Further to its announcement on 30 March 2023 (click here to see our coverage), The Investment Company (INV) has announced that it expects to publish a circular and prospectus shortly, in relation to the following proposals, which require shareholder approval:
- appointment of Chelverton Asset Management Limited (“Chelverton”) as external investment manager to the company;
- 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;
- 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 (note: none of the continuing directors intends to tender their shares);
- 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;
- appointment of David Horner as a non-independent non-executive director;
- amendment to the company’s articles of association in relation to the timing of the company’s next continuation vote;
- 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
- 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.
The general meeting
A general meeting is scheduled for 11.00 a.m. on 26 June 2023 at the offices of Stephenson Harwood LLP, 1 Finsbury Circus, London, EC2M 7SH. The general meeting will see three resolutions 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.
Benefits of the Proposals
INV’s board believes that its 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 £1.53bn, 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 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.