A UK takeover saga…
18 October 2011
The Evolution Group PLC (“Evolution”) –
Offer UpdateThe board of Evolution notes the announcement by Aberforth Partners LLP on 17 October 2011, stating that it no longer intends to comply with its non-binding letter of intent regarding the recommended acquisition of Evolution by Investec plc (“Investec”).
The Board of Evolution confirms that it continues unanimously to recommend Investec’s offer for Evolution as set out in the circular to shareholders published on 3 October 2011 (the “Scheme Document”).
The Evolution Court Meeting and the Evolution General Meeting to approve the Scheme will be held on 27 October 2011. Further details are set out in the Scheme Document.
That’s a statement you don’t see every day. A shareholder pulling its support for an recommended offer. In this case Investec’s proposed acquisition of Evolution Group, the stockbroker and wealth manager. (Terms: 0.23124 Investec shares in exchange for each Evolution Share).
Now, we don’t know what’s behind Aberforth’s volte-face, but we can speculate.
- Perhaps Aberforth (Evolution’s biggest shareholder) is frustrated by the Investec share price.
(Investec shares have dropped since on 9 Sept and the implied valuation is now 84p versus 100p when the bid was made).
- Perhaps Aberforth is frustrated by the fact that Evolution decided not to recommend a competing offer from Canaccord Genuity, that is widely rumoured to have had a chunky cash component and pitched around 100p a share.
- Perhaps Aberforth is frustrated by the options Evolution’s chief executive Alex Snow was granted just before the takeover interest was made public and subsequently revised.
On 25 July 2011, the Committee agreed to enter into a commitment to make awards to Alex Snow under the Plan over 2,000,000 Ordinary Shares subject to the performance conditions set out above (including automatic vesting on change of control) once the Company was no longer in a close period. In light of the possible change of control of the Company announced on 9 September 2011, Alex Snow requested that the Committee reduce the quantum of the awards from 2,000,000 to 1,285,000 Ordinary Shares. The Committee has agreed to this request, although it has resolved to reconsider the granting of further awards in due course should a change of control not take place.
- Perhaps Aberforth is frustrated that in addition to the options, Snow has managed to secure a seat on the board of Investec, a FTSE 100 company.
The existing chief executive of Evolution, Alex Snow, will become the executive chairman of Investec’s UK investment banking division and will join the boards of Investec Bank plc and Investec Wealth & Investment Limited. David Currie will continue as head of Investec’s UK investment banking division. Philip Howell will remain the chief executive of Williams de Broë and will join the board of Investec Wealth & Investment Limited and become a member of the strategic and integration committees of the greater wealth and investment group. Jonathan Wragg, the chief executive of Investec Wealth & Investment Limited and an existing member of the strategic and integration committees will join the board of Williams de Broë.
- And perhaps Aberforth is puzzled by the departure of Evolution’s finance director during the takeover talks.
The Board of Evolution Group, the listed investment bank and private client investment management group, announces that Andrew Westenberger has decided to resign from his position as Group Finance Director with immediate effect.
We have our own suspicions, but the key question now is whether other shareholders join Aberforth and vote against the deal, which has been structured as a scheme of arrangement and needs 75 per cent shareholder approval.
That’s difficult to call, says Keith Baird at Oriel Securities.
Blackrock have 10%, Schroders 5% & Majedie 5%. They have enough combined to block the deal. Doing so would carry the risk that there is no fresh bid and the shares would fall. The question is who has the greater leverage: Investec or the shareholders?
Well, there certainly won’t be another bid from Canaccord, who it’s rumoured aren’t too pleased with the way the sale process was handled by the Evolution board and its advisers. It’s possible there might be another interested party out there, but it seems unlikely given market volatility, low trading volumes, IPO drought etc.
In all probability Evolution shareholders will probably vote in favour of the Investec acquisition even if it leaves a nasty taste in the mouth.
Related link:
Evolution Group’s largest shareholder withdraws support for Investec bid – Daily Telegraph