TIDMESO TIDMEO.P
RNS Number : 6584M
EPE Special Opportunities PLC
17 October 2016
EPE Special Opportunities plc
Pricing of Initial Public Offering of Luceco plc and NAV
Update
EPE Special Opportunities plc ("ESO plc" or the "Company")
announces that Luceco plc has successfully priced its initial
public offering (the "Offer") of 71.6 million shares at a price of
130.0 pence per share. Luceco plc will admit its entire issued
share capital of 160.8 million shares to trading on the Main Market
of the London Stock Exchange, implying a market capitalisation of
GBP209.0 million.
ESO plc is an AIM quoted private equity investment company,
focussed on long-term value creation in primarily UK-based small
and medium sized enterprises ("SMEs"). EPIC Private Equity LLP
("EPE"), an independent investment manager, is the Investment
Advisor to ESO plc.
As at 13 October 2016 and prior to the Offer, ESO plc was the
second best performing investment trust over five years, with a
share price increase of 396%.(1)
Highlights
-- The Offer was substantially over-subscribed following an excellent reception by investors.
-- The board of ESO plc and EPE would like to thank John Hornby,
CEO of Luceco plc, and his management team for their concerted and
continuous hard work, both in day-to-day operations and in
successfully leading the company to its initial public
offering.
-- Prior to the Offer, ESO plc held 48.6% of the shares of
Luceco plc and loans of GBP10 million through ESO Investments 1 LP
("ESO 1 LP"), in which it is the sole investor. Subsequent to the
secondary sale of shares to new investors, ESO 1 LP now holds 24.3%
of the newly quoted entity.
-- The retention by ESO plc of 24.3% of Luceco plc is expected
to be accretive to ESO plc shareholders over the medium to long
term. Giles Brand, Managing Partner of EPE, will be Non-executive
Chairman of Luceco plc.
-- The Offer implies a return to ESO plc of 24.4x Money Multiple
and 75.6% IRR, of which 12.3x Money Multiple and 57.9% IRR is
realised.
-- Giles Brand, Alex Leslie and Dan Murray led the transaction on behalf of EPE and ESO plc.
-- The transaction has a positive impact on ESO plc's NAV,
resulting in an increase of 127.91 pence per share. The total NAV
at 17 October 2016 incorporating this increase is 304.81 pence per
share. This equates to a one year increase in NAV of 118.9% and a
five year increase in NAV of 260.7%.(2)
-- Subsequent to the Offer, overall returns in the current ESO
plc portfolio are running at 6.9x Money Multiple and 37.7% IRR.
-- The Offer substantially de-risks and diversifies ESO plc,
reducing the proportion of ESO plc's gross asset value represented
by Luceco plc from 68.4% to 42.2%.
-- ESO plc intends to utilise the proceeds of the Offer to
enhance value in its existing portfolio companies, make new
investments and retire capital at advantageous pricing where
possible, with the aim of continuing its market-leading track
record of share price growth.
-- ESO plc has retired 43.7% of its capital base (equity and
debt) over the last five years(3) .
-- EPE team members have been consistent buyers of shares in ESO
plc and currently own 26% of the Company. Giles Brand is the single
largest holder with 22%.
About ESO plc and EPIC Private Equity LLP ("EPE")
ESO plc is an AIM-quoted private equity investment company. The
Company's objective is to provide long-term return on equity for
its shareholders by investing primarily in UK-based SMEs.
Founded in June 2001, EPE is an independent investment manager
wholly owned by its partners. In addition to the investment
activities of the Capital division, EPE provides corporate finance
and fund placement and fund administration services. Since 2001,
the Capital division of EPE has made 37 platform investments.
EPE believes in developing certain investments over the very
long term in order to maximise value. The quoted structure of the
Company facilitates prolonged holding periods. Luceco plc, which
funds advised by EPE have held since 2005, demonstrates the benefit
of returns compounding over periods in excess of standard private
equity hold periods (typically three to five years). EPE intends to
continue to develop ESO plc as a private equity investment company
focussed on long-term capital gain. EPE targets growth, buyout,
special opportunities and distressed transactions at attractive
in-prices. EPE uses proprietary deal sourcing approaches to
identify opportunities, as well as actively engaging with the wider
advisory community to communicate ESO plc's investment strategy.
The Company will continue to target the following types of
investments:
-- Growth, Buyout and Pre-IPO: leveraging EPE's investment
experience, contacts and ability. The Company is particularly
focused on making investments in sectors where the opportunity
exists to create a unique asset via the consolidation of a number
of smaller companies, taking advantage of the lack of liquidity in
the SME market and the attraction to secondary buyers of larger
operations.
-- Special Situations: investment opportunities where EPE
believes that assets are undervalued due to specific, event-driven
circumstances and where asset-backing may be available creating the
opportunity for recovery and significant upside. Target companies
may or may not be distressed as a result of the situation. EPE will
aim to use its restructuring and refinancing expertise to resolve
the situation and achieve a controlling position in the target
company. ESO plc seeks to acquire distressed debt, undervalued
equity or the assets of target businesses in solvent or insolvent
situations.
-- Private Investment in Public Equities ("PIPE"): ESO plc may
consider making investments in smaller quoted companies, primarily
those listed on AIM. The Company will either seek to acquire and
de-list the target company or take a large minority interest in the
target company whilst retaining the listing. ESO plc may offer
shares in the Company as all or part of the consideration for such
investments.
-- Special Purpose Acquisition Companies ("SPAC"): ESO plc may
consider making investments in listed companies which have been
established to acquire other companies. EPE intends to work with
management teams to develop acquisition strategies in advance of
the listing of a SPAC, at which point the Company would invest. The
subsequent acquisition or acquisitions may be funded through
further equity raises directly into the SPAC. The strategy seeks to
take advantage of EPE's combination of experience in both the
establishment and management of listed companies and private equity
investing.
-- Secondary portfolios / LP positions (secondary or primary) /
EPE Funds: ESO plc has access, via EPE's Placement division, to
opportunities to invest as a limited partner in various private
funds on preferential terms. On occasion, the Company may seek to
take advantage of these opportunities. EPE's experience is well
suited to the requirements of co-investing in funds.
ESO plc will consider most industry sectors, including consumer,
retail, manufacturing, financial services, healthcare services and
media. ESO plc targets companies with strong fundamentals,
including defensible competitive positioning and high levels of
cash generation, and seeks to partner with outstanding management
teams to combine operational and financial expertise in each
investment.
The Company aims to invest between GBP2 million and GBP20
million in each portfolio asset. Investments are structured as both
debt and equity instruments to generate returns through yield
(targeting 5% to 15% per annum) as well as capital gain. Whilst in
general ESO plc aims to take controlling equity positions, it may
also decide to develop companies as a minority investor.
Occasionally ESO plc may consider investments of less than GBP2
million. For investments larger than GBP10 million, the Company may
source co-investment from third parties or may raise additional
capital via public market fundraisings.
As demonstrated in the past, the portfolio may be concentrated,
numbering between two and 10 assets at any one time.
For more information about EPE or ESO plc please go to
www.epicprivateequity.com.
About Luceco plc
ESO plc is the largest shareholder in Luceco plc through ESO 1
LP, in which it is the sole investor.
EPE led the original buyout of Luceco plc in June 2005. Luceco
plc is a manufacturer and distributor of electrical accessories and
LED lighting in the UK and internationally, supplying both the
retail and wholesale markets.
-- Strong track record of growth: three year sales CAGR of 25% and EBITDA CAGR of 39%.
-- Differentiated by wholly-owned manufacturing facility in
China and significant opportunity in LED lighting, with no legacy
lighting business facing disruption by the transition away from
traditional lighting solutions.
-- LED lighting market currently worth $40bn globally and
expected to grow by 15%+ CAGR to $70bn in 2019.
-- Luceco plc has raised GBP26.0 million in new primary capital
via the Offer to fund expansion and pay down debt, in addition to
which GBP67.1 million has been realised by existing shareholders
via a secondary sale of shares to new investors.
EPE has supported the transformation of Luceco plc from a
distributor of imported third party products primarily servicing
the UK market, to a Chinese manufacturer supplying a global client
base with market-leading product design and service. The
construction of Luceco plc's wholly-owned manufacturing facility in
Jiaxing, China, in 2008 has been instrumental in this
transformation, enhancing new product development capability,
improving margins and creating capacity for growth.
ESO plc has retained 24.3% of Luceco plc, which is expected to
be accretive to ESO plc shareholders over the medium to long term.
Giles Brand will be Non-executive Chairman of Luceco plc.
Enquiries:
EPIC Private Equity LLP +44 (0) 207 269
8865
Giles Brand / Alex
Leslie
FIM Capital Limited +44 (0) 1624 681
250
Philip Scales
Cardew Group Limited +44 (0) 207 930
0777
Richard Spiegelberg
+44 (0) 207 260
Numis Securities Limited 1000
Nominated Advisor: Stuart Skinner /
Hugh Jonathan
Corporate Broker: Charles Farquhar
Note 1: FE Trustnet data, 14 October 2016, all European
investment trusts excluding those purely focussed on property (325
investment trusts in total).
Note 2: NAV per share is based upon total issued share capital,
including shares held in the employee benefit trust but excluding
shares held in treasury.
Note 3: in the five year period since September 2011, ESO plc
has repurchased shares and convertible loan notes in the Company
and has acquired a minority interest in ESO 1 LP from a third
party. The stated percentage of capital retired is calculated by
comparing the current NAV per share with the pro forma NAV per
share had these transactions not taken place (being 212.05 pence
per share). The pro forma NAV per share takes into account the
number of shares repurchased, the principal value and remaining
financing costs (at the time of the repurchase) of the repurchased
loan notes, the current value of the minority interest in ESO 1 LP,
and the cash used to effect the transactions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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