Gresham House plc
(“Gresham House”, the “Company” or the “Group”)
Acquisition of the VCT business of Mobeus Equity Partners
and
Proposed Placing of approximately £40 million at 910 pence per share to fund acquisition and AUM growth development projects
Gresham House (AIM: GHE), the specialist alternative asset manager, is pleased to announce its intention to acquire the Venture Capital Trust (“VCT”) business of Mobeus Equity Partners LLP (“Mobeus”) for an initial consideration of £24.0 million, with further consideration of up to £12.1 million payable over a three-year period and subject to the achievement of certain criteria (the “Acquisition”).
The Company intends to raise gross proceeds of approximately £40 million through a placing, which includes a £20m cash placing of 2,197,802 new ordinary shares of 25 pence each in the capital of the Company (“Ordinary Shares”) (“Cash Placing Shares”) at a price of 910 pence per Placing Share (the “Placing Price”) (the “Cash Placing”) and a £20 million vendor placing (“Vendor Placing”) by way of a placing of 2,197,802 new Ordinary Shares to be issued to the Sellers pursuant to the Acquisition.
The intended net proceeds of the Placing will be used to fund the Acquisition as well as to fund development projects such as battery storage and solar projects, which are intended to be acquired by vehicles managed by Gresham House, thereby creating value for shareholders.
Mobeus is a UK-based investment firm managing assets across two distinct client groups, one of which is the VCT business being acquired by Gresham House. The four VCT contracts being acquired from Mobeus are with Mobeus Income & Growth VCT plc, Mobeus Income & Growth 2 VCT plc, Mobeus Income & Growth 4 VCT plc and The Income & Growth VCT plc (together, the “Mobeus VCTs”), with a combined AUM of £369 million[1]. Following an extensive due diligence process, the Mobeus VCT Boards have unanimously approved the transaction.
Key highlights of the Acquisition and Placings
Directors of the Company believe there is a clear and compelling strategic rationale for the Acquisition:
– Mobeus VCTs' strong brand and long term investment performance provide a close fit with
Gresham House's reputation for governance, fund performance and investment culture
High-quality and experienced Mobeus team is culturally aligned with the Gresham House team and brings complementary skills
Acquisition gives Mobeus VCTs access to Gresham House central resources, existing investment resources and network to support long-term investment ambitions
Acquisition structure provides a framework to both incentivise and retain key Mobeus VCT team members post completion
– Acquisition creates a leading player in the VCT segment with a combined c.£850 million of AUM
Combined platform will help target enhanced returns for Mobeus and Gresham House's VCT investors and accelerate growth of the Group's VCT AUM
– Strong ambitions in line with Gresham House's approach to ESG and sustainable investment processes
VCT segment increasingly recognised as providing economic and social benefits through growth capital provision to small businesses
Increases Group pro-forma AUM to c.£5.4 billion[2] upon completion
Materially earnings enhancing in the first full year and is consistent with the Company's stated financial and strategic acquisition metrics
– Expected to deliver operating profit increase of c.£4.5m (annualised) and ROIC of over 15%
Placing to raise gross proceeds of £40.0 million to fund:
– £26.0 million – Acquisition of Mobeus VCT business (initial consideration payable pursuant to the Acquisition and transaction and Placing fees and costs)
– £14.0 million – AUM growth development projects
The Company expects the Acquisition to exceed its medium-term ROIC target of 15%. The Group has identified a number of potential synergies in the Mobeus VCT business, and the Acquisition is expected to support the Group's stated objective of achieving a 40% operating margin as part of the GH25 Group plan.
It is intended that the Acquisition will be funded through the allotment of 2,637,362 new Ordinary Shares (the “Consideration Shares”) comprising the allotment of 439,560 new Ordinary Shares to certain individual partners of Mobeus (the “Sellers”) with a value of approximately £4.0 million and the allotment of 2,197,802 new Ordinary Shares pursuant to a vendor placing at the Placing Price (the “Vendor Placing Shares”) with a value of approximately £20.0 million. The Company also intends to raise an additional approximately £20.0 million through the placing of the Cash Placing Shares.
The Placing Price of 910 pence per Placing Share represents a 2.15% discount to the closing middle market price of 930 pence per Ordinary Share on 9 September 2021 (being the last business day prior to the release of this announcement).
Completion of the Acquisition is conditional on completion and settlement of the Cash Placing.
The Placing Shares will be issued pursuant to the Company's existing shareholder authorities granted at the Company's annual general meeting on 12 May 2021.
The Placing is being conducted through an accelerated bookbuild process, in accordance with the terms and conditions set out in the Appendix1 to this announcement (the “Bookbuild”), which will be launched immediately following this announcement.
Canaccord Genuity Limited (“Canaccord”) is acting as Nominated Adviser, Joint Global Co-Ordinator, Joint Bookrunner and Joint Broker in relation to the Placing. Jefferies International Limited (“Jefferies”) are acting as Joint Global Co-Ordinator, Joint Bookrunner and Joint Broker in relation to the Placing. The Placing is not being underwritten.
The Placing Shares are not being made available to the public. The Bookbuild will be closed at the discretion of Banks, it is envisaged that this will be no later than 4.30 p.m. today, 10 September 2021.
Completion of the Cash Placing is conditional on, inter alia, First Admission occurring, and completion of the Vendor Placing is conditional on, inter alia, completion of the Acquisition and Second Admission occurring.
Commenting on the Acquisition, Anthony Dalwood, Gresham House's Chief Executive Officer, said:
“This Acquisition substantially boosts our AUM, profitability and enhances our presence in the VCT segment, accelerating progress towards our GH25 targets. The combination of Mobeus with Gresham House's existing VCT business expands our scale and presence in the VCT segment, and our combined complementary strengths will bring what believe are considerable benefits to VCT investors.
“The Acquisition brings together two of the leading teams and brands to create a VCT platform with c.£850 million of AUM. In addition, the Mobeus VCTs' focus on private markets and emphasis on total return is highly complementary to our existing Baronsmead VCTs, which invest in unlisted and public companies to deliver consistent dividends.
“As the VCT segment continues to consolidate, this deal enhances our combined reach amid what we believe is a period of rising demand for early stage growth capital. The role of VCTs in supporting emerging and disruptive businesses is closely aligned with Gresham House's ESG-focused investment strategies and I look forward to working closely with the Mobeus team to deliver excellent returns for all our stakeholders.”
About the VCT business of Mobeus Equity Partners LLP
Mobeus ( www.mobeus.co.uk ) is a UK based investment firm managing assets across two distinct client groups, one of which is the VCT business being acquired by Gresham House. The VCT business is made up of four VCTs, being Mobeus Income & Growth VCT plc, Mobeus Income & Growth 2 VCT plc, Mobeus Income & Growth 4 VCT plc and The Income & Growth VCT plc, which have a combined AUM of £369 million 1 .
Over the last 10 years, the Mobeus VCTs are ranked as four of the top five performing funds within the generalist VCT segment [3] , with strong performance throughout. In the year ended 30 June 2021, the Mobeus VCT business generated EBITDA of £4.5 million [4] and had AUM of £369 million 1 .
Acquisition overview
The addition of Mobeus' scaled, high performing set of VCT funds will create a leading player in the VCT segment with c.£850 million of combined VCT AUM post Acquisition. The larger asset base and additional investment team members will provide an opportunity to increase fundraising and deployment across the enlarged Group's two VCT brands, being Baronsmead and Mobeus. The Company believes the combined platform will benefit from positive momentum as the Company expects further growth in the pool of VCT qualifying companies over the coming years and increasing retail investor demand for private equity investments and the tax incentives linked to VCT investing.
Following completion of the Acquisition, the Mobeus team transferring to Gresham House will consist of 16 full time employees and a further three consultants. Of the transferring Mobeus team, the partners, Trevor Hope and Clive Austin, will join Bevan Duncan and Ken Wotton to become the senior management team of Gresham House's Strategic Equity division. Trevor and Clive will remain responsible for the investment, portfolio, and fund management of the Mobeus VCTs, alongside their investment and operations teams.
Each VCT brand will retain its unique identity. The combination of Mobeus and Baronsmead creates a large integrated team, combining experience, resource, contacts, and know-how to access more and higher quality investment opportunities.
Further details of the Acquisition
The Company has agreed to acquire (on a cash-free, debt-free basis), through its subsidiary Gresham House Holdings Limited and subject to the satisfaction of certain conditions, the business and assets of Mobeus Equity Partners LLP's VCT business as it relates to Mobeus Income & Growth VCT plc, Mobeus Income & Growth 2 VCT plc, Mobeus Income & Growth 4 VCT plc and The Income & Growth VCT plc. The Acquisition shall be for a total initial consideration of £24.0 million, which may rise to £36.1 million subject to certain criteria and maintaining the VCT contracts being satisfied over the three-year period following completion of the Acquisition.
Of the £24.0 million payable upon completion of the Acquisition, £20.0 million shall be payable in cash (and shall be funded from the net proceeds of the Vendor Placing and, if required, the Cash Placing) with the remaining £4.0 million to be satisfied by the allotment of 439,560 Consideration Shares to the Sellers at the Placing Price. These retained Consideration Shares shall be subject to a lock up until the later of the announcement by Gresham House of its financial results for the year ended 31 December 2022, or 31 March 2023. Subject to certain limitations part of the conditional consideration may be settled in a mixture of cash and shares at the Company's discretion.
The Initial Consideration Shares, which will rank pari passu with the Company's existing ordinary shares, will be admitted to trading on AIM, a market operated by the London Stock Exchange, at 8.00 a.m. on 30 September 2021 (or such later date as may be agreed between the Company and the Banks).
Subject to the satisfaction of certain conditions, including completion and settlement of the Cash Placing, completion is expected to occur on 30 September 2021.
Details of the Placing
The Company has today entered into a placing and arrangement agreement with the Banks (the “Placing and Arrangement Agreement”) pursuant to which the Banks have agreed to arrange the Cash Placing and the Vendor Placing. In addition, the Company, Mobeus and the Sellers today entered into a vendor placing agreement with the Banks (“the Vendor Placing Agreement”) pursuant to which the Banks have agreed to arrange a placing of certain of the Consideration Shares to be issued to the Sellers under the Acquisition. The Company has given certain warranties and indemnities customary on a placing in favour of the Banks in the Placing and Arrangement Agreement.
The Placing, which is being conducted by way of an accelerated book-building process, will be launched immediately following this announcement, in accordance with the terms and conditions set out in the Appendix to this announcement.
The timing of the closing of the Bookbuild, and allocations of Placing Shares pursuant to the Placing, are at the discretion of the Banks, following consultation with the Company.
The Placing is to be effected by way of the Cash Placing of up to £20 million (the “Cash Placing”) and the Vendor Placing of up to £20 million of the Consideration Shares to be allotted and issued to the Sellers in connection with the Acquisition (the “Vendor Placing”) in each case at the Placing Price.
It is expected that admission of the Cash Placing Shares to trading on AIM (“First Admission”) will become effective and that dealings in the Cash Placing Shares will commence on AIM at 8.00 a.m. on 17 September 2021. The Cash Placing is conditional upon, inter alia, First Admission taking place on 17 September 2021 (or such later date as may be agreed between the Company and the Banks, being no later than 30 September 2021 (“First Long Stop Date”)).
It is expected that admission of the Consideration Shares (including the Vendor Placing Shares) to trading on AIM (“Second Admission”) will become effective and that dealings in the Consideration Shares (including the Vendor Placing Shares) will commence on AIM at 8.00 a.m. on 30 September 2021. The Vendor Placing is conditional upon, inter alia, First Admission taking place, completion of the Acquisition and Second Admission occurring on 30 September 2021 (or such later date as may be agreed between the Company and the Banks, being no later than 15 October 2021 (“Second Long Stop Date”)).
Your attention is drawn to the detailed terms and conditions of the Placing set out in the Appendix to this announcement (which forms part of this announcement).
The Appendix to this announcement contains the detailed terms and conditions of the Placing and the basis on which investors may agree to participate in the Placing. The Placing has not been underwritten by the Banks. Placees are deemed to have read and understood this announcement in its entirety, including the Appendix, and to have made their offer on the terms and subject to the conditions contained herein and to have given the representations, warranties, undertakings and acknowledgements contained in the Appendix to this announcemen
Placing and Acquisition Considerations
The Directors believe the Acquisition to be in the best interests of the Company and its shareholders as a whole. In making this statement the Directors have spent time, and have taken appropriate advice, in considering the Acquisition and the method by which the cash consideration payable in respect of the Acquisition should be funded. The Directors concluded that the Placing and Vendor Placing was the most appropriate structure to raise equity funding.
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the UK version of the Market Abuse Regulation (EU 596/2014), which is part of the laws of England and Wales by virtue of the EUWA and certain other enacting measures (“UK MAR”). Upon the publication of this announcement via a Regulatory Information Service this inside information is now considered to be in the public domain.