6th Dec 2010 07:00
For immediate release on 6 December 2010 Candover Investments plc
Proposed change of investment policy, disposal of Candover Partners Limited and sale of a strip of investments
Candover Investments plc ("Candover") today announces a proposed change of investment policy under which it intends to return cash to shareholders over time. As a consequence of this, the Board of Candover proposes two disposals:
* The sale of Candover Partners Limited ("CPL"), its wholly owned private equity investment manager, to Arle Capital Partners LLP ("Arle"), a new private equity investment adviser formed by some of the current CPL directors, for a nominal consideration. * The sale of up to 29.1% of Candover's investments in the portfolio (the "strip") to an entity backed by Pantheon and Arle, for a cash consideration of up to approximately £60.0m, a 14.3% discount to the £70.0m carrying value of the assets. Pantheon is one of the largest private equity fund of fund and secondary managers in the world.
The strip sale results in a pro forma reduction of 5.9% on NAV at 30 June 2010 which compares favourably to an average share price discount to NAV of 21.4% from the interim announcement on 31 August 2010 up to 3 December 2010.
The sale of the strip will strengthen Candover's balance sheet, both through a reduction in net debt and a reduction in its outstanding commitments of up to £ 11.2m. The creation of Arle will help ensure Candover's portfolio continues to be managed by an experienced team who are focused on maximising returns.
In the light of the change in the nature of the company, Gerry Grimstone has indicated that he intends to stand down as Chairman when the disposals complete. The search for a successor has begun.
Malcolm Fallen, Chief Executive Officer of Candover Investments plc, said: "This is the last significant step in implementing our plans to return cash to shareholders over time. The sale of CPL to its executives will create an independent, motivated and incentivised manager focused on maximising and realising the value in the portfolio. At the same time, the sale of a strip of our investments will have the dual benefit of reducing net debt and lowering Candover's liability to fund outstanding commitments. The Board is confident that these actions are the best way to ensure that shareholders will benefit from the long term value inherent in the portfolio."
Gerry Grimstone, Chairman of Candover Investments plc, said:
"Given these important changes, I have decided that after 11 years on the Candover Board, four as Chairman, the time is right for me to announce my intention to step down. I would like to thank my Board colleagues and everyone at CPL for their support, dedication and hard work through a very difficult period. A tightly focused Candover, with a resolved operating model, is the best platform from which to deliver to shareholders the significant value in the underlying investments."
The amendment to Candover's investment policy and the disposals, which are interconditional, each require the approval of shareholders. Candover has already reached agreement with noteholders and the Advisory Boards of the Candover Funds in respect of the disposal of CPL. Regulatory approval for the disposal of CPL will be requested from the Financial Services Authority. There are no approvals required from Pantheon.
The Company is today posting a circular to its shareholders (the "circular"). The circular provides further details of the principal terms of and rationale for the change in investment policy and the disposals. The circular contains a notice convening a General Meeting of shareholders to be held at 11am on 22 December 2010 at the offices of Ashurst LLP, Broadwalk House, 5 Appold Street, London EC2A 2HA to approve the change in investment policy and the disposals. The circular will be available to view shortly on Candover's website (www.candoverinvestments.com/investor-info/key-events).
A copy of the circular has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.Hemscott.com/nsm.do. Shareholders should read the whole of the circular and not rely solely on the information contained in this announcement.
Ends.
For further information, please contact: Candover +44 20 7489 9848 Malcolm Fallen, CEO +44 20 7353 4200 Susanna Voyle & Peter Hewer - Tulchan Communications Arle +44 (0)7775 945369 Lindsay Vetch +44 20 7484 6200 Pantheon Carsten Huwendiek KEY DETAILS
Change of investment policy
Candover proposes to change its investment policy to one under which cash will be returned progressively to shareholders.
* Candover will not make any new investments, other than to satisfy its outstanding commitments for follow-on investments in the 2005 Fund. * As investments are realised by CPL, Candover will invest disposal proceeds in cash and cash-equivalent securities, pending its return to shareholders. * No cash will be returned to shareholders until the Company is in a net cash position, save for dividend payments required to meet Investment Trust obligations and an appropriate cash reserve to support future operating cash flows. * The Board intends to consider, with its advisers, different mechanisms for returning cash to shareholders during the realisation period in the most efficient manner. The disposal of CPL
The sale of CPL to Arle is proposed, for a nominal consideration.
* In line with the proposed amended investment policy, Candover will not commit to a new fund and therefore no longer needs a manager with the capacity to make new investments. * The sale of CPL to Arle provides a mechanism for the creation of a stable, independent manager through which a motivated and incentivised management team can be retained in order to focus on maximising and realising the value of the portfolio. * Arle will be led by John Arney, currently Managing Partner of CPL. CPL will remain as manager of the Candover 2001, 2005 and 2008 Funds, as well as manager of Candover's portfolio and the strip assets. * The disposal of CPL, had it occurred on 1 January 2010, would not have had a material impact on the Group's loss before tax for the six months ended 30 June 2010. As at 30 June 2010, CPL had gross assets of £53.0m. Prior to the completion, the balance sheet of CPL will be restructured such that net assets will be £50,000, ensuring that it has the minimum regulatory capital that it is required to maintain by the FSA.
The disposal of the strip
It is proposed to sell up to 29.1% of Candover's investments in the portfolio to a SPV backed by Pantheon and Arle for a cash consideration of approximately £60.0m.
* The disposal of the strip will mitigate Candover's exposure to the potential volatilities that may otherwise impact its ability to progressively return cash to shareholders by strengthening its balance sheet through the reduction of net debt. * The disposal involves giving up a proportion of potential upside for greater current certainty of outcome, which the Board considers to be an appropriate de-risking strategy. * The pro forma reduction in the Company's net assets as at 30 June 2010 is 5.9%, which compares to an average share price discount to NAV of 21.4% for the period since the interim announcement on 31 August 2010 up until 3 December 2010, based on an average share price of 709.4p and a 30 June 2010 net asset value per share of 903p. The discount of 14.3% to the carrying value of the strip is in line with current secondary market transactions. * On a pro forma basis, net debt would have been reduced as at 30 June 2010 to £15.8m (actual £58.8m) with a pro forma loan to value covenant of 8.8% (actual 25%). * In addition, Candover's current liability to fund outstanding commitments to the Candover 2005 Fund will be reduced by up to £11.2m from £38.4m to £ 27.2m. * Pantheon proposes to put in place incentive arrangements for the Arle team which, combined with Arle's investment in the SPV, ensures alignment of Arle with all stakeholders. * Existing third party investors have "tag" rights which entitle them to participate in any sale of investments in certain portfolio companies on a pro rata basis. Certain holders of tag rights have irrevocably undertaken not to exercise any of those rights. * At this stage the Board cannot assess the level to which the remaining tag rights might be exercised. However if the level of sale proceeds falls below £58.0m as a result of these rights being exercised, Candover will be entitled to increase the size of the strip it sells pro-rata across all investments up to a limit of £10.0m of additional strip assets, to be sold at the same discount. * If these remaining tag rights were exercised in full, this would result in: * The consideration payable being reduced from a maximum of £60.0m to a minimum of £52.8m (ie a reduction of approximately 12% in sale proceeds); * The value of assets sold by the Company being reduced from a maximum of £ 70.0m to a minimum of £61.8m out of £240.9m of the investments (at 30 June 2010 and those follow-on investments made post 30 June 2010) held by the Company which will be subject to this disposal; * The size of the strip being reduced from a maximum of 29.1% to a minimum of 25.7% as a proportion of this £240.9m of the investments (at 30 June 2010 and those follow on investments made post 30 June 2010) held by the Company which will be subject to this disposal; and * The follow-on commitments assumed by Pantheon being reduced from a maximum of £11.2m to a minimum of £9.6m. * Proceeds from the disposal of the strip will be used to reduce net debt and thereby reduce the Company's net annual interest costs. The gross proceeds will be made available to the 2007 noteholders to prepay part of the 2007 notes outstanding at par. To the extent that some noteholders do not accept the offer of pre-payment, Candover has agreed to retain the net proceeds to be invested in cash and cash equivalent assets in a designated account to meet the future repayment obligations. * The disposal of the strip, had it occurred on 1 January 2010, and assuming no exercise of tag rights, would have reduced the Group's loss before tax for the six months ended 30 June 2010, as the strip assets contributed part of the Group's unrealised loss on financial instruments at fair value through profit and loss for the period. The disposal of the strip comprises gross assets of up to £70.0m.
vendorRelated Shares:
CDI.L