LMS Capital has announced proposals to change its investment policy and to return up to GBP6 million to Shareholders through a tender offer and repurchase of up to 7.72% of the issued share capital of the Company at a 5 per cent. discount to its net asset value per share as at 30 June 2016. If the Tender Offer is completed it will bring the total returned to shareholders to GBP161 million since the commencement of the Company’s realisation strategy. This exceeds the Company’s market capitalisation of GBP155 million at the start of its realisation strategy. As explained below, the Company is intending to make further returns to shareholders that will increase the total returned.
LMS Capital is proposing to change its investment policy from the current realisation strategy to a new policy predominantly focused on private equity investment. If the proposed investment policy is approved by shareholders, the Company will target a return on equity, after running costs, of between 12 per cent. and 15 per cent. per annum over the long term. If this change is approved, the Company will appoint Gresham House Asset Management Limited (“GHAM”) as its investment manager to carry out the new investment policy and to manage the Company’s assets on a discretionary basis.
The board believes that the proposal to change the investment policy will:
- result in cost savings under the arrangements with GHAM as costs are absorbed into a larger management business and economies of scale can be achieved;
- improve prospects for long-term capital growth in the net asset value of the Company through the implementation of a new investment policy and the strategic relationship with GHAM and the skills and expertise of the GHAM management team;
- allow those of the Company’s assets with growth potential to be managed for a longer period, generating additional returns;
- avoid the Company incurring costs in connection with the winding-up of its legal structure.
In consideration of the value of awarding GHAM the position of investment manager, the Company will receive GBP1 million worth of new ordinary Gresham House shares on the date on which the agreement appointing GHAM becomes effective. The Company will also receive further new ordinary Gresham House shares with a value of up to GBP1.25 million on the second anniversary of that agreement, subject to the satisfaction of certain conditions as set out in the Circular. In order to give Shareholders the opportunity to benefit further from any accretion in value derived by Gresham House from the management of the Company’s assets, the Company will commit up to GBP1.5 million in acquiring a further interest in shares and/or warrants in Gresham House.
The Company requires approval from both the FCA and shareholders for any material change to its investment policy. The Company has received FCA approval for the proposed change and is now seeking shareholder approval.
If the new investment policy is approved, Nicholas Friedlos and Antony Sweet will cease to be employees of the Company and will step down from the board. The Company will be governed by a non-executive board comprising Martin Knight, Rod Birkett, Bernard Duroc-Danner, Neil Lerner and Robert Rayne. Nicholas Friedlos and Antony Sweet will both become employees of GHAM and will continue to work on matters relating to the Company’s portfolio.
LMS : Gresham House to take on LMS Capital