LMS Capital handing back another £11m in two tender offers. In its circular published on 27 July 2016, LMS Capital proposed two further returns of capital to shareholders either by way of tender offers or share repurchases. This would be up to half the net proceeds of further sales of assets from the existing portfolio. The details of these further capital returns are as follows:
- the first tender offer and associated share repurchases would return up to GBP6 million to shareholders (once net realisation proceeds, after 27 July 2016, exceeded GBP12 million);
- the second tender offer and associated share repurchases would return up to GBP5 million to shareholders (once net realisation proceeds, after 27 July 2016, exceeded GBP22 million in total);
- both tender offers and associated share repurchases would be priced at a 5% discount to the net asset value of the company at the relevant time; and
- the concert party (comprising members of the extended Rayne family and associated trusts together currently holding 36.12% of LMS’ issued share capital) has undertaken not to participate in these tender offers.
As envisaged in the 2016 circular, the cash left over will be reinvested in accordance with the investment policy.
They announced on 22 May 2017 that net realisation proceeds since the change in investment policy totalled GBP12.4 million, exceeding the threshold of net realisations for a first tender. As at 31 May 2017, net realisation proceeds amounted to GBP12.8 million.
The board has reviewed the company’s liquid resources, future cash requirements, commitments and costs with a view to determining the appropriate amount and timing of a further tender offer. The Board has now completed this review:
- As at 31 May 2017 liquid resources amounted to GBP9.2 million, comprised of cash and cash equivalents.
- The company has uncalled commitments to third party funds of up to approximately GBP3.5 million – the timing and amount of these potential future calls is unknown.
- Taking liquidity levels and liquidity requirements into account, including the ability to realise some of its existing quoted holdings, the Board has concluded that it is able to fulfil its first tender commitment with a capital return of GBP6 million, priced at a 5% discount to the net asset value at the relevant time. A new circular convening a general meeting to consider the resolutions required to effect the first tender is expected to be sent to shareholders in July.
- At this stage it is not possible to confirm the timing or final amount of the second tender. It is possible that liquidity and working capital constraints could lead to a delay in effecting the second tender. The Board will update shareholders as progress is made with sales and the implementation of the new investment policy.
LMS focuses predominantly on private equity investment, targeting a return on equity after running costs of between 12% – 15% per annum over the longer term, principally through capital gains and supplemented with the generation of longer term income yield.
LMS : LMS Capital handing back another £11m