Recommended Proposal for Merger
December 21 2009 - 12:01PM
UK Regulatory
TIDMAQT1 TIDMAQT2 TIDMAQTC
RNS Number : 5131E
Acuity VCT PLC
21 December 2009
JOINT ANNOUNCEMENT
ACUITY VCT PLC
ACUITY VCT 2 PLC
21 DECEMBER 2009
RECOMMENDED PROPOSALS FOR A MERGER BETWEEN ACUITY VCT PLC ("ACUITY 1") AND
ACUITY VCT 2 PLC ("ACUITY 2") TO BE COMPLETED BY PLACING ACUITY 1 INTO MEMBERS'
VOLUNTARY LIQUIDATION PURSUANT TO SECTION 110 OF THE INSOLVENCY ACT 1986 AND THE
TRANSFER BY ACUITY 1 OF ALL OF ITS ASSETS AND LIABILITIES TO ACUITY 2 IN
CONSIDERATION FOR NEW ORDINARY SHARES OF 1 PENCE EACH IN ACUITY 1 ("NEW ACUITY 2
SHARES") AND THE CANCELLATION OF THE LISTING OF THE ORDINARY SHARES AND C SHARES
OF 1 PENCE EACH IN ACUITY 1 ("ACUITY 1 SHARES")
SUMMARY
The boards of Acuity 1 and Acuity 2 announced on 16 December 2009 that agreement
in principle had been reached for the merger of the two companies. These
discussions have now concluded and both boards are today writing to their
respective shareholders with proposals for consideration for the proposed merger
("the Scheme").
The Scheme will be effected by Acuity 1 being placed into members' voluntary
liquidation pursuant to a scheme of reconstruction under Section 110 of the
Insolvency Act 1986. All of the assets and liabilities of Acuity 1 will be
transferred to Acuity 2 in exchange for New Acuity 2 Shares (which will be
issued directly to the shareholders of Acuity 1). The merger will be completed
on a relative net asset basis.
The effective date for the transfer of the assets and liabilities of Acuity 1
and the issue of New Acuity 2 Shares pursuant to the Scheme is expected to be 29
January 2010 ("the Effective Date"), following which the listing of the Acuity 1
Shares will be cancelled and Acuity 1 will be wound up.
The Scheme is conditional, inter alia, on the approval of resolutions to be
proposed to shareholders of Acuity 1 and Acuity 2 at general meetings to be held
on 21 January 2010 (for both Acuity 1 ("Acuity 1 GM 1") and Acuity 2 ("Acuity 2
GM")) and 29 January 2010 (for Acuity 1 only ("Acuity 1 GM")) and dissent not
having been expressed by shareholders of Acuity 1 holding more than 10 per cent.
of the issued Acuity 1 share capital.
The board of Acuity 2 also consider it appropriate, subject to resolutions being
passed at the Acuity 2 GM and the Scheme becoming effective, to change the name
of Acuity 2, on completion of the Scheme, to "Acuity Growth VCT plc". It is also
proposed to renew share issue and share repurchase authorities for Acuity 2.
BACKGROUND
In September 2004, the Venture Capital Trusts (Winding-up and Mergers) (Tax)
Regulations 2004 were introduced, allowing venture capital trusts ("VCTs") to be
acquired by, or merge with, each other without prejudicing tax reliefs obtained
by their shareholders. A number of VCTs have now taken advantage of these
regulations to create larger VCTs where running costs can be spread over a
substantially greater asset base. Some 25 commonly managed VCTs have now merged
With the above in mind, the boards of Acuity 1 and Acuity 2 entered into
discussions to consider a merger of the companies to create a single larger VCT
and reduce the overall running costs. Following detailed consideration of the
portfolio and financial position of each company (both of which are managed by
Acuity Capital Management Limited ("Acuity Capital"), and the same investment
policies) the boards of Acuity 1 and Acuity 2 have reached an agreement to
recommend that the companies be merged.
The main purpose of the proposed merger is to create a single larger VCT that
will bring a number of commercial advantages to both sets of shareholders,
namely:
* a reduction in the annual running costs of the Enlarged Company compared to the
aggregate annual running costs of the separate companies;
* the creation of a single VCT of a more economically efficient size with a
greater capital base over which to spread administration, regulatory and
management costs;
* participation in a larger VCT with a more diversified portfolio thereby
spreading the portfolio risk across a broader range of investments and
businesses;
* increase the potential to pay dividend distributions and reinstate and maintain
a buy-back programme due to the increased size and the reduced need to retain
funds to remain at an economically viable size; and
* increase the flexibility in meeting the various qualifying VCT requirements.
The boards believe that the Scheme provides an efficient way of effecting a
merger with an acceptable level of costs compared with other merger routes. The
merger is a step towards enhancing performance and improving cost efficiency in
the Enlarged Company. Shareholders should note that the merger will be outside
the provisions of the City Code on Takeovers and Mergers.
EXPECTED TIMETABLE
Acuity 1 GM 1 11:30 a.m. on 21 January 2010
Acuity 2 GM 11:00 a.m. on 21 January 2010
Record date for Acuity 1 shareholders'
entitlements under the merger 28 January2010
Calculation date
after 5 p.m. on 28 January 2010
Suspension of listing of the Acuity 1 Shares 8 a.m. on 29 January 2010
Acuity 1 GM 2 11:30 a.m. on 29 January 2010
Effective Date for transfer of assets and 29 January 2010
liabilities of Acuity 1 to Acuity 2 and the
issue of New Acuity 2 Shares
Announcement of results of the Acuity 1 GM 2 29 January 2010
and completion of the Scheme (if applicable)
Cancellation of listing of the Acuity 1 Shares 3 February 2010
Admission of and dealings in New Acuity 2 Shares 3 February 2010
to commence
Share certificates for the New Acuity 2 Shares to be
17 February 2010
issued pursuant to the Scheme despatched
despatched
BACKGROUND TO ACUITY 1 AND ACUITY 2
Acuity 1 was launched in 2001 with the objective to achieve capital gains and
maximise UK tax-free income to its shareholders from dividends and capital
distributions. Acuity Capital has been the investment manager of Acuity 1 since
its launch.
As at 30 September 2009, Acuity 1 had an audited net asset value of
GBP19,965,000, and investments in 21 companies with a valuation of GBP18.4
million.
Acuity 2 was launched in 2004 with the same objective as Acuity 1. Acuity 2
raised GBP35.0 million since launch.
As at 30 September 2009 Acuity 2 had net assets of 28,656,000 with investments
in 21 companies. Following a management buy-out of Acuity Capital from Electra
Partners Group in February 2008, Acuity 2 has retained Acuity Capital as its
investment manager.
The Acuity 1 and Acuity 2 boards comprises five non-executive directors, Rupert
Lascelles Pennant-Rea, David Donnelly, Nicholas Ross, David Sebire and Catrina
Holme. Both boards have discussed the size and future composition of the Acuity
2 board and it has been concluded that the board of Acuity 2 will remain the
same (subject to, if the Scheme is effected, an increase in directors fees to
take into account additional duties and time in relation to Acuity 2).
THE MERGER
The merger of the companies should result in a number of commercial advantages,
including cost savings and enhanced administrative efficiency. As both companies
have the same investment manager, and the same investment policies, this is
achievable without major additional cost or disruption to the portfolio
investments. The existing investment management arrangements between Acuity
Capital and Acuity 2 will remain in place.
The aggregate anticipated cost of undertaking the merger by way of the Scheme is
approximately GBP326,000, including VAT, legal and professional fees, stamp duty
and the costs of winding up Acuity 1. The costs of the Scheme will be split
proportionally between Acuity 1 and Acuity 2 by reference to their respective
merger values. Following completion of the Scheme, annual cost savings for the
Enlarged Company of at least GBP370,000 per annum (representing 0.8% per cent.
per annum of the expected net assets of the Enlarged Company) are expected to be
achieved.
DOCUMENTS AND APPROVALS
Acuity 1 shareholders will receive a circular convening Acuity GM 1 on 21
January 2010 and Acuity 1 GM 2 on 29 January 2010 (together with the Acuity 2
prospectus) at which Acuity 1 shareholders will be invited to approve
resolutions in connection with the Scheme.
Acuity 2 shareholders will also receive a copy of a circular convening the
Acuity 2 GM to be held on 21 January 2010 (together with the Acuity 2
prospectus) at which Acuity 2 shareholders will be invited to approve
resolutions in connection with the Scheme, to change the name of Acuity 2 to
"Acuity Growth VCT PLC" (subject to the Scheme becoming effective) and to renew
share issue and share repurchase authorities.
Copies of the prospectus and the circulars for Acuity 1 and Acuity 2 have been
submitted to the UK Listing Authority and will be shortly available for
inspection at the UK Listing Authority's Document Viewing Facility which is
situated at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS
Telephone: 0207 066 1000
Investment Manager and Administrator for Acuity 1 and Acuity 2
Acuity Capital Management Limited
Mark Speeks/Nicholas Ross
Telephone: 020 7306 3901
Sponsor to Acuity 1 and Acuity 2
Howard Kennedy
Keith Lassman
Telephone: 0207 636 1616
The directors of Acuity 2 accept responsibility for the information relating to
Acuity 2 and its directors contained in this announcement. To the best of the
knowledge and belief of such directors (who have taken all reasonable care to
ensure that such is the case), the information relating to Acuity 2 and its
directors contained in this announcement, for which they are solely responsible,
is in accordance with the facts and does not omit anything likely to affect the
import of such information.
The directors of Acuity 1 accept responsibility for the information relating to
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