TIDMCIC
RNS Number : 6680X
Conygar Investment Company PLC(The)
23 February 2017
For immediate release
23 February 2017
THE CONYGAR INVESTMENT COMPANY PLC
Proposed Disposal of the Investment Property Portfolio
The Conygar Investment Company PLC ("Conygar" or the "Company"),
the property investment and development group, announces that it
has entered into a conditional sale agreement for the disposal of
its Investment Property Portfolio to Regional Commercial Midco
Limited (a wholly owned subsidiary of Regional REIT Limited) (the
"Purchaser") for a consideration which attributes a value of
GBP129.8m to the Investment Property Portfolio and represents a
modest premium to its valuation of GBP129.51m as at 30 September
2016 (the "Disposal").
The consideration will be satisfied by the issue of 26,326,644
ordinary shares in Regional REIT at a price of 106.347 pence per
share and the assumption by the Purchaser of both the bank debt of
the Investment Property Portfolio and Conygar's obligation to fund
the repayment of the ZDPs in January 2019 issued by Conygar ZDP plc
("ZDP Co"). The Consideration Shares will represent approximately
8.8% of the enlarged issued share capital of Regional REIT. The
consideration will be adjusted following Completion to reflect the
net asset value of the SPVs, which own the Investment Property
Portfolio, on the Completion Date. The Consideration Shares will
provide income which will substantially cover Conygar's ongoing
overheads.
The Disposal constitutes a fundamental change of business for
the purposes of the AIM Rules. Accordingly, Completion is
conditional on, inter alia, the approval of Shareholders at a
general meeting of the Company, notice of which will be posted to
Shareholders shortly. The Disposal is also conditional upon ZDP
Shareholders sanctioning the transfer of the ZDP Co Ordinary Shares
to the Purchaser and the assumption by the Purchaser (whose
obligations will be guaranteed by Regional REIT) of the obligations
currently owed by the Company to ZDP Co under the terms of the Loan
Agreement and the Contribution Agreement. Notice convening a
separate class meeting of the ZDP Shareholders seeking the ZDP
Class Consent will also be sent by ZDP Co to the ZDP Shareholders
shortly.
Further details of the Disposal, including additional conditions
to which it is subject, are set out in the Appendix to this
announcement.
Robert Ware, Chief Executive of Conygar, commented:
"We are pleased to be divesting the Investment Property
Portfolio, having added a great deal of value to the portfolio
since it was acquired during the years following the financial
crisis. We believe that the team's time will be best spent focusing
on maximising the latent value of the development pipeline over the
coming years.
We would like to thank the Regional REIT team for their
professionalism and hard work throughout the period to date and we
look forward to working with them to the completion of this
transaction and in the future, as a significant shareholder."
Enquiries:
The Conygar Investment Company PLC
Robert Ware: 020 7258 8670
Ross McCaskill: 020 7258 8670
Liberum Capital Limited (Nominated Adviser, Financial Adviser
and Broker)
Richard Bootle/Steve Pearce/Henry Freeman: 020 3100 2222
Temple Bar Advisory (Public Relations)
Alex Child-Villiers: 07795 425580
This announcement contains inside information which is disclosed
in accordance with the Market Abuse Regulation.
Appendix
Background to and reasons for the Disposal
Conygar was originally admitted to trading on AIM on 23 October
2003. Since that time, the Company's stated strategy has been, and
will continue to be following completion of the Disposal, to invest
in property assets and companies where it can add value by
utilising its property management, development and transaction
structuring skills and realise capital growth and create value for
Shareholders.
Since its admission to trading on AIM, the Company's management
has consistently sought to acquire or dispose of assets within its
property portfolio, often on an opportunistic basis, where the
Board considers to do so would generate returns for Shareholders.
Whilst the Board considers that holding the Investment Property
Portfolio to provide a stable flow of cash remains a credible
strategy, the Board believes that the Disposal represents a
significantly compelling opportunity for the following reasons:
-- the Disposal is being completed at a modest premium to the
most recent valuation of the Investment Property Portfolio, which
the Board believes is an acceptable valuation when considered in
light of the current political and economic uncertainty;
-- as the SPV's that hold the Investment Property Portfolio are
being sold with their existing loan facilities in place and the
Purchaser is assuming the Company's obligations to fund the ZDP
Capital Entitlement, this will result in the Company being debt
free following Completion of the Disposal; and
-- the proceeds recognised from the Disposal can be utilised to
accelerate the progress of the Company's existing development asset
portfolio and also enable the Company to seek new investment
opportunities.
Summary of the terms of the Disposal and the Sale Agreement
The Sale Agreement provides that, subject to the passing of the
resolution to be proposed at a general meeting of Conygar, the
obtaining of the ZDP Class Consent and the consent of the banks,
who have provided finance to the SPV's, the Purchaser has agreed to
purchase from the Vendors the entire issued share capital of the
SPV's for a consideration of GBP28.0m (representing the aggregate
net asset values of the SPV's as at 31 December 2016) to be
satisfied by the issue, credited as fully paid, of the
Consideration Shares and the assumption of the debt obligations
mentioned above.
The consideration is subject to adjustment by reference to
completion accounts to be prepared as at the Completion Date. To
the extent that the net assets have decreased, Conygar is obliged
to pay any shortfall in cash and to the extent that the net assets
have increased, Regional REIT is obliged to issue further
Consideration Shares (at an issue price of 106.347p per
Consideration Share) or pay the amount of the increase in cash at
its election. The Consideration Shares will rank pari passu with
all Regional REIT shares currently in issue, save that they will be
subject to the lock-in arrangements described below and the
Consideration Shares will not be entitled to the dividend of 2.40
pence per Regional REIT share declared by Regional REIT today for
the period from 1 October 2016 to 31 December 2016.
Under the terms of the Sale Agreement, the Purchaser will, upon
Completion, acquire all the ZDP Co Ordinary Shares and will also
(by way of novation) assume the obligations owed by the Company to
ZDP Co, pursuant to the terms of the Loan Agreement and the
Contribution Agreement. Regional REIT is a party to the novation
agreements to, inter alia, guarantee the performance of the
Purchaser's obligations thereunder. In conjunction with the
transfer of the obligations of ZDP Co, the final ZDP Capital
Entitlement of 130.7 pence per ZDP Share payable in January 2019
will be increased to 132.9 pence per ZDP Share, which will require
ZDP Shareholders to approve an amendment to the articles of ZDP Co.
ZDP Co will also change its name to Regional REIT ZDP PLC.
Under the terms of the Sale Agreement, the Company has agreed a
lock-in arrangement in respect of the Consideration Shares.
Specifically, the Company will not be permitted to dispose
(directly or indirectly) of the legal or beneficial ownership
of:
-- one-third of the Consideration Shares until the date falling 6 months after Completion;
-- one-third of the Consideration Shares until the date falling 12 months after Completion; and
-- one-third of the Consideration Shares until the date falling 18 months after Completion
(in each case a "Lock-in Period").
The Company has also agreed that for a period of 12 months
following expiry of the relevant Lock-in Period, it will only
dispose of Consideration Shares through Regional REIT's
brokers.
The lock-in arrangements are subject to standard "carve-outs",
including the ability of Conygar to accept a takeover offer or
tender offer and to dispose of Consideration Shares pursuant to a
court order, or to fund any liabilities or obligations arising
under the terms of the Sale Agreement. The Consideration Shares
will be held by the Company, subject to the Lock-in Periods
described above and may look to dispose of them in the future as
attractive liquidity opportunities arise. Cash raised from the sale
of Consideration Shares will be used to execute the Company's
stated investment strategy.
Completion is, subject to satisfaction or (where appropriate)
waiver of the conditions set out in the Sale Agreement, due to
occur on 24 March 2017 or such later date as the parties to the
Sale Agreement shall agree, being not later than 14 April 2017.
Information on the Investment Property Portfolio
The Disposal of the Investment Property Portfolio excludes the
development site held by the Company at Ashby-de-la-Zouch. The
Investment Property Portfolio (including the Ashby-de-la-Zouch
development site) was valued at GBP130.7 million (as at 30
September 2016) and had a contracted annual rent roll of GBP9.7
million for the financial year ended 30 September 2016. As at 30
September 2016, the overall vacancy rate in the Investment Property
Portfolio was 17.1 per cent. which, whilst an increase from 14.1
per cent. as at 30 September 2015, reflected significant
refurbishment at the Company's assets at Farnborough and the Links,
Warrington. If one excludes these assets and the Company's asset at
Mochdre, the vacancy rate was 6.9 per cent. The unexpired lease
length rose from 4.8 years to 5.8 years as at 30 September 2016,
which reflected a number of new leases and renewals at Mochdre
Commerce Park, Kelvin Close, Warrington, Watt Place, Hamilton and
Kingscourt Leisure Centre, Dundee.
Information on Regional REIT
Regional REIT is a United Kingdom based real estate investment
trust whose shares were admitted to the premium segment of the
Official List and to trading on the main market of the London Stock
Exchange on 6 November 2015. Regional REIT is managed by London
& Scottish Investments Limited, as asset manager, and Toscafund
Asset Management LLP, as investment manager, and was formed from
the combination of the existing property funds previously created
by Toscafund Asset Management LLP and London & Scottish
Investments Limited.
Regional REIT pursues its investment objective by investing in,
actively managing and disposing of regional property assets.
Regional REIT seeks to offer investors a differentiated play on the
recovery prospects of UK regional property. It aims to deliver an
attractive total return to its shareholders, targeting (10 - 15 per
cent per annum) with a strong focus on income and good capital
growth prospects.
Regional REIT's current commercial property portfolio is wholly
in the UK and comprises, predominantly, quality office and
industrial units located in the regional centres of the UK outside
the M25 motorway.
On 20 September 2016, Regional REIT announced its half-year
report for the six month period ended 30 June 2016 which set
out:
-- Gross value of property assets of GBP501.3m, a net initial
yield of 7.1 per cent. and an EPRA NAV of 108.0p per share;
-- Operating profit (before gains / losses on property assets
and other investments) of GBP13.436m and profit before tax of
GBP5.947m, with declared dividends of 3.5p per share for the
half-year;
-- A diversified portfolio of 128 properties, 974 units and 719
tenants, with the portfolio split between offices (62.5 per cent.
by value) and industrial sites (29.1 per cent.) across the UK;
and
-- The weighted average unexpired lease term to first break was approximately 3.6 years.
Regional REIT has today declared a Q4 dividend of 2.40 pence per
share, which equated to aggregate dividends paid of 7.65 pence per
share paid for the 12 month period ended 31 December 2016.
Further information on Regional REIT can be found on its website
at www.regionalreit.com.
The Company's operations following the Disposal
Following the Disposal, the Company will continue to operate as
an AIM quoted property investment and development group dealing
primarily in UK property. The existing management of the Company
will be retained to focus on its existing strategy to invest in
property assets and companies to add significant value using its
property management, development and transaction structuring
skills.
The Board believes that the Company's development projects will
provide further Shareholder value in the medium term and as such,
following Completion, the Company will continue to progress its
development projects and anticipates commencing construction work
at a number of sites during 2017, in addition to ongoing works at
several of its existing development sites. The Company has also
identified a pipeline of attractive investment and development
projects throughout the UK which, provided it can agree attractive
terms, it anticipates acquiring and maximising returns over the
medium term.
Following Completion, the Company will continue to consider
buying back Ordinary Shares where the Board deems it appropriate to
do so and if surplus cash is available. Accordingly, the Company
renewed its buy back authority at its recent Annual General Meeting
to provide effective capital management and potential cash returns
to Shareholders.
Definitions
In this announcement the following terms shall, where the
context so requires, have the following meanings
"AIM" the AIM Market operated by the
London Stock Exchange;
"Board" the Board of directors of the
Company;
"Completion" the completion of the sale and
purchase of the SPV's which
hold the Investment Property
Portfolio pursuant to the terms
of the Sale Agreement;
"Completion Date" the date upon which Completion
occurs, currently anticipated
to be 24 March 2017;
"Consideration 26,326,644 ordinary shares of
Shares" nil par value in Regional REIT;
"Contribution Agreement" the contribution agreement dated
7 January 2014 and entered into
between the Company and ZDP
Co;
"Disposal" the proposed sale of the SPV's
to the Purchaser on and subject
to the terms of the Sale Agreement;
"Investment Property the portfolio of 32 investment
Portfolio" or "Portfolio" properties held by the SPV's
proposed to be sold to the Purchaser
pursuant to the terms of the
Sale Agreement;
"Loan Agreement" the loan agreement dated 7 January
2014 and entered into between
the Company and ZDP Co;
"Purchaser" Regional Commercial Midco Limited,
a wholly owned subsidiary of
Regional REIT;
"Regional REIT" Regional REIT Limited;
"Sale Agreement" the conditional sale and purchase
agreement entered into today
between the Company, the Purchaser,
Regional REIT and the Vendors
setting out the terms of the
Disposal;
"Shareholder" a holder of Conygar ordinary
shares of GBP0.05 each in the
capital of the Company;
"SPV's" the special purposes vehicles
which hold the Investment Property
Portfolio being Conygar Hanover
Street Limited, Conygar Strand
Limited, Conygar Dundee Limited,
Conygar Stafford Limited, Conygar
St Helens Limited, TAPP Property
Limited, TOPP Property Limited,
TOPP Bletchley Limited, Lamont
Property Acquisition (Jersey)
I Limited, Lamont Property Acquisition
(Jersey) II Limited and Lamont
Property Acquisition (Jersey)
IV Limited;
"UK" the United Kingdom of Great
Britain and Northern Ireland;
"Vendors" Conygar Holdings Limited, Conygar
Properties Limited, The Advantage
Property Income Trust Limited
and TOPP Holdings Limited;
"ZDP Capital Entitlement" the accrued capital entitlement
of a ZDP Share on 9 January
2019;
"ZDP Class Consent" the consent of ZDP Shareholders,
given as a class, to the transfer
of the ZDP Co Ordinary Shares
by the Company to the Purchaser
and the assumption by the Purchaser
(in place of the Company) of
the Company's obligations to
ZDP Co under the terms of the
Loan Agreement and the Contribution
Agreement;
"ZDP Co" Conygar ZDP PLC (to be renamed
Regional REIT ZDP PLC);
"ZDP Co Ordinary the 50,000 ordinary shares GBP0.01
Shares" each in the capital of ZDP Co,
comprising the entire issued
ordinary share capital of ZDP
Co;
"ZDP Share" zero dividend preference shares
of GBP0.01 each issued by ZDP
Co;
"ZDP Shareholder" a holder of ZDP Shares; and
"GBP" the legal currency of the UK.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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