AssetCo plc Update

09/09/2011
 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, IN OR INTO OR FROM, ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.
 

THIS IS AN ANNOUNCEMENT FALLING UNDER RULE 2.4 OF THE TAKEOVER CODE (THE "CODE"). IT DOES NOT REPRESENT A FIRM INTENTION TO MAKE AN OFFER UNDER RULE 2.5 OF THE CODE. ACCORDINGLY, THERE CAN BE NO CERTAINTY THAT AN OFFER WILL BE MADE NOR AS TO THE TERMS ON WHICH ANY OFFER MIGHT BE MADE.

 

AssetCo plc ("AssetCo" or "the Company")

Posting of Circular to Shareholders and Suspension of trading in shares


AssetCo PLC today announces Proposals which will refinance the Group, including the injection of £14 million of new equity into the Company. The Proposals, together with the Further Arrangements in relation to the London Group, will help stabilise the Company and create a strengthened platform on which to expand. In particular, the Company continues to pursue several contract opportunities in the UAE where it sees potential for significant expansion.
 

In addition, management has concluded that it would be appropriate to appoint new auditors for the Group in the light of the Proposals and as a consequence the existing auditors have resigned in accordance with section 516 of the Act. There were no circumstances connected with their ceasing of holding office which they consider should be brought to the attention of the members or creditors of the Company. To reflect the changing nature of the Group, the Company is changing its year end from 31 March to 30 September to enable the impact of the Proposals to be taken into account in the next audited accounts. As a consequence, trading in the Company’s shares has been temporarily suspended until the audited accounts for the period ended 30 September 2011 of the Group have been published.
 

The Proposals are intended to address the Company’s current financial issues and to effect a recapitalisation.
 

The Proposals include:

• A Scheme of Arrangement with Scheme Creditors to compromise and settle all of the Company’s liabilities, other than liabilities which are specifically excluded from the Scheme (such as in respect of the Company’s UAE operations).

• A capital reorganisation and a 1 for 1,000 share consolidation.

• The exchange of the Subsidiary Preference Shares in consideration for the issue of 3.75 million New Ordinary Shares by the Company.

• A placing of 7 million New Ordinary Shares to raise £14 million (before expenses).

• The approval of the Share Exchange and the Placing for the purposes of Rule 21.1 of the Code.

• A waiver of obligations under Rule 9 of the Code which would otherwise arise from the Share Exchange and Placing.
 

Arden Partners continues to act as its nominated adviser, broker and Panel adviser in relation to the proposed restructuring and Placing.
 

Espirito Santo are acting as sole financial adviser to the Company  in relation to the proposed restructuring of the business.
 

A Circular is being sent to Shareholders and sets out the Proposals in more detail, outlining the reasons for the Proposals and explaining why the Independent Directors, or where appropriate, the Board consider them to be fair and reasonable as far as Shareholders are concerned and why they recommend that Shareholders vote in favour of the Resolutions required to put the Proposals into effect.
 

A copy of this Circular will be available on the Company website: www.assetco.com

IF THE RESOLUTIONS ARE NOT PASSED OR IF THE SCHEME OF ARRANGEMENT DOES NOT RECEIVE THE APPROVAL OF THE SCHEME CREDITORS AND THE COURT THEN THE COMPANY MAY BE WOUND UP SAVE IN THE EVENT OF AN OFFER BEING RECEIVED. CERTAIN PARTS OF THE GROUP WILL BE UNLIKELY TO BE IN A POSITION TO MEET THEIR LIABILITIES AS THEY FALL DUE, FORCING THE DIRECTORS TO EITHER PLACE ASSETCO PLC INTO ADMINISTRATION, SELL IT ON LESS FAVOURABLE TERMS OR RESULT IN THE COMPANY BEING WOUND UP BY THE COURT. IN SUCH CIRCUMSTANCES, IT IS NOT EXPECTED THAT THE SHAREHOLDERS WOULD RECEIVE MORE THAN NOMINAL VALUE FOR THEIR CURRENT SHAREHOLDING.


1. Scheme of Arrangement with the Scheme Creditors
The Company posted documentation on 30 August 2011 to Scheme Creditors setting out the details of the Scheme of Arrangement. The Scheme is intended to ensure that all Scheme Creditors are identified and compromised. The proposal to the unsecured lender and trade creditor class (other than intercompany creditors) is for approximately £5 million, to be raised from the Placing, to be allocated amongst those creditors, giving rise to an estimated payout of around 23p in the £1. The proposal to intercompany creditors is for a total allocation of £10,000, resulting in a payout of up to 0.01p in the £1.
 

If the Scheme is given the support of the Scheme Creditors and the Court, upon the Scheme becoming effective, the Company will have no trade creditors, no borrowings and no intercompany creditors, except for liabilities which are specifically excluded from the Scheme. The Scheme Document is available to view at www.assetco.com/Investor-Relations/Documents.aspx


2. Capital Reorganisation
The price at which the Company proposes to raise additional capital is less than the current nominal value of its Existing Ordinary Shares and the Act prevents a company from issuing shares at a discount to the nominal value of its shares. Accordingly, the Company is undertaking the Capital Reorganisation in order to reduce the nominal value of the Company’s Existing Ordinary Shares. The Capital Reorganisation will be made up of a number of steps.
 

In order to effect the issue of ordinary shares at less than the present nominal value, it is proposed to sub divide each Existing Ordinary Share of 1p each into 1 Split Ordinary Share of 0.01p each and 1 Split Deferred Share of 0.99p each. This will result in 250,712,740 Split Ordinary Shares each and 250,712,740 Split Deferred Shares being in issue immediately following the Capital Reorganisation.
 

Following the subdivision and redesignation of share capital referred to above, it is proposed that every 1,000 Split Ordinary Shares each be consolidated and redesignated as one New Ordinary Share of 10p.
 

Resolution 5 in the notice of General Meeting sets out the proposed Capital Reorganisation. Unless a holding of Existing Ordinary Shares is exactly divisible by 1,000, it will be rounded down to the nearest whole number of New Ordinary Shares. The New Ordinary Shares will have the same rights (including as to voting, dividends and return of capital) as the Existing Ordinary Shares following completion of the Capital Reorganisation. The Company will consolidate the fractional entitlements to New Ordinary Shares and may sell such number of New Ordinary Shares on the market for the benefit of the Company.
 

In addition, following the subdivision and redesignation of share capital referred to above, it is proposed that every 500 Split Deferred Shares be consolidated and redesignated as one New Deferred Share of £4.95. The rights attaching to the New Deferred Shares are set out in the new articles of association of the Company and will be minimal. The New Deferred Shares will therefore be effectively valueless as they will not carry any rights to vote or dividend rights and they will only be entitled to a payment on a return of capital or on a winding up of the Company after each New Ordinary Share has received a payment of £1,000,000. The New Deferred Shares will not be listed or traded on AIM and will not be transferable without the written consent of the Company.
 

The Board intends to make an application to the Court for the New Deferred Shares to be cancelled in due course. The New Deferred Shares may, by order of the Court, be cancelled for no consideration by means of a reduction of capital effected in accordance with applicable law without sanction of the holders of the New Deferred Shares. Upon cancellation, the share capital will be debited in respect of the New Deferred Shares and the capital redemption reserve will be credited.
 

3. Share Exchange of the Subsidiary Preference Shares
AssetCo (Abu Dhabi) Limited, a wholly owned subsidiary of the Company, currently has £15 million of Subsidiary Preference Shares outstanding to NAV. The Subsidiary Preference Shares were issued in January 2009 to fund expansion of the business of the Company in the UAE and at the same time AssetCo (Abu Dhabi) Limited entered into an agreement with NAV and others allocating all of the cashflows related to the UAE contracts to NAV until the Subsidiary Preference Shares were repaid. The Proposals will enable future benefits from the UAE to flow to the Company.
 

Under the terms of the Share Exchange Agreement, it is intended that NAV transfers 100 per cent. of the Subsidiary Preference Shares to the Company in consideration for the issue of 3.75 million New Ordinary Shares, equivalent to £7.5 million at the Placing Price. NAV and the Company will enter into the Share Exchange Agreement which will be conditional upon various matters including the Shareholders approving the Proposals for the purposes of Rule 21 and Rule 9 and the approval of the Scheme by the Scheme Creditors.
 

Pursuant to the terms of the Share Exchange Agreement, NAV will waive all claims it has against the Company relating to payments due to it and to the operation of the Group under the investment agreement in relation to AssetCo (Abu Dhabi) Limited, including payment of any management fees due to the holders of the Subsidiary Preference Shares. In addition, the Investor Warrants will be cancelled. The Share Exchange will account for 34.1 per cent. of the Enlarged Share Capital. The maximum shareholding of the New Ordinary Shares held by NAV following the Share Exchange and the Placing will be 55.3 per cent. of the Enlarged Share Capital (based on the Investors subscribing for 100 per cent. of the Placing Shares and before the exercise of any of the Warrants). Should NAV exercise its Warrants and no one else exercises their Warrants, then NAV would hold 59.6 per cent. of the Enlarged Share Capital.
 

4. Placing
The Company proposes to raise £14 million through the fully underwritten issue of the Placing Shares. The Placing is conditional on Shareholder and regulatory approval of the Proposals. The Placing Price of 200 pence represents an effective discount of 88.2 per cent. to the adjusted closing midmarket price of 1,700 pence on 8 September 2011 (the “Adjusted Closing Price”), being the last dealing day prior to the publication of the Circular. The actual closing price of the Existing Ordinary Shares, on 8 September 2011 (being the latest practicable date prior to the publication of the Circular), was 1.7 pence each and the Adjusted Closing Price reflects the equivalent closing price following completion of the Capital Reorganisation. The Placing Shares will represent approximately 63.6 per cent. of the Enlarged Share Capital.
 

The Placing proposals also provide for the subscription by Placees for up to 3.5 million warrants exercisable at 200 pence each, pro rata to their participation in the Placing. In addition under the terms of the Warrant Instrument, any Placee will receive 1 Warrant for every 2 Placing Shares subscribed for.
 

The Placing is conditional, inter alia, upon:

• the Scheme becoming effective;

• the Resolutions being passed at the General Meeting;

• the completion of the Share Exchange; and

• Admission occurring on or before 8.00 a.m on 14 October 2011 (or such later date as the parties may agree).
 

The Placing Shares will rank pari passu with the New Ordinary Shares in all respects including the right to receive all dividends or other distributions declared, made or paid by the Company after their respective dates of allotment.

Pre-emption rights will be disapplied in relation to the Placing. The Company believes that its working capital constraints and associated timescales, and the lack of audited accounts for the past year, means that a Placing with pre-emption rights disapplied is in the best interest of the Company as it maximises certainty of funds and minimises the timescale for the fund raising. The Placing is being fully underwritten by the Investors.
 

25 per cent. of the Placing Shares will be offered to a limited number of other institutional shareholders on the same terms. To the extent that they are not taken up, the Investors have undertaken to subscribe for these Placing Shares. Existing Shareholders excluding the Investors, will hold 17.6 per cent. of the New Ordinary Shares following the Placing should they take up 25 per cent. of Placing Shares.
 

5. Rule 21.1 Approval of the Share Exchange
Rule 21.1 of the Code (“Rule 21.1”) provides that during the course of an offer period, the Board must not take any action without shareholder approval which may result in any offer or bona fide possible offer being frustrated or in shareholders being denied the opportunity to decide on its merits (“Frustrating Action”).
 

As a result of the approach received for the Company as described above, the Company is in an offer period for the purposes of the Code. Consequently the issue of any shares by the Company is deemed to be Frustrating Action by the Code and accordingly, the Proposals require the approval of the Shareholders under Rule 21.1.

Whilst the Board does not have any indication as to the intentions of Arcapita Bank B.S.C(c), approval of the Proposals may result in any potential offer for the Company being withdrawn. Shareholder and regulatory approval is required in respect of the Placing and the Share Exchange for the purposes of the Rule 21 Approval and Shareholders will be asked to vote on this at the General Meeting.
 

As highlighted above, discussions with the potential offeror have not progressed for several weeks. In particular, the potential offeror has been unable to reach an agreement with the Banks. The Board believes that if the Resolutions are not passed, the Company may be liquidated or the Directors may be forced to put the Company into administration. The Board recommends that the Shareholders vote in favour of the Resolutions.
 

6. Waiver of Rule 9 of the Takeover Code
NAV, in which Christopher Mills is the Chief Investment Officer, currently holds 0.004 per cent. of the Existing Ordinary Share capital of the Company as at the date of the Circular. In the event that the Proposals set out in the Circular are approved by the Shareholders.
 

Under Rule 9 of the Code, any person who acquires an interest (as such term is defined in the Code) in shares which, taken together with the shares in which he and persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights in a company which is subject to the Code, is normally required to make a general offer to all of the remaining shareholders to acquire their shares. Similarly, when any person, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights but does not hold shares carrying more than 50 per cent. of the voting rights of such a company, a general offer will normally be required if any further interests in shares are acquired by any such person. Such an offer would have to be made in cash at a price not less than the highest price paid by him, or by any member of the group of persons acting in concert with him, for any interest in shares in the company during the 12 months prior to the announcement of the offer.
 

The Panel has agreed, subject to Resolution 3 being passed on a poll by the Independent Shareholders at the General Meeting, to waive the requirement under Rule 9 of the Code that would otherwise arise as a result of the Placing and Share Exchange. The Independent Directors believe that it is in the best interests of the Company that Resolution 3 be passed. Following completion of the Proposals, should the existing Shareholders, excluding the Investors, take up their full entitlement to Placing Shares under the Placing, NAV will hold New Ordinary Shares carrying 49.00 per cent. of the voting rights of the Company. NAV will also hold a further interest in New Ordinary Shares by virtue of the Warrants which it will receive as part of the Placing. As such NAV will have an interest in New Ordinary Shares representing more than 30 per cent. of the voting rights of the Company but will not hold such number of New Ordinary Shares as to carry over 50 per cent. of the voting rights of the Company. As a consequence NAV will be unable to increase its interest in New Ordinary Shares, save for increasing its interest by the exercise of its Warrants, without making a general offer to all remaining Shareholders to acquire their New Ordinary Shares.
 

Should NAV exercise a sufficient number of its Warrants and/or should the existing Shareholders, excluding the Investors, not take up such number of Placing Shares, NAV will hold over 50 per cent. of the Company’s voting rights and may increase its interest in New Ordinary Shares without incurring any obligation under Rule 9 of the Code to make a general offer.
 

The maximum shareholding of NAV, assuming no existing Shareholders, excluding the Investors, take up their entitlement to Placing Shares and only NAV exercises its Warrants, would represent 59.6 per cent. of the voting rights of the Company.
 

7. UAE
The Company will as a result of the Proposals be ring fenced from all subsidiary operations, enabling it to focus on growing its operations in UAE, which currently comprise the existing 3-year Special Operations Command I contract, and a 30 per cent. economic interest in AssetCo Emirates Response Services LLC (a joint venture with Emirates Response Services LLC) that currently operates a contract with the UAE Air Force for the provision of personnel, training, operational equipment and facilities management as part of an outsourced firefighting service. The Company continues to pursue several contract opportunities in the UAE, where is sees potential for significant expansion.
 

8. Further Arrangements
In addition to the Scheme and the Proposals, which is intended to stabilise the financial position of the Company and to provide a platform for growth of operations in the UAE, the Directors consider that further steps are required to put the UK operating subsidiaries on a financial basis that will be stable in the medium to long term.
 

The contract with the LFEPA delivers a steady stream of revenue to the London Group but this does not match the debt repayment profile which is accelerated versus the length of the contract. Therefore the cash flows of the contract are unable to match the capital, interest and repayments required by the banking facilities of the London Group, most of which are provided by Lloyds Banking Group. The assets and the amount of debt on those assets have been mismatched, leading to excess indebtedness compared to the underlying asset values.
 

The Further Arrangements with the London Group Banks are intended to provide the basis for a stable financial platform through a restructuring of the London Group, and include:
 

• No repayment of capital or interest to the London Group Banks until the restructuring is complete.

• All of the London Group lenders to write down all their loan facilities (including arrears on interest and capital) down to £30.6 million, equivalent to approximately 60p in the £1.

• The Company to inject £3.0 million as a lump sum immediately on completion of the write down to meet the payments due to creditors and to provide working capital.

• The facility repayment dates for all London Group Banks to be shortened to 31 December 2013, with the intention to refinance or dispose of the London Group prior to that date.

• The new facilities to be repaid at the rate of £3 million per annum in aggregate to the London Group Banks.

The Group is in advanced discussions with the London Group Banks regarding the Further Arrangements, which are conditional, inter alia, upon Shareholder approval of the Proposals.
 

Subject to receiving the appropriate Shareholder and regulatory approval necessary, the intention of the Directors is to refinance or sell the London Group as soon as practicable after it has been financially stabilised, but in any event prior to 31 December 2013 when the modified facilities provided by the London Group Banks fall due.
 

It is the intention of the Board to consider options for the Lincoln Business, which carries out the contract with Lincoln Fire & Rescue Service and comprises AssetCo Lincoln Ltd and AssetCo Solutions Ltd, including potentially its disposal, subject to receiving the appropriate Shareholder and regulatory approvals necessary, following completion of the Scheme and the Proposals.
 

New facilities may need to be put in place to enable the funding of necessary capital expenditure pending the sale or restructuring of the London and Lincoln contracts. The UK subsidiaries of the Company, which include a substantial number of dormant and legacy trading companies as well as the London and Lincoln operating companies, are to be ring fenced from the Company and will be restructured, disposed of, or wound up.
 

IF THE RESOLUTIONS ARE NOT PASSED OR IF THE SCHEME OF ARRANGEMENT DOES NOT RECEIVE THE APPROVAL OF THE SCHEME CREDITORS AND THE COURT THEN THE COMPANY MAY BE WOUND UP SAVE IN THE EVENT OF AN OFFER BEING RECEIVED. CERTAIN PARTS OF THE GROUP WILL BE UNLIKELY TO BE IN A POSITION TO MEET THEIR LIABILITIES AS THEY FALL DUE, FORCING THE DIRECTORS TO EITHER PLACE ASSETCO PLC INTO ADMINISTRATION, SELL IT ON LESS FAVOURABLE TERMS OR RESULT IN THE COMPANY BEING WOUND UP BY THE COURT. IN SUCH CIRCUMSTANCES, IT IS NOT EXPECTED THAT THE SHAREHOLDERS WOULD RECEIVE MORE THAN NOMINAL VALUE FOR THEIR CURRENT SHAREHOLDING.


9. Current trading and prospects
The Group has continued to perform its contracts in the UK and Abu Dhabi on a satisfactory basis, considering the serious problems arising from the financing issues that have inevitably resulted in supply issues, creditor pressure and winding up petitions, although the measuring performance on the UK contracts has inevitably slipped in recent months. Management’s attention has been focused on finding solutions to the immediate financing issues as well as devising a longer term solution, and these factors together with the additional management and professional costs which have been incurred as a result have had a material impact on the Group’s trading results. Whilst the investigation into the carrying value of balance sheet items is at an early stage, the Company anticipates there being material write downs arising from difficulties in linking asset finance to the underlying assets. The Company also anticipates there being write downs of the carrying value of goodwill attributed to the various contracts, and a possibility of further material write downs of other assets.
 

As a result of the Proposals, the Group will see a substantial reduction in its indebtedness, both at the level of the Company and within the Group as a whole. This reduction will amount to approximately £55 million, comprising the elimination of the liabilities associated with the Subsidiary Preference Shares as a result of the Share Exchange, the elimination of up to £20 million of indebtedness and other creditors of the Company as a result of the Scheme of Arrangement and the elimination of 40% of the indebtedness of the London Group, equivalent to approximately £20 million, as a result of the Further Arrangements in relation to the London Group. Assuming the full implementation of the Proposals including those in the Further Arrangements for the London Group, the Group as a whole would have an estimated £42.6 million of indebtedness, of which £30.6 million would relate to the London Group and a further £12 million relate to the Lincoln Business.
 

The Proposals, together with the Further Arrangements in relation to the London Group, will help stabilise the Company and create a strengthened platform on which to expand. In particular, the Company continues to pursue several contract opportunities in the UAE where it sees potential for significant expansion. However, the Group will continue to operate under serious financial pressures until the Proposals are complete, and even then there can be no certainty that the net proceeds of the Placing will be sufficient for the Group’s requirements in the medium term as the expansion of the business in the UAE and capital expenditure in the UK may require further capital to continue to grow and develop. In addition, until completion of the restructuring of the UK Subsidiaries of the Company, there may be contingencies that would put further pressure on the Company’s working capital management.
 

10. Pension Scheme
The Company is the principal employer of the Pension Scheme, even though it has no pensionable members in the pension scheme. The pension trustees have agreed a settlement of £450,000 enabling the Company to leave the pension scheme assuming the Proposals are implemented. The pension scheme will continue for the benefit of employees of the London Group.
 

As at today, the triennial valuation of the Pension Scheme is overdue. This must be resolved with the pension trustees as soon as practicable and may result in additional contributions.
 

11. NAV and its intentions
NAV is an independently managed UK investment management entity which since it was established in 2003, has been authorised and regulated by the Financial Services Authority. The principal activity of NAV is to provide discretionary investment management and advisory services to its active value and private equity clients.

NAV manages the North Atlantic Smaller Companies Investment Trust PLC and Oryx International Growth Fund Limited, both of which are listed on the London Stock Exchange, as well as the Trident Private Equity funds, representing £365 million of assets under management as at 30 June 2011. Christopher Mills is the Chief Investment Officer of NAV.
 

NAV is considering to seek to make such changes to the Board so as to strengthen the Group going forward and has confirmed its intention that, following implementation of the Proposals and the increase in its shareholding as a result of the Share Exchange, the business of the Group would be continued in substantially the same manner as proposed by the Circular.
 

NAV intends to hold its shareholding in the Company as a long term investment and its strategy will focus on the growth potential of the Group in the Middle East. Existing employment rights, including pension rights, of the employees or management of the Group will be safeguarded.

NAV has confirmed that its intentions regarding the location of the Company’s place of business and the continued employment of its employees and management will not be altered as a result of the Proposals. There are no plans to introduce any significant change in the business or in the terms of employment of the employees of the Group nor are there plans for any redeployment of the fixed assets of the Group as a result of the Proposals.
 

12. Use of proceeds
In aggregate, the Company will receive gross proceeds of £14 million as a result of the Placing. The Company will use the net proceeds after costs to settle with the Scheme Creditors for £5 million in the Scheme of Arrangement, to settle the Pension Scheme for a further £450,000, and also for an additional £3 million of working capital into the London Group and for additional general working capital and costs related to the Proposals. The remaining funds will be used to expand the UAE operations.
 

13. Related party transactions
Utilico Group, being the Company’s largest shareholder as at the date of the Circular (which currently holds 46,650,000 Existing Ordinary Shares representing 18.61 per cent. of the total issued share capital of the Company as at the date of the Circular), has subscribed for up to 2,333,333 Placing Shares in the Placing and is deemed to be a related party to the Company.
 

NAV, by virtue of its relationship with Christopher Mills who is a Director of the Company, is deemed to be a related party. Therefore, the Placing is considered to be a related party transaction pursuant to Rule 13 of the AIM Rules for both Utilico Group and NAV. The Company’s Directors (with the exception of Christopher Mills who is deemed to be interested in the transaction) consider, having consulted with the Company’s Nominated Adviser, Arden Partners, that the terms of the Placing are fair and reasonable insofar as the Shareholders are concerned.

In addition, the acquisition by the Company of the Subsidiary Preference Shares in consideration for the issue of the New Ordinary Shares to NAV and its related parties is considered to be a related party transaction pursuant to Rule 13 of the AIM Rules due to the relationship of their owner NAV with Christopher Mills.
 

The Company’s Directors (with the exception of Christopher Mills who is deemed to be interested in the transaction) consider, having consulted with the Company’s Nominated Adviser, Arden Partners, that the terms of the Share Exchange are fair and reasonable insofar as the Shareholders are concerned.
 

IF THE RESOLUTIONS ARE NOT PASSED OR IF THE SCHEME OF ARRANGEMENT DOES NOT RECEIVE THE APPROVAL OF THE SCHEME CREDITORS AND THE COURT THEN THE COMPANY MAY BE WOUND UP SAVE IN THE EVENT OF AN OFFER BEING RECEIVED. CERTAIN PARTS OF THE GROUP WILL BE UNLIKELY TO BE IN A POSITION TO MEET THEIR LIABILITIES AS THEY FALL DUE, FORCING THE DIRECTORS TO EITHER PLACE ASSETCO PLC INTO ADMINISTRATION, SELL IT ON LESS FAVOURABLE TERMS OR RESULT IN THE COMPANY BEING WOUND UP BY THE COURT. IN SUCH CIRCUMSTANCES, IT IS NOT EXPECTED THAT THE SHAREHOLDERS WOULD RECEIVE MORE THAN NOMINAL VALUE FOR THEIR CURRENT SHAREHOLDING.
 

14. Board of Directors
Following approval of the Proposals, it is intended that the Board will consider necessary management changes as well as the Board structure and its composition.
 

15. Irrevocable Undertakings
As at the date of the Circular, the Company has received irrevocable undertakings to vote in favour of the Proposals from Shareholders accounting for 57,422,187 Existing Ordinary Shares representing 22.9 per cent. of the Existing Share Capital. This includes irrevocable undertakings for the Directors, Utilico Group and Henderson and excludes NAV and Christopher Mills, who are not permitted to vote on the Resolutions. In addition, Utilico Group and Henderson will not vote on the approval of Resolution 3 as they are deemed to be interested in the outcome of the Proposals under Resolution 3. This reduces the percentage of Existing Ordinary Shares over which the Company has received irrevocable undertakings to vote in favour of Resolution 3 to 0.12 per cent..
 

16. General Meeting
At the General Meeting, convened for 10.00 a.m. on 26 September 2011, the following Resolutions will be proposed:

Resolution 1: an ordinary resolution to give the Directors authority to allot, inter alia, the Placing Shares and the New Ordinary Shares to be issued in connection with the Share Exchange

Resolution 3: an ordinary resolution to approve the waiver of Rule 9 of the Code following the increase of NAV’s proportionate shareholding in the Company after the Capital Reorganisation as required by the Panel

Resolution 4: an ordinary resolution to approve Proposals for the purposes of Rule 21.1 of the Code

Resolution 5: a special resolution to approve the Capital Reorganisation

Resolution 6: a special resolution to disapply the statutory pre-emption rights in relation to, inter alia, the issue of the Placing Shares

Resolution 7: a special resolution to approve the adoption of new articles of association of the Company following the Capital Reorganisation
 

17. Recommendation
As the Placing is deemed to be a related party transaction pursuant to Rule 13 of the AIM Rules, the Placing Independent Directors (who exclude Christopher Mills who is deemed to be interested in the transaction), having consulted with the Company’s Nominated Adviser, Arden Partners, consider that the terms of the transaction are fair and reasonable insofar as Shareholders are concerned. During this consultation Arden Partners has relied upon the Directors’ commercial assessments.
 

IF THE RESOLUTIONS ARE NOT PASSED OR IF THE SCHEME OF ARRANGEMENT DOES NOT RECEIVE THE APPROVAL OF THE SCHEME CREDITORS AND THE COURT THEN THE COMPANY MAY BE WOUND UP SAVE IN THE EVENT OF AN OFFER BEING RECEIVED. CERTAIN PARTS OF THE GROUP WILL BE UNLIKELY TO BE IN A POSITION TO MEET THEIR LIABILITIES AS THEY FALL DUE, FORCING THE DIRECTORS TO EITHER PLACE ASSETCO PLC INTO ADMINISTRATION, SELL IT ON LESS FAVOURABLE TERMS OR RESULT IN THE COMPANY BEING WOUND UP BY THE COURT. IN SUCH CIRCUMSTANCES, IT IS NOT EXPECTED THAT THE SHAREHOLDERS WOULD RECEIVE MORE THAN NOMINAL VALUE FOR THEIR CURRENT SHAREHOLDING.
 

Accordingly, your Directors unanimously recommend that Shareholders vote in favour of Resolutions 1, 2, 4, 5, 6 and 7 to be proposed at the General Meeting, as they intend to do in respect of their own beneficial holdings in the ordinary share capital of the Company.
 

In addition, the Rule 9 Independent Directors for the Placing and the Share Exchange (who exclude Christopher Mills who is deemed not to be independent by virtue of his position at NAV), having been so advised by Arden Partners, the Company’s independent adviser for the purposes of the Code, consider the Proposals to be fair and reasonable and in the best interest of the Independent Shareholders and the Company as a whole and unanimously recommend that you vote in favour of Resolution 3 to be proposed and held on a poll at the General Meeting, as they intend to do in respect of their own beneficial holdings in the ordinary share capital of the Company.
 

As a result of the terms of the Proposals, NAV and Christopher Mills will not vote on the approval of the Proposals. In addition Utilico Group and Henderson will not vote on Resolution 3 as they are deemed to be interested in the outcome of the Proposals under Resolution 3.
 

The Company has received irrevocable undertakings from certain other Shareholders to vote in favour of the Resolutions which amount to 57,422,187 Existing Ordinary Shares representing approximately 22.9 per cent. of the Existing Share Capital of the Company. However, Utilico Group and Henderson will not vote on the approval of Resolution 3 as they are deemed to be interested in the outcome of the Proposals under Resolution 3. This reduces the percentage of Existing Ordinary Shares which the Company has received irrevocable undertakings to vote in favour of Resolution 3 to 0.12 per cent.
 

In addition to his current position, Tudor Davies has been appointed as Company secretary with immediate effect.



DEFINITIONS
 

In this announcement, unless inconsistent with the subject or context, the following expressions have the following meanings:

“Act” or “Acts” means the Companies Act 2006, as amended;

“Admission” means the admission of the New Ordinary Shares in issue immediately following the completion of the Capital Reorganisation, the Share Exchange and the Placing Shares to trading on AIM becoming effective in accordance with the AIM Rules;

“AIM” means the AIM market of the London Stock Exchange;

“AIM Rules” means the AIM Rules for Companies published by the London Stock Exchange, as amended from time to time;

“Arden Partners” means Arden Partners plc, which is authorised and regulated by the Financial Services Authority;

“Banks” means the lenders to the Group;

“Board” means the board of directors of the Company, from time to time;

“Capital Reorganisation” means the proposed subdivision and consolidation of every Existing Ordinary Share into one New Ordinary Share and one New Deferred Share as described in the Circular;

“Circular” means this circular to Shareholders;

“Code” means the City Code on Takeovers and Mergers;

“Company” or “AssetCo PLC” means AssetCo PLC, a company incorporated under the laws of England and Wales, with registered number: 4966347 whose registered office is at 800 Field End Road, South Ruislip, Middlesex HA4 0QH;

“Court” means the High Court of Justice of England and Wales;

“CREST” means the system for Paperless settlement of trading and the holding of uncertified shares administrated through Euroclear UK & Ireland Limited;

“Directors” means Tudor Davies, Andrew Freemantle, Peter Manning and Christopher Mills;

“Enlarged Share Capital” means 11,000,712 New Ordinary Shares in issue at Admission;

“Espirito Santo” means Espirito Santo Investment Bank, incorporating Execution Noble & Co Limited, which is authorised and regulated by the Financial Services Authority;

“Excluded Liabilities” means each of the liabilities set out in schedule 1 of the Scheme;

“Existing Ordinary Shares” means the ordinary shares of 1p each in the capital of the Company in issue as at the date of the Circular;

“Existing Share Capital” means the 250,712,740 Existing Ordinary Shares in issue as at 8 September 2011, the last practicable date prior to the issue of the Circular;

“Form of Proxy” means the form of proxy accompanying the Circular for use in connection with the General Meeting;

“Further Arrangements” means the heads of terms and consequent definitive agreements intended to be entered into among the Company, the London Banks, and the London Group in relation to the restructuring of the London Group;

“Gartmore” means Gartmore Investment Management Limited subsequently acquired by Henderson on 4 April 2011;

“General Meeting” means the general meeting of the Company convened for 10.00 a.m. on 26 September 2011, notice of which is set out in the Circular;

“Group” means the Company and all of its subsidiaries (within the meaning of section 1159 of the Act);

“Group Company Creditors” means the members of the Group to whom the Company has any liability;

“Henderson” means Henderson Global Investors Limited;

“HMRC” means Her Majesty’s Revenue & Customs;

“Independent Directors” means Tudor Davies, Andrew Freemantle and Peter Manning;

“Independent Shareholders” means the Shareholders excluding the Investors;

“Investors” means NAV, Henderson and Utilico Group;

“Investors Warrants” means the warrants issued to the holders of Subsidiary Preference Shares in January 2009 convertible into AssetCo PLC shares at 61.2 pence each;

“LFEPA” means the London Fire and Emergency Planning Authority;

“Lincoln Business” means the companies that provide the delivery of the contract with the Lincoln Fire & Rescue Service, being AssetCo Lincoln Ltd and AssetCo Solutions Ltd;

“London Group” means the companies that provide the delivery of the contract with LFEPA, being AssetCo London Ltd, AssetCo Engineering Ltd and AssetCo Managed Services (ROI) Ltd;

“London Group Banks” means Lloyds Banking Group, Northern Bank Limited and Close Asset Finance, the lenders to the London Group as at the date of the Circular;

“London Stock Exchange” means the London Stock Exchange plc;

“NAV” means North Atlantic Value LLP with its registered office at Ground Floor, Ryder Court, 14 Ryder Street, London, SW1Y 6QB and certain funds that NAV advise or manage on a discretionary basis including North Atlantic Smaller Companies Investment Trust PLC, Trident Private Equity Fund II LP, Oryx International Growth Fund Limited and a number of private client accounts;

“New Articles” means the new articles of association of the Company proposed to be adopted
at the General Meeting;

“New Deferred Shares” means the new deferred shares of £4.95 each in the capital of the Company arising from the Capital Reorganisation;

“New Ordinary Shares” means the new ordinary shares of 10p each in the capital of the Company arising from the Capital Reorganisation;

“Panel” means the Panel on Takeovers and Mergers;

“Pension Scheme” means the AssetCo pension scheme currently governed by a trust deed with roles annexed dated 11 October 2003 (as amended from time to time);

“Placee” means a subscriber in the Placing;

“Placing” means the conditional placing of the Placing Shares;

“Placing Independent Directors” means Tudor Davies, Andrew Freemantle and Peter
Manning;

“Placing Letters” means the placing letters dated 9 September 2011 between the Company and each of the Investors relating to the Placing, further details of which are set out in paragraph 8 of Part II of the Circular;

“Placing Price” means the price at which the Placing Shares are placed at;

“Placing Shares” means the 7 million New Ordinary Shares to be issued pursuant to the Placing;

“PPP” means public private partnership;

“Proposals” means the Capital Reorganisation, the Share Exchange, the Placing, the Rule 9 Waiver, Admission and, if required by the Panel, the Rule 21 Approval;

“Record Date” means the record date for the Capital Reorganisation;

“Resolutions” means the resolutions set out in the notice of General Meeting in the Circular;

“Rule 9 Independent Directors” means Tudor Davies, Andrew Freemantle and Peter Manning;

“Rule 9 Waiver” means the agreement by the Panel to waive the obligations of NAV to make a general offer to all Shareholders pursuant to Rule 9 of the Code subject to approval, by way of a poll vote, of the Independent Shareholders as a result of the increase in the number of New Ordinary Shares which will be held by NAV in connection to the Proposals and exercise of Warrants as described in Part I of the Circular;

“Rule 21 Approval” means the approval of the Shareholders pursuant to Rule 21.1 of the Code in respect of the Placing and the Share Exchange;

“Scheme” or “Scheme of Arrangement” means the proposed scheme of arrangement under Part 26 of the Act between the Company and the Scheme Creditors;

“Scheme Creditors” means any person who is, or claims to be, a creditor of the Company in respect of a Scheme Liability, at the Scheme Record Date;

“Scheme Document” means the circular dated 30 August 2011 to be posted to the Scheme Creditors and others by the Company containing inter alia, the Scheme;

“Scheme Liability” has the meaning ascribed to it in the Scheme Document;

“Scheme Meeting” means the meetings summoned by the Court under section 896 of the Act for the purpose of obtaining the approval of the Scheme Creditors;

“Scheme Record Date” means the Effective Date (as defined in the Scheme Document);

“Share Exchange” means the sale by NAV of the Subsidiary Preference Shares in consideration for the issue of certain New Ordinary Shares;

“Share Exchange Agreement” means the share exchange agreement between the Company and the Investors in relation to the Share Exchange;

“Share Option Holders” means the holders of options under the Share Options Plans;

“Share Option Plans” means the AssetCo Unapproved Share Option Plan, the AssetCo EMI Share Option Plan and the AssetCo Savings Related Share Option Scheme;

“Shareholder” means the holders of the Existing Ordinary Shares;

“Split Deferred Share” means one deferred share of 0.99p resulting from the Capital Reorganisation;

“Split Ordinary Share” means one ordinary share of 0.01p resulting form the Capital Reorganisation;

“Subsidiary Preference Shares” means the zero dividend redeemable preference shares of £1.00 each in the capital of AssetCo (Abu Dhabi) Limited issued to NAV;

“UAE” means the United Arab Emirates;

“Utilico Group” means Utilico Investments Limited and Bermuda Commercial Bank;

“Warrant” means the entitlement to subscribe for one New Ordinary Share exercisable at the Placing Price in whole or in part at any time from Admission up to 31 December 2013;

“Warrant Instrument” means the warrant instrument by which, pursuant to the terms of the Placing Letters, the Placees are entitled upon Admission to receive 3,500,000 Warrants;

“Whitewash” means the procedure under Rule 9 of the Code and the circumstances in which the Panel may grant a waiver from the requirement to make a general offer under Rule 9 of the Code;

“Whitewash Resolution” means the resolution in relation to the Rule 9 Waiver set out in the notice of the General Meeting.


This is an announcement falling under Rule 2.4 of the Code. It does not represent a firm intention to make an offer under Rule 2.5 of the Code. This announcement is made without the consent of the offeror and, accordingly, there can be no certainty that an offer will be made nor as to the terms on which any offer might be made. In particular, it should be noted that nothing in this announcement should be taken as a no-increase statement under Rule 32.2 of the Code.


 

Enquiries:
 

AssetCo plc
Tudor Davies: +44 (0) 207 614 5917
 

Arden Partners plc
Richard Day: +44 (0) 207 614 5917
Adrian Trimmings
Chris Thomas
 

Espirito Santo Investment Bank
John Llewellyn-Lloyd: +44 (0) 20 3429 1426
John Riddell
 

Citigate Dewe Rogerson
Fiona Tooley: Office: +44 (0) 121 362 4035
Mobile: +44 (0) 7785 703 523


 

Dealing Disclosure Requirements

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any paper offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any paper offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any paper offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a paper offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.
 

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any paper offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any paper offeror, save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a paper offeror they will be deemed to be a single person for the purpose of Rule 8.3.
 

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).
 

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. If you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure, you should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129.