Menhaden Resource Efficiency PLC - Circular re Members' Voluntary Liquidation
LEI: 2138004NTCUZTHFWXS17
Publication of Circular in relation to the proposed Members' Voluntary Liquidation and return of capital
Further to the Company’s announcement on
Capitalised terms used in this announcement shall have the same meanings given to them in the Circular unless otherwise defined herein.
The Members' Voluntary Liquidation is conditional on the approval of Shareholders of the special resolution to be proposed at the General Meeting (the " Resolution ").
The formal notice convening the General Meeting, to be held at the office of
Shareholders should read the whole of the Circular, in particular the letter from the Chairman, which contains the unanimous recommendation from the Board that Shareholders vote in favour of the Members' Voluntary Liquidation.
“
Shareholders have expressed clear feedback to move forward promptly with the portfolio realisation; we appreciate their constructive input. The Circular published today reflects their wish for a timely and cost-effective full cash exit. If these proposals are approved on 25th March, we expect that the listed portfolio will be realised shortly after the appointment of liquidators, with an initial distribution expected during the week commencing
Led by the portfolio manager,
“We fully support the board putting forward this realisation plan for shareholders’ approval. It aims to provide our investors with a full cash exit, optimising the speed and costs of the process. We will assist the liquidator as required to help expedite the sale of the quoted and unquoted investments. I, and the rest of the MCM team, would like to thank shareholders in advance, for their ongoing support in this process.”
Background and shareholder support
Following careful consideration, and in consultation with the Portfolio Manager, the AIFM, the Company's corporate broker and a range of shareholders, the Board has decided that approval of a Members' Voluntary Liquidation at the General Meeting is in the best interests of the Company and shareholders as a whole. The Board believes that this will achieve optimal, timely and cost-effective realisation of the portfolio. Feedback from shareholders has indicated overwhelming support for the proposal and the Board thanks them for their constructive approach.
The Company has subsequently engaged with a number of large shareholders and received letters of intent to vote, or procure the votes, in favour of the Resolution to be proposed at the General Meeting from a majority of the Company's top Shareholders, including
Assuming the Resolution is approved at the General Meeting, the process of voluntary liquidation will commence with the appointment of the Liquidators. It is intended that the Company's listed investments will be sold shortly following the General Meeting. The Portfolio Manager is engaged in ongoing discussions with the
EXPECTED TIMETABLE
2025
Last day for dealings in the Shares on
the London Stock Exchange on a rolling 19 March(¹)
two-day settlement basis
Latest time and date for receipt of hard
copy forms of proxy or electronic proxy 10.00 a.m. on 21 March(²)
appointments for the General Meeting
Payment date for the First Interim 24 March
Dividend
Payment date for the Second Interim 24 March
Dividend
Close of Register and record date for
participation in the Members' Voluntary 6.00 p.m. on 24 March
Liquidation
Suspension of Shares from trading on the
London Stock Exchange and suspension of 7.30 a.m. on 25 March(³)
listing on the Official List
General Meeting 10.00a.m. on 25 March
Publication of the results of the General 25 March
Meeting
Appointment of the Liquidators 25 March
Initial Distribution to Shareholders expected during the week commencing 26
May (⁴)
Notes:
(¹) After this date, dealings should be for cash settlement only and will be registered in the normal way if the transfer, accompanied by the documents of title, is received by the Registrars by close of business on
(²) Shareholders should be aware that deadlines for voting through platforms may be earlier than the Company's proxy voting deadline.
(³) Cancellation of the listing of the Shares on the Official List and cancellation of admission to trading of the Shares on the Main Market will take place as soon as practicable thereafter or on such date as the Liquidators shall determine. An announcement will be made at the relevant time.
(⁴) Actual date to be determined by the Liquidators.
The above times and/or dates may be subject to change and, in the event of such change, the revised times and/or dates will be notified to Shareholders by an announcement through a
All references to times in this announcement are to
FURTHER INFORMATION
Overview and further background of the proposal
The Company was founded in 2015 on the belief that, with insatiable demand for higher living standards on a finite planet, some companies enabling the cleaner and more efficient delivery of basic societal needs and key infrastructure, such as energy, water, digital services and mass transportation, or mitigating environmental risks like pollution and climate change, will grow earnings faster than the global economy over the long term.
The Company was established with an unlimited life, however, the Articles provide that a continuation resolution be put to shareholders as an ordinary resolution at the annual general meeting of the Company every five years, with the next continuation vote due to be put to shareholders at the annual general meeting to be held in
The strategy has been successful from the perspective of NAV growth. Although the NAV has grown (to
For a number of reasons significant share price discounts have persisted across the majority of the
Over the past couple of years, the Board has taken action to help mitigate this share price discount. Whilst the Board had not historically favoured share buybacks for such purpose, it recognised that they are accretive to NAV per Share and can help to temper share price volatility, as well as sending a signal to the market about the Board's confidence in the underlying value of the assets in the portfolio. Therefore, during 2023 the Company undertook a modest programme of share buybacks. While this exercise resulted in no discernible effect on the discount at the time, with the discount continuing to widen the Board took the decision in
Figure 1
_____________________________________________________________________ |Year |Share price discount to NAV (as at 31 December) (%)| |_________________|___________________________________________________| |2015 |-8.2 | |_________________|___________________________________________________| |2016 |-22.2 | |_________________|___________________________________________________| |2017 |-25.6 | |_________________|___________________________________________________| |2018 |-26.1 | |_________________|___________________________________________________| |2019 |-17.9 | |_________________|___________________________________________________| |2020 |-25.4 | |_________________|___________________________________________________| |2021 |-28.1 | |_________________|___________________________________________________| |2022 |-31.4 | |_________________|___________________________________________________| |2023 |-37.2 | |_________________|___________________________________________________| |15 September 2024|-38.9 | |_________________|___________________________________________________|
Source: The Company.
Conscious of the challenges facing the listed investment company sector, many of which the Company has also faced, and notwithstanding the Company's good net asset value performance, at its current size the Company’s secondary market liquidity is relatively low and it has been unable to attract sufficient attention and demand from investors, which has also been a factor behind the Company’s shares trading at a material discount to the NAV per Share.
This led to the Board's announcement on
While the Board believes that the Company's resource efficiency investment thesis remains compelling, headwinds continue to weigh more widely on appetite for investment trust shares, particularly those with smaller scale and lower liquidity, resulting in wide discounts and the inability to issue new shares and grow trusts.
Following careful consideration, and consultation with the Portfolio Manager, the AIFM, the Company's corporate broker and a range of Shareholders, the Board has decided that approval of a Members' Voluntary Liquidation at the General Meeting is in the best interests of the Company and Shareholders as a whole – achieving realisation of the portfolio for Shareholders while carefully considering the costs and time of the process. The Board would like to thank Shareholders for their constructive feedback provided as part of that process, which has been invaluable in informing the Board's decision-making process.
The Company received a number of proposals from third parties which included alternative investment management arrangements, potential mergers with other investment trusts and discounted cash offers for the unquoted portfolio. However, the Shareholder feedback received by the Board heavily supported a managed realisation of the portfolio and return of capital to Shareholders. As such, and after taking account of the deliverability and immediacy of the options, the Board has decided to propose to Shareholders that the Company is put into Members' Voluntary Liquidation.
The Board considers that the proposed Members' Voluntary Liquidation is in Shareholders' best interests. It will provide clarity in advance of the 2025 Continuation Vote and expedites, so far as practicable, the realisation of Shareholders' investments thereby providing Shareholders with liquidity and the inherent value of the portfolio despite the share price discount.
Portfolio profile and plan for realisation of the Company's investments
As at
A summary of the ten largest holdings in the portfolio as at
__________________________________________________________________________ |Name of investment|Listed/ unquoted|Investment Theme |Total (% of gross| | | | |assets) | |__________________|________________|____________________|_________________| |Alphabet |Listed |Digitalisation |13.9% | |__________________|________________|____________________|_________________| |Safran |Listed |Industrial Emissions|11.7% | | | |Reduction | | |__________________|________________|____________________|_________________| |Airbus |Listed |Infrastructure & |11.0% | | | |Transportation | | |__________________|________________|____________________|_________________| |Avantus |Unquoted |Clean Energy |9.7% | |__________________|________________|____________________|_________________| |Microsoft |Listed |Digitalisation |8.7% | |__________________|________________|____________________|_________________| |VINCI |Listed |Infrastructure & |7.1% | | | |Transportation | | |__________________|________________|____________________|_________________| |Canadian Pacific |Listed |Infrastructure & |6.1% | |Kansas City | |Transportation | | |__________________|________________|____________________|_________________| |TCI Real Estate |Unquoted |Infrastructure & |6.1% | |Partners IV | |Transportation | | |__________________|________________|____________________|_________________| |Amazon |Listed |Digitalisation |5.7% | |__________________|________________|____________________|_________________| |Canadian National |Listed |Infrastructure & |4.7% | |Railway | |Transportation | | |__________________|________________|____________________|_________________| |Total |84.7% | |________________________________________________________|_________________|
The geographical breakdown of the investments comprising the Company's portfolio as at
__________________________________________ |Location |Total (% of gross assets)| |________________|_________________________| |US |47.1% | |________________|_________________________| |Europe |30.2% | |________________|_________________________| |Canada |10.8% | |________________|_________________________| |Emerging Markets|3.2% | |________________|_________________________| |UK |3.1% | |________________|_________________________| |Liquidity |5.6% | |________________|_________________________| |Total |100% | |________________|_________________________|
Subject to the terms of the Termination Deed, the Portfolio Manager will assist the Liquidators with the sale of the Company's listed and unquoted investments, given its expertise and knowledge of the Company's portfolio.
It is intended that the Company's listed investments will be sold shortly following the Liquidation Date.
The Portfolio Manager is engaged in ongoing discussions with the
Further updates on the progress of these realisations will be provided to Shareholders by RNS or, after their appointment, by the Liquidators.
Subject to progress in disposing of the Company's unquoted investments, the need to retain cash for any unfunded contractual commitments in relation to the unquoted investments and the ongoing costs of the liquidation, it is currently expected that the Liquidators will make the Initial Distribution (defined in
Members' Voluntary Liquidation
paragraph below)
during the week commencing
Pending the distribution of any realisation proceeds to Shareholders, monies will be held in appropriate currencies in the absolute determination of the Liquidators.
Members' Voluntary Liquidation
Under the proposed Members' Voluntary Liquidation, Shareholders will be able to realise their investment in the Company by way of a voluntary liquidation of the Company. The Members' Voluntary Liquidation is conditional upon Shareholder approval of the Resolution at the General Meeting.
Subject to Shareholder approval at the General Meeting,
If the Resolution is passed at the General Meeting, Shareholders will be provided with a full cash exit less costs. It is expected that the Liquidators will make an initial cash distribution to Shareholders, via the Company's Registrar, using the proceeds of the realisation of the Company's listed investments,
less
the costs of the Members' Voluntary Liquidation, any amounts required to honour unfunded contractual commitments in relation to the unquoted investments and the amount attributable to the
The Liquidators will retain sufficient funds in the Members' Voluntary Liquidation to meet the current, future and contingent liabilities of the Company, including the costs and expenses (inclusive of VAT, if applicable) of the liquidation not already paid at the point of liquidation and an additional retention of £100,000 for unknown contingencies (the "
Once the Liquidators have realised the Company's assets, made the Initial Distribution, satisfied the claims of creditors of the Company, honoured the Company's unfunded contractual commitments and paid the costs and expenses of the liquidation, it is expected that the Liquidators would make a final distribution to Shareholders. This final distribution, if any, would be made solely at the discretion of the Liquidators.
For illustrative purposes only
, based on a Net Asset Value of £143.4 million as at
All Shareholders on the Register on the record date (being
So far as possible, the Liquidators will seek to ensure that the Company's tax status as an investment trust is maintained throughout this process, although this cannot be guaranteed.
If the Members' Voluntary Liquidation is approved, Shareholders will be provided with a full cash exit less costs.
Nothing in the proposals contained in the Circular shall impose any personal liability on the Liquidators or either of them.
Termination of the AIFM and the Portfolio Manager
The Company, the AIFM and the Portfolio Manager have entered into a deed of termination in respect of the AIFM Agreement and the Investment Management Agreement (the " Termination Deed "), which is conditional on the approval of the Resolution at the General Meeting.
Pursuant to the terms of the Termination Deed, the appointment of each of the AIFM and the Portfolio Manager will terminate on
Pursuant to the terms of the Termination Deed, the AIFM Agreement and the Investment Management Agreement, the Company shall pay to the AIFM and the Portfolio Manager an amount in lieu of notice of termination. The Portfolio Manager is also entitled to receive a Performance Fee up to the Termination Date, calculated in accordance with the existing terms of the Investment Management Agreement.
The Company's other service providers
The Company is taking steps to ensure that the appointments of certain of its other service providers will terminate should the Resolution be passed.
The Company's Registrars, MUFG Corporate Markets, will be retained by the Company during the liquidation period to facilitate communications with and distributions to Shareholders.
Interim Dividends
As announced on
In relation to the period from
For the avoidance of doubt, the Interim Dividends are not conditional on the Resolution being passed.
Suspension and cancellation of listing and trading of the Shares
The Register will be closed at
The last day for dealings in the Shares on the
If the Resolution is passed, the Company will make an application for the cancellation of the admission of the Shares to listing on the Official List and to trading on the Main Market following the General Meeting, with the cancellation to take effect on such date as the Liquidators shall determine. An announcement regarding the cancellation will be made at the relevant time.
After the liquidation of the Company and the making of the final distribution to Shareholders (if any), existing certificates in respect of the Shares will cease to be of value and any existing credit of the Shares in any stock account in CREST will be redundant.
Costs and expenses of the Members' Voluntary Liquidation
The costs and expenses of the proposals will be borne by the Company and are expected to be approximately £0.9 million (including VAT) in aggregate.
Benefits of the Members' Voluntary Liquidation
The Board believes that, having taken into account the views of Shareholders, the Members' Voluntary Liquidation is in the best interests of the Company and its Shareholders as a whole and should yield two principal benefits:
-- The future direction and strategy of the Company is determined as soon
as practicable and in advance of the 2025 Continuation Vote, providing
Shareholders with liquidity that would not otherwise be available to
them and bringing forward the timeline for the receipt of realisation
proceeds.
-- The proposals also have the effect of unlocking previously unrealised
financial value at a level that better reflects the Company's underlying
NAV compared to the share price.
Risk Factors relating to the Members' Voluntary Liquidation
The risks referred to below are the material risks known to the Directors at the date of the Circular which the Board believes Shareholders should consider prior to deciding how to cast their votes on the Resolution. Only those risks which are material and currently known to the Board have been disclosed below. It is possible that additional risks and uncertainties not currently known to the Board, or that the Board currently deems to be immaterial, may also have an adverse effect on the Company.
-- Implementation of the Members' Voluntary Liquidation is conditional upon
the passing of the Resolution at the General Meeting. In the event that
the Resolution is not passed the Members' Voluntary Liquidation will not
be implemented. The Board will then have to consider alternative
proposals for the future the Company, the implementation of which will
likely result in additional costs being incurred by the Company.
-- There can be no certainty as to the timing of the realisation of any
asset and/or the return of capital to Shareholders. In particular, the
Company's unquoted investments may take longer to realise than
anticipated, and when compared to the realisation timeline for the
Company's listed investments, and it may take longer for Shareholders to
receive back their capital. The realisation of such assets and/or the
value at which such assets are realised may also be affected by
political, social, environmental, economic or market events that are
outside the Company's control.
-- There can be no assurance as to the value that will be realised from the
realisation of the Company's assets. Sales commissions, liquidation
costs, taxes and other costs associated with the realisation of the
Company’s assets together with the usual operating costs of the Company
will reduce the cash available for distribution to Shareholders.
-- There may be other matters or factors which affect the availability,
amount or timing of receipt of the proceeds of realisation of some or
all of the Company’s investments. In determining the size of any
distributions to be made to Shareholders, the Liquidators will take into
account the Company’s ongoing running costs, further funding required to
protect the Company’s remaining investments and the costs of the
liquidation of the Company. However, should these costs be greater than
expected or should cash receipts for the realisations of investments be
less than expected, this will reduce the amount available for
Shareholders in future distributions.
-- The Company reports in Sterling and intends to pay any return of capital
to Shareholders in Sterling. The realisation proceeds from the Company's
investments may be denominated in currencies other than Sterling,
including US Dollars. Pending the distribution of any realisation
proceeds to Shareholders, monies will be held in appropriate currencies
in the absolute determination of the Liquidators. Realisation proceeds
received that are denominated in non-Sterling currencies will be
converted into Sterling prior to their distribution to Shareholders. The
Sterling amount will depend upon exchange rates between the relevant
currencies of cash received and Sterling at the relevant time, which may
fluctuate.
If Shareholders are in any doubt as to the contents of this announcement or the Circular or as to what action to take, they should seek immediately their own personal financial advice from their stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under FSMA or, if in a territory outside the
Action to be taken in respect of the General Meeting
All Shareholders are encouraged to vote on the Resolution to be proposed at the General Meeting and, if their Shares are not held directly, to arrange for their nominee to vote on their behalf.
Whether or not you intend to attend the General Meeting, you should complete and return your proxy appointments so as to arrive not later than
Shareholders can appoint a proxy using one of the following methods:
(i) logging onto www.signalshares.com and following instructions;
(ii) in the case of CREST members, by utilising the CREST electronic proxy appointment service by using the procedures described in the CREST manual. The CREST manual can be viewed at www.euroclear.com ;
(iii) requesting a hard copy Form of Proxy directly from the Company's Registrar, MUFG Corporate Markets via telephone on: +44 (0) 371 664 0300 or by emailing shareholderenquiries@cm.mpms.mufg.com ; or
(iv) institutional investors may be able to appoint a proxy electronically using the Proxymity platform, a process which has been agreed by the Company and approved by MUFG Corporate Markets. Please visit www.proxymity.io for further details.
To be valid any hard copy Form of Proxy must be completed, signed and received at MUFG Corporate Markets, PXS 1,
Proxies sent electronically must be sent as soon as possible and, in any event, so as to be received no later than
Please note that deadlines for voting through platforms may be earlier than the deadlines stated in this Circular.
Appointment of a proxy will not prevent you from attending and voting in person at the General Meeting should you wish to do so. If any Shareholder submits more than one valid proxy appointment, the appointment received last before the latest time for receipt of proxies will take precedence.
Recipients of the Circular who are the beneficial owners of Shares held through a nominee should follow the instructions provided by their nominee or their professional adviser if no instructions have been provided.
Recommendation
The Board considers the Members' Voluntary Liquidation to be in the best interests of the Company and Shareholders as a whole.
Accordingly, the Board unanimously recommends that Shareholders vote IN FAVOUR of the Resolution to be proposed at the General Meeting, as the Directors intend to do in respect of their own beneficial holdings, which total 335,111 Shares (representing 0.4% of the Company's total voting rights) as at the Latest Practicable Date.
The Circular is available on the Company's website at https://www.menhaden.com/ . The Circular will shortly be available for inspection at the National Storage Mechanism which is located at https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
Contacts:
Menhaden Resource Efficiency plc
Howard Pearce , Chairman Via KL Communications or Deutsche Numis
Deutsche Numis – Corporate Broker
David Benda
+44 (0)20 7260 1000
Matt Goss KL Communications – Financial PR Menhaden@kl-communications.comCharles Gorman
+44 (0)20 3882 6644 / +44 (0)7795 977 967
Henry Taylor Frostrow Capital – AIFM
Paul Griggs (Company Secretary) +44 (0)20 3709 8733
