TIDMTSL
RNS Number : 8422D
ThinkSmart Limited
24 October 2022
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN ANY JURISDICTION
WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR
REGULATIONS OF SUCH JURISDICTION.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
24 October 2022
ThinkSmart Limited
("ThinkSmart" or the "Company" which together with its
subsidiaries is the "Group")
Recommended acquisition of ThinkSmart by Tuscan Equity Pty Ltd
("Bidco") by way of a scheme of arrangement under the Australian
Corporations Act 2001 (Cth).
SCHEME BOOKLET REGISTERED WITH ASIC
PUBLICATION AND POSTING OF SCHEME BOOKLET
AND
NOTICE OF SCHEME MEETINGS AND NOTICE OF AGM
On 29 July 2022, ThinkSmart (AIM: TSL) entered into a binding
Scheme Implementation Deed with Tuscan Equity Pty Ltd ("Bidco")
under which Bidco would acquire the entire issued share capital of
ThinkSmart pursuant to a scheme of arrangement under the Australian
Corporations Act 2001 (Cth) (the "Scheme").
Scheme Booklet
The Board of ThinkSmart is pleased to announce that the
Australian Securities and Exchange Commission has registered its
scheme booklet ("Scheme Booklet") in relation to the proposed
acquisition of ThinkSmart by Bidco by way of the Scheme.
The Scheme Booklet, which includes information about the Scheme,
an independent expert's report prepared by Grant Thornton Corporate
Finance Pty Ltd ("Independent Expert"), the notices of the Scheme
Meetings and Annual General Meeting, and details of the actions to
be taken by ThinkSmart Shareholders, has therefore today been
published.
ThinkSmart Shareholders and DI Holders will receive either a
hard copy of the Scheme Booklet or access to a URL where the Scheme
Booklet can be viewed and downloaded. In addition, ThinkSmart
Shareholders will receive a hard copy Proxy Form or access to a
portal where proxy instructions for the applicable meeting can be
lodged electronically. ThinkSmart DI Holders will receive a hard
copy Form of Instruction in respect of the General Scheme Meeting
and Annual General Meeting (but not in respect of the Excluded
Shareholder Scheme Meeting, as no Excluded Shareholder holds
ThinkSmart Depositary Interests).
The Scheme Booklet is available on ThinkSmart's website (subject
to any restrictions relating to persons resident in Restricted
Jurisdictions) at www.thinksmartworld.com and the full text of the
Scheme Booklet is set out in the Additional Information section
below.
Notice of Scheme Meetings and Notice of AGM
ThinkSmart hereby gives notice of the meeting of ThinkSmart
Shareholders to consider and vote on the Scheme ("General Scheme
Meeting") and the meeting of Excluded Shareholders(1) to consider
and vote on the Scheme ("Excluded Shareholder Scheme Meeting")
("Scheme Meetings").
The General Scheme Meeting for ThinkSmart Shareholders
(excluding the Excluded Shareholders) will be held virtually via
the Computershare Virtual Meeting Platform on 16 November 2022,
commencing at 5.00pm (Perth time). The Excluded Shareholder Scheme
Meeting for Excluded Shareholders will be held virtually via the
Computershare Virtual Meeting Platform on 16 November 2022,
commencing at 5.30pm (Perth time). If the General Scheme Meeting
concludes after 5.30pm (Perth time) on this date, the Excluded
Shareholder Scheme Meeting will begin as soon as practicable after
the conclusion of the General Scheme Meeting.
ThinkSmart's 2022 Annual General Meeting will also be held
virtually via the Computershare Virtual Meeting Platform prior to
the Scheme Meetings on 16 November 2022, commencing at 4.00pm
(Perth time).
Independent Expert's Report
The Independent Expert has concluded that the Scheme is fair and
reasonable and therefore in the best interests of ThinkSmart
Shareholders (other than the Excluded Shareholders), in the absence
of a superior proposal.
Independent Board Committee recommendation
The ThinkSmart Independent Board Committee ("IBC")(2)
unanimously recommends that the Scheme Shareholders vote in favour
of the Scheme in the absence of a Superior Proposal and subject to
the Independent Expert continuing to conclude that the Scheme is in
the best interest of ThinkSmart Shareholders (other than the
Excluded Shareholders). Subject to those same qualifications, each
member of the IBC intends to vote, or cause to be voted, all of the
ThinkSmart shares held or controlled by them in favour of the
Scheme at the applicable Scheme Meeting.
Action to be taken
ThinkSmart Shareholders should carefully read the Scheme Booklet
in its entirety before deciding whether or not to vote in relation
to the Scheme.
Timetable
The current expected timetable of principal events for the
implementation of the Scheme is set out below and in the Scheme
Booklet. If any of the key dates set out in the expected timetable
changes, an announcement will be made through a Regulatory
Information Service.
Event Time and date
============================================== ============================
First Court Date 21 October 2022
============================================== ============================
Date of this Scheme Booklet 24 October 2022
============================================== ============================
Latest time and date for receipt 14 November
of proxy forms or powers of attorney 2022 at 5.30pm
by the ThinkSmart Share Registry (Perth time)*
for:
* Annual General Meeting
* General Scheme Meeting
* Excluded Shareholder Scheme Meeting
*Refer to the Scheme Booklet for
applicable times for ThinkSmart
DI Holders
============================================== ============================
Time and date for determining eligibility 14 November
to vote at the Annual General Meeting 2022 at 5.30pm
and the Scheme Meetings (Perth time)
for ThinkSmart
Shareholders
11 November
2022 at 6.00pm
(London time)
for ThinkSmart
DI Holders
============================================== ============================
Annual General Meeting 16 November
2022 at 4.00pm
(Perth time)
============================================== ============================
Scheme Meetings: 16 November
* General Scheme Meeting 2022 (T) at:
* 5.00pm (Perth time)
* Excluded Shareholder Scheme Meeting*
* 5.30pm (Perth time)
*If the General Scheme Meeting
concludes after 5.30pm (Perth time)
on this date, the Excluded Shareholder
Scheme Meeting will begin as soon
as practicable after the conclusion
of the General Scheme Meeting.
============================================== ============================
If the Scheme is approved by the Requisite Majorities
============================================================================
Second Court Date 22 November
Court hearing to approve the Scheme 2022
============================================== ============================
Last day for dealings in, and for 22 November
the registration of transfer of, 2022
ThinkSmart Shares
Last day for repositioning securities
between the ThinkSmart Share Register
(for Australian shares) and the
ThinkSmart DI Register (for UK
Depositary Interests)
============================================== ============================
Suspension of dealings in ThinkSmart 23 November
Shares 2022 at 7.30am
(London time)
============================================== ============================
Effective Date 23 November
Court order lodged with ASIC and 2022
announcement to AIM
============================================== ============================
Scheme Record Date
Date for determining entitlements 25 November
to Scheme Consideration for: 2022 at:
* ThinkSmart Shareholders * 5.00pm (Perth time)
* ThinkSmart DI Holders * 6.00pm (London time)
============================================== ============================
Disablement of CREST in respect 25 November
of ThinkSmart Shares 2022 at 6.00pm
London time
============================================== ============================
Implementation Date 2 December 2022
============================================== ============================
Cancellation of admission to trading 5 December 2022
on AIM of ThinkSmart Shares at 7.00am (London
time)
============================================== ============================
Sale of Block Sale Shares 5 December 2022
to 7 December
2022
============================================== ============================
Payment of Scheme Consideration* As soon as practicable
following the
sale of the
Block Sale Shares,
expected to
be approximately
8 Business Days
after completion
of the sale
of the Block
Sale Shares
============================================== ============================
All times and dates in the above timetable are references to the
time and date in Perth, Australia unless otherwise stated. All such
times and dates are subject to change. Certain times and dates are
conditional on the approval of the Scheme by ThinkSmart
Shareholders and by the Court, and the satisfaction of the other
conditions precedent of the Scheme set out in section 4.3 of the
Scheme Booklet, including regulatory approval from the UK Financial
Conduct Authority. Any changes will be announced by ThinkSmart via
the RNS of the LSE.
* For the avoidance of doubt, the value of the Cash
Consideration will not be known at the time of cancellation of
admission to trading on AIM of ThinkSmart Shares.
Loan Deed
The Cash Consideration under the Scheme relates to the net
proceeds from the sale of certain Block Shares held by
ThinkSmart.
If the Scheme becomes Effective, then the Block Sale Shares will
be the number of the Block Shares held by ThinkSmart to be sold and
will be referable to the proportion of Scheme Shares held by Scheme
Shareholders entitled to receive Cash Consideration.
Once the Broker sells the Block Sale Shares pursuant to the
Broker Agreement it will remit the United States Dollar sale
proceeds to an ADI account operated by ThinkSmart. Then, in
accordance with the Funds Flow Deed, ThinkSmart and Bidco will be
required to comply with the following procedure:
1. ThinkSmart will transfer the United States Dollar sale
proceeds to an ADI account operated by Bidco via a loan from
ThinkSmart to Bidco (Loan) pursuant to a loan deed to be entered
after the Implementation Date (Loan Deed).
2. Bidco will convert the United States Dollar sale proceeds
into Australian Dollars and Pounds Sterling (as applicable).
3. Bidco will transfer these amounts to two separate trust
accounts (one account for Australian Dollars and one account for
Pounds Sterling) with an ADI operated by the ThinkSmart Share
Registry and held for the benefit of the Scheme Shareholders.
4. ThinkSmart will instruct Computershare to transfer the Cash
Consideration to the Scheme Shareholders entitled to receive Cash
Consideration pro rata to their respective holding of ThinkSmart
Shares, in accordance with the applicable currency allocations.
Step 1 above involves ThinkSmart and Bidco entering into a Loan
Deed. Practically, the Loan is required to document the flow of
funds from ThinkSmart to Bidco, which are then converted into
applicable currencies and transferred into a ThinkSmart Share
Registry account (held for the benefit of Scheme Shareholders)
before being distributed to Scheme Shareholders entitled to receive
the Cash Consideration.
The Loan is provided by ThinkSmart (as lender) to Bidco (as
borrower) and provides that ThinkSmart may advance funds to Bidco
solely for the "permitted purpose", which is defined as complying
with Bidco's obligations under the Scheme Implementation Deed. Each
advance made under the Loan may incur interest (at a rate to be
agreed for each advance, which may be nil), is unsecured and must
be repaid on or before the end date to be agreed for that
advance.
Given that the funds flow described above involves a Loan means
that certain additional approvals are required to be obtained from
ThinkSmart Shareholders for the Scheme to proceed, being the
Financial Assistance Resolution and the Financial Benefit
Resolution. These resolutions will be voted on at the Annual
General Meeting to be held prior to the Scheme Meetings. Further
details of all resolution are set out in full in the Scheme
Booklet.
Related Party Transaction
The Loan Deed constitutes a related party transaction under the
AIM Rules for Companies as Bidco is a related party by virtue of
being wholly owned and controlled by Ned Montarello, ThinkSmart's
Executive Chairman, CEO, founder and (together with the Excluded
Shareholders) current 29.4% shareholder.
The Directors of the Company (excluding Ned Montarello)
consider, having consulted with the Company's nominated adviser,
Canaccord Genuity Limited, that the terms of the Loan are fair and
reasonable insofar as the Company's shareholders are concerned.
Cancellation and Delisting from AIM
It is intended that dealings in ThinkSmart Shares should be
suspended shortly prior to the Effective Date, at the time set out
in the Scheme Booklet. Subject to the implementation of the Scheme,
it is intended that an application will be made to the London Stock
Exchange for the cancellation of the admission to trading of the
ThinkSmart Shares on AIM, in accordance with Rule 41 of the AIM
Rules.
If the Scheme is approved by the Court, it is expected that the
last day of dealings in, and registration of transfers of,
ThinkSmart Shares on AIM will be the Business Day immediately prior
to the Effective Date, following which ThinkSmart will make an
application to the London Stock Exchange for suspension of dealings
in ThinkSmart Shares on AIM with effect by 7.30 a.m. (London time)
on the Effective Date.
It is intended that the cancellation of admission of the
ThinkSmart Shares to trading on AIM will take effect at 7.30 a.m.
(London time) on the Business Day following the Implementation
Date. In addition, entitlements to ThinkSmart Shares held within
the CREST system will be cancelled and share certificates in
respect of Scheme Shares will cease to be valid and should, if so
requested by ThinkSmart, be sent to ThinkSmart for
cancellation.
Capitalised terms used in this announcement (the "Announcement")
shall, unless otherwise defined, have the same meanings as set out
in the Scheme Booklet. All references to times in this Announcement
are to Perth time, Australia times unless stated otherwise.
(1) the term "Excluded Shareholders" has the meaning given to it
in the definitions section of the Scheme Booklet. In summary, it
means Mr Ned Montarello and the entities he is related to that hold
ThinkSmart shares.
(2) The ThinkSmart Independent Board Committee consists of all
directors of ThinkSmart excluding Mr Ned Montarello having regard
to his ownership of Bidco.
Prior to publication the information communicated in this
announcement was deemed by the Company to constitute inside
information for the purposes of article 7 of the Market Abuse
Regulations (EU) No 596/2014 as amended by regulation 11 of the
Market Abuse (Amendment) (EU Exit) Regulations No 2019/310 ('MAR').
With the publication of this announcement, this information is now
considered to be in the public domain.
For further information please contact:
ThinkSmart Limited Via Buchanan
Canaccord Genuity Ltd (Nominated
Adviser and Broker)
Emma Gabriel
Andrew Potts
Tom Diehl +44 (0)20 7523 8350
Buchanan
Giles Stewart
Chris Lane
Toto Berger +44 20 7466 5000
Notes to Editors
About ThinkSmart Limited
ThinkSmart's roots are as a specialist digital payments platform
business. Following the sale of its remaining 10% shareholding in
Clearpay in January 2022, the Group holds shares in NYSE listed
Block, Inc (NYSE: SQ). The Group also provides an outsourced call
centre customer service and support service to Clearpay and is
managing the wind-down of its leasing business.
Further information
This announcement is for information purposes only and is not
intended to and does not constitute, or form part of, an offer,
invitation or the solicitation of an offer to purchase, otherwise
acquire, subscribe for, sell or otherwise dispose of any
securities, or the solicitation of any vote or approval in any
jurisdiction, pursuant to the Scheme or otherwise, nor shall there
be any sale, issuance or transfer of securities of ThinkSmart in
any jurisdiction in contravention of applicable law. The Scheme
will be implemented in accordance with the Scheme Implementation
Deed and the Scheme Booklet, which will contain the full terms and
conditions of the Scheme including details of how to vote in
respect of the Scheme. Any vote in respect of the Scheme or other
response in relation to the Scheme should be made on the basis of
the information contained in the Scheme Booklet. This announcement
does not constitute a prospectus, prospectus equivalent document or
an exempted document.
If you are in any doubt about the contents of this announcement
or the action you should take, you are recommended to seek your own
independent financial advice immediately from your stockbroker,
bank manager, solicitor, accountant or independent financial
adviser.
Overseas shareholders
The release, publication or distribution of this announcement in
or into jurisdictions other than Australia or the UK may be
restricted by law and therefore any persons who are subject to the
law of any jurisdiction other than Australia or the UK should
inform themselves of, and observe, any applicable legal or
regulatory requirements. Any failure to comply with such
requirements may constitute a violation of the securities laws of
any such jurisdiction. To the fullest extent permitted by
applicable law, the companies and persons involved in the Scheme
disclaim any responsibility or liability for the violation of such
restrictions by any person. This announcement has been prepared in
accordance and for the purpose of complying with Australian law,
English law, the AIM Rules, the Market Abuse Regulation and the
Disclosure Guidance and Transparency Rules and information
disclosed may not be the same as that which would have been
prepared in accordance with the laws of jurisdictions outside
Australia or England.
The availability of the Scheme to ThinkSmart Shareholders who
are not resident in and citizens of Australia or the UK may be
affected by the laws of the relevant jurisdictions in which they
are located or of which they are citizens. Persons who are not
resident in Australia or the UK should inform themselves of, and
observe, any applicable legal or regulatory requirements of their
jurisdictions. In particular, the ability of persons who are not
resident in Australia or the UK to vote their ThinkSmart Shares
with respect to the Scheme at the Scheme Meeting, or to appoint
another person as proxy to vote at the Scheme Meeting on their
behalf, may be affected by the laws of the relevant jurisdictions
in which they are located. Any failure to comply with the
applicable restrictions may constitute a violation of the
securities laws of any such jurisdiction. To the fullest extent
permitted by applicable law, the companies and persons involved in
the Scheme disclaim any responsibility or liability for the
violation of such restrictions by any person.
Forward looking statements
This announcement (including information incorporated by
reference in this announcement), oral statements made regarding the
Scheme, and other information published by Bidco or ThinkSmart may
contain statements which are, or may be deemed to be,
"forward-looking statements". Forward-looking statements are
prospective in nature and are not based on historical facts, but
rather on current expectations and projections of the management of
Bidco and ThinkSmart about future events, and are therefore subject
to risks and uncertainties which could cause actual results to
differ materially from the future results expressed or implied by
the forward-looking statements.
The forward-looking statements contained in this announcement
include statements relating to the expected effects of the Scheme
on Bidco and ThinkSmart (including their future prospects,
developments and strategies), the expected timing and scope of the
Scheme and other statements other than historical facts. Often, but
not always, forward-looking statements can be identified by the use
of forward-looking words such as "plans", "expects", "estimates",
"forecasts", "intends" or "anticipates", or variations of such
words and phrases or statements that certain actions, events or
results "may", "could", "should", "would", "might" or "will" be
taken, occur or be achieved. Although Bidco and ThinkSmart believe
that the expectations reflected in such forward-looking statements
are reasonable, Bidco and ThinkSmart can give no assurance that
such expectations will prove to be correct. By their nature,
forward-looking statements involve risk and uncertainty because
they relate to events and depend on circumstances that will occur
in the future. There are a number of factors that could cause
actual results and developments to differ materially from those
expressed or implied by such forward-looking statements.
These factors include, but are not limited to: the ability to
complete the Scheme; the ability to obtain requisite regulatory and
shareholder approvals and the satisfaction of other conditions on
the proposed terms and timetable; changes in general economic and
business conditions; the behaviour of other market participants;
the anticipated benefits from the proposed transaction not being
realised as a result of changes in general economic and market
conditions; weak, volatile or illiquid capital and/or credit
markets; changes in tax rates, interest rate and currency value
fluctuations; the degree of competition in the geographic and
business areas in which ThinkSmart operates and changes in laws or
in supervisory expectations or requirements. Other unknown or
unpredictable factors could cause actual results to differ
materially from those in the forward-looking statements. Such
forward-looking statements should therefore be construed in the
light of such factors. Neither Bidco nor ThinkSmart, nor any of
their respective associates or directors, officers or advisers,
provides any representation, assurance or guarantee that the
occurrence of the events expressed or implied in any
forward-looking statements in this announcement will actually
occur. You are cautioned not to place any reliance on these
forward-looking statements. Other than in accordance with their
legal or regulatory obligations, neither Bidco nor ThinkSmart is
under any obligation, and Bidco and ThinkSmart expressly disclaim
any intention or obligation, to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Scheme Booklet
This Scheme Booklet relates to a scheme of arrangement between
ThinkSmart Limited and the Scheme Shareholders which, if
implemented, will result in Tuscan Equity Pty Ltd, a company wholly
owned and controlled by Mr Ned Montarello, ThinkSmart's Executive
Chairman and CEO, acquiring all of the Scheme Shares.
The notices for each Scheme Meeting are included in this Scheme
Booklet. A proxy form for the Scheme Meetings also accompanies this
Scheme Booklet.
The notice for ThinkSmart's 2022 Annual General Meeting is also
included in this Scheme Booklet. A proxy form for the Annual
General Meeting also accompanies this Scheme Booklet.
VOTE IN FAVOUR
The Independent Expert has concluded that the Scheme is fair and
reasonable and therefore in the best interests of ThinkSmart
Shareholders (other than the Excluded Shareholders), in the absence
of a Superior Proposal.
The ThinkSmart Independent Board Committee unanimously
recommends that you vote in favour of the Scheme, in the absence of
a Superior Proposal and subject to the Independent Expert
continuing to conclude that the Scheme is in the best interests of
ThinkSmart Shareholders (other than the Excluded Shareholders).
This is an important document and requires your immediate
attention.
You should read it entirely before deciding whether or not to
vote in favour of the Scheme.
If you are in any doubt about how to deal with this document,
you should contact your broker or financial, taxation, legal or
other professional adviser immediately.
Important notices
General
This Scheme Booklet is important and requires your immediate
attention. You should read this Scheme Booklet in full before
making any decision as to how to vote at the Scheme Meeting
applicable to you.
Nature of this Scheme Booklet
This Scheme Booklet includes the explanatory statement for the
Scheme required by subsection 412(1) of the Corporations Act.
This Scheme Booklet also includes the explanatory statements
required by section 260B(4) of the Corporations Act (in relation to
the Financial Assistance Resolution) and section 219(1) of the
Corporations Act (in relation to the Financial Benefit
Resolution).
This Scheme Booklet does not constitute or contain an offer to
ThinkSmart Shareholders, or a solicitation of an offer from
ThinkSmart Shareholders, in any jurisdiction. This Scheme Booklet
is not a disclosure document required by Chapter 6D of the
Corporations Act. Subsection 708(17) of the Corporations Act
provides that Chapter 6D of the Corporations Act does not apply in
relation to arrangements under Part 5.1 of the Corporations Act
approved at a meeting held as a result of an order under subsection
411(1). Instead, ThinkSmart Shareholders asked to vote on an
arrangement at such a meeting must be provided with an explanatory
statement as referred to above.
ASIC
A copy of this Scheme Booklet has been registered by ASIC for
the purposes of subsection 412(6) of the Corporations Act. ASIC has
been given the opportunity to comment on this Scheme Booklet in
accordance with subsection 411(2) of the Corporations Act. Neither
ASIC, nor any of its officers, takes any responsibility for the
contents of this Scheme Booklet.
ASIC has been requested to provide a statement, in accordance
with paragraph 411(17)(b) of the Corporations Act, that it has no
objection to the Scheme. If ASIC provides that statement, it will
be produced to the Court at the time of the Court hearings to
approve the Scheme.
Important notice associated with Court order under subsection
411(1) of the Corporations Act
The fact that, under subsection 411(1) of the Corporations Act,
the Court has ordered that a meeting be convened and has approved
the explanatory statement required to accompany the Notice of
Scheme Meetings does not mean that the Court:
-- has formed any view as to the merits of the proposed Scheme
or as to how ThinkSmart Shareholders should vote (on this matter
ThinkSmart Shareholders must reach their own conclusion); or
-- has prepared, or is responsible for the content of, the explanatory statement.
Notice of Scheme Meetings
The Notice of General Scheme Meeting (for ThinkSmart
Shareholders who are not Excluded Shareholders) is set out in
Annexure 4 . The Notice of Excluded Shareholder Scheme Meeting (for
Excluded Shareholders) is set out in Annexure 5 .
Notice of Annual General Meeting
The Notice of Annual General Meeting is set out in Annexure 6
.
Notice of Second Court Hearing
At the Second Court Hearing, the Court will consider whether to
approve the Scheme following the vote at the Scheme Meetings. Any
ThinkSmart Shareholder may appear at the Second Court Hearing,
currently expected to be held at 10.15am (Perth time) on 22
November 2022 at the Federal Court of Australia, Western Australia
Registry, Peter Durack Commonwealth Law Building, 1 Victoria
Avenue, Perth, Western Australia. Any ThinkSmart Shareholder who
wishes to oppose approval of the Scheme at the Second Court Hearing
may do so by filing with the Court and serving on ThinkSmart a
notice of appearance in the prescribed form together with any
affidavit that the ThinkSmart Shareholder proposes to rely on.
No investment advice
This Scheme Booklet has been prepared without reference to the
investment objectives, financial and taxation situation or
particular needs of any ThinkSmart Shareholder or any other person.
The information and recommendations contained in this Scheme
Booklet do not constitute, and should not be taken as, financial
product advice. The ThinkSmart Independent Board Committee
encourages you to seek independent financial and taxation advice
before making any investment decision and any decision as to
whether or not to vote in favour of the Scheme. This Scheme Booklet
should be read in its entirety before making a decision on whether
or not to vote in favour of the Scheme. In particular, it is
important that you consider the potential risks if the Scheme does
not proceed, as set out in section 7 , and the views of the
Independent Expert set out in the Independent Expert's Report
contained in Annexure 1 . If you are in doubt as to the course you
should follow, you should consult an independent and appropriately
licensed and authorised professional adviser immediately.
Forward looking statements
Some of the statements appearing in this Scheme Booklet
(including in the Independent Expert's Report) may be in the nature
of forward looking statements. Forward looking statements or
statements of intent in relation to future events in this Scheme
Booklet (including in the Independent Expert's Report) should not
be taken to be forecasts or predictions that those events will
occur. Forward looking statements generally may be identified by
the use of forward looking words such as 'believe', 'aim',
'expect', 'anticipate', 'intending', 'foreseeing', 'likely',
'should', 'planned', 'may', 'estimate', 'potential', or other
similar words. Similarly, statements that describe the objectives,
plans, goals, intentions or expectations of ThinkSmart or BidCo are
or may be forward looking statements. You should be aware that such
statements are only opinions and are subject to inherent risks and
uncertainties. Those risks and uncertainties include factors and
risks specific to ThinkSmart or BidCo and / or the industries in
which they operate, as well as general economic conditions,
prevailing exchange rates and interest rates and conditions in
financial markets.
Actual events or results may differ materially from the events
or results expressed or implied in any forward looking statement
and deviations are both normal and to be expected. None of
ThinkSmart, BidCo, or their respective officers, directors,
employees or advisers or any person named in this Scheme Booklet or
any person involved in the preparation of this Scheme Booklet makes
any representation or warranty (either express or implied) as to
the accuracy or likelihood of fulfilment of any forward looking
statement, or any events or results expressed or implied in any
forward looking statement. Accordingly, you are cautioned not to
place undue reliance on those statements.
Any forward looking statements in this Scheme Booklet reflect
views held only at the date of this Scheme Booklet. Subject to any
continuing obligations under the AIM Rules, UK MAR or the
Corporations Act, ThinkSmart and BidCo and their respective
officers, directors, employees and advisers, disclaim any
obligation or undertaking to distribute after the date of this
Scheme Booklet any updates or revisions to any forward looking
statements to reflect (a) any change in expectations in relation to
such statements; or (b) any change in events, conditions or
circumstances on which any such statement is based.
Responsibility statement
ThinkSmart has prepared, and is responsible for, the ThinkSmart
Information. Neither BidCo nor any of its subsidiaries, directors,
officers, employees or advisers assume any responsibility for the
accuracy or completeness of the ThinkSmart Information.
BidCo has prepared, and is responsible for, the BidCo
Information. Neither ThinkSmart nor any of its subsidiaries,
directors, officers, employees or advisers assume any
responsibility for the accuracy or completeness of the BidCo
information.
Grant Thornton Corporate Finance Pty Ltd has prepared the
Independent Expert's Report (as set out in Annexure 1 ) and takes
responsibility for that report. None of ThinkSmart or BidCo or any
of their respective subsidiaries, directors, officers, employees or
advisers assume any responsibility for the accuracy or completeness
of the information contained in the Independent Expert's Report,
except, in the case of ThinkSmart, in relation to the information
which it has provided to the Independent Expert.
No consenting party has withdrawn their consent to be named
before the date of this Scheme Booklet.
Foreign jurisdictions
The release, publication or distribution of this Scheme Booklet
in jurisdictions other than Australia and the UK may be restricted
by law or regulation in such other jurisdictions and persons
outside of Australia or the UK who come into possession of this
Scheme Booklet should seek advice on and observe any such
restrictions. Any failure to comply with such restrictions may
constitute a violation of applicable laws or regulations.
ThinkSmart disclaims all liabilities to such persons who contravene
these laws.
ThinkSmart Shareholders who are nominees, trustees or custodians
are encouraged to seek independent advice as to how they should
proceed.
This Scheme Booklet has been prepared in accordance with the
laws of Australia and the information contained in this Scheme
Booklet may not be the same as that which would have been disclosed
if this Scheme Booklet had been prepared in accordance with the
laws and regulations of a jurisdiction outside of Australia.
Notice for US investors
The Scheme relates to shares of an AIM-listed Australian company
and is proposed to be effected by means of a scheme of arrangement
under the laws of Australia. A transaction effected by means of
Australian scheme of arrangement is not subject to the tender offer
rules or the proxy solicitation rules under the US Securities
Exchange Act of 1934, as amended. Accordingly, the Scheme is
subject to the disclosure and procedural requirements applicable in
Australia to schemes of arrangement (and, to the extent applicable,
the AIM Rules, UK MAR and the Corporations Act) which differ from
the disclosure and procedural requirements of the United States
tender offer and proxy solicitation rules.
The receipt of consideration by a US holder for the transfer of
its ThinkSmart Shares pursuant to the Scheme will likely be a
taxable transaction for United States federal income tax purposes.
Each ThinkSmart Shareholder is urged to consult their own
independent professional adviser immediately regarding the tax
consequences of the Scheme applicable to them, including under
applicable United States state and local, as well as overseas and
other, tax laws.
Any financial information relating to ThinkSmart included in
this Scheme Booklet has been or shall have been prepared in
accordance with accounting standards applicable in Australia and,
to the extent applicable, the AIM Rules, UK MAR and the
Corporations Act, and may not be comparable to financial
information of US companies or companies whose financial statements
are prepared in accordance with generally accepted accounting
principles in the United States.
It may be difficult for US ThinkSmart Shareholders to enforce
their rights or any claims arising out of the US federal securities
laws, since ThinkSmart is incorporated in a country other than the
United States, and some or all of its officers and directors may be
residents of countries other than the United States. US ThinkSmart
Shareholders may not be able to sue a non-US company or its
officers or directors in a non-US court for violations of US
securities laws. Further, it may be difficult to compel a non-US
company or non-US residents to subject themselves to a US court's
jurisdiction and judgement.
Financial amounts and effects of rounding
All financial amounts in this Scheme Booklet are expressed in
Australian currency unless otherwise stated. A number of figures,
amounts, percentages, estimates, calculations of value and
fractions in the Scheme Booklet are subject to the effect of
rounding. Accordingly, any discrepancies between totals in tables
or financial statements, or in calculations, graphs or charts are
due to rounding. All financial and operational information set out
in this Scheme Booklet is current as at the date of this Scheme
Booklet, unless otherwise stated.
Charts and diagrams
Any diagrams, charts, graphs or tables appearing in this Scheme
Booklet are illustrative only and may not be drawn to scale. Unless
stated otherwise, all data contained in diagrams, charts, graphs
and tables is based on information available as at the Last
Practicable Date.
Timetable and dates
All times and dates referred to in this Scheme Booklet are times
and dates in Perth, Australia, unless otherwise indicated. All
times and dates relating to the implementation of the Scheme
referred to in this Scheme Booklet may change and, among other
things, are subject to all necessary approvals from Government
Agencies.
External websites
Unless expressly stated otherwise, the content of the ThinkSmart
website does not form part of this Scheme Booklet and ThinkSmart
Shareholders should not rely on any such content.
Tax consequences of the Scheme
If the Scheme becomes Effective, there will be tax consequences
for the Scheme Shareholders which may include tax being payable.
For further detail regarding general Australian and UK tax
consequences of the Scheme, refer to section 8 of this Scheme
Booklet. The tax consequences may vary depending on the nature and
characteristics of Scheme Shareholders and their specific
circumstances. Accordingly, you should seek professional tax advice
in relation to your particular circumstances.
Privacy
ThinkSmart may collect personal information in the process of
implementing the Scheme. The type of information that it may
collect about you includes your name, contact details and
information on your shareholding in ThinkSmart and the names of
persons appointed by you to act as a proxy, attorney or corporate
representative at the Scheme Meetings as relevant to you. The
collection of some of this information is required or authorised by
the Corporations Act. The primary purpose of the collection of
personal information is to assist ThinkSmart to conduct the Scheme
Meetings and implement the Scheme. Without this information,
ThinkSmart may be hindered in its ability to issue this Scheme
Booklet and implement the Scheme. Personal information of the type
described above may be disclosed to the ThinkSmart Share Registry,
third party service providers (including print and mail service
providers and parties otherwise involved in the conduct of the
Scheme Meetings), authorised securities brokers, professional
advisers, related bodies corporate of ThinkSmart, Government
Agencies, and also where disclosure is otherwise required or
allowed by law. ThinkSmart Shareholders who are individuals and the
other individuals in respect of whom personal information is
collected as outlined above have certain rights to access the
personal information collected in relation to them. If you would
like to obtain details of the information about you held by the
ThinkSmart Share Registry in connection with ThinkSmart Shares,
please contact the ThinkSmart Share Registry. ThinkSmart
Shareholders who appoint an individual as their proxy, corporate
representative or attorney to vote at the Scheme Meetings should
ensure that they inform such an individual of the matters outlined
above. Further information about how ThinkSmart collects, uses and
discloses personal information is contained in ThinkSmart's Privacy
Policy located at thinksmartworld.com/privacy.
Date of Scheme Booklet
This Scheme Booklet is dated 24 October 2022.
Table of contents
Letter from the Chair of the ThinkSmart Independent Board
Committee
Key dates
1 Key considerations relevant to your vote
2 Frequently asked questions
3 What should you do?
4 Overview of the Scheme
5 Information about ThinkSmart
6 Information about BidCo
7 Risks
8 Tax implications
9 Financial Assistance Resolution and Financial Benefit Resolution
10 Additional information
11 Glossary
Annexure 1
Independent Expert's Report
Annexure 2
Scheme of Arrangement
Annexure 3
Deed Poll
Annexure 4
Notice of General Scheme Meeting
Annexure 5
Notice of Excluded Shareholder Scheme Meeting
Annexure 6
Notice of Annual General Meeting
Corporate directory
Letter from the Chair of the ThinkSmart Independent Board
Committee
Dear fellow ThinkSmart Shareholder,
Proposed acquisition of ThinkSmart Ltd by Tuscan Equity Pty
Ltd
On behalf of the ThinkSmart Independent Board Committee, I am
pleased to provide you with this Scheme Booklet which contains
important information for your consideration about the proposed
acquisition of ThinkSmart by Tuscan Equity Pty Ltd (BidCo) by way
of a scheme of arrangement under the Australian Corporations Act
2001 (Cth).
Background to the Scheme
On 29 July 2022, ThinkSmart announced that it had entered into a
Scheme Implementation Deed with BidCo under which it is proposed
that BidCo will acquire all of the shares in ThinkSmart as at the
Scheme Record Date.
BidCo is a proprietary company limited by shares that was
incorporated in Australia for the purposes of the Scheme and is
wholly owned and controlled by Mr Ned Montarello, ThinkSmart's
Executive Chairman, CEO, founder and (together with the Excluded
Shareholders) current 29.4% shareholder. [1]
As such, an Independent Board Committee comprising all of the
directors of ThinkSmart other than Mr Ned Montarello has been
established to consider the proposal for the Scheme on behalf of
ThinkSmart.
In order for the Scheme to be implemented it must be approved at
meetings of ThinkSmart Shareholders and by the Court. The Scheme is
also conditional on regulatory approval from the UK Financial
Conduct Authority (described further below). In addition, the
Scheme is subject to other customary conditions, including the
Independent Expert continuing to conclude that the Scheme is in the
best interests of ThinkSmart Shareholders (excluding the Excluded
Shareholders).
The purpose of this Scheme Booklet is to provide you with
information about the Scheme to assist you to determine how to vote
on the Scheme at the applicable Scheme Meeting.
Overview of the Scheme
If the Scheme is approved and implemented, ThinkSmart
Shareholders entitled to receive the Cash Consideration will
receive cash consideration equal to the proceeds realised from the
post-Scheme implementation sale on the New York Stock Exchange of
the proportion of the 618,750 shares in Block held by ThinkSmart
attributable to their fully diluted [2] shareholding in ThinkSmart
(net of their proportion of the 0.5% sale fees and other applicable
costs, and after conversion of the proceeds from United States
Dollars into Pounds Sterling and Australian Dollars as
applicable).
Holders of ThinkSmart Depositary Interests will be paid the Cash
Consideration in Pounds Sterling, while holders of ThinkSmart
Shares who do not hold via ThinkSmart Depositary Interests will
receive the Cash Consideration in Australian Dollars but can make
an election to receive Pounds Sterling.
The amount of Cash Consideration actually received by Scheme
Shareholders will be dependent on both the price of Block Shares at
the time of the sale of the Block Sale Shares and the applicable
exchange rates at the time of the conversion of the sale proceeds.
Therefore, the amount of Cash Consideration received by Scheme
Shareholders will not be known until after the Implementation Date
and therefore after ThinkSmart Shareholders are required to vote on
the Scheme.
Further detail regarding the variability of the Cash
Consideration is set out in section 4.1 of this Scheme Booklet.
The following chart shows the price of Block Shares over the
time period used by the Independent Expert to value the Cash
Consideration (see the Independent Expert Report in Annexure 1 for
further details):
The Cash Consideration will be paid to those ThinkSmart
Shareholders entitled to receive the Cash Consideration in cash
after implementation of the Scheme, which is expected to occur in
December 2022.
Whilst the Scheme will result in ThinkSmart Shareholders selling
their shareholding in ThinkSmart and no longer having exposure to
Block Shares via ThinkSmart, ThinkSmart Shareholders can (if they
wish to) make their own arrangements to purchase shares in Block
on-market, thereby enabling them to have a direct exposure to Block
Shares rather than through a shareholding in ThinkSmart. ThinkSmart
Shareholders wishing to make their own arrangements to purchase
Block Shares directly should seek their own advice to understand
the relevant implications (including tax implications) and should
be aware that there may be transaction costs in connection with the
purchase of Block Shares on-market.
Shareholders in ThinkSmart will be able to continue to trade
ThinkSmart Shares (via the ThinkSmart Depositary Interests) on the
Alternative Investment Market of the London Stock Exchange up until
suspension of dealings on AIM of ThinkSmart Depositary Interests on
the Effective Date.
Excluded Shareholders
The Excluded Shareholders are those ThinkSmart Shareholders who
are associated with BidCo and Mr Ned Montarello. Whilst ThinkSmart
Shareholders other than Excluded Shareholders will receive the Cash
Consideration under the Scheme, the Excluded Shareholders can elect
to receive either Cash Consideration or BidCo Shares (or a
combination thereof) as consideration for their Scheme Shares. To
the extent the Excluded Shareholders elect to receive BidCo Shares,
they will retain exposure to ThinkSmart's assets and liabilities
after the Scheme is implemented, which are discussed further
below.
The Excluded Shareholders will not be permitted to vote at the
General Scheme Meeting and will instead vote at a separate Scheme
Meeting (being the Excluded Shareholder Scheme Meeting) on a
separate Scheme Resolution (being the Excluded Shareholder Scheme
Resolution). The reason there are two Scheme Meetings is that the
Excluded Shareholders constitute a separate class of members
because they are offered different consideration under the Scheme
as noted above.
Financial Assistance Resolution and the Financial Benefit
Resolution
For the Scheme to proceed, ThinkSmart Shareholders will also
need to approve the Financial Assistance Resolution and the
Financial Benefit Resolution at ThinkSmart's 2022 Annual General
Meeting, which will be held on the same day and prior to the
General Scheme Meeting.
The Excluded Shareholders will be excluded from voting on the
Financial Assistance Resolution and the Financial Benefit
Resolution.
Details of the Financial Assistance Resolution and the Financial
Benefit Resolution, including why these resolutions are required,
are set out in section 9 of this Scheme Booklet and in the Notice
of Annual General Meeting in Annexure 6 .
UK Financial Conduct Authority
Furthermore, the Scheme is conditional on, and will not become
Effective unless, the UK Financial Conduct Authority provides the
necessary approval under the UK Financial Services and Markets Act
2000.
Details of the regulatory approvals that are required to
implement the Scheme, including the reasons why a change in control
notification has been submitted to the UK Financial Conduct
Authority in connection with the Scheme, are set out in sections
4.3 and 7.4(a) of this Scheme Booklet.
ThinkSmart's assets other than the Block Shares
If the Scheme is Effective, following the sale of the Block Sale
Shares and payment of the Scheme Consideration, ThinkSmart's assets
and operations will comprise:
-- approximately GBP2.2 million in cash, noting that the
ThinkSmart Group's cash balance as at the Last Practicable Date is
approximately GBP2.8 million;
-- the remainder of the Block Shares which are not Block Sale Shares;
-- ThinkSmart's legacy leasing business which is currently
subject to a managed wind down process; and
-- ThinkSmart's business of providing an outsourced call centre
customer support service to support the Clearpay business which was
previously owned by ThinkSmart.
In relation to these assets and operations, if the Scheme is
Effective BidCo currently intends to procure that ThinkSmart:
-- continues to hold the remaining Block Shares which are not
Block Sale Shares and will monitor this holding over time taking
into account its own relevant financial objectives and priorities
(including rationalisation of the legacy ThinkSmart corporate
group);
-- continues the existing managed wind down process for the
legacy leasing business in an orderly manner through to completion;
and
-- continues to provide the outsourced call centre customer
support service to the Clearpay business which was previously owned
by ThinkSmart, noting that this can be terminated by either
Clearpay or ThinkSmart at any time with 3 months' notice.
Where appropriate, BidCo may also arrange the rationalisation of
any subsidiaries in the ThinkSmart corporate group which are
dormant or otherwise no longer required.
Recommendation of the ThinkSmart Independent Board Committee
The ThinkSmart Independent Board Committee unanimously
recommends that ThinkSmart Shareholders vote in favour of the
Scheme in the absence of a Superior Proposal and subject to the
Independent Expert continuing to conclude that the Scheme is in the
best interests of ThinkSmart Shareholders (other than the Excluded
Shareholders). Subject to those same qualifications, each member of
the ThinkSmart Independent Board Committee intends to vote, or
cause to be voted, all the ThinkSmart Shares held or controlled by
them in favour of the Scheme at the applicable Scheme Meeting.
Details of the interests of the ThinkSmart Directors (including
the members of the ThinkSmart Independent Board Committee) in
ThinkSmart are set out in section 10.1 of this Scheme Booklet.
In forming its unanimous recommendation, the ThinkSmart
Independent Board Committee carefully considered the following
reasons (which are explained in more detail in section 1 of this
Scheme Booklet):
-- The Independent Expert has concluded that the Scheme is fair
and reasonable and therefore in the best interests of ThinkSmart
Shareholders (other than the Excluded Shareholders), in the absence
of a Superior Proposal.
-- The Scheme facilitates an exit by ThinkSmart Shareholders of
their shareholding in ThinkSmart at a price that eliminates the
discount to the market value of ThinkSmart's holding in Block
Shares at which ThinkSmart Shares have historically traded.
Prior to the announcement of the Scheme on 29 July 2022 on AIM,
ThinkSmart Shares traded at an approximate 31% average discount to
the market value of its Block shareholding since it received the
Block Shares on 1 February 2022. [3] As at the Last Practicable
Date, this discount had reduced to approximately 12% since the
announcement of the Scheme. The Scheme effectively allows Scheme
Shareholders to eliminate the prevailing discount at which
ThinkSmart Shares have traded relative to the market value of its
Block shareholding and realise value for their interest in the
Block Shares (held indirectly via ThinkSmart).
Further detail regarding the variability of the Cash
Consideration is set out in section 4.1 .
-- Under the Scheme, ThinkSmart Shareholders entitled to receive
Cash Consideration will receive cash consideration equal to their
proportion of proceeds realised from the post-Scheme implementation
sale on the New York Stock Exchange of the Block Sale Shares (net
of their proportion of the 0.5% sale fees and other applicable
costs, and after conversion of the proceeds from United States
Dollar into Pounds Sterling and Australian Dollars (as
applicable)). The Scheme therefore allows ThinkSmart Shareholders
to realise value for their ThinkSmart Shares within a relatively
short time frame, with payment of the Cash Consideration expected
to be made in December 2022.
As announced by ThinkSmart on 13 May 2022, ThinkSmart has been
undertaking a strategic review of its Block shareholding and has
considered a number of options to maximise shareholder value (which
included reviewing BidCo's proposal to acquire all the shares in
ThinkSmart as described above). The proposed Scheme is the
culmination of that review.
The ThinkSmart Independent Board Committee considers the Scheme
to be the preferred commercial mechanism for Scheme Shareholders to
exit their investment in ThinkSmart as compared to remaining
shareholders of ThinkSmart during the eventual wind down and
liquidation of ThinkSmart. In particular, a public company wind
down and liquidation process is expected to be a more protracted
process than the Scheme that would result in additional costs to
ThinkSmart (and indirectly ThinkSmart Shareholders), therefore
reducing ThinkSmart's available cash and the value that would be
available to ThinkSmart Shareholders.
While the Scheme will not result in ThinkSmart Shareholders
realising value for the residual components of the ThinkSmart
business (as detailed in section 5.2(b) of this Scheme Booklet) or
receiving the cash currently held by ThinkSmart, these assets are
considered to be immaterial by the ThinkSmart Independent Board
Committee when compared to the value of ThinkSmart's holding in
Block Shares. Although ThinkSmart will continue to generate income
from its call centre and secondary rentals, the ThinkSmart
Independent Board Committee considers these operations lack the
scale to cover both operating and corporate costs, such as data
storage costs, salaries and property leases and the cash balance
would be expected to reduce to cover these costs and likely
eventual wind down and liquidation of ThinkSmart. The ThinkSmart
Independent Board Committee expects that the costs of maintaining
ThinkSmart as a listed entity until completion of the wind down
would likely exceed the cash generated from the wind down of its
business operations. The ThinkSmart Independent Board Committee
therefore considers the Scheme to be the optimal commercial
transaction overall.
-- ThinkSmart Shares currently trade at a discount relative to
the market value of its holding in Block Shares. As noted above,
prior to the announcement of the Scheme on 29 July 2022, ThinkSmart
Shares traded at an approximate 31% average discount to the market
value of its Block shareholding since it received the Block Shares
on 1 February 2022. [4] As at the Last Practicable Date, this
discount had reduced to approximately 12% since the announcement of
the Scheme.
If the Scheme does not proceed, and no comparable proposal or
Superior Proposal is received by the ThinkSmart Independent Board
Committee, then the discount between the price of a ThinkSmart
Share and the market value of ThinkSmart's Block holding could
increase to a level closer to that observed prior to the
announcement of the Scheme. This would likely reduce the ThinkSmart
Share price compared to the ThinkSmart Share price as at the Last
Practicable Date.
-- You will not incur any brokerage charges on the transfer of
your ThinkSmart Shares to BidCo under the Scheme. However,
brokerage will be payable in relation to the sale of the Block
Shares - see section 4.1 of this Scheme Booklet for further
information. It is possible that such brokerage charges (and,
potentially GST/VAT on those charges) would be incurred if you
dispose of your ThinkSmart Shares other than under the Scheme.
In determining to unanimously recommend the Scheme, the
ThinkSmart Independent Board Committee also considered the
disadvantages of the Scheme proceeding, and reasons why you may
consider voting against the Scheme, which include the
following:
-- There are a number of risks associated with the Scheme, which
are set out in detail in section 7 of this Scheme Booklet. These
risks include:
-- performance risk;
-- risks relating to the deferred payment of the Cash
Consideration, including the uncertainty regarding the price of
Block Shares at the time the Block Sale Shares are sold and, in
particular, the risk that the Block Share price may fall at any
time prior to the sale of the Block Sale Shares; and
-- risks relating to implementation of the Scheme.
In relation to the performance risk specifically, it is noted
that if the Scheme becomes Effective, ThinkSmart Shareholders will
transfer their ThinkSmart Shares to BidCo on the Implementation
Date. However, ThinkSmart Shareholders entitled to receive Cash
Consideration will not receive their Cash Consideration until after
the Implementation Date and the amount of Cash Consideration will
be determined by the price at which the Block Sale Shares can be
sold for following Implementation.
There is therefore a risk that ThinkSmart Shareholders transfer
their ThinkSmart Shares to BidCo on the Implementation Date but
that BidCo does not pay the Cash Consideration, in breach of its
obligations under the Scheme Implementation Deed, Deed Poll and
Funds Flow Deed. However, the ThinkSmart Independent Board
Committee considers this risk to be theoretical only, because:
-- it would require BidCo (which is controlled by ThinkSmart's
founder and Executive Chairman) to deliberately breach its
obligations under the Scheme Implementation Deed, Deed Poll and
Funds Flow Deed all of which are legally binding documents which
form key elements of the Court supervised process in connection
with the Scheme. If, contrary to the ThinkSmart Independent Board
Committee's expectation, such a breach did occur, Scheme
Shareholders will have an unsecured claim against BidCo under the
Deed Poll in relation to the payment of the Cash Consideration;
and
-- as a practical matter, under the terms of the Scheme
Implementation Deed, the members of the ThinkSmart Independent
Board Committee will remain on the ThinkSmart Board until after the
Cash Consideration has been despatched to Scheme Shareholders, and
so, the ThinkSmart Independent Board Committee will assist with
overseeing the payment of the Cash Consideration to the Scheme
Shareholders in accordance with the Scheme.
Further details of this performance risk are set out in section
7.4(b) of this Scheme Booklet.
-- You may disagree with the ThinkSmart Independent Board
Committee's unanimous recommendation and the Independent Expert's
conclusion.
-- You may believe it is in your best interests to maintain your
current investment and risk profile, in particular:
-- you may consider that the price of Block Shares in the future
will be higher than the prevailing price at the time of the sale of
the Block Sale Shares in connection with the Scheme; and
-- you may consider that the value of ThinkSmart's legacy
leasing business may, in the future, increase above its current
value or be greater than the value attributed to it by the
Independent Expert (see section 6 of the Independent Expert's
Report in Annexure 1 ).
-- You may consider that a Superior Proposal could emerge in the
future. The ThinkSmart Independent Board Committee is, as at the
date of this Scheme Booklet, not aware of, and has not received,
any Superior Proposal.
-- The tax consequences of transferring your ThinkSmart Shares
pursuant to the Scheme, specifically the bringing forward of a
taxation event, may not be attractive to you.
Further details on these reasons are provided in section 1.2 of
this Scheme Booklet.
Independent Expert
The ThinkSmart Independent Board Committee appointed Grant
Thornton Corporate Finance Pty Ltd as the Independent Expert to
assess the merits of the Scheme. The Independent Expert has
concluded that the Scheme is fair and reasonable and therefore in
the best interests of ThinkSmart Shareholders (excluding the
Excluded Shareholders), in the absence of a Superior Proposal.
A complete copy of the Independent Expert's Report is included
as Annexure 1 to this Scheme Booklet.
How to vote
Your vote is important and I encourage you to vote on this
significant proposed transaction. ThinkSmart will conduct the
Scheme Meetings and Annual General Meeting virtually via the
Computershare Virtual Meeting Platform with ThinkSmart Shareholders
(and their proxies) being able to cast votes in real time during
the Meetings.
For the Scheme to proceed, ThinkSmart Shareholders will need to
approve the Scheme Resolutions at the applicable Scheme Meeting and
the Financial Assistance Resolution and Financial Benefit
Resolution at ThinkSmart's 2022 Annual General Meeting, which will
be held prior to the Scheme Meetings. The ThinkSmart Independent
Board Committee encourages ThinkSmart Shareholders to vote at both
the Annual General Meeting and the applicable Scheme Meeting.
All ThinkSmart Shareholders who would like to have their vote
counted must either:
-- vote by lodging a Proxy Form online at
www.investorvote.com.au (Control ID: 181913 (for the Annual General
Meeting), 181915 (for the General Scheme Meeting) and 181916 (for
the Excluded Shareholder Scheme Meeting)) for the applicable
Meeting no later than the times noted in the Key Dates section of
this Scheme Booklet. ThinkSmart Shareholders are strongly
encouraged to lodge a Proxy Form appointing the Chair of the
applicable Meeting as their proxy. ThinkSmart Shareholders can
complete the Proxy Form that was enclosed with the Notice of
Meeting and Notice and Access Letter to provide specific
instructions on how a shareholder's vote is to be cast on each item
of business, and the Chair must follow those instructions.
Lodgement instructions are set out in the Proxy Form attached to
each Notice of Meeting and Notice and Access Letter. If a person
other than the Chair is appointed as proxy, the proxy must attend
the Meeting via the Computershare Virtual Meeting Platform and
vote. The proxy will revert to the Chair in the absence of the
appointed proxy holder's attendance at the applicable Meeting;
or
-- participate via the Computershare Virtual Meeting Platform
and vote live at the applicable Meeting. The Meetings will be
accessible to all ThinkSmart Shareholders (and their proxies) via
the Computershare Virtual Meeting Platform, which will allow
ThinkSmart Shareholders (and their proxies) to listen to and
observe the applicable Meeting and ask questions on the business of
the Meeting. ThinkSmart Shareholders (and their proxies) attending
via the Computershare Virtual Meeting Platform will be able to
participate in the Meetings and vote in real time.
ThinkSmart DI Holders may access the applicable Meetings via the
Computershare Virtual Meeting Platform but will not be permitted to
vote at the applicable Meeting. For their votes to be counted,
ThinkSmart DI Holders must submit their CREST Voting Instruction to
ThinkSmart's agent by the required cut-off time set out in section
3.2 of this Scheme Booklet. Alternatively, ThinkSmart DI Holders
can vote using the enclosed Form of Instruction as per the
instruction set out in section 3.2 .
I encourage you to submit a directed proxy vote so that your
vote will be counted if for any reason you cannot join the meeting
(for example, if there is an issue with your internet connection on
the day of the meeting).
The Scheme will only become Effective if it is approved by:
-- at least 75% of the total number of votes cast on the General
Scheme Resolution by ThinkSmart Shareholders (excluding the
Excluded Shareholders); and
-- more than 50% of ThinkSmart Shareholders (excluding the
Excluded Shareholders) by number present and voting at the General
Scheme Meeting (unless the Court orders otherwise).
The Scheme also requires similar approvals from the Excluded
Shareholders on the Excluded Shareholder Scheme Resolution, as
explained in section 4.5 (b) of this Scheme Booklet.
In addition, the Scheme will only become Effective if the
Financial Assistance Resolution and Financial Benefit Resolution
are passed at the Annual General Meeting, as set out in section 9
of this Scheme Booklet.
If you wish for the Scheme to proceed, it is important that you
vote in favour of the applicable Scheme Resolution at the
applicable Scheme Meeting and the Financial Assistance Resolution
and Financial Benefit Resolution at the Annual General Meeting.
Further details regarding how to access the Computershare
Virtual Meeting Platform and vote are set out in:
-- the Notice of General Scheme Meeting for ThinkSmart
Shareholders who are not Excluded Shareholders, as contained in
Annexure 4 of this Scheme Booklet;
-- the Notice of Excluded Shareholder Scheme Meeting for
Excluded Shareholders, as contained in Annexure 5 of this Scheme
Booklet; and
-- the Notice of Annual General Meeting for ThinkSmart
Shareholders, as contained in Annexure 6 of this Scheme
Booklet.
Further information
This Scheme Booklet sets out important information regarding the
Scheme, including the reasons for the ThinkSmart Independent Board
Committee's recommendation and the Independent Expert's Report. It
also sets out reasons why you may wish to vote against the Scheme,
as well as the risks associated with the Scheme (which are set out
in section 7 of this Scheme Booklet).
Please read this document carefully and in its entirety as it
will assist you in making an informed decision as to how to vote. I
would also encourage you to seek independent financial, legal and
taxation advice before making any investment decision in relation
to your ThinkSmart Shares.
If you have any questions, please contact the ThinkSmart
Shareholder Information Line on 1300 528 984 (within Australia) or
+61 3 9415 4826 (outside Australia), between 8.30am and 5.00pm
(Sydney time), Monday to Friday. ThinkSmart DI Holders can contact
the dedicated Depositary Interest Information Line on +44 0207 887
2225 or +44 0800 298 7356 (within the United Kingdom) between
9.00am and 5.00pm (London time), Monday to Friday.
On behalf of the ThinkSmart Independent Board Committee, I would
like to take this opportunity to thank you for your ongoing
support. I encourage you to vote in favour of the Scheme, which the
ThinkSmart Independent Board Committee believes, and the
Independent Expert has concluded, is fair and reasonable and
therefore in the best interests of ThinkSmart Shareholders (other
than the Excluded Shareholders), in the absence of a Superior
Proposal.
Yours sincerely
David Adams
Senior Independent Non-Executive Director
Chair of the ThinkSmart Independent Board Committee
Key dates
Event Time and date
================================================== ============================
First Court Date 21 October 2022
================================================== ============================
Date of this Scheme Booklet 24 October 2022
================================================== ============================
Latest time and date for receipt of proxy 14 November 2022
forms or powers of attorney by the ThinkSmart at 5.30pm (Perth
Share Registry for: time)
* Annual General Meeting
* General Scheme Meeting
* Excluded Shareholder Scheme Meeting
================================================== ============================
Time and date for determining eligibility 14 November 2022
to vote at the Annual General Meeting and at 5.30pm (Perth
the Scheme Meetings time) for ThinkSmart
Shareholders
11 November 2022
at 6.00pm (London
time) for ThinkSmart
DI Holders
================================================== ============================
Annual General Meeting 16 November 2022
at 4.00pm (Perth
time)
================================================== ============================
Scheme Meetings: 16 November 2022
* General Scheme Meeting (T) at:
* 5.00pm (Perth time)
* Excluded Shareholder Scheme Meeting*
* 5.30pm (Perth time)
*If the General Scheme Meeting concludes
after 5.30pm (Perth time) on this date,
the Excluded Shareholder Scheme Meeting
will begin as soon as practicable after
the conclusion of the General Scheme Meeting.
================================================== ============================
If the Scheme is approved by the Requisite Majorities
================================================================================
Second Court Date 22 November 2022
Court hearing to approve the Scheme
================================================== ============================
Last day for dealings in, and for the registration 22 November 2022
of transfer of, ThinkSmart Shares
Last day for repositioning securities between
the ThinkSmart Share Register (for Australian
shares) and the ThinkSmart DI Register (for
UK Depositary Interests)
================================================== ============================
Suspension of dealings in ThinkSmart Shares 23 November 2022
at 7.30am (London
time)
================================================== ============================
Effective Date 23 November 2022
Court order lodged with ASIC and announcement
to AIM
================================================== ============================
Scheme Record Date
Date for determining entitlements to Scheme 25 November 2022
Consideration for: at:
* ThinkSmart Shareholders * 5.00pm (Perth time)
* ThinkSmart DI Holders * 6.00pm (London time)
================================================== ============================
Disablement of CREST in respect of ThinkSmart 25 November 2022
Shares at 6.00pm London
time
================================================== ============================
Implementation Date 2 December 2022
================================================== ============================
Cancellation of admission to trading on 5 December 2022
AIM of ThinkSmart Shares at 7.00am (London
time)
================================================== ============================
Sale of Block Sale Shares 5 December 2022
to 7 December
2022
================================================== ============================
Payment of Scheme Consideration* As soon as practicable
following the
sale of the Block
Sale Shares, expected
to be approximately
8 Business Days
after completion
of the sale of
the Block Sale
Shares
================================================== ============================
All times and dates in the above timetable are references to the
time and date in Perth, Australia unless otherwise stated. All such
times and dates are subject to change. Certain times and dates are
conditional on the approval of the Scheme by ThinkSmart
Shareholders and by the Court, and the satisfaction of the other
conditions precedent of the Scheme set out in section 4.3 of this
Scheme Booklet, including regulatory approval from the UK Financial
Conduct Authority. Any changes will be announced by ThinkSmart via
the RNS of the LSE.
* For the avoidance of doubt, the value of the Cash
Consideration will not be known at the time of cancellation of
admission to trading on AIM of ThinkSmart Shares.
1 Key considerations relevant to your vote
1.1 Why you should vote in favour of the Scheme
(a) The ThinkSmart Independent Board Committee unanimously
recommends that you vote in favour of the Scheme, in the absence of
a Superior Proposal and subject to the Independent Expert
continuing to conclude that the Scheme is in the best interests of
ThinkSmart Shareholders (other than the Excluded Shareholders)
The ThinkSmart Independent Board Committee unanimously
recommends that ThinkSmart Shareholders vote in favour of the
Scheme, in the absence of a Superior Proposal and subject to the
Independent Expert continuing to conclude that the Scheme is in the
best interests of ThinkSmart Shareholders (other than the Excluded
Shareholders).
Subject to those same qualifications, each member of the
ThinkSmart Independent Board Committee intends to vote, or cause to
be voted, all the ThinkSmart Shares held or controlled by them in
favour of the Scheme at the applicable Scheme Meeting. The
interests of the Independent Directors in ThinkSmart Shares are set
out in section 10.1 .
(b) The Independent Expert has concluded that the Scheme is fair
and reasonable and, therefore, in your best interests
The Independent Expert has analysed ThinkSmart's business and,
in light of this analysis, the Independent Expert has concluded
that the Scheme is fair and reasonable and, therefore, is in the
best interests of ThinkSmart Shareholders (other than the Excluded
Shareholders), in the absence of a Superior Proposal.
The reasons why the Independent Expert reached these conclusions
are set out in the Independent Expert's Report, a copy of which is
included in Annexure 1 . The ThinkSmart Independent Board Committee
encourages you to read this report in its entirety.
(c) The Scheme allows ThinkSmart Shareholders to realise full
value at prevailing market prices for their pro rata interest in
Block
The Scheme facilitates an exit by ThinkSmart Shareholders of
their shareholding in ThinkSmart at a price that eliminates the
discount to the market value of ThinkSmart's holding in Block
Shares at which ThinkSmart Shares have historically traded.
Prior to the announcement of the Scheme on 29 July 2022,
ThinkSmart Shares traded at an approximate 31% average discount to
the market value of its Block shareholding since it received the
Block Shares on 1 February 2022. [5] As at the Last Practicable
Date, this discount had reduced to approximately 12% since the
announcement of the Scheme. The Scheme effectively allows Scheme
Shareholders to eliminate the prevailing discount at which
ThinkSmart Shares have traded relative to the market value of its
Block shareholding and realise value for their interest in the
Block Shares (held indirectly via ThinkSmart).
Further detail regarding the variability of the Cash
Consideration is set out in section 4.1 .
(d) The Scheme Consideration provides you with cash value for
your ThinkSmart Shares, together with an exit opportunity in
respect of your ThinkSmart Shares
Under the Scheme, ThinkSmart Shareholders entitled to receive
Cash Consideration will receive Cash Consideration equal to their
proportion of the proceeds realised from the post-Scheme
implementation sale on the New York Stock Exchange of the Block
Sale Shares (net of their proportion of the 0.5% sale fees and
other applicable costs, and after conversion of the proceeds from
United States Dollars into Pounds Sterling and Australian Dollars
(as applicable)). The Scheme therefore allows ThinkSmart
Shareholders to realise value for their ThinkSmart Shares within a
relatively short time frame, with payment of the Cash Consideration
to be made as soon as practicable following the sale of the Block
Sale Shares (payment expected to occur in December 2022).
As announced by ThinkSmart on 13 May 2022, ThinkSmart has been
undertaking a strategic review of its Block shareholding and has
considered a number of options to maximise shareholder value (which
included reviewing BidCo's proposal to acquire all the shares in
ThinkSmart as described above). The proposed Scheme is the
culmination of that review.
The ThinkSmart Independent Board Committee considers the Scheme
to be the preferred commercial mechanism for Scheme Shareholders to
exit their investment in ThinkSmart as compared to remaining
shareholders of ThinkSmart during the eventual wind down and
liquidation of ThinkSmart. In particular, a public company wind
down and liquidation process is expected to be a more protracted
process than the Scheme that would result in additional costs to
ThinkSmart (and indirectly ThinkSmart Shareholders), therefore
reducing ThinkSmart's available cash and the value that would be
available to ThinkSmart Shareholders.
While the Scheme will not result in ThinkSmart Shareholders
realising value for the residual components of the ThinkSmart
business (as detailed in section 5.2(b) of this Scheme Booklet) or
receiving the cash currently held by ThinkSmart, the ThinkSmart
Independent Board Committee considers that these assets are
immaterial when compared to the value of ThinkSmart's holding in
Block Shares. Although ThinkSmart will continue to generate income
from its call centre and secondary rentals, the ThinkSmart
Independent Board Committee considers these operations lack the
scale to cover both operating and corporate costs, such as data
storage costs, salaries and property leases and the cash balance
would be expected to reduce to cover these costs and likely
eventual wind down and liquidation of ThinkSmart. The ThinkSmart
Independent Board Committee expects that the costs of maintaining
ThinkSmart as a listed entity until completion of the wind down
would likely exceed the cash generated from the wind down of its
business operations. The ThinkSmart Independent Board Committee
therefore considers the Scheme to be the optimal commercial
transaction overall.
(e) No Superior Proposal has emerged
Since the proposed Scheme was announced up until the date of
this Scheme Booklet, no Superior Proposal has emerged.
The ThinkSmart Independent Board Committee is, as at the date of
this Scheme Booklet, not aware of, and has not received, any
Superior Proposal.
(f) The discount of ThinkSmart Shares relative to the market
value of its holding in Block Shares is expected to increase if the
Scheme does not proceed
ThinkSmart Shares have traded at a discount relative to the
market value of its holding in Block Shares. As noted above, prior
to the announcement of the Scheme on 29 July 2022, ThinkSmart
Shares traded at an approximate 31% average discount to the market
value of its Block shareholding since it received the Block Shares
on 1 February 2022. [6] As at the Last Practicable Date, this
discount had reduced to approximately 12% since the announcement of
the Scheme.
If the Scheme does not proceed, and no comparable proposal or
Superior Proposal is received by the ThinkSmart Independent Board
Committee, then the discount between the price of a ThinkSmart
Share and the market value of ThinkSmart's Block holding could
increase to a level closer to that observed prior to the
announcement of the Scheme. This would likely reduce the ThinkSmart
Share price compared to the ThinkSmart Share price as at the Last
Practicable Date.
(g) Brokerage charges will not apply to the transfer of your ThinkSmart Shares to BidCo
You will not incur any brokerage charges on the transfer of your
ThinkSmart Shares to BidCo under the Scheme. However, brokerage may
be payable in relation to the sale of the Block Shares - see
section 4.1 of this Scheme Booklet for further information.
It is possible that such brokerage charges (and, potentially
GST/VAT on those charges) would be incurred if you dispose of your
ThinkSmart Shares other than under the Scheme.
1.2 Why you may consider voting against the Scheme
(a) There are a number of risks associated with the Scheme
There are a number of risks associated with the Scheme, which
are set out in detail in section 7 of this Scheme Booklet. These
risks include the following:
Performance risk : If the Scheme becomes Effective, ThinkSmart
Shareholders will transfer their ThinkSmart Shares to BidCo on the
Implementation Date. However, ThinkSmart Shareholders entitled to
receive Cash Consideration will not receive their Cash
Consideration until after the Implementation Date and the amount of
Cash Consideration will be determined by the price at which the
Block Sale Shares can be sold for following Implementation.
There is therefore a risk that ThinkSmart Shareholders transfer
their ThinkSmart Shares to BidCo on the Implementation Date but
that BidCo does not pay the Cash Consideration, in breach of its
obligations under the Scheme Implementation Deed, Deed Poll and
Funds Flow Deed. However, the ThinkSmart Independent Board
Committee considers this risk to be theoretical only, because:
-- it would require BidCo (which is controlled by ThinkSmart's
founder and Executive Chairman) to deliberately breach its
obligations under the Scheme Implementation Deed, Deed Poll and
Funds Flow Deed all of which are legally binding documents which
form key elements of the Court supervised process in connection
with the Scheme. If, contrary to the ThinkSmart Independent Board
Committee's expectation, such a breach did occur, Scheme
Shareholders will have an unsecured claim against BidCo under the
Deed Poll in relation to the payment of the Cash Consideration
and
-- as a practical matter, under the terms of the Scheme
Implementation Deed, the members of the ThinkSmart Independent
Board Committee will remain on the ThinkSmart Board until after the
Cash Consideration has been despatched to Scheme Shareholders, and
so, the ThinkSmart Independent Board Committee will assist with
overseeing the payment of the Cash Consideration to the Scheme
Shareholders in accordance with the Scheme.
Further details of this risk are set out in section 7.4(b) of
this Scheme Booklet.
Risks relating to deferred payment of Cash Consideration : There
is a risk that the price of Block Shares falls between the date
ThinkSmart Shareholders approve the Scheme and the date the Block
Sale Shares are sold, which will directly impact the amount of Cash
Consideration received by ThinkSmart Shareholders entitled to
receive Cash Consideration. See section 4.1 of this Scheme Booklet
for further discussion of how changes in the Block Share price will
impact the Cash Consideration. Even if the Scheme does not proceed,
for so long as ThinkSmart continues to hold Block Shares, it is
likely that any fall in the price of Block Shares would result in a
fall in the price of ThinkSmart Shares.
In addition, as the proceeds from the sale of the Block Sale
Shares will be converted from United States Dollars to Australian
Dollars and Pounds Sterling (as required), the amount of Cash
Consideration received by Scheme Shareholders will depend on the
applicable exchange rate at the time of conversion.
Further details of this risk are set out in section 7.4(b) of
this Scheme Booklet.
Risks relating to implementation the Scheme : The implementation
of the Scheme is subject to certain conditions precedent, which are
summarised in section 4.3 and are set out in full in clause 3.1 of
the Scheme Implementation Deed.
ThinkSmart will only apply to the Court for orders approving the
Scheme if each of the conditions precedent (except Court approval
of the Scheme) are satisfied or waived (if capable of waiver) prior
to 8.00am (Perth time) on the Second Court Date. As such, failure
to satisfy or waive, or a delay in satisfying or waiving, any of
the conditions precedent may delay or prevent implementation of the
Scheme. The failure of a condition precedent to be satisfied or
waived (if capable of waiver) may also give rise to a right of
either ThinkSmart or BidCo to terminate the Scheme Implementation
Deed.
There is a risk that the ThinkSmart Shareholders do not approve
the Scheme by the Requisite Majorities or do not approve the
Financial Assistance Resolution or Financial Benefit Resolution.
There is also a risk that the Court may not, at the final court
hearing, approve the Scheme, or may only be willing to approve the
Scheme subject to conditions that ThinkSmart and/or BidCo (as
applicable) are not prepared to accept. There is also a risk that
some or all of the aspects of the ThinkSmart Shareholder and Court
approvals required for the Scheme to proceed may be delayed.
There is also a risk that the FCA rejects the change in control
notification submitted on behalf of BidCo.
Further details of this risk are set out in section 7.4(a) of
this Scheme Booklet.
(b) You may disagree with the ThinkSmart Independent Board
Committee's unanimous recommendation and the Independent Expert's
conclusion
Despite the unanimous recommendation of the ThinkSmart
Independent Board Committee to vote in favour of the Scheme and the
conclusion of the Independent Expert that the Scheme is in the best
interests of ThinkSmart Shareholders (other than the Excluded
Shareholders) in the absence of a Superior Proposal, you may
believe that the Scheme is not in your best interests.
(c) You may believe it is in your best interests to maintain
your current investment and risk profile
You may prefer to keep your ThinkSmart Shares to preserve your
investment in an AIM-listed company with the specific
characteristics of ThinkSmart.
In particular:
-- you may consider that the price of Block Shares in the future
will be higher than the prevailing price at the time of the sale of
the Block Sale Shares in connection with the Scheme; and
-- you may consider that the value of ThinkSmart's legacy
leasing business may, in the future, increase above its current
value or be greater than the value attributed to it by the
Independent Expert (see section 6 of the Independent Expert's
Report in Annexure 1 ).
Additionally, you may consider that, despite the risk factors
relevant to ThinkSmart's potential future operations (including
those set out in section 7 of this Scheme Booklet), ThinkSmart may
be able to return greater value from its assets by remaining a
standalone entity or by seeking alternative corporate transactions
in the future. However, as ThinkSmart's primary assets are the
Block Shares you could hold a similar investment and risk profile
by purchasing shares in Block directly.
You may also consider that it would be difficult to identify or
invest in alternative investments that have a similar investment
profile to that of ThinkSmart or may incur transaction costs in
undertaking any new investment.
(d) You may believe that there is potential for a Superior Proposal to emerge
You may consider that a Superior Proposal could emerge in the
future.
The ThinkSmart Independent Board Committee is, as at the date of
this Scheme Booklet, not aware of, and has not received, any
Superior Proposal.
(e) The tax consequences of transferring your ThinkSmart Shares
pursuant to the Scheme may not be attractive to you
The tax consequences of the Scheme applicable to you will depend
on your personal situation and the circumstances of the Scheme.
If the price of Block Shares does not materially change between
the Implementation Date and the sale date for the Block Shares, the
Australian and UK tax outcomes of transferring your ThinkSmart
Shares pursuant to the Scheme are expected to be broadly in line
with an on-market sale of ThinkSmart Shares (see section 8 of this
Scheme Booklet for further details).
The Scheme would bring forward a taxation event for Scheme
Shareholders, potentially diluting Scheme Shareholders' exposure in
the market (e.g. by having lower after-tax proceeds for a direct
investment in Block Shares).
ThinkSmart Shareholders should read the tax implications of the
Scheme outlined in section 8 of this Scheme Booklet. However,
section 8 is general in nature, and ThinkSmart Shareholders should
consult with their own independent taxation advisers regarding the
tax implications of the Scheme.
2 Frequently asked questions
This section 2 answers some frequently asked questions relating
to the Scheme. It is not intended to address all relevant issues
for ThinkSmart Shareholders. This section 2 should be read together
with all other parts of this Scheme Booklet.
Question Answer More information
======================= ========================================================================= ==================
Overview of the Scheme
======================================================================================================================
Why have I This Scheme Booklet has been Section 4
received this sent to you because you are
Scheme Booklet? a ThinkSmart Shareholder
and you are being asked to
vote on the Scheme. This
Scheme Booklet is intended
to help you consider and
decide on how to vote on
the Scheme at the Scheme
Meetings.
======================= ========================================================================= ==================
What is the The Scheme is a scheme of Section 4
Scheme? arrangement between ThinkSmart and Annexure
and the Scheme Shareholders. 2
A "scheme of arrangement"
is a statutory procedure
in the Corporations Act that
is commonly used in transactions
in Australia that may result
in a change of ownership
or control of a company.
In addition to requiring
Court approval, schemes of
arrangement require a shareholder
vote in favour of a resolution
to implement the scheme of
arrangement by the Requisite
Majorities.
If the Scheme becomes Effective,
BidCo will acquire all of
the Scheme Shares for the
Scheme Consideration. ThinkSmart
will be delisted from AIM
and become a wholly owned
subsidiary of BidCo.
======================= ========================================================================= ==================
BidCo
======================================================================================================================
Who is BidCo? BidCo is a special purpose Section 6
Australian proprietary company
limited by shares incorporated
specifically for the purpose
of acquiring the ThinkSmart
Shares pursuant to the Scheme.
BidCo is 100% wholly owned
by Mr Ned Montarello, the
current Executive Chairman
and CEO of ThinkSmart.
======================= ========================================================================= ==================
Does BidCo As at the date of this Scheme Section 6
currently hold Booklet, BidCo does not hold
any ThinkSmart any ThinkSmart Shares.
Shares? As at the Last Practicable
Date, Mr Ned Montarello and
the other Excluded Shareholders
own 31,342,286 ThinkSmart
Shares, representing approximately
29.4% of the ThinkSmart Shares.
[7]
======================= ========================================================================= ==================
Recommendations and intentions
======================================================================================================================
What do the The ThinkSmart Independent Letter from
ThinkSmart Board Committee unanimously the Chair
Directors recommend? recommends that you vote of the ThinkSmart
in favour of the Scheme, Independent
in the absence of a Superior Board Committee
Proposal and subject to the and section
Independent Expert continuing 1
to conclude that the Scheme
is in the best interests
of ThinkSmart Shareholders
(excluding the Excluded Shareholders).
The reasons for this recommendation
and other relevant considerations
are set out in section 1
.
In light of the arrangements
summarised in section 6.1
, Mr Ned Montarello, who
is the sole shareholder of
BidCo, has recused himself
from discussions on the Scheme
and abstains from giving
a recommendation in respect
of how ThinkSmart Shareholders
should vote on the Scheme.
Details of the interests
of the ThinkSmart Directors
(including the members of
the ThinkSmart Independent
Board Committee) in ThinkSmart
are set out in section 10.1
of this Scheme Booklet. ThinkSmart
Shareholders should have
regard to these details in
the context of the recommendation
of the ThinkSmart Independent
Board Committee which appears
through this Scheme Booklet,
when considering how to vote
on the Scheme.
The ThinkSmart Independent
Board Committee encourages
you to seek independent legal,
financial, taxation or other
appropriate professional
advice.
======================= ========================================================================= ==================
What are the Each member of the ThinkSmart Letter from
intentions Independent Board Committee the Chair
of the ThinkSmart intends to vote, or cause of the ThinkSmart
Independent to be voted, all the ThinkSmart Independent
Board Committee Shares held or controlled Board Committee
members? by them in favour of the and section
Scheme at the applicable 1.1(a)
Scheme Meeting in the absence
of a Superior Proposal and
subject to the Independent
Expert continuing to conclude
that the Scheme is in the
best interests of ThinkSmart
Shareholders (other than
the Excluded Shareholders).
======================= ========================================================================= ==================
What is the The Independent Expert has Annexure
conclusion concluded that the Scheme 1
of the Independent is fair and reasonable and
Expert? therefore in the best interests
of ThinkSmart Shareholders
(other than the Excluded
Shareholders), in the absence
of a Superior Proposal.
A complete copy of the Independent
Expert's Report is included
as Annexure 1 to this Scheme
Booklet.
======================= ========================================================================= ==================
What choices As a ThinkSmart Shareholder Section 4.2
do I have as who is eligible to vote on
a ThinkSmart the Scheme, you have the
Shareholder? following choices in relation
to your ThinkSmart Shares:
* vote in favour of the Scheme at the applicable Scheme
Meeting;
* vote against the Scheme at the applicable Scheme
Meeting;
* sell your ThinkSmart Shares or ThinkSmart Depositary
Interests; or
* do nothing.
======================= ========================================================================= ==================
Overview of the Scheme Consideration
======================================================================================================================
What is the If the Scheme is implemented, Section 4.1
Scheme Consideration? ThinkSmart Shareholders (other
than the Excluded Shareholders)
will receive the Cash Consideration
which is equal to the proceeds
realised from the post-Scheme
implementation sale on the
New York Stock Exchange of
the proportion of the 618,750
shares in Block held by ThinkSmart
attributable to their fully
diluted [8] shareholding
in ThinkSmart (net of their
proportion of the 0.5% sale
fees and after conversion
into Pounds Sterling and
Australian Dollars, as applicable).
The amount of Cash Consideration
actually received by Scheme
Shareholders will be dependent
on both the price of Block
Shares at the time of the
sale of the Block Sale Shares
and the applicable exchange
rates at the time of the
conversion of the sale proceeds.
Therefore, the amount of
Cash Consideration received
by Scheme Shareholders will
not be known until after
the Implementation Date and
therefore after ThinkSmart
Shareholders are required
to vote on the Scheme.
If the Scheme is implemented,
Excluded Shareholders will
receive
* if an Excluded Shareholder does not make an Election,
one new BidCo Share for each ThinkSmart Share held;
or
* if an Excluded Shareholder does make an Election:
* the Cash Consideration per Scheme Share to which the
Election relates; and
* the Scrip Consideration (being one BidCo share per
Scheme Share) for any Scheme Shares to which the
Election does not relate.
If an Excluded Shareholder
elects to receive Cash Consideration
in respect of some or all
of its ThinkSmart Shares,
the total number of Block
Shares to be sold by ThinkSmart
will increase by that proportion
of ThinkSmart Shares. This
means that the Cash Consideration
otherwise received by ThinkSmart
Shareholders will not be
impacted by an Excluded Shareholder
electing to receive some
or all of their Scheme Consideration
as Cash Consideration.
======================= ========================================================================= ==================
When and how If the Scheme becomes Effective, Section 4.1
will I receive Scheme Shareholders entitled
my Cash Consideration? to receive Cash Consideration
will be sent the Cash Consideration
as soon as practicable after
the Implementation Date once
the Block Sale Shares have
been sold and the sale proceeds
have been received and converted
into the applicable currencies.
The Cash Consideration is
expected to be sent approximately
8 Business Days after completion
of the sale of the Block
Sale Shares.
Scheme Shareholders entitled
to receive Cash Consideration
will be paid the Cash Consideration
in Australian Dollars, except
for the Depositary Custodian
who will be paid the Cash
Consideration in Pounds Sterling
(meaning that ThinkSmart
DI Holders will receive the
Cash Consideration in Pounds
Sterling).
The Cash Consideration will
be paid:
* For ThinkSmart DI Holders, by way of assured payment
obligation directly through the CREST system.
* For ThinkSmart Shareholders that are not ThinkSmart
DI Holders, as follows:
* where a Scheme Shareholder has validly elected to
receive payments from ThinkSmart in Australian
Dollars, by electronic funds transfer to their
nominated bank account;
* by the Global Wire Payment Service, if a Scheme
Shareholder who resides outside of Australia has
elected to receive payments from ThinkSmart
electronically in their local currency using the
ThinkSmart Share Registry's Global Wire Payment
Service; or
* otherwise, by cheque in Australian Dollars,
dispatched by post to the Scheme Shareholder's
registered address.
To provide or update your
bank account details or Global
Wire Payment Instruction,
please visit www.computershare.com.au/easyupdate/TSMU.
======================= ========================================================================= ==================
Will I have You will not have to pay Sections
to pay brokerage? brokerage on the transfer 1.1(g) and
of your ThinkSmart Shares 4.1
to BidCo under the Scheme.
However, brokerage will be
payable in relation to the
sale of the Block Shares
and the total sale costs
for the sale of the Block
Shares are expected to be
0.5% of sale proceeds.
======================= ========================================================================= ==================
What are the The taxation implications Section 8
taxation implications of the Scheme will depend
of the Scheme? on your particular circumstances.
Section 8.1 provides a general
description of the Australian
taxation consequences for
Scheme Shareholders, and
section 8.2 provides a general
description of the United
Kingdom taxation consequences
for Scheme Shareholders.
You should seek independent
professional taxation advice
with respect to your particular
circumstances.
======================= ========================================================================= ==================
Conditions to the Scheme
======================================================================================================================
Are there Yes. The Scheme is subject Section 4.3
any conditions to various conditions precedent
to the Scheme? that must be satisfied or
waived (if capable of waiver)
in order for the Scheme to
be implemented. These conditions
are summarised in section
4.3 and are set out in full
in clause 3.1 of the Scheme
Implementation Deed.
The conditions include customary
conditions in schemes of
arrangement (such as shareholder
approval, Court approval
and the Independent Expert
continuing to conclude that
the Scheme is in the best
interest of ThinkSmart Shareholders
(other than the Excluded
Shareholders)).
As at the date of this Scheme
Booklet, the ThinkSmart Independent
Board Committee is not aware
of any circumstance which
would cause any condition
to the Scheme not be satisfied
or waived (if capable of
waiver).
======================= ========================================================================= ==================
What is required The Scheme will become Effective N/A
for the Scheme if:
to become Effective? * the Scheme is approved by the Requisite Majorities of
ThinkSmart Shareholders at each of the Scheme
Meetings to be held on 16 November 2022;
* the Financial Assistance Resolution and Financial
Benefit Resolution are approved at the Annual General
Meeting to be held prior to the Scheme Meetings;
* the Court approves the Scheme at the Second Court
Hearing; and
* all of the other conditions precedent to the Scheme
are satisfied or waived (if capable of waiver).
======================= ========================================================================= ==================
Scheme Meetings
======================================================================================================================
When and where The General Scheme Meeting Annexure
will the General for ThinkSmart Shareholders 4
Scheme Meeting (excluding the Excluded Shareholders)
be held? will be held virtually via
the Computershare Virtual
Meeting Platform on 16 November
2022, commencing at 5.00pm
(Perth time).
Please see the Notice of
General Scheme Meeting in
Annexure 4 for further details
in relation to the conduct
of the General Scheme Meeting.
The General Scheme Meeting
may be postponed or adjourned.
Any such postponement or
adjournment will be announced
by ThinkSmart.
======================= ========================================================================= ==================
When and where The Excluded Shareholder Annexure
will the Excluded Scheme Meeting for Excluded 5
Shareholder Shareholders will be held
Scheme Meeting virtually via the Computershare
be held? Virtual Meeting Platform
on 16 November 2022, commencing
at 5.30pm (Perth time).
If the General Scheme Meeting
concludes after 5.30pm (Perth
time) on this date, the Excluded
Shareholder Scheme Meeting
will begin as soon as practicable
after the conclusion of the
General Scheme Meeting.
Please see the Notice of
Excluded Shareholder Scheme
Meeting in Annexure 5 for
further details in relation
to the conduct of the Excluded
Shareholder Scheme Meeting.
The Excluded Shareholder
Scheme Meeting may be postponed
or adjourned. Any such postponement
or adjournment will be announced
by ThinkSmart.
======================= ========================================================================= ==================
Why are there The reason that there are Section 4.5
two Scheme two Scheme Meetings is that
Meetings in the Excluded Shareholders
relation to constitute a separate class
the Scheme? of members because they are
offered different consideration
under the Scheme (being the
Scrip Consideration, unless
an Excluded Shareholder elects
otherwise).
This means that the Excluded
Shareholders will not be
permitted to vote at the
General Scheme Meeting and
will instead vote at the
Excluded Shareholder Scheme
Meeting on a separate Scheme
Resolution (being the Excluded
Shareholder Scheme Resolution).
======================= ========================================================================= ==================
What will At each respective Scheme Annexure
Scheme Shareholders Meeting, Scheme Shareholders 4 and Annexure
be asked to will be asked to vote on 5
vote on at whether to approve the Scheme.
the Scheme
Meetings?
======================= ========================================================================= ==================
What is the In order to become Effective, Section 4.5
ThinkSmart the Scheme must be approved
Shareholder by the Requisite Majorities,
approval threshold being:
for the Scheme? (a) in relation to the General
Scheme Resolution, a resolution
passed by:
* unless the Court orders otherwise, a majority in
number (more than 50%) of ThinkSmart Shareholders
(excluding Excluded Shareholders) present and voting
at the General Scheme Meeting (either in person or by
proxy, attorney or, in the case of corporate
ThinkSmart Shareholders, body corporate
representative); and
* at least 75% of the total number of votes cast on the
General Scheme Resolution at the General Scheme
Meeting by ThinkSmart Shareholders (excluding
Excluded Shareholders) present and voting (either in
person or by proxy, attorney or, in the case of
corporate ThinkSmart Shareholders, body corporate
representative); and
(b) in relation to the Excluded
Shareholder Scheme Resolution,
a resolution passed by:
* unless the Court orders otherwise, a majority in
number (more than 50%) of Excluded Shareholders
present and voting at the Excluded Shareholder Scheme
Meeting (either in person or by proxy, attorney or,
in the case of corporate Excluded Shareholders, body
corporate representative); and
* at least 75% of the total number of votes cast on the
Excluded Shareholder Scheme Resolution at the
Excluded Shareholder Scheme Meeting by Excluded
Shareholders present and voting (either in person or
by proxy, attorney or, in the case of corporate
Excluded Shareholders, body corporate
representative).
Even if the Scheme is approved
by the Requisite Majorities
of Scheme Shareholders at
the Scheme Meetings, the
Scheme is still subject to
the approval of the Court.
======================= ========================================================================= ==================
Am I entitled ThinkSmart Shareholders who Annexure
to vote at are recorded on the ThinkSmart 4 and Annexure
a Scheme Meeting? Share Register at 5.30pm 5
(Perth time) on 14 November
2022 will be entitled to
attend and vote at the applicable
Scheme Meeting.
ThinkSmart DI Holders who
are recorded on the ThinkSmart
DI Register at 6.00pm (London
time) on 11 November 2022
will be entitled to access
the applicable Scheme Meeting
but will not vote at the
applicable Scheme Meeting
(see below).
======================= ========================================================================= ==================
How can I ThinkSmart Shareholders who Section 3.2(d)
vote if I can't would like to vote but cannot , Annexure
attend the attend the applicable Scheme 4 and Annexure
Scheme Meetings? Meeting can vote by either 5
appointing a proxy or an
attorney. They may also vote
by appointing a corporate
representative if that option
is applicable.
ThinkSmart DI Holders will
not vote at the applicable
Scheme Meeting. ThinkSmart
DI Holders may only vote
by completing the Form of
Instruction for the applicable
Meeting in accordance with
the instructions on the form
and lodging it with the Depositary
or by completing CREST Voting
Instructions for the applicable
Meeting.
======================= ========================================================================= ==================
When will The results of each Scheme N/A
the results Meeting will be available
of the Scheme as soon as possible after
Meetings be the conclusion of the Scheme
known? Meetings and will be announced
by ThinkSmart via the RNS
of the LSE once available.
======================= ========================================================================= ==================
Is voting Voting is not compulsory. Section 4.5
compulsory? However, the Scheme will
only be successful if it
is approved by ThinkSmart
Shareholders by the Requisite
Majorities at each Scheme
Meeting, so voting is important
and the ThinkSmart Independent
Board Committee encourages
you to vote.
The ThinkSmart Independent
Board Committee unanimously
recommends that ThinkSmart
Shareholders vote in favour
of the Scheme in the absence
of a Superior Proposal, and
subject to the Independent
Expert continuing to conclude
that the Scheme is in the
best interests of ThinkSmart
Shareholders (other than
the Excluded Shareholders).
In light of the arrangements
summarised in section 6.1
, Mr Ned Montarello, who
is the sole shareholder of
BidCo, has recused himself
from discussions on the Scheme
and abstains from giving
a recommendation in respect
of how ThinkSmart Shareholders
should vote on the Scheme.
======================= ========================================================================= ==================
What happens If you do not vote, or vote Section 4.5(a)
to my ThinkSmart against the Scheme, the Scheme
Shares if I may still be implemented
do not vote, if it is approved by the
or if I vote Requisite Majorities of ThinkSmart
against the Shareholders and the Court.
Scheme, and If this occurs, your ThinkSmart
the Scheme Shares will be transferred
becomes effective to BidCo and you will receive
and is implemented? the Scheme Consideration
even though you did not vote
on, or voted against, the
Scheme.
======================= ========================================================================= ==================
What happens I f the Scheme is not implemented: Sections
if the Scheme * ThinkSmart Shareholders will continue to hold 4.4 and 7.4(c)
does not become ThinkSmart Shares;
Effective?
* ThinkSmart Shareholders will not receive the Scheme
Consideration;
* a Reimbursement Fee up to a maximum of $200,000
(excluding GST) may be payable by ThinkSmart to BidCo
under certain circumstances. Those circumstances do
not include the failure by ThinkSmart Shareholders to
approve the Scheme at the Scheme Meetings;
* ThinkSmart Shareholders will continue to be exposed
to the risks associated with Block Shares through
their ThinkSmart shareholding, as well as the ongoing
wind down of ThinkSmart's business operations and
likely eventual liquidation; and
* ThinkSmart will continue as an AIM-listed entity
incurring ongoing listing and corporate costs.
======================= ========================================================================= ==================
Annual General Meeting
======================================================================================================================
When and where The 2022 Annual General Meeting Annexure
will the Annual will be held virtually via 6
General Meeting the Computershare Virtual
be held? Meeting Platform on 16 November
2022, commencing at 4.00pm
(Perth time).
Please see the Notice of
Annual General Meeting in
Annexure 6 for further details
in relation to the conduct
of the Annual General Meeting.
The Annual General Meeting
may be postponed or adjourned.
Any such postponement or
adjournment will be announced
by ThinkSmart.
======================= ========================================================================= ==================
What are the ThinkSmart will provide the Section 9
Financial Assistance Loan (as lender) to BidCo
Resolution (as borrower) as part of
and Financial the flow of the sale proceeds
Benefit Resolution from the sale of the Block
being considered Sale Shares from ThinkSmart
at the Annual to BidCo, following which
General Meeting? the proceeds will be converted
to Australian Dollars and
Pounds Sterling (as required).
By incurring obligations
under the Loan Deed (including
to provide the Loan) ThinkSmart
will be:
* giving financial assistance to BidCo to acquire
ThinkSmart Shares for the purposes of Part 2J.3 of
the Corporations Act; and
* giving a financial benefit to BidCo for the purposes
of Chapter 2E of the Corporations Act.
This must be authorised by
ThinkSmart Shareholders for
the purposes of sections
260A and 208 of the Corporations
Act.
ThinkSmart Shareholders need
to approve both the Financial
Assistance Resolution and
the Financial Benefit Resolution,
in addition to the Scheme
Resolutions, for the Scheme
to be implemented.
======================= ========================================================================= ==================
What is the The Financial Assistance Section 9
ThinkSmart Resolution must be approved and Annexure
Shareholder by a special resolution (ie 6
approval threshold 75% or more) of ThinkSmart
for the Financial Shareholders (with no votes
Assistance being cast in favour of the
Resolution resolution by any of BidCo's
and Financial associates (being Mr Ned
Benefit Resolution? Montarello and the Excluded
Shareholders)).
The Financial Benefit Resolution
needs to be approved by a
simple majority (ie more
than 50%) of votes cast by
ThinkSmart Shareholders.
Mr Ned Montarello and the
Excluded Shareholders will
also be excluded from voting
on this resolution under
section 224 of the Corporations
Act.
ThinkSmart Shareholders need
to approve both the Financial
Assistance Resolution and
the Financial Benefit Resolution,
in addition to the Scheme
Resolutions, for the Scheme
to be implemented.
======================= ========================================================================= ==================
Am I entitled ThinkSmart Shareholders who Section 9
to vote at are recorded on the ThinkSmart and Annexure
the Annual Share Register at 5.30pm 6
General Meeting? (Perth time) on 14 November
2022 will be entitled to
attend and vote at the Annual
General Meeting.
ThinkSmart DI Holders who
are recorded on the ThinkSmart
DI Register at 6.00pm (London
time) on 11 November 2022
will be entitled to access
the Annual General Meeting
but will not vote at the
Annual General Meeting (see
below).
======================= ========================================================================= ==================
How can I ThinkSmart Shareholders who Section 9
vote if I can't would like to vote but cannot and Annexure
attend the attend the Annual General 6
Annual General Meeting can vote by either
Meeting? appointing a proxy or an
attorney. They may also vote
by appointing a corporate
representative if that option
is applicable.
ThinkSmart DI Holders will
not vote at the Annual General
Meeting. ThinkSmart DI Holders
may only vote by completing
the Form of Instruction for
the Annual General Meeting
in accordance with the instructions
on the form and lodging it
with the Depositary or by
completing CREST Voting Instructions
for the Annual General Meeting.
======================= ========================================================================= ==================
When will The results of the Annual N/A
the results General Meeting will be available
of the Annual as soon as possible after
General Meeting the conclusion of the Annual
be known? General Meeting and will
be announced by ThinkSmart
once available.
======================= ========================================================================= ==================
Is voting Voting is not compulsory. Sections
compulsory? However, the Scheme will 4.5 and 9
only be successful if the
Financial Assistance Resolution
and Financial Benefit Resolution
are approved by ThinkSmart
Shareholders, so voting is
important and the ThinkSmart
Independent Board Committee
encourages you to vote.
The ThinkSmart Independent
Board Committee unanimously
recommends that ThinkSmart
Shareholders vote in favour
of the Scheme in the absence
of a Superior Proposal and
subject to the Independent
Expert continuing to conclude
that the Scheme is in the
best interests of ThinkSmart
Shareholders (other than
the Excluded Shareholders).
The ThinkSmart Independent
Board Committee also unanimously
recommends that ThinkSmart
Shareholders vote in favour
of the Financial Assistance
Resolution and Financial
Benefit Resolution at the
Annual General Meeting.
Mr Ned Montarello owns and
controls BidCo. Accordingly,
he does not make any recommendation
in relation to the Financial
Assistance Resolution or
Financial Benefit Resolution.
======================= ========================================================================= ==================
Do the Financial Yes, for the Scheme to be Section 9
Assistance implemented, ThinkSmart Shareholders
Resolution need to approve both the
and Financial Financial Assistance Resolution
Benefit Resolution and the Financial Benefit
need to be Resolution, in addition to
approved for the Scheme Resolutions.
the Scheme It is therefore important
to be implemented? that ThinkSmart Shareholders
vote at the Annual General
Meeting in addition to the
applicable Scheme Meeting.
======================= ========================================================================= ==================
Other questions
======================================================================================================================
What happens If a Competing Proposal is Section 10.4
if a Competing received, the ThinkSmart
Proposal is Independent Board Committee
received? will carefully consider it.
ThinkSmart must notify BidCo
of that Competing Proposal
in accordance with the Scheme
Implementation Deed.
ThinkSmart Shareholders should
note that ThinkSmart has
agreed to certain exclusivity
provisions in favour of BidCo
under the Scheme Implementation
Deed that restrict ThinkSmart's
ability to participate in
negotiations and discussions
in relation to a Competing
Proposal (subject to certain
fiduciary exceptions).
======================= ========================================================================= ==================
What is the If the Scheme becomes Effective, Section 7
performance ThinkSmart Shareholders will
risk associated transfer their ThinkSmart
with the Scheme? Shares to BidCo on the Implementation
Date. However, ThinkSmart
Shareholders entitled to
receive Cash Consideration
will not receive their Cash
Consideration until after
the Implementation Date and
the amount of Cash Consideration
will be determined by the
price at which the Block
Sale Shares can be sold for
following Implementation.
There is therefore a risk
that ThinkSmart Shareholders
transfer their ThinkSmart
Shares to BidCo on the Implementation
Date but that BidCo does
not pay the Cash Consideration,
in breach of its obligations
under the Scheme Implementation
Deed, Deed Poll and Funds
Flow Deed. However, the ThinkSmart
Independent Board Committee
considers this risk to be
theoretical only, because:
* it would require BidCo (which is controlled by
ThinkSmart's founder and Executive Chairman) to
deliberately breach its obligations under the Scheme
Implementation Deed, Deed Poll and Funds Flow Deed
all of which are legally binding documents which form
key elements of the Court supervised process in
connection with the Scheme. If, contrary to the
ThinkSmart Independent Board Committee's expectation,
such a breach did occur, Scheme Shareholders will
have an unsecured claim against BidCo under the Deed
Poll in relation to the payment of the Cash
Consideration; and
* as a practical matter, under the terms of the Scheme
Implementation Deed, the members of the ThinkSmart
Independent Board Committee will remain on the
ThinkSmart Board until after the Cash Consideration
has been despatched to Scheme Shareholders, and so,
the ThinkSmart Independent Board Committee will
assist with overseeing the payment of the Cash
Consideration to the Scheme Shareholders in
accordance with the Scheme.
Further details of the performance
risk are set out in section
7.4(b) .
======================= ========================================================================= ==================
What are the In considering the Scheme, Section 7
other risks ThinkSmart Shareholders should
associated be aware that there are a
with the ThinkSmart number of risk factors, both
business? general and specifically
relating to ThinkSmart, which
may affect the future operating
and financial performance
of ThinkSmart and the price
and/or value of ThinkSmart
Shares.
If the Scheme proceeds, ThinkSmart
Shareholders will receive
the Scheme Consideration,
will cease to hold ThinkSmart
Shares and will also no longer
be exposed to such risks.
If the Scheme does not proceed,
ThinkSmart Shareholders will
continue to hold ThinkSmart
Shares and continue to be
exposed to risks associated
with investment in ThinkSmart.
In deciding whether to vote
in favour of the Scheme,
ThinkSmart Shareholders should
read this Scheme Booklet
carefully and consider the
risk factors set out in section
7 , as well as the other
information contained in
this Scheme Booklet before
making any decision in relation
to the Scheme.
======================= ========================================================================= ==================
Can I sell The Scheme does not preclude Section 4.2
my ThinkSmart you from selling some or
Shares now? all of your ThinkSmart Shares
prior to the Effective Date.
ThinkSmart intends to apply
to AIM for ThinkSmart Shares
to be suspended from trading
on AIM from 7.30am (London
time) on the Effective Date.
ThinkSmart Shareholders who
sell some or all of their
ThinkSmart Shares:
* may receive payment (which may vary from the Scheme
Consideration) for the sale of their ThinkSmart
Shares sooner than they would receive the Scheme
Consideration under the Scheme;
* may incur a brokerage charge;
* will not be able to participate in the Scheme or, if
one emerges, a Superior Proposal, in respect of those
ThinkSmart Shares they have sold; and
* may be liable for income tax (including capital gains
tax) on the disposal of their ThinkSmart Shares (as
they also may be under the Scheme - see section 8 for
further information).
======================= ========================================================================= ==================
If the Scheme ThinkSmart intends to apply N/A
is implemented, to AIM for ThinkSmart Shares
will ThinkSmart to be suspended from trading
cease trading on AIM from 7.30am (London
on AIM? time) on the Effective Date.
ThinkSmart then intends to
apply for the cancellation
of the admission of ThinkSmart
Shares to trading on AIM
to occur shortly after the
Implementation Date.
======================= ========================================================================= ==================
What if I For further information, N/A
have further please contact the ThinkSmart
questions about Shareholder Information Line
the Scheme? on 1300 528 984 (within Australia)
or +61 3 9415 4826 (outside
Australia), between 8.30am
and 5.00pm (Sydney time),
Monday to Friday. ThinkSmart
DI Holders can contact the
dedicated Depositary Interest
Information Line on +44 0207
887 2225 or +44 0800 298
7356 (within the United Kingdom)
between 9.00am and 5.00pm
(London time), Monday to
Friday.
If you are in doubt about
anything in this Scheme Booklet,
please contact your financial,
legal, taxation or other
professional adviser immediately.
======================= ========================================================================= ==================
3 What should you do?
3.1 Step 1: Read this Scheme Booklet
You should carefully read this Scheme Booklet in its entirety
before deciding whether to vote in favour of the Scheme.
If you have any questions, please contact the ThinkSmart
Shareholder Information Line on 1300 528 984 (within Australia) or
+61 3 9415 4826 (outside Australia), between 8.30am and 5.00pm
(Sydney time), Monday to Friday. ThinkSmart DI Holders can contact
the dedicated Depositary Interest Information Line on +44 0207 887
2225 or +44 0800 298 7356 (within the United Kingdom) between
9.00am and 5.00pm (London time), Monday to Friday.
If you are in any doubt as to what you should do, please consult
your legal, financial, tax or other professional adviser
immediately.
3.2 Step 2: Vote on the Scheme
(a) Your vote is important
For the Scheme to proceed, it is necessary that the Requisite
Majorities of ThinkSmart Shareholders vote in favour of the
Scheme.
For the Scheme to proceed, ThinkSmart Shareholders will need to
approve the Scheme Resolution at the applicable Scheme Meeting and
the Financial Assistance Resolution and the Financial Benefit
Resolution at ThinkSmart's 2022 Annual General Meeting, which will
be held prior to the Scheme Meetings. The ThinkSmart Independent
Board Committee encourages ThinkSmart Shareholders to vote at both
the Annual General Meeting and the applicable Scheme Meeting.
(b) Scheme Meetings and Annual General Meeting
The General Scheme Meeting will be held virtually via the
Computershare Virtual Meeting Platform at 5.00pm (Perth time) on 16
November 2022. Details about the General Scheme Meeting are set out
in the Notice of General Scheme Meeting contained in Annexure
4.
The Excluded Shareholder Scheme Meeting will be held virtually
via the Computershare Virtual Meeting Platform at 5.30pm (Perth
time) on 16 November 2022. Details about the Excluded Shareholder
Scheme Meeting are set out in the Notice of Excluded Shareholder
Scheme Meeting contained in Annexure 5 .
If the General Scheme Meeting concludes after 5.30pm (Perth
time) on 16 November 2022, the Excluded Shareholder Scheme Meeting
will begin as soon as practicable after the conclusion of the
General Scheme Meeting. Details about the Excluded Shareholder
Scheme Meeting are set out in the Notice of Excluded Shareholder
Scheme Meeting contained in Annexure 5 .
The Annual General Meeting will be held virtually via the
Computershare Virtual Meeting Platform prior to the Scheme Meetings
at 4.00pm (Perth time) on 16 November 2022. Details about the
Annual General Meeting are set out in the Notice of Annual General
Meeting contained in Annexure 6 .
(c) Who is entitled to vote?
ThinkSmart Shareholders registered on the ThinkSmart Share
Register at 5.30pm (Perth time) on 14 November 2022, will be
entitled to vote at:
-- the Annual General Meeting;
-- the General Scheme Meeting, if they are not an Excluded Shareholder; and
-- the Excluded Shareholder Scheme Meeting, if they are an Excluded Shareholder.
ThinkSmart DI Holders who are recorded on the ThinkSmart DI
Register at 6.00pm (London time) on 11 November 2022 will be
entitled to vote at the Annual General Meeting and the General
Scheme Meeting.
(d) How to vote?
ThinkSmart Shareholders
You may vote:
-- in person , by attending the relevant Meeting via the
Computershare Virtual Meeting Platform. Details regarding how to
access the Computershare Virtual Meeting Platform and vote are set
out in:
-- the Notice of General Scheme Meeting for ThinkSmart
Shareholders who are not Excluded Shareholders, as contained in
Annexure 4 of this Scheme Booklet;
-- the Notice of Excluded Shareholder Scheme Meeting for
Excluded Shareholders, as contained in Annexure 5 of this Scheme
Booklet; and
-- the Notice of Annual General Meeting for ThinkSmart
Shareholders, as contained in Annexure 6 of this Scheme
Booklet.
-- by proxy , by lodging a Scheme Meeting proxy form or Annual
General Meeting proxy form online at www.investorvote.com.au
(Control ID: 181913 (for the Annual General Meeting), 181915 (for
the General Scheme Meeting) and 181916 (for the Excluded
Shareholder Scheme Meeting)) or by completing, signing and lodging
a proxy form for the relevant Meeting in accordance with the
instructions set out on the form. To be valid, your proxy form(s)
must be received by the ThinkSmart Share Registry by:
-- 5.30pm (Perth time) on 14 November 2022 for ThinkSmart
Shareholders voting by proxy at the Annual General Meeting;
-- 5.30pm (Perth time) on 14 November 2022 for ThinkSmart
Shareholders (excluding Excluded Shareholders) voting by proxy at
the General Scheme Meeting; or
-- 5.30pm (Perth time) on 14 November 2022 for Excluded
Shareholders voting by proxy at the Excluded Shareholder Scheme
meeting;
-- by attorney , by appointing an attorney to attend and vote at
the relevant Meeting on your behalf and providing a duly executed
power of attorney to the ThinkSmart Share Registry by:
-- 5.30pm (Perth time) on 14 November 2022 for ThinkSmart
Shareholders voting by attorney at the Annual General Meeting;
-- 5.30pm (Perth time) on 14 November 2022 for ThinkSmart
Shareholders (excluding Excluded Shareholders) voting by attorney
at the General Scheme Meeting; or
-- 5.30pm (Perth time) on 14 November 2022 for Excluded
Shareholders voting by attorney at the Excluded Shareholder Scheme
meeting; or
-- by corporate representative , in the case of a body corporate
which is a ThinkSmart Shareholder, by appointing a corporate
representative to attend and vote at the relevant Meeting on behalf
of that ThinkSmart Shareholder.
Further details on how to vote are contained in Annexure 4 ,
Annexure 5 and Annexure 6 .
ThinkSmart DI Holders
If you are entitled to vote and are a ThinkSmart DI Holder, you
can do so only:
-- by completing the Form of Instruction for the applicable
Meeting in accordance with the instructions on the form and lodging
it with the Depositary at the following address: Computershare
Investor Services plc, The Pavilions, Bridgwater Road, Bristol BS99
6ZY by 11 November 2022 at 9.00 am (London time) for the Annual
General Meeting or 10.00am (London time) for the General Scheme
Meeting; or
-- by completing CREST Voting Instructions for the applicable Meeting.
ThinkSmart DI Holders should vote through the Form of
Instruction or via the CREST voting service using a CREST Voting
Instruction. To be effective, the Form of Instruction or the CREST
Voting Instruction for each applicable Meeting must be received by
the Depositary no later than 9.00am (London time) for the Annual
General Meeting or 10.00am (London time) for the General Scheme
Meeting on 11 November 2022.
ThinkSmart DI Holders can access the applicable Meeting
virtually via the Computershare Virtual Meeting Platform, but
cannot vote at the Meeting. ThinkSmart DI Holders can only vote
through the process described above. ThinkSmart DI Holders (or
their proxies) should submit a request to ThinkSmart at
www.thinksmartworld.com/contact to be provided with a link to the
Computershare Virtual Meeting Platform.
Further details on how to vote are contained in Annexure 4 ,
Annexure 5 and Annexure 6 .
4 Overview of the Scheme
4.1 Overview of Scheme Consideration
Cash Consideration
The Cash Consideration under the Scheme relates to the proceeds
from the sale of certain Block Shares held by ThinkSmart.
If the Scheme becomes Effective, then:
-- the Block Sale Shares will be the number of the Block Shares
held by ThinkSmart that will be sold and will be referable to the
proportion of Scheme Shares held by Scheme Shareholders entitled to
receive Cash Consideration. This will be calculated as: 618,750
(being the total number of Block Shares held by ThinkSmart)
multiplied by the total number of Relevant Scheme Shares (being the
ThinkSmart Shares held by Scheme Shareholders who are entitled to
receive Cash Consideration), and divided by the total number of
ThinkSmart Shares on issue at that time, rounded to the nearest
whole number of Block Shares;
-- the Broker irrevocably appointed by ThinkSmart and BidCo will
be instructed to sell the Block Sale Shares on-market on the New
York Stock Exchange as soon as practicable on the next Trading Day
following the Implementation Date (and, in any event, within 3
Trading Days following the Implementation Date) [9] ; and
-- BidCo and ThinkSmart will procure that the proceeds from the
sale of the Block Sale Shares (subject to certain adjustments as
set out in the definition of Block Sale Share Proceeds - see
section 11.1 of this Scheme Booklet) are, as soon as practicable,
paid to the Scheme Shareholders entitled to receive Cash
Consideration under the Scheme:
-- pro rata to the relative respective holdings of Relevant
Scheme Shares of each Scheme Shareholder entitled to receive Cash
Consideration;
-- in the applicable currencies (see below); and
-- net of any banking charges or fees (including wire transfer
fees or corresponding charges) or charges or fees of a similar
nature which are incurred with respect to the payment of the Block
Sale Share Proceeds to the relevant Scheme Shareholder entitled to
receive Cash Consideration under the Scheme and net of any other
amounts (including tax) required by law to be withheld (if
applicable).
Where the calculation of the Cash Consideration to be provided
to a particular Scheme Shareholder would result in the Scheme
Shareholder becoming entitled to a fraction of a cent (or a
fraction of a pence, where applicable), the fractional entitlement
will be rounded down to the nearest whole cent or pence (as
applicable).
Variability of the Cash Consideration
The Cash Consideration to be paid under the Scheme is dependent
on:
-- the price of Block Shares on the New York Stock Exchange as
at the date of the sale; and
-- the applicable currency conversion rates as at the date of
the conversion of the sale proceeds from United States Dollars to
Pounds Sterling and Australian Dollars (as applicable).
Therefore, the Cash Consideration to be paid under the Scheme
will not be known until after the Implementation Date and after the
date Scheme Shareholders are asked to vote on the Scheme.
Accordingly, the amount of Cash Consideration that is ultimately
received by Scheme Shareholders may be more or less than was
anticipated by the Scheme Shareholders prior to the Scheme Record
Date.
ThinkSmart makes no representation that any sale price received
for the Block Sale Shares will be the best price available for
Block Shares at the relevant time.
The table below demonstrates how the Cash Consideration received
by Scheme Shareholders may vary depending on the average price
received for the Block Sale Shares. [10] This table is illustrative
only and ThinkSmart does not guarantee that the average price
received for the Block Sale Shares will be in the ranges noted
below.
Average Indicative Indicative
Block Cash Cash
Sale Share Consideration Consideration
price per per
realised ThinkSmart ThinkSmart
(USD) Share Share
(GBP) (AUD)
======================================== ========================================= =========================================
US$44.74, GBP0.2266 A$0.4083
being
a 20%
discount
to the
closing
price of
Block
Shares as at
the
Last
Practicable
Date
======================================== ========================================= =========================================
US$50.33, GBP0.2550 A$0.4594
being
a 10%
discount
to the
closing
price of
Block
Shares as at
the
Last
Practicable
Date
======================================== ========================================= =========================================
US$55.92, GBP0.2833 A$0.5104
being
the closing
price
of Block
Shares
as at the
Last
Practicable
Date
======================================== ========================================= =========================================
US$61.51, GBP0.3116 A$0.5615
being
a 10%
premium to
the closing
price
of Block
Shares
as at the
Last
Practicable
Date
======================================== ========================================= =========================================
US$67.10, GBP0.3399 A$0.6125
being
a 20%
premium to
the closing
price
of Block
Shares
as at the
Last
Practicable
Date
======================================== ========================================= =========================================
The following chart shows the price of Block Shares over the
time period used by the Independent Expert to value the Cash
Consideration (see the Independent Expert Report in Annexure 1 for
further details):
Entitlement to Cash Consideration
The Scheme Shareholders entitled to receive Cash Consideration
under the Scheme are:
-- the ThinkSmart Shareholders (excluding the Excluded
Shareholders) who hold ThinkSmart Shares at the Scheme Record Date;
and
-- any Excluded Shareholder who holds ThinkSmart Shares at the
Scheme Record Date and elects to receive Cash Consideration in
accordance with the election procedure below.
Currency conversion
As the Block Sale Shares are traded in United States Dollars on
the New York Stock Exchange, the Block Sale Share Proceeds will be
received in United States Dollars.
The Block Sale Share Proceeds will therefore be converted from
United States Dollars into Australian Dollars and Pounds Sterling
(as described below). The Scheme Shareholders will bear all foreign
exchange risk and costs in relation to any currency conversion
undertaken in connection with the conversion and transfer of the
Cash Consideration.
The applicable currency conversion rate will be set at the time
the Block Sale Share Proceeds are converted and will be equal to
the applicable exchange rate that ThinkSmart receives for the
transaction. It is likely that the exchange rate received by
ThinkSmart will be different to the exchange rate that is published
prior to the Scheme Record Date. Accordingly, the amount of Cash
Consideration that is ultimately received by Scheme Shareholders
may be more or less than was anticipated by the Scheme Shareholders
prior to the Scheme Record Date.
ThinkSmart makes no representation that any exchange rate
received will be the best exchange rate available.
Cash Consideration payment currencies
Scheme Shareholders entitled to receive Cash Consideration will
be paid the Cash Consideration in Australian Dollars, except for
the Depositary Custodian who will be paid the Cash Consideration in
Pounds Sterling (meaning that the ThinkSmart DI Holders will
receive the Cash Consideration in Pounds Sterling).
ThinkSmart Shareholders who reside outside of Australia may,
before the Scheme Record Date, elect to receive payments from
ThinkSmart electronically in their local currency using the
ThinkSmart Share Registry's Global Wire Payment Service.
Withholding tax
As set out in the Scheme Implementation Deed and the definition
of "Block Sale Share Proceeds" in this Scheme Booklet, BidCo is
entitled to deduct from the Block Sale Share Proceeds any tax
(including withholding) which is required to be remitted to a
Government Agency (with such tax excluding any income tax or tax on
profits). Such withholding tax, if applicable, would reduce the
Cash Consideration received by Scheme Shareholders.
Based on Australian, English and United States tax law
applicable as at the date of this Scheme Booklet, neither
ThinkSmart nor BidCo expect any such withholding tax to apply to
the sale of the Block Sale Shares by ThinkSmart and therefore do
not expect there to be any associated reduction in the amount of
Cash Consideration to be received by Scheme Shareholders entitled
to receive Cash Consideration. However, new law (or changes in the
way current law is regulated) may occur between the date of this
Scheme Booklet and the time when the Block Sale Shares are sold,
which could result in withholding tax applying. To the extent that
any such change (or potential change) of law arises, BidCo and
ThinkSmart intend to communicate this and the associated impact on
the Cash Consideration to ThinkSmart Shareholders via ThinkSmart's
website at https://www.thinksmartworld.com.
Payment
The Cash Consideration will be sent to the Scheme Shareholders
entitled to receive Cash Consideration as soon as practicable after
the Implementation Date once the Block Sale Shares have been sold
and the Block Sale Share Proceeds have been received and converted
into the applicable currencies. Payment is currently expected to be
sent to Scheme Shareholders approximately 8 Business Days after
completion of the sale of the Block Sale Shares .
It is important to note that you will only receive the Scheme
Consideration (including the Cash Consideration, if applicable) if
you are a Scheme Shareholder. You will be a Scheme Shareholder if
you hold ThinkSmart Shares at the Scheme Record Date.
The Cash Consideration will be paid:
-- For ThinkSmart DI Holders, by way of assured payment
obligation directly through the CREST system.
-- For ThinkSmart Shareholders that are not ThinkSmart DI Holders, as follows:
-- where a Scheme Shareholder has, before the Scheme Record
Date, validly elected to receive payments from ThinkSmart in
Australian Dollars, by electronic funds transfer to the bank
account nominated by the Scheme Shareholder;
-- by the Global Wire Payment Service, if a Scheme Shareholder
who resides outside of Australia has, before the Scheme Record
Date, elected to receive payments from ThinkSmart electronically in
their local currency using the ThinkSmart Share Registry's Global
Wire Payment Service; or
-- otherwise, by cheque in Australian Dollars, dispatched by
post to the Scheme Shareholder's registered address.
To provide or update your bank account details or Global Wire
Payment Instruction, please visit
www.computershare.com.au/easyupdate/TSMU .
Excluded Shareholders
The Excluded Shareholders are those ThinkSmart Shareholders who
are associated with BidCo and Mr Ned Montarello. The Excluded
Shareholders can elect to receive either Cash Consideration or
BidCo Shares (or a combination thereof) as consideration for their
Scheme Shares.
If the Scheme becomes Effective, the Excluded Shareholders will
be entitled to receive either:
-- the Scrip Consideration; or
-- if an Excluded Shareholder makes an Election:
-- the Cash Consideration per Scheme Share in respect of that
number of Scheme Shares held by the Excluded Shareholder on the
Scheme Record Date for which the Excluded Shareholder has made an
Election (in an Election Form) to receive the Cash Consideration;
and
-- the Scrip Consideration per Scheme Share in respect of the
Scheme Shares held by the Excluded Shareholder on the Scheme Record
Date for which the Excluded Shareholder has not made an Election
(in an Election Form) to receive the Cash Consideration.
Scrip Consideration
If an Excluded Shareholder is entitled to receive Scrip
Consideration under the Scheme, then for each ThinkSmart Share held
by the Excluded Shareholder as at the Scheme Record Date for which
an Election has not been made, the Scrip Consideration is 1 BidCo
Share.
Cash Consideration
To make an Election to receive Cash Consideration, the Excluded
Shareholder must complete and sign an Election Form and ensure the
Election Form is received by ThinkSmart before the Election Time,
being 5:00pm on the fifth Business Day before the date of the
Scheme Meetings, or such other date as is agreed in writing between
BidCo and ThinkSmart. ThinkSmart will make Election Forms available
to each Excluded Shareholder.
If an Excluded Shareholder elects to receive Cash Consideration
in respect of some or all of its ThinkSmart Shares, the total
number of Block Shares to be sold by ThinkSmart (in accordance with
the procedure noted above) will increase by that proportion of
ThinkSmart Shares.
ThinkSmart Shareholders will receive the sale proceeds (subject
to the adjustments noted above) relating to the proportion of the
618,750 Block Shares held by ThinkSmart attributable to their fully
diluted [11] shareholding in ThinkSmart as at the Scheme Record
Date. This means that the Cash Consideration otherwise received by
ThinkSmart Shareholders will not be impacted by an Excluded
Shareholder electing to receive some or all of their Scheme
Consideration as Cash Consideration.
4.2 Your choices as a ThinkSmart Shareholder
As a ThinkSmart Shareholder who is eligible to vote at the
applicable Scheme Meeting, you have the following choices in
relation to your ThinkSmart Shares:
Vote in favour of the Scheme
This is the course of action unanimously recommended by the
ThinkSmart Independent Board Committee, in the absence of a
Superior Proposal and subject to the Independent Expert continuing
to conclude that the Scheme is in the best interest of ThinkSmart
Shareholders (other than the Excluded Shareholders).
To follow the ThinkSmart Independent Board Committee's unanimous
recommendation, you should:
-- vote in favour of the Scheme at the applicable Scheme Meeting
on 16 November 2022; and
-- vote in favour of the Financial Assistance Resolution and
Financial Benefit Resolution at ThinkSmart's 2022 Annual General
Meeting, which will be held prior to the Scheme Meetings.
For a summary of how to vote on the Scheme, please refer to
section 3 , the Notice of General Scheme Meeting contained in
Annexure 4 (for ThinkSmart Shareholders excluding Excluded
Shareholders), the Notice of Excluded Shareholder Scheme Meeting
contained in Annexure 5 (for Excluded Shareholders) and the Notice
of Annual General Meeting contained in Annexure 6 .
Vote against the Scheme
If, despite the ThinkSmart Independent Board Committee's
unanimous recommendation and the Independent Expert's conclusion
that the Scheme is fair and reasonable and therefore in the best
interest of ThinkSmart Shareholders (other than the Excluded
Shareholders), you do not support the Scheme, you may vote against
the Scheme at the applicable Scheme Meeting on 16 November 2022 and
against the Financial Assistance Resolution and Financial Benefit
Resolution at the Annual General Meeting, which will be held prior
to the Scheme Meetings.
However, if all the Conditions Precedent to the Scheme are
satisfied or waived (if capable of waiver) and the Scheme becomes
Effective and is implemented, the Scheme will bind all Scheme
Shareholders, including those who vote against the Scheme
Resolution at the applicable Scheme Meeting (and/or those that vote
against the Financial Assistance Resolution and Financial Benefit
Resolution at the Annual General Meeting) and those who do not vote
at all.
As noted in ThinkSmart's RNS announcement dated 29 July 2022, Mr
Ned Montarello has confirmed he intends to vote in favour of the
Scheme in respect of all the ThinkSmart Shares he holds or
controls. Accordingly, the Excluded Shareholder Scheme Resolution
is expected to be passed at the Excluded Shareholder Scheme
Meeting.
Sell your ThinkSmart Shares or ThinkSmart Depositary
Interests
The Scheme does not preclude you from selling some or all of
your ThinkSmart Shares prior to the Effective Date.
ThinkSmart intends to apply to AIM for ThinkSmart Shares to be
suspended from trading on AIM from 7.30am (London time) on the
Effective Date.
ThinkSmart Shareholders who sell some or all of their ThinkSmart
Shares:
-- are likely to receive payment (which may vary from the Scheme
Consideration) for the sale of their ThinkSmart Shares sooner than
they would receive the Scheme Consideration under the Scheme;
-- may incur a brokerage charge;
-- will not be able to participate in the Scheme or, if one
emerges, a Superior Proposal, in respect of those ThinkSmart Shares
they have sold; and
-- may be liable for income tax (including capital gains tax) on
the disposal of their ThinkSmart Shares (as they also may be under
the Scheme - see section 8 for further information).
Do nothing
ThinkSmart Shareholders who elect not to vote at the relevant
Scheme Meeting or do not sell their ThinkSmart Shares will:
-- if the Scheme is implemented - have any ThinkSmart Shares
held by them as at the Scheme Record Date transferred to BidCo by
operation of the Scheme and receive the Scheme Consideration;
or
-- if the Scheme is not implemented - retain their ThinkSmart Shares.
4.3 Conditions to the Scheme
Implementation of the Scheme is subject to the following
outstanding conditions precedent:
(a) Regulatory approvals : the UK Financial Conduct Authority
providing the necessary approvals under the UK Financial Services
and Markets Act 2000, and ASIC issuing or providing all relief,
waivers, confirmations, exemptions, consents or approvals necessary
to implement the Scheme (with such approvals not being revoked
before 8.00am on the Second Court Date);
(b) Shareholder approval : the Requisite Majorities of
ThinkSmart Shareholders approve the Scheme at the Scheme
Meetings;
(c) Independent Expert : the Independent Expert does not change
its conclusion or withdraw its Independent Expert's Report before
8.00am on the Second Court Date;
(d) Court approval : the Court approves the Scheme in accordance
with section 411(4)(b) of the Corporations Act;
(e) Financial Assistance Resolution and Financial Benefit
Resolution : ThinkSmart Shareholders approve the Financial
Assistance Resolution and Financial Benefit Resolution at the
Annual General Meeting;
(f) Restraints : no restraining order, injunction or other order
that would prevent or delay the Scheme made by a court of competent
jurisdiction or Government Agency is in effect at 8.00am on the
Second Court Date;
(g) No Target Prescribed Occurrence or Target Regulated Event :
no Target Prescribed Occurrence or Target Regulated Event (each as
defined in the Scheme Implementation Deed) occurs between (and
including) 29 July 2022 and 8.00am on the Second Court Date;
and
(h) Sale of Block Shares : ThinkSmart not selling, disposing of
or otherwise dealing with any Block Shares (other than in
accordance with the Scheme Implementation Deed) between (and
including) 29 July 2022 and 8.00am on the Second Court Date.
The Scheme was also subject to the following conditions, which
have been satisfied:
(a) Broker : the Broker having been appointed in accordance with
the Scheme Implementation Deed.
The Scheme will not proceed unless all of the conditions
precedent to the Scheme are satisfied or waived (as applicable) in
accordance with the Scheme Implementation Deed.
As at the date of this Scheme Booklet, none of the Independent
Directors or BidCo Directors are aware of any circumstances which
would cause any condition precedent not to be satisfied.
4.4 Implications if the Scheme does not become Effective
If the Scheme is not implemented:
-- ThinkSmart Shareholders will continue to hold ThinkSmart
Shares and will be exposed to general risks as well as risks
specific to ThinkSmart, including those set out in section 7 .
-- ThinkSmart Shareholders will not receive the Scheme Consideration.
-- A reimbursement fee of up to $200,000 (excluding GST) may be
payable by ThinkSmart to BidCo under certain circumstances. Those
circumstances do not include the failure by ThinkSmart Shareholders
to approve the Scheme at the Scheme Meetings. Further information
on the reimbursement fee is set out in section 10.4(g) .
-- ThinkSmart Shareholders will continue to be exposed to the
ThinkSmart business, meaning:
-- they will continue to have exposure to Block Shares through
their ThinkSmart shareholding. The risks associated with Block
(including those set out in section 7.2(a) will therefore continue
to apply to ThinkSmart Shareholders;
-- the ThinkSmart Directors will consider alternate
opportunities in respect of ThinkSmart's Block Shares, including
whether to retain such shareholding or to sell ThinkSmart's Block
Shares, and what to do with the proceeds from any such sale. As at
the date of this Scheme Booklet, the ThinkSmart Directors have not
made any decision regarding ThinkSmart's Block Shares should the
Scheme not become Effective; and
-- they will remain exposed to the ongoing wind down of
ThinkSmart's business operations and likely eventual liquidation.
This includes the uncertainty relating to the timing of any exit
for ThinkSmart Shareholders, if the ThinkSmart Group were to be
liquidated following conclusion of the wind down of ThinkSmart's
business operations, noting there may also be significant costs
involved in a liquidation scenario as well as the time taken to
complete the liquidation process before a final distribution of any
remaining cash could be made to ThinkSmart Shareholders.
-- ThinkSmart will have incurred approximately GBP0.7 million of
costs relating to the Scheme.
-- ThinkSmart will continue as an AIM-listed entity incurring
ongoing listing and corporate costs with management continuing to
wind down the legacy leasing business and provision of an
outsourced call centre customer support service to support the
Clearpay business which can be terminated at any time with 3
months' notice.
-- The ThinkSmart Independent Board Committee expects that the
costs of maintaining ThinkSmart as a listed entity until completion
of the wind down would likely exceed the cash generated from the
wind down of its business operations.
-- Since the announcement of the Scheme on 29 July 2022, the
average discount that ThinkSmart Shares trade to the market value
of its Block shareholding has reduced from approximately 31% (for
the period between 1 February 2022 (when ThinkSmart first received
the Block Shares) and 28 July 2022) to approximately 12% (for the
period between 29 July 2022 and the Last Practicable Date). [12] If
the Scheme is not implemented, it is likely that the price of a
ThinkSmart Share will change such that the discount to the market
value of its Block shareholding will increase (subject to any
changes to the Block Share price).
4.5 Key steps in the Scheme
(a) Scheme Meetings and Scheme approval requirements
The Court has ordered ThinkSmart to convene the Scheme Meetings
at which ThinkSmart Shareholders will be asked to approve the
Scheme.
The terms of the Scheme Resolutions to be considered at the
Scheme Meetings are contained in the Notice of General Scheme
Meeting in Annexure 4 (for ThinkSmart Shareholders excluding
Excluded Shareholders) and the Notice of Excluded Shareholder
Scheme Meeting in Annexure 5 (for Excluded Shareholders).
ThinkSmart Shareholders (excluding Excluded Shareholders) are to
vote on the General Scheme Resolution at the General Scheme
Meeting. Excluded Shareholders are to vote on the Excluded
Shareholder Scheme Resolution at the separate Excluded Shareholder
Scheme Meeting.
The Scheme will only become Effective and be implemented if:
-- it is approved by the Requisite Majorities of ThinkSmart
Shareholders at each applicable Scheme Meeting;
-- ThinkSmart Shareholders approve the Financial Assistance
Resolution and the Financial Benefit Resolution at ThinkSmart's
2022 Annual General Meeting;
-- it is approved by the Court at the Second Court Hearing; and
-- the other conditions precedent to the Scheme outlined in
section 4.3 are satisfied or waived (as applicable).
The Requisite Majorities of ThinkSmart Shareholders to approve
the Scheme are:
1 in relation to the General Scheme Resolution, a resolution passed by:
-- unless the Court orders otherwise, a majority in number (more
than 50%) of ThinkSmart Shareholders (excluding Excluded
Shareholders) present and voting at the General Scheme Meeting
(either in person or by proxy, attorney or, in the case of
corporate ThinkSmart Shareholders, body corporate representative);
and
-- at least 75% of the total number of votes cast on the General
Scheme Resolution at the General Scheme Meeting by ThinkSmart
Shareholders (excluding Excluded Shareholders) present and voting
(either in person or by proxy, attorney or, in the case of
corporate ThinkSmart Shareholders, body corporate representative);
and
2 in relation to the Excluded Shareholder Scheme Resolution, a resolution passed by:
-- unless the Court orders otherwise, a majority in number (more
than 50%) of Excluded Shareholders present and voting at the
Excluded Shareholder Scheme Meeting (either in person or by proxy,
attorney or, in the case of corporate Excluded Shareholders, body
corporate representative); and
-- at least 75% of the total number of votes cast on the
Excluded Shareholder Scheme Resolution at the Excluded Shareholder
Scheme Meeting by Excluded Shareholders present and voting (either
in person or by proxy, attorney or, in the case of corporate
Excluded Shareholders, body corporate representative).
The Court has the power to waive the first requirements referred
to in paragraphs (1) and (2) above.
The entitlement of ThinkSmart Shareholders to attend and vote at
the Scheme Meetings is set out in the Notice of General Scheme
Meeting in Annexure 4 (for ThinkSmart Shareholders excluding
Excluded Shareholders) and the Notice of Excluded Shareholder
Scheme Meeting in Annexure 5 (for Excluded Shareholders).
Details of the Financial Assistance Resolution and the Financial
Benefit Resolution are set out in section 9 . The entitlement of
ThinkSmart Shareholders to attend and vote at the Annual General
Meeting is set out in the Notice of Annual General Meeting in
Annexure 6 .
As at the Last Practicable Date, ThinkSmart DI Holders represent
approximately 47% of the ordinary fully paid shares of ThinkSmart.
If necessary, ThinkSmart intends to seek a declaration from the
Court at the Second Court Date to include the ThinkSmart DI Holders
who provide voting instructions to the Depositary Custodian as if
they were present at the meeting for the purpose of calculating the
majority in number present and voting at the General Scheme
Meeting.
The objective in seeking that declaration would be to treat
ThinkSmart DI Holders in a way that is consistent with the
ThinkSmart Shareholders that do not hold their ThinkSmart Shares
via the ThinkSmart Depositary Interests. In the absence of the
declaration, the ThinkSmart DI Holders would be represented by one
proxy at the applicable Meeting and thus would count as only one
ThinkSmart Shareholder for the purpose of calculating the number
present and voting at the applicable Meeting.
The granting of such declaration (if sought by ThinkSmart) and
the terms of it are at the discretion of the Court.
Voting is not compulsory. However, the ThinkSmart Independent
Board Committee unanimously recommends that ThinkSmart Shareholders
vote in favour of the Scheme in the absence of a Superior Proposal,
and subject to the Independent Expert continuing to conclude that
the Scheme is in the best interests of ThinkSmart Shareholders
(other than the Excluded Shareholders).
You should be aware that even if you do not vote, or vote
against the Scheme, the Scheme may still be implemented if it is
approved by the Requisite Majorities of ThinkSmart Shareholders and
the Court. If this occurs, your ThinkSmart Shares will be
transferred to BidCo and you will receive the Scheme Consideration
even though you did not vote on, or voted against, the Scheme.
The results of each Scheme Meeting will be available as soon as
possible after the conclusion of the Scheme Meetings and will be
announced by ThinkSmart via the RNS of the LSE once available.
(b) Excluded Shareholders and the Excluded Shareholder Scheme Meeting
The Excluded Shareholders are listed in section 11.1 of this
Scheme Booklet. As at the Last Practicable Date, the Excluded
Shareholders own 31,342,286 ThinkSmart Shares.
Because the Excluded Shareholders are offered a different form
of consideration under the Scheme to all other ThinkSmart
Shareholders (see section 4.1 of this Scheme Booklet), their rights
under the Scheme differ from those of other ThinkSmart Shareholders
under the Scheme such that they constitute a separate class of
shareholders for the purposes of voting on the Scheme. This means
that the Excluded Shareholders will not be permitted to vote at the
General Scheme Meeting and will instead vote at the Excluded
Shareholder Scheme Meeting on a separate Scheme Resolution (being
the Excluded Shareholder Scheme Resolution).
The Excluded Shareholder Scheme Resolution must be passed at the
Excluded Shareholder Scheme Meeting by the Requisite Majorities (of
Excluded Shareholders). As noted in ThinkSmart's RNS announcement
dated 29 July 2022, Mr Ned Montarello has confirmed he intends to
vote in favour of the Scheme in respect of all the ThinkSmart
Shares he holds or controls. Accordingly, the Excluded Shareholder
Scheme Resolution is expected to be passed at the Excluded
Shareholder Scheme Meeting.
In addition, the Excluded Shareholders will not be permitted to
vote on the Financial Assistance Resolution and the Financial
Benefit Resolution, as set out in section 9 of this Scheme
Booklet.
(c) Court approval of the Scheme
In the event that:
-- the Scheme is approved by the Requisite Majorities of
ThinkSmart Shareholders at each of the Scheme Meetings; and
-- all other conditions precedent to the Scheme (except Court
approval of the Scheme) have been satisfied or waived (as
applicable),
then ThinkSmart will apply to the Court for orders approving the
Scheme.
Each ThinkSmart Shareholder has the right to appear at the
Second Court Hearing.
(d) Effective Date
If the Court approves the Scheme, the Scheme will become
Effective on the Effective Date, being the date an office copy of
the Court order from the Second Court Hearing approving the Scheme
is lodged with ASIC. ThinkSmart will, on the Scheme becoming
Effective, give notice of that event to AIM.
ThinkSmart intends to apply to AIM for ThinkSmart Shares to be
suspended from trading on AIM from 7.30am (London time) on the
Effective Date.
(e) Scheme Record Date and entitlement to Scheme Consideration
ThinkSmart Shareholders who are recorded on the ThinkSmart Share
Register on the Scheme Record Date (currently expected to be 5.00pm
(Perth time) on 25 November 2022 or such other time and date as the
parties agree in writing) will be entitled to receive the Scheme
Consideration in respect of the ThinkSmart Shares they hold at that
time.
ThinkSmart DI Holders who are recorded on the ThinkSmart DI
Register on the Scheme Record Date (currently expected to be 6.00pm
(London time) on 25 November 2022 or such other time and date as
the parties agree in writing) will be entitled to receive the
Scheme Consideration in respect of the ThinkSmart Shares their
ThinkSmart Depositary Interests relate to at that time.
(1) Dealings on or prior to the Scheme Record Date
For the purposes of determining which ThinkSmart Shareholders
are eligible to participate in the Scheme, dealings in ThinkSmart
Shares will be recognised only if:
-- in the case of dealings of the type to be effected by CREST,
the transferee is registered in the ThinkSmart DI Register as the
holder of the relevant ThinkSmart Depositary Interests on or before
the Scheme Record Date; and
-- in all other cases, registrable transfer or transmission
applications in respect of those dealings, or valid requests in
respect of other alterations, are received by the ThinkSmart Share
Registry before the Scheme Record Date (and the transferee remains
registered as at the Scheme Record Date).
For the purposes of determining entitlements under the Scheme,
ThinkSmart will not accept for registration or recognise any
transfer or transmission applications in respect of ThinkSmart
Shares or ThinkSmart Depositary Interests received after the Scheme
Record Date.
(2) Dealings after the Scheme Record Date
For the purpose of determining entitlements to the Scheme
Consideration, ThinkSmart and the Depositary must maintain the
ThinkSmart Share Register and ThinkSmart DI Register in its form as
at the Scheme Record Date until the Implementation Date. The
ThinkSmart Share Register and ThinkSmart DI Register in this form
will solely determine entitlements to the Scheme Consideration.
After the Scheme Record Date:
-- all certificates and statements of holding for ThinkSmart
Shares including statements of holding for ThinkSmart Depositary
Interests (other than statements of holding in favour of BidCo)
will cease to have effect as documents relating to title in respect
of such ThinkSmart Shares; and
-- each entry on the ThinkSmart Share Register or ThinkSmart DI
Register (other than entries on the ThinkSmart Share Register in
respect of BidCo) will cease to have effect except as evidence of
entitlement to the Scheme Consideration in respect of the
ThinkSmart Shares relating to that entry.
(f) Implementation Date
On the Implementation Date, the Scheme Shares will be
transferred to BidCo.
(g) Payment of Scheme Consideration
As described in section 4.1 of this Scheme Booklet, following
Implementation of the Scheme, the Broker appointed by ThinkSmart
and BidCo, will be instructed to sell the Block Sale Shares
on-market on the New York Stock Exchange as soon as practicable on
the next Trading Day following the Implementation Date (and, in any
event, within 3 Trading Days following the Implementation
Date).
BidCo and ThinkSmart will procure that the proceeds from the
sale of the Block Sale Share (subject to certain adjustments as set
out in the definition of Block Sale Share Proceeds - see section
11.1 of this Scheme Booklet) are, as soon as practicable, paid to
the Scheme Shareholders entitled to receive Cash Consideration
under the Scheme:
-- pro rata to the relative respective holdings of Relevant
Scheme Shares of each Scheme Shareholder entitled to receive Cash
Consideration;
-- in accordance with the applicable currencies (see section 4.1 ); and
-- net of any banking charges or fees (including wire transfer
fees or corresponding charges) or charges or fees of a similar
nature which are incurred with respect to the payment of the Block
Sale Share Proceeds to the relevant Scheme Shareholder entitled to
receive Cash Consideration under the Scheme and net of any other
amounts (including tax) required by law to be withheld (if
applicable).
BidCo is contractually obliged, under the Scheme Implementation
Deed, to pay the Scheme Consideration to the Scheme
Shareholders.
In addition, as at the date of this Scheme Booklet, a Deed Poll
has been entered into by BidCo in favour of the Scheme
Shareholders. Under the Deed Poll, BidCo covenants in favour of the
Scheme Shareholders to:
-- provide, or procure the provision of, the Scheme
Consideration to each Scheme Shareholder, subject to the Scheme
becoming Effective; and
-- undertake all other actions attributed to BidCo under the Scheme.
The Deed Poll may be relied on and enforced by any Scheme
Shareholder in accordance with its terms even though the Scheme
Shareholders are not party to it. A copy of the Deed Poll is
contained in Annexure 3 .
To further support BidCo's obligation to pay the Cash
Consideration to Scheme Shareholders, BidCo and ThinkSmart have
entered into the following:
-- Broker Agreement between ThinkSmart, BidCo and the Broker,
under which the Broker is irrevocably appointed to sell the Block
Sale Shares and is obliged to remit the proceeds back to
ThinkSmart; and
-- Funds Flow Deed between ThinkSmart and BidCo, which sets out
the flow of proceeds to ThinkSmart Shareholders once the Block Sale
Shares have been sold , including the applicable currency
conversions .
4.6 Warranties by Scheme Shareholders
Under the terms of the Scheme, each Scheme Shareholder is taken
to have warranted to ThinkSmart and BidCo, and appointed and
authorised ThinkSmart as its attorney and agent to warrant to
BidCo, on the Implementation Date, that:
-- all their ThinkSmart Shares (including any rights and
entitlements attaching to those shares) which are transferred under
the Scheme will, at the date of transfer, be fully paid and free
from all mortgages, charges, liens, encumbrances, pledges, security
interests (including any 'security interests' within the meaning of
section 12 of the Personal Property Securities Act 2009 (Cth)) and
interests of third parties of any kind, whether legal or otherwise,
and restrictions on transfer of any kind; and
-- they have full power and capacity to transfer their Scheme
Shares to BidCo together with any rights attaching to those
shares.
4.7 Cancellation of admission to AIM
ThinkSmart will apply for the cancellation of the admission of
ThinkSmart Shares to trading on AIM to occur shortly after the
Implementation Date.
5 Information about ThinkSmart
5.1 Introduction
ThinkSmart's origins are as a specialist digital payments
platform business with operations within retail consumer and
business finance.
ThinkSmart was listed on the Australian Securities Exchange on 4
June 2007 and transferred its listing from the ASX to the
Alternative Investment Market of the London Stock Exchange in 2016,
following the sale of its Australian operations and expansion into
the United Kingdom market, in order to better align its listing
with its principal place of business.
Over the years, ThinkSmart has had operations in providing
point-of-sale lease finance for high-volume small-ticket electronic
and commercial equipment in Australia and the United Kingdom,
including B2B (business-to-business) and B2C (business-to-consumer)
point-of-sale lease finance through its longstanding relationships
with retail businesses.
ThinkSmart's current business strategy is to deliver shareholder
value through managing its shareholding in Block (see section 5.2
below), while managing the orderly wind down of its legacy leasing
business and providing an outsourced call centre customer support
service for Clearpay.
Further information on ThinkSmart and its operations is
available on its website at https://www.thinksmartworld.com.
5.2 Business overview
(a) ThinkSmart's shareholding in Block
ThinkSmart currently holds 618,750 shares in Block, Inc., a
global fintech company incorporated in Delaware, United States.
Block became a public company and Block's Class A Shares were
listed on the New York Stock Exchange on 19 November 2015 under the
symbol SQ.
Block provides financial services and digital payment solutions
to international markets by creating tools that empower businesses,
sellers and individuals to participate in the economy. Block
provides more than 30 distinct products and services to sellers
(together the "seller ecosystem"), while through Block's Cash App,
it provides a parallel ecosystem of financial services to support
individuals in managing their money (together the "Cash App
ecosystem").
Block acquired Afterpay in 2022 and also owns a majority
ownership stake in TIDAL, a global music and entertainment platform
that seeks to expand Block's purpose of economic empowerment to
artists. Block also recently launched TBD, a bitcoin-focused
ecosystem established to build an open developer platform with the
sole goal of making it easy to create non-custodial,
permissionless, and decentralised financial services.
Block's financial model is based on the recurrent use of its
tools, attracting transaction-based revenue, subscription and
services-based revenue, hardware revenue and bitcoin revenue. Block
has a market capitalisation of approximately US$33 billion as at
the close of trading on NYSE on the Last Practicable Date.
Clearpay is a "buy now pay later" specialist digital payments
platform business developed by ThinkSmart.
In August 2018, the ThinkSmart Group sold 90% of the shares in
Clearpay Finance Ltd (ThinkSmart's wholly owned subsidiary which
operated the Clearpay business) to Afterpay Ltd for GBP10.5
million, delivering a profit on sale of GBP7.9 million. Following
the announcement of the intended takeover of Afterpay by Block (at
the time named Square, Inc.) in November 2021, which entitled
Afterpay to exercise its call option to buy the remaining shares in
Clearpay held by ThinkSmart in cash at any time following the
change of control, the ThinkSmart Group agreed with Afterpay to
sell its remaining 10% shareholding in Clearpay to Afterpay in
exchange for 1.65 million shares in Afterpay, subject to ThinkSmart
shareholder approval, which was given on 14 January 2022.
ThinkSmart's Afterpay shares were subsequently exchanged for
618,750 shares in Block, following the completion of the takeover
of Afterpay by Block, on 1 February 2022. On 1 February 2022 Block
Shares had a closing share price on the New York Stock Exchange of
US$127.61 which, by the Last Practicable Date, had reduced to
US$55.92 in line with the reduction in share prices of global
technology stocks.
Since acquiring the Block Shares, ThinkSmart Shares have
typically traded at an approximate 31% average discount to the
market value of its Block shareholding and have continued to do so
after the 1 July 2022 record date for the A$4.4 million (GBP2.5
million equivalent [13] ) capital return and dividend payment which
was paid to ThinkSmart shareholders on 15 July 2022. This July 2022
payment to shareholders takes the total capital return and dividend
payments by ThinkSmart to its shareholders, since the sale of 90%
of Clearpay in August 2018, to A$30.5 million (GBP16.7 million
equivalent [14] ).
As announced on 13 May 2022, ThinkSmart has been undertaking a
strategic review of its Block shareholding and has considered a
number of options to maximise shareholder value (which included
reviewing BidCo's proposal to acquire all the shares in ThinkSmart
as described above). The proposed Scheme is the culmination of that
review.
(b) ThinkSmart's legacy leasing business and call centre customer support service
ThinkSmart's business operations comprise the legacy leasing
business and provision of an outsourced call centre customer
support service to support the Clearpay business which can be
terminated at any time with three months' notice.
ThinkSmart's legacy leasing business operations are currently in
managed wind down following the cessation of new leasing volumes
origination in February 2021. As at 30 June 2022, the ThinkSmart
Group's finance lease receivables had a gross receivable balance of
GBP0.7 million and an average term outstanding of seven months
(with a maximum term outstanding of 28 months).
Whilst the managed wind down has yielded positive cash flows to
date, due to the ThinkSmart business' declining revenues associated
with the wind down and the fixed costs associated with maintaining
an AIM listing and related corporate overhead costs, the ThinkSmart
business is now entering a period of being cash flow negative.
Following the A$4.4 million (GBP2.5 million equivalent [15] )
capital return and dividend payment on 15 July 2022, the ThinkSmart
Group's cash balance as at the Last Practicable Date is
approximately GBP2.8 million and it is expected that this balance
will continue to reduce if ThinkSmart remains listed going forward,
as a result of ongoing operational and corporate costs exceeding
its income, transaction costs relating to the Scheme and the
eventual costs of liquidating the ThinkSmart Group.
5.3 ThinkSmart Board and senior management
(a) ThinkSmart Board
The ThinkSmart Board comprises the following directors:
Name Position
============================ ==================================
Mr Ned Montarello Executive Chairman
============================ ==================================
Mr Peter Joshua Thomas Independent Non-Executive Director
Gammell
============================ ==================================
Mr David Alexander Robertson Independent Non-Executive Director
Adams
============================ ==================================
Mr Gary Robert Halton Director
============================ ==================================
(b) ThinkSmart senior management
ThinkSmart's senior management comprises the following
members:
Name Position
===================== =======================
Mr Ned Montarello Chief Executive Officer
===================== =======================
Mr Gary Robert Halton Chief Financial Officer
===================== =======================
5.4 Historical financial information
(a) Basis of preparation
This section 5.4 sets out a summary of historical financial
information in relation to ThinkSmart for the purpose of this
Scheme Booklet. The financial information has been derived from
ThinkSmart's financial statements for the financial years ended 30
June 2022, 2021 and 2020, which were audited by BDO Audit (WA) Pty
Ltd.
The historical financial information of ThinkSmart is presented
in an abbreviated form and does not contain all the disclosures,
presentation, statements or comparatives that are usually provided
in an annual report prepared in accordance with the Corporations
Act. ThinkSmart considers that for the purposes of this Scheme
Booklet the historical financial information presented in an
abbreviated form is more meaningful to ThinkSmart Shareholders.
Further detail on ThinkSmart's financial performance can be
found in:
-- the financial statements for the year ended 30 June 2022
(included in the announcement of the results for the year ended 30
June 2022 released on RNS on 15 September 2022);
-- the financial statements for the year ended 30 June 2021
(included in the announcement of the results for the year ended 30
June 2021 released on RNS on 14 September 2021); and
-- the financial statements for the year ended 30 June 2020
(included in the announcement of the results for the year ended 30
June 2020 released on RNS on 17 September 2020),
each of which can be found on ThinkSmart's website
(thinksmartworld.com) or the LSE website
(londonstockexchange.com).
(b) Historical consolidated statement of profit & loss and other comprehensive income
12 Months 12 Months 12 Months
to 30 June to 30 June to 30 June
2022 2021 2020
GBP,000 GBP,000 GBP,000
Revenue 3,269 4,286 6,079
Other revenue 207 62 253
------------ ------------ ------------
Total revenue 3,476 4,348 6,332
Customer acquisition cost (74) (258) (627)
Cost of inertia assets sold (166) (335) (700)
Other operating expenses (2,704) (3,431) (4,270)
Depreciation and amortisation (802) (1,401) (2,047)
Impairment gains/(losses) (103) 41 (2)
(Losses)/gains on Financial
Instruments (93,696) 71,267 54,418
Other gains - 1,450 -
------------ ------------ ------------
(Loss)/profit before tax (94,069) 71,681 53,104
Income tax charge (11) (17) (62)
------------ ------------ ------------
Net (loss)/profit after tax
- attributable to owners of
the Company (94,080) 71,664 53,042
Other comprehensive income/(loss)
Items that may be reclassified
subsequently to profit or
loss, net of income tax:
Foreign currency translation
differences for foreign operations (13) (43) 146
Total items that may be reclassified
subsequently to profit or
loss net of income tax (13) (43) 146
------------ ------------ ------------
Other comprehensive income/(loss)
for the year, net of income
tax (13) (43) 146
------------ ------------ ------------
Total comprehensive (loss)/income
for the year attributable
to owners of the Company (94,093) 71,621 53,188
------------ ------------ ------------
(c) Historical consolidated statement of financial position
As at As at As at
30 June 30 June 30 June
2022 2021 2020
GBP,000 GBP,000 GBP,000
Current assets
Cash and cash equivalents 5,536 7,067 8,805
Trade receivables 17 55 129
Finance lease receivables 866 38 431
Financial assets at fair value 31,304 - -
through profit or loss
Other current assets 231 380 924
Total current assets 37.954 7,540 10,289
--------- --------- ---------
Non-current assets
Finance lease receivables 46 - 15
Plant and equipment 98 302 460
Intangible assets 188 590 1,433
Financial assets at fair value
through profit or loss - 125,000 53,733
Contract assets - 777 1,430
Other non-current assets 3 2,069 2,147
Total non-current assets 335 128,738 59,218
--------- --------- ---------
Total assets 38,289 136,278 69,507
--------- --------- ---------
Current liabilities
Trade and other payables (1,043) (728) (1,195)
Lease liabilities (46) (103) (94)
Contract liabilities (39) (410) (648)
Provisions (167) (202) (255)
Total current liabilities (1,295) (1,443) (2,192)
--------- --------- ---------
Non-current liabilities
Lease liabilities - (46) (148)
Contract liabilities - (332) (679)
Total non-current liabilities - (378) (827)
--------- --------- ---------
Total liabilities (1,295) (1,821) (3,019)
--------- --------- ---------
Net assets 36,994 134,457 66,488
--------- --------- ---------
Equity
Issued capital 7,862 10,413 13,164
Reserves (2,888) (2,875) (2,832)
Accumulated profits 32,020 126,919 56,156
--------- --------- ---------
Total equity 36,994 134,457 66,488
--------- --------- ---------
(d) Historical consolidated statement of cash flows
12 Months 12 Months 12 Months
to 30 June to 30 June to 30 June
2022 2021 2020
GBP,000 GBP,000 GBP,000
Cash Flows from Operating
Activities
Receipts from customers 3,152 4,033 4,741
Payments to suppliers and
employees (2,832) (3,796) (4,670)
(Payments)/receipts in respect
of lease receivables (746) 511 3,244
Payments from other interest-bearing
liabilities, inclusive of
related costs - - (2,533)
Interest received 61 65 108
Interest and finance charges
paid (10) (92) (380)
Receipts/(payments) from security
guarantee 2,021 35 (29)
Income tax (paid)/received (11) (17) 478
Other gains receipts - 1,450 -
Net cash from operating activities 1,635 2,189 959
------------ ------------ ------------
Cash Flows from Investing
Activities
Payments for plant and equipment (41) (17) (398)
Payment for intangible assets
- software & contract rights - (122) (111)
Payments for purchase of financial
instruments - - (987)
Receipts from sale of financial
instruments - - 5,376
Net cash (used in)/from investing
activities (41) (139) 3,880
------------ ------------ ------------
Cash Flows from Financing
Activities
Payment of lease liabilities (103) (93) (114)
Dividends paid (458) (901) (1,135)
Proceeds from share issue
net of costs 8 6 -
Return of capital net of costs (2,559) (2,757) (2,047)
Net cash used in financing
activities (3,112) (3,745) (3,296)
------------ ------------ ------------
Net (decrease)/increase in
cash and cash equivalents (1,518) (1,695) 1,543
Effect of exchange rate fluctuations
on cash held (13) (43) 163
Cash and cash equivalents
at beginning of the financial
year 7,067 8,805 7,099
Total cash and cash equivalents
at the end of the financial
period 5,536 7,067 8,805
------------ ------------ ------------
Restricted cash and cash equivalents
at the end of the financial
period (62) (60) (61)
------------ ------------ ------------
Net available cash and cash
equivalents at the end of
the financial period 5,474 7,007 8,744
------------ ------------ ------------
5.5 Material changes in financial position (since 30 June 2022)
Other than as disclosed in this Scheme Booklet, including in
relation to the A$4.4 million (GBP2.5 million equivalent [16] )
capital return and dividend payment which was paid to ThinkSmart
shareholders on 15 July 2022 (which reduced ThinkSmart's cash
balance accordingly), to the knowledge of the ThinkSmart Directors,
there have been no material changes to the financial position of
ThinkSmart and the ThinkSmart Group since 30 June 2022.
As ThinkSmart's primary asset is its holding of Block Shares,
ThinkSmart's financial position (in particular, its financial
assets at fair value) is impacted by changes in the price of Block
Shares. ThinkSmart Shareholders should note that the price of Block
Shares has traded in a range of US$89.70 and US$51.51 in the period
between 30 June 2022 and the Last Practicable Date and has declined
from US$61.46 as at 30 June 2022 to US$55.92 as at the Last
Practicable Date.
5.6 Capital structure
As at the Last Practicable Date, the capital structure of
ThinkSmart was:
Type of security Number on issue
================== ==============================
ThinkSmart Shares 106,587,814 (in respect of
which 50,611,736 are held
as ThinkSmart Depositary
Interests as at the Last
Practicable Date).
================== ==============================
ThinkSmart Options 1,679,532 expiring 21 December
2026 with an exercise price
of 0.1308 Pounds Sterling.
================== ==============================
Additional details about ThinkSmart's equity incentive plan
under which the ThinkSmart Options were issued are set out in
section 10.2 of this Scheme Booklet.
5.7 Significant holders in ThinkSmart Shares
As extracted from filings released on the LSE RNS on or before
the Last Practicable Date, the following persons are significant
holders of ThinkSmart Shares:
Significant holder Number of ThinkSmart Voting power
Shares in ThinkSmart
================================= ==================== ==============
Mr Ned Montarello (together
with the Excluded Shareholders) 31,342,286 29.40%
================================= ==================== ==============
Mr Peter Gammell 12,582,572 11.80%
================================= ==================== ==============
London and Capital Asset
Management Ltd 3,309,685 3.11%
================================= ==================== ==============
Note: The table above displays beneficial holdings, which may be
held through nominee accounts.
5.8 Publicly available information about ThinkSmart
ThinkSmart is subject to the AIM Rules and UK MAR and, as such,
is subject to regular reporting and disclosure obligations. These
reporting and disclosure requirements include, subject to some
exceptions, a requirement on ThinkSmart to disclose information
without delay concerning its financial condition, sphere of
activity, performance of its business or its expectations of its
performance (or other 'inside information' of a precise nature)
that would be likely to have a significant effect on the price of
ThinkSmart Shares .
In addition, as a company incorporated in Australia, ThinkSmart
is required to lodge various documents with ASIC. Copies of
documents lodged with ASIC by ThinkSmart may be obtained from an
ASIC office.
ThinkSmart Shareholders may obtain a copy of ThinkSmart 's
financial statements for the year ended 30 June 2022 from the LSE
website (londonstockexchange.com), from ThinkSmart 's website
(thinksmartworld.com) or by calling the ThinkSmart Shareholder
Information Line on 1300 528 984 (within Australia) or +61 3 9415
4826 (outside Australia), between 8.30am and 5.00pm (Sydney time),
Monday to Friday. ThinkSmart DI Holders can contact the dedicated
Depositary Interest Information Line on +44 0207 887 2225 or +44
0800 298 7356 (within the United Kingdom) between 9.00am and 5.00pm
(London time), Monday to Friday.
6 Information about BidCo
This section 6 has been prepared by, and is the responsibility
of, BidCo.
This section 6 contains information relating to BidCo and
outlines how BidCo is funding the Scheme Consideration. It also
includes an explanation of BidCo's intentions regarding ThinkSmart
under the Transaction.
Although BidCo believes that the statements regarding its
intentions concerning future events in this section 6 have been
made on a reasonable basis, no assurance can be given that such
intentions will not change in the future.
6.1 Overview of BidCo and BidCo ownership structure
BidCo is a special purpose Australian proprietary company
limited by shares incorporated specifically for the purpose of
acquiring the ThinkSmart Shares pursuant to the Scheme.
As a special purpose Australian proprietary company, BidCo does
not have any assets other than nominal paid up capital. Similarly,
BidCo does not have any liabilities other than its obligations
under the Scheme Implementation Deed, Deed Poll and Funds Flow
Deed.
As referred to in section 6.3 below, BidCo will be satisfying
its obligation to pay the Cash Consideration to Scheme Shareholders
by the post-Scheme implementation sale on the New York Stock
Exchange of the Block Sale Shares held by ThinkSmart (net of their
proportion of sale fees and after conversion into Pounds Sterling
and Australian dollars (as applicable)). In order to facilitate the
sale, BidCo has agreed under the Scheme Implementation Deed that
the members of the ThinkSmart Independent Board Committee will
remain on the ThinkSmart Board until after the Cash Consideration
has been despatched to Scheme Shareholders. Accordingly, the
ThinkSmart Independent Board Committee will assist with overseeing
the payment of the Cash Consideration to the Scheme Shareholders in
accordance with the Scheme.
BidCo is 100% wholly owned and controlled by Mr Ned Montarello,
the Executive Chairman and CEO of ThinkSmart.
The BidCo Board currently comprises the following directors:
-- Mr Ned Montarello;
-- Mr Adam Montarello; and
-- Mr Scott Montarello.
It is not currently intended that the BidCo Board will be
reconstituted as part of the Transaction.
The rights and liabilities attaching to BidCo Shares issued as
Scheme Consideration for Excluded Shareholders under the Scheme are
contained in the constitution of BidCo and are subject to the
Corporations Act. The form of the constitution of BidCo is
customary for an Australian proprietary company limited by
shares.
6.2 Rationale for proposing Scheme
BidCo's rationale for proposing the Scheme is to:
-- provide for a commercial outcome that would enable ThinkSmart
Shareholders to exit their investment in ThinkSmart as compared to
them remaining shareholders during the eventual wind down and
liquidation of ThinkSmart;
-- delist ThinkSmart to enable the wind down of its legacy
operations to be effected in a more cost-effective manner; and
-- provide Mr Ned Montarello and the other Excluded Shareholders
an opportunity to continue to have exposure to the residual Block
Shares held by ThinkSmart following implementation of the
Scheme.
6.3 Funding of the Scheme Consideration
Under the Scheme, BidCo will acquire 100% of the ThinkSmart
Shares, including the shares owned by the Excluded
Shareholders.
In exchange, Scheme Shareholders entitled to receive Cash
Consideration will receive the Cash Consideration which will be
funded entirely by the post-Scheme implementation sale on the New
York Stock Exchange of the Block Sale Shares held by ThinkSmart
(net of their proportion of sale fees and after conversion into
Pounds Sterling and Australian Dollars (as applicable)).
Under the Scheme, BidCo will also acquire all of the ThinkSmart
Shares held by the Excluded Shareholders in exchange for issuing
BidCo Shares to the Excluded Shareholders, or if an Excluded
Shareholder so elects, part or all of its ThinkSmart Shares may be
acquired by BidCo for Cash Consideration, in which case the
Excluded Shareholder will receive the same Cash Consideration as
the other Scheme Shareholders (to be funded by a proportionate
increase in the number of Block Shares that will be sold by
ThinkSmart post-Scheme implementation sale, as instructed by
BidCo).
6.4 Interest in ThinkSmart Shares
As at the date of this Scheme Booklet, BidCo does not hold any
ThinkSmart Shares.
As at the date of this Scheme Booklet, Mr Ned Montarello and the
other Excluded Shareholders hold the following ThinkSmart Shares
and ThinkSmart Options:
Excluded Shareholder Number of ThinkSmart Number of ThinkSmart
Shares Options
================================== ==================== ====================
Mr Ned Montarello 1,078,253 1,073,863
================================== ==================== ====================
Mr Ned Montarello as trustee
for the Montarello Investment
Trust 27,021,956 0
================================== ==================== ====================
Ms Kimberly Montarello 1,680 0
================================== ==================== ====================
Ms Kimberly Montarello
& Mr Ned Montarello as
trustees for the Adam Montarello
Trust 1,200 0
================================== ==================== ====================
Ms Kimberly Montarello
& Mr Ned Montarello as
trustees for the Scott
Montarello Trust 1,200 0
================================== ==================== ====================
Ms Kimberly Montarello
& Mr Ned Montarello as
trustees for the Montarello
Superannuation Fund 3,237,997 0
================================== ==================== ====================
6.5 BidCo's intentions
(a) Introduction
If the Scheme is implemented, BidCo will become the holder of
all ThinkSmart Shares on the Implementation Date and, accordingly,
ThinkSmart will become a wholly-owned subsidiary of BidCo on that
date.
This section 6.5 sets out BidCo's current intention only with
respect to ThinkSmart and is based on the information relating to
ThinkSmart and the general business environment which is known to
BidCo at the date of this Scheme Booklet .
Accordingly, the statements set out in this section 6.5 are
statements of present intention only and may change as new
information becomes available or as circumstances change.
(b) ThinkSmart's cancellation from AIM
As noted in section 4.7 , ThinkSmart will apply for the
cancellation of the admission of ThinkSmart Shares to trading on
AIM to occur shortly after the Implementation Date. BidCo intends
to continue that process to the extent it has not been completed
prior to the Implementation Date.
(c) Board of Directors
If the Scheme becomes Effective, the ThinkSmart Board will be
reconstituted following the despatch of the Scheme Consideration to
Scheme Shareholders.
BidCo's current intention is that, following payment of the
Scheme Consideration to Scheme Shareholders, the ThinkSmart Board
will comprise:
-- Mr Ned Montarello;
-- Mr Adam Montarello; and
-- Mr Scott Montarello.
BidCo's current intention is that there will be no change to the
directors of ThinkSmart's Subsidiaries. This means that Mr Ned
Montarello and Mr Gary Halton will be the directors of all of
ThinkSmart's Subsidiaries, other than Mr Keith Jones who will also
be a director of ThinkSmart Europe Limited and Mr Ned Montarello
who will be the sole director of ThinkSmart LTI Pty Limited.
(d) Assets and operations
Following implementation of the Scheme, ThinkSmart will be
controlled by Mr Ned Montarello (who owns 100% of the shares in
BidCo).
Following payment of the Scheme Consideration by BidCo to
satisfy its obligations under the Scheme, ThinkSmart's assets and
operations will comprise:
-- approximately GBP2.2 million in cash, noting that the
ThinkSmart Group's cash balance as at the Last Practicable Date is
approximately GBP2.8 million;
-- the remainder of the Block Shares which are not Block Sale Shares;
-- ThinkSmart's legacy leasing business which is currently
subject to a managed wind down process; and
-- ThinkSmart's business of providing an outsourced call centre
customer support service to support the Clearpay business which was
previously owned by ThinkSmart.
Following implementation of the Scheme, BidCo currently intends
to procure that ThinkSmart:
-- continues to hold the remaining Block Shares which are not
Block Sale Shares and will monitor this holding over time taking
into account its own relevant financial objectives and priorities
(including rationalisation of the legacy ThinkSmart corporate
group);
-- continues the existing managed wind down process for the
legacy leasing business in an orderly manner through to completion;
and
-- continues to provide the outsourced call centre customer
support service to the Clearpay business which was previously owned
by ThinkSmart, noting that this can be terminated by either
Clearpay or ThinkSmart at any time with 3 months' notice.
Where appropriate, BidCo may also arrange the rationalisation of
any subsidiaries in the ThinkSmart corporate group which are
dormant or otherwise no longer required.
(e) Employees
It is not expected that implementation of the Scheme will have
any immediate impact on the employees of ThinkSmart (other than the
changes to the directors of ThinkSmart and its Subsidiaries as
detailed in section 6.5(c) ).
As noted in section 6.5(d) , ThinkSmart's legacy leasing
business is already in the process of a managed wind-down.
The provision of the outsourced call centre customer support
service to Clearpay can be terminated by either Clearpay or
ThinkSmart at any time with 3 months' notice. BidCo will continue
to monitor and review the personnel requirements of ThinkSmart in
this context.
6.6 Additional information
(a) Dealing in ThinkSmart Shares in previous four months
Neither BidCo nor its Associates have provided or agreed to
provide any consideration for any BidCo Shares under any
transaction or agreement during the period of four months before
the date of this Scheme Booklet, except for the Scheme
Consideration which BidCo has agreed to provide under the
Scheme.
(b) Benefits to ThinkSmart Shareholders
During the four months before the date of this Scheme Booklet,
none of BidCo or its Associates have given, or offered to give or
agreed to give a benefit to another person where the benefit was
likely to induce the other person or an Associate to:
(1) vote in favour of the Scheme; or
(2) dispose of Scheme Shares,
where the benefit was not offered to all ThinkSmart
Shareholders.
(c) Benefits to current ThinkSmart officers
Other than as disclosed in this Scheme Booklet, none of BidCo or
any of its Associates will be making any payment or giving any
benefit to any current director, secretary or executive officer of
ThinkSmart or any of its related bodies corporate as compensation
or consideration for, or otherwise in connection with, their
resignation from their respective offices if the Scheme is
implemented.
(d) No other material information
Except as otherwise disclosed in this Scheme Booklet, there is
no other BidCo Information that is material to the making of a
decision in relation to the Scheme by ThinkSmart Shareholders,
being BidCo Information that is within the knowledge of the
directors of BidCo, at the date of this Scheme Booklet, which has
not previously been disclosed to ThinkSmart Shareholders.
7 Risks
7.1 Introduction
In considering the Scheme, ThinkSmart Shareholders should be
aware that there are a number of risk factors, both general and
specifically relating to ThinkSmart, which may affect the future
operating and financial performance of ThinkSmart and the price
and/or value of ThinkSmart Shares.
If the Scheme proceeds, ThinkSmart Shareholders will receive the
Scheme Consideration, will cease to hold ThinkSmart Shares and will
also no longer be exposed to the risks set out in this section 7
(and other risks to which ThinkSmart may be exposed).
If the Scheme does not proceed, ThinkSmart Shareholders will
continue to hold ThinkSmart Shares and continue to be exposed to
risks associated with an investment in ThinkSmart.
In deciding whether to vote in favour of the Scheme, ThinkSmart
Shareholders should read this Scheme Booklet carefully and consider
the following risk factors. These risk factors do not take into
account the individual investment objectives, financial situation,
position or particular needs of ThinkSmart Shareholders. In
addition, this section 7 is a summary only and does not purport to
list every risk that may be associated with an investment in
ThinkSmart now or in the future. There also may be additional risks
and uncertainties not currently known to ThinkSmart which may have
a material adverse effect on ThinkSmart's assets and liabilities,
financial position, profits and prospects and the ability to make
future distributions to ThinkSmart Shareholders, and the price
and/or value of ThinkSmart Shares.
Whilst the ThinkSmart Independent Board Committee unanimously
recommends that ThinkSmart Shareholders vote in favour of the
Scheme in the absence of a Superior Proposal and subject to the
Independent Expert continuing to conclude that the Scheme is in the
best interests of ThinkSmart Shareholders (other than the Excluded
Shareholders), ThinkSmart Shareholders are encouraged to make their
own independent assessment as to whether to vote in favour of the
Scheme.
7.2 Specific risks relating to the business and operations of ThinkSmart
There are a range of business-specific risks associated with
your current investment in ThinkSmart Shares, as set out below.
You will only continue to be exposed to these risks if the
Scheme does not proceed and you retain your investment in
ThinkSmart Shares. While ThinkSmart has in place what it considers
are appropriate policies and procedures to help manage these risks,
there is no guarantee that ThinkSmart will be able to manage these
risks completely. Furthermore, certain aspects of these risks (or
ThinkSmart's ability to respond to and manage them) may be partly
or wholly outside of ThinkSmart's control.
(a) Risks associated with Block Shares
ThinkSmart's main asset is its holding of 618,750 Block
Shares.
Block is a global fintech company incorporated in Delaware.
Block's Class A Shares are listed on NYSE under the symbol SQ.
Block has a market capitalisation of approximately US$33 billion as
at the close of trading on NYSE on the Last Practicable Date. There
is no public trading market for Block Class B Shares.
Founded in 2009, Block builds tools that aim to empower
businesses and individuals to participate in the economy. Sellers
use Block to reach buyers online and in person, manage their
business, and access financing. Individuals use Block's Cash App to
spend, send, store, and invest money. Block owns a majority
ownership stake in TIDAL, a global music and entertainment platform
that expands Block's purpose of economic empowerment to artists.
Block also recently launched TBD, a bitcoin-focused business
established to build an open developer platform with the sole goal
of making it easy to create non-custodial, permissionless, and
decentralised financial services.
Block has offices in the United States, Canada, Japan,
Australia, Ireland, Spain, Norway, and the United Kingdom.
Section 5.2 of this Scheme Booklet explains the background to
ThinkSmart becoming a holder of Block Shares.
The effect of ThinkSmart's main asset being shares in Block is
that the trading price of ThinkSmart Shares is correlated to the
price of Block Shares. This also means that the various risks
associated with a holding in Block Shares apply to holders of
ThinkSmart Shares. Broadly, these risks include:
-- business and industry risks, including Block's ability to
maintain, protect and enhance its brand, and Block's ability to
retain existing sellers and customers, attract new sellers and
customers, and increase sales to both new and existing sellers and
customers;
-- operational risks, including real or perceived improper or
unauthorised use of, disclosure of, or access to sensitive data,
and real or perceived security breaches or incidents or human error
in administering Block's software, hardware, and systems;
-- economic financial and tax risks, including a deterioration
of general macroeconomic conditions and the ongoing COVID-19
pandemic and measures intended to prevent its spread;
-- legal, regulatory and compliance risk, including extensive
regulation and oversight in a variety of Block's areas of business,
and complex and evolving regulations and oversight related to
privacy and data breaches; and
-- risks related to ownership of Block's common stock, including
the dual class structure of Block's common stock, and volatility of
the market price of Block's Class A common stock.
Further detail of the risks associated with a holding in Block
Shares can be found in:
-- Block's Annual Report (SEC Form 10-K) for the year ended 31
December 2021, filed with the SEC on 24 February 2022; and
-- Block's Quarterly Report (SEC Form 10-Q) for the quarter
ended 30 June 2022, filed with the SEC on 4 August 2022.
Block's SEC filings are available to the public at the SEC's
website at www.sec.gov and at Block's website at www.block.xyz.
(b) Costs associated with managed wind down
As noted in section 5.2 , ThinkSmart's legacy leasing business
operations are currently in managed wind down following the
cessation of new leasing volumes origination in February 2021. As
at 30 June 2022, the ThinkSmart Group's finance lease receivables
had a gross receivable balance of GBP0.7 million and an average
term outstanding of seven months (with a maximum term outstanding
of 28 months).
Whilst the managed wind down has yielded positive cash flows to
date, due to the ThinkSmart business' declining revenues associated
with the wind down and the fixed costs associated with maintaining
an AIM listing and related corporate overhead cost, the ThinkSmart
business is now entering a period of being cash flow negative.
Following the A$4.4 million (GBP2.5 million equivalent [17] )
capital return and dividend payment on 15 July 2022, the ThinkSmart
Group's cash balance as at the Last Practicable Date is
approximately GBP2.8 million and the ThinkSmart Independent Board
Committee expects that this balance will continue to reduce as a
result of ongoing operational and corporate costs exceeding its
income, transaction costs relating to the Scheme and the eventual
costs of liquidating the ThinkSmart Group.
(c) Risk of default or fraud by customers
The credit quality of previously accepted customers and the
potential for payment defaults has an impact on ThinkSmart's
financial performance through impairment. Historic robust credit
checking and collection processes combined with development of
ThinkSmart's intellectual property capability in this area assist
in managing and mitigating this risk, but there is a risk that
deteriorating UK macroeconomic conditions (including rising
inflation, supply shortages, rising cost of living, high energy
prices and tightening monetary policy) may increase the likelihood
of payment defaults in relation to ThinkSmart's remaining
receivables from its legacy leasing business (which is now in wind
down).
(d) Clearpay support contract
Following the sale of Clearpay to Afterpay (now Block),
ThinkSmart continues to provide an outsourced call centre customer
support service to support the Clearpay business. Under this
arrangement, ThinkSmart currently generates approximately GBP0.9
million in annual revenue.
This contract can be terminated for convenience at any time by
either party with 3 months' notice. Accordingly, there is a risk
that this contract may be terminated by Block (eg if Block
establishes its own customer support service for Clearpay), which
would negatively impact ThinkSmart's future cash flow.
(e) COVID-19
Thanks to operating in a less affected sector of the economy,
robust business continuity processes, proactive management and
timely access to government support, ThinkSmart has so far been
only minimally impacted by COVID-19.
Prior to the outbreak of COVID-19, ThinkSmart already had in
place a robust risk management structure which has been augmented
by the adoption of a specific COVID-19 risk assessment and
associated updates to operating procedures. In line with UK
government guidance, ThinkSmart facilitated remote working for all
staff and supported a safe working environment with a focus on
staff health and wellbeing. ThinkSmart has in place adequate
measures to mitigate the impact of COVID-19 on the wind down of its
business.
(f) Changes in government policies
Government policies (of both the UK and Australia) are subject
to review and change on a periodic basis. Such changes are likely
to be beyond the control of ThinkSmart and may adversely affect its
operating and financial performance. At present, ThinkSmart is not
aware of any reviews or changes that would materially affect its
business.
(g) The consumer credit industry is subject to extensive
regulation, and companies operating in this sector are generally
required to obtain authorisation from the FCA
The industry in which ThinkSmart operates is subject to a range
of legislation and regulation. The FCA is the regulatory body
responsible for the consumer credit industry in the UK.
ThinkSmart's activities are regulated by a regulatory framework
based on a combination of the Financial Services and Markets Act
2000 and its secondary legislation, the provisions of the Consumer
Credit Act 1974 and the FCA Rules. The volume and demands of
regulation, and the regulatory scrutiny have increased since the
transfer of regulatory powers from the UK Office of Fair Trading to
the FCA in 2014. Further regulation in the form of a new regime
referred to as Consumer Duty is currently being implemented in the
UK, which focuses on enhancing overall consumer protection but will
further increase the regulatory demands on consumer credit
providers.
(h) Dependency on information technology
ThinkSmart relies on information technology in relation to its
lease contracts and benefits from software developed for this
purpose. The successful operation of ThinkSmart's business depends
on maintaining the integrity of its computer, communication and
information technology systems. These systems and operations are
vulnerable to damage, breakdown or interruption from events which
are beyond ThinkSmart's control, such as fire, flood and other
natural disasters; power loss or telecommunications or data network
failures; improper or negligent operation of systems by employees,
or unauthorised physical or electronic access; and interruptions to
internet system integrity. Whilst ThinkSmart's legacy leasing
business is in wind down, any such damage or interruption could
cause significant disruption to the operations of ThinkSmart, its
ability to trade and its reputation.
(i) Key personnel risk
ThinkSmart's continued success has depended on its ability to
retain current key members of the senior management team, with
their experience and knowledge of the business. While ThinkSmart
endeavours to retain key management personnel, there can be no
guarantee that its key management personnel will continue in their
employment. Any loss of key members of the senior management team
would disrupt ThinkSmart's operations and may also have a material
adverse effect on ThinkSmart's ability to conduct an orderly wind
down.
7.3 General risks relating to the business and operations of ThinkSmart
ThinkSmart is exposed to a number of general risks that could
materially adversely affect its assets and liabilities, financial
position, profits, prospects and potential to make further
distributions to ThinkSmart Shareholders, and the price and/or
value of ThinkSmart Shares. General risks that may impact on
ThinkSmart or the market for ThinkSmart Shares include:
-- changes in general business, industry cycles and economic
conditions including inflation, interest rates, exchange rates,
employment rates and consumer demand;
-- natural disasters, catastrophes and disease or pandemic
(including the outbreak, escalation or any impact of, or recovery
from, COVID-19 or any COVID-19 Measures) and other macroeconomic
occurrences, including but not limited to geopolitical events such
as outbreak of hostilities, acts of terrorism and declarations of
war;
-- changes to government policy, legislation or regulation, both
domestic and global, which may restrict or otherwise impact the
business operations and activities of ThinkSmart;
-- variations in recommendations by securities analysts and brokers;
-- changes in investor sentiment and perceptions, market
fluctuations and overall performance of the international stock
markets;
-- the operating and trading price performance of other
comparable listed and unlisted entities;
-- changes to accounting standards and reporting standards;
-- changes to the current tax regime;
-- claims, litigation, industry complaints, regulatory
investigations and other disputes, which may be with or without
merit, giving rise to, among other things, costs of defending and
resolving such disputes, heightened public scrutiny and potential
reputational harm;
-- general operational and business risks; and
-- other risks and uncertainties which may not currently be known to ThinkSmart.
Some of these factors could affect the value of ThinkSmart
regardless of ThinkSmart's underlying operating performance.
7.4 Risks relating to the Scheme
(a) Risks relating to implementing the Scheme
The implementation of the Scheme is subject to certain
conditions precedent, which are summarised in section 4.3 and are
set out in full in clause 3.1 of the Scheme Implementation
Deed.
ThinkSmart will only apply to the Court for orders approving the
Scheme if each of the conditions precedent (except Court approval
of the Scheme) are satisfied or waived (if capable of waiver) prior
to 8.00am (Perth time) on the Second Court Date. As such, failure
to satisfy or waive, or a delay in satisfying or waiving, any of
the conditions precedent may delay or prevent implementation of the
Scheme. The failure of a condition precedent to be satisfied or
waived (if capable of waiver) may also give rise to a right of
either ThinkSmart or BidCo to terminate the Scheme Implementation
Deed.
There is a risk that the ThinkSmart Shareholders do not approve
the Scheme by the Requisite Majorities or do not approve the
Financial Assistance Resolution or Financial Benefit Resolution.
There is also a risk that the Court may not, at the final court
hearing, approve the Scheme, or may only be willing to approve the
Scheme subject to conditions that ThinkSmart and/or BidCo (as
applicable) are not prepared to accept. There is also a risk that
some or all of the aspects of the ThinkSmart Shareholder and Court
approvals required for the Scheme to proceed may be delayed.
There is also a risk that the FCA rejects the change in control
notification submitted on behalf of BidCo. This notification to the
FCA is required because BidCo, by virtue of it acquiring all the
ThinkSmart Shares, will become a controller of RentSmart Limited
(an FCA regulated company in the ThinkSmart Group). Under Part 12
of the UK's Financial Services and Markets Act 2000, prospective
controllers of a regulated business must seek approval from the FCA
before acquiring control over a business that is authorised by the
FCA. Failure to gain such prior approval is a criminal offence. If
the FCA rejects BidCo's change in control notification, it could
prevent implementation of the Scheme.
(b) Risks relating to deferred payment of Cash Consideration
If the Scheme becomes Effective, ThinkSmart Shareholders will
transfer their ThinkSmart Shares to BidCo on the Implementation
Date. However, ThinkSmart Shareholders entitled to receive Cash
Consideration will not receive their Cash Consideration until after
the Implementation Date and the amount of Cash Consideration will
be determined by the price at which the Block Sale Shares can be
sold for following Implementation.
This means that the exact amount of Cash Consideration to be
received by each ThinkSmart Shareholder will not be known until
after the Implementation Date (and therefore after ThinkSmart
Shareholders are required to vote on the Scheme). There is a risk
that the price of Block Shares falls between the date ThinkSmart
Shareholders approve the Scheme and the date the Block Sale Shares
are sold, which will directly impact the amount of Cash
Consideration received. In addition, as the proceeds from the sale
of the Block Sale Shares will be converted from United States
Dollars to Australian Dollars and Pounds Sterling (in accordance
with section 4.1 of this Scheme Booklet), the amount of Cash
Consideration received by Scheme Shareholders will depend on the
applicable exchange rate at the time of conversion.
ThinkSmart makes no representation that either the sale price of
Block Shares or any exchange rate received will be the best price
or rate available.
As noted in section 4.1 of this Scheme Booklet, if the Scheme
becomes Effective, the Broker appointed by ThinkSmart and BidCo
will sell the Block Sale Shares on-market on the New York Stock
Exchange as soon as practicable on the next Trading Day following
the Implementation Date (and, in any event, within 3 Trading Days
following the Implementation Date). There is a risk that, at the
proposed time of sale, Block Shares are suspended from trading or
otherwise unable to be traded on market (for example, due to an
outage of the New York Stock Exchange as a result of an emergency
event). This may result in the sale of the Block Sale Shares being
delayed.
There may also be tax implications for Australian tax resident
non-corporate ThinkSmart Shareholders who have held their
ThinkSmart Shares for more than 12 months if any material Block
Share price movement occurs between the Implementation Date and the
date the Cash Consideration is received by Scheme Shareholders. See
section 8 of this Scheme Booklet for further details.
In exchange for being transferred the ThinkSmart Shares on the
Implementation Date, BidCo has agreed in the Scheme Implementation
Deed and Deed Poll to undertake certain steps so that the Block
Sale Shares will be sold in accordance with section 4.1 of this
Scheme Booklet and the Scheme Implementation Deed. The proceeds
from this sale will be used to fund the Cash Consideration.
To further support the obligation to pay the Cash Consideration
to ThinkSmart Shareholders, BidCo and ThinkSmart have entered into
the following contracts:
-- Broker Agreement with the Broker, under which the Broker is
irrevocably appointed to sell the Block Sale Shares and is obliged
to remit the proceeds back to ThinkSmart; and
-- Funds Flow Deed, which sets out the flow of proceeds to
ThinkSmart Shareholders once the Block Sale Shares have been sold,
including the applicable currency conversions.
ThinkSmart Shareholders should note the performance risk which
may arise in relation BidCo failing to pay the Cash Consideration
(which would be in breach of its obligations under the Scheme
Implementation Deed, Deed Poll and Funds Flow Deed) in
circumstances where Scheme Shareholders will have already
transferred their Scheme Shares to BidCo on the Implementation Date
and where there is no other security being provided by BidCo in
relation to the payment of the Cash Consideration. In such
circumstances, Scheme Shareholders will have an unsecured claim
against BidCo under the Deed Poll in relation to the payment of the
Cash Consideration.
In addition, as a practical matter, under the terms of the
Scheme Implementation Deed, the members of the ThinkSmart
Independent Board Committee will remain on the ThinkSmart Board
until after the Cash Consideration has been despatched to Scheme
Shareholders, and so, the ThinkSmart Independent Board Committee
will assist with overseeing the payment of the Cash Consideration
to the Scheme Shareholders in accordance with the Scheme.
(c) Implications for ThinkSmart and ThinkSmart Shareholders if
the Scheme is not implemented
If the Scheme does not become Effective and is not implemented,
ThinkSmart Shareholders will not receive the Scheme Consideration
and ThinkSmart will continue, in the absence of a Superior
Proposal, to operate as a standalone entity and remain listed on
AIM.
Unless ThinkSmart Shareholders choose to sell their ThinkSmart
Shares or ThinkSmart Depositary Interests, ThinkSmart Shareholders
will continue to hold ThinkSmart Shares and be exposed to both the
risks (including those set out in this section 7 ) and potential
future benefits in retaining exposure to ThinkSmart's business and
assets.
The ThinkSmart Share price will also remain subject to market
volatility and may fall in absence of a Superior Proposal.
(d) Implications for ThinkSmart and ThinkSmart Shareholders if the Scheme is implemented
If the Scheme becomes Effective and is implemented, Scheme
Shareholders (other than Excluded Shareholders receiving Scrip
Consideration) will cease to hold ThinkSmart Shares and will forgo
any benefits that may result from being a ThinkSmart
Shareholder.
This will mean that Scheme Shareholders will not participate in
the future performance of ThinkSmart or retain any exposure to
ThinkSmart's business or assets or have the potential to share in
the value that could be generated by ThinkSmart in the future.
However, there is no guarantee as to ThinkSmart's future
performance, or its future share price performance, as is the case
with all investments.
ThinkSmart Shareholders may also consider that it would be
difficult to identify or invest in alternative investments that
have a similar investment profit to that of ThinkSmart, or may
incur transaction costs in undertaking any new investment. In this
respect, however, ThinkSmart notes that ThinkSmart Shareholders
could make a direct investment in Block Shares to retain economic
exposure to ThinkSmart's main asset.
(e) Tax consequences for Scheme Shareholders
If the Scheme becomes Effective, there will be tax consequences
for the Scheme Shareholders which may include tax being
payable.
For further detail regarding the general tax consequences of the
Scheme, refer to section 8 of this Scheme Booklet. It is noted that
if the Block Share price does not materially change between the
Implementation Date and the sale date for the Block Shares, then
practically the Cash Consideration under the Scheme is expected to
have similar Australian and UK tax consequences to an on-market
sale for Australian and UK tax resident Scheme Shareholders
respectively. However, t he tax consequences may vary depending on
the nature and characteristics of Scheme Shareholders and their
specific circumstances. Accordingly, you should seek professional
tax advice in relation to your particular circumstances.
8 Tax implications
8.1 Australian tax considerations
This section provides a general overview of the Australian
income tax, stamp duty and GST consequences for Scheme Shareholders
who transfer their Scheme Shares to BidCo under the Scheme. The
comments in this section are based on the Australian taxation and
duty laws (including established interpretations of those laws) as
at the date of this Scheme Booklet, which may change.
This section is general in nature and is not intended to be an
authoritative or a complete statement of the Australian taxation
and duty laws and should not be relied upon as taxation advice. It
should be noted that the Australian taxation and duty laws are
complex, and the Scheme Shareholders' own circumstances will affect
the taxation outcomes of the transfer of the Scheme Shares to BidCo
under the Scheme. It is therefore recommended that Scheme
Shareholders seek independent professional advice, having regard to
their own specific circumstances, in considering the Scheme.
The categories of the Scheme Shareholders considered in this
summary are limited to individuals, complying superannuation
entities and certain companies, trusts or partnerships, each of
whom holds their shares on capital account. This section is also
limited to Australian income tax, GST and stamp duty. This summary
does not cover any non-Australian taxes or duties.
This summary does not consider the consequences for the Scheme
Shareholders who are insurance companies, banks, investors that
hold their shares on revenue account or carry on a business of
trading in shares, or the Scheme Shareholders who are exempt from
Australian tax.
This summary also does not cover the consequences for the Scheme
Shareholders who are subject to Division 230 of the Income Tax
Assessment Act 1997 (the Taxation of Financial Arrangements or
"TOFA" regime). Both resident and non-resident Scheme Shareholders
should seek professional advice to determine if Scheme Shares are
held in this capacity (and the corresponding income tax
implications should this apply).
This summary also does not cover the consequences for holders of
ThinkSmart Options under ThinkSmart's equity incentive plan. Such
holders of ThinkSmart Options should seek professional advice
regarding the tax impacts of holding, converting and/or disposing
of the options.
It is noted that ThinkSmart will not seek an ATO Class Ruling in
respect of the Scheme transaction. ThinkSmart strongly recommends
all ThinkSmart Shareholders seek independent tax advice regarding
the tax implications of the Scheme to them, based on their
particular profile and circumstances and the terms of the
Scheme.
This section 8.1 has been prepared by Deloitte Tax Services Pty
Ltd. Deloitte Tax Services Pty Ltd is not licensed under Chapter 7
of the Corporations Act to provide financial product advice.
Taxation issues, such as those covered by section 8.1 of this
Scheme Booklet, are only some of the matters you need to consider
when making a decision about a financial product. You should
consider taking advice from someone who holds Australian Financial
Services Licence before making such a decision.
(a) Taxation of Share disposals - Australian tax resident
Capital gains tax (CGT)
Australian tax resident Scheme Shareholders who hold their
Scheme Shares on capital account will be required to consider the
impact of the CGT provisions in respect of the disposal of their
Scheme Shares.
Where the capital proceeds received on the disposal of the
Scheme Shares exceeds the CGT cost base of those Scheme Shares,
Australian tax resident Scheme Shareholders will derive a capital
gain. Conversely, Australian tax resident Scheme Shareholders may
recognise a capital loss on the disposal of Scheme Shares where the
capital proceeds received on disposal are less than the reduced CGT
cost base of the Scheme Shares.
Cost base / reduced cost base
The cost base and reduced cost base of the Scheme Shares should
generally include the amount paid to acquire the Scheme Shares and
the market value of any property given to acquire the Scheme
Shares, plus amongst other things, incidental costs associated with
of the acquisition and disposal of the Scheme Shares (for example,
brokerage fees and stamp duty). This amount may be reduced as a
result of receiving non-assessable distributions from ThinkSmart,
such as previous returns of capital.
Capital proceeds - Cash Consideration
The capital proceeds should be equal to the market value of the
right to the deferred Cash Consideration (determined on the
Implementation Date of the Scheme). The difference between this
amount and a Scheme Shareholder's cost base / reduced cost base for
their Scheme Shares should equal the capital gain / loss on
disposal.
The market value of the deferred Cash Consideration referred to
above should then form part of the cost base / reduced cost base of
the deferred Cash Consideration 'right' for income tax purposes.
The difference between this amount and the Cash Consideration
ultimately received should realise a further capital gain /
loss.
Scheme Shareholders may wish to adopt a practical position that
the market value of the deferred Cash Consideration on the
Implementation Date of the Scheme is equal to the Cash
Consideration ultimately received given the circumstances of the
Scheme (e.g. as the Block Sale Shares are to be sold on market
shortly after the Implementation Date of the Scheme).
If the Block Share price does not materially change between
Implementation Date of the Scheme and the sale date for the Block
Sale Shares, then practically the Scheme Cash Consideration outcome
should be similar to an on-market sale for Australian tax resident
Scheme Shareholders.
In the event the market value of the Block Sale Shares changes
materially between the Implementation Date and the sale date for
the Block Sale Shares, there may be additional complexities in
calculating net capital gains / losses, particularly in respect of
the application of any CGT discounts.
Net capital gain / loss
All capital gains and losses recognised by an Australian tax
resident Scheme Shareholder for an income year are aggregated. To
the extent that a net gain exists, such a Scheme Shareholder should
be able to reduce the net gain by any amount of unapplied net
capital losses or revenue losses carried forward from previous
income years (provided the relevant loss recoupment tests are
satisfied) or current year revenue or capital losses. Any remaining
net gain (after the application of any carried forward tax losses
or current year revenue losses) will then be required to be
included in the Australian tax resident Scheme Shareholder's
assessable income (subject to comments below in relation to the
availability of the CGT discount concession) and taxable at the
Scheme Shareholder's applicable rate of tax. Where a net capital
loss is recognised, the loss should only be deductible against
capital gains and are capable of being carried forward
indefinitely, provided the relevant loss recoupment tests are
satisfied. Scheme Shareholders should seek independent tax advice
in relation to the future utilisation of capital losses.
CGT discount
Non-corporate Scheme Shareholders may be entitled to a
concession which discounts the amount of capital gain that is
assessed. In respect of the disposal of Scheme Shares, broadly, the
concession is available where the Scheme Shares have been held for
12 months or more prior to disposal. The concession results in a
50% reduction in the assessable amount of a capital gain for an
individual Scheme Shareholder and a one third reduction of a
capital gain for an Australian tax resident complying
superannuation entity Scheme Shareholder (including generally where
a flow through trust or partnership distributes to such
shareholders), after offsetting any current or carried forward
losses. The concession is not available to corporate Scheme
Shareholders (including those deemed to be companies).
In relation to trusts or partnerships including limited
partnerships, the rules surrounding capital gains and the CGT
discount are complex, but the benefit of the CGT discount may flow
through to relevant beneficiaries or partners, subject to certain
requirements being satisfied. Scheme Shareholders who are trustees
are recommended to seek their own independent advice on how the CGT
discount provisions will apply to them and the trust's
beneficiaries.
For completeness, it is noted that capital gains arising in
respect of the deferred Cash Consideration 'right' for income tax
purposes should not be eligible for the CGT discount given the
'right' will not have been held for the requisite period (given the
right will be extinguished shortly after the Implementation Date of
the Scheme).
"Look-through earnout" rules
The above comments have been prepared on the basis that the
"look-through earnout" rules do not apply to the deferred Cash
Consideration for a particular Scheme Shareholder. These rules
effectively treat the cash consideration received as the capital
proceeds for the CGT event and ignore any income tax impact of the
deferred Cash Consideration 'right'.
The application of the "look-through earnout" rules is complex
and contains various requirements. For example, the requirements
include that the Scheme Shares are 'active assets' of the Scheme
Shareholder just before the relevant CGT event happened to the
Scheme Shares. While a detailed analysis has not been undertaken by
ThinkSmart on the applicability of the "look-through earnout" rules
to the deferred Cash Consideration, having regard to the
circumstances of ThinkSmart, it is unlikely that the rules will
apply to Scheme Shareholders who hold less than 20% of the shares
of ThinkSmart. Notwithstanding, if the Block Share price does not
materially change between the Implementation Date of the Scheme and
the sale date for the Block Shares, then practically the impact of
the "look-through earnout" rules applying or not applying to a
particular Scheme Shareholder should not be material.
Scheme Shareholders are advised to seek independent professional
advice regarding the application of the "look through earnout"
rules having regard to their individual circumstances and the
circumstances of the Scheme / ThinkSmart.
Foreign (non-Australian dollar) currency
Australian income tax calculations generally need to be done in
Australian dollars (unless an applicable and valid non-Australian
dollar functional currency election is in place). Therefore,
non-Australian dollar amounts generally need to be translated into
Australian dollars at an appropriate exchange rate as outlined in
Australian tax law and guidance.
To the extent that amounts relevant to the calculation of
capital gains / losses on the disposal of Scheme Shares by Scheme
Shareholders are denominated in non-Australian dollars (e.g. in
Pounds Sterling for shares bought on AIM and / or in Pounds
Sterling for Scheme Shareholders who receive the Cash Consideration
in Pounds Sterling), Scheme Shareholders will generally be required
to translate those amount into Australian dollars at an appropriate
exchange rate to determine the amount of capital gains / losses for
Australian income tax purposes. Scheme Shareholders are advised to
seek independent professional advice regarding the foreign currency
Australian income tax implications having regard to their
individual circumstances.
ThinkSmart Depositary Interests
For those Scheme Shareholders that hold their shares via
ThinkSmart Depositary Interests and on capital account, the CGT
outcomes depend on whether the Scheme Shareholder is 'absolutely
entitled' to the shares / rights they have a beneficial interest in
via their ThinkSmart Depositary Interests. Where the holders of
ThinkSmart Depositary Interests are so 'absolutely entitled', the
CGT consequences should generally be attributable to the underlying
Scheme Shareholders.
Scheme Shareholders that hold their shares via ThinkSmart
Depositary Interests are strongly advised to obtain their own
professional advice regarding whether they are 'absolutely
entitled' via their ThinkSmart Depositary Interests and the income
tax implications of receiving the Scheme Consideration via their
ThinkSmart Depositary Interests, based on their own specific
circumstances (including the nature of their ThinkSmart Depositary
Interest facility), and the circumstances of the Scheme.
Scheme Shareholders are also directed to consider Class Ruling
2017/10 "Income tax: ThinkSmart Limited - delisting from ASX and
shares converted into Depositary Interests", which outlines certain
Australian income tax implications of holding shares via ThinkSmart
Depositary Interests.
Rollover relief
For Excluded Shareholders that receive Scheme Consideration in
the form of Scrip Consideration, their capital proceeds should
include the market value of that Scrip Consideration. Very broadly,
the Australian income tax legislation allows the deferral of
capital gains where shares are exchanged for shares, and other
relevant requirements are satisfied. If Excluded Shareholders that
receive Scheme Consideration in the form of Scrip Consideration
derive a capital gain from such disposal, they should consider the
applicability of the CGT rollover rules (including whether the
requirements of the rollover provisions are satisfied).
For completeness, it is noted that the only Scheme Shareholder
that may be eligible for CGT rollover are the Excluded Shareholders
(i.e. Mr Ned Montarello and his relevant associated persons /
entities) as they are the only Scheme Shareholders that can receive
Scrip Consideration.
(b) Taxation of share disposals - non-Australian tax residents
Non-Australian tax resident Scheme Shareholders who hold their
Scheme Shares on capital account should not generally be subject to
the Australian CGT regime upon disposal of their Scheme Shares
except in limited circumstances, for example where the Scheme
Shares relate to a business carried on by the foreign resident
through a permanent establishment in Australia or where the Scheme
Shares are "indirect Australian real property interests". The
Scheme Shares should be indirect Australian real property interests
to the extent that, broadly, the following two requirements are
satisfied:
-- ThinkSmart is considered "land rich" for Australian income
tax purposes (i.e., greater than 50% of the market value of the
ThinkSmart's underlying assets is principally derived from
Australian real property or certain interests in relation to
Australian minerals); and
-- the non-resident Scheme Shareholder has an associate
inclusive interest of at least 10% in the ThinkSmart (either at the
time of disposal or throughout a 12-month period that began no
earlier than 24 months before the disposal).
Non-resident Scheme Shareholders will need to determine if the
above requirements are met at the time of disposal of their Scheme
Shares.
Notwithstanding the above, it is noted that ThinkSmart should
not be considered "land rich" for Australian income tax purposes
given its asset composition.
Non-Australian resident investors who hold Scheme Shares on
revenue account should seek separate independent professional
advice.
(c) Foreign resident capital gains withholding tax (FRCGW)
Rules can apply to the disposal of certain taxable Australian
property, whereby, a 12.5% non -- final withholding tax may be
applied. Where applicable, the withholding obligation would be with
BidCo as purchaser.
The majority of the assets in ThinkSmart should not be
considered real property situated in Australia and the Scheme
Shares should accordingly not constitute an indirect Australian
real property interest. Therefore, FRCGW should not apply to
disposal of the Scheme Shares. BidCo has confirmed that it will not
apply FRCGW to its acquisition of the Scheme Shares.
(d) Stamp duty
No stamp duty should be payable by Scheme Shareholders on the
disposal of Scheme Shares, or on receipt of the Cash Consideration
or Scrip Consideration.
(e) Goods and services tax (GST)
GST is not applicable to the disposal of Scheme Shares or the
receipt of the Cash Consideration or Scrip Consideration. The
ability of Scheme Shareholders to recover any GST incurred as an
input tax credit in relation to costs associated with the Scheme
(such as costs relating to professional advice obtained by Scheme
Shareholders regarding the Scheme) would vary according to
individual circumstances and as such this should be reviewed by
Scheme Shareholders prior to making any claim.
8.2 UK tax considerations
Disclaimer
This section 8.2 has been prepared by KPMG LLP and provides a
general overview of the UK capital gains tax consequences for a
hypothetical individual Scheme Shareholder who is a UK resident and
UK domiciled for tax purposes who transfer their Scheme Shares to
BidCo under the Scheme. The comments in this section are based on
the UK taxation laws (including established interpretations of
those laws) as at the date of the Scheme Booklet, which may
change.
This section is general in nature and is not intended to be an
authoritative or a complete statement of the UK taxation laws. It
should be noted that the UK taxation laws are complex, and the
Scheme Shareholders' own circumstances will affect the taxation
outcomes of the transfer of the Scheme Shares to BidCo under the
Scheme. It is therefore recommended that Scheme Shareholders seek
independent professional advice, having regard to their own
specific circumstances, in considering the Scheme.
The categories of the Scheme Shareholders considered in this
summary are limited to UK tax resident and domiciled individuals
and certain trusts, each of whom holds their shares on capital
account. This section is also limited to UK capital gains tax for a
UK tax resident and domiciled individual. This summary does not
cover any other taxes or duties.
This summary also does not cover the consequences for holders of
ThinkSmart Options under ThinkSmart's equity incentive plan. Such
holders of ThinkSmart Options should seek professional advice
regarding the tax impacts of holding, converting and/or disposing
of the options. The summary does not include the tax implications
in respect of any corporate, fund or trust shareholders, or any
non-UK resident and non-UK domiciled individual shareholders. For
the avoidance of doubt, the advice does not consider the tax
implications for UK resident individual shareholders that hold
their shares through an Individual Savings Account (ISA), pension
fund, trust arrangement or through any other form of tax-advantaged
arrangement, for example but not limited to an Enterprise
Investment Scheme (EIS), Venture Capital Trust (VCT) or other
non-tax advantaged share plan.
ThinkSmart strongly recommends all ThinkSmart Shareholders seek
independent tax advice regarding the tax implications of the Scheme
to them, based on their particular profile and circumstances and
the terms of the Scheme.
Capital gains tax (CGT)
Overview
The sale of the ThinkSmart Shares pursuant to the Scheme will be
subject to UK capital gains tax. CGT is payable on the chargeable
gain on disposal after taking into account any other available
reliefs such as capital losses. The chargeable gain will be the
disposal proceeds, less the base cost and any allowable incidental
costs of acquisition and disposal (such as legal fees, stamp
duty).
CGT on gains arising on the disposal of shares is currently
charged at a rate of 10 per cent where the individual's taxable
income and gains are within the basic rate band (GBP50,270 in
2022/23). Where any chargeable gains or part of any chargeable gain
exceed the basic rate band when aggregated with income then CGT
will be charged at 20 per cent.
For trustees and personal representatives of deceased persons,
CGT on gains in excess of the current annual exempt amount will be
charged at a flat rate of 20 per cent.
Annual exemption
UK resident taxpayers are entitled to a capital gains tax annual
exemption which is currently GBP12,300 per tax year. This means
that the first GBP12,300 of capital gains per year are tax
free.
The annual exemption may be applied in the most beneficial way
i.e. may be utilised against gains subject to the 20 per cent rate
of CGT in preference to those subject to the 10 per cent rate.
Base cost
The base cost will be the original cost of the ThinkSmart
Shares. If the shares were acquired for cash, this will simply be
the amount paid plus any allowable acquisition costs (see
below).
If the shares were obtained by other means, for example via a
share for share exchange, the base cost may be the amount paid for
the original shares which were exchanged. Any shareholders who
received their shares other than a direct acquisition for cash
should seek separate tax advice for their circumstances.
Allowable costs
Costs which are directly attributable to the acquisition or
disposal of the ThinkSmart Shares are allowable for CGT purposes.
Allowable costs would include items such as stamp duty paid on
acquisition or legal or professional fees incurred wholly and
exclusively for the purpose of the purchase or sale.
Professional fees which are not directly attributable to the
sale, such as general investment advice or the management of a
portfolio are not allowed to be deducted in the computation of the
gain.
9 Financial Assistance Resolution and Financial Benefit Resolution
9.1 Background to Loan and Loan Deed
As noted in section 4.1 , the Cash Consideration under the
Scheme relates to the proceeds from the sale of the Block Sale
Shares.
Once the Broker sells the Block Sale Shares pursuant to the
Broker Agreement it will remit the United States Dollar sale
proceeds to an ADI account operated by ThinkSmart.
Then, in accordance with the Funds Flow Deed, ThinkSmart and
BidCo will be required to comply with the following procedure:
1 ThinkSmart will transfer the United States Dollar sale
proceeds to an ADI account operated by BidCo via a loan from
ThinkSmart to BidCo (Loan) pursuant to a loan deed to be entered
after the Implementation Date (Loan Deed).
2 BidCo will convert the United States Dollar sale proceeds into
Australian Dollars and Pounds Sterling (as applicable).
3 BidCo will transfer these amounts to two separate trust
accounts (one account for Australian Dollars and one account for
Pounds Sterling) with an ADI operated by the ThinkSmart Share
Registry and held for the benefit of the Scheme Shareholders.
4 ThinkSmart will instruct Computershare to transfer the Cash
Consideration to the Scheme Shareholders entitled to receive Cash
Consideration pro rata to their respective holding of ThinkSmart
Shares, in accordance with the applicable currency allocations.
Step 1 above involves ThinkSmart and BidCo entering into a Loan
Deed. Practically, the Loan is required to document the flow of
funds from ThinkSmart to BidCo, which are then converted into
applicable currencies and transferred into a ThinkSmart Share
Registry account (held for the benefit of Scheme Shareholders)
before being distributed to Scheme Shareholders entitled to receive
the Cash Consideration.
The Loan is provided by ThinkSmart (as lender) to BidCo (as
borrower) and provides that ThinkSmart may advance funds to BidCo
solely for the "permitted purpose", which is defined as complying
with BidCo's obligations under the Scheme Implementation Deed. Each
advance made under the Loan may incur interest (at a rate to be
agreed for each advance, which may be nil), is unsecured and must
be repaid on or before the end date to be agreed for that
advance.
There are no establishment costs to BidCo associated with the
Loan Deed and, as such, BidCo will not incur any establishment
costs by utilising the Loan rather than external finance.
As ThinkSmart will be wholly owned by BidCo at the time of the
Loan, the Loan will represent an intercompany loan between a parent
and its subsidiary.
For the reasons noted in sections 9.2 and 9.3 below, the fact
that the funds flow described above involves a Loan means that
certain additional approvals are required to be obtained from
ThinkSmart Shareholders for the Scheme to proceed, being the
Financial Assistance Resolution and the Financial Benefit
Resolution. These resolutions will be voted on at the Annual
General Meeting to be held prior to the Scheme Meetings. The
ThinkSmart Independent Board Committee encourages ThinkSmart
Shareholders to vote at both the Annual General Meeting and the
applicable Scheme Meeting.
9.2 Financial Assistance Resolution
This Scheme Booklet constitutes an explanatory statement in
respect of the Financial Assistance Resolution for the purposes of
section 260B(4) of the Corporations Act and contains all material
information known to the ThinkSmart Independent Board Committee
that could reasonably be required by ThinkSmart Shareholders in
deciding how to vote on the Financial Assistance Resolution (other
than information that would be unreasonable to require the
ThinkSmart Independent Board Committee to disclose because such
information has previously been disclosed to ThinkSmart
Shareholders).
Reason for the Financial Assistance Resolution
As BidCo will use the proceeds from the Loan to fund the Cash
Consideration, ThinkSmart will financially assist BidCo's
acquisition of ThinkSmart Shares under the Scheme.
Section 260A of the Corporations Act prohibits ThinkSmart from
financially assisting BidCo to acquire ThinkSmart Shares
unless:
-- giving the financial assistance does not materially prejudice
the interests of ThinkSmart or ThinkSmart Shareholders, or
ThinkSmart's ability to pay its creditors;
-- the assistance is approved by a special resolution passed at
a general meeting of ThinkSmart under section 260B of the
Corporations Act; or
-- the assistance is exempted under section 260C of the Corporations Act.
None of the exemptions in section 260C of the Corporations Act
apply in these circumstances.
The ThinkSmart Independent Board Committee does not consider
that the provision of the Loan will materially prejudice the
interests of ThinkSmart or its shareholders, or its ability to pay
its creditors. Specifically, the ThinkSmart Independent Board
Committee considers that:
-- the interests of ThinkSmart Shareholders will not be
prejudiced because the Loan will only be provided after the Scheme
becomes Effective; and
-- the interests of ThinkSmart creditors will not be prejudiced
because ThinkSmart will continue to maintain a net cash balance
sufficient to meet its liabilities as and when they are due and
payable, taking into account:
-- the potential timing of ThinkSmart's current receivables and payables;
-- the levels of operating cash inflows expected to be generated
by ThinkSmart's legacy business;
-- the expected working capital requirements associated with ThinkSmart's legacy business; and
-- ThinkSmart's ability to access funds from external financiers (if required).
Notwithstanding this, the ThinkSmart Independent Board Committee
considers it appropriate to seek the approval of ThinkSmart
Shareholders under section 260B(1) of the Corporations Act to
authorise entry into the Loan Deed and the provision of the Loan,
each as described in section 9.1 .
A summary of the ThinkSmart historic financial information is
set out in section 5.4 .
Additional information regarding the Financial Assistance
Resolution
-- Lodgement of Notice of Annual General Meeting with ASIC : A
copy of the Notice of Annual General Meeting set out in Annexure 6
proposing the Financial Assistance Resolution (together with this
Scheme Booklet) was lodged with ASIC before being sent to
ThinkSmart Shareholders, as required by section 260B(5) of the
Corporations Act.
-- Lodgement of special resolutions : If the Financial
Assistance Resolution is passed:
-- ThinkSmart will lodge with ASIC a notice in the prescribed
form stating that the Financial Assistance Resolution has been
approved at least 14 days before providing the Loan, as required by
section 260B(6) of the Corporations Act; and
-- a copy of the Financial Assistance Resolution will be lodged
with ASIC within 14 days after being passed, as required by section
260B(7) of the Corporations Act.
9.3 Financial Benefit Resolution
This Scheme Booklet constitutes an explanatory statement in
respect of the Financial Benefit Resolution for the purposes of
section 219 of the Corporations Act and contains all of the
information required by that section.
Reason for the Financial Benefit Resolution
By providing the Loan on the terms described in section 9.1 ,
ThinkSmart will be giving a financial benefit to BidCo. The
financial benefit includes the benefit to BidCo of there being no
establishment costs associated with the Loan Deed.
BidCo is a related party of ThinkSmart for the purposes of
section 228(4) of the Corporations Act because it is an entity
controlled by a director of ThinkSmart (Mr Ned Montarello).
Chapter 2E of the Corporations Act prohibits ThinkSmart from
providing a financial benefit to BidCo, unless:
-- ThinkSmart Shareholders approve the giving of the financial
benefit in advance; or
-- the financial benefit falls within one of the exemptions in
Division 2 of Chapter 2E of the Corporations Act.
None of the exemptions set out in Division 2 of Chapter 2E of
the Corporations Act apply in these circumstances (except section
214 of the Corporations Act). In relation to section 214 of the
Corporations Act, while ThinkSmart will be a closely held
subsidiary of BidCo (as defined in that section) at the time of the
Loan, the ThinkSmart Independent Board Committee considers it
appropriate to seek the Financial Benefit Resolution simultaneously
with the Financial Assistance Resolution.
Additional information regarding the Financial Benefit
Resolution
-- No adverse effect on ThinkSmart Shareholders : The ThinkSmart
Independent Board Committee considers that the risks for ThinkSmart
Shareholders associated with the Loan are minimal because the Loan
will only be provided after the Scheme becomes Effective. At this
point in time, BidCo will own all of the ThinkSmart Shares and the
ThinkSmart Shareholders will be beneficially entitled to the Scheme
Consideration. Accordingly, the provision of the Loan will not
affect ThinkSmart Shareholders from a commercial or economic
perspective.
-- Interest of the Independent Directors : The Financial Benefit
Resolution is required to implement the Scheme and the Independent
Directors therefore recommend that ThinkSmart Shareholders vote in
favour of the Financial Benefit Resolution. The Independent
Directors do not have any interest in the outcome of the Financial
Benefit Resolution, other than their interest in the Scheme and the
ThinkSmart Shares set out in section 10.1 .
-- Interest of Mr Ned Montarello : Mr Ned Montarello has an
interest in the outcome of the Financial Benefit Resolution as he
owns and controls BidCo. The Excluded Shareholders will therefore
be excluded from voting on the Financial Benefit Resolution.
-- Other impacts : As the financial benefit will only be
provided after the Scheme has become Effective, the provision of
the Loan does not give rise to any opportunity costs, taxation
consequences or benefits foregone that affect the ThinkSmart
Shareholders' investment in ThinkSmart. In addition, for the
reasons set out in section 9.1 of this Scheme Booklet, the
ThinkSmart Independent Board Committee does not consider that the
provision of the Loan will materially prejudice ThinkSmart's
ability to pay its creditors.
-- Lodgement of Notice of Annual General Meeting with ASIC : A
copy of the Notice of Annual General Meeting set out in Annexure 6
proposing the Financial Benefit Resolution (together with this
Scheme Booklet) was lodged with ASIC before being sent to
ThinkSmart Shareholders, as required by section 218(1) of the
Corporations Act.
9.4 Additional information regarding both the Financial
Assistance Resolution and the Financial Benefit Resolution
Directors' recommendation
Each of the Financial Assistance Resolution and Financial
Benefit Resolution are required to be approved by ThinkSmart
Shareholders to implement the Scheme.
The ThinkSmart Independent Board Committee unanimously
recommends that ThinkSmart Shareholders vote in favour of the
Scheme in the absence of a Superior Proposal and subject to the
Independent Expert continuing to conclude that the Scheme is in the
best interests of ThinkSmart Shareholders (other than the Excluded
Shareholders). The ThinkSmart Independent Board Committee also
recommends that ThinkSmart Shareholders vote in favour of the
Financial Assistance Resolution and Financial Benefit Resolution at
the Annual General Meeting.
Section 1 sets out the reasons why the ThinkSmart Independent
Board Committee support the Scheme.
Mr Ned Montarello owns and controls BidCo. Accordingly, he does
not make any recommendation in relation to the Financial Assistance
Resolution or Financial Benefit Resolution.
Approval and voting exclusions
Pursuant to section 260B(1) of the Corporations Act, the
Financial Assistance Resolution must be approved by a special
resolution (ie 75% or more) of ThinkSmart Shareholders (with no
votes being cast in favour of the resolution by Bid and any of
BidCo's associates (being the Excluded Shareholders)).
The Financial Benefit Resolution needs to be approved by a
simple majority (ie more than 50%) of votes cast by ThinkSmart
Shareholders. The Excluded Shareholders will also be excluded from
voting on this resolution under section 224 of the Corporations
Act.
For the Scheme to be implemented, ThinkSmart Shareholders need
to approve both the Financial Assistance Resolution and the
Financial Benefit Resolution, in addition to the Scheme
Resolutions. It is therefore important that ThinkSmart Shareholders
vote at the Annual General Meeting in addition to the applicable
Scheme Meeting.
In accordance with the Corporations Act, ThinkSmart will
disregard any votes cast in favour of the Financial Assistance
Resolution and Financial Benefit Resolution by any Excluded
Shareholder.
10 Additional information
10.1 Interests of ThinkSmart Directors in ThinkSmart Shares
As at the Last Practicable Date, the ThinkSmart Directors have
the following Relevant Interests in ThinkSmart Shares:
ThinkSmart Director Number of ThinkSmart Shares
==================== ==============================
Mr Ned Montarello 31,342,286
==================== ==============================
Mr Peter Gammell 12,582,572 (in respect of
which 2,500,000 are held
as ThinkSmart Depositary
Interests as at the Last
Practicable Date)
==================== ==============================
Mr David Adams 100,000 (all of which are
held as ThinkSmart Depositary
Interests as at the Last
Practicable Date)
==================== ==============================
Mr Gary Halton 0
==================== ==============================
In addition, Mr Ned Montarello holds 1,073,863 and Mr Gary
Halton holds 470,659 ThinkSmart Options under ThinkSmart's equity
incentive plan, each of which expire on 21 December 2026 and have
an exercise price of GBP0.1308. See section 10.2 of this Scheme
Booklet for further detail.
No ThinkSmart Director acquired or disposed of a Relevant
Interest in any ThinkSmart Shares during the four months before the
date of this Scheme Booklet.
10.2 ThinkSmart equity incentive arrangements
As detailed in ThinkSmart's annual report for the year ended 30
June 2022, ThinkSmart operates a long term incentive plan (LTIP)
under which ThinkSmart Options are offered to senior management.
Each ThinkSmart Option is convertible to one Share in ThinkSmart
subject to the satisfaction of certain conditions. All 1,679,532
ThinkSmart Options on issue are no longer subject to any vesting
conditions and are presently exercisable at an exercise price of
GBP0.1308.
The LTIP provides that the ThinkSmart Board may, where it
considers it likely that the Court will approve the Scheme, request
that the holders of ThinkSmart Options give an exercise notice in
advance of the Court approving the Scheme in respect of any
ThinkSmart Options held. If a holder of ThinkSmart Options does not
give such exercise notice, then the ThinkSmart Options held by that
holder will automatically lapse on the Court approving the
Scheme.
Accordingly, after the date of this Scheme Booklet, the
ThinkSmart Board will issue a notice to each holder of ThinkSmart
Options requesting that, if they wish to exercise any of their
ThinkSmart Options in advance of the Scheme, they give the exercise
notice described above.
As at the Last Practicable Date, no ThinkSmart Options have been
exercised and the ThinkSmart Options on issue are as set out
above.
10.3 Other benefits and agreements
(a) Interests of ThinkSmart Directors in BidCo securities
Mr Ned Montarello holds 100% of the shares in BidCo.
No other ThinkSmart Director has a Relevant Interest in any
securities in BidCo. Nor have they acquired or disposed of a
Relevant Interest in any securities in BidCo during the four months
before the date of this Scheme Booklet.
(b) Interests of ThinkSmart Directors in contracts with BidCo
No ThinkSmart Director has any interest in any contract entered
into by BidCo, or any of its related bodies corporate.
(c) Benefits in connection with retirement from office
There is no payment or other benefit that is proposed to be made
or given to any director, secretary or executive officer of
ThinkSmart (or any of its related bodies corporate) as compensation
for the loss of, or consideration for or in connection with his or
her retirement from, office in ThinkSmart (or any of its related
bodies corporate) in connection with the Scheme.
(d) Benefits from BidCo
No ThinkSmart Director has agreed to receive, or is entitled to
receive, any benefit from BidCo, or any of its related bodies
corporate, which is conditional on, or is related to, the
Scheme.
(e) Agreements connected with or conditional on the Scheme
Other than as disclosed in this section 10 , there are no
agreements or arrangements made between any ThinkSmart Director and
any other person in connection with, or conditional on, the outcome
of the Scheme.
10.4 Scheme Implementation Deed
(a) Introduction
On 29 July 2022, ThinkSmart and BidCo entered into the Scheme
Implementation Deed, which governs the conduct of the Scheme.
A summary of the key terms of the Scheme Implementation Deed is
set out below. A full copy of the Scheme Implementation Deed was
released on ThinkSmart's website on 29 July 2022 and can be
obtained from www.thinksmartworld.com.
(b) Conditions precedent
The conditions precedent are outlined in section 4.3 .
(c) ThinkSmart Independent Board Committee recommendation (clause 5.7)
The Scheme Implementation Deed requires ThinkSmart to use its
reasonable endeavours to procure that each Independent Director
does not change or withdraw their recommendation or intention to
vote in favour of the Scheme subject to:
-- the Independent Expert concluding that the Scheme is in the
best interests of ThinkSmart Shareholders (other than the Excluded
Shareholders);
-- there being no Superior Proposal; and
-- the ThinkSmart Independent Board Committee not determining
that, by virtue of the director's duties of its members, it is
required to change, withdraw or modify its recommendation.
(d) Conduct of business (clause 5.5)
The Scheme Implementation Deed requires that ThinkSmart carry on
its business and operations in the ordinary course.
In addition, ThinkSmart must also:
-- not enter into new lines of business;
-- ensure no 'Target Prescribed Occurrence' (as defined in Schedule 1 of the Scheme Implementation Deed) occurs; and
-- make reasonable efforts to maintain and preserve its
relationships with Government Agencies.
However, ThinkSmart will be able to take any actions:
-- fairly disclosed in public documents prior to the date of the
Scheme Implementation Deed;
-- agreed to in writing by BidCo; or
-- required or permitted by law, the Scheme Implementation Deed or the Scheme.
(e) Representations and warranties (clause 7)
The Scheme Implementation Deed contains customary
representations and warranties given by each of ThinkSmart and
BidCo to each other.
These representations and warranties are set out in Schedule 2
(in the case of BidCo) and Schedule 3 (in the case of ThinkSmart)
of the Scheme Implementation Deed.
(f) Exclusivity (clause 11)
The Scheme Implementation Deed contains the following customary
exclusivity provisions:
-- no shop provisions, providing that, during the Exclusivity
Period, ThinkSmart must not solicit, invite, encourage or initiate
any inquiry, expression of interest, offer, proposal, discussion or
other communication which would reasonably be expected to encourage
or lead to the making of, an actual, proposed or potential
Competing Proposal;
-- no talk provisions, providing that, during the Exclusivity
Period, ThinkSmart must not engage with potential bidders or
negotiate or enter into an actual, proposed or potential Competing
Proposal (provided that the no talk provision does not apply if the
ThinkSmart Independent Board Committee determines that (after
consultation with its advisers) such proposal could reasonably be
expected to become a Superior Proposal and that (after receiving
written legal advice) complying with the provision would be
reasonably likely to constitute a breach of their fiduciary or
statutory duties);
-- no due diligence provisions, providing that, during the
Exclusivity Period, ThinkSmart must not disclose any non-public
information to potential bidders in connection with, or with a view
of obtaining, or which would reasonably be expected to lead to, an
actual, proposed or potential Competing Proposal (subject to the
fiduciary out described above);
-- notification right for BidCo during the Exclusivity Period if
ThinkSmart becomes aware of any discussions, proposals or provision
of information in connection with an actual, proposed or potential
Competing Proposal (subject to the fiduciary out described above) -
BidCo must be notified as soon as possible and in any event within
48 hours; and
-- a 3 Business Day matching right period in favour of BidCo
whereby the ThinkSmart Independent Board Committee cannot accept or
recommend a Competing Proposal unless:
-- in acting in good faith and in satisfaction of their
fiduciary duties, they determine that the Competing Proposal is a,
or would be, or would be reasonably likely to be, an actual,
proposed or potential, Superior Proposal;
-- ThinkSmart has provided the material terms of the Competing
Proposal to BidCo, including the identity of the party making the
proposal; and
-- ThinkSmart has given BidCo at least 3 Business Days to
provide a matching or superior counterproposal and BidCo has not
announced or formally proposed a matching or superior proposal by
the expiry of that period.
If the ThinkSmart Independent Board Committee considers BidCo's
counterproposal to be a matching or superior proposal, then
ThinkSmart and BidCo must use their best endeavours to agree
amendments to the Scheme Implementation Deed to implement the
counterproposal.
(g) Reimbursement fee (clause 12)
The Scheme Implementation Deed contains a reimbursement fee to
reimburse BidCo for its actual out-of-pocket costs incurred in
pursuing the Scheme, up to a maximum of $200,000 (excluding GST),
which will be triggered if:
-- during the Exclusivity Period, any member of the ThinkSmart
Independent Board Committee changes their recommendation in
relation to the Scheme, except as a result of:
-- the Independent Expert concluding that the Scheme is not in
the best interests of ThinkSmart Shareholders;
-- a Court or Government Agency requiring a change to the recommendation; or
-- ThinkSmart being entitled to terminate the Scheme Implementation Deed for material breach;
-- a Competing Proposal is announced during the Exclusivity
Period and, within 12 months of the date of such announcement, the
third party completes a Competing Proposal (of a kind referred to
in paragraphs 2, 3 or 4 of the definition of Competing Proposal set
out in the Glossary in section 11 of this Scheme Booklet) or the
third party acquires a Relevant Interest in more than 50% of
ThinkSmart Shares under a transaction that is or has become wholly
unconditional or otherwise acquires control of ThinkSmart; or
-- BidCo terminates the Scheme Implementation Deed following a
material breach by ThinkSmart, including of ThinkSmart's
representations and warranties.
(h) Termination (clause 13)
Each of ThinkSmart and BidCo may terminate the Scheme
Implementation Deed:
-- for material breach of the Scheme Implementation Deed or
where the other party has breached a representation or warranty
that is material in the context of the Scheme taken as a whole, and
the breach is not remedied within a specified period;
-- if, any time before 8.00am on the Second Court Date, the
Court or another Government Agency has taken any action permanently
restraining or otherwise prohibiting or preventing the Transaction,
or has refused to do anything necessary to permit the Transaction
to be implemented by the 'End Date' (being 29 January 2023), and
the action or refusal has become final and cannot be appealed or
reviewed;
-- for failure of a condition precedent to the Scheme (as
outlined in section 4.3 );
-- if the Scheme is not Effective by the 'End Date' (being 29 January 2023); or
-- if ThinkSmart's Shareholders have not agreed to the Scheme at
the Scheme Meetings by the Requisite Majorities.
10.5 Other material agreements
BidCo and ThinkSmart have entered into the following
contracts:
-- Broker Agreement between ThinkSmart, BidCo and the Broker.
Under the Broker Agreement the Broker is irrevocably appointed to
sell the Block Sale Shares and is obliged to remit the proceeds
back to ThinkSmart. In exchange ThinkSmart must pay the Broker a
fee of 0.5% of the gross sale proceeds. The Broker must sell the
Block Sale Shares on-market on the New York Stock Exchange as soon
as practicable on the next Trading Day following the Implementation
Date (and, in any event, within 3 Trading Days following the
Implementation Date) in the ordinary course of trading on the New
York Stock Exchange at such prices in United States Dollars and at
such times as the Broker sees fit, and on such other terms as the
Broker determines in good faith, with the objective of achieving
the best price for the Block Sale Shares that is reasonably
obtainable at the time of the relevant sale.
-- Funds Flow Deed between ThinkSmart and BidCo. Under the Funds
Flow Deed , ThinkSmart and BidCo agree to execute the funds flow
described in section 9.1 of this Scheme Booklet.
BidCo and ThinkSmart also intend to enter into the Loan Deed, as
described in section 9.1 of this Scheme Booklet.
10.6 Consents, disclosures and fees
(a) Consents
This Scheme Booklet contains statements made by, or statements
said to be based on statements made by:
-- BidCo in respect of the BidCo Information only;
-- Deloitte Tax Services Pty Ltd in respect of section 8.1 ;
-- KPMG LLP in respect of section 8.2; and
-- Grant Thornton Corporate Finance Pty Ltd as the Independent Expert.
Each of those persons named above has consented to the inclusion
of each statement it has made in the form and context in which the
statements appear and has not withdrawn that consent at the date of
this Scheme Booklet.
The following parties have given and have not, before the time
of registration of this Scheme Booklet with ASIC, withdrawn their
consent to be named in this Scheme Booklet in the form and context
in which they are named:
-- Deloitte Tax Services Pty Ltd as Australian tax adviser to ThinkSmart;
-- KPMG LLP as UK tax adviser to ThinkSmart;
-- Grant Thornton Corporate Finance Pty Ltd as the Independent Expert;
-- Herbert Smith Freehills as Australian legal adviser to ThinkSmart;
-- Shoosmiths LLP as UK legal adviser to ThinkSmart; and
-- Computershare Investor Services Pty Limited as the ThinkSmart Share Registry.
(b) Disclosures and responsibility
Each person named in section 10.6(a):
-- has not authorised or caused the issue of this Scheme Booklet;
-- does not make, or purport to make, any statement in this
Scheme Booklet or any statement on which a statement in this Scheme
Booklet is based, other than:
-- BidCo in respect of the BidCo Information only;
-- Deloitte Tax Services Pty Ltd in respect of section 8.1 only;
-- KPMG LLP in respect of section 8.2 only; and
-- Grant Thornton Corporate Finance Pty Ltd in respect of the
Independent Expert's Report only; and
-- to the maximum extent permitted by law, expressly disclaims
all liability in respect of, makes no representation regarding, and
takes no responsibility for, any part of this Scheme Booklet other
than a reference to its name and the statement (if any) included in
this Scheme Booklet with the consent of that party as specified in
this section 10.6(b).
(c) Fees
The fees set out in this section 10.6(c) only relate to fees
paid or payable by ThinkSmart in connection with the Transaction
and the preparation of this Scheme Booklet. As at the Last
Practicable Date, such fees include amounts paid or payable to:
-- Deloitte Tax Services Pty Ltd for acting as Australian tax
adviser to ThinkSmart of up to approximately $190,000 (excluding
GST);
-- KPMG LLP for acting as UK tax adviser to ThinkSmart of up to
approximately $17,000 (excluding VAT);
-- Grant Thornton Corporate Finance Pty Ltd for acting as the
Independent Expert of up to approximately $70,000 (excluding
GST);
-- Herbert Smith Freehills for acting as Australian legal
adviser to ThinkSmart of up to approximately $570,000 (excluding
GST);
-- Shoosmiths LLP for acting as UK legal adviser to ThinkSmart
of up to approximately $51,000 (excluding VAT); and
-- Computershare Investor Services Pty Limited for acting as the
ThinkSmart Share Registry of up to approximately $17,000 (excluding
GST).
In aggregate, if the Scheme is implemented, ThinkSmart expects
to pay approximately $1.25 million (excluding GST) in transaction
costs. In aggregate, if the Scheme is not implemented, ThinkSmart
expects to pay approximately $1 million (excluding GST) in
transaction costs.
10.7 Regulatory relief
Paragraph 8302(d) of Part 3 of Schedule 8 of the Corporations
Regulations 2001 (Cth) requires this Scheme Booklet to set out
particulars of any payment or benefit proposed to be made or given
to any director, secretary or executive officer of ThinkSmart or a
Related Body Corporate (each a Relevant Person) as compensation for
loss of office in ThinkSmart or a Related Body Corporate or as
conditions for or in connection with his or her retirement from
office in ThinkSmart or a Related Body Corporate.
ASIC has granted ThinkSmart relief from this requirement on the
basis that ThinkSmart is not required to set out in this Scheme
Booklet the particulars of any payments or benefits which may be
made or given to a Relevant Person in relation to their loss of
office, or retirement from office, unless:
-- the Relevant Person will lose office or retire from office as
a consequence of, or in connection with, the Scheme; or
-- the amount of any payment or benefit which may be made to the
Relevant Person upon their loss of office or retirement from office
may be materially affected by the Scheme.
10.8 No unacceptable circumstances
The ThinkSmart Independent Board Committee believes that the
Scheme does not involve any circumstances in relation to the
affairs of ThinkSmart that could reasonably be characterised as
constituting 'unacceptable circumstances' for the purposes of
section 657A of the Corporations Act.
10.9 No other material information
Except as disclosed elsewhere in this Scheme Booklet, so far as
the ThinkSmart Independent Board Committee is aware, there is no
other information that is:
-- material to the making of a decision by an ThinkSmart
Shareholder whether or not to vote in favour of the Scheme; and
-- known to any ThinkSmart Director at the date of lodging this
Scheme Booklet with ASIC for registration,
which has not previously been disclosed to ThinkSmart
Shareholders.
10.10 Supplementary disclosure
ThinkSmart will issue a supplementary document to this Scheme
Booklet if it becomes aware of any of the following between the
date of this Scheme Booklet and the Second Court Date:
-- a material statement in this Scheme Booklet is false or
misleading in a material respect;
-- a material omission from this Scheme Booklet;
-- a significant change affecting a matter included in this Scheme Booklet; or
-- a significant new matter has arisen and it would have been
required to be included in this Scheme Booklet if it had arisen
before the date of this Scheme Booklet.
Depending on the nature and timing of the changed circumstances,
and subject to obtaining any relevant approvals, ThinkSmart may
circulate and publish any supplementary document by:
-- making an RNS announcement;
-- placing an advertisement in a prominently published newspaper
which is circulated generally throughout Australia;
-- posting the supplementary document to ThinkSmart Shareholders
at their address shown on the ThinkSmart Share Register; and/or
-- posting a statement on ThinkSmart's website at www.thinksmartworld.com,
as ThinkSmart, in its absolute discretion, considers
appropriate.
ASIC will be provided with an opportunity to review and comment
on any supplementary documents prior to their issue by
ThinkSmart.
11 Glossary
11.1 Definitions
In this Scheme Booklet, unless the context otherwise appears,
the following terms have the meanings shown below:
Afterpay Afterpay Limited ACN 618 280 649.
====================== =================================================================
AIM the Alternative Investment Market of
the London Stock Exchange.
====================== =================================================================
AIM Rules the rules for companies whose securities
are admitted to trading on AIM, as
published by the London Stock Exchange
from time to time.
====================== =================================================================
Annual General the 2022 annual general meeting of
Meeting ThinkSmart Shareholders.
====================== =================================================================
ASIC the Australian Securities and Investments
Commission.
====================== =================================================================
ASX the Australian Securities Exchange.
====================== =================================================================
Associate has the meaning set out in section
12 of the Corporations Act, as if subsection
12(1) of the Corporations Act included
a reference to this deed and ThinkSmart
was the designated body.
====================== =================================================================
ATO the Australian Taxation Office.
====================== =================================================================
Authorisations any approval, licence, consent, authority
or permit.
====================== =================================================================
BidCo Tuscan Equity Pty Ltd ACN 661 151 560.
====================== =================================================================
BidCo Board the board of directors of BidCo.
====================== =================================================================
BidCo Director a member of the BidCo Board.
====================== =================================================================
BidCo Group BidCo, its Related Bodies Corporate
and Mr Ned Montarello and a reference
to a BidCo Group Member is to any one
of them.
====================== =================================================================
BidCo Information the information regarding the BidCo
Group contained in the following sections
of this Scheme Booklet:
1 the response to the question "Who
is BidCo" in section 2 ;
2 the third bullet point in the section
headed "Cash Consideration" in section
4.1 (to the extent it pertains to statements
made by BidCo);
3 the section headed "Withholding tax"
in section 4.1 (to the extent it pertains
to statements made by BidCo);
4 the statement in section 4.3 that,
as at the date of this Scheme Booklet,
none of the BidCo Directors are aware
of any circumstances which would cause
any condition precedent not to be satisfied;
5 section 4.5 (g) (to the extent it
pertains to statements made by BidCo);
6 the entire content of section 6.
7 section 9 (to the extent it pertains
to statements made by BidCo); and
8 the list of "Excluded Shareholder"
in section 11 .
For the avoidance of doubt, the BidCo
Information excludes the ThinkSmart
Information and the Independent Expert's
Report and any description of the taxation
effect of the Transaction on Scheme
Shareholders prepared by an external
adviser to ThinkSmart.
====================== =================================================================
BidCo Shares fully paid ordinary shares in the capital
of BidCo and BidCo Share means any
one of them.
====================== =================================================================
Block Block, Inc. a publicly traded company
on the New York Stock Exchange (ticker
symbol "SQ").
====================== =================================================================
Block Shares Class A shares in Block.
====================== =================================================================
Block Sale Shares that number of the Block Shares held
by ThinkSmart as at the date of the
Scheme Implementation Deed that is
equal to 618,750 multiplied by the
total number of Relevant Scheme Shares
and divided by the total number of
ThinkSmart Shares, rounded to the nearest
whole number of Block Shares.
====================== =================================================================
Block Sale Share 1 the proceeds from the sale of the
Proceeds Block Sale Shares pursuant to clause
5.4 of the Scheme Implementation Deed;
less
2 any applicable brokerage, foreign
exchange or banking charges or fees
(including wire transfer fees or corresponding
charges) or charges or fees of a similar
nature which are incurred with respect
to the sale of the Block Sale Shares
and the deposit of the proceeds of
sale into the bank account referred
to in clause 5.4 of the Scheme Implementation
Deed; plus
3 any dividend, return of capital or
other payment paid to ThinkSmart with
respect to the Block Sale Shares between
the date of this deed and the date
the Cash Consideration is paid pursuant
to clause 5.4 of the Scheme Implementation
Deed; less
4 any tax (including withholding) which
is required to be remitted by ThinkSmart
(or a party acting on behalf of ThinkSmart
or a party to the sale of the Block
Sale Shares) to a Government Agency,
from the proceeds of sale of the Block
Sale Shares (to the extent not already
reflected in the proceeds) which, for
the avoidance of doubt, excludes any
income tax or tax on profits; less
5 any net tax payable by ThinkSmart
in respect of any amount referred to
in paragraph 3 of this definition.
====================== =================================================================
Broker the share broker appointed for the
purposes of clause 5.4 of the Scheme
Implementation Deed under the Broker
Agreement, being Canaccord Genuity
Limited.
====================== =================================================================
Broker Agreement the broker agreement described in section
10.5 of this Scheme Booklet.
====================== =================================================================
Business Day a day that is not a Saturday, Sunday
or a public holiday or bank holiday
in Perth, Western Australia.
====================== =================================================================
Cash Consideration the cash consideration described in
section 4.1 of this Scheme Booklet.
====================== =================================================================
Clearpay Clearpay Finance Ltd (UK company number
05198026).
====================== =================================================================
Competing Proposal any proposal, offer, expression of
interest, agreement, arrangement or
transaction , which, if entered into
or completed in accordance with its
terms, would result in a Third Party
(either alone or together with any
Associate):
1 directly or indirectly acquiring
or having the right to acquire (a)
a Relevant Interest in; (b) a legal,
beneficial or economic interest (including
by way of an equity swap, contract
for difference or similar transaction
or arrangement) in; or (c) control
of, 15% or more of the ThinkSmart Shares
;
2 acquiring Control of ThinkSmart or
any material Subsidiary of ThinkSmart;
3 directly or indirectly acquiring
or becoming the holder of, or otherwise
acquiring or having a right to acquire,
a legal, beneficial or economic interest
in, or control of, all or a substantial
part of ThinkSmart's business or assets
or the business or assets of the ThinkSmart
Group;
4 otherwise directly or indirectly
acquiring or merging, or being involved
in an amalgamation or reconstruction
(as those terms are used in s413(1)
of the Corporations Act), with ThinkSmart
or a material Subsidiary of ThinkSmart;
or
5 require ThinkSmart to abandon, or
otherwise fail to proceed with, the
Transaction,
whether by way of takeover bid, members'
or creditors' scheme of arrangement,
reverse takeover, shareholder approved
acquisition, capital reduction, buy
back, sale or purchase of shares, other
securities or assets, assignment of
assets and liabilities, incorporated
or unincorporated joint venture, dual-listed
company (or other synthetic merger),
deed of company arrangement, any debt
for equity arrangement, recapitalisation,
refinancing or other transaction or
arrangement.
For the avoidance of doubt, each successive
material modification or variation
of any proposal, agreement, arrangement
or transaction in relation to a Competing
Proposal will constitute a new Competing
Proposal.
====================== =================================================================
Control has the meaning given in section 50AA
of the Corporations Act.
====================== =================================================================
Corporations the Corporations Act 2001 (Cth), as
Act modified or varied by ASIC.
====================== =================================================================
Court the Federal Court Australia or such
other court of competent jurisdiction
under the Corporations Act agreed to
in writing by BidCo and ThinkSmart.
====================== =================================================================
COVID-19 SARS-CoV-2 or COVID-19, and any evolutions
or mutations thereof (including any
subsequent waves or outbreaks thereof).
====================== =================================================================
COVID-19 Measures any quarantine, "shelter in place",
"stay at home", lockdown, workforce
reduction, social distancing, shutdown,
closure, sequester, safety or similar
laws, rules, regulations, directives,
guidelines or recommendations promulgated
by any Government Agency in connection
with or in response to COVID-19.
====================== =================================================================
CREST the relevant system (as defined in
the CREST Regulations) in respect of
which Euroclear is the Operator (as
defined in the CREST Regulations) in
accordance with which securities may
be held and transferred in uncertificated
form.
====================== =================================================================
CREST Regulations the UK Uncertificated Securities Regulations
2001 (SI 2001 No. 3755).
====================== =================================================================
CREST Voting a message which is sent using CREST.
Instruction
====================== =================================================================
Deed Poll a deed poll in the form of Annexure
3 under which BidCo covenants in favour
of the Scheme Shareholders to perform
the obligations attributed to BidCo
under the Scheme.
====================== =================================================================
Depositary Computershare Investor Services plc.
====================== =================================================================
Depositary Custodian Computershare Clearing Pty Limited
ACN 063 826 228.
====================== =================================================================
Effective when used in relation to the Scheme,
the coming into effect, under subsection
411(10) of the Corporations Act, of
the order of the Court made under paragraph
411(4)(b) of the Corporations Act in
relation to the Scheme.
====================== =================================================================
Effective Date the date on which the Scheme becomes
Effective, currently expected to be
23 November 2022.
====================== =================================================================
Election an election by an Excluded Shareholder
to receive their Scheme Consideration
either:
1 in the form of Scrip Consideration
in respect of all Scheme Shares held
by that Excluded Shareholder on the
Scheme Record Date; or
2 in the form of Cash Consideration
for a number of the Scheme Shares held
by that Excluded Shareholder on the
Scheme Record Date and in the form
of Scrip Consideration in respect of
the remaining Scheme Shares held by
that Excluded Shareholder on the Scheme
Record Date,
made in accordance with clause 4.4
of the Scheme Implementation Deed and
otherwise in accordance with the Scheme.
====================== =================================================================
Election Form a form issued by or on behalf of ThinkSmart
for the purposes of an Excluded Shareholder
making an Election, in a form agreed
to by ThinkSmart and BidCo.
====================== =================================================================
Election Time 5.00pm on the fifth Business Day before
the date of the Scheme Meetings, or
such other date as is agreed in writing
between BidCo and ThinkSmart.
====================== =================================================================
Euroclear Euroclear UK & International Limited.
====================== =================================================================
Excluded Shareholder
any ThinkSmart Shareholder who is (or
becomes under clause 5.3(m) of the
Scheme Implementation Deed) a member
of the BidCo Group or any ThinkSmart
Shareholder who holds any ThinkSmart
Shares on behalf of, or for the benefit
of, any member of the BidCo Group and
does not hold BidCo Shares on behalf
of, or for the benefit of, any other
person, being as at the date of this
deed:
1 Mr Ned Montarello;
2 Mr Ned Montarello as trustee for
the Montarello Investment Trust;
3 Kimberly Montarello;
4 Kimberly Montarello & Mr Ned Montarello
as trustees for the Adam Montarello
Trust;
5 Kimberly Montarello & Mr Ned Montarello
as trustees for the Scott Montarello
Trust; and
6 Kimberly Montarello & Mr Ned Montarello
as trustees for the Montarello Superannuation
Fund.
====================== =================================================================
Excluded Shareholder the meeting of Excluded Shareholders
Scheme Meeting ordered by the Court to be convened
under section 411(1) of the Corporations
Act.
====================== =================================================================
Excluded Shareholder the resolution to approve the Scheme
Scheme Resolution to be voted on at the Excluded Shareholder
Scheme Meeting, as set out in the Notice
of Excluded Shareholder Scheme Meeting.
====================== =================================================================
Exclusivity Period the period from and including the date
of the Scheme Implementation Deed (being
29 July 2022) to the earlier of:
1 the date of termination of the Scheme
Implementation Deed;
2 the 'End Date' (being 29 January
2023); and
3 the Effective Date.
====================== =================================================================
Financial Assistance the resolution to approve the financial
Resolution assistance to be given by ThinkSmart
to BidCo in connection with the Scheme
under the Loan Deed, as described in
section 9 of this Scheme Booklet.
====================== =================================================================
Financial Benefit the resolution to approve the financial
Resolution benefit to be given by ThinkSmart to
BidCo in connection with the Scheme
under the Loan Deed, as described in
section 9 of this Scheme Booklet.
====================== =================================================================
First Court Date the first day on which an application
made to the Court for an order under
subsection 411(1) of the Corporations
Act convening the Scheme Meeting is
heard, or, if the application is adjourned
or subject to appeal for any reason,
the day on which the adjourned application
is heard.
====================== =================================================================
Form of Instruction the form of instruction that provides
for ThinkSmart DI Holders to instruct
the Depositary Custodian how to vote
at the General Scheme Meeting and which
accompanies the version of the Scheme
Booklet to be dispatched to each ThinkSmart
DI Holder.
====================== =================================================================
Funds Flow Deed the funds flow deed described in section
10.5 of this Scheme Booklet.
====================== =================================================================
General Scheme the meeting of ThinkSmart Shareholders
Meeting (excluding the Excluded Shareholders)
ordered by the Court to be convened
under section 411(1) of the Corporations
Act.
====================== =================================================================
General Scheme the resolution to approve the Scheme
Resolution to be voted on at the General Scheme
Meeting, as set out in the Notice of
General Scheme Meeting.
====================== =================================================================
Government Agency any foreign or Australian government
or governmental, semi-governmental,
administrative, fiscal or judicial
body, department, commission, authority,
tribunal, agency or entity (including
any stock or other securities exchange),
or any minister of the Crown in right
of the Commonwealth of Australia or
any State, and any other federal, state,
provincial, or local government, whether
foreign or Australian.
====================== =================================================================
GST goods and services tax or similar value
added tax levied or imposed in Australia
under the GST Law or otherwise on a
supply.
====================== =================================================================
GST Act the A New Tax System (Goods and Services
Tax) Act 1999 (Cth).
====================== =================================================================
GST Law has the same meaning as in the GST
Act.
====================== =================================================================
HMRC the United Kingdom government department,
His Majesty's Revenue and Customs.
====================== =================================================================
Implementation the fifth Business Day after the Scheme
Date Record Date, or such other date after
the Scheme Record Date as ThinkSmart
and BidCo agree in writing, currently
expected to be 2 December 2022.
====================== =================================================================
Independent Director each of David Adams, Peter Gammell
and Gary Halton.
====================== =================================================================
Independent Director any ThinkSmart Share held by or on
ThinkSmart Share behalf of an Independent Director.
====================== =================================================================
Independent Expert Grant Thornton Corporate Finance Pty
Ltd ACN 003 265 987, the independent
expert in respect of the Scheme appointed
by ThinkSmart.
====================== =================================================================
Independent Expert's the report issued by the Independent
Report Expert in connection with the Scheme,
as set out in Annexure 1 .
====================== =================================================================
Insolvency Event in relation to an entity:
1 the entity resolving that it be wound
up or a court making an order for the
winding up or dissolution of the entity
(other than where the order is set
aside within 14 days) ;
2 a liquidator, provisional liquidator,
administrator, receiver, receiver and
manager or other insolvency official
being appointed to the entity or in
relation to the whole, or a substantial
part, of its assets;
3 the entity executing a deed of company
arrangement;
4 the entity ceasing, or threatening
to cease to, carry on substantially
all the business conducted by it as
at the date of the Scheme Implementation
Deed;
5 the entity is or becomes unable to
pay its debts when they fall due within
the meaning of the Corporations Act
(or, if appropriate, legislation of
its place of incorporation) ; or
6 the entity being deregistered as
a company or otherwise dissolved,
or any other like event, matter or
circumstance occurring in relation
to an entity in another jurisdiction
.
====================== =================================================================
Last Practicable 17 October 2022.
Date
====================== =================================================================
Loan has the meaning given in section 9.1
.
====================== =================================================================
Loan Deed has the meaning given in section 9.1
.
====================== =================================================================
LSE the London Stock Exchange.
====================== =================================================================
Meetings the Scheme Meetings and the Annual
General Meeting.
====================== =================================================================
Mr Ned Montarello Natale ('Ned') Ronald Montarello.
====================== =================================================================
Notice of Annual the notice in relation to the Annual
General Meeting General Meeting set out in Annexure
6 .
====================== =================================================================
Notice of Excluded the notice in relation to the Excluded
Shareholder Scheme Shareholder Scheme Meeting set out
Meeting in Annexure 5 .
====================== =================================================================
Notice of General the notice in relation to the General
Scheme Meeting Scheme Meeting set out in Annexure
4 .
====================== =================================================================
Notice of Scheme both the Notice of General Scheme Meeting
Meetings and the Notice of Excluded Shareholder
Scheme Meeting.
====================== =================================================================
Reimbursement the actual out-of-pocket costs of BidCo
Fee in pursuing the Transaction, up to
a maximum of $200,000 (excluding GST).
====================== =================================================================
Related Bodies has the meaning set out in section
Corporate 50 of the Corporations Act.
====================== =================================================================
Relevant Interest has the meaning given in sections 608
and 609 of the Corporations Act.
====================== =================================================================
Relevant Scheme the aggregate of:
Shares 1 all Scheme Shares held by Scheme
Shareholders who are not Excluded Shareholders;
and
2 all Scheme Shares in respect of which
an Excluded Shareholder has made an
Election to receive Cash Consideration.
====================== =================================================================
Requisite Majorities 1 in relation to the General Scheme
Resolution, a resolution passed by:
* unless the Court orders otherwise, a majority in
number (more than 50%) of ThinkSmart Shareholders
(excluding Excluded Shareholders) present and voting
at the General Scheme Meeting (either in person or by
proxy, attorney or, in the case of corporate
ThinkSmart Shareholders, body corporate
representative); and
* at least 75% of the total number of votes cast on the
General Scheme Resolution at the General Scheme
Meeting by ThinkSmart Shareholders (excluding
Excluded Shareholders) present and voting (either in
person or by proxy, attorney or, in the case of
corporate ThinkSmart Shareholders, body corporate
representative); and
2 in relation to the Excluded Shareholder
Scheme Resolution, a resolution passed
by:
* unless the Court orders otherwise, a majority in
number (more than 50%) of Excluded Shareholders
present and voting at the Excluded Shareholder Scheme
Meeting (either in person or by proxy, attorney or,
in the case of corporate Excluded Shareholders, body
corporate representative); and
* at least 75% of the total number of votes cast on the
Excluded Shareholder Scheme Resolution at the
Excluded Shareholder Scheme Meeting by Excluded
Shareholders present and voting (either in person or
by proxy, attorney or, in the case of corporate
Excluded Shareholders, body corporate
representative).
====================== =================================================================
RNS a regulatory information service approved
by the UK Financial Conduct Authority
for the distribution to the pubic of
regulatory announcements and included
within the list maintained on the UK
Financial Conduct Authority's website.
====================== =================================================================
Scheme the scheme of arrangement under Part
5.1 of the Corporations Act between
ThinkSmart and the Scheme Shareholders,
the form of which is attached as Annexure
2 , subject to any alterations or conditions
made or required by the Court under
subsection 411(6) of the Corporations
Act and agreed to in writing by BidCo
and ThinkSmart.
====================== =================================================================
Scheme Booklet this document being the explanatory
statement in respect of the Scheme,
which has been prepared by ThinkSmart
in accordance with section 412 of the
Corporations Act.
====================== =================================================================
Scheme Consideration the consideration to be provided to
each Scheme Shareholder for the transfer
to BidCo of each Scheme Share, being
for each ThinkSmart Share held by a
Scheme Shareholder as at the Scheme
Record Date, as determined in accordance
with clauses 4.5 and 4.6 of the Scheme
Implementation Deed and section 4.1
of this Scheme Booklet.
====================== =================================================================
Scheme Implementation the Scheme Implementation Deed dated
Deed 29 July 2022 between ThinkSmart and
BidCo, as amended from time to time.
====================== =================================================================
Scheme Meetings both of the General Scheme Meeting
and the Excluded Shareholder Scheme
Meeting, and Scheme Meeting means either
or both of them (as the context requires),
and includes any meeting convened following
any adjournment or postponement of
that meeting.
====================== =================================================================
Scheme Record the time and date for determining entitlements
Date to receive the Scheme Consideration,
being the second Business Day after
the Effective Date, currently expected
to be 5.00pm (Perth time) on 25 November
2022 for ThinkSmart Shareholders and
6.00pm (London time) on 25 November
2022 for ThinkSmart DI Holders, or
such other time and date as ThinkSmart
and BidCo agree in writing.
====================== =================================================================
Scheme Resolution the resolutions to approve the Scheme
to be voted on at the Scheme Meetings,
as set out in the Notice of General
Scheme Meeting and the Notice of Excluded
Shareholder Scheme Meeting, and Scheme
Resolution means either or both of
them (as the context requires).
====================== =================================================================
Scheme Shareholder a holder of ThinkSmart Shares recorded
in the ThinkSmart Share Register as
at the Scheme Record Date.
====================== =================================================================
Scheme Shares all ThinkSmart Shares held by the Scheme
Shareholders as at the Scheme Record
Date.
====================== =================================================================
Scrip Consideration one new BidCo Share for each Scheme
Share.
====================== =================================================================
SEC the United States Securities and Exchange
Commission.
====================== =================================================================
Second Court the first day on which an application
Date made to the Court for an order under
paragraph 411(4)(b) of the Corporations
Act approving the Scheme is heard,
currently expected to be 22 November
2022, or, if the application is adjourned
or subject to appeal for any reason,
the day on which the adjourned application
or appeal is heard.
====================== =================================================================
Second Court the hearing of the application made
Hearing to the Court for an order pursuant
to section 411(4)(b) of the Corporations
Act approving the Scheme.
====================== =================================================================
Subsidiary has the meaning given in Division 6
of Part 1.2 of the Corporations Act.
====================== =================================================================
Superior Proposal
a bona fide Competing Proposal:
1 of the kind referred to in any of
paragraphs 2, 3, 4 or 5 of the definition
of Competing Proposal; and
2 not resulting from a breach by ThinkSmart
of any of its obligations under clause
11 of the Scheme Implementation Deed,
that the ThinkSmart Independent Board
Committee, acting in the best interests
of the ThinkSmart Group and in good
faith, and after receiving written
advice from its external legal and
financial advisers , determines:
3 is reasonably capable of being valued
and completed in a reasonable timeframe
in accordance with its terms; and
4 would, if completed substantially
in accordance with its terms, be more
favourable to ThinkSmart Shareholders
(as a whole) than the Transaction (and,
if applicable, than the Transaction
as amended or varied following application
of the matching right set out in clause
11.4 of the Scheme Implementation Deed),
in each case taking into account all
terms and conditions and other aspects
of the Competing Proposal (including
any timing considerations, any conditions
precedent, the identity, reputation
and financial condition of the proponent,
all relevant legal, financial, regulatory
or other matters affecting the probability
of the Competing Proposal being completed)
and of the Transaction.
====================== =================================================================
ThinkSmart ThinkSmart Limited ACN 092 319 698.
====================== =================================================================
ThinkSmart Board the board of directors of ThinkSmart
and a ThinkSmart Board Member means
any director of ThinkSmart comprising
part of the ThinkSmart Board.
====================== =================================================================
ThinkSmart Depositary a depositary interest issued by the
Interest Depositary representing one fully paid
ThinkSmart Share.
====================== =================================================================
ThinkSmart DI the holder of a ThinkSmart Depositary
Holder Interest.
====================== =================================================================
ThinkSmart DI the register of ThinkSmart DI Holders
Register maintained by ThinkSmart.
====================== =================================================================
ThinkSmart Director a member of the ThinkSmart Board.
====================== =================================================================
ThinkSmart Group ThinkSmart and each of its Subsidiaries,
and a reference to a ThinkSmart Group
Member or a member of the ThinkSmart
Group is to ThinkSmart or any of its
Subsidiaries.
====================== =================================================================
ThinkSmart Independent the independent board committee established
Board Committee by ThinkSmart Board to consider and
implement the Transaction, which comprises
all ThinkSmart Board Members other
than Mr Ned Montarello.
====================== =================================================================
ThinkSmart Information the information contained in this Scheme
Booklet, other than:
1 section 8 of this Scheme Booklet
2 the BidCo Information; and
3 the Independent Expert's Report.
====================== =================================================================
ThinkSmart Option the options to subscribe for ThinkSmart
Shares (on a one for one basis), as
described in section 5.6 and 10.2 of
this Scheme Booklet.
====================== =================================================================
ThinkSmart Share a fully paid ordinary share in the
capital of ThinkSmart.
====================== =================================================================
ThinkSmart Shareholder each person who is registered as the
holder of a ThinkSmart Share in the
ThinkSmart Share Register and, as the
context permits, includes a ThinkSmart
DI Holder.
====================== =================================================================
ThinkSmart Share the register of members of ThinkSmart
Register maintained in accordance with the Corporations
Act.
====================== =================================================================
ThinkSmart Share Computershare Investor Services Pty
Registry Limited ACN 078 279 277.
====================== =================================================================
Third Party a person other than BidCo, its Related
Bodies Corporate and its Associates.
====================== =================================================================
Transaction the acquisition of the Scheme Shares
by BidCo through implementation of
the Scheme in accordance with the terms
of the Scheme Implementation Deed.
====================== =================================================================
UK the United Kingdom.
====================== =================================================================
UK MAR the UK Market Abuse Regulation, which
is the retained UK law version of the
EU Market Abuse Regulation (596/2014)
pursuant to the European Union (Withdrawal)
Act 2018.
====================== =================================================================
VAT the United Kingdom's value added tax.
====================== =================================================================
VWAP volume weighted average price.
====================== =================================================================
11.2 Interpretation
In this Scheme Booklet, unless expressly stated or the context
otherwise appears:
(a) words and phrases have the same meaning (if any) given to
them in the Corporations Act;
(b) words importing a gender include any gender;
(c) words importing the singular include the plural and vice versa;
(d) an expression importing a natural person includes any
company, partnership, joint venture, association, corporation or
other body corporate and vice versa;
(e) a reference to a section or annexure is a reference to a
section of and an annexure to this Scheme Booklet as relevant;
(f) a reference to any statute, regulation, proclamation,
ordinance or by law includes all statutes, regulations,
proclamations, ordinances, or by laws amending, varying,
consolidating or replacing it and a reference to a statute includes
all regulations, proclamations, ordinances and by laws issued under
that statute;
(g) headings and bold type are for convenience only and do not
affect the interpretation of this Scheme Booklet;
(h) a reference to time is a reference to time in Perth, Australia;
(i) a reference to writing includes facsimile transmissions; and
(j) a reference to dollars, $, cents, c and currency is a
reference to the lawful currency of the Commonwealth of
Australia.
Annexure 1
Independent Expert's Report
ThinkSmart Limited
Independent Expert's Report and Financial Services Guide
24 October 2022
The Independent Directors
ThinkSmart Limited
531 Hay Street
SUBIACO WA 6008
19(th) October 2022
Dear Independent Directors
Independent Expert's Report and Financial Services Guide
Introduction
ThinkSmart Limited ("ThinkSmart" or the "Company") is an
AIM-listed financial services company with a market capitalisation
of GBP27.2 million ([18]) as at 14(th) October 2022, whose main
asset is 618,750 shares in New York Stock Exchange ("NYSE") listed
Block, Inc ("Block") ("Block Shares"). In addition to holding the
Block Shares, the Company operates a legacy leasing business
("Leasing Business") and an outsourced call centre customer support
service ("Call Centre Business") for Clearpay Finance Limited, the
UK operations of Afterpay Limited ("Afterpay").
Tuscan Equity Pty Ltd ("Bidco") is an Australian private
company, wholly-owned by Natale Ronald Montarello ("Mr.
Montarello") ThinkSmart's Executive Chairman, CEO, founder and
significant shareholder who has, along with his related entities,
an interest in 29.4% of ThinkSmart shares (29.94% on a fully
diluted basis including all vested but currently unexercised share
options).
Between the 1(st) February 2022 and 28(th) July 2022, ThinkSmart
has traded at an average 31% ([19]) discount to the market value of
the Block Shares with minimum discount of 11% on the 16(th) June
2022 and maximum discount of 48% on the 25(th) February 2022. This
discount has persisted despite the Company paying a GBP2.5 million
capital return and dividend payment to shareholders on 15 July
2022.
In order to try and bridge this gap, ThinkSmart undertook a
strategic review of its business, assets and operations, including
its Block shareholding, and considered a number of commercial
strategic options. To assist its assessment, the Company engaged
with advisers in relation to the commercial options under
consideration.
Following the Strategic Review, on 29(th) July 2022 ThinkSmart
announced that it had entered into a Scheme Implementation Deed
with Bidco, under which Bidco will acquire 100% of the ordinary
shares in ThinkSmart ("ThinkSmart Shares") that it does not already
owned via a Scheme of Arrangement ("the Scheme") based on the
following terms:
-- ThinkSmart shareholders not associated with Mr. Montarello
and his related entities ("Non-Associated Securityholders") will
receive a cash consideration ("Cash Consideration") equal to the
proceeds realised from the post-Scheme implementation sale of Block
Shares attributable to their shareholding in ThinkSmart (net of
their proportion of sale fees, expected to be approximately 0.5% of
gross proceeds and net of any other amount (including tax) required
to be withheld by law). Sale fees include brokerage fees, wire
transfer fees, foreign exchange fees and other banking fees.
-- Depositary interest holders will receive the Cash
Consideration in Pounds Sterling and holders of ThinkSmart Shares
that do not hold via depositary interests will receive the Cash
Consideration in Australian Dollars unless they reside outside
Australia in which case they can elect to receive the Cash
Consideration in their local currency. ThinkSmart shareholders will
bear the foreign exchange risk of converting the proceeds from the
sale of Block Shares from US Dollars.
-- The relevant number of Block Shares will be sold on the New
York Stock Exchange ("NYSE") as soon as practically possible (and
in any case within three trading days) following the implementation
date of the Scheme. The Implementation date of the Scheme
("Implementation Date") is expected to be c. 10 trading days after
the date shareholders meet to vote on the Scheme ("Scheme
Meetings"). ThinkSmart shareholders will receive the Cash
Consideration as soon as practically possible following the sale of
the Block Shares.
-- Bidco will acquire all of the ThinkSmart Shares held by Mr.
Montarello and his related entities in exchange for either Bidco
shares or if they so elect, part or all of their shares in
ThinkSmart may be acquired by Bidco for the Cash Consideration,
funded by a proportionate increase in the number of Block Shares
that will be sold by ThinkSmart post-Scheme implementation.
As Bidco is wholly-owned by Mr. Montarello, and he is
ThinkSmart's Executive Chairman, CEO, founder and substantial
shareholder, ThinkSmart has established an Independent Board
Committee comprising all of the directors of ThinkSmart other than
Mr. Montarello, to consider the Scheme on behalf of ThinkSmart and
the Non-Associated Securityholders.
The Scheme is subject to the terms and conditions discussed in
section 1 of this IER.
Subject to no superior proposal emerging, and an Independent
Expert concluding and continuing to conclude that the Scheme is in
the best interest of ThinkSmart Non-Associated Securityholders
("Securityholders"), the Independent Directors of ThinkSmart have
unanimously recommended that Non-Associated Securityholders vote in
favour of the Scheme and each Independent Director intends to vote
in favour the ThinkSmart Shares held or controlled by them.
Purpose of the report
The Independent Directors have requested that Grant Thornton
Corporate Finance prepare an IER stating whether the Scheme is in
the best interests of ThinkSmart's Non-Associated Securityholders
for the purposes of Section 411 of the Corporations Act. When
preparing this IER, Grant Thornton Corporate Finance had regard to
the Australian Securities Investment Commission's ("ASIC")
Regulatory Guide 111 Contents of expert reports ("RG 111") and
Regulatory Guide 112 Independence of experts ("RG 112"). The IER
also includes other information and disclosures as required by
ASIC.
Summary of opinion
Grant Thornton Corporate Finance has concluded that the Scheme
is FAIR AND REASONABLE and hence in the BEST INTERESTS of the
Non-Associated Securityholders.
In forming our opinion, Grant Thornton Corporate Finance has
considered whether the Scheme is fair and reasonable to the
ThinkSmart Non-Associated Securityholders and other quantitative
and qualitative considerations.
Fairness Assessment
In forming our opinion in relation to the fairness of the
Scheme, Grant Thornton Corporate Finance has compared the fair
market value of ThinkSmart Shares on a control basis before the
Scheme with the fair market value of Cash Consideration. However,
the Cash Consideration for the Scheme will not be known until after
the Scheme is implemented and will depend on the price of Block
Shares on the date they are sold, which is expected to occur within
3 trading days following the Implementation Date. The amount of
Cash Consideration will also depend on the applicable exchange rate
achieved for the conversion of the US Dollar sale proceeds to
Pounds Sterling and Australian Dollars. Furthermore, our assessed
value of ThinkSmart Shares before the Scheme and the value of the
Cash Consideration are both primarily driven by the same price of
Block Shares. Any increase or decrease in the price of Block Shares
or applicable exchange rates would result in a substantially equal
adjustment to the fair market value of ThinkSmart Shares and of the
Cash Consideration. Accordingly, for the purpose of our fairness
assessment we have had regard to the recent trading prices of Block
Shares and recent exchange rates to form our fairness opinion.
The following table summarises our fairness assessment in Pounds
Sterling, ThinkSmart's functional and reporting currency.
Source: GTCF Calculations
The Cash Consideration is within and substantially in line with
our assessed valuation range of ThinkSmart Shares before the Scheme
and on a control basis. Accordingly, we conclude the Cash
Consideration is FAIR to the Non-Associated Securityholders.
Since the Grant Thornton fair market value of ThinkSmart is
dependent on the post-Scheme implementation sale of Block on the
New York Stock Exchange, we have sensitised the fair market value
of ThinkSmart using different Block Shares prices and USDGBP
exchange rates. The sensitivity analysis is presented in the table
below.
Source: GTCF, S&P Global
Although the fair market value of ThinkSmart is dependent on the
post-Scheme implementation sale of Block on the New York Stock
Exchange, it does not impact our fairness assessment since the Cash
Consideration will be impacted to the same extent.
Valuation assessment of ThinkSmart based on the Net Realisable
Value ("NRV") approach
In forming our opinion on the value of ThinkSmart, Grant
Thornton has relied on the orderly realisation of assets approach
having regard to the latest available balance sheet as at 30(th)
June 2022, the board approved budget for the next two years and the
share price of Block on the NYSE. We note the following:
-- Market value of financial assets - ThinkSmart's 618,750
shares in Block are valued by having regard to its traded price on
the NYSE. Due to volatility in the Block shares, Grant Thornton has
used 5 and 10-day VWAP as of the 14(th) October 2022 to determine
the value of ThinkSmart's investment. We have also assumed
transaction costs of 0.5%.
-- Remaining legacy business - ThinkSmart generates income from
a call centre supporting Clearpay operations in the UK, primary and
secondary rentals on electronic equipment and insurance on
equipment under finance lease. ThinkSmart ceased writing new leases
to new customers as of February 2021, hence this business is in
wind-down mode. Grant Thornton has performed a discounted cash flow
of the remaining cash flow streams over the next two years to
determine the value of the legacy business. These cash flows
include costs associated with winding down the business and
transaction costs associated with the Scheme. Since our valuation
is based on a 100% and control basis, Grant Thornton has excluded
ThinkSmart listing costs. Grant Thornton has also performed a high
case scenario, based on a ThinkSmart budget and forecasts conducted
in February 2022 and a low case scenario assuming lower income and
higher costs as the macro-economic outlook (and assumptions upon
which the budget was based), has deteriorated since February
2022.
-- Value of the software - ThinkSmart continues to use its
proprietary SmartCheck software which has the ability to manage
electronic payments from point-of-sale through the entire lease
cycle. It is also a credit decision making tool. We have considered
the value of ThinkSmart's software by having regard to its
development costs, book value and market conditions in the
technology and Buy-Now-Pay-Later ("BNPL") sectors.
-- Liquidation costs - ThinkSmart expects to incur costs of c.
GBP500,000 to liquidate its 5 active UK companies. This is based on
a high-level estimate, due to the early stage in the process. Costs
associated with liquidation include correspondence with tax
authorities to lodge returns and obtain tax clearance, distribution
of any remaining assets to the shareholders and deregistration of
the company.
-- Cash - ThinkSmart had a net cash balance of c. GBP5.5 million
on 30 June 2022. We have adjusted this balance for a post year-end
return to shareholders of GBP2.5 million and income from an
Employee Share Option Scheme ("ESOP") being exercised. Grant
Thornton has also deducted contingency cash required to run the
business over the next two years for any unexpected liabilities
such as indemnity claims which have not been captured in ThinkSmart
budget or Grant Thornton's valuation or in the event cash flow
generation is weaker than expected.
ThinkSmart shareholders should be aware that our assessment of
the value per ThinkSmart Share should not be considered to reflect
the price at which ThinkSmart Shares may be exchanged if the Scheme
is not implemented. The price at which ThinkSmart Shares will
ultimately trade depends on a range of factors. However, if the
Scheme is not approved, ThinkSmart's discount to its value in Block
shares is likely to widen closer to the average discount seen
between 1(st) February 2022 and 28(th) July 2022 of 31%.
Valuation Assessment of the Cash Consideration
The Cash Consideration for ThinkSmart Shares will be determined
when its 618,750 shares in Block are sold on the NYSE and the US
Dollar sale proceeds converted to Pounds Sterling and Australian
Dollars as applicable. This disposal of Block Shares will take
place over a maximum of three trading days from the Implementation
Date, and c. 11 to 13 trading days after the Scheme Meetings which
are expected to take place on 11(th) November 2022. ThinkSmart
shareholders entitled to receive the Cash Consideration, will
receive the Cash Consideration as soon as practically possible
following the sale of the Block Shares, prior to which the sales
proceeds will have been converted from US Dollars to Pounds
Sterling or Australian Dollars, as applicable. Therefore,
ThinkSmart shareholders entitled to receive the Cash Consideration,
will assume currency risk over that period.
In assessing the Cash Consideration for ThinkSmart Shares, Grant
Thornton has selected a price range based on a 5-day and 10-day
VWAP ending 14(th) October 2022 of US$54.97 and US$56.82
respectively. Transaction costs of 0.5% have been deducted from the
realisable value. The resulting value is converted into Pounds
Sterling and Australian Dollars at the 5 and 10-day average
exchange rates of US$/UKGBP 0.8967 and US$/A$ 1.577 and divided by
the number of fully diluted shares in issue. In the following table
we present our calculations. We note that under the Scheme, income
tax positions including capital gains tax will be for the account
of Bidco and ThinkSmart, and will not impact the Cash Consideration
received by ThinkSmart shareholders, entitled to receive the Cash
Consideration.
Source:GTCF, S&P Global
Under the Scheme, the Cash Consideration will be unknown until
the post-Scheme implementation sale of certain Block Shares on the
New York Stock Exchange and the US Dollar sale proceeds are
converted to Pounds Sterling and Australian Dollars as applicable.
Therefore, the Cash Consideration may be higher or lower than the
Grant Thornton assessed Cash Consideration.
In the following table, we present the impact of different Block
Share prices (after transaction costs) and the USDGBP exchange
rates the Cash Consideration.
Source: GTCF, S&P Global
Since our valuation of ThinkSmart and the Cash Consideration
assume the same share prices and exchange rates, movements in these
prices will not change our view of whether the Scheme is fair or
not.
Reasonableness Assessment
RG111 establishes that the offer is reasonable if it is fair. It
might also be reasonable if, despite being not fair, there are
sufficient reasons for the security holders to accept the offer in
the absence of any superior proposal. In assessing the
reasonableness of the Offer, we have considered the following
advantages, disadvantages and other factors.
Advantages
In accordance with ASIC RG111, a transaction is fair if it is
also reasonable. Notwithstanding that we have concluded that the
Scheme is fair, we have also considered the following likely
advantages, disadvantages and other factors.
Unlocking the discount to market value of Block Shares
In August 2018, ThinkSmart sold 90% of Clearpay, it's UK BNPL
offering to Afterpay for GBP10.5 million. Following the
announcement of the intended takeover of Afterpay by Block
(previously Square) in November 2021, Afterpay was entitled to
exercise a call option on the remaining 10% in Clearpay due to a
change in control. ThinkSmart agreed to sell this remaining
shareholding in exchange for 1.65 million shares in Afterpay,
subject to ThinkSmart Shareholder approval, which was obtained on
14 January 2022. ThinkSmart's Afterpay Shares were subsequently
exchanged for 618,750 shares in Block, following the completion of
the takeover of Afterpay by Block, on 1 February 2022.
ThinkSmart's investment in Block is by far the biggest
contributor to ThinkSmart's fair value. However, since ThinkSmart
received these shares, its market capitalisation has traded at a
significant discount to the market value of its investment in
Block. In the following chart, we present this discount from the
1st February 2022 to the 28(th) July 2022, the day preceding the
announcement of the Scheme.
-- ThinkSmart discount to market value of its investment in
Block (1 February 2022 - 28(th) July 2022)
Source: S&P Global, GTCF
Up to 28(th) July 2022, the average discount was 31%. The
average discount declined to 13% following ThinkSmart entering into
a Scheme Implementation Deed on the 29(th) July 2022.
If the Scheme is approved, ThinkSmart shareholders entitled to
receive the Cash Consideration under the Scheme, will receive the
net proceeds after transaction costs from the sale of Block Shares,
unlocking the remaining discount and allowing shareholders to
realise the full value of their investment in Block.
Although Block Shares are likely to be sold well below their
2021 highs of US$280 per share, ThinkSmart shareholders will be
entitled to make their own arrangements to re-invest in Block with
proceeds from the Cash Consideration if they desire to do so.
Premium for control
A premium for control is applicable when the acquisition of
control of a company or business would give rise to benefits such
as the ability to realise synergies, access cash flows, access tax
benefits and control of the Board of Directors of the company.
The assessed Cash Consideration represents a premium to
ThinkSmart's trading price before the announcement of the Scheme as
summarised below:
-- Between 20% to 24% based on the 1-day VWAP of GBP0.234 of ThinkSmart on 28 July 2022.
-- Between 19% to 23% based on the 1-month VWAP of GBP0.235 of ThinkSmart on 28 July 2022.
-- Between 14% to 18% based on the 2-month VWAP of GBP0.246 of ThinkSmart on 28 July 2022.
This premium for control will not be available to ThinkSmart
shareholders in the absence of the Scheme. The level of control
premium is higher than that typically observed for control
transactions occurring in Australia of between 20% and 40%.
-- Legacy business is not viable on a stand-alone basis
-- ThinkSmart's legacy business generates income from primary
and secondary rentals as well as a call centre in the UK to support
Clearpay. Primary rentals are generated from finance lease term
contracts, while secondary rentals are generated from customers
selecting to rent their IT equipment at the end of the minimum
lease term. The finance lease book is expected to unwind by June
2023. Although ThinkSmart will continue to generate income from its
call centre and secondary rentals, these operations lack the scale
to cover both operating and corporate costs, such as data storage
costs, salaries and property leases. Grant Thornton has assessed
the value of the legacy business by discounting the remaining cash
flows as it winds down assuming two scenarios. The high scenario is
based on the budget but excludes listing costs as our valuation is
assessed on a control basis. Our low scenario takes a more
conservative view on income and costs due to a deterioration in
macro-economic conditions in the UK since the budget was compiled.
In the absence of the Scheme, it is possible that significant
resources will be absorbed by the legacy business without financial
benefits for the shareholders.
-- Non-associated shareholders will not take on risk associated
with finance leasing book or any potential indemnity claims
-- ThinkSmart's gross finance receivables were valued at GBP
1.036 million at the end of June 2022. After allowances for bad
debt of GBP 124,000, equivalent to 12% of gross finance
receivables, the net finance receivables were GBP 912,000 at the
end of June 2022.
-- We note that macro-economic conditions characterised by
higher inflation and rising interest rates have deteriorated in the
UK. For example, CPI including housing costs in July 2022 increased
by 8.8% fueled by the outbreak of war in Ukraine and a tight labour
market. Furthermore, interest rates in the UK have risen from 0.25%
to 1.75% within six months. This could place pressure on household
disposable income, affecting small businesses and consumers ability
to repay their leases. If the scheme is implemented, Non-Associated
Securityholders will not bear risks associated with the quality of
the finance receivables book.
Additionally, if the Scheme is implemented, Non-Associated
Securityholders will no longer be exposed to indemnity claim risk
which arises under the UK's Direct Debit Guarantee Scheme. This
protects consumers with direct debits in the event of an error in
debit order based on an incorrect information, dates or amounts.
Although banks should only allow the claim where an error has been
made, in ThinkSmart's experience, banks have refunded all claims
leaving ThinkSmart with the responsibility to reclaim amounts that
were refunded in error, the cost of which is uneconomical. This
risk has escalated with rising inflation and interest rates in the
UK and has not been captured in our valuation assessment of
ThinkSmart.
Cash certainty
Under a Strategic Review, ThinkSmart considered a number of
commercial strategic options regarding the business, assets and
operations of ThinkSmart. The Scheme, the culmination of this
process, allows shareholders to realise their full value of
ThinkSmart in cash, rather than wait for the wind-down and
liquidation which may be a protracted process with a potentially
worse outcome for shareholders, if cash flows do not materialise as
expected
ThinkSmart shareholders will be able to re-invest directly in
Block using their Cash Consideration
Although ThinkSmart is selling its shareholding in Block,
ThinkSmart shareholders can directly invest in Block using the
after-tax proceeds of the Cash Consideration if they desire to do
so, allowing for direct control over their investment.
Disadvantages
-- Legacy business may generate more income than expected
-- Although unlikely, the legacy business may generate more
income than expected due to secondary rentals increasing at a
faster than expected rate or costs growing at a slower than
expected rate. ThinkSmart also operates a call centre in the UK to
support Clearpay (Block's BNPL operation in the UK formerly owned
by Afterpay) for which it receives a margin contribution to
overheads. This may continue operating until ThinkSmart is
wound-down, in the absence of either party cancelling their
agreement, which can be done with three-months notice.
-- ThinkSmart may not require all its contingency cash
In determining ThinkSmart's net cash position, Grant Thornton
has deducted contingency cash for any potential liabilities such as
indemnity claims which have not been captured in either
ThinkSmart's budget or Grant Thornton's fair market value of
ThinkSmart. Contingency cash may also be needed if budgeted and
projected cash flows are weaker than expected. However, any
contingency cash not required in the wind-down and liquidation of
ThinkSmart, will not accrue to ThinkSmart Non-Associated
Securityholders. On the flip side, Non-Associated Securityholders
will not be taking the risk of any additional contingency cash
requirements.
-- Block shares have weakened and are likely to be sold at prices well below the 12-month high
-- Block's share price peaked at US$280 per share in August
2021, significantly higher than the 5 and 10-day VWAP ending 14(th)
October 2022 of US$54.97 and US$56.82 respectively.. Block Shares
are likely to be sold at prices materially lower than 12-month
highs, however, shareholders can re-invest in Block with the Cash
Consideration if they desire to do so.
Other factors
Directors' recommendations and intentions
The ThinkSmart Independent Board Committee unanimously
recommends that ThinkSmart shareholders vote in favour of the
Scheme in the absence of a Superior Proposal and subject to the
Independent Expert continuing to conclude that the Scheme is in the
best interests of ThinkSmart shareholders (other than the excluded
shareholders).
Subject to those same qualifications, each member of the
ThinkSmart Independent Board Committee intends to vote, or cause to
be voted, all the ThinkSmart Shares held or controlled by them in
favour of the Scheme at the applicable Scheme Meeting.
Reasonableness conclusion
In our opinion, the advantages outweigh the disadvantages as set
out above and on this basis, it is our opinion that the Scheme is
REASONABLE to the Non-Associated Securityholders.
Overall conclusion
After considering the abovementioned quantitative and
qualitative factors, Grant Thornton Corporate Finance has concluded
that the Scheme is FAIR AND REASONABLE to the Non-Associated
Securityholders.
Other matters
Grant Thornton Corporate Finance has prepared a Financial
Services Guide in accordance with the Corporations Act. The
Financial Services Guide is set out in the following section.
The decision of whether or not to vote in favour of the Scheme
is a matter for each ThinkSmart Securityholder to decide based on
their own views of the value of ThinkSmart and expectations about
future market conditions, performance, risk profile and investment
strategy. If ThinkSmart Securityholders are in doubt about the
action they should take in relation to the Scheme, they should seek
their own professional advice.
Yours faithfully
GRANT THORNTON CORPORATE FINANCE PTY LTD
ANDREA DE CIAN JANNAYA JAMES
Director Director
24 October 2022
Financial Services Guide
Grant Thornton Corporate Finance Pty Ltd
Grant Thornton Corporate Finance carries on a business, and has
a registered office, at Level 17, 383 Kent Street, Sydney NSW 2000.
Grant Thornton Corporate Finance holds Australian Financial
Services Licence No 247140 authorising it to provide financial
product advice in relation to securities and superannuation funds
to wholesale and retail clients.
Grant Thornton Corporate Finance has been engaged by ThinkSmart
to provide general financial product advice in the form of an
independent expert's report in relation to the Scheme. This report
is included in ThinkSmart's Scheme booklet.
Financial Services Guide
This Financial Services Guide ("FSG") has been prepared in
accordance with the Corporations Act, 2001 and provides important
information to help retail clients make a decision as to their use
of general financial product advice in a report, the services we
offer, information about us, our dispute resolution process and how
we are remunerated.
General financial product advice
In our report we provide general financial product advice. The
advice in our report does not take into account your personal
objectives, financial situation or needs.
Grant Thornton Corporate Finance does not accept instructions
from retail clients. Grant Thornton Corporate Finance provides no
financial services directly to retail clients and receives no
remuneration from retail clients for financial services. Grant
Thornton Corporate Finance does not provide any personal retail
financial product advice directly to retail investors nor does it
provide market-related advice directly to retail investors.
Remuneration
When providing the IER, Grant Thornton Corporate Finance's
client is ThinkSmart. Grant Thornton Corporate Finance receives its
remuneration from ThinkSmart. In respect of the IER, Grant Thornton
Corporate Finance will receive from ThinkSmart a fee of A$70,000
(plus GST), which is based on commercial rates plus reimbursement
of out-of-pocket expenses for the preparation of the IER. Our
directors and employees providing financial services receive an
annual salary, a performance bonus or profit share depending on
their level of seniority .
Except for the fees referred to above, no related body corporate
of Grant Thornton Corporate Finance, or any of the directors or
employees of Grant Thornton Corporate Finance or any of those
related bodies or any associate receives any other remuneration or
other benefit attributable to the preparation of and provision of
this report.
Independence
Grant Thornton Corporate Finance is required to be independent
of ThinkSmart and Bidco in order to provide this report. The
guidelines for independence in the preparation of independent
expert's reports are set out in Regulatory Guide 112 Independence
of expert issued by ASIC. The following information in relation to
the independence of Grant Thornton Corporate Finance is stated
below.
"Grant Thornton Corporate Finance and its related entities do
not have at the date of this report, and have not had within the
previous two years, any shareholding in or other relationship with
ThinkSmart or Bidco (and associated entities) that could reasonably
be regarded as capable of affecting its ability to provide an
unbiased opinion in relation to the Scheme.
Grant Thornton Corporate Finance has no involvement with, or
interest in the outcome of the transaction, other than the
preparation of this report.
Grant Thornton Corporate Finance will receive a fee based on
commercial rates for the preparation of this report. This fee is
not contingent on the outcome of the Scheme. Grant Thornton
Corporate Finance's out of pocket expenses in relation to the
preparation of the report will be reimbursed. Grant Thornton
Corporate Finance will receive no other benefit for the preparation
of this report.
Grant Thornton Corporate Finance considers itself to be
independent in terms of Regulatory Guide 112 "Independence of
expert" issued by the ASIC."
Complaints process
Grant Thornton Corporate Finance has an internal complaint
handling mechanism and is a member of the Financial Ombudsman
Service (membership no. 11800). All complaints must be in writing
and addressed to the Chief Executive Officer at Grant Thornton
Corporate Finance. We will endeavour to resolve all complaints
within 30 days of receiving the complaint. If the complaint has not
been satisfactorily ThinkSmart with, the complaint can be referred
to the Financial Ombudsman Service who can be contacted at:
Financial Ombudsman Service Limited
GPO Box 3
Melbourne, VIC 3001
Telephone: 1800 367 287
Grant Thornton Corporate Finance is only responsible for this
report and FSG. Complaints or questions about the General Meeting
should not be directed to Grant Thornton Corporate Finance. Grant
Thornton Corporate Finance will not respond in any way that might
involve any provision of financial product advice to any retail
investor.
Compensation arrangements
Grant Thornton Corporate Finance has professional indemnity
insurance cover under its professional indemnity insurance policy.
This policy meets the compensation arrangement requirements of
section 912B of the Corporations Act, 2001.
Contents
Page
1 Overview of the Proposed Scheme
2 Purpose and scope of the report
3 Industry Overview
4 Profile of ThinkSmart
5 Valuation methodologies
6 Valuation assessment of ThinkSmart
7 Valuation assessment of the Cash Consideration
8 Sources of information, disclaimer and consents
Appendix A - Valuation methodologies
Appendix B - WACC
Appendix C - Glossary
1 Overview of the Proposed Scheme
On the 29(th) July 2022, ThinkSmart announced it had entered
into a binding Scheme Implementation Deed with Bidco, an Australian
incorporated company, wholly owned by Ned Montarello the founder,
Chairman and significant shareholder who has an interest in 29.4%
of ThinkSmart Shares. As part of the Scheme, Bidco will acquire all
the shares in ThinkSmart for:
-- A Cash Consideration equivalent to the US dollar proceeds
from the sale of the relevant number of ThinkSmart's shares in
Block. This will be executed on the NYSE, between one to three
trading days after the implementation of the Scheme.
-- Net of transaction costs, estimated to be approximately 0.5%
of the value of the shares, and
-- Converted from US dollars into either Pounds Sterling and
Australian Dollars, as applicable. Shareholders who own ThinkSmart
via Depository Interest will receive the Cash Consideration in
Pounds Sterling. All other shareholders will receive the Cash
Consideration in Australian Dollars, unless they reside outside
Australia in which case they can elect to receive the Cash
Consideration in their local currency.
Following the sale of the shares on the NYSE, the proceeds will
be remitted to an account with an approved depository institution,
operated by ThinkSmart. Thereafter, ThinkSmart will transfer the US
Dollar proceeds to an approved depositary institution account of
Bidco. Bidco will then convert the US Dollar proceeds to Australian
Dollars and Pounds Sterling before transferring the funds to two
separate trust accounts in the name of ThinkSmart (as trustee for
the Scheme shareholders) operated by Computershare for onwards
payment to the ThinkSmart shareholders entitled to receive the Cash
Consideration. This could take approximately two weeks exposing
ThinkSmart shareholders entitled to receive the Cash Consideration
to currency movements over that period.
The Scheme is subject to a number of conditions including:
-- Approval being obtained from the Financial Conduct Authority
to the extent necessary under the Financial Services and Markets
Act 2000.
-- ThinkSmart Non-Associated Securityholders approving the
Scheme by the requisite majorities at the Scheme Meeting (requiring
approval of a simple majority in number of the ThinkSmart
Non-Associated Securityholders voting and approval of the
ThinkSmart Non-Associated Securityholders who represent at least
75% of the total votes cast at the Scheme Meeting).
-- Court approval in relation to the Scheme.
-- No prescribed occurrences or regulated events (each as
defined in the Scheme Implementation Deed) occurring in relation to
ThinkSmart.
The Scheme Implementation Deed also includes certain exclusivity
arrangements in respect of ThinkSmart, which are subject to
customary fiduciary exceptions.
1.1 Tax consequences
Once the Scheme is implemented, Block Shares will be sold by
ThinkSmart at the direction of Bidco after the Scheme
Implementation Date when ThinkSmart is a wholly-owned subsidiary of
Bidco. The income tax implications of the sale of Block Shares will
not affect the Cash Consideration and will be for the account of
ThinkSmart and Bidco.
ThinkSmart shareholders entitled to receive the Cash
Consideration will be required to consider the income tax
implications, including capital gains tax implications, in respect
of receiving the Cash Consideration, with the Cash Consideration
taken into account in determining the sale proceeds for tax
purposes.
2 Purpose and scope of the report
2.1 Purpose
Schemes under section 411 of the Corporations Act
Schemes under section 411 of the Corporations Act 2001 regulates
scheme of arrangements between companies and their members. Part 3
of Schedule 8 of the Corporations Regulations 2001 (Cth)
("Corporations Regulations") prescribes information to be sent to
Securityholders and creditors in relation to members' and
creditors' scheme of arrangement pursuant to Section 411 of the
Corporations Act.
Part 3 of Schedule 8 of the Corporations Regulations requires an
independent expert's report in relation to a scheme to be prepared
when a party to that scheme has a shareholding greater than 30% in
the company subject to the scheme, or where any of its directors
are also directors of the company subject to the scheme. In those
circumstances, the independent expert's report must state whether a
scheme of arrangement is in the best interests of Securityholders
and state reasons for that opinion. Even where there is no
requirement for an independent expert's report, documentation for a
scheme of arrangement typically includes an independent expert's
report.
2.2 Basis of assessment
In forming our opinion, Grant Thornton Corporate Finance has had
regard to relevant Regulatory Guides issued by the ASIC, including
RG 111, Regulatory Guide 60 Scheme of Arrangement ("RG60") and RG
112. The IER will also include other information and disclosures as
required by ASIC. We note that neither the Corporations Act nor the
Corporations Regulations define the term "in the best interests of
members".
RG 111 establishes certain guidelines in respect of independent
expert's reports prepared for the purposes of the Corporations Act.
RG111 is framed largely in relation to reports prepared pursuant to
Section 640 of the Corporations Act and comments on the meaning of
"fair and reasonable" in the context of a takeover offer. Pursuant
to RG111, an offer is "fair" if the value of the offer price or
consideration is equal to or greater than the value of the
securities that are subject of the offer. A comparison must be made
assuming 100% ownership of the target company. RG111 considers an
offer to be "reasonable" if it is fair. An offer may also be
reasonable if, despite not being "fair" but after considering other
significant factors, Securityholders should accept the offer in the
absence of any higher bid before the close of the offer.
RG111 also requires an independent expert report prepared for a
change of control transaction implemented by way of a scheme to
undertake substantially the same analysis as for a takeover bid
(i.e. fair and reasonable analysis). Whilst the analysis is
substantially the same, the opinion of the expert should be whether
or not the proposed scheme is "in the best interests of the members
of the company". If an expert were to conclude that a scheme was
"fair and reasonable" if it was in the form of a takeover bid, it
will also conclude that the proposed scheme is "in the best
interests of the members of the company".
In our opinion, the most appropriate way to evaluate the
fairness of the Scheme is to compare the fair market value of
ThinkSmart on a control basis with the Cash Consideration being the
net proceeds on the disposal of Block Shares which we estimate to
be between A$ 54.0 million and A$ 55.2 million assuming a 5 and
10-day VWAP as of 14(th) October 2022. In considering whether the
Scheme is reasonable for Securityholders, we have considered a
number of factors, including:
-- Whether the Scheme is fair.
-- The implications to Securityholders if the Scheme is not approved.
-- Other likely advantages and disadvantages associated with the Scheme.
-- Other costs and risks associated with the Scheme that could
potentially affect Securityholders.
2.3 Independence
Prior to accepting this engagement, Grant Thornton Corporate
Finance (a 100% subsidiary of Grant Thornton Australia Limited)
considered its independence with respect to the proposed Scheme
("Proposed Scheme") with reference to the ASIC Regulatory Guide 112
"Independence of Expert's Reports".
Grant Thornton Corporate Finance has no involvement with, or
interest in, the outcome of the Scheme other than that of an
independent expert. Grant Thornton Corporate Finance is entitled to
receive a fee based on commercial rates and including reimbursement
of out-of-pocket expenses for the preparation of this report.
Except for these fees, Grant Thornton Corporate Finance will not
be entitled to any other pecuniary or other benefit, whether direct
or indirect, in connection with the issuing of this report. The
payment of this fee is in no way contingent upon the success or
failure of the Proposed Scheme.
2.4 Consent and other matters
Our report is to be read in conjunction with the Scheme Booklet
dated on or around the 18(th) October 2022 in which this report is
included, and is prepared for the exclusive purpose of assisting
the Non-Associated Securityholders in their consideration of the
Scheme. This report should not be used for any other purpose. Grant
Thornton Corporate Finance consents to the issue of this report in
its form and context and consents to its inclusion in the Scheme
Booklet.
This report constitutes general financial product advice only
and in undertaking our assessment, we have considered the likely
impact of the Scheme to the Non-Associated Securityholders as a
whole. We have not considered the potential impact of the Scheme on
individual Non-Associated Security holders. Individual security
holders have different financial circumstances and it is neither
practicable nor possible to consider the implications of the Scheme
on individual Securityholders.
The decision of whether or not to approve the Scheme is a matter
for each Non-Associated Securityholder based on their own views of
the value of ThinkSmart and expectations about future market
conditions, ThinkSmart's performance, risk profile and investment
strategy. If the Non-Associated Security holders are in doubt about
the action they should take in relation to the Proposed Scheme,
they should seek their own professional advice.
3 Industry Overview
Since all of ThinkSmart's assessed value is made up of Block,
our industry overview focuses on sector to which the company is
exposed; the global payments market.
Block is a fintech company that enables sellers to accept card
payments and provides reporting and analytics, and next-day
settlement. The company also provides a Cash App, which enables
consumers to transfer, spend and store money. Effective 31 January
2022, Block acquired Afterpay, an Australian listed BNPL player
that allows retailers to offer customers the ability to buy goods
and services online and in-store on a Buy-Now, Pay Later basis.
Shifting Global Payments Methods
Global payment preferences whether at the point-on-sale (POS) or
online, are shifting away from cash and credit cards towards
alternative payment systems such digital wallets and BNPL.
Alternative payment methods (to cash and cards) comprised c.63% of
2021 e-commerce transaction value and c. 35% of 2021 POS spend. In
the following chart, we present global e-commerce payment methods
in 2021 and expected methods in 2025.
-- Global e-commerce payment methods
Source: Worldpay, the Global Payments report 2022
In the next chart, we present global POS payment methods in 2021
and expected in 2025.
-- Global POS payment methods
Source: Worldpay, the Global Payments report 2022
Mobile wallet usage is increasing across markets. In 2021, it
increased 21% year-on-year ("yoy") to 28.6% of global POS
transactions, equivalent to over US$13.3 trillion. Some of the
world's largest technology companies have entered this market and
popular mobile wallets include Google Pay, Apple Pay and Block's
CashApp.
BNPL is also growing globally, accounting for 2.9% of global
e-commerce transaction values in 2021 and c.1% of POS transactions
globally. In the US, one of the fastest growing BNPL markets, BNPL
is expected to account for 9% of the payments market by 2025,
equivalent to US$180 billion. BNPL is led globally by Klarna,
Afterpay (acquired by Block), PayPal and smaller competitors such
as Zip, Sezzle and Affirm. Furthermore, some of the traditional
financial services and technology companies are also offering
products on a BNPL basis.
Recent Challenges in BNPL
Although the BNPL sector is growing globally, competition has
also intensified from existing BNPL players diversifying
geographically and global technology and financial services
companies like Paypal, Mastercard and Apple offering similar
instalment-type products. This, at a time when the sector has not
yet achieved the scale to break-even. For example, Klarna, Europe's
largest BNPL provider reported 1H FY22 results on 31(st) August
2022 with losses increasing to SEK6.2 billion (US$577 million) from
SEK1.4billion ($130million) in the previously comparable period.
([20]) This was due to rapid international expansion, higher credit
losses and increasing staff costs. Klarna has recently reduced its
global headcount by 10%. ([21])
Furthermore, the deterioration in macro-economic conditions in
major markets like the US, UK, Europe and Australia has raised the
risk of a slowdown in consumer spending and rising bad debts,
extending the pathway to profitability for the BNPL sector. Since
March 2022, the United States Federal Reserve has raised interest
rates from 0.25% to 2.5% and has signalled the potential for
further increases in an attempt to slowdown inflation to its target
2%. In July 2022, US CPI rose by a slower than expected 8.5%
compared with 9.1% in the previous month.
Share prices of global fintech companies and BNPL in particular,
have underperformed major indexes. In the following chart, we
present the performance of Block and Block's peers, indexed to one
on 1 February 2022, the date on which ThinkSmart received the
shares.
-- Block and its peers indexed to 1 on the 1(st) February 2022
Source: S&P Globa
Since the 1(st) February 2022, Block's share price has declined
60%. Over the same period, competitors Paypal and Shopify declined
54% and 74% respectively while BNPL players Sezzle and Affirm
declined 81% and 74% respectively. Although markets over this
period were weak, for example, the Nasdaq Composite Index and
S&P500 declined by 28% and 21% respectively, Block and its
peers underperformed.
Regulatory oversight of BNPL
Presently there is significant debate around whether or not the
BNPL sector should be regulated in a similar way to banks and other
financial institutions. Regulators across the globe have been
showing a growing interest in the BNPL industry and there has been
increased scrutiny of industry participants' compliance with
regulatory requirements. Consequently, there is a risk that new or
modified laws, regulations or regulatory guidance will be
introduced which may adversely affect industry profitability and
take-up of BNPL.
4 Profile of ThinkSmart
ThinkSmart's business is made up of an investment in NYSE listed
Block, a consumer leasing business which has been in wind-down
since February 2021, and a call centre which provides support to
Clearpay in the UK. It's listed investment is by far its largest
asset. As at June 2022, ThinkSmart's Total and Net Assets were
GBP38.3 million (A$67.6 million) and GBP37.0 million (A$65.1
million) respectively of which its investment in Block was valued
at GBP31.3 million (A$55.7 million) at that date.
4.1 Investment in Block
Between 2017 and 2018, ThinkSmart developed and launched
Clearpay, one of the first BNPL operators in the UK. Clearpay
provided a POS credit software solution allowing customers to
purchase products for up to GBP450 and spread the cost over three
instalments.
On 23 August 2018, ThinkSmart sold 90% of Clearpay to Afterpay,
in exchange for 1,000,000 Afterpay Shares, equivalent to
GBP10,570,000 or (A$18,550,000 using an Afterpay share price of
A$18.55 at the time and a GBPAUD exchange rate of 0.57). These
shares were sold within two years. ThinkSmart's remaining 10%
shareholding in Clearpay contained a call option for Afterpay to
buy the remaining shareholding in Clearpay, under various
conditions, including a change in control. Although this option was
exercisable following Square's (later renamed Block) takeover of
Afterpay first announced in November 2021, a separate agreement was
entered into between ThinkSmart and Afterpay for the remaining 10%
of Clearpay. As a result of this agreement, ThinkSmart received
1.65 million shares in Afterpay, which were subsequently exchanged
for 618,750 shares in Block, following the completion of the
Afterpay takeover by Block, on 1 February 2022.
Since ThinkSmart received its Block Shares, its shares have
consistently traded at a discount to the market value of its Block
shareholding. In the following chart, we present the market value
of ThinkSmart's shares in Block, compared with ThinkSmart's market
capitalisation.
-- Market value of ThinkSmart's investment Block vs ThinkSmart market capitalisation ([22])
Source: S&P Global
Between 1 February 2022 and 29 July 2022, the date the Scheme
was announced, ThinkSmart's market value has been GBP14.6 million
lower, on average, compared to the market value of its Block
shares. This is equivalent to a 31% average discount. The minimum
discount over this period was 11% on the 16(th) June 2022 and the
maximum discount was 48% on the 25(th) February 2022. Following the
announcement of the Scheme, the discount narrowed to an average
13%. In the following chart, we present the discount of
ThinkSmart's market value to the market value of its shares in
Block from the 1(st) of February 2022 to the 28(th) July 2022, the
date preceding the Scheme announcement.
-- ThinkSmart's discounted market value to its investment in Block
Source: S&P Global
Unlocking this discount is the primary rationale for the Scheme.
We note, the discount has narrowed since the announcement of the
Scheme.
4.2 Remaining operations
ThinkSmart's operations comprise a legacy electronics equipment
leasing business and a provision of an outsourced call centre to
Clearpay (now part of Block). ThinkSmart will continue to service
its existing customers, collect lease receivables, inertia and
insurance revenue on its leases.
In FY22, ThinkSmart generated revenue of GBP 3.5 million. In the
following chart, we present a breakdown of FY22 revenue per
division.
-- Breakdown of FY22 revenue
Source: ThinkSmart
4.2.1 Call Centre
ThinkSmart provides a customer support call centre service to
Clearpay, now owned by Block. It has been operational since
mid-FY19. The call centre, located in the United Kingdom employs
c.20 people and generates revenue based on a cost plus model. The
contract can be terminated by either ThinkSmart or Block with three
months-notice.
Theoretically, this operation may continue and even grow as
Clearpay gains traction in the UK, however, Clearpay makes use of
other outsourced call centres therefore there is no guarantee that
greater resources will be allocated to the ThinkSmart operated call
centre. Furthermore, ThinkSmart's call centre revenues declined in
FY22 by 2.3% to GBP843,000, notwithstanding Clearpay's ongoing
growth over the same period. From a ThinkSmart perspective, the
call centre may not be viable on a stand-alone basis as it does not
have the scale to cover support services and corporate costs such
as finance and IT.
4.2.2 Leasing Business
Primary leasing legacy business
In 2018, ThinkSmart entered into an exclusive 3-year agreement
with Carphone Warehouse, its sole retail partner, allowing
consumers to lease electronic equipment over a period of up to four
years. However, over the term of the agreement, the volume and
value of new leases written per year declined due to a lack of
marketing from Carphone Warehouse. In November 2019, ThinkSmart
began legal proceedings against Carphone Warehouse due to this lack
of marketing which resulted in a further slowdown in ThinkSmart's
leasing volumes and commissions. This culminated in a settlement
agreement of GBP1.45 million and ThinkSmart ceasing to write leases
to new customers as of February 2021. Although the business is in
wind-up mode, ThinkSmart continues to service the existing customer
base. In the following chart, we present the volume of new leases
written per year from FY18.
-- Value of new business (UKGBP) Number of new contracts
Source: ThinkSmart
In FY18, the value and volume of new leases written by
ThinkSmart was GBP13.3 million and 17,800 (new customers) at
contract value of GBP750 per contract. In FY22, no new lease
contracts were written.
Up until January 2022, lease funding was provided by third party
funders. ThinkSmart took a commission for brokering the lease and
was required to repurchase leases that were 91 days or more in
arrears. In January 2022, ThinkSmart acquired the leasing
receivables book from its remaining funder, Secure Trust Bank
("STB") as it was already taking on the credit risk. As at June
2022, the net receivables book was valued at GBP912,000 which
included a provision for bad debts of GBP124,000. The receivables
book has an average outstanding term of 7 months and a maximum term
outstanding of 28 months. Prior to the 31 January 2022, lease
receivables under management were recognised on the Balance Sheet
as Deposits Held with Funders and Contract Assets. As at 30 June
2021, these were GBP2.6 million.
Secondary rentals/extended rental period
Once the minimum term contract between the funder (ThinkSmart
since January 2022) and the end customer expires, the asset becomes
the property of ThinkSmart and any extended rental income is
payable to the Company and recognised when rent is received.
Approximately 50% of customers continue renting the equipment,
while the remainder terminate the contract and either return or buy
the equipment. This rental stream will continue until customers
cancel the rental or debit order or five years after the end of the
primary leasing activities. In a small number of cases, customers
have instituted indemnity claims. This arises under the UK's Direct
Debit Guarantee Scheme which protects consumers with direct debits
in the event of an error in debit order based on an incorrect
information, dates or amounts. Although banks should only allow the
claim where an error has been made, in ThinkSmart's experience,
banks have refunded all claims leaving ThinkSmart with the
responsibility to reclaim the funds that were refunded in error.
This risk has escalated with rising inflation and interest rates in
the UK and has not been captured in our valuation assessment of
ThinkSmart.
Inertia income
At the end of the extended rental period any proceeds on
disposal of the asset are recognised at the point of disposal. In
FY22, this accounted for 11% of total revenue or GBP396,000.
4.2.3 Ancillary Services
Insurance on electronic equipment
Lease customers are required to have insurance in respect of
their leased equipment. If these customers did not make independent
insurance arrangements, ThinkSmart arranged insurance and collected
the premiums on their behalf, receiving a commission from the
insurer for doing so. The insurance runs for the term of the
primary lease agreement, hence, is expected to end within two years
as the remaining lease book winds-down.
4.2.4 Intellectual Property
ThinkSmart's equipment lease offering has been enabled by its
proprietary SmartCheck technology, a digital payment platform and
credit decision making tool used both at the point of sale and
through the lease payment cycle. The credit underwriting technology
uses a combination of credit scoring and credit bureau reports as
well as electronic identity verification and a review of an
applicant's details against a fraud database.
The software was also used to develop Clearpay, however,
following the sale of Clearpay to Afterpay, ThinkSmart as well as
its directors were required to sign non-compete restrictions with
Afterpay preventing them from providing interest free loans or
deferred payment terms to consumers at the point of sale from
retailers, either online or instore and repayable over a period of
less than 12 months. These restrictions remain in place for a
period of two years after the sale of Clearpay, or January 2024 and
apply anywhere in the world.
4.3 Financial information
4.3.1 Financial performance
The table below illustrates ThinkSmart's audited consolidated
statements of comprehensive income from FY19 to FY22.
Sources: Company Reports
With regard to financial performance, we note the following:
-- Between FY19 and FY22, revenue declined by 20% to GBP3.5
million as the business winds down. Other than Outsourced Services,
whose business is dependent on growth in Clearpay, revenue from all
divisions has declined since FY19.
-- Finance lease income increased by 234% in FY22 due to the
acquisition of the finance lease book from STB in February 2022.
Prior to this, ThinkSmart earned Commission Income on the value of
the book as STB was the lessor. As of 2HFY22, ThinkSmart will no
longer earned Commission Income.
-- In FY19, gains on financial instruments represents realised
gains from the sale of 875,000 Afterpay Shares between 24 August
2018 and July 2019, as well as unrealised gains on the remaining
125,000 Afterpay Shares still held. In FY20, gains on financial
instruments arose from realised gains on the sale of the remaining
125,000 as well as unrealised gains on its remaining 10% in
Clearpay. In FY22, unrealised losses arose from ThinkSmart's 10% in
Clearpay. On 14 January 2022, the Group exchanged its 10% holding
in Clearpay for 1,650,000 shares in Afterpay which were
subsequently exchanged for 618,750 shares in Block on 1 February
2022 as a result of the acquisition of Afterpay by Block.
4.3.2 Financial position
In the table below is the consolidated statement of financial
position of ThinkSmart for FY19, FY20, FY21 and FY22.
Sources: Company reports
With regard to the financial position, we note the
following:
-- ThinkSmart's cash balance at the end of June 2022 was GBP5.5
million. Following a GBP2.5 million (A$4.4 million) capital return
and dividend payment on 15 July 2022, its cash balance has reduced
to approximately GBP3 million.
-- Finance lease receivables increased in FY22 following the
acquisition of the finance lease book from STB.
-- Other current assets relate mainly to prepayments and accrued income.
4.3.3 Cashflow Statement
In the table below is the consolidated cash flow statement of
ThinkSmart for FY19, FY20, FY21 and FY22.
Sources: Company reports
With respect to its cash flows, we note the following:
-- Between FY19 and FY22, ThinkSmart returned GBP14.6 million to
shareholders either as a dividend of return of capital.
-- In FY19 and FY20, interest received and payments from other
liabilities relates to the bank loans from STB and Santander Bank
to finance various mobile phone leases that were repaid.
-- On 31 January 2022 the Group purchased the portfolio of
leases held by STB for GBP1.2m. The GBP630,000 reflects the
purchase price of the book offset to some extent by rentals
associated with the book to the 30 June 2022. This transaction
resulted in STB releasing the GBP2 million credit support balance
held in relation to the finance book, reflected in "Payments
received from security guarantees" in FY22.
4.4 Capital Structure
At the date of this report, ThinkSmart had the following
securities on issue:
-- 106,587,814 ordinary shares, and
-- 1,679,532 in-the-money options expiring 21 December 2026 with
an exercise price of GBP0.1308
4.4.1 Share price movements
Our analysis of the daily movements in ThinkSmart's share price
and volume for the period from 27 July2020 to 14(th) October 2022
is set out below.
-- ThinkSmart - historical share trading price and volume
Source: S&P Global
The following table illustrates the key events from July 2020 to
August 2022, which may have impacted the share price and volume
movements shown above.
-- The monthly share price performance of ThinkSmart from July
2021 to September 2022 and the weekly share price performance of
ThinkSmart over the last 16 weeks is summarised below.
4.4.2 Securityholders
We have set out below the top 10 relevant Securityholders of
ThinkSmart as at 30 June 2022.
-- In most cases, individual shareholdings are held in nominee accounts.
-- In total, directors Ned Montarello (and his associated
entities) and Peter Gammell (and his associated entities) currently
own 29.4% and 11.8% respectively and London&Capital Asset
Management owns 3.1%.
5 Valuation methodologies
5.1 Introduction
As part of assessing whether or not the Scheme is fair to the
Non-Associated Security holders, Grant Thornton Corporate Finance
has assessed the fair market value of ThinkSmart between A$61.8
million and A$66.0 million on a 100% and fully diluted basis or
A$0.57 and A$0.61 per share. This is equivalent to GBP 36.4 million
and GBP 38.9 million or GBP 0.34 and GBP 0.36 per share.
In each case, Grant Thornton Corporate Finance has assessed
value using the concept of fair market value. Fair market value is
commonly defined as:
"the price that would be negotiated in an open and unrestricted
market between a knowledgeable, willing but not anxious buyer and a
knowledgeable, willing but not anxious seller acting at arm's
length."
Fair market value excludes any special value. Special value is
the value that may accrue to a particular purchaser. In a
competitive bidding situation, potential purchasers may be prepared
to pay part, or all, of the special value that they expect to
realise from the acquisition to the seller.
We note, RG111 requires the fairness assessment to be made
assuming 100% ownership of the target company and irrespective of
whether the consideration offered is scrip or cash and without
consideration of the percentage holding of the offeror or its
associates in the target company.
5.2 Valuation methodologies
RG 111 outlines the appropriate methodologies that a valuer
should generally consider when valuing assets or securities for the
purposes of, amongst other things, approval of an issue of shares
using item 7 of s611 of the Corporations Act, share buy-backs,
selective capital reductions, scheme of arrangements, takeovers and
prospectuses. These include:
-- Discounted cash flow ("DCF") method and the estimated
realisable value of any surplus assets.
-- Application of earnings multiples to the estimated future
maintainable earnings or cash flows of the entity, added to the
estimated realisable value of any surplus assets.
-- Amount available for distribution to security holders on an
orderly realisation of assets (NAV method).
-- Quoted price for listed securities, when there is a liquid and active market.
-- Any recent genuine offers received by the target for any
business units or assets as a basis for valuation of those business
units or assets.
Further details on these methodologies are set out in Appendix A
to this report. Each of these methodologies is appropriate in
certain circumstances.
RG111 does not prescribe the above methodologies as the
method(s) that an expert should use in preparing their report. The
decision as to which methodology to use lies with the expert based
on the expert's skill and judgement and after considering the
unique circumstances of the entity or asset being valued. In
general, an expert would have regard to valuation theory, the
accepted and most common market practice in valuing the entity or
asset in question and the availability of relevant information.
5.3 Selected valuation methods
5.3.1 Valuation of ThinkSmart
We have adopted the Net Realisable Value ("NRV Method") to value
100% of the issued capital in ThinkSmart for the purpose of this
report. We have assumed it would take two years to complete the
orderly realisation. When applying this approach, the resulting
value represents 100% of the value of the ThinkSmart and includes a
premium for control as required by RG 111. In our valuation
assessment, we have included an allowance for the liquidation costs
which includes correspondence with tax authorities, the
distribution of any remaining assets to the shareholders and steps
to deregister the Company.
Various components of the company have been valued using
different methodologies:
-- Quoted Security Price Method: The current or recent listed
market prices of Block provides an accurate representation of the
current fair value of ThinkSmart's investment holdings.
Consequently, the assessment of net realisable assets is generally
considered the most appropriate method for the valuation of
companies of this type.
-- DCF: Due to a reasonable degree of predictability in the
ThinkSmart's remaining cash flow streams, we have relied on a DCF
to value ThinkSmart's remaining cash flow streams.
For the purpose of this report, we have based our valuation on
the FY22 financial results, which is also the most recent financial
position of ThinkSmart made available to us. Grant Thornton has
also relied on a board approved budget for FY23 and forecasts for
FY24 to value the remaining legacy operations.
5.3.2 Valuation of the Cash Consideration
Grant Thornton has also considered the value of the Cash
Consideration, dependent on the sales price of Block using the
Quoted Security Price Method, in which we compare the Cash
Consideration payable to the fair market value of ThinkSmart
derived using the NRV method.
6 Valuation assessment of ThinkSmart
As discussed in Section 5.3.1, we have used the NRV method to
value ThinkSmart.
6.1 NRV Method
When applying this approach, we have included an allowance for
liquidation costs associated with the orderly realisation of
ThinkSmart. T he following table sets out the valuation assessment
of ThinkSmart based on the NRV method.
Source: GTCF, S&P Global
6.1.1 Market value of ThinkSmart's investment in Block
Block is listed on the NYSE, but before relying on the trading
price in accordance with the requirements of RG 111, we have
considered the listed securities' depth, liquidity, and whether or
not the market value is likely to represent the underlying value of
Block Shares.
Liquidity analysis
In accordance with the requirements of RG111, we have analysed
the liquidity of Block Shares by considering the trading volume
from March 2021 to September 2022 as a percentage of the total
shares outstanding as well as free float shares outstanding, as
outlined in the table below:
With regard to the above analysis, we note that:
The level of free float in Block is c. 88.8%. From March 2021 to
August 2022, c. 66.4% of the free float shares were traded on
average per month.
The number of Block Shares owned by ThinkSmart represents 0.2%
of average monthly volumes traded and 6.7% of average daily volumes
traded. This suggests there are sufficient volumes traded to sell
the shares within three trading days.
In the absence of a takeover or alternative transactions, the
trading prices represent the value at which Block Shares can be
sold.
Block provides updates to the market on a regular monthly basis
with information regarding the investment strategy and its
performance. It is also well covering by stock broking analysts. As
a result, the stock price reflects all available information.
Where a company's stock is not heavily traded or is relatively
illiquid, the market typically observes a difference between the
'bid' and 'ask' price for the stock as there may be a difference in
opinion between the buyer and seller on the value of the stock. The
graph below shows the bid ask spread for Block.
Block - Bid/Ask Spread Source: S&P Global and GTCF
analysis.
As shown in the graph above, the historical difference between
the bid and ask price has been consistently low, with an average of
0.024% over the past 12 months.
Based on the analysis above, we conclude that there is
sufficient liquidity in Block Shares to use the trading price as
best representation of value.
Valuation assessment of Block based on trading price
-- Due to the volatility in Block Shares, ThinkSmart's
investment in Block has been valued using a range of prices based
on a 5 and 10-day VWAP ending 14(th) October 2022 of US$54.97 and
US$56.82 respectively. Transaction costs of 0.5% have been deducted
from the realisable value reflecting ThinkSmart's strategy to
dispose of its investment. The resulting value is converted into
Pounds Sterling and Australian Dollars at the 5 and 10-day average
exchange rates of US$/UKGBP 0.8967 and US$/A$ 1.577.
In the following chart, we present the share price of Block
since 1 February 2022.
Block share price (US$) (1(st) February 2022 to 14(th) October
2022)
Source: S&P Global
We note the following about Block Shares since 1 February
2022:
-- Block's share price has ranged from a high of US$ 149.00 to a
low of US$51.45. It's share price over the period has declined by
60%.
-- The Nasdaq over the same period has declined 28%.
Set out below is a summary of Block's VWAP at various intervals
over the past nine months.
Sources: S&P Global and GTCF analysis.
We note the following:
-- Block's VWAP has trended lower over the past nine months.
Weakness in the technology sector is broad based and the technology
heavy Nasdaq Composite is down 28% YTD.
-- Block's share price has had a wide range over the past nine
months, with a high of US$ 149 and a low of US$ 51.45 highlighting
the volatility in the price.
Grant Thornton believes it appropriate to use the recent VWAP to
assess the Cash Consideration due to the proximity to the
Implementation Date, making it the best estimate for the sales
price of Block Shares. However, given the volatility in Block
Shares, Grant Thornton has selected a range based on the 5 and
10-day VWAP of US$ 14(th) October 2022 of US$54.97 and US$ 56.82
respectively .
In the following table, we present the market value of
ThinkSmart's investment in Block.
Source: ThinkSmart, GTCF
6.1.2 Value of legacy business
As ThinkSmart's legacy business winds down, it will continue to
generate primary rentals from its finance leases, insurance
brokerage fees, secondary rentals generated after the primary lease
term ends (if contracts are not cancelled), and income from a call
centre that supports Clearpay. It will also incur operating costs,
and headcount and property lease redundancies associated with
winding down the business.
Grant Thornton has generated a discounted cashflow using a board
approved budget in FY23 and management forecasts in FY24. In
determining a valuation range for the legacy business, Grant
Thornton has performed a low scenario where secondary rentals are
lower than expected. Furthermore, the ThinkSmart budget upon which
our discounted cash flow is based, assumed an FY23 and FY24 UK
inflation rate of 5% and 3% respectively which appears low compared
to the latest reported data. Accordingly, in our low case scenario,
we have assumed an uplift in operating costs by 3% including wages,
headcount and IT and storage costs in both FY23 and FY24.
ThinkSmart plans to continue winding down its legacy operations
while remaining listed. For the purposes of our valuation, and in
accordance with ASIC RG111, Grant Thornton has considered the
valuation on a 100% basis and therefore removed the listing
costs.
-- Legacy leasing business - This comprises the primary and
secondary leasing business. The largest contributor to revenue in
FY23 and FY24 is secondary rentals which contribute c.36% and 78%
respectively. Although customers can continue renting their IT
equipment at the end of the finance lease for a period of up to
five years, they have the right to cancel their rental at any time.
Secondary rentals may theoretically continue beyond June 2024,
however, they can only continue for a maximum of five years after
the finance lease has ended. Furthermore, the business is not
viable on a stand-alone basis beyond FY23 as it lacks the scale to
cover corporate costs.
The finance lease book associated with primary leases, with a
book value of GBP912,000 as at end of June 2022, is expected to
wind down by June 2024. Income will be generated through primary
rentals and asset sale income.
-- Call Centre Business - The ThinkSmart budget assumes the call
centre which provides support to Clearpay will continue until June
2023. Theoretically the call centre may not terminate at end of
FY23 however it is unlikely to continue in perpetuity, as the
contract can be terminated within three months by either party.
Furthermore, it is not viable on a stand-alone basis as it lacks
the scale to cover corporate costs.
-- Costs - The largest cash costs are corporate overheads, a
large portion of which is IT costs related to storing customer
data, which is required for five years after the finance lease has
ended. Included in corporate costs are transaction costs of c.
GBP750,000 incurred to execute the Scheme, irrespective of whether
it is approved or not. It also includes operational headcount.
-- Working capital - This mostly represents trade payables which
will be repaid over the two-year period.
-- Discount rate - The cash flows discussed above are discounted
at a WACC of 15% which is discussed in greater detail in Appendix
B.
In the following table, we present the results of our discounted
cashflow.
6.1.3 Value of the Proprietary Software
ThinkSmart uses proprietary software, SmartCheck to operate its
leasing business. This software was also used to develop Clearpay,
although Afterpay replaced SmartCheck with its own software within
a year of acquiring Clearpay. Grant Thornton has considered the
value of the IP which does not form part of the Cash
Consideration.
ThinkSmart began developing SmartCheck in 2016 and between FY17
and FY22, incurred costs of GBP1.76 million. In the table below, we
present annual and cumulative software and systems development
costs incurred by ThinkSmart to develop SmartCheck.
Source: GTCF
-- We note the following with respect to the SmartCheck:
-- There have been limited upgrades in the software over the
past two years with 6% of total development costs incurred in FY21
and no investment in FY22. Approximately 87% of development costs
were incurred between FY17 and FY19, suggesting the core technology
is at least three years old. Hence, a potential purchaser, if any,
is likely to incur significant costs upgrading the technology.
-- The book value of the technology at the 30 June 2022 was
UKGBP 95,000; almost fully amortized.
-- Over the past six years, ThinkSmart has attempted to sell the
platform. Although there was one serious suitor, the transaction
did not proceed due to concerns that regulation of BNPL would
become more rigorous and negatively impact profitability and
take-up of the product.
-- Market values of technology stocks and BNPL in particular
have worsened over the past 12-months due to the following
non-exhaustive reasons:
- Deteriorating macro-economic conditions characterised by
higher inflation and rising interest rates. In the US and the UK
for example, the annual inflation rate in July 2022 increased by
8.5% and 8.8% (CPI including housing costs) respectively fueled by
the outbreak of war in Ukraine and a tight labour market. In the
US, the Fed Funds rate has risen from 0.25% to 2.5% within six
months while in the UK 0.25% to 1.75% within a year. In addition to
pressure on household disposable income and spending as a result of
higher interest rates, they have also negatively impacted equity
valuations due to the opportunity cost of holding them.
- Some technology companies, like online retailers and streaming
services, that benefited from the Covid-19 lock-downs are
experiencing slow-downs as people return to work and travel. For
example, stocks like Netflix and Amazon have declined c. 68% and
44% from their respective 2021 highs.
- Competitive BNPL environment characterised by numerous smaller
players many of which remain unprofitable. Furthermore, there has
also been a trend for BNPL players to cease geographic expansions
and focus on domestic markets to improve profitability. For
example, Openpay shut down its US and UK operations in calendar
year 2022 to focus on profitability in Australia. And ZIP cancelled
its plans to acquire Sezzle in May 2022 which would have given it a
footprint in the US market. In the following table we highlight the
profitability of key players in the sector over the last 12
months.
Source: S&P Global
Based on the above analysis, we are of the opinion that the
software has nil value to a pool of potential purchasers.
6.1.4 Net cash
In the following table, we present a breakdown of ThinkSmart's
net cash position.
Source:GTCF
ThinkSmart's net cash balance includes the following:
Note 1 - This relates to lease liabilities on the balance sheet
as at 30 June 2022.
Note 2 - Reflects cash on the balance sheet as at 30 June
2022.
Note 3 - On the 19(th) July 2022, ThinkSmart returned cash to
shareholders in the form of a special dividend and a capital
return. In total, this amounted to GBP2,500,000. Since it was
payable after year-end, it has been deducted from balance sheet
cash as at 30 June 2022.
Note 4 - This reflects cash from ESOP's being exercised.
ThinkSmart has 1,679,532 in-the-money options with an exercise
price of GBP0.1308. Although expiring 21 December 2026, they can be
exercised at any time as they have fully vested.
Note 5 - Grant Thornton has also deducted contingency cash
required to run the business over the next two years as the
business does not generate sufficient cash to cover all its costs,
for any unexpected liabilities such as indemnity claims which have
not been captured in ThinkSmart valuation and in the event actual
income is lower than expected.
7 Valuation assessment of the Cash Consideration
If the Scheme proceeds, ThinkSmart shareholders entitled to
receive the Cash Consideration will sell all of their ThinkSmart
Shares to Bidco and receive the Cash Consideration based on the
proceeds generated from the sale of Block Shares on the NYSE less
transaction costs of 0.5%, converted to the relevant currencies as
soon as practically possible.
Since the Cash Consideration is valued in the same way as the m
arket value of ThinkSmart's investment in Block, please refer to
Section 6.1.1 for liquidity and share price analysis of Block.
In the following chart, we present the Block share price with
the selected price range used to value the Cash Consideration.
Refer to the Executive Summary for further details.
Block trading price and GT selected price range
Source: S&P Global and GTCF analysis.
8 Sources of information, disclaimer and consents
8.1 Sources of information
In preparing this report Grant Thornton Corporate Finance has
used various sources of information, including:
-- ThinkSmart and AIM announcements
-- ThinkSmart's historical financial performance and position
-- Other publicly available information
-- IBISWorld Report
-- S&P Capital IQ
-- Discussions with Management
-- Other materials provided by Management
8.2 Qualifications and independence
Grant Thornton Corporate Finance Pty Ltd holds Australian
Financial Service Licence number 247140 under the Corporations Act
and its authorised representatives are qualified to provide this
report.
Grant Thornton Corporate Finance provides a full range of
corporate finance services and has advised on numerous takeovers,
corporate valuations, acquisitions, and restructures. Prior to
accepting this engagement, Grant Thornton Corporate Finance
considered its independence with respect to ThinkSmart and all
other parties involved in the Proposed Scheme with reference to the
ASIC Regulatory Guide 112 "Independence of expert" and APES 110
"Code of Ethics for Professional Accountants" issued by the
Accounting Professional and Ethical Standard Board. We have
concluded that there are no conflicts of interest with respect to
ThinkSmart and all other parties involved in the Scheme.
Grant Thornton Corporate Finance and its related entities do not
have at the date of this report, and have not had within the
previous two years, any shareholding in or other relationship with
ThinkSmart or its associated entities that could reasonably be
regarded as capable of affecting its ability to provide an unbiased
opinion in relation to the Proposed Scheme.
Grant Thornton Corporate Finance has no involvement with, or
interest in the outcome of the Proposed Scheme, other than the
preparation of this report.
Grant Thornton Corporate Finance will receive a fee based on
commercial rates for the preparation of this report. This fee is
not contingent on the outcome of the Proposed Scheme. Grant
Thornton Corporate Finance's out of pocket expenses in relation to
the preparation of the report will be reimbursed. Grant Thornton
Corporate Finance will receive no other benefit for the preparation
of this report.
8.3 Limitations and reliance on information
This report and opinion is based on economic, market and other
conditions prevailing at the date of this report. Such conditions
can change significantly over relatively short periods of time.
Grant Thornton Corporate Finance has prepared this report on the
basis of financial and other information provided by ThinkSmart and
publicly available information. Grant Thornton Corporate Finance
has considered and relied upon this information. Grant Thornton
Corporate Finance has no reason to believe that any information
supplied was false or that any material information has been
withheld. Grant Thornton Corporate Finance has evaluated the
information provided by ThinkSmart and other experts through
inquiry, analysis and review, and nothing has come to our attention
to indicate the information provided was materially misstated or
would not afford reasonable grounds upon which to base our report.
Nothing in this report should be taken to imply that Grant Thornton
Corporate Finance has audited any information supplied to us, or
has in any way carried out an audit on the books of accounts or
other records of ThinkSmart.
Grant Thornton Corporate Finance, its affiliated companies and
their respective officers and employees, who may be involved in or
in any way associated with the performance of services contemplated
by our engagement letter, disclaim all responsibility for
ThinkSmart's failure to inform us of any changes to any information
and/or material which impacts upon the services we have agreed to
provide. ThinkSmart must take all necessary steps to immediately
correct any announcement, communication or document issued which
contains, refers to, or is based upon such information.
This report has been prepared to assist the Non-Associated
Securityholders in relation to the Scheme. This report should not
be used for any other purpose. In particular, it is not intended
that this report should be used for any purpose other than as an
expression of Grant Thornton Corporate Finance's opinion as to
whether the Scheme is fair and reasonable to the Non-Associated
Securityholders.
8.4 Consents
Grant Thornton Corporate Finance consents to the issuing of this
report in the form and context in which it is included in the
Scheme Booklet to be sent to ThinkSmart Securityholders. Neither
the whole nor part of this report nor any reference thereto may be
included in or with or attached to any other document, resolution,
letter or statement without the prior written consent of Grant
Thornton Corporate Finance as to the form and content in which it
appears.
-- Appendix A - Valuation methodologies
Discounted future cash flows
An analysis of the net present value of forecast cash flows or
DCF is a valuation technique based on the premise that the value of
the business is the present value of its future cash flows. This
technique is particularly suited to a business with a finite life.
In applying this method, the expected level of future cash flows
are discounted by an appropriate discount rate based on the
weighted average cost of capital. The cost of equity capital, being
a component of the WACC, is estimated using the Capital Asset
Pricing Model.
Predicting future cash flows is a complex exercise requiring
assumptions as to the future direction of the company, growth
rates, operating and capital expenditure and numerous other
factors. An application of this method generally requires cash flow
forecasts for a minimum of five years.
Capitalisation of future maintainable earnings
The capitalisation of future maintainable earnings multiplied by
appropriate earnings multiple is a suitable valuation method for
businesses that are expected to trade profitably into the
foreseeable future. Maintainable earnings are the assessed
sustainable profits that can be derived by a company's business and
excludes any abnormal or "one off" profits or losses.
This approach involves a review of the multiples at which shares
in listed companies in the same industry sector trade on the share
market. These multiples give an indication of the price payable by
portfolio investors for the acquisition of a parcel shareholding in
the company.
Orderly realisation of assets
The amount that would be distributed to Securityholders on an
orderly realisation of assets is based on the assumption that a
company is liquidated with the funds realised from the sale of its
assets, after payment of all liabilities, including realisation
costs and taxation charges that arise, being distributed to
Securityholders.
Market value of quoted securities
Market value is the price per issued share as quoted on the ASX
or other recognised securities exchange. The share market price
would, prima facie, constitute the market value of the shares of a
publicly traded company, although such market price usually
reflects the price paid for a minority holding or small parcel of
shares, and does not reflect the market value offering control to
the acquirer.
Comparable market transactions
The comparable transactions method is the value of similar
assets established through comparative transactions to which is
added the realisable value of surplus assets. The comparable
transactions method uses similar or comparative transactions to
establish a value for the current transaction.
Comparable transactions methodology involves applying multiples
extracted from the market transaction price of similar assets to
the equivalent assets and earnings of the company. The risk
attached to this valuation methodology is that in many cases, the
relevant transactions contain features that are unique to that
transaction and it is often difficult to establish sufficient
detail of all the material factors that contributed to the
transaction price.
-- Appendix B - WACC
Introduction
The discount rates were determined using the WACC formula. The
WACC represents the average of the rates of return required by
providers of debt and equity capital to compensate for the time
value of money and the perceived risk or uncertainty of the cash
flows, weighted in proportion to the market value of the debt and
equity capital provided. However, we note that the selection of an
appropriate discount rate is ultimately a matter of professional
judgment.
Under a classical tax system, the nominal WACC is calculated as
follows:
Where:
-- Re = the required rate of return on equity capital;
-- E = the market value of equity capital;
-- D = the market value of debt capital;
-- Rd = the required rate of return on debt capital; and
-- t = the statutory corporate tax rate.
Required rate of return on equity capital
We have used the CAPM, which is commonly used by practitioners,
to calculate the required return on equity capital.
The CAPM assumes that an investor holds a large portfolio
comprising risk-free and risky investments. The total risk of an
investment comprises systematic risk and unsystematic risk.
Systematic risk is the variability in an investment's expected
return that relates to general movements in capital markets (such
as the share market) while unsystematic risk is the variability
that relates to matters that are unsystematic to the investment
being valued.
The CAPM assumes that unsystematic risk can be avoided by
holding investments as part of a large and well-diversified
portfolio and that the investor will only require a rate of return
sufficient to compensate for the additional, non-diversifiable
systematic risk that the investment brings to the portfolio.
Diversification cannot eliminate the systematic risk due to
economy-wide factors that are assumed to affect all securities in a
similar fashion.
Accordingly, whilst investors can eliminate unsystematic risk by
diversifying their portfolio, they will seek to be compensated for
the non-diversifiable systematic risk by way of a risk premium on
the expected return. The extent of this compensation depends on the
extent to which the company's returns are correlated with the
market as a whole. The greater the systematic risk faced by
investors, the larger the required return on capital will be
demanded by investors.
The systematic risk is measured by the investment's beta. The
beta is a measure of the co-variance of the expected returns of the
investment with the expected returns on a hypothetical portfolio
comprising all investments in the market - it is a measure of the
investment's relative risk.
A risk-free investment has a beta of zero and the market
portfolio has a beta of one. The greater the systematic risk of an
investment the higher the beta of the investment.
The CAPM assumes that the return required by an investor in
respect of an investment will be a combination of the risk-free
rate of return and a premium for systematic risk, which is measured
by multiplying the beta of the investment by the return earned on
the market portfolio in excess of the risk-free rate.
Under the CAPM, the required nominal rate of return on equity
(Re) is estimated as follows:
Where:
-- Rf = risk free rate
-- <BETA>e = expected equity beta of the investment
-- (Rm - Rf) = market risk premium
Risk-free rate - 2.5%
In the absence of an official risk-free rate, the yield on
government bonds is commonly used as a proxy. Accordingly, we have
observed the yield on the 5-year UK Government bond over several
intervals from a period of 5 trading days to 10 trading years. We
have selected a short-dated bond to reflect the fact that
ThinkSmart is winding down its legacy business within two to four
years. The following table sets out the average yield on 5-year UK
Government Bond over the last 10 years.
Given the current volatility in the global financial markets,
the impact of Ukraine war on energy prices and inflation, rising
interest rates, expectations of further rate rises as well as
rising government bond yields, we have placed more emphasis on the
average risk free rate observed over the past 5-10 trading days.
Our adopted risk-free rate is 2.5%.
Market risk premium - 6.0%
The market risk premium represents the additional return an
investor expects to receive to compensate for additional risk
associated with investing in equities as opposed to assets on which
a risk-free rate of return is earned. However, given the inherent
high volatility of realised rates of return, especially for
equities, the market risk premium can only be meaningfully
estimated over long periods of time. In this regard, Grant Thornton
studies of the historical risk premium over periods of 20 to 80
years suggest a risk premium between 5.5% and 6.0% for the
Australia markets.
For the purpose of the WACC assessment, Grant Thornton Corporate
Finance has adopted a market risk premium of 6.0%.
Company specific risk premium - 1%
The specific risk premium represents the additional return an
investor expects to receive to compensate for country, size and
project related risk not reflected in the beta of observed
comparable companies. When applying the specific risk premium of
1.0%, we have considered the risk associated with the following
factors:
-- ThinkSmart's legacy business is winding down
We note that the selection of the specific risk premium involves
a certain level of professional judgement and as a result, the
total specific risk premium is not fully quantifiable with
analytical data.
Equity beta - 2.2
The beta measures the expected relative risk of the equity in a
company. The choice of the beta requires judgement and necessarily
involves subjective assessment as it is subject to measurement
issues and a high degree of variation.
An equity beta includes the effect of gearing on equity returns
and reflects the riskiness of returns to equity holders. However,
an asset beta excludes the impact of gearing and reflects the
riskiness of returns on the asset, rather than returns to equity
holders. Asset betas can be compared across asset classes
independent of the impact of the financial structure adopted by the
owners of the business.
Equity betas are typically calculated from historical data.
These are then used as a proxy for the future which assumes that
the relative risk of the past will continue into the future.
Therefore, there is no right equity beta and it is important not to
simply apply historical equity betas when calculating the cost of
equity. For the purpose of the report, we have had regard to the
observed betas (equity betas) of listed companies in comparable
sectors in the US and Australia. We note these stocks have been
volatile.
Source: S&P Global and GTCF calculations
It should be noted that the above betas are drawn from the
actual and observed historical relationship between risk and
returns. From these actual results, the expected relationship is
estimated generally on the basis of extrapolating past results.
Despite the arbitrary nature of the calculations it is important to
assess their commercial reasonableness. That is to assess how
closely the observed relationship is likely to deviate from the
expected relationship.
Consequently, while measured equity betas of the listed
comparable companies provide useful benchmarks against which the
equity beta used in estimating the cost of equity, the selection of
an unsystematic equity beta requires a level of judgement.
The asset betas of the selected companies are calculated by
adjusting the equity betas for the effect of gearing to obtain an
estimate of the business risk of the comparable companies, a
process commonly referred as de-gearing. We have then recalculated
the equity beta based on an assumed 'optimal' capital structure
deemed appropriate for the business (regearing). This is a
subjective exercise, which carries a significant possibility of
estimation error.
We used the following formula to undertake the de-gearing and
regearing exercise:
Where:
-- <BETA>e = Equity beta
-- <BETA>a = Asset beta
-- t = corporate tax rate
The betas are de-geared using the average historical gearing
levels of those respective companies over several years. We note
that most comparable companies had net cash positions. We then
re-geared based on a gearing ratio of 11% debt.
Cost of debt - 5.0% - 6.0%
Grant Thornton Corporate Finance has adopted a cost of debt
between 5.0% and 6.0% on a pre-tax basis, reflecting a credit
spread of between 2.5% and 3.5% above the Risk Free Rate.
Capital Structure
The appropriate level of gearing that is utilised in determining
WACC for a particular company should be the "target" gearing ratio,
rather than the actual level of gearing, which may fluctuate over
the life of a company. The target or optimal gearing level can
therefore be derived based on the trade-off theory which stipulates
that the target level of gearing for a project is one at which the
present value of the tax benefits from the deductibility of
interest are offset by present value of costs of financial
distress. For the purpose of the valuation, Grant Thornton
Corporate Finance has adopted a capital structure based on 85%
equity.
Tax rate - 19%
For the purpose of our WACC assessment we have assumed the UK
corporate tax rate of 19%.
Discount rate summary
In the following table we present our WACC assessment.
The WACC is relatively high, mainly due to the Beta of 2.2. For
the purposes of our valuation, we have used a WACC of 15%.
-- Appendix C - Glossary
Annexure 2
Scheme of Arrangement
Please see the Scheme Booklet on the ThinkSmart website at
www.thinksmartworld.com for the Scheme of Arrangement.
Annexure 3
Deed Poll
Please see the Scheme Booklet on the ThinkSmart website at
www.thinksmartworld.com for the Deed Poll.
Annexure 4
Notice of General Scheme Meeting
ThinkSmart Limited ACN 092 319 698
Notice of General Scheme Meeting (Notice)
Notice is hereby given that, by an order of the Federal Court of
Australia pursuant to section 411(1) of the Corporations Act, a
meeting of shareholders of ThinkSmart Limited (ThinkSmart)
(excluding the Excluded Shareholders) (General Scheme Meeting) will
be held virtually via the Computershare Virtual Meeting Platform on
16 November 2022, commencing at 5.00pm (Perth time).
ThinkSmart will conduct the General Scheme Meeting via the
Computershare Virtual Meeting Platform with ThinkSmart Shareholders
(and their proxies, attorneys or corporate representatives) being
able to cast their vote in real time during the General Scheme
Meeting.
In accordance with section 411(4)(a) of the Corporations Act,
for the Scheme to be effective, the resolution below must be passed
by:
-- at least 75% of the total number of votes cast on the General
Scheme Resolution by ThinkSmart Shareholders (excluding the
Excluded Shareholders); and
-- more than 50% of ThinkSmart Shareholders (excluding the
Excluded Shareholders) present and voting at the General Scheme
Meeting (unless the Court orders otherwise).
The voting will be conducted on a poll.
Purpose of the General Scheme Meeting
The purpose of the General Scheme Meeting is for ThinkSmart
Shareholders (excluding the Excluded Shareholders) to consider and,
if thought fit, to agree to the Scheme.
A copy of the Scheme and a copy of the explanatory statement
required by section 412 of the Corporations Act in relation to the
Scheme are contained in the Scheme Booklet, of which this notice
forms part. Additional information about the General Scheme Meeting
is set out in the explanatory notes that accompany and form part of
this notice. Capitalised terms used but not defined in this Notice
have the defined meanings set out in section 11 of the Scheme
Booklet, unless the context otherwise requires.
General Scheme Resolution
The General Scheme Meeting will be asked to consider and, if
thought fit, pass (with or without amendment) the General Scheme
Resolution as follows:
"That, pursuant to and in accordance with the provisions of
section 411 of the Corporations Act 2001 (Cth), the scheme of
arrangement proposed between ThinkSmart Limited and the holders of
its fully paid ordinary shares, as contained in and more
particularly described in the scheme booklet of which the notice
convening this meeting forms part, is approved, with or without
alterations or conditions as approved by the Federal Court of
Australia to which ThinkSmart Limited and Tuscan Equity Pty Ltd
agree."
General Scheme Meeting format
To participate in the virtual General Scheme Meeting via the
Computershare Virtual Meeting Platform, you can log in by entering
the following URL on your computer, tablet or smartphone:
https://meetnow.global/M7GFCPV.
Online registration will open 30 minutes before the meeting. To
make the registration process quicker, please have your SRN/HIN and
registered postcode or country code ready.
Proxyholders will need to contact Computershare prior to the
General Scheme Meeting to obtain their login details.
To participate in the Meeting online, follow the instructions
below.
(a) Click on 'Join Meeting Now'.
(b) Enter your SRN/HIN. Proxyholders will need to contact
Computershare on +61 3 9415 4024 one hour prior to the Meeting to
obtain their login details.
(c) Enter your postcode registered to your holding if you are an
Australian securityholder. If you are an overseas securityholder
select the country of your registered holding from the drop down
list.
(d) Accept the Terms and Conditions and 'Click Continue'.
ThinkSmart DI Holders may access the General Scheme Meeting via
the Computershare Virtual Meeting Platform but will not be
permitted to vote at the General Scheme Meeting. For their votes to
be counted, ThinkSmart DI Holders must submit their CREST Voting
Instruction to Computershare Investor Services plc by no later than
10.00am (London time) on 11 November 2022. Alternatively,
ThinkSmart DI Holders can vote using the enclosed Form of
Instruction as per the instruction set out below.
Further details on how to participate in the General Scheme
Meeting are set out in the explanatory notes that accompany and
form part of this Notice.
All ThinkSmart Shareholders (other than Excluded Shareholders)
are strongly encouraged to sign and return the Proxy Form to
ThinkSmart prior to the General Scheme Meeting in accordance with
the instructions thereon.
Dated 24 October 2022
By order of the Court and the ThinkSmart Independent Board
Committee
sign
here
----------------------
Company Secretary
print KERIN WILLIAMS
name
----------------------
Explanatory notes
1 General
This Notice and the General Scheme Resolution should be read in
conjunction with the Scheme Booklet of which this Notice forms
part. The Scheme Booklet contains important information to assist
you in determining how to vote on the General Scheme
Resolution.
Unless otherwise defined, terms used in this Notice have the
same meaning as set out in the Glossary in section 11 of the Scheme
Booklet.
2 Chair
The Court has directed that Mr David Adams is to act as Chair of
the General Scheme Meeting and that if they are unable or unwilling
to act, Mr Peter Gammell is to act as Chair of the General Scheme
Meeting.
3 Voting
The ThinkSmart Independent Board Committee recommends that you
vote in favour of the General Scheme Resolution. Each member of the
ThinkSmart Independent Board Committee intends to vote, or cause to
be voted, all ThinkSmart Shares owned or controlled by them in
favour of the General Scheme Resolution.
4 Required Voting Majority
For the proposed Scheme to be binding in accordance with section
411 of the Corporations Act, the General Scheme Resolution must be
passed by:
-- at least 75% of the total number of votes cast on the General
Scheme Resolution by ThinkSmart Shareholders (excluding the
Excluded Shareholders); and
-- more than 50% of ThinkSmart Shareholders (excluding the
Excluded Shareholders) by number present and voting at the General
Scheme Meeting (unless the Court orders otherwise).
5 Court approval
In accordance with section 411(4)(b) of the Corporations Act, to
become effective, the Scheme must be approved by the order of the
Court. If the General Scheme Resolution set out in this Notice is
agreed to by the required majorities set out above and the
conditions set out in the Scheme are satisfied or waived (where
capable of waiver), ThinkSmart will apply to the Court for the
necessary orders to give effect to the Scheme.
In order for the Scheme to become effective, it must be approved
by the Court and an office copy of the orders of the Court
approving the Scheme must be lodged with ASIC.
6 Determination of entitlement to participate and vote
It has been determined that under regulation 7.11.37 of the
Corporations Regulations 2001 (Cth), for the purposes of the
General Scheme Meeting:
-- ThinkSmart Shares will be taken to be held by the persons who
are recorded as the registered holders of those shares in the
ThinkSmart Share Register at 5.30pm (Perth time) on 14 November
2022; and
-- ThinkSmart Depositary Interests will be taken to be held by
the persons who are recorded as the registered holders of those
ThinkSmart Depositary Interests in the ThinkSmart DI Register at
6.00pm (London time) on 11 November 2022.
7 Voting via proxy, attorney or corporate representative
7.1 Proxies
A Proxy Form is attached to the Notice. This is to be used by
ThinkSmart Shareholders (excluding the Excluded Shareholders) if
they wish to appoint a representative (a 'proxy') to vote in their
place. All ThinkSmart Shareholders (excluding the Excluded
Shareholders) are strongly encouraged to sign and return the Proxy
Form to ThinkSmart prior to the General Scheme Meeting in
accordance with the instructions thereon. Lodgement of a Proxy Form
will not preclude a ThinkSmart Shareholder from attending and
voting at the General Scheme Meeting virtually.
Please note that:
(a) a ThinkSmart Shareholder entitled to attend and vote at the
General Scheme Meeting is entitled to appoint a proxy;
(b) a proxy need not be a shareholder of ThinkSmart and can
either be an individual or body corporate; and
(c) a ThinkSmart Shareholder entitled to cast two or more votes
at the General Scheme Meeting may appoint two proxies and may
specify the proportion or number of votes each proxy is appointed
to exercise, but where the proportion or number is not specified,
each proxy may exercise half of the votes.
If a ThinkSmart Shareholder appoints a body corporate as a
proxy, that body corporate will need to ensure that it appoints an
individual as its corporate representative to exercise its powers
at the General Scheme Meeting, in accordance with section 250D of
the Corporations Act.
The enclosed Proxy Form provides further details on appointing
proxies and lodging Proxy Forms. A Proxy Form accompanies this
Notice and to be effective must be received by the ThinkSmart Share
Registry by no later than 5.30pm (Perth time) on 14 November
2022.
7.2 Attorney
ThinkSmart Shareholders entitled to vote may appoint not more
than two attorneys to participate in and vote at the General Scheme
Meeting on their behalf. An attorney need not be a ThinkSmart
Shareholder and will have the right to vote and also to speak at
the General Scheme Meeting.
A power of attorney appointing an attorney to participate in and
vote at the General Scheme Meeting must be duly executed by the
ThinkSmart Shareholder and must specify the name of the ThinkSmart
Shareholder, the company (that is, ThinkSmart), and the attorney,
and also specify the meeting(s) at which the appointment may be
used. The appointment may be a standing one.
If two attorneys are appointed, each attorney may be appointed
to represent a specified number or proportion of your votes. If no
such number or proportion is specified, each attorney may exercise
half of your votes.
A power of attorney, or a certified copy of such power of
attorney, should be received by the ThinkSmart Share Registry
before 5.30pm (Perth time) on 14 November 2022. If you have not
already lodged the power of attorney with the Share Registry,
please attach a certified photocopy of the power of attorney to the
Proxy Form when you return it.
A single appointed attorney wishing to participate in and vote
at the General Scheme Meeting via the Computershare Virtual Meeting
Platform will require the appointing ThinkSmart Shareholder's name
and postcode and the SRN/HIN of the shareholding in order to access
the Computershare Virtual Meeting Platform.
If two attorneys are appointed, each must contact the ThinkSmart
Shareholder Information Line on 1800 528 984 (within Australia) or
+61 3 9415 4826 (outside Australia), between 8.30am and 5.00pm
(Sydney time), Monday to Friday to organise voting and online
platform access arrangements.
7.3 Corporate Representative
A corporation that is a ThinkSmart Shareholder, or that has been
appointed as a proxy, must appoint an individual to act as its
corporate representative at the General Scheme Meeting.
A validly appointed corporate representative wishing to
participate in and vote at the General Scheme Meeting via the
Computershare Virtual Meeting Platform will require the appointing
ThinkSmart Shareholder's name and postcode and the SRN/HIN of the
shareholding in order to access the Computershare Virtual Meeting
Platform.
8 United Kingdom (Crest Voting Instruction)
ThinkSmart DI Holders in CREST may transmit voting instructions
by utilising the CREST voting service in accordance with the
procedures described in the CREST Manual. CREST personal members or
other CREST sponsored members, and those CREST members who have
appointed a voting service provider, should refer to their CREST
sponsor or voting service provider, who will be able to take
appropriate action on their behalf. In order for instructions made
using the CREST voting service to be valid, the appropriate CREST
message (a "CREST Voting Instruction") must be properly
authenticated in accordance with Euroclear's specifications and
must contain the information required for such instructions, as
described in the CREST Manual (available via
www.euroclear.com/CREST).
To be effective, the CREST Voting Instruction must be
transmitted so as to be received by ThinkSmart's agent (3RA50) no
later than 10.00am (London time) on 11 November 2022. For this
purpose, the time of receipt will be taken to be the time (as
determined by the timestamp applied to the CREST Voting Instruction
by the CREST applications host) from which the ThinkSmart's agent
is able to retrieve the CREST Voting Instruction by enquiry to
CREST in the manner prescribed by CREST. ThinkSmart DI Holders in
CREST and, where applicable, their CREST sponsors or voting service
providers should note that Euroclear does not make available
special procedures in CREST for any particular messages. Normal
system timings and limitations will therefore apply in relation to
the transmission of CREST Voting Instructions. It is the
responsibility of the ThinkSmart DI Holder concerned to take (or,
if the ThinkSmart DI Holder is a CREST personal member or sponsored
member or has appointed a voting service provider, to procure that
the CREST sponsor or voting service provider takes) such action as
shall be necessary to ensure that a CREST Voting Instruction is
transmitted by means of the CREST voting service by any particular
time.
In this connection, ThinkSmart DI Holders and, where applicable,
their CREST sponsors or voting service providers are referred, in
particular, to those sections of the CREST Manual concerning
practical limitations of the CREST system and timings.
9 United Kingdom (Form of Instruction)
ThinkSmart DI Holders are invited to access the virtual General
Scheme Meeting via the Computershare Virtual Meeting Platform but
are not entitled to vote at the General Scheme Meeting. In order to
have votes cast at the General Scheme Meeting on their behalf,
ThinkSmart DI Holders must complete, sign and return the Forms of
Instruction forwarded to them along with the Notice to ThinkSmart's
agent, Computershare Investor Services plc, by 10.00am (London
time) on 11 November 2022.
ThinkSmart DI Holders (or their proxies) should submit a request
to ThinkSmart at www.thinksmartworld.com/contact to be provided
with a link to the Computershare Virtual Meeting Platform.
10 Jointly held ThinkSmart Shares
If the ThinkSmart Shares are jointly held, each of the joint
shareholders is entitled to vote. However, if more than one
shareholder votes in respect of jointly held ThinkSmart Shares,
only the vote of the shareholder whose name appears first on the
ThinkSmart Share Register will be counted.
11 Accessing the General Scheme Meeting
To participate in the virtual General Scheme Meeting via the
Computershare Virtual Meeting Platform, you can log in by entering
the following URL on your computer, tablet or smartphone:
https://meetnow.global/M7GFCPV.
Online registration will open 30 minutes before the meeting. To
make the registration process quicker, please have your SRN/HIN and
registered postcode or country code ready.
Proxyholders will need to contact Computershare prior to the
General Scheme Meeting to obtain their login details.
To participate in the Meeting online, follow the instructions
below.
(a) Click on 'Join Meeting Now'.
(b) Enter your SRN/HIN. Proxyholders will need to contact
Computershare on +61 3 9415 4024 one hour prior to the Meeting to
obtain their login details.
(c) Enter your postcode registered to your holding if you are an
Australian securityholder. If you are an overseas securityholder
select the country of your registered holding from the drop down
list.
(d) Accept the Terms and Conditions and 'Click Continue'.
ThinkSmart DI Holders may access the General Scheme Meeting via
the Computershare Virtual Meeting Platform but will not be
permitted to vote at the General Scheme Meeting. ThinkSmart DI
Holders (or their proxies) should submit a request to ThinkSmart at
www.thinksmartworld.com/contact to be provided with a link to the
Computershare Virtual Meeting Platform.
ThinkSmart Shareholders and ThinkSmart DI Holders will be able
to listen to the Chair of the General Scheme Meeting and others,
and view presentation slides, live and in real-time. ThinkSmart
Shareholders will also have the ability to ask questions via the
Computershare Virtual Meeting Platform, to speak and ask questions
via telephone, and hear all of the discussions that occur at the
General Scheme Meeting, subject to the connectivity of their
devices. In order to ensure an orderly meeting, the Chair will have
authority to make rules (including rules regarding the time
permitted for each shareholder to ask questions). The Chair will
explain such rules at the commencement of the General Scheme
Meeting.
ThinkSmart Shareholders seeking to speak or ask questions via
telephone please follow the instructions written below the
broadcast on the Computershare Virtual Meeting Platform.
Only ThinkSmart Shareholders will be able to vote online at the
General Scheme Meeting. To participate and vote using the
Computershare Virtual Meeting Platform:
-- ThinkSmart Shareholders will need their SRN/HIN (which is
shown on their holding statement or proxy form) and their postcode
(or country code if outside Australia) for verification
purposes;
-- proxyholders will need to contact the ThinkSmart Share
Registry in the hour before the start of the General Scheme Meeting
on +61 3 9415 4024 to obtain a unique email invitation link to
enter the Computershare Virtual Meeting Platform; and
-- attorneys and corporate representatives can log in to the
Computershare Virtual Meeting Platform using the SRN/HIN of the
shareholding and postcode of the relevant ThinkSmart
Shareholder.
ThinkSmart Shareholders entitled to vote at the General Scheme
Meeting will be able to vote between the commencement of the
General Scheme Meeting and the closure of voting as announced by
the Chair during the General Scheme Meeting.
Registration via the Computershare Virtual Meeting Platform will
open one hour prior to the scheduled start time of the General
Scheme Meeting. Logging into the Computershare Virtual Meeting
Platform at least 15 minutes prior to the start time is recommended
for ThinkSmart Shareholders and ThinkSmart DI Holders.
12 Proxy voting by the chair of the General Scheme Meeting
If the Chair of the General Scheme Meeting is a proxy, either by
appointment or default, and the appointment does not provide any
voting directions on the proxy form, by signing and returning the
proxy form, the ThinkSmart Shareholder will be expressly
authorising the Chair of the General Scheme Meeting to cast their
vote on the General Scheme Resolution as the Chair of the General
Scheme Meeting sees fit.
The Chair of the General Scheme Meeting intends to vote
undirected proxies in favour of the General Scheme Resolution, in
the absence of a Superior Proposal and subject to the Independent
Expert continuing to conclude that the Scheme is fair and
reasonable and in the best interests of ThinkSmart Shareholders
(other than the Excluded Shareholders).
Annexure 5
Notice of Excluded Shareholder Scheme Meeting
ThinkSmart Limited ACN 092 319 698
Notice of Excluded Shareholder Scheme Meeting (Notice)
Notice is hereby given that, by an order of the Federal Court of
Australia pursuant to section 411(1) of the Corporations Act, a
meeting of Excluded Shareholders of ThinkSmart Limited (ThinkSmart)
(Excluded Shareholder Scheme Meeting) will be held virtually via
the Computershare Virtual Meeting Platform on 16 November 2022,
commencing at 5.30pm (Perth time). If the General Scheme Meeting
concludes after 5.30pm (Perth time) on this date, the Excluded
Shareholder Scheme Meeting will begin as soon as practicable after
the conclusion of the General Scheme Meeting.
ThinkSmart will conduct the Excluded Shareholders Scheme Meeting
via the Computershare Virtual Meeting Platform with Excluded
Shareholders (and their proxies, attorneys or corporate
representatives) being able to cast their vote in real time during
the Excluded Shareholder Scheme Meeting.
In accordance with section 411(4)(a) of the Corporations Act,
for the Scheme to be effective, the resolution below must be passed
by:
-- at least 75% of the total number of votes cast on the
Excluded Shareholder Scheme Resolution by Excluded Shareholders;
and
-- more than 50% of Excluded Shareholders present and voting at
the Excluded Shareholder Scheme Meeting (unless the Court orders
otherwise).
The voting will be conducted on a poll.
Purpose of the Excluded Shareholder Scheme Meeting
The purpose of the Excluded Shareholders Scheme Meeting is for
Excluded Shareholders to consider and, if thought fit, to agree to
the Scheme.
A copy of the Scheme and a copy of the explanatory statement
required by section 412 of the Corporations Act in relation to the
Scheme are contained in the Scheme Booklet, of which this notice
forms part. Additional information about the Excluded Shareholder
Scheme Meeting is set out in the explanatory notes that accompany
and form part of this notice. Capitalised terms used but not
defined in this Notice have the defined meanings set out in section
11 of the Scheme Booklet, unless the context otherwise
requires.
Excluded Shareholder Scheme Resolution
The Excluded Shareholder Scheme Meeting will be asked to
consider and, if thought fit, pass (with or without amendment) the
Excluded Shareholder Scheme Resolution as follows:
"That, pursuant to and in accordance with the provisions of
section 411 of the Corporations Act 2001 (Cth), the scheme of
arrangement proposed between ThinkSmart Limited and the holders of
its fully paid ordinary shares, as contained in and more
particularly described in the scheme booklet of which the notice
convening this meeting forms part, is approved, with or without
alterations or conditions as approved by the Federal Court of
Australia to which ThinkSmart Limited and Tuscan Equity Pty Ltd
agree."
Excluded Shareholders Scheme Meeting format
To access the Excluded Shareholder Scheme Meeting and
participate and vote via the Computershare Virtual Meeting
Platform, Excluded Shareholders (or their proxies) will need to use
the meeting link provided on their proxy form.
Further details on how to participate in the Excluded
Shareholder Scheme Meeting are set out in the explanatory notes
that accompany and form part of this Notice.
All Excluded Shareholders are strongly encouraged to sign and
return the Proxy Form to ThinkSmart prior to the Excluded
Shareholder Scheme Meeting in accordance with the instructions
thereon.
Dated 24 October 2022
By order of the Court and the ThinkSmart Independent Board
Committee
sign
here
----------------------
Company Secretary
print KERIN WILLIAMS
name
----------------------
Explanatory notes
1 General
This Notice and the Excluded Shareholder Scheme Resolution
should be read in conjunction with the Scheme Booklet of which this
Notice forms part. The Scheme Booklet contains important
information to assist you in determining how to vote on the
Excluded Shareholder Scheme Resolution.
Unless otherwise defined, terms used in this Notice have the
same meaning as set out in the Glossary in section 11 of the Scheme
Booklet.
2 Chair
The Court has directed that Mr David Adams is to act as Chair of
the Excluded Shareholder Scheme Meeting and that if they are unable
or unwilling to act, Mr Peter Gammell is to act as Chair of the
Excluded Shareholder Scheme Meeting.
3 Voting
The ThinkSmart Independent Board Committee recommends that you
vote in favour of the Excluded Shareholder Scheme Resolution. No
member of the ThinkSmart Independent Board Committee is an Excluded
Shareholder and therefore will not vote on the Excluded Shareholder
Scheme Resolution. However each member of the ThinkSmart
Independent Board Committee intends to vote, or cause to be voted,
all ThinkSmart Shares owned or controlled by them in favour of the
General Scheme Resolution.
4 Required Voting Majority
For the proposed Scheme to be binding in accordance with section
411 of the Corporations Act, the Excluded Shareholder Scheme
Resolution must be passed by:
-- at least 75% of the total number of votes cast on the
Excluded Shareholder Scheme Resolution by Excluded Shareholders;
and
-- more than 50% of Excluded Shareholders by number present and
voting at the Excluded Shareholder Scheme Meeting (unless the Court
orders otherwise).
5 Court approval
In accordance with section 411(4)(b) of the Corporations Act, to
become effective, the Scheme must be approved by the order of the
Court. If the Excluded Shareholder Scheme Resolution set out in
this Notice is agreed to by the required majorities set out above
and the conditions set out in the Scheme are satisfied or waived
(where capable of waiver), ThinkSmart will apply to the Court for
the necessary orders to give effect to the Scheme.
In order for the Scheme to become effective, it must be approved
by the Court and an office copy of the orders of the Court
approving the Scheme must be lodged with ASIC.
6 Determination of entitlement to participate and vote
It has been determined that under regulation 7.11.37 of the
Corporations Regulations 2001 (Cth), for the purposes of the
Excluded Shareholder Scheme Meeting, ThinkSmart Shares will be
taken to be held by the persons who are recorded as the registered
holders of those shares in the ThinkSmart Share Register at 5.30pm
(Perth time) on 14 November 2022.
7 Voting via proxy, attorney or corporate representative
7.1 Proxies
A Proxy Form is attached to the Notice. This is to be used by
Excluded Shareholders if they wish to appoint a representative (a
'proxy') to vote in their place. All Excluded Shareholders are
strongly encouraged to sign and return the Proxy Form to ThinkSmart
prior to the Excluded Shareholder Scheme Meeting in accordance with
the instructions thereon. Lodgement of a Proxy Form will not
preclude an Excluded Shareholder from attending and voting at the
Excluded Shareholder Scheme Meeting virtually.
Please note that:
(a) an Excluded Shareholder entitled to attend and vote at the
Excluded Shareholder Scheme Meeting is entitled to appoint a
proxy;
(b) a proxy need not be a shareholder of ThinkSmart and can
either be an individual or body corporate; and
(c) an Excluded Shareholder entitled to cast two or more votes
at the Excluded Shareholder Scheme Meeting may appoint two proxies
and may specify the proportion or number of votes each proxy is
appointed to exercise, but where the proportion or number is not
specified, each proxy may exercise half of the votes.
If an Excluded Shareholder appoints a body corporate as a proxy,
that body corporate will need to ensure that it appoints an
individual as its corporate representative to exercise its powers
at the Excluded Shareholder Scheme Meeting, in accordance with
section 250D of the Corporations Act.
The enclosed Proxy Form provides further details on appointing
proxies and lodging Proxy Forms. A Proxy Form accompanies this
Notice and to be effective must be received by the ThinkSmart Share
Registry by no later than 5.30pm (Perth time) on 14 November
2022.
7.2 Attorney
Excluded Shareholders entitled to vote may appoint not more than
two attorneys to participate in and vote at the Excluded
Shareholder Scheme Meeting on their behalf. An attorney need not be
a ThinkSmart Shareholder and will have the right to vote and also
to speak at the Excluded Shareholder Scheme Meeting.
A power of attorney appointing an attorney to participate in and
vote at the Excluded Shareholder Scheme Meeting must be duly
executed by the Excluded Shareholder and must specify the name of
the Excluded Shareholder, the company (that is, ThinkSmart), and
the attorney, and also specify the meeting(s) at which the
appointment may be used. The appointment may be a standing one.
If two attorneys are appointed, each attorney may be appointed
to represent a specified number or proportion of your votes. If no
such number or proportion is specified, each attorney may exercise
half of your votes.
A power of attorney, or a certified copy of such power of
attorney, should be received by the ThinkSmart Share Registry
before 5.30pm (Perth time) on 14 November 2022. If you have not
already lodged the power of attorney with the Share Registry,
please attach a certified photocopy of the power of attorney to the
Proxy Form when you return it.
A single appointed attorney wishing to participate in and vote
at the Excluded Shareholder Scheme Meeting via the Computershare
Virtual Meeting Platform will require the appointing Excluded
Shareholder's name and postcode and the SRN/HIN of the shareholding
in order to access the Computershare Virtual Meeting Platform.
If two attorneys are appointed, each must contact the ThinkSmart
Shareholder Information Line on 1800 528 984 (within Australia) or
+61 3 9415 4826 (outside Australia), between 8.30am and 5.00pm
(Sydney time), Monday to Friday to organise voting and online
platform access arrangements.
7.3 Corporate Representative
A corporation that is an Excluded Shareholder, or that has been
appointed as a proxy, must appoint an individual to act as its
corporate representative at the Excluded Shareholder Scheme
Meeting.
A validly appointed corporate representative wishing to
participate in and vote at the Excluded Shareholder Scheme Meeting
via the Computershare Virtual Meeting Platform will require the
appointing Excluded Shareholder's name and postcode and the SRN/HIN
of the shareholding in order to access the Computershare Virtual
Meeting Platform.
8 Jointly held ThinkSmart Shares
If the ThinkSmart Shares are jointly held, each of the joint
shareholders is entitled to vote. However, if more than one
shareholder votes in respect of jointly held ThinkSmart Shares,
only the vote of the shareholder whose name appears first on the
ThinkSmart Share Register will be counted.
9 Accessing the Excluded Shareholder Scheme Meeting
To access the Excluded Shareholder Scheme Meeting and
participate and vote via the Computershare Virtual Meeting
Platform, Excluded Shareholders (or their proxies) will need to use
the meeting link provided by the ThinkSmart Share Registry.
Excluded Shareholders will need a desktop or mobile / tablet device
with internet access to do so.
Excluded Shareholders will be able to listen to the Chair of the
Excluded Shareholders Scheme Meeting and others, and view
presentation slides, live and in real-time. Excluded Shareholders
will also have the ability to ask questions via the Computershare
Virtual Meeting Platform, to speak and ask questions via telephone,
and hear all of the discussions that occur at the Excluded
Shareholder Scheme Meeting, subject to the connectivity of their
devices. In order to ensure an orderly meeting, the Chair will have
authority to make rules (including rules regarding the time
permitted for each shareholder to ask questions). The Chair will
explain such rules at the commencement of the Excluded Shareholder
Scheme Meeting.
Excluded Shareholders seeking to speak or ask questions via
telephone please follow the instructions written below the
broadcast on the Computershare Virtual Meeting Platform.
To participate and vote using the Computershare Virtual Meeting
Platform:
-- Excluded Shareholders will need their SRN/HIN (which is shown
on their holding statement or proxy form) and their postcode (or
country code if outside Australia) for verification purposes;
-- proxyholders will need to contact the ThinkSmart Share
Registry in the hour before the start of the Excluded Shareholder
Scheme Meeting on +61 3 9415 4024 to obtain a unique email
invitation link to enter the Computershare Virtual Meeting
Platform; and
-- attorneys and corporate representatives can log in to the
Computershare Virtual Meeting Platform using the SRN/HIN of the
shareholding and postcode of the relevant Excluded Shareholder.
Excluded Shareholders entitled to vote at the Excluded
Shareholder Scheme Meeting will be able to vote between the
commencement of the Excluded Shareholder Scheme Meeting and the
closure of voting as announced by the Chair during the Excluded
Shareholders Scheme Meeting.
Registration via the Computershare Virtual Meeting Platform will
open one hour prior to the scheduled start time of the Excluded
Shareholder Scheme Meeting. Logging into the Computershare Virtual
Meeting Platform at least 15 minutes prior to the start time is
recommended for Excluded Shareholders.
10 Proxy voting by the chair of the Excluded Shareholder Scheme Meeting
If the Chair of the Excluded Shareholder Scheme Meeting is a
proxy, either by appointment or default, and the appointment does
not provide any voting directions on the proxy form, by signing and
returning the proxy form, the Excluded Shareholder will be
expressly authorising the chair of the Excluded Shareholder Scheme
Meeting to cast their vote on the Excluded Shareholder Scheme
Resolution as the Chair of the Excluded Shareholder Scheme Meeting
sees fit.
The Chair of the Excluded Shareholder Scheme Meeting intends to
vote undirected proxies in favour of the Excluded Shareholder
Scheme Resolution, in the absence of a Superior Proposal and
subject to the Independent Expert continuing to conclude that the
Scheme is fair and reasonable and in the best interests of
ThinkSmart Shareholders (excluding the Excluded Shareholders).
Annexure 6
Notice of Annual General Meeting
ThinkSmart Limited ACN 092 319 698
Notice of Annual General Meeting (Notice)
Notice is hereby given that the 2022 Annual General Meeting of
ThinkSmart Limited (the "Company") ("Meeting") will be held
virtually via the Computershare Virtual Meeting Platform on 16
November 2022, commencing at 4.00pm (Perth time).
ThinkSmart will conduct the Annual General Meeting via the
Computershare Virtual Meeting Platform with ThinkSmart Shareholders
(and their proxies, attorneys or corporate representatives) being
able to cast their vote in real time during the Annual General
Meeting.
Additional information about the Annual General Meeting is set
out in the explanatory notes that accompany and form part of this
Notice. Capitalised terms used but not defined in this Notice have
the defined meanings set out in section 11 of the Scheme Booklet,
unless the context otherwise requires.
In addition, the Scheme Booklet accompanying this Notice of
Annual General Meeting constitutes the explanatory statement for
the purposes of sections 260B(4) and 219(1) of the Corporations Act
in relation to the Financial Assistance Resolution and Financial
Benefit Resolution.
The 2022 Annual Report is available on the Company's website:
www.thinksmartworld.com.
Business
1 Financial Reporting
To receive and consider the financial report of the Company and
the consolidated entity (the "Group") and the reports of the
directors and the auditors for the financial year ended 30 June
2022. There is no vote on this item.
2 Resolution 1 - Retirement and Re-election of Director - Mr Gary Halton
To consider and, if thought fit, pass the following resolution
as an ordinary resolution:
"That Mr Gary Halton, being a director of the Company who
retires in accordance with rule 8.1(d) and 8.1(e) of the Company's
Constitution, and being eligible, is re-elected as a director of
the Company."
3 Resolution 2 - Financial Assistance Resolution - required for
Scheme to become Effective
To consider and, if thought fit, pass the following resolution
as a special resolution:
"That, subject to and conditional upon:
-- approval of the Scheme by the Requisite Majorities of
ThinkSmart Shareholders and Excluded Shareholders at the Scheme
Meetings; and
-- the Scheme becoming Effective,
for the purposes of section 260A(1)(b) of the Corporations Act
and for all other purposes, approval is given for any financial
assistance to be given by ThinkSmart (and its Subsidiaries) to
BidCo in connection with the acquisition by BidCo of the Scheme
Shares pursuant to the Scheme and the entry into, and performance
of, the Loan Deed described in further detail in the Scheme Booklet
which accompanies this Notice of Annual General Meeting."
4 Resolution 3 - Financial Benefit Resolution - required for Scheme to become Effective
To consider and, if thought fit, pass the following resolution
as an ordinary resolution:
"That, subject to and conditional upon:
-- approval of the Scheme by the Requisite Majorities of
ThinkSmart Shareholders and Excluded Shareholders at the Scheme
Meetings; and
-- the Scheme becoming Effective,
for the purposes of section 208(1)(a) of the Corporations Act
and for all other purposes, approval is given for any financial
benefit to be given by ThinkSmart (and its Subsidiaries) to BidCo
in connection with the acquisition by BidCo of the Scheme Shares
pursuant to the Scheme and the entry into, and performance of, the
Loan Deed described in further detail in the Scheme Booklet which
accompanies this Notice of Annual General Meeting."
In accordance with the Corporations Act, and as set out in
section 9 of the Scheme Booklet, ThinkSmart will disregard any
votes cast in favour of Resolution 2 and Resolution 3 by any
Excluded Shareholder.
Annual General Meeting format
To participate in the virtual Annual General Meeting via the
Computershare Virtual Meeting Platform, you can log in by entering
the following URL on your computer, tablet or smartphone:
https://meetnow.global/ MQVYS9U.
Online registration will open 30 minutes before the meeting. To
make the registration process quicker, please have your SRN/HIN and
registered postcode or country code ready.
Proxyholders will need to contact Computershare prior to the
Annual General Meeting to obtain their login details.
To participate in the Meeting online, follow the instructions
below.
(a) Click on 'Join Meeting Now'.
(b) Enter your SRN/HIN. Proxyholders will need to contact
Computershare on +61 3 9415 4024 one hour prior to the Meeting to
obtain their login details.
(c) Enter your postcode registered to your holding if you are an
Australian securityholder. If you are an overseas securityholder
select the country of your registered holding from the drop down
list.
(d) Accept the Terms and Conditions and 'Click Continue'.
ThinkSmart DI Holders may access the Annual General Meeting via
the Computershare Virtual Meeting Platform but will not be
permitted to vote at the Annual General Meeting. For their votes to
be counted, ThinkSmart DI Holders must submit their CREST Voting
Instruction to Computershare Investor Services plc by no later than
9.00am (London time) on 11 November 2022. Alternatively, ThinkSmart
DI Holders can vote using the enclosed Form of Instruction as per
the instruction set out below.
Further details on how to participate in the Annual General
Meeting are set out in the explanatory notes that accompany and
form part of this Notice.
All ThinkSmart Shareholders are strongly encouraged to sign and
return the Proxy Form to ThinkSmart prior to the Annual General
Meeting in accordance with the instructions thereon.
Dated 24 October 2022
sign
here
----------------------
Company Secretary
print KERIN WILLIAMS
name
----------------------
Explanatory notes
1 General
This Notice and the resolutions should be read in conjunction
with the Scheme Booklet. The Scheme Booklet contains important
information to assist you in determining how to vote on the
Financial Assistance Resolution and Financial Benefit
Resolution.
Unless otherwise defined, terms used in this Notice have the
same meaning as set out in the Glossary in section 11 of the Scheme
Booklet.
Financial Statements and Reporting
The Corporations Act requires:
-- the reports of the directors and auditors; and
-- the annual financial report, including the financial
statements of the Company for the year ended 30 June 2022,
to be laid before the Annual General Meeting. Neither the
Corporations Act nor the Company's Constitution requires a vote of
ThinkSmart Shareholders on the reports or statements. However,
ThinkSmart Shareholders will be given reasonable opportunity to
raise questions or make comments on the financial affairs of
ThinkSmart at the Annual General Meeting.
Also, a reasonable opportunity will be given to members as a
whole at the Annual General Meeting to ask ThinkSmart's auditor
questions relevant to the conduct of the audit, the preparation and
content of the auditor's report, the accounting policies adopted by
ThinkSmart in relation to the preparation of the financial
statements and the independence of the auditor in relation to the
conduct of the audit.
Resolution 1 - Re-election of Director - Mr Gary Halton
The Company's Constitution provides that at every Annual General
Meeting after excluding: (1) a director who is managing director;
(2) a director appointed by the directors under rule 8.1 (b) and
standing for election, one third of the remaining directors
(rounded down to the nearest whole number) must retire from office.
ThinkSmart's Constitution further provides that no director who is
not the managing director may hold office without re-election
beyond the third Annual General Meeting following the meeting at
which the director was elected or last elected.
As Mr Halton was last re-elected at ThinkSmart's 2019 Annual
General Meeting, Mr Halton retires from office with effect from the
end of the Annual General Meeting and, being eligible, offers
himself for re-election.
A brief description of the candidate follows:
Mr Gary Halton was appointed to the Board on Admission to London
AIM and has been Chief Financial Officer of the ThinkSmart Group
since 2008 when he joined the ThinkSmart Group. Between October
2012 and January 2014, Gary acted as interim Managing Director of
the ThinkSmart Group.
Prior to joining the ThinkSmart Group, Gary held several senior
positions, including Head of Finance Services and Head of Group
Taxation, with De Vere Group plc. Gary is a qualified chartered
accountant and a chartered tax advisor, with over 20 years
post-qualification experience, having qualified with Ernst &
Young, and then a subsequent senior manager role with
PricewaterhouseCoopers.
The ThinkSmart directors (other than Mr Halton) recommend that
ThinkSmart Shareholders vote in favour of Resolution 1. Mr Halton,
who has an interest in the outcome of Resolution 1, declines to
make a recommendation.
Resolution 2 - Financial Assistance Resolution and
Resolution 3 - Financial Benefit Resolution
(each required to be approved for the Scheme to become
Effective)
For the Scheme to proceed, ThinkSmart Shareholders will need to
approve the Financial Assistance Resolution and the Financial
Benefit Resolution at ThinkSmart's Annual General Meeting.
The Scheme Booklet contains important information to assist you
in determining how to vote on the Financial Assistance Resolution
and Financial Benefit Resolution, including the information
prescribed by sections 260B(4) and 219 of the Corporations Act. In
particular, section 9 of the Scheme Booklet (among other
things):
-- contains the key information prescribed by the Corporations Act; and
-- explains the nature of the financial assistance and the
financial benefit to be given by ThinkSmart to BidCo and, in each
case, why this requires approval of ThinkSmart Shareholders.
The ThinkSmart Independent Board Committee strongly encourages
ThinkSmart Shareholders to read the Scheme Booklet in its entirety
before deciding whether or not to vote in favour of the Financial
Assistance Resolution or Financial Benefit Resolution.
The ThinkSmart Independent Board Committee recommends that
ThinkSmart Shareholders vote in favour of the Financial Assistance
Resolution and Financial Benefit Resolution at the Annual General
Meeting. Mr Ned Montarello owns and controls BidCo. Accordingly, he
does not make any recommendation in relation to the Financial
Assistance Resolution or Financial Benefit Resolution.
In accordance with the Corporations Act, and as set out in
section 9 of the Scheme Booklet, ThinkSmart will disregard any
votes cast in favour of the Financial Assistance Resolution and
Financial Benefit Resolution by any Excluded Shareholder.
2 Chair
Mr David Adams will act as Chair of the Annual General Meeting
and if they are unable or unwilling to act, Mr Peter Gammell is to
act as Chair of the Annual General Meeting.
3 Determination of entitlement to participate and vote
It has been determined that under regulation 7.11.37 of the
Corporations Regulations 2001 (Cth), for the purposes of the Annual
General Meeting:
-- ThinkSmart Shares will be taken to be held by the persons who
are recorded as the registered holders of those shares in the
ThinkSmart Share Register at 5.30pm (Perth time) on 14 November
2022; and
-- ThinkSmart Depositary Interests will be taken to be held by
the persons who are recorded as the registered holders of those
ThinkSmart Depositary Interests in the ThinkSmart DI Register at
6.00pm (London time) on 11 November 2022.
4 Voting via proxy, attorney or corporate representative
4.1 Proxies
A Proxy Form is attached to the Notice. This is to be used by
ThinkSmart Shareholders if they wish to appoint a representative (a
'proxy') to vote in their place. All ThinkSmart Shareholders are
strongly encouraged to sign and return the Proxy Form to ThinkSmart
prior to the Annual General Meeting in accordance with the
instructions thereon. Lodgement of a Proxy Form will not preclude a
ThinkSmart Shareholder from attending and voting at the Annual
General Meeting virtually.
Please note that:
(a) a ThinkSmart Shareholder entitled to attend and vote at the
Annual General Meeting is entitled to appoint a proxy;
(b) a proxy need not be a shareholder of ThinkSmart and can
either be an individual or body corporate; and
(c) a ThinkSmart Shareholder entitled to cast two or more votes
at the Annual General Meeting may appoint two proxies and may
specify the proportion or number of votes each proxy is appointed
to exercise, but where the proportion or number is not specified,
each proxy may exercise half of the votes.
If a ThinkSmart Shareholder appoints a body corporate as a
proxy, that body corporate will need to ensure that it appoints an
individual as its corporate representative to exercise its powers
at the Annual General Meeting, in accordance with section 250D of
the Corporations Act.
The enclosed Proxy Form provides further details on appointing
proxies and lodging Proxy Forms. A Proxy Form accompanies this
Notice and to be effective must be received by the ThinkSmart Share
Registry by no later than 5.30pm (Perth time) on 14 November
2022.
4.2 Attorney
ThinkSmart Shareholders entitled to vote may appoint not more
than two attorneys to participate in and vote at the Annual General
Meeting on their behalf. An attorney need not be a ThinkSmart
Shareholder and will have the right to vote and also to speak at
the Annual General Meeting.
A power of attorney appointing an attorney to participate in and
vote at the Annual General Meeting must be duly executed by the
ThinkSmart Shareholder and must specify the name of the ThinkSmart
Shareholder, the company (that is, ThinkSmart), and the attorney,
and also specify the meeting(s) at which the appointment may be
used. The appointment may be a standing one.
If two attorneys are appointed, each attorney may be appointed
to represent a specified number or proportion of your votes. If no
such number or proportion is specified, each attorney may exercise
half of your votes.
A power of attorney, or a certified copy of such power of
attorney, should be received by the ThinkSmart Share Registry
before 5.30pm on 14 November 2022. If you have not already lodged
the power of attorney with the Share Registry, please attach a
certified photocopy of the power of attorney to the Proxy Form when
you return it.
A single appointed attorney wishing to participate in and vote
at the Annual General Meeting via the Computershare Virtual Meeting
Platform will require the appointing ThinkSmart Shareholder's name
and postcode and the SRN/HIN of the shareholding in order to access
the Computershare Virtual Meeting Platform.
If two attorneys are appointed, each must contact the ThinkSmart
Shareholder Information Line on 1800 528 984 (within Australia) or
+61 3 9415 4826 (outside Australia), between 8.30am and 5.00pm
(Sydney time), Monday to Friday to organise voting and online
platform access arrangements.
4.3 Corporate Representative
A corporation that is a ThinkSmart Shareholder, or that has been
appointed as a proxy, must appoint an individual to act as its
corporate representative at the Annual General Meeting.
A validly appointed corporate representative wishing to
participate in and vote at the Annual General Meeting via the
Computershare Virtual Meeting Platform will require the appointing
ThinkSmart Shareholder's name and postcode and the SRN/HIN of the
shareholding in order to access the Computershare Virtual Meeting
Platform.
5 United Kingdom (Crest Voting Instruction)
ThinkSmart DI Holders in CREST may transmit voting instructions
by utilising the CREST voting service in accordance with the
procedures described in the CREST Manual. CREST personal members or
other CREST sponsored members, and those CREST members who have
appointed a voting service provider, should refer to their CREST
sponsor or voting service provider, who will be able to take
appropriate action on their behalf. In order for instructions made
using the CREST voting service to be valid, the appropriate CREST
message (a "CREST Voting Instruction") must be properly
authenticated in accordance with Euroclear's specifications and
must contain the information required for such instructions, as
described in the CREST Manual (available via
www.euroclear.com/CREST).
To be effective, the CREST Voting Instruction must be
transmitted so as to be received by ThinkSmart's agent (3RA50) no
later than 9.00am (London time) on 11 November 2022. For this
purpose, the time of receipt will be taken to be the time (as
determined by the timestamp applied to the CREST Voting Instruction
by the CREST applications host) from which the ThinkSmart's agent
is able to retrieve the CREST Voting Instruction by enquiry to
CREST in the manner prescribed by CREST. ThinkSmart DI Holders in
CREST and, where applicable, their CREST sponsors or voting service
providers should note that Euroclear does not make available
special procedures in CREST for any particular messages. Normal
system timings and limitations will therefore apply in relation to
the transmission of CREST Voting Instructions. It is the
responsibility of the ThinkSmart DI Holder concerned to take (or,
if the ThinkSmart DI Holder is a CREST personal member or sponsored
member or has appointed a voting service provider, to procure that
the CREST sponsor or voting service provider takes) such action as
shall be necessary to ensure that a CREST Voting Instruction is
transmitted by means of the CREST voting service by any particular
time.
In this connection, ThinkSmart DI Holders and, where applicable,
their CREST sponsors or voting service providers are referred, in
particular, to those sections of the CREST Manual concerning
practical limitations of the CREST system and timings.
6 United Kingdom (Form of Instruction)
ThinkSmart DI Holders are invited to access the virtual Annual
General Meeting via the Computershare Virtual Meeting Platform but
are not entitled to vote at the Annual General Meeting. In order to
have votes cast at the Annual General Meeting on their behalf,
ThinkSmart DI Holders must complete, sign and return the Forms of
Instruction forwarded to them along with the Notice to ThinkSmart's
agent, Computershare Investor Services plc, by 9.00am (London time)
on 11 November 2022.
ThinkSmart DI Holders (or their proxies) should submit a request
to ThinkSmart at www.thinksmartworld.com/contact to be provided
with a link to the Computershare Virtual Meeting Platform.
7 Jointly held ThinkSmart Shares
If the ThinkSmart Shares are jointly held, each of the joint
shareholders is entitled to vote. However, if more than one
shareholder votes in respect of jointly held ThinkSmart Shares,
only the vote of the shareholder whose name appears first on the
ThinkSmart Share Register will be counted.
8 Accessing the Annual General Meeting
To participate in the virtual Annual General Meeting via the
Computershare Virtual Meeting Platform, you can log in by entering
on your computer, tablet or smartphone the following URL:
https://meetnow.global/ MQVYS9U.
Online registration will open 30 minutes before the meeting. To
make the registration process quicker, please have your SRN/HIN and
registered postcode or country code ready.
Proxyholders will need to contact Computershare prior to the
Annual General Meeting to obtain their login details.
To participate in the Meeting online follow the instructions
below.
(a) Click on 'Join Meeting Now'.
(b) Enter your SRN/HIN. Proxyholders will need to contact
Computershare on +61 3 9415 4024 one hour prior to the Meeting to
obtain their login details.
(c) Enter your postcode registered to your holding if you are an
Australian securityholder. If you are an overseas securityholder
select the country of your registered holding from the drop down
list.
(d) Accept the Terms and Conditions and 'Click Continue'.
ThinkSmart DI Holders may access the Annual General Meeting via
the Computershare Virtual Meeting Platform but will not be
permitted to vote at the Annual General Meeting. ThinkSmart DI
Holders (or their proxies) should submit a request to ThinkSmart at
www.thinksmartworld.com/contact to be provided with a link to the
Computershare Virtual Meeting Platform.
ThinkSmart Shareholders and ThinkSmart DI Holders will be able
to listen to the Chair of the Annual General Meeting and others,
and view presentation slides, live and in real-time. ThinkSmart
Shareholders will also have the ability to ask questions via the
Computershare Virtual Meeting Platform, to speak and ask questions
via telephone, and hear all of the discussions that occur at the
Annual General Meeting, subject to the connectivity of their
devices. In order to ensure an orderly meeting, the Chair will have
authority to make rules (including rules regarding the time
permitted for each shareholder to ask questions). The Chair will
explain such rules at the commencement of the Annual General
Meeting.
ThinkSmart Shareholders seeking to speak or ask questions via
telephone please follow the instructions written below the
broadcast on the Computershare Virtual Meeting Platform.
Only ThinkSmart Shareholders will be able to vote online at the
Annual General Meeting. To participate and vote using the
Computershare Virtual Meeting Platform:
-- ThinkSmart Shareholders will need their SRN/HIN (which is
shown on their holding statement or proxy form) and their postcode
(or country code if outside Australia) for verification
purposes;
-- proxyholders will need to contact the ThinkSmart Share
Registry in the hour before the start of the Annual General Meeting
on +61 3 9415 4024 to obtain a unique email invitation link to
enter the Computershare Virtual Meeting Platform; and
-- attorneys and corporate representatives can log in to the
Computershare Virtual Meeting Platform using the SRN/HIN of the
shareholding and postcode of the relevant ThinkSmart
Shareholder.
ThinkSmart Shareholders entitled to vote at the Annual General
Meeting will be able to vote between the commencement of the Annual
General Meeting and the closure of voting as announced by the Chair
during the Annual General Meeting.
Registration via the Computershare Virtual Meeting Platform will
open one hour prior to the scheduled start time of the Annual
General Meeting. Logging into the Computershare Virtual Meeting
Platform at least 15 minutes prior to the start time is recommended
for ThinkSmart Shareholders and ThinkSmart DI Holders.
9 Proxy voting by the chair of the Annual General Meeting
If the Chair of the Annual General Meeting is a proxy, either by
appointment or default, and the appointment does not provide any
voting directions on the proxy form, by signing and returning the
proxy form, the ThinkSmart Shareholder will be expressly
authorising the Chair of the Annual General Meeting to cast their
vote on the General Scheme Resolution as the Chair of the Annual
General Meeting sees fit.
The Chair of the Annual General Meeting intends to vote
undirected proxies in favour of the resolutions.
Corporate directory
ThinkSmart Limited
Suite 5, 531 Hay Street
Subiaco WA 6008
Australian legal adviser
Herbert Smith Freehills
QV1 Building, Level 36, 250 St Georges Terrace
Perth WA 6000
UK legal adviser
Shoosmiths LLP
The XYZ Building, 2 Hardman Boulevard
Spinningfields Manchester M3 3AZ
Independent Expert
Grant Thornton Corporate Finance Pty Ltd
Australian Financial Services Licence No. 247140
Tower 5, Level 22, 727 Collins Street
Docklands VIC 3008
ThinkSmart Share Registry
Computershare Investor Services Pty Limited
452 Johnston Street
Abbotsford VIC 3067
[1] 29.94% on a fully diluted basis including all vested but
currently unexercised share options.
[2] Assumes all 1,679,532 ThinkSmart Options are exercised.
[3] See pages 1, 7 and 23 of the Independent Expert's Report
contained in Annexure 1 for details.
[4] See pages 1, 7 and 23 of the Independent Expert's Report
contained in Annexure 1 for details.
[5] See pages 1, 7 and 23 of the Independent Expert's Report
contained in Annexure 1 for details.
[6] See pages 1, 7 and 23 of the Independent Expert's Report
contained in Annexure 1 for details.
[7] 29.94% on a fully diluted basis including all vested but
currently unexercised share options.
[8] Assumes all 1,679,532 ThinkSmart Options are exercised.
[9] The sale of the Block Sale Shares is not underwritten by the
Broker or any other person.
[10] Assumes total sale costs of 0.5% of sale proceeds, a
USD:GBP exchange rate of 1.1225 USD : 1 GBP, a USD:AUD exchange
rate of 0.623 USD : 1 AUD (being the applicable exchange rates as
at the Last Practicable Date) and 108,267,346 ThinkSmart Shares on
issue following the expected exercise of all vested ThinkSmart
Options prior to the implementation of the Scheme.
[11] Assumes all 1,679,532 ThinkSmart Options are exercised.
[12] See pages 1, 7 and 23 of the Independent Expert's Report
contained in Annexure 1 for details.
[13] Using an exchange rate of 1.76 AUD: 1 GBP as at 15 July
2022.
[14] Using exchange rate of 1.83 AUD: 1 GBP being the average
for the various payment dates.
[15] Using an exchange rate of 1.76 AUD: 1 GBP as at 15 July
2022.
[16] Using an exchange rate of 1.76 AUD: 1 GBP as at 15 July
2022.
[17] Using exchange rate of 1.76 AUD: 1 GBP
[18] Based on 106,587,814 shares on issue and a closing share
price of GBP0.31.
[19] From the period 1 February 2022, when ThinkSmart received
its Block shares, up to the 29(th) July 2022, the date on which the
Scheme was announced. Calculation is based on closing prices.
[20]
https://www.klarna.com/assets/sites/15/2022/08/30191346/Klarna-Bank-AB_Interim-Report-2022_EN.pdf
[21]
https://www.cnbc.com/2022/05/23/klarna-to-lay-off-10percent-of-its-workforce-.html
[22] These are calculated using closing prices
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END
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