during the period in which the Offer is open for submission of tenders, so long as the acquisitions or arrangements comply with the provisions of the exemption provided under Rule 14e-5. Pursuant to Rule 14e-5 of the Exchange Act, HarbourVest Bidco, its affiliates, nominees or brokers (acting as agents), and a financial adviser and its affiliates, may from time to time make purchases of, or arrangements to purchase, the SVG Capital Shares, other than pursuant to the Offer, before or during the period in which the Offer is open for submission of tenders so long as those acquisitions or arrangements comply with the provisions of the exemption provided under Rule 14e-5 of the Exchange Act. These purchases may occur either in the open market at prevailing prices or in private transactions at negotiated prices. Information about such purchases will be disclosed as and if required by applicable securities laws.
Forward Looking Statements
This announcement contains statements about HarbourVest, HarbourVest Bidco and the SVG Capital Group that are or may be forward looking statements. All statements other than statements of historical facts included in this announcement may be forward looking statements. Without limitation, any statements preceded or followed by or that include the words "targets", "plans" "believes", "expects", "aims"," intends", "will", "may", "anticipates", "estimates", "projects" or, words or terms of similar substance or the negative thereof, are forward looking statements. Forward looking statements include statements relating to the following: (i) statements relating to the expected benefits of the acquisition to HarbourVest, the Wider HarbourVest Group and/or the SVG Capital Group; (ii) background to and reasons for the Offer; (iii) expectations of the impact of the acquisition on revenue and earnings of HarbourVest, the Wider HarbourVest Group and/or the SVG Capital Group; (iv) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (v) business and management strategies and the expansion and growth of HarbourVest's, the Wider HarbourVest Group's and/or the SVG Capital Group's operations and potential synergies resulting from the Offer; and (vi) the effects of government regulation on HarbourVest's, the HarbourVest Group's and/or the SVG Capital Group's business.
Such forward looking statements involve risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors could cause actual results to differ materially from those projected or implied in any forward looking statements, including risks relating to the successful combination of SVG Capital with HarbourVest; higher than anticipated costs relating to the combination of SVG Capital with HarbourVest or investment required in SVG Capital to realise expected benefits and facts relating to SVG Capital that may impact the timing or amount of benefit realised from the acquisition that are unknown to HarbourVest. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward looking statements, which speak only as of the date hereof. Each of HarbourVest and HarbourVest Bidco disclaims any obligation to update any forward looking or other statements contained herein, except as required by applicable law.
No Profit Forecasts or Estimates
Nothing herein contained shall be deemed to be a profit forecast, projection or estimate for any period unless otherwise stated, and no statement in this announcement should be interpreted to mean that earnings or earnings per SVG Capital Share for the current or future financial years will necessarily match or exceed the historical published earnings or earnings per SVG Capital Share.
Publication on Website
A copy of this announcement and the documents required to be published pursuant to Rule 26.1 of the City Code will be made available, subject to certain restrictions relating to persons resident in any Restricted Jurisdiction, on HarbourVest's website at http://www.harbourvest.com/offer-2016 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.
Information Relating to Shareholders
Please be aware that addresses, electronic addresses and certain other information provided by Shareholders, persons with information rights and other relevant persons for the receipt of communication from the Company may be provided to the Offeror during the Offer Period as required under Section 4 of Appendix 4 of the City Code.
Certain figures included in this announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.
This information is provided by RNS