Foresight 3 VCT plc
Statement re Possible Merger with Foresight 4 VCT plc
The Board announces that, further to its discussions with Foresight 4 VCT plc ('Foresight 4'), the principal details of a potential merger, should it proceed and be approved by Shareholders, are set out below.
Potential Merger with Foresight 4
With respect to a potential merger with Foresight 4, the Board wishes to seek Shareholders' views before incurring any significant merger costs and will do so at the time of publishing the half-yearly report during November 2016. This will be achieved through an advisory vote open to all Shareholders which will be carefully considered by the independent Directors in addition to all other options. Details of how to vote will be enclosed with the half-yearly report.
The Board has had preliminary discussions with the board of Foresight 4 and the benefits of a merger, should it proceed, are anticipated to be as follows:
- A combined VCT with assets of approximately £70 million;
- Based on the costs of the merger being in the region of £450,000, a payback period of approximately 12 months is expected;
- A reduction in the aggregate number of Board directors from six to four, possibly to three over time;
- A reduction in the annual management fee from 2.25% to 2.0% of net assets;
- A portfolio of over 25 companies, many of which are making good progress and are profitable and which have delivered the recent improvements in NAV in the Company;
- A reduction in the annual expenses cap from 3.5% to 2.95% of net assets;
- An enlarged entity better positioned to raise further funds and continue with the current investment strategy; and
- The ability to consider realisations within an enlarged entity to assist with creating liquidity events for Shareholders and support dividend payments.
A merger should create an enlarged VCT with sufficient critical mass to enable it to generate sufficient income and realisations to meet an attractive dividend target, as well as maintaining a regular program of share buybacks aimed at maintaining a discount to NAV at which the Company's shares trade in the region of 10%.
It should be noted that a merger between Foresight VCT plc, Foresight 3 and the Company is not possible without the divestment of significant holdings which, together, being over 50%, would otherwise be non-qualifying under the VCT rules.
The Board anticipates that the following would also be put in place for all shareholders of the enlarged VCT, following the completion of a merger:
Tender Offer post-Merger
The Board recognises that the discount to NAV at which the Company's shares trade has been too wide for a prolonged period of time. In that regard, the Board anticipates that the enlarged VCT will undertake a tender offer as soon as possible after a merger.
Buyback Commitment post-Merger
In addition to the proposed tender offer referred to above, over time the Board also expects to be in a position following a merger to implement a series of share buybacks to enable the enlarged VCT to achieve its target of a discount to NAV in the region of 10%.
Dividend post-Merger
In addition to the tender offer and share buyback objective noted above, the Board also expects that the enlarged VCT would be in a position to pay a post-merger dividend.
Following the advisory vote a recommendation on the preferred option of the independent Directors of the Board will be sent to Shareholders for their consideration.
For further information please contact:
Gary Fraser, Foresight Group: 0203 667 8100