TIDMIFC
RNS Number : 4936X
Indian Film Company Limited (The)
14 August 2009
For immediate release
14 August 2009
The Indian Film Company Limited
("IFC" or the "Company")
Posting of circular advising IFC Shareholders to reject
Network 18's Offer
The Independent Directors of IFC (the "Independent Directors") have today
written to shareholders advising them why they are urging them to reject the
mandatory cash offer announced by Network 18 Holdings Limited ("Network 18") on
30 July 2009 (the "Offer") as set out in an offer document dated 3 August 2009
(the "Offer Document").
The circular ("Circular") posted today to shareholders sets out the Independent
Directors' reasons for rejecting the Offer and in particular highlights the
Independent Directors' belief that the Offer undervalues the Company.
The Independent Directors strongly recommend that IFC shareholders reject the
Offer by taking no action in response to the Offer and, in particular, that they
should not complete the form of acceptance that they received with the Offer
Document.The text of a letter from the Chairman to the Shareholders setting out
in detail why the Independent Directors recommend that Shareholders should
reject the Offer is set out below.
Further announcements will be made as appropriate.
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| For further information, please contact: | |
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| The Indian Film Company Limited | |
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| www.theindianfilmcompany.com | |
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| Sandeep Bhargava | Tel: +91 22 6629 1723 |
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| Grant Thornton UK LLP (Nominated | |
| Adviser) | |
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| Fiona Owen | Tel: +44 20 7383 5100 |
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| Elara Capital plc (Broker and Joint Rule | |
| 3 Adviser) | |
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| Raj Bhatt/Mary Phelan | Tel: +44 20 7486 9733 |
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| Blomfield Corporate Finance Limited | |
| (Joint Rule 3 Adviser) | |
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| Derek Crowhurst/James Pinner | Tel: +44 207 489 4500 |
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| | |
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| Oriel Securities Limited (Broker) | |
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| Natalie Fortescue/Daniel Conti | Tel: +44 20 7710 7600 |
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| Pelham Public Relations | |
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| Alex Walters/Francesca Tuckett | Tel: +44 20 7337 1500 |
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The following information is an excerpt from the circular to Shareholders
(the "Circular") posted today. Copies of the Circular can be obtained upon
request from the Company Secretary, Elysium Fund Management Limited, PO Box 650,
2nd Floor, No. 1 Le Truchot, St Peter Port, Guernsey, Channel Islands, GY1
3JX and will also be available for download from www.theindianfilmcompany.com.
Definitions used in the Circular apply in this announcement unless the context
otherwise requires.
Dear Shareholder,
REJECT THE MANDATORY CASH OFFER BY NETWORK 18 HOLDINGS LIMITED
On 4 August 2009, we wrote to you enclosing a copy of the announcement of the
mandatory cash offer by Network 18 for the Company and a copy of the Company's
announcement recommending that the Shareholders take no action in respect of the
Offer.
This letter explains the reasons why the Independent Directors believe that the
Offer undervalues the Company and that Shareholders should therefore reject the
Offer.
Offer at an undervalue
The Offer represents:
* a nominal premium of approximately 1.2 per cent. to the Closing Price of 39.5
pence on 29 July 2009, being the latest practicable date prior to the
announcement of the Offer;
* no premium to the Closing Price of 40 pence on 13 August 2009, being the latest
practicable date prior to the posting of this response; and
* a discount of approximately 66 per cent. to the net asset value of 117.32 pence
per Share as at 31 March 2009, being the date of the last audited balance sheet
of the Company.
The Independent Directors believe that any takeover offer for the Company should
reflect an appropriate premium to the prevailing price of an Indian Film Company
Share prior to the announcement of such an offer and note that the 40 pence per
share offer from Network 18 represents a significant discount to the most
recently published net asset value per Indian Film Company Share.
The Independent Directors recognise that the liquidity of the Indian Film
Company Shares has been low and that certain Shareholders may, therefore, wish
to use the Offer as an opportunity to crystallise their investment. However, the
Independent Directors are firmly of the view that the Offer undervalues the
Indian Film Company Shares and that, although there can be no certainty that
Shareholders who wish to sell in future will be able to sell at a price of 40
pence or higher, Shareholders with a medium to long term investment strategy
should retain their Indian Film Company Shares at this time. The Independent
Directors believe that the Offer undervalues the Indian Film Company's business,
assets, goodwill and prospects.
The Independent Directors unanimously recommend Shareholders not to accept the
Network 18 Offer and they do not intend to accept the Offer in respect of their
own beneficial holdings, which are in aggregate 10,000 Indian Film Company
Shares.
In light of the upwards movement in the share price of the Company following the
release of the audited accounts of the Company for the year ended 31 March 2009,
an offer of 40 pence per Share does not represent a premium over the market
price of an Indian Film Company Share. Indeed, Shareholders should be aware
that, it was for this reason that the Board decided not to proceed to recommend
an indicative partial offer which Network 18 had tabled before the Board in June
2009 to acquire Indian Film Company Shares at a price of 40 pence per Indian
Film Company Share which was intended to result in Network 18 holding 51 per
cent. of the issued share capital of the Company.
Indian Film Company - Key Information
The Indian Film Company was incorporated in Guernsey on 4 April 2007 and
established as a closed ended investment fund to make investments in both Indian
films and films primarily targeted at the Indian audience. The Indian Film
Company Shares were admitted to trading on AIM on 18 June 2007. The Indian Film
Company operates as an externally managed Indian-focused motion picture company
with outsourced production and distribution functions. The Indian Film Company
was specifically created to invest in a portfolio of Indian films and films
primarily targeted at the Indian audience across different genres, languages and
budgets.
The year ended 31 March 2009 was an important year for the Group with eight
films being released and nine films going into production to be released in the
year ending 31 March 2010. The Indian Film Company Group recorded a net profit
for the year ended 31 March 2009 of GBP3.89 million (period to 31 March 2008:
GBP1.96 million) giving earnings per share of 7.07 pence (2008: 3.56 pence). The
Indian Film Company Group's net asset value as at 31 March 2009 was 117.32 pence
per Indian Film Company Share (2008: 99.59 pence). The year-ended 31 March 2009
saw the Group release a mix of acquired and co-produced content. The Group's
production and co-production projects have progressed well and some of these
will be released in the current financial year. In addition, the Group has
focused more on mounting its own productions in order to generate higher margins
and profitability. The Group has recruited talented directors with established
track records who are working on projects in various stages of production
including scripting, casting, shooting and post production.
However, the Independent Directors note that trading in the current economic
environment continues to be very challenging with several external factors, such
as the Mumbai terror attacks, affecting the Company's overall performance. The
Independent Directors also note that the Company has two films currently on
release and, whilst there can be no certainty as to the total return that these
films will realise, at this time the Independent Directors do not anticipate
that these films will perform as well as originally expected and, therefore, the
Directors believe they will be loss making investments for the Company.
The Independent Directors believe that, despite the above factors and the
uncertainty over the films currently on release, the track record of the Company
since inception supports their belief that the continued growth opportunities of
the Company remain strong. The Company continues to invest in appropriate
projects which are expected to provide strong returns and increase shareholder
value in the medium to long-term.
The Independent Directors consider that the growth prospects and plans for
delivery of shareholder value support a case for a premium rating for the Indian
Film Company.
Independent Directors
The Independent Directors of the Company for the purposes of the Offer are Shyam
Benegal, Lord Meghnad Desai, Alok Verma and Peter Radford.
Network 18 is a company in which Raghav Bahl, who is a non-executive director of
the Indian Film Company, has material interests as described further below under
"Information on Network 18". Raghav Bahl has, accordingly, not taken part in the
Board's consideration of the Offer and this letter contains the views and
recommendations of the Independent Directors alone.
On 31 July 2009, Atul Setia tendered his resignation from the Board of the
Indian Film Company as a result of Altima India Master Fund Limited ceasing to
have an aggregate interest in 10 per cent. or more of the Indian Film Company's
issued share capital.
On 12 August 2009, Deepak Gupta tendered his resignation from the Board of the
Indian Film Company which became effective on 13 August 2009.
Information on Network 18
Network 18 is a company incorporated in the Cayman Islands and is a subsidiary
of Network 18 Media, a company quoted on both the National Stock Exchange and
the Bombay Stock Exchange of India.
Raghav Bahl and his relatives control over 51 per cent. of the issued share
capital of Network 18 Media and therefore Mr. Bahl has a material interest in
the outcome of the Offer. If the Offer were to become unconditional, the Company
would become a subsidiary of Network 18 and an indirect subsidiary of Network 18
Media.
Possible consequences on the Indian Film Company's business of Network 18
gaining a controlling interest
The Independent Directors note the following statement (drawn without material
adjustment, save for the emphasis in the text below) from the Offer Document:
"Network 18 has no current plans to change the current strategy of The Indian
Film Company or the location of The Indian Film Company's operational places of
business, although this will be kept under review with a view to maximising
value for shareholders."
The Independent Directors believe that the current operational strategy and
investing policy of the Company as outlined in the audited accounts of the
Company for the year ended 31 March 2009 continues to be a strong plan aimed at
delivering value and achieving growth for the Company. The Indian Film Company
is a relatively young Company and it has yet to fulfil a number of the
strategies and realise a number of the opportunities that were outlined at the
time of its admission to AIM. The Independent Directors believe that the Company
should be given the opportunity to do so.
The Independent Directors do note that a number of the Company's competitors are
part of larger media or entertainment groups which in some cases have brought
advantages to their competitor's businesses as they have been able to leverage
off the efficiencies, contacts and networks of the larger corporate groups that
they belong to. In this regard, the Independent Directors note that Network 18
has stated that it "anticipates that if it, and its concert parties, owned a
controlling interest in The Indian Film Company, this would lead to greater
traction with all film industry participants such as Producers, Directors,
Artists, Distributors and Exhibitors and would allow a more direct association
with the branding that the Network 18 Group enjoys in the media industry, and
would also result in a better access to capital on the strength of Network 18
Group's track record with the financial community".
Whilst the Independent Directors consider that it would be in the best interests
of all Shareholders for the Company to leverage off these stated benefits with
Network 18 remaining as a significant shareholder as opposed to a controlling
shareholder, they note that Network 18 has stated that the full benefits of
directly and openly leveraging its strengths, can only be achieved by Network 18
becoming a controlling shareholder.
The Independent Directors also note that whilst Network 18's anticipated
benefits of the Indian Film Company being consolidated as a Network 18 group
company as noted in the extract from the Offer Document above may result in
benefits to the Company, Network 18 has not provided specific details of how it
proposes in practice to generate this greater traction and allow the Company to
leverage off its strengths.
Continuation of quotation on AIM
The Independent Directors continue to believe that it is in the best interests
of Shareholders to retain the Indian Film Company's quotation on AIM.
Shareholders should be aware that Network 18 has stated that, subject to it
obtaining a controlling interest in the Company, its intention is that the
Company will continue with its quotation on AIM. However, Shareholders should
note that they could become minority shareholders in a controlled company, which
may have an adverse impact on the liquidity and marketability of the reduced
number of Shares that are held in public hands.
Further, Shareholders should note that Network 18 has stated that if it acquires
such number of Indian Film Company Shares that results in the Network 18 Parties
owning more than 75 per cent. of the Company's issued share capital, Network 18
has reserved the right to consider all its options and this may include
cancellation of the Indian Film Company's quotation on AIM. It is important for
Shareholders to note that, if the Indian Film Company's quotation is cancelled
at some future date, it may not be possible for Shareholders to realise as much
as 40 pence per Indian Film Company Share, should they so wish, before the
quotation is cancelled and Shareholders might find themselves as minority
shareholders in an unquoted company. Cancellation of the quotation on AIM would
significantly reduce the liquidity and marketability of Indian Film Company
Shares not acquired by Network 18.
Shareholders should be aware that Network 18 has stated that in the event it
acquires 90 per cent. or more of the shares to which the Offer relates (which
would exclude any shares currently owned by Network 18 and the Network 18
Parties), it intends to exercise its rights under sections 336 to 338
(inclusive) of the Companies (Guernsey) Law 2008 (as amended) to compulsorily
acquire the remaining shares of any Shareholder who did not accept the Offer.
Management and employees
The Independent Directors note the following statements (drawn without material
adjustment) from the Offer Document.
"Accordingly, assuming Network 18 Holdings acquired sufficient Indian Film
Company Shares so that the Network 18 Parties have a controlling interest,
Network 18 Holdings will ensure the existing contractual employment and pension
rights of all employees and management of the Indian Film Company Group will be
fully safeguarded. It is Network 18 Holding's current intention that key members
of the management team should remain with the Indian Film Company."
The Independent Directors note that the Company, which is led by a board of
non-executive directors and is managed by the Investment Manager (a third party
investment management company jointly owned by Viacom Inc and BK Media Mauritius
Pvt. Limited (which is owned by Raghav Bahl)), has no direct employees or
management. Accordingly it is not clear to the Independent Directors from the
statements referred to above what the intentions of Network 18 are in this
regard. In particular, Shareholders should note that Network 18 has not stated
in its Offer Document what its intentions are with respect to the retention of
the Investment Manager, Investment Adviser nor the retention or maintenance of
an independent board of non-executive directors of the Company, in the event
that the Offer becomes unconditional.
Conclusions and Recommendation
For the reasons set out above, the Independent Directors believe that the Offer
undervalues the Indian Film Company's business, assets, goodwill and prospects
and that Shareholders should therefore reject the Offer and not return any Form
of Acceptance as will the Independent Directors who collectively have interests
in 10,000 Indian Film Company Shares.
The Independent Directors of the Indian Film Company, who have been so advised
by each of Elara Capital and Blomfield (who are acting jointly as independent
advisers to the Independent Directors for the purposes of Rule 3 of the City
Code), consider that the Network 18 Offer of 40 pence per Share does not
represent a fair and reasonable offer for Shareholders with a medium to
long-term investment strategy.
In providing advice to the Independent Directors Blomfield and Elara Capital
have taken into account the commercial assessments of the Independent Directors.
Yours sincerely,
Shyam Benegal
Chairman
Elara Capital PLC, which is authorised and regulated in the United Kingdom by
the Financial Services Authority, is acting as joint adviser to the Company and
no one else in connection with the matters referred to herein and will not be
responsible to anyone other than the Company for providing the protections
afforded to its clients or for providing advice in relation to Network 18
Holdings Limited's Offer, the contents of this document or any transaction or
arrangement or other matter referred to herein.
Blomfield Corporate Finance Limited, which is authorised and regulated in the
United Kingdom by the Financial Services Authority, is acting as joint adviser
to the Company and no one else in connection with the matters referred to herein
and will not be responsible to anyone other than the Company for providing the
protections afforded to its clients or for providing advice in relation to
Network 18 Holdings Limited's Offer, the contents of this document or any
transaction or arrangement or other matter referred to herein.
The Independent Directors accept responsibility for the information contained
in this announcement. To the best of the knowledge and belief of the Independent
Directors (who have taken all reasonable care to ensure such is the case),
the information contained in this announcement is in accordance with the facts
and does not affect the import of such information.
Overseas jurisdictions
The release, publication or distribution of this announcement and the
Circular in jurisdictions other than the United Kingdom may be restricted by law
and therefore any persons who are subject to the laws of any jurisdiction other
than the United Kingdom should inform themselves about, and observe, any
applicable requirements. Any failure to comply with the applicable requirements
may constitute a violation of the securities laws of any such jurisdiction.
This announcement has been prepared for the purpose of complying with English
law and the City Code and the information disclosed herein may not be the same
as that which would have been disclosed if this announcement had been prepared
in accordance with the laws of jurisdictions outside the United Kingdom.
Unless otherwise determined by Network 18 or required by the City Code
on Takeovers and Mergers (the "Code") and permitted by applicable law
and regulation, the Offer is not being made, directly or indirectly, in or into,
or by the use of the mails or by any means or instrumentality (including,
without limitation, telephonically or electronically) of interstate or foreign
commerce, or any facility of a national securities exchange, of the United
States, Canada, Australia or Japan or any other jurisdiction where extension or
acceptance of the Offer would violate the law of that jurisdiction (a
"Restricted Jurisdiction"), and the Offer is not capable of acceptance by any
such use, means, instrumentality or facility or from within a Restricted
Jurisdiction.
Accordingly, unless otherwise determined by IFC or required by the Code and
permitted by applicable law and regulation, copies of this announcement and the
Circular are not being, and must not be, directly or indirectly,
mailed, transmitted or otherwise forwarded, distributed or sent in or into or
from a Restricted Jurisdiction and persons receiving such documents (including,
without limitation, custodians, nominees and trustees) must not mail, transmit
or otherwise forward, distribute or send them in or into or from a
Restricted Jurisdiction.
Forward looking statements
This document, including information included or incorporated by reference to
this document, may include certain "forward-looking statements". These
statements are based on the current expectations of the Independent Directors
and are naturally subject to uncertainty and changes in circumstances. The
forward-looking statements contained herein may include statements about the
expected effects on the Indian Film Company of the Offer, the expected timing
and scope of the Offer, strategic options and all other statements in this
document other than historical facts. Without limitation, any statements
preceded or followed by or that include the words "targets", "plans" "believes",
"expects", "aims", "intends", "will", "may", "should", "could", "would", "can",
"continue", "opportunity", "anticipates", "estimates", "projects" or, words or
terms of similar substance or the negative thereof, are forward-looking
statements. Forward-looking statements involve risk and uncertainties that could
cause actual results to differ materially from those expressed in the
forward-looking statements. Many of these risks and uncertainties relate to
factors that are beyond the Company's abilities to control or estimate
precisely, such as: (i) future capital expenditures, expenses, revenues,
earnings, synergies, economic performance, indebtedness, financial condition,
dividend policy, losses and future prospects; (ii) business and management
strategies and the expansion and growth of the Indian Film Company's operations
and potential synergies resulting from the Offer; and (iii) the effects of
government regulation on the Indian Film Company's business. 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 satisfaction of the conditions to
the Offer, changes in economic conditions, changes in the level of capital
investment, success of business and operating initiatives and restructuring
objectives, changes in consumer habits and preferences, competitive product and
pricing pressures, customers' strategies and stability, changes in the
regulatory environment, fluctuations in interest and exchange rates, the outcome
of litigation, government actions and natural phenomena such as floods,
earthquakes and hurricanes. Other unknown or unpredictable factors could cause
actual results to differ materially from those in the forward-looking
statements. The Indian Film Company does not assume any obligation nor does it
intend to update publicly or revise forward-looking statements, whether as a
result of new information, future events or otherwise, except to the extent
legally required.
Nothing in this announcement or the Circular is intended to be a profit
forecast and the statements in this announcement and the Circular should not
be interpreted to mean that the earnings per IFC Share for the current or future
financial periods will necessarily be greater (or lesser) than those for the
relevant preceding financial period.
Dealing Disclosure Requirements
Under the provisions of Rule 8.3 of the City Code, if any person is, or becomes,
"interested" (directly or indirectly) in one per cent. or more of any class of
"relevant securities" of the Indian Film Company, all "dealings" in any
"relevant securities" of the Indian Film Company (including by means of an
option in respect of, or a derivative referenced to, any such "relevant
securities") must be publicly disclosed by no later than 3.30 p.m. (London time)
on the Business Day following the date of the relevant transaction. This
requirement will continue until the date on which the Offer becomes, or is
declared, unconditional as to acceptances, lapses or is otherwise withdrawn or
on which the "offer period" otherwise ends. If two or more persons act together
pursuant to an agreement or understanding, whether formal or informal, to
acquire an "interest" in "relevant securities" of the Indian Film Company they
will be deemed to be a single person for the purpose of Rule 8.3.
Under the provisions of Rule 8.1 of the City Code, all "dealings" in "relevant
securities" of the Indian Film Company by Network 18, or the Indian Film Company
or by any of their respective "associates", must be disclosed by no later than
12.00 noon (London time) on the Business Day following the date of the relevant
transaction.
A disclosure table, giving details of the companies in whose "relevant
securities" "dealings" should be disclosed, and the number of such securities in
issue, can be found on the Panel's website at www.thetakeoverpanel.org.uk.
"Interests in securities" arise, in summary, when a person has long economic
exposure, whether conditional or absolute, to changes in the price of
securities. In particular, a person will be treated as having an "interest" by
virtue of the ownership or control of securities, or by virtue of any option in
respect of, or derivative referenced to, securities.
Terms in quotation marks are defined in the City Code, which can also be found
on the Panel's website. If you are in any doubt as to the application of Rule 8
to you, please consult the Panel on telephone number +44 (0)20 7382 9026; fax
+44 (0)20 7638 1554.
-Ends-
This information is provided by RNS
The company news service from the London Stock Exchange
END
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