TIDMAFMC
RNS Number : 9799O
Aberdeen Frontier Mkts Inv Co Ltd
11 November 2016
Aberdeen Frontier Markets Investment Company Limited
Publication of Tender Offer circular
11 November 2016
Aberdeen Frontier Markets Investment Company Limited (the
"Company") has today published a circular (the "Circular") in
connection with a Tender Offer to purchase up to 100 per cent. of
the Company's Ordinary Shares in issue and provide for any or all
of such Ordinary Shares tendered to be sold by Numis to Incoming
Investors. Shareholders should note however that they are not
obliged to tender any Ordinary Shares.
1 INTRODUCTION
As was first announced in December 2012 the Board intends to
provide Shareholders with an opportunity to realise their
investment in the Company at prevailing NAV less costs should they
wish to do so. The purpose of the Circular is to set out details of
that opportunity.
When the liquidity opportunity was first announced the discount
to NAV at which the Ordinary Shares traded was significantly wider
than the current discount. The Board believes that the prospect of
a liquidity opportunity has successfully contributed to a
meaningful reduction in the discount since 2012 and it will
continue to support the Company's rating over the coming years.
Should Shareholders pass the Resolution at the Extraordinary
General Meeting and the Tender Offer proceeds, the Board intends to
offer Shareholders a similar liquidity opportunity in 2021 and
every five years thereafter.
As noted below, the Board and the Investment Manager believe
that long term prospects for Frontier Markets are compelling and
members of the Board that own Ordinary Shares do not intend to
tender them under the Tender Offer.
Shareholders are not obliged to tender any Ordinary Shares and
if they do not wish to participate in the Tender Offer, they should
not complete or return a Tender Form or submit a TTE Instruction in
CREST.
The Circular contains, inter alia, the formal terms of the
Tender Offer, together with details of how Shareholders can tender
Ordinary Shares, if they wish to do so. The implementation of the
Tender Offer is conditional, among other things, on Shareholder
approval to be obtained at the Extraordinary General Meeting to be
held on 12 December 2016, notice of which is set out at the end of
the Circular.
Shareholders are reminded that the Company is, and intends to
remain, a closed-ended collective investment scheme. The Tender
Offer should not be seen as affording or implying that any
Shareholder will be offered an opportunity to routinely exit by
this means or otherwise.
2 THE PROPOSALS
The Circular contains details of arrangements which, in
summary:
-- provide for a tender offer for up to 100 per cent. of the
Company's issued Ordinary Share capital (excluding treasury shares,
if any) as at the Record Date; and
-- provide for any or all of such Ordinary Shares tendered to be
sold by Numis to Incoming Investors.
Under the Companies Law, the Tender Offer requires Shareholder
approval by way of an ordinary resolution of Shareholders which
will be sought at the Extraordinary General Meeting to be held on
12 December 2016.
Shareholder approval will be sought at the Extraordinary General
Meeting to grant the Directors authority to repurchase up to 100
per cent. of the Company's issued Ordinary Shares (excluding
treasury shares, if any) provided that at least one Ordinary Share
remains held by a person other than the Company.
3 PROSPECTS FOR FRONTIER MARKETS
3.1 An increasingly relevant asset class
The rationale for investing in Frontier Markets today is little
changed from when the Company was launched in 2007. Strong economic
growth continues to be driven by long term trends in demographics
and consumption, creating a favourable environment for many
companies operating in frontier countries. Most of the major
Frontier Markets have experienced significant real economic growth,
measured in US dollar terms, in the years since the Company's
launch.
Despite positive fundamentals, frontier equity markets remain
under-represented in global indices relative to their economic
significance. Frontier Markets are, in aggregate, home to 31 per
cent. of the World's population and account for 9 per cent. of
global GDP but have a market capitalisation that is equivalent to
just 0.2 per cent. of the global total. From such a low base, the
Directors and the Manager believe there is scope for the asset
class to grow significantly over the long term. Until this happens,
Frontier Markets will remain an under-researched asset class,
providing opportunities for active stock pickers to identify
mispriced companies.
3.2 Attractive valuations
Frontier Markets are lowly valued. As at the end of June 2016,
the Company's portfolio (on a look through basis) traded on median
trailing valuations of 11.8x Price to Earnings, 1.4x Price to Book,
with a 3.4 per cent. dividend yield and return on equity of 14.0
per cent. Such metrics are broadly consistent with those prevailing
on the MSCI Frontier Markets Index. The trend in the Price to
Earnings valuation ratio of that index over the long term shows
very clearly the significant discount at which Frontier Markets
presently trade relative to both Emerging Markets and Developed
Markets.
3.3 Positive performance since launch
Since the Company was launched in June 2007 the Net Asset Value
has risen by 42.1 per cent. in sterling terms (net of all fees to
31 October 2016) and the share price has risen by 31.7 per cent.
While the Company's stated objective is to achieve long term
capital growth, rather than targeting outperformance of an index,
it is worthy of note that the NAV gains achieved by the Manager
have been comfortably ahead of those of the MSCI Frontier Markets
Net Total Return Index (this index having risen by 21.0 per cent.
over the same period). The Company's NAV performance has been
achieved at a materially lower level of risk, with the volatility
of monthly returns being 11.9 per cent., compared to 16.0 per cent.
for the MSCI Frontier Markets Index.
3.4 Recent Developments
At the end of 2015 Aberdeen Asset Management acquired 100 per
cent. ownership of the Company's previous investment manager,
Advance Emerging Capital Limited. The Board was supportive of this
transaction as it was felt that it would bring benefits to
investors. These included the increased resources that would be at
the disposal of the Manager, particularly with regard to investment
management, marketing, compliance and administration. The Board is
satisfied that these benefits are being delivered.
In April 2016, Shareholders approved the change of the Company's
name to Aberdeen Frontier Markets Investment Company Limited, a
measure that the Board believes will assist in the ongoing
marketing of the Company to a wider audience. In addition, the
Company now participates in Aberdeen's direct marketing activities
with investors being afforded a low cost route to investing in the
Company through Aberdeen's Share Plan, Investment Trust ISA and
Investment Plan for Children.
3.5 Initiation of a dividend
An attractive dividend yield has been a consistent feature of
the asset class over time and the Board considers that dividends
are an increasingly important part of the rationale for investing
in the Frontier Markets asset class. In June 2016 the Company
announced the introduction of a semi-annual dividend. On an
annualised basis the maiden dividend, payable in December 2016,
equates to a c 3.0 per cent. yield based upon the last available
share price.
3.6 Strong corporate governance has reduced the discount to Net
Asset Value
The Board remains of the opinion that a closed-ended vehicle is
the ideal structure through which to pursue an investment strategy
such as that employed by the Manager in an asset class where
liquidity is constrained.
The discount to NAV at which the Ordinary Shares trade was 4.3
per cent. on 31 October 2016. That level is narrower than that
associated with the majority of other closed-ended funds focused on
emerging and Frontier Markets. The liquidity opportunity to which
the Circular relates was announced in December 2012 when the
Ordinary Shares traded on a significantly wider discount.
The Board believes that this policy has successfully contributed
to a meaningful reduction in the discount since 2012 and that it,
combined with increased marketing and the recently introduced
dividend policy, will support the Company's rating over the coming
years. Shareholders should also bear in mind that a similar
liquidity opportunity will be offered to investors in advance of
the Annual General Meeting to be held in 2021. The Board believes
that a period of five years is an appropriate period over which
both the Manager and the underlying asset class can be measured and
reviewed, with liquidity offered for those investors that desire
it.
3.7 Conclusion
The Company provides access to an attractive asset class,
through an appropriate structure and with a Manager and strategy
that has delivered attractive risk adjusted returns since the
Company's inception. Recent changes to the management arrangements
and structure bode well for the future of the Company and,
alongside existing measures, should help to maintain the rating of
the Ordinary Shares. This combination of factors should enable the
Company to continue to deliver attractive risk adjusted returns
over the coming years to those Shareholders who wish to remain
invested in the Company.
4 TER OFFER
4.1 Key Points of the Tender Offer
The key points of the Tender Offer are as follows:
-- the Tender Offer is for up to 100 per cent. of the Company's
issued Ordinary Share capital (excluding treasury shares, if any)
as at the Record Date (30 September 2016) provided that at least
one Ordinary Share remains held by a person other than the
Company;
-- Shareholders (other than Restricted Shareholders) will be
able to decide whether to tender none, some or all of their
Ordinary Shares;
-- Incoming Investors will be sought to acquire Ordinary Shares
which have been tendered by Shareholders, through Numis at the
Investment Price;
-- after accounting for the sale of the On-sale Shares and the
realisation of the Tender Pool, Tendering Shareholders shall
receive the Tender Price in cash in consideration of the purchase
of Ordinary Shares tendered by them; and
-- the Tender Price shall be the Final Tender Offer Asset Value
of the Tender Pool divided by the total number of Exit Shares
expressed in sterling and in pence, rounded down to two decimal
places. Shareholders should note that the Tender Price will not be
known and will not be paid until realisation of all the assets in
the Tender Pool.
If the number of Ordinary Shares tendered is such that the Board
is of the view that the continuance of the Company is not in the
best interests of the continuing Shareholders, it reserves the
right to terminate the Tender Offer and in such circumstances the
Tender Offer will not proceed and instead the Company will put
forward further proposals to the Shareholders. If the Tender Offer
is terminated, the Company will make an announcement through an RIS
that such is the case.
Shareholders (other than Restricted Shareholders) on the
Register on the Record Date will be invited to tender for sale some
or all of their Ordinary Shares held on the Record Date to Numis
who will, as principal, purchase at the Tender Price the Ordinary
Shares validly tendered. Numis may seek to sell some or all of such
tendered Ordinary Shares to Incoming Investors at the Investment
Price. The aggregate Investment Price for such number of Ordinary
Shares as Incoming Investors agree to acquire will be deemed to
form part of the Tender Pool and will be paid to Tendering
Shareholders for their Exit Shares once the Tender Price has been
determined.
Any Ordinary Shares not sold by Numis to Incoming Investors will
be repurchased by the Company. Tendering Shareholders will receive
the full Tender Price in cash for the Exit Shares (including the
On-sale Shares) only once all of the assets in the Tender Pool have
been fully realised. However, if and when an interim distribution
from the Tender Pool is made the amount received by Tendering
Shareholders will include an amount in respect of their pro rata
proportion of any On-sale Shares.
The Tender Offer is subject to certain conditions and may be
terminated in certain circumstances as set out in paragraph 7 of
Part 3 of the Circular.
The Tender Offer is not conditional on Ordinary Shares trading
at a discount to the Net Asset Value per Ordinary Share as at the
Calculation Date (i.e. the share price per Ordinary Share being
less than the Net Asset Value per Ordinary Share). In the event
that Ordinary Shares are trading at a premium to the Net Asset
Value per Ordinary Share as at the Calculation Date (i.e. the share
price per Ordinary Share is higher than the Net Asset Value per
Ordinary Share), Shareholders who tender Ordinary Shares may
receive less than they could otherwise be able to realise in the
market.
Shareholders' (other than Restricted Shareholders) attention is
drawn to the letter from Numis set out in Part 1 of the Circular
and to Part 3 of the Circular which, in the case of certificated
Ordinary Shares, together with the Tender Form or the Savings
Schemes Tender Form, where applicable, constitute the terms and
conditions of the Tender Offer. Details of how Shareholders will be
able to tender Ordinary Shares can be found in paragraph 3 of Part
3 of the Circular.
Shareholders should note that, once tendered, Ordinary Shares
may not be sold, transferred, charged or otherwise disposed of
other than in accordance with the Tender Offer.
Shareholders who are in any doubt as to the contents of the
Circular or as to the action to be taken should immediately consult
a suitably qualified independent financial adviser authorised under
the FSMA if in the United Kingdom, or from another appropriately
authorised independent financial adviser if in a territory outside
of the United Kingdom.
4.2 Restricted Shareholders and Other Overseas Shareholders
The Tender Offer is not being made to Shareholders who are
resident in, or citizens of, Restricted Territories. Restricted
Shareholders are being excluded from the Tender Offer in order to
avoid offending applicable local laws relating to the
implementation of the Tender Offer. It is the responsibility of all
Overseas Shareholders to satisfy themselves as to the observance of
any legal requirements in their jurisdiction, including, without
limitation, any relevant requirements in relation to the ability of
such holders to participate in the Tender Offer.
4.3 Tender Pool
Save as set out below, all of the Company's assets and
liabilities will, following valuation on the Calculation Date, be
allocated between the Continuing Pool and the Tender Pool on the
basis set out under paragraph 10 of Part 1 of the Circular. The net
value of the assets and liabilities allocated to the Tender Pool on
its establishment will equal the Tender Offer FAV (calculated in
accordance with paragraph 8 of Part 1 of the Circular). The Tender
Pool assets (other than cash) will be realised and the liabilities
settled and the net cash proceeds paid in sterling to Shareholders
who successfully tendered their Ordinary Shares in satisfaction of
the Tender Price.
The Tender Pool will bear the costs of realising the assets in
the Tender Pool. Shareholders who successfully tender their
Ordinary Shares will receive a pro rata share of the net proceeds
of the Tender Pool (including the proceeds of sale of any On-sale
Shares), less associated costs. The assets of the Tender Pool will
be fully realised as soon as practicable after the commencement of
the realisation of the Tender Pool such that final cash payments
can be made to the Tendering Shareholders as soon as practicable
thereafter. The Board may at its discretion make interim
distributions from the Tender Pool. However, under the Tender Offer
the Company reserves the right to defer the Tender Pool
realisations and/or cash payments if the Board believes this to be
in the best interests of Shareholders as a whole.
Shareholders should note that the Tender Price will only be
determined finally once all the assets in the Tender Pool have been
realised.
The Board retains the discretion to allocate only cash and near
cash assets of the Company to the Tender Pool. In such
circumstances there will be no or minimal costs of realising the
assets in the Tender Pool and it is expected that payment for
Ordinary Shares (including any On-sale Shares) will be made to
Tendering Shareholders in the week commencing 19 December 2016. It
is the Board's current intention only to exercise such discretion
where the number of Ordinary Shares that the Company is required to
repurchase pursuant to the Tender Offer is such that allocating
only cash and near cash to the Tender Pool is considered by the
Board to be in the best interests of Shareholders as a whole.
4.4 Conditions of the Tender Offer
The Tender Offer is conditional on the following (together the
"Conditions"):
(a) the passing of the Resolution by not later than twenty
Business Days after the date of the Extraordinary General
Meeting;
(b) the Directors and Numis being satisfied that, immediately
after the Tender Offer takes place, the Company is able to pass the
Guernsey statutory solvency test pursuant to the Companies Law,
being that the Company is able to pay its debts as they become due,
the value of the Company's assets is greater than the value of its
liabilities and the Company satisfies any applicable solvency
requirements imposed pursuant to the Protection of Investors
(Bailiwick of Guernsey) Law, 1987 and thereby effect the purchase
of all the Exit Shares (other than the On-sale Shares) pursuant to
the Repurchase Agreement;
(c) the Tender Offer not having been terminated in accordance
with paragraph 7 of Part 3 of the Circular prior to the fulfilment
of the conditions referred to in sub-paragraphs 4.4(a) and (b)
above; and
(d) Numis being satisfied, acting in good faith, that at all
times up to and immediately prior to the announcement of the
results of the Tender Offer, the Company has complied with its
obligations and is not in breach of any of the representations and
warranties given by it under the Repurchase Agreement.
5 TAKEOVER CODE
Following discussions between the Company and the Takeover
Panel, the Takeover Panel has confirmed that, under Rule 37.1 of
the Takeover Code and the notes to that Rule, Lazard is not
connected, nor acting in concert, with the Company or any of its
Directors and accordingly Lazard should be treated as an "innocent
bystander" in relation to any increase in its holding of Ordinary
Shares as a result of the Tender Offer and therefore will not be
required to make an offer under Rule 9 of the Takeover Code as a
result of any increase in its holding caused by the Tender
Offer.
In addition, under the Tender Offer, Numis will purchase, as
principal, voting shares in the Company which could result in Numis
coming to have an interest in such Ordinary Shares carrying 30 per
cent. or more of the Voting Rights of the Company. Numis has
unconditionally undertaken that, promptly following such purchase,
it will sell all those Ordinary Shares, acquired pursuant to the
Tender Offer, to Incoming Investors or to the Company for
cancellation or to hold in treasury and the Company has
unconditionally undertaken to buy all such Ordinary Shares to the
extent not sold to Incoming Investors. Numis has undertaken that so
far as it is interested in the tendered Ordinary Shares that it
will not exercise any rights attached to those Ordinary Shares.
Accordingly, a waiver has been obtained from the Takeover Panel in
respect of the application of Rule 9 of the Takeover Code to the
purchase by Numis of the Ordinary Shares under the Tender
Offer.
6 EXPENSES AND FOREIGN EXCHANGE MOVEMENTS
The costs and expenses incurred in relation to the Tender Offer,
including financial advice and other professional advice, are
expected to be approximately GBP180,000 including any applicable
VAT. Such costs will be borne by Shareholders as a whole. The costs
of realising the assets in the Tender Pool will be borne by the
Tendering Shareholders.
Shareholders should note that the Tender Offer FAV to be
announced by the Company on
14 December 2016 may be impacted positively or negatively as the
assets in the Tender Pool are realised and will be particularly
exposed to foreign exchange movements as assets denominated in
foreign currencies are realised and the proceeds converted into
sterling in order to pay the Tender Price which is payable in
sterling.
7 RISK FACTORS
Before deciding whether or not to tender all or any Ordinary
Shares, Shareholders should read the Circular in its entirety and
particularly the Risk Factors set out in Part 6 of the
Circular.
8 RECOMMENDATION
The Board considers that the Tender Offer is fair and reasonable
and in the best interests of the Company and its Shareholders as a
whole. Accordingly, the Board recommends unanimously that
Shareholders vote in favour of the Resolution to be proposed at the
Extraordinary General Meeting.
The Directors intend to vote in favour, or procure the vote in
favour, of the Resolution at the Extraordinary General Meeting in
respect of their beneficial holdings of Ordinary Shares which, in
aggregate, amount to 91,000 Ordinary Shares representing
approximately 0.5 per cent. of the issued Ordinary Share capital of
the Company as at the date of the Circular. The Directors do not
intend to tender any of their own Ordinary Shares under the Tender
Offer. The Directors make no recommendation to Shareholders as to
whether or not they should tender all or any of their Ordinary
Shares in the Tender Offer. Whether or not Shareholders decide to
tender their Ordinary Shares will depend, amongst other factors, on
their view of the Company's prospects and their own individual
circumstances, including their own tax position.
A timetable for the implementation of the Tender Offer is set
out below.
Terms used and not defined in this announcement shall have the
meaning given to them in the Circular.
Enquiries:
Aberdeen Fund Managers Limited
(Manager to Aberdeen Frontier Markets Investment Company
Limited)
Andrew Lister / Bernard Moody
Tel: +44 (0)20 7618 1440
Grant Thornton UK LLP
(Nominated Adviser)
Philip Secrett
Tel: +44 (0)20 7383 5100
Numis Securities Limited
(Nominated Broker)
David Benda
Tel: +44 (0)20 7260 1275
EXPECTED TIMETABLE
All references are to London time unless otherwise stated.
Dates and times are indicative only and may be subject to
change. Any changes will be notified via an RIS
Record Date for participation 5.00 p.m. on 30
in the Tender Offer September 2016
Posting of the Circular, Tender 11 November 2016
Form, Savings Schemes Tender
Form, Form of Proxy and Form
of Direction
Latest time and date for receipt 1.00 p.m. on 23
of Savings Schemes Tender Forms November 2016
Tender Closing Date: latest 1.00 p.m. on 30
time and date for receipt of November 2016
Tender Forms and TTE Instructions
in CREST
Latest time and date for receipt 3.30 p.m. on 5
of Forms of Direction for the December 2016
Extraordinary General Meeting
Latest time and date for receipt 3.30 p.m. on 10
of Forms of Proxy for the Extraordinary December 2016
General Meeting
Extraordinary General Meeting 3.30p.m. on 12
December 2016
Results of Extraordinary General 12 December 2016
Meeting and Tender Offer announced
Calculation Date close of business
on 12 December
2016
Purchase of Exit Shares and 14 December 2016
Sale of On-sale Shares
Tender Offer FAV and number 14 December 2016
of On-sale Shares announced
Establishment of Tender Pool 14 December 2016
and Continuing Pool
Realisation of the Tender Pool 14 December 2016
commences
Tender Price announced; final as soon as practicable
distribution under the Tender after the realisation
Offer of assets in the Tender of the Tender Pool
Pool announced; cheques despatched
and payments through CREST
made
This information is provided by RNS
The company news service from the London Stock Exchange
END
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