PROPOSED TENDER OFFER, BY HARWOOD CAPITAL LLP, TO PURCHASE UP TO 53,500,000 ORDINARY SHARES OF FULCRUM UTILITY SERVICES LIMITED,
AT A PRICE OF 26.25 PENCE PER SHARE
Highlights :
In response to the extraordinary movement in the share price, towards the end of trading today, in the shares of Fulcrum Utility Services Limited (“Fulcrum”), Harwood Capital LLP (“Harwood”) today announces a proposed tender offer (the “Tender Offer”), by a special purpose vehicle, to be established by Harwood (the “Harwood SPV”), to acquire up to 53,500,000 ordinary shares of 0.1p each in the capital of Fulcrum (“Ordinary Shares”), representing up to approximately 24.1 per cent. of Fulcrum's existing issued share capital.
This Tender Offer has been accelerated by Harwood, as a result of today's share price movements and, as such, Harwood has not had the opportunity to discuss the Tender Offer with the board of Fulcrum ahead of this announcement.
The Tender Offer price of 26.25 pence per share represents an attractive premium of approximately:
- 47.5 per cent. to the closing bid price of 17.8 pence per Ordinary Share on 7 April 2020 (being the latest practicable date prior to the publication of this announcement);
- 42.7 per cent. to the closing middle market price of 18.4 pence per Ordinary Share on 7 April 2020 (being the latest practicable date prior to the publication of this announcement); and
- 80.3 per cent. to the volume weighted average price of 14.56 pence per Ordinary Share over the twenty business days up to and including 7 April 2020 (being the latest practicable date prior to the publication of this announcement).
Harwood believes that the Tender Offer represents both a significant premium to any relevant share price metric, as well as offering a significant liquidity event to all shareholders, against the background of the current, and sustained, market dislocation and global macro-economic uncertainty.
Certain clients of Harwood are already interested in 12,915,000 Ordinary Shares representing approximately 5.8 per cent. of Fulcrum's existing issued share capital such that full take-up of the Tender Offer will result in the Harwood Investors (as defined below) being interested in approximately up to 29.9 per cent. of Fulcrum's existing issued share capital.
The Tender Offer is expected to be conditional on the receipt of tenders representing approximately 24.1 per cent. of Fulcrum's issued share capital on the date that the Tender Offer is made, save that the Harwood SPV will reserve the right to waive this condition in whole or in part at its sole discretion.
The Harwood SPV will be a private limited company to be established at the direction of Harwood, on behalf of certain of its discretionary investment management and/or advisory clients, specifically for the purpose of making the Tender Offer.
Harwood is a private investment management firm engaged in the provision of discretionary investment management and/or advisory services to its clients.
The tender offer document (the “Tender Offer Document”) is expected to be sent, as soon as practicable following receipt of a copy of Fulcrum's share register, and in any event within fourteen business days of the date of this announcement. The Tender Offer will remain open for at least 21 days following the date it is made, with such closing date to be specified in the Tender Offer Document.
It is currently the intent of Harwood, should the Tender Offer be successful, to propose a resolution to seek a delisting of Fulcrum from trading on AIM.
Details of the Tender Offer:
In response to the extraordinary movement in the share price, towards the end of trading today, of the shares of Fulcrum, Harwood today announces its intention to acquire up to 53,500,000 Ordinary Shares in Fulcrum, representing up to approximately 24.1 per cent. of Fulcrum's existing issued share capital, by way of the Tender Offer by the Harwood SPV at a price of 26.25 pence per share. On successful completion of the Tender Offer, this would, when combined with the existing Ordinary Shares already held by certain clients of Harwood, amount, in aggregate, to a holding of 29.9 per cent., of Fulcrum's existing issued share capital.
The Tender Offer price of 26.25 pence per Ordinary Share represents a premium of approximately:
i) 47.5 per cent. to the closing bid price of 17.8 pence per Ordinary Share on 7 April 2020 (being the latest practicable date prior to the publication of this announcement);
ii) 42.7 per cent. to the closing middle market price of 18.4 pence per Ordinary Share on 7 April 2020 (being the latest practicable date prior to the publication of this announcement); and
iii) 80.3 per cent. to the volume weighted average price of 14.56 pence per Ordinary Share over the twenty business days up to and including 7 April 2020 (being the latest practicable date prior to the publication of this announcement).
The Harwood SPV will be a private limited company to be established at the direction of Harwood, on behalf of certain of its discretionary investment management and/or advisory clients (the “Harwood Funds”), specifically for the purpose of making the Tender Offer. Harwood is a private investment management firm engaged in the provision of discretionary investment management and/or advisory services to its clients.
Mr Christopher Mills is a director and the majority shareholder of Harwood Capital Management Limited which is a designated corporate member and controller of Harwood and the parent company of the Harwood Capital Management Group which has in excess of £1 billion of assets under management. Following implementation of the Tender Offer, the Harwood SPV will be wholly owned by the Harwood Funds. The directors of the Harwood SPV will be Mr Jeremy Brade and Mr James Agnew, being the planned appointees of Harwood.
Harwood believes that the Tender Offer represents both a significant premium to any relevant share price metric, as well as offering a significant liquidity event to all shareholders, against the background of the current, and sustained, market dislocation and global macro-economic uncertainty.
As at the date of this announcement, the Harwood Funds are interested, in aggregate, in 12,915,000 Ordinary Shares representing approximately 5.8 per cent. of Fulcrum's existing issued share capital. If the Tender Offer were to be accepted in full, the Harwood SPV and the Harwood Funds (together, being the “Harwood Investors”) would therefore hold 29.9 per cent. of Fulcrum's existing issued share capital (based on the latest publicly available information).
As Fulcrum is incorporated in the Cayman Islands, the UK's City Code on Takeovers and Mergers (the “Takeover Code”) does not apply to the Company or the Tender Offer.
Reasons for the Tender Offer
Harwood believes that the Tender Offer is essential in order to protect the Harwood Funds' existing significant investment in Fulcrum, as Harwood has material concerns with respect to the Company's corporate governance.
In particular, Harwood believes that the Company has frustrated at least one potential acquirer of the business culminating in such party withdrawing its potential interest in such a transaction.
Furthermore, Harwood notes that the Company has recently completed the disposal of its domestic customer gas connection assets, including the order book and associated meters, to E.S. Pipelines Limited (the “Disposal”), without a shareholder vote and at what Harwood believes may well have been an undervaluation.
In addition, the terms of the Disposal include certain clawback provisions on a change of control of Fulcrum (as referred to in greater detail below) which Harwood believes are in effect a 'poison pill' and materially detrimental to any potential acquirer of the Company and therefore to the shareholders of Falcon (the “Shareholders”).
Further details of the Tender Offer
The Tender Offer will be made by means of a press advertisement in two UK newspapers and the Tender Offer Document, including a tender form (collectively, the “Tender Offer Documents”) which are expected to be sent as soon as practicable following receipt of a copy of Fulcrum's share register and in any event within fourteen business days of the date of this announcement, to each Shareholder whose name appears on such register.
Whilst Harwood recognises that, as a result of the domicile of the Company in the Cayman Islands, there is, unfortunately, no prescribed right under the law of the Cayman Islands, for the Harwood Funds, as a substantial shareholder in Fulcrum, to require the Company to send Harwood a copy of the share register, Harwood would expect that, in the interests of all Shareholders, this is provided to Harwood as soon as practicable.
Accordingly, a formal written request will shortly be submitted to Fulcrum by Harwood's legal advisers, and Harwood would hope that the board of Fulcrum will respond promptly to this request and provide a copy of Fulcrum's share register, such that the Tender Offer can be put forward to all Shareholders as soon as practicable.
The Tender Offer will remain open for at least 21 days following the date the Tender Offer is made (as shall be specified in the Tender Offer Documents, being the “Closing Date”). The Tender Offer will only be available to those Shareholders who are on Fulcrum's share register as at 6.00 p.m. on the Closing Date.
The Tender Offer will be conditional on the receipt of tenders representing 24.1 per cent. of Fulcrum's issued share capital on the date that the Tender Offer is made, save that the Harwood SPV will reserve the right to waive this condition in whole or in part at its sole discretion. Accordingly, if this condition is not satisfied or waived by the Closing Date, the Tender Offer will be void. Subject to this condition, any tender forms submitted by Shareholders shall be irrevocable.
In determining the acceptance condition for the Tender Offer, Harwood has been mindful of the clawback provisions, referred to in the Company's regulatory announcement of 23 December 2019, with respect to the Disposal (the “Disposal Announcement”), the completion of which was confirmed in the Company's subsequent announcement of 1 April 2020. The relevant extract from the Disposal Announcement is set out below:
“The consideration for the Sale is subject to certain clawback provisions over a three year period in the event of, inter alia, a change of control of the Company, of approximately 15 per cent. or 7.5 per cent. of the consideration if the change of control occurs within one year or between one and three years of Completion respectively.”
Harwood notes that it is unclear from the Disposal Announcement exactly what constitutes a change of control of Fulcrum, and, as such, Harwood has set its maximum resultant ownership of Fulcrum under the Tender Offer, together with the existing interests of the Harwood Funds, at just below what the Takeover Code would deem to be control, viz, 29.9 per cent.
In addition, it is also unclear whether the clawback percentages relate to the gross or net consideration received by the Company in the time periods concerned. Harwood would welcome the Company's clarification on these matters as a matter of urgency.
If the Tender Offer is oversubscribed, such that the aggregate number of tendered Ordinary Shares exceeds the maximum number of 53,500,000, tenders will be scaled back pro rata to the number of Ordinary Shares that are tendered.
Ordinary Shares that are successfully tendered will be acquired by the Harwood SPV fully paid and free from all liens, charges, equitable interests and encumbrances and together with all rights attaching thereto, including the right to all dividends and other distributions declared on or after the date of this announcement, and the right to attend and vote at any meeting of Fulcrum.
Settlement of the consideration to which any Shareholder is entitled pursuant to valid tenders accepted by the Harwood SPV will be made in accordance with the terms of the Tender Offer Documents.
Harwood's future intentions for Fulcrum's business
Following the successful completion of the Tender Offer, Harwood intends, inter alia, to:
i) continue to support the Company's current executive management team;
ii) seek the appointment of two new directors to the board of Fulcrum, namely Mr Jeremy Brade from Harwood and Mr Jonathan Turner, the Chief Executive Officer of the Bayford Group (“Bayford”), Bayford and its connected persons together being substantial existing Shareholders in the Company. Mr Turner has extensive knowledge and experience of the energy industry and he has confirmed to Harwood that Bayford and its connected persons will not be participating in the Tender Offer;
iii) seek the continued suspension of dividend payments; and
iv) propose a resolution to cancel the admission to trading of the Ordinary Shares on AIM as the costs and regulatory burden associated with maintaining such a public company quotation are not, in the opinion of Harwood, appropriate for a microcap public company of the Company's size.
Additional information
The availability of the Tender Offer and the release, publication and distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by the laws of those jurisdictions and therefore persons who are not resident in the United Kingdom into whose possession this announcement comes should inform themselves about and observe any such restrictions. Failure to comply with any such restrictions may constitute a violation of the securities laws of any such jurisdiction. In particular, the ability of persons who are not resident in the United Kingdom to participate in the Tender Offer may be affected by the laws of the relevant jurisdictions in which they are located.
In this announcement, all share capital details are based on the latest publicly available information and certain figures have been subjected to rounding adjustments. This announcement is for information purposes only and is not intended to, and does not, constitute or form any part of, an offer to sell or an invitation to subscribe for or purchase any securities or the solicitation of an offer to buy any securities in any jurisdiction pursuant to the Tender Offer or otherwise, nor shall there be any sale, issuance or transfer of the securities referred to in this announcement in any jurisdiction in contravention of applicable law. The Tender Offer shall be made solely by means of the Tender Offer Documents which shall contain the full terms and conditions of the Tender Offer, including details of how to tender Ordinary Shares. The Tender Offer Documents are important and will require your immediate attention upon receipt.