REG - Chesnara PLC - Acquisition & Rights Issue
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RNS Number : 5932P Chesnara PLC 03 July 2025
Not for release, publication or distribution, IN WHOLE OR IN PART, directly or
indirectly, in or into THE UNITED STATES, AUSTRALIA, CANADA, Japan, the
republic of south africa OR ANY OTHER JURISDICTION WHERE SUCH RELEASE,
PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.
THIS ANNOUNCEMENT IS AN ADVERTISEMENT FOR THE PURPOSES OF THE UK PROSPECTUS
REGULATION RULES OF THE FINANCIAL CONDUCT AUTHORITY (THE "FCA") AND DOES NOT
CONSTITUTE A PROSPECTUS OR A PROSPECTUS EQUIVALENT DOCUMENT. NEITHER THIS
ANNOUNCEMENT NOR ANY PART OF IT SHOULD FORM THE BASIS OF OR BE RELIED ON IN
CONNECTION WITH OR ACT AS AN INDUCEMENT TO ENTER INTO ANY CONTRACT OR
COMMITMENT WHATSOEVER. NOTHING IN THIS ANNOUNCEMENT SHOULD BE INTERPRETED AS A
TERM OR CONDITION OF THE RIGHTS ISSUE. ANY DECISION TO PURCHASE, SUBSCRIBE
FOR, OTHERWISE ACQUIRE, SELL OR OTHERWISE DISPOSE OF ANY NIL PAID RIGHTS,
FULLY PAID RIGHTS OR NEW SHARES MUST BE MADE ONLY ON THE BASIS OF THE
INFORMATION CONTAINED IN THE PROSPECTUS ONCE PUBLISHED. COPIES OF THE
PROSPECTUS WILL, FOLLOWING PUBLICATION, BE AVAILABLE FROM THE REGISTERED
OFFICE OF THE COMPANY AND ON ITS WEBSITE AT WWW.CHESNARA.CO.UK/INVESTORS
(http://WWW.CHESNARA.CO.UK/INVESTORS) .
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
Chesnara PLC
3 July 2025
ACQUISITION OF HSBC LIFE (UK)
FULLY UNDERWRITTEN RIGHTS ISSUE TO RAISE APPROXIMATELY £140 MILLION
AMENDED REVOLVING CREDIT FACILITY AGREEMENT
Chesnara plc ("Chesnara" or the "Company" and, together with its subsidiaries,
the "Group") today announces that it has entered into an agreement to acquire
HSBC Life (UK) Limited ("HSBC Life (UK)"), a specialist life protection and
investment bond provider in the United Kingdom for a total consideration of
£260 million, from HSBC Bank plc ("HSBC Bank") (the "Acquisition").
Highlights:
§ Agreement with HSBC Bank to acquire HSBC Life (UK), a specialist life
protection and investment bond provider in the UK with Eligible Own Funds of
£314 million as at 31 December 2024.
§ Expected incremental lifetime cash generation in excess of £800 million
from HSBC Life (UK) with cash generation of over £140 million during the
first five years post-acquisition((1)).
§ Cash consideration of £260 million funded through a combination of (i)
£55 million of existing internal cash resources, (ii) £65 million drawdown
from the Group's increased £150m revolving credit facility ("Amended RCF");
and (iii) equity raised via a fully underwritten rights issue at 176p per
share to raise gross proceeds of approximately £140 million (the "Rights
Issue") on the basis of 10 New Ordinary Shares for every 19 Existing Ordinary
Shares.
§ Anticipated increase in final FY25 and interim FY26 dividend by an adjusted
6% and enhanced support for Chesnara's future dividend trajectory from
incremental cash generation((2)).
§ Potential further value creation opportunities from additional expense and
capital synergies, management actions and new business.
§ Scale in the UK transformed by adding approximately £4 billion of assets
under administration((3)) ("AuA") and approximately 454,000 policies((3)).
§ Increased free float and expected eligibility for FTSE 250 inclusion
increasing liquidity in the Company's Ordinary Shares.
§ Completion is expected in early 2026, subject to customary regulatory
approvals.
Commenting on the Acquisition
Steve Murray, Chief Executive Officer, Chesnara stated:
"The proposed acquisition of HSBC Life (UK) represents a material step up in
scale for Chesnara Group. HSBC Life (UK) is a high-quality business operating
in products that we know well and is capable, under our ownership, of
generating substantial cash flows for many years. This highly accretive
transaction will allow us to build on our strong, 20-year track record of
uninterrupted dividend growth. It is also a further example of a major
financial institution choosing to work with us, enhancing our reputation as a
leading life and pensions consolidator. We are continuing to see a strong
M&A pipeline across our group which we are well-positioned to execute on.
We look forward to welcoming HSBC Life (UK) policyholders and the HSBC Life
(UK) team to Chesnara and working closely with HSBC Bank plc to ensure the
smooth transition of the business into the Group."
Summary of background to and reasons for the Acquisition
Chesnara's primary focus is consolidating life and pensions books in the UK
and the Netherlands, complemented by profitable new business written across
the Group's businesses in Sweden, the Netherlands and the UK. The Group's
business model is based on seeking out and delivering value-enhancing M&A
opportunities which can be efficiently integrated into the Group with the
objective to grow future cash generation through additional scale and, in
doing so, enhance the sustainability of the Group's strong dividend
trajectory. Chesnara proactively and diligently assesses deals on a regular
basis by applying well-established criteria and a robust risk-based due
diligence process. The board of directors of the Company (the "Board")
believes that the Acquisition is strategically compelling and offers
significant financial benefits as set out below.
§ Increased cash generation: With lifetime cash generation in excess of £800
million, achieved through the delivery of future profits and run off of
capital requirements over time, the Acquisition is expected to enhance the
future cash generation of the Group. £140 million of cash generation is
expected to emerge during the first five years post-acquisition over the
period 2025 - 2029, with significant cash generation expected to emerge in
future years, enhancing the sustainability and longevity of the Group's cash
generation.
§ Attractive transaction pricing: The total consideration for the Acquisition
of £260 million represents 83% of HSBC Life (UK)'s Eligible Solvency II Own
Funds as at 31 December 2024((4)).
§ Efficient financing structure: Chesnara will fund the Acquisition
utilising: (a) £55 million of own cash resources; (b) £65 million from the
Group's Amended RCF which is currently completely undrawn; and (c) a fully
underwritten rights issue to raise gross proceeds of £140 million from its
shareholders. The proposed financing structure would have resulted in a
leverage ratio of 29%((5)) if the transaction had occurred on 31 December 2024
(compared to 31% reported at 2024 year-end), consistent with the Group's
investment grade rating((6)). In the medium term, the Group's leverage ratio
is expected to reduce further as Chesnara pays down the Amended RCF.
§ Robust balance sheet maintained: On a pro forma basis, if the transaction
had occurred on 31 December 2024, the Group's Solvency II Surplus would have
been £361 million (compared to £327 million reported at 2024 year-end) and
the Solvency Coverage Ratio would have been 169% (compared to 203% reported at
2024 year-end), which is above the Group's normal operating range of 140% -
160%.
§ Step-up in dividend: Supported by the strong financial profile of the
Acquisition, it is anticipated that there will be an increase in the Group's
dividend trajectory. The final FY25 dividend and interim FY26 dividend is
expected to be increased by 6%, representing a one-year acceleration in the
Group's recent historic track record of 3% per annum increases((2)).
§ Value creation through operating efficiencies and capital optimisation: The
Acquisition is expected to create value for shareholders through operating
efficiencies from the migration of the policy administration of the HSBC Life
(UK) policies to our strategic outsourcing partner SS&C Technologies
Limited ("SS&C"). This activity will be part of the ongoing migration of
the policy administration for Chesnara's UK business from the existing range
of outsourced providers to SS&C.
The Acquisition is also expected to enable incremental value creation for
shareholders through management actions and capital synergies including, for
example, the Part VII transfer of HSBC Life (UK) to a single UK entity over
time, mass lapse reinsurance, FX hedging and capital diversification benefits.
§ New business opportunity: The HSBC Life (UK) product suite is complementary
and well-aligned to the Group's existing products, particularly its open
onshore bond. HSBC Life (UK) offers potential to generate further value from
new business which the Company will assess carefully over the coming months.
§ Reinforces Chesnara's position as a leading life and pensions consolidator:
The Acquisition represents the Group's largest transaction to date with
approximately £4 billion of assets under administration((3)) and
approximately 454,000 policies((3)) being acquired by Chesnara, creating a
combined Group with approximately £18 billion((7)) of total AuA and
approximately 1.4 million policies((7)). The Acquisition is also expected to
result in Chesnara's inclusion in the FTSE 250 index and further supports
Chesnara's position as one of the leading life and pensions consolidators.
Summary of background to and reasons for the Rights Issue
The Board decided to undertake the Rights Issue to raise capital to support
the Acquisition as part of establishing an optimal financing structure,
comprising use of existing cash, drawdown of the Amended RCF and equity raised
from the proposed Rights Issue, to align with the Group's financing framework
and to support additional M&A in the future. The Rights Issue would ensure
that, if Qualifying Shareholders (other than, subject to limited exceptions,
Shareholders with a registered address in, or resident in, one of the Excluded
Territories) buy all of the New Ordinary Shares to which they are entitled,
their shareholdings would not be diluted. This means that Shareholders who
subscribe for all of the New Ordinary Shares to which they are entitled under
the Rights Issue will have the same percentage interest in the Company both
before and after the Rights Issue, subject to the rounding down of fractional
share entitlements.
The Company is proposing to raise gross proceeds of approximately £140
million by way of a rights issue of 79,539,337 New Ordinary Shares. The
Company entered into an underwriting agreement today with RBC Europe Limited
("RBC") and ABN AMRO Bank N.V., in cooperation with ODDO BHF SCA, ("ABN AMRO")
acting as underwriters (the "Underwriters") and Panmure Liberum Limited
("Panmure Liberum", and together with RBC and ABN AMRO, the "Joint
Bookrunners") in connection with the Rights Issue (the "Underwriting
Agreement"). This Rights Issue will be on the basis of:
10 New Ordinary Shares for every 19 Existing Ordinary Shares
held on the Record Time (and so in proportion for any other number of Existing
Ordinary Shares then held) and otherwise on the terms and conditions as set
out in the Prospectus.
The offer is to be made at 176 pence per New Ordinary Share (the "Issue
Price"), payable in full on acceptance by no later than 11 a.m. on 22 July
2025. The Issue Price represents a discount of 40.0 per cent. to the closing
price of 293.50 pence per Ordinary Share on 2 July 2025 (the last Business Day
before the publication of this announcement), and a discount of 30.4 per cent.
to the theoretical ex-rights price of 252.98 pence per Ordinary Share by
reference to the closing price on the same basis.
The New Ordinary Shares, when issued and fully paid, will rank pari passu in
all respects with the Existing Ordinary Shares, including the right to receive
dividends or distributions made, paid or declared after the date of this
announcement. Applications will be made to the FCA and to the London Stock
Exchange ("LSE") for the New Ordinary Shares to be admitted to the Official
List and to trading on the LSE's main market for listed securities
("Admission"). It is expected that Admission will occur and that dealings in
the Rights (Nil and Fully Paid) on a multi-lateral trading facility of the LSE
will commence at 8.00 am on 8 July 2025. It is expected that dealings in the
New Ordinary Shares (fully paid) will commence on the LSE at the time and date
shown in the Indicative Summary Timetable of Principal Events set out below.
If the Rights Issue were to proceed but the Acquisition does not complete, the
Board intends to retain the net proceeds of the Rights Issue for use within
the following 12 months on the general commercial activities of the Group and
alternative acquisitions in pursuit of the Group's strategy as a consolidator
of closed life and pension funds, currently focusing on the UK and Dutch
insurance markets as well as exploring potential opportunities in the wider
European insurance market. Failing this, the Board will either seek to return
the net proceeds of the Rights Issue to Shareholders in a tax efficient and
practicable manner or seek Shareholders' approval to continue to hold the net
proceeds of the Rights Issue for general corporate purposes.
The Rights Issue is fully underwritten by the Underwriters pursuant to the
terms and conditions of the Underwriting Agreement.
Amended and Restated Facility Agreement and other Acquisition Details
Alongside the announcement of the Acquisition and the Rights Issue, earlier
today the Company entered into an amendment and restatement deed with National
Westminster Bank plc as arranger, original lender and facility agent and ABN
AMRO Bank N.V. as an original lender to amend and restate the existing credit
facility agreement originally dated 2 July 2024 (the "Amended and Restated
Facility Agreement") pursuant to which a three year increased £150,000,000
multicurrency revolving facility ("Amended RCF") is made available to the
Company. The Company will draw down £65 million from the Amended RCF for the
purposes of part funding the consideration for the Acquisition.
The Amended RCF may also be applied towards certain other acquisitions that
are permitted under the Amended and Restated Facility Agreement and general
corporate and working capital purposes of the Group. The Amended RCF is
unsecured, and the Company is the only borrower under the Amended and Restated
Facility Agreement but the Company can on-lend amounts borrowed to other
members of the Group.
The Acquisition is expected to bring the Group an additional approximately £4
billion of assets under administration((3)) and approximately 454,000
policies((3)), based on information as at 31 December 2024. This will result
in an increase in the Group's existing AuA((7)) to £18 billion and a total of
approximately 1.4 million policyholders((7)).
Completion of the Acquisition is conditional upon customary regulatory
approvals and Admission becoming effective.
Board Statement
The Board unanimously considers the Acquisition to be in the best interests of
the shareholders of the Company as a whole. The Board believes the Acquisition
offers significant financial benefits for Shareholders and is a strong
strategic fit for the Group.
UK Listing Rules
The Acquisition, due to its size relative to the Group, constitutes a
"significant transaction" for the purposes of the UK Listing Rules, and is
therefore notifiable in accordance with UK Listing Rule 7.3.1R and 7.3.2R.
Additional details as required under the UK Listing Rules are presented in
Appendix 2.
Prospectus
A Prospectus setting out the full details of the Rights Issue is expected to
be published on the Company's website at www.chesnara.co.uk/investors
(http://www.chesnara.co.uk/investors) later today.
The Prospectus will be submitted to the National Storage Mechanism and will be
available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism following
publication.
The preceding summary should be read in conjunction with the full text of the
following announcement, together with the Prospectus.
Unless the context otherwise requires, words and expressions defined in the
Prospectus shall have the same meanings in this announcement.
Expected Summary Timetable of Principal Events
2025
Rights Issue Record Date 6.00 p.m. on 1 July
Announcement of the Rights Issue 3 July
Publication of the Prospectus 3 July
Despatch of Provisional Allotment Letters (to Qualifying Non-CREST 4 July
Shareholders only)
Existing Ordinary Shares marked "ex-rights" by the London Stock Exchange 8.00 a.m. on 8 July
Admission of New Ordinary Shares, and admission of and commencement of 8.00 a.m. on 8 July
dealings in, Nil Paid Rights on a multi-lateral trading facility of the London
Stock Exchange
Latest time and date for acceptance and payment in full and registration of 11.00 a.m. on 22 July
renounced Provisional Allotment Letters
Expected date of announcement of the results of the Rights Issue through a by 8.00 a.m. on 23 July
Regulatory Information Service
Dealings in New Ordinary Shares (fully paid) commence on the London Stock 8.00 a.m. on 23 July
Exchange
The times and dates set out in the expected timetable above may be subject to
change and based on London time.
Webcast and Conference Call
A presentation for analysts and investors will be held today, 3 July 2025, at
8.30 a.m. (BST).
A link to a live webcast of the presentation, with the facility to raise
questions, and a copy of the presentation will be available at
www.chesnara.co.uk/investors (http://www.chesnara.co.uk/investors) .
To access the live webcast please go to: https://brrmedia.news/CSN_IP
(https://url.uk.m.mimecastprotect.com/s/UCUKCvB1HWLDLphXh3iQ68hM) .
To access the conference call please dial: +44 (0) 33 0551 0200 or 0808 109
0700 (UK Toll Free) and quote 'Chesnara' when prompted by the operator.
A replay of the presentation will also be available through the website.
Notes:
((1) ) Incremental cash generation arising from the acquisition of
HSBC Life (UK) is calculated using Chesnara's assumptions and reporting bases
on an undiscounted basis
((2) ) Increase in Final FY25 dividend per share compared to
re-stated Final FY24 dividend per share; Increase in Interim FY26 dividend per
share compared to expected Interim FY25 dividend per share. See Appendix I,
Paragraph 2 for further details
((3) ) HSBC Life (UK)'s approximate assets under administration and
number of policies as at 31 December 2024
((4) ) Eligible Solvency II Own Funds of £314 million after Tier 3
tiering restriction as at 31 December 2024
((5) ) Leverage ratio calculated as debt divided by debt plus
equity with the equity denominator adding back the net of tax CSM liability
((6) ) In reference to Fitch's investment grade rating of Chesnara
((7) ) Pro forma assets under administration and number of policies
for Chesnara are calculated as at 31 December 2024
Enquiries
Investors:
Chesnara
Steve Murray, Group Chief Executive Officer
Tom Howard, Group Chief Financial Officer
Sam Perowne, Head of Strategic Development & Investor Relations
sam.perowne@chesnara.co.uk (mailto:sam.perowne@chesnara.co.uk)
Fenchurch Advisory Partners (Lead Financial Advisor to Chesnara)
Paul Miller
Yiannis Kourris
David Cochrane
+44 (0) 20 7382 2222
RBC Capital Markets (Sponsor, Global Coordinator, Lead Underwriter, Joint
Financial Advisor and Corporate Broker to Chesnara)
James Agnew
Ezzedine Ben Frej
Jamil Miah
+44 (0) 20 7653 4000
ABN AMRO (Joint Bookrunner and Underwriter to Chesnara)
Julie Wakkie
Maarten Altena
+ 31 (0) 20 628 48 66
Panmure Liberum (Joint Bookrunner and Joint Corporate Broker to Chesnara)
Stephen Jones
David Watkins
Atholl Tweedie
+ 44 (0) 20 3100 2000
Media:
Teneo
Oscar Burnett
chesnara@teneo.com
+44 (0) 20 7427 5435
The person responsible for arranging for the release of this announcement on
behalf of Chesnara is Al Lonie, Company Secretary.
Notes to Editors
LEI Number: 213800VFRMBRTSZ3SJ06
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 (as it forms part of domestic law as defined in
the European Union (Withdrawal) Act 2018).
About Chesnara plc
Chesnara (CSN.L) is a European life and pensions consolidator listed on the
London Stock Exchange. It administers just under one million policies and
operates as Countrywide Assured in the UK, as The Waard Group and Scildon in
the Netherlands and as Movestic in Sweden.
Following a three-pillar strategy, Chesnara's primary responsibility is the
efficient administration of its customers' life and savings policies, ensuring
good customer outcomes and providing a secure and compliant environment to
protect policyholder interests. It also adds value by writing profitable new
business in the UK, Sweden and the Netherlands and by undertaking value-adding
acquisitions of either companies or portfolios.
Consistent delivery of the Company strategy has enabled Chesnara to increase
its dividend for 20 years in succession.
Further details are available on the Company's website (www.chesnara.co.uk
(http://www.chesnara.co.uk) ).
IMPORTANT NOTICES
This announcement has been issued by and is the sole responsibility of the
Company. The information in this announcement is for background purposes only
and does not purport to be full or complete. No reliance may or should be
placed by any person for any purpose whatsoever on the information contained
in this announcement or on its accuracy, fairness or completeness. The
information in this announcement is subject to change without notice.
This announcement is an advertisement for the purposes of the Prospectus
Regulation Rules of the FCA and does not constitute a prospectus (or
prospectus equivalent document) and investors should not subscribe for,
purchase, otherwise acquire, sell or otherwise dispose of any securities
referred to in this announcement except on the basis of information in the
Prospectus to be published by the company in due course Neither this
announcement nor anything contained in it shall form the basis of, or be
relied upon in conjunction with, any offer or commitment whatsoever in any
jurisdiction.
A copy of the Prospectus will, following publication, be available from the
registered office of the Company and on its website at
www.chesnara.co.uk/investors, save that the Prospectus will not be available
to shareholders in the United States, Australia, Canada, Japan, the Republic
of South Africa or any other jurisdiction where such release, publication or
distribution would be unlawful. Neither the content of the Company's website
nor any website accessible by hyperlinks on the Company's website is
incorporated in, or forms part of, this announcement. The Prospectus will
provide further details of the New Ordinary Shares, the Nil Paid Rights and
the Fully Paid Rights being offered pursuant to the Rights Issue.
This announcement is for information purposes only and is not intended to and
does not constitute an offer or an invitation to apply to acquire any Nil Paid
Rights, Fully Paid Rights or New Ordinary Shares in any jurisdiction. No offer
or invitation to purchase or subscribe for, or any solicitation to purchase or
subscribe for, Nil Paid Rights, Fully Paid Rights or New Ordinary Shares or to
take up any entitlements to Nil Paid Rights will be made in any jurisdiction
in which such an offer or solicitation is unlawful. The information contained
in this announcement is not for release, publication or distribution to
shareholders in the United States, Australia, Canada, Japan, the Republic of
South Africa or any other jurisdiction where such release, publication or
distribution would be unlawful. The distribution of this announcement, the
Prospectus, the Provisional Allotment Letter and the offering or transfer of
Nil Paid Rights, Fully Paid Rights or New Ordinary Shares into jurisdictions
other than the United Kingdom may be restricted by law, and therefore persons
into whose possession this announcement comes should inform themselves about
and observe any such restrictions.
Any failure to comply with any such restrictions may constitute a violation of
the securities laws of such jurisdiction. In particular, subject to certain
exceptions, this announcement, the Prospectus (once published) and the
Provisional Allotment Letters (once printed) should not be distributed,
forwarded to or transmitted in or into the United States, Australia, Canada,
Japan, the Republic of South Africa. Recipients of this announcement and/or
the Prospectus should conduct their own investigation, evaluation and analysis
of the business, data and property described in this announcement and/or if
and when published the Prospectus.
This announcement does not constitute a recommendation concerning any
investor's options with respect to the Rights Issue. The price and value of
securities can go down as well as up. Past performance is not a guide to
future performance. The contents of this announcement are not to be construed
as legal, business, financial or tax advice. Each shareholder or prospective
investor should consult his, her or its own legal adviser, business adviser,
financial adviser or tax adviser for legal, financial, business or tax advice.
Acquiring investments to which this announcement relates may expose an
investor to a significant risk of losing all of the amount invested
This announcement is not for publication or distribution in or into the United
States of America. This announcement is not an offer of securities for sale
into the United States. The securities referred to herein have not been and
will not be registered under the U.S. Securities Act of 1933, as amended, and
may not be offered or sold in the United States, except pursuant to an
applicable exemption from registration. No public offering of securities is
being made in the United States.
RBC Europe Limited ("RBC") is authorised by the PRA and regulated by the FCA
and the PRA in the United Kingdom. ABN AMRO Bank N.V. ("ABN AMRO") is
regulated by the European Central Bank in close cooperation with the Dutch
Central Bank (De Nederlandsche Bank) and the Dutch Authority for the Financial
Markets (Autoriteit Financiële Markten) in the Netherlands. Panmure Liberum
Limited ("Panmure Liberum", and together with ABN AMRO and RBC, the "Joint
Bookrunners") is authorised and regulated in the United Kingdom by the FCA.
Each of the Joint Bookrunners is acting exclusively for the Company and no-one
else in connection with this announcement and the Rights Issue and will not
regard any other person (whether or not a recipient of this announcement) as a
client in connection with the Rights Issue and will not be responsible to
anyone other than the Company for providing the protections afforded to its
clients nor for providing advice to any person in relation to the Rights Issue
or any other matter, transaction or arrangement referred to in this
announcement.
None of RBC, ABN AMRO or Panmure Liberum, nor any of their respective
subsidiaries, branches or affiliates, nor any of their respective directors,
officers, employees or advisers accepts any responsibility or liability
whatsoever for the contents of this announcement, or makes any representation
or warranty, express or implied, as to its accuracy, completeness or
verification or for any other statement made or purported to be made by it, or
on its behalf, in connection with the Company, the Nil Paid Rights, the Fully
Paid Rights, the Provisional Allotment Letter, the New Ordinary Shares or the
Rights Issue. Subject to applicable law, each of RBC, ABN AMRO and Panmure
Liberum disclaims all and any liability or responsibility whatsoever (whether
direct or indirect, whether in contract, in tort, contract or otherwise) which
it might otherwise have in respect of the Rights Issue, this announcement, or
any statement contained herein, or otherwise.
Forward Looking Statements
This announcement may contain forward-looking statements that reflect the
Company's current views and expectations regarding future events. These
forward-looking statements can be identified by the use of forward-looking
terminology, including the terms "believes", "envisages", "estimates",
"anticipates", "projects", "expects", "intends", "may", "will", "could",
"seeks" or "should" or, in each case, their negative or other variations or
comparable terminology, or by discussions of strategy, plans, objectives,
goals, future events or intentions. By their nature, forward-looking
statements involve risks and uncertainties that could cause actual results to
differ materially from those expressed or implied by the forward-looking
statements. These forward-looking statements include matters that are not
historical facts and speak only as of the date of this announcement.
Accordingly, undue reliance should not be placed on these forward-looking
statements.
Readers are advised to read the Prospectus when published and the information
incorporated by reference therein in their entirety, and, in particular, the
section of the Prospectus headed Part II (Risk Factors), for a further
discussion of the factors that could affect the Group's and following
Completion, the Enlarged Group's future performance and business. In light of
these risks, uncertainties and assumptions, the events described in the
forward-looking statements in this announcement, the Prospectus and/or the
information incorporated by reference into the Prospectus may not prove to be
accurate or may not occur. Prospective investors should therefore carefully
review the Prospectus when published. Such forward-looking statements are
based on numerous assumptions regarding the Company's present and future
business strategies and the environment in which the Company will operate in
the future.
Nothing in this announcement is intended as a profit forecast or estimate for
any period, and no statement in this announcement should be interpreted to
mean that earnings or earnings per share or dividend per share for the Company
for the current or future financial years would necessarily match or exceed
the historical published earnings or earnings per share or dividend per share
for the Company.
To the extent required by applicable law or regulation (including as may be
required by the Companies Act, the Prospectus Regulation Rules, the UK Listing
Rules, MAR, the Disclosure Guidance and Transparency Rules and FSMA), the
Company will update or revise the information in this announcement. Otherwise,
neither the Company nor the Joint Bookrunners assume any obligation to update
or provide any additional information in relation to such forward-looking
statements. Additionally, statements of the intentions or beliefs of the Board
and/or the Directors reflect the present intentions and beliefs of the Board
and/or Directors, respectively, as at the date of this announcement and may be
subject to change as the composition of the Board alters, or as circumstances
require.
INFORMATION TO DISTRIBUTORS
Solely for the purposes of the product governance requirements of Chapter 3 of
the FCA Handbook Product Intervention and Product Governance Sourcebook (the
"UK Product Governance Requirements"), and disclaiming all and any liability,
whether arising in tort, contract or otherwise, which any "manufacturer" (for
the purposes of the UK Product Governance Requirements) may otherwise have
with respect thereto, the New Ordinary Shares have been subject to a product
approval process, which has determined that the New Ordinary Shares are: (a)
compatible with an end target market of retail investors and investors who
meet the criteria of professional clients and eligible counterparties, each as
defined in Chapter 3 of the FCA Handbook Conduct of Business Sourcebook; and
(b) eligible for distribution through all permitted distribution channels (the
"Target Market Assessment"). Notwithstanding the Target Market Assessment,
"distributors" (for the purposes of the UK Product Governance Requirements)
should note that: the price of the New Ordinary Shares may decline and
investors could lose all or part of their investment; the New Ordinary Shares
offer no guaranteed income and no capital protection; and an investment in the
New Ordinary Shares is compatible only with investors who do not need a
guaranteed income or capital protection, who (either alone or in conjunction
with an appropriate financial or other adviser) are capable of evaluating the
merits and risks of such an investment and who have sufficient resources to be
able to bear any losses that may result therefrom. The Target Market
Assessment is without prejudice to any contractual, legal or regulatory
selling restrictions in relation to the offer of New Ordinary Shares.
Furthermore, it is noted that, notwithstanding the Target Market Assessment,
the Joint Bookrunners will only procure investors who meet the criteria of
professional clients and eligible counterparties.
For the avoidance of doubt, the Target Market Assessment does not constitute:
(i) an assessment of suitability or appropriateness for the purposes of
Chapters 9A or 10A, respectively, of the FCA Handbook Conduct of Business
Sourcebook; or (ii) a recommendation to any investor or group of investors to
invest in, or purchase, or take any other action whatsoever with respect to,
the New Ordinary Shares. Each distributor is responsible for undertaking its
own target market assessment in respect of the New Ordinary Shares and
determining appropriate distribution channels.
APPENDIX 1
RIGHTS ISSUE
1. Principal Terms and Conditions of the Rights Issue
Today the Board of Chesnara announces a proposed capital raise of
approximately £140 million by way of a fully underwritten Rights Issue of
79,539,337 New Ordinary Shares. Subject to the fulfilment of the conditions of
the Underwriting Agreement, the New Ordinary Shares will be offered under the
Rights Issue by way of rights at 176 pence per New Ordinary Share (the "Issue
Price") payable in full on acceptance by no later than 11 a.m. on 22 July
2025. This Rights Issue will be on the basis of:
10 New Ordinary Shares for every 19 Existing Ordinary Shares
held on the Record Time (and so in proportion for any other number of Existing
Ordinary Shares then held) and otherwise on the terms and conditions as set
out in the Prospectus.
The Issue Price represents a discount of 40.0 per cent. to the closing price
of 293.50 pence per Ordinary Share on 2 July 2025 (the last Business Day
before the publication of this announcement), and a discount of 30.4 per cent.
to the theoretical ex-rights price of 252.98 pence per Ordinary Share by
reference to the closing price on the same basis.
The Rights Issue is expected to raise approximately £140 million in gross
proceeds and approximately £130 million in net proceeds (after deduction of
estimated commissions, fees and expenses). These net proceeds will be to part
fund the Acquisition, as described in detail above in this announcement.
Qualifying Shareholders who do not (or who are not permitted to) take up their
entitlements to New Ordinary Shares will have their proportionate
shareholdings in the Company diluted by approximately 34.5 per cent. Those
Qualifying Shareholders who take up the New Ordinary Shares provisionally
allotted to them in full will, subject to the rounding down and sale of any
fractions, retain the same proportionate voting and distribution rights as
held by them at the Record Time.
The Nil Paid Rights (also described as New Ordinary Shares, nil paid) are
entitlements to acquire the New Ordinary Shares subject to payment of the
Issue Price. The Fully Paid Rights (also described as New Ordinary Shares,
fully paid) are entitlements to receive the New Ordinary Shares, for which a
payment has already been made.
Applications will be made to the FCA and to the LSE for the New Ordinary
Shares to be admitted to listing on the equity shares (commercial companies)
category of the Official List and to trading on the LSE's main market for
listed securities, respectively. It is expected that the Rights (Nil and Fully
Paid) will be admitted to trading on a multi-lateral trading facility of the
London Stock Exchange. It is expected that Admission will become effective at
8.00 am on 8 July 2025, that dealings in the Rights (Nil and Fully Paid) will
commence as soon as possible after 8.00 am on that date, and that dealings in
the New Ordinary Shares (fully paid) will commence on the London Stock
Exchange at the time and date shown in the Expected Indicative Summary
Timetable of Principal Events set out above.
The International Securities Identification Number ("ISIN") for the New
Ordinary Shares will be the same as that of the Existing Ordinary Shares,
being GB00B00FPT80. The ISIN for the Nil Paid Rights will be GB00BR0W1Q72 and
for the Fully Paid Rights will be GB00BR0W1R89.
None of the New Ordinary Shares are being offered to the public other than
pursuant to the Rights Issue. The Company reserves the right to decide not to
proceed with the Rights Issue at any time before Admission and the
commencement of dealings of the Nil Paid Rights and Fully Paid Rights on a
multi-lateral trading facility of the London Stock Exchange.
The Rights Issue is conditional, inter alia, upon:
(i) the Underwriting Agreement having become unconditional in all
respects (save for the condition relating to Admission) and not having been
terminated in accordance with its terms prior to Admission; and
(ii) Admission becoming effective by not later than 8.00 am on 8
July 2025 (or such later time and/or date as the Company may agree with the
Global Coordinator).
The Rights Issue is fully underwritten by the Underwriters pursuant to the
terms and subject to the conditions of the Underwriting Agreement. The
Underwriting Agreement is conditional upon certain matters being satisfied
prior to Admission. The Underwriting Agreement may be terminated by the
Underwriters prior to Admission upon the occurrence of certain specified
events, in which case the Rights Issue will not proceed. For the avoidance of
doubt, Admission will not proceed in the event the conditions are not
satisfied or the Underwriting Agreement is terminated. The Underwriting
Agreement is not capable of termination following Admission. The Underwriters
may arrange sub-underwriting for some, all or none of the New Ordinary Shares.
The New Ordinary Shares will, when issued and fully paid, rank pari passu in
all respects with the Existing Ordinary Shares, including the right to receive
all dividends or other distributions made, paid or declared after the date of
their issue. There will be no restrictions on the free transferability of the
New Ordinary Shares save as provided in the Articles.
If the Rights Issue were to proceed but the Acquisition does not complete, the
Board intends to retain the net proceeds of the Rights Issue for use within
the following 12 months on the general commercial activities of the Group and
alternative acquisitions in pursuit of the Group's strategy as a consolidator
of closed life and pension funds, currently focusing on the UK and Dutch
insurance markets as well as exploring potential opportunities in the wider
European insurance market. Failing this, the Board will either seek to return
the net proceeds of the Rights Issue to Shareholders in a tax efficient and
practicable manner or seek Shareholders' approval to continue to hold the net
proceeds of the Rights Issue for general corporate purposes.
Overseas Shareholders, including Shareholders in the United States, should
refer to paragraph 7 (Overseas Shareholders) of Part VIII (Terms and
Conditions of the Rights Issue) of the Prospectus once published for further
information regarding their ability to participate in the Rights Issue.
Some questions and answers, together with details of further terms and
conditions of the Rights Issue, including the procedure for acceptance and
payment and the procedure in respect of rights not taken up, will be set out
in Part IX (Questions and Answers about the Rights Issue) and Part VIII (Terms
and Conditions of the Rights Issue) of the Prospectus once published.
2. Dividend Policy
Supported by the strong financial profile of the Acquisition, it is
anticipated that there will be a step-up in the Group's dividend trajectory.
The final FY25 dividend and interim FY26 dividend is expected to be increased
by an adjusted 6%, representing a one-year acceleration in the Group's recent
historic track record of 3% per annum increases.
The FY24 interim dividend was 8.6p and final dividend was 16.1p resulting in a
total dividend of 24.7p. Following issue of 79,539,337 new shares in relation
to the Rights Issue at a discount of 30.4% to the theoretical ex-rights price,
the adjusted dividend per share for FY24 would have been 21.3p (interim
dividend of 7.4p and final dividend of 13.9p) on the basis of a bonus factor
of 1.16 being applied. The FY25 dividend is expected to increase to 22.3p
(interim dividend of 7.6p and final dividend of 14.7p) and the interim
dividend per share for FY26 is expected to increase to 8.1p, reflecting the
one-year acceleration described above. This is set out in more detail in the
table below.
Group dividend per share
FY24 actual FY24 FY25 post-transaction Annual change (FY25 vs. FY24 restated) FY26 post-transaction Annual change (FY26 vs. FY25)
re-stated post-transaction
Interim dividend 8.6p 7.4p 7.6p +3.0% 8.1p +6.0%
Final dividend 16.1p 13.9p 14.7p +6.0%
Total dividend 24.7p 21.3p 22.3p +5.0%
3. Current Trading and Prospects
The outlook for the current financial year remains consistent with the Board's
expectations. The Group remains positive on the outlook for further M&A
where it remains very active and continues to see a pipeline of opportunities.
Chesnara believes it is well placed to execute further value accretive deals
for Shareholders.
The Group is expecting to announce its interim results on 28 August 2025.
In addition to the Amended and Restated Facilities Agreement, the Group has
additional financing options available, including, following the shareholder
authorities given at the Company's annual general meeting in May 2025, the
ability to issue restricted tier 1 ("RT1") instruments, which would provide
flexibility to refinance existing debt facilities or to give the Group the
ability to execute on further value enhancing opportunities as they arise.
Accordingly, given its positive pipeline of opportunities, the Group continues
actively to assess all such financing options including the issuance of RT1
instruments.
4. Directors' Intentions
The Directors are fully supportive of the Rights Issue and believe that the
Rights Issue is in the best interest of the Company and the Shareholders as a
whole. Each of the Directors who holds Ordinary Shares will, to the extent
that he or she is able to, take up his or her rights in respect of his or her
Ordinary Shares to subscribe for New Ordinary Shares under the Rights Issue as
set out in the Prospectus, once published.
5. Risk Factors and Further Information
Shareholders' attention is drawn to the Risk Factors which will be set out in
the Prospectus, once published. Shareholders should read the whole of the
Prospectus once published before deciding on the action to take in respect of
the Rights Issue.
APPENDIX 2
KEY TERMS OF THE ACQUISITION
Financial Impact of the Acquisition
The Acquisition will bring to the Group an additional approximately £4
billion of assets under administration((3)) and approximately 454,000
policies((3)). This will result in an increase in Chesnara's existing total
life company assets under administration((7)) to approximately £18 billion
and create a Group with approximately 1.4 million policies((7)).
The Acquisition is expected to lead to incremental lifetime cash generation in
excess of £800 million with over £140 million of incremental cash generation
during the first five years post-acquisition((1)).
On a pro forma basis, the Acquisition would have increased the Group's IFRS
profit for the year ended 31 December 2024 from £3.9 million to £20.6
million had the transaction completed on 1 January 2024.
The proposed financing mix will maintain the Group's balance sheet strength,
with the leverage ratio of the enlarged Group expected to be 29% as if the
transaction had occurred on 31 December 2024 in line with the Group's
investment grade rating.
The estimated Solvency II Surplus of the enlarged Group is expected to
increase from £327 million to £361 million as if the transaction had
occurred on 31 December 2024, with the Solvency Coverage Ratio decreasing from
203% to 169%, and continuing to be above our target operating range of 140% -
160%.
In addition, the liabilities for the enlarged Group are expected to increase
from £12,441 million to £16,519 million as if the transaction had occurred
on 31 December 2024.
The Company expects that the integration of HSBC Life (UK) will unlock
significant value for Chesnara shareholders over time. The Acquisition is also
expected to create value for the benefit of shareholders, through potential
capital management actions such as the Part VII transfer to a single UK
entity, mass lapse reinsurance, FX hedging and capital diversification
benefits.
The Acquisition is subject to a non-refundable £20 million break fee payable
by the Company on termination of the Share Purchase Agreement other than in
certain limited circumstances.
Information on HSBC Life (UK)
HSBC Life (UK) is a specialist life protection and investment bond provider in
the UK. HSBC Life (UK) operates both open and closed life assurance
portfolios, with approximately 454,000 policies((3)), of which approximately
432,000 are protection products (as of 31 December 2024). HSBC Life (UK) is
the UK life insurance arm of the HSBC Group and a wholly-owned subsidiary of
HSBC Bank. The HSBC Group is one of the world's largest banking and financial
services organisations.
HSBC Life (UK) provides two key products: (i) an onshore investment bond
("OIB") and (ii) certain protection products (including life, critical illness
and income protection). HSBC Life (UK) is the second largest operator in the
UK OIB market and provides individual investors with access to approximately
3,800 funds from 200+ fund managers (including investment trusts, unit trusts
and OEICs). HSBC Life (UK) has key operations in Fareham, Bristol and London.
HSBC Life (UK)'s key strategy is to be one of the top five (5) providers in
the protection market in the UK, whilst continuing growth in the OIB sector.
HSBC Life (UK) is authorised and regulated by the FCA and the PRA in the UK.
Key financial data for HSBC Life (UK):
The financial information below has been extracted from the audited
consolidated financial statements for HSBC Life (UK) as at and for the
financial year ended 31 December 2024, prepared in accordance with IAS-GBP.
£ million, unless stated 31 December 2024
Solvency II
Eligible Own Funds 314
Solvency Capital Requirement 210
Solvency Coverage Ratio (%)((4)) 149
IFRS
Profit After Tax 26
Total Equity 277
Alternative performance measures
Assets under Administration (£ billion)((3)) c.4
Policies((3)) 454,000
Key Terms of the Acquisition
Share Purchase Agreement
Today, the Company, as the buyer and HSBC Bank plc, as the seller entered into
a share purchase agreement, to acquire the entire issued and to be issued
share capital of HSBC Life (UK) (the "Share Purchase Agreement").
Completion of the Share Purchase Agreement is subject to certain conditions
being satisfied (or waived by the agreement of each of the Company and the
Seller under the terms of the Share Purchase Agreement): being the PRA having
approved, or being treated as having approved, the acquisition of control of
HSBC Life (UK) by the Company for the purposes of the FSMA; and Admission
having become effective (the "Admission Condition"). The Company has agreed to
use its best endeavours to take certain actions in connection with the
satisfaction of the condition relating to the approval by the PRA. If each
of the conditions has not been satisfied (or waived by mutual written consent
between the Company and the Seller) by the date falling nine months after the
date of the Share Purchase Agreement and the Company and the Seller have not
otherwise agreed in writing within five Business Days thereof then the Share
Purchase Agreement will terminate and the Acquisition will not proceed.
The total consideration for the Acquisition comprises: an amount equal to:
a) £260 million (the "Basic Amount"); minus
b) an amount equal to all dividend payments made by HSBC Life (UK) to the
Seller in circumstances where the record date for such dividend falls between
31 December 2024 up the date of Completion; (the "Dividend Amount"); plus
c) an amount equal to:
a. 1 per cent. per annum calculated on a 365-day year, applied daily, from
and including 1 January 2025 to an including the earlier of the date of
Completion or 31 December 2025; and
b. 5 per cent. per annum calculated on a 365-day year, applied daily, from
and including 1 January 2026 to and including the date of Completion,
the "Daily Amount", calculated in accordance with the provisions set out in
the Share Purchase Agreement; plus
d) an amount equal to the aggregate of any capital equity contribution, or
other capital amounts to be contributed by the Seller and/or any member of the
Seller's group to HSBC Life (UK) in the form of cash between the date of the
Share Purchase Agreement (included) and the date of Completion (included)
("Capital Contributions"); plus
e) an amount for each Capital Contribution equal to the Daily Amount
multiplied by the amount of the relevant Capital Contribution multiplied by
the number of days elapsed from but excluding the date of payment of the
relevant Capital Contribution up to and including the date of Completion,
together the ("Consideration Amount").
The Consideration Amount may be adjusted via a "locked box" mechanism.
Prior to the date of Completion, either the Company or the Seller may
terminate the Share Purchase Agreement with immediate effect, upon becoming
aware that the other party has become a sanctioned person (as such term is
defined within the Share Purchase Agreement); or has violated or would cause
the other party to violate certain laws relating to anti-terrorism, anti-money
laundering, economic sanctions or other legislation as set out in the
Prospectus.
If the Admission Condition is not satisfied within four Business Days of the
date of the Share Purchase Agreement, the Company shall use best endeavours to
seek alternative financing for the Acquisition. In such circumstances, the
Seller may terminate the Share Purchase Agreement, from the fortieth Business
Day following the date of the Share Purchase Agreement provided that HSBC Bank
plc must give not less than 10 Business Days' notice to the Company of its
intention to exercise the termination right and further provided that such
termination right shall lapse if the Company has been able to obtain
alternative financing for the Acquisition to the reasonable satisfaction of
the Seller.
On termination of the Share Purchase Agreement (other than in certain limited
circumstances), a non-refundable break payment of an amount equal to
£20,000,000 shall become payable within 5 Business Days of termination of the
Share Purchase Agreement.
The Seller and the Company have given each other certain customary
representations and warranties in relation to the Acquisition and the issue of
the New Ordinary Shares. The Seller has also given to the Company an indemnity
in respect of potential liabilities associated with certain enhanced
redundancy or early retirement benefits under occupational pension schemes
that may transfer to the Company upon Completion. The Company's recourse in
respect of warranties and certain indemnities in relation to HSBC Life (UK)
is, save in respect of fraud, limited to recovery under warranty and indemnity
insurance policy which was also entered into between the Company and RiskPoint
Solutions Limited on 3 July 2025.
Save as set out above, the Seller's liability in respect of claims made
pursuant to the Share Purchase Agreement is subject to certain customary
limitations including that the Seller's total liability in respect of all
claims (other than specific claims relating to adjustments to the
Consideration Amount via the "locked box" mechanism) relating to the
Acquisition is not to exceed 100% of the Consideration Amount. Certain
sub-caps on the Seller's liability also apply.
The Seller has undertaken that HSBC Life (UK) will be run in the ordinary
course of business until Completion and will not make any material change to
the nature of the business. The Share Purchase Agreement contains customary
restrictions on the conduct of certain activities by HSBC Life (UK) prior to
Completion. The Share Purchase Agreement is governed by English law.
Advisers
Fenchurch Advisory Partners is acting as the lead financial adviser, RBC is
acting as Sponsor, global coordinator, lead Underwriter and joint financial
adviser and Pinsent Masons is acting as legal adviser, to Chesnara in
connection with the Acquisition.
OTHER INFORMATION
Part A - Material Contracts - Company
Share Purchase Agreement
Details of the Share Purchase Agreement are set out above.
Underwriting Agreement
The Company and the Joint Bookrunners entered into the Underwriting Agreement
pursuant to which the Company has appointed RBC as sole sponsor, global
coordinator, lead underwriter and joint bookrunner, ABN AMRO as joint
underwriter and joint bookrunner and Panmure Liberum as joint bookrunner in
connection with the Rights Issue and Admission.
Subject to the terms and conditions of the Underwriting Agreement, the Joint
Bookrunners (as agents for the Company) have severally (and not jointly or
jointly and severally) agreed to use reasonable endeavours to procure
subscribers for all (or as many as possible of) the New Ordinary Shares which
are not taken up as soon as reasonably practicable and in any event no later
than 8.00 pm on the second dealing day after the last date for acceptances
under the Rights Issue, for an amount which is not less than the total of the
Issue Price multiplied by the number of such New Ordinary Shares for which
subscribers are so procured and the expenses of procurement (including any
commissions and related amounts in respect of VAT).
If and to the extent that the Joint Bookrunners are unable to procure
subscribers on the basis outlined above, the Underwriters shall, as
principals, subscribe on a several basis in the agreed proportions for any
remaining New Ordinary Shares at the Issue Price.
In consideration for their services under the Underwriting Agreement, and
subject to their obligations under the Underwriting Agreement having become
unconditional and the Underwriting Agreement not having been terminated, the
Joint Bookrunners will be paid a fee by reference to the gross proceeds of the
Rights Issue in respect of the New Ordinary Shares. The Company has also
agreed to pay a fee to RBC in consideration for its services as sponsor.
The Company has given certain customary representations and warranties and
undertakings to the Joint Bookrunners, including a 180-day lock-up on issues
of new shares from the date of settlement (save for permitted issuances in
connection with the Rights Issue and existing employee share schemes and the
issue of certain convertible securities following completion of the Rights
Issue). The Company has also given customary indemnities to the Joint
Bookrunners and to certain persons connected with the Joint Bookrunners.
If any condition is not satisfied (unless, where permissible, extended or
waived by the Global Coordinator), or becomes incapable of being satisfied, by
the required time and date then, save for certain exceptions, the parties'
obligations under the Underwriting Agreement shall cease and terminate,
without prejudice to any liability for any prior breach of the Underwriting
Agreement. The Underwriting Agreement cannot be terminated once Admission has
occurred.
Further details of the Underwriting Agreement will be contained in the
Prospectus which is expected to be published later today by the Company.
Previous Acquisitions
Further details of the other material acquisition agreements which the Group
has entered into in the previous two years will be contained in the Prospectus
which is expected to be published later today by the Company.
Amended and Restated Facility Agreement
Earlier today, the Company entered into an amendment and restatement deed with
National Westminster Bank plc as arranger, original lender and facility agent
and ABN AMRO Bank N.V. as an original lender to amend and restate credit
facility agreement originally dated 2 July 2024 (the "Amended and Restated
Facility Agreement") pursuant to which a three year £150,000,000
multicurrency revolving facility (the "Amended RCF") is made available to the
Company.
The Amended RCF may be applied towards, amongst other things, the part funding
of consideration and acquisition by the Company of the entire issued share
capital of HSBC Life (UK) from HSBC Bank plc (the "Acquisition ") under and
pursuant to the Share Purchase Agreement as disclosed to the Amended RCF
finance parties, certain other acquisitions that are permitted under the
Amended and Restated Facility Agreement and general corporate and working
capital purposes of the "Group" as defined in the Amended and Restated
Facility Agreement (being the Company and each of its respective subsidiaries
for the time being). The Amended RCF is unsecured, and the Company is the only
borrower under the Amended and Restated Facility Agreement but the Company can
on-lend amounts borrowed to other members of the Group.
The Amended and Restated Facility Agreement contains a certain funds concept
which will apply to a utilisation of the Amended RCF to fund the Acquisition.
In the context of the Acquisition, the "Agreed Certain Funds Period" will run
from the effective date of the Amended and Restated Facility Agreement to the
earlier of: (i) the date falling nine months from the date of the Amended and
Restated Facility Agreement; (ii) the date on which the Share Purchase
Agreement is terminated in accordance with its terms; and (iii) the date on
which the Company notifies the Facility Agent that the Acquisition will not be
proceeding.
To make a certain funds utilisation, the Company has to comply with certain
notice requirements under the Amended and Restated Facility Agreement and it
must have sufficient headroom to draw the amount requested. If these
requirements are met, during the Agreed Certain Funds Period, subject to
certain carve outs, there can be no acceleration of the loans, cancellation of
undrawn commitments or refusal to make available a utilisation of the loans in
each case to the extent that such acceleration, cancellation or refusal to
fund would prevent or limit the making of any loan to fund the Acquisition.
The carve outs to certain funds are illegality, a "Major Event of Default" is
continuing (on the date of the utilisation request, on the proposed
utilisation date or would result from the proposed utilisation) and a change
of control in relation to the Company.
Loans under the Amended RCF may be drawn in sterling, US dollars or euro.
Interest is payable on the loans at a percentage rate per annum which is equal
to the aggregate of the relevant reference rate (SONIA for sterling loans,
SOFR for US dollar loans and EURIBOR for euro loans) plus a margin which is
subject to change depending on the total debt to economic value for the 12
month period ending on the most recent financial quarter date. If an event of
default is continuing the highest possible margin applies. Each interest
period is one month and interest is payable at the end of each interest
period. The Company is also required to pay a commitment fee equal to 35 per
cent. of the applicable margin on available commitments under the Amended RCF
for the period that the Amended RCF is available. The commitment fee is
calculated on the last day of each month but is payable quarterly in arrears.
The Amended and Restated Facility Agreement includes standard information
undertakings. These include the delivery of annual audited consolidated
financial statements, half yearly interim consolidated financial statements
relative the first half of each financial year, quarterly consolidated
management accounts and copies of regulatory returns required to be delivered
by a member of the Group to any financial services regulator.
In addition, the Amended and Restated Facility Agreement contains certain
other customary representations, warranties and undertakings including,
without limitation, a restriction on certain acquisitions, a restriction on
certain sales and other disposals of assets, a restriction on the creation or
subsistence of security subject to certain exceptions, a restriction on
financial indebtedness subject to certain exceptions, a requirement that if
any reinsurer providing reinsurance services to a member of the Group becomes
insolvent, ceases business or whose certain credit rating falls below a
certain level to replace that reinsurer or recapture the reinsurance provided
by that reinsurer and a requirement to maintain certain regulatory
authorisations.
Further details of the Amended and Restated Facility Agreement will be
contained in the Prospectus which is expected to be published later today by
the Company.
Part B - Risk Factors
The Acquisition is subject to a number of risks. The risks and uncertainties
set out below are those which the Directors believe are the material risks
relating to the Acquisition, material new risks to the Group as a result of
the Acquisition or existing material risks to the Group which will be impacted
by the Acquisition. If any, or a combination of, these risks actually
materialise, the business, results of operations, financial condition, cash
flows or prospects of the Enlarged Group could be materially and adversely
affected.
The risks and uncertainties described below are not intended to be exhaustive
and are not the only ones that face the Group. The information given is as at
the date of this announcement and, except as required by the FCA, the London
Stock Exchange, the UK Listing Rules, UK Market Abuse Regulations and/or any
regulatory requirements or applicable law, will not be updated. Additional
risks and uncertainties not currently known to the Directors or that they
currently deem immaterial, may also have an adverse effect on the business,
financial condition, results of operations and prospects of the Group. If this
occurs, the price of the Ordinary Shares may decline and Shareholders could
lose all or part of their investment.
The Rights Issue is not conditional upon completion of the Acquisition; if the
Rights Issue completes but the Acquisition does not, the proceeds of the
Rights Issue will be retained by the Group
It is possible that the Acquisition could cease to be capable of completion,
in particular, if a condition precedent to Completion relating to regulatory
approval is not satisfied in accordance with the Share Purchase Agreement
following Admission and the Rights Issue becoming wholly unconditional. In
this case, as the Rights Issue is not conditional upon completion of the
Acquisition, the Rights Issue would still be completed, and funds would be
raised by the Group.
In the unlikely event that the Rights Issue were to proceed but the
Acquisition does not complete, the Directors intend to retain the net proceeds
of the Rights Issue for use within the following 12 months on the general
commercial activities of the Group and alternative acquisitions in pursuit of
the Group's strategy as a consolidator of closed life and pension funds,
currently focusing on the UK and Dutch insurance markets as well as exploring
potential opportunities in the wider European insurance market. Failing this,
the Directors will either seek to return the net proceeds of the Rights Issue
to Shareholders in a tax efficient and practicable manner or seek
Shareholders' approval to continue to hold the net proceeds of the Rights
Issue for general corporate purposes. Any such return to Shareholders could
carry fiscal costs for certain Shareholders, will have costs for the Group and
would be subject to applicable securities laws. As a result, in such
circumstances, Shareholders may not receive a return in full (or at all) of
any amounts invested pursuant to the Rights Issue. This could, in turn, result
in the Group experiencing negative reactions from the financial markets, its
Shareholders and its other stakeholders which could cause the market value of
the Ordinary Shares to fall.
Completion of the Acquisition is subject to the satisfaction of certain
conditions, which may not be satisfied or waived
Completion of the Acquisition is subject only to the satisfaction (or waiver,
where applicable) of the following conditions:
(a) the PRA having approved, or being treated as having approved, the
acquisition of control of HSBC Life (UK) by Chesnara for the purposes of the
Financial Services and Markets Act 2000; and
(b) Admission having become effective.
There is no guarantee that these conditions will be satisfied. Failure to
satisfy any of these conditions may result in the Acquisition not completing.
If the Acquisition does not complete, the Group will not benefit from the
expected benefits of the Acquisition. The Company has agreed to use its best
endeavours to take certain actions in connection with the satisfaction of the
condition relating to the approval by the PRA. As a result, there is a risk
that the Company may incur significant expenditure in connection with, or to
satisfy, such condition which will be in addition to the actual costs of the
Acquisition and the integration process.
If the condition related to Admission is not satisfied within four Business
Days of the date of the Share Purchase Agreement, the Company is required to
use best endeavours to seek alternative financing for the Acquisition. Such
alternative financing may not be forthcoming or may only be available on terms
which are not as advantageous. In such circumstances, the Company may not be
able to complete the Acquisition or, if it does complete the Acquisition, it
may not be able to not achieve the expected benefits of it. Failure to
complete an acquisition could adversely impact the Group's reputation as a
successful consolidator leading to difficulty in acquiring future targets and
an adverse effect on the business and financial condition of the Group.
In addition to the risks highlighted above, on termination of the Share
Purchase Agreement (other than: (i) as a result of the Seller becoming
sanctioned under relevant sanctions legislation; or (ii) having violated or
caused the Company to violate certain legislation; or (iii) completion not
occurring due to a failure of the Seller to comply with its completion
obligations), a non-refundable break payment of an amount equal to
£20,000,000 shall become payable within 5 Business Days. All of these events
could cause the market price of the Company's shares to decline.
Only limited and capped warranties and indemnities are provided by the Seller
and such warranties are subject to a warranty and indemnity insurance policy
("W&I Policy") which may not cover all of the potential liabilities
associated with the Target, which could in turn impact the Group's ability to
recover in full from the Seller any losses which it may suffer in respect of a
breach of those warranties and/or the indemnities
The Company has put in the W&I Policy to provide insurance coverage for
breach of the warranties and tax covenant given by the Seller in respect of
the Target. The W&I Policy is subject to certain customary and specific
exclusions and to agreed policy limits. As a result, there is a risk that the
Company may not be able to recover amounts in respect of claims brought in
respect of breach of the warranties.
In addition, the Group would be dependent on the financial position of the
Seller in the event that it sought to recover amounts in respect of any claims
for which the Seller is liable.
In either circumstance mentioned above, if claims arose but losses could not
be recovered, this could adversely affect the Enlarged Group's business,
prospects, financial condition and results of operations.
The Group has limited management resources and thus may become distracted or
overstretched by the process of integrating and managing the Group. There may
be unforeseen integration difficulties which could mean that, following
completion of the Acquisition, the implementation of the Group's strategy may
not proceed as expected
The Group has been, and will be, required to devote significant management
attention and resources to executing the Acquisition and subsequently
integrating the Target into the Group's business. While the Group has carried
out significant planning in respect of the Acquisition, there is a risk that
the Group may encounter difficulties when seeking to integrate the Target, as
a result of differences in management and operation of the Target prior to the
Acquisition. If such integration difficulties are significant, this could
result in management distraction or overstretch and the deferral of certain
planned management actions and adversely affect the Group's business,
prospects, financial condition and results of operations. Should any of these
integration difficulties occur, the Enlarged Group's businesses may not
perform in line with management or Shareholder expectations, which could have
an adverse effect on the Group's business, results, financial condition and
prospects.
The Group may incur higher than expected Acquisition-related costs and
integration costs
The Group has incurred and will incur legal, accounting, financing and
transaction fees and other costs related to the Acquisition. Some of these
costs are payable regardless of whether the Acquisition is completed. The
actual costs of the Acquisition and the integration process may exceed those
estimated and there may be further additional and unforeseen expenses incurred
in connection with the Acquisition or the integration, or in complying with
the ongoing United Kingdom company and listing requirements post-Acquisition.
In addition, in connection with the Acquisition, the Seller and the Target
will enter into the Transitional Services Agreement at Completion pursuant to
which the Seller will provide certain services to the Target for an agreed
transitional period. If the Seller fails to provide the services to be
provided under the Transitional Services Agreement in a timely manner or as
required under the agreement, this could extend the agreed transitional period
which, under the agreement, would require the Target to pay additional costs.
As a result, there is a risk that the actual costs of the Transitional
Services Agreement could be higher than expected. Any of the above factors
could materially adversely affect the Group's results of operations.
The value of the Target may be less than the consideration paid
Prior to completion of the Acquisition, the Company has limited rights to
terminate the Acquisition. Accordingly, in the event that there is an adverse
event affecting the value of the Target or the value of the Target otherwise
declines prior to completion of the Acquisition, the value of the Target
purchased by the Group may be less than the consideration agreed to be paid
and, accordingly, the net POL of the Group could be reduced. There can be no
assurance that the Company will be able to renegotiate the consideration paid
for the Target and the Company may therefore pay an amount in excess of market
value for the Target, which could have an adverse effect on the business and
financial condition of the Enlarged Group.
Risks of executing the Acquisition could cause the market price of Ordinary
Shares to decline
The market price of Ordinary Shares may decline as a result of the Acquisition
if, among other reasons, the Group does not achieve the expected benefits of
the Acquisition as rapidly or to the extent anticipated or at all, the effect
of the Acquisition on Chesnara's financial results is not consistent with the
expectations of investors, or Shareholders sell a significant number of
Ordinary Shares after completion of the Acquisition.
The terms of the financing arrangements of the Enlarged Group may limit its
commercial and financial flexibility
The commercial and financial flexibility of the Enlarged Group will be
restricted by certain covenants under the terms of the Amended and Restated
Facility Agreement. These covenants include customary restrictions relating to
mergers and acquisitions, the granting of security over or disposal of assets,
the incurrence of financial indebtedness, guarantees and indemnities, the
extension of loans or credit by members of the Enlarged Group and derivative
transactions. Any inability to exploit commercial opportunities as a result of
such covenants may have a material adverse effect on the Enlarged Group.
Part C - Legal or arbitration proceedings
Group
There are no governmental, legal or arbitration proceedings (including any
such proceedings which are pending or threatened of which the Group is aware)
during a period covering at least the previous 12 months preceding the date of
this announcement which may have, or have had in the recent past, a
significant effect on the Group's financial position or profitability.
HSBC Life (UK)
There are no governmental, legal or arbitration proceedings (including any
such proceedings which are pending or threatened of which the Group is aware)
during a period covering at least the previous 12 months preceding the date of
this announcement which may have, or have had in the recent past, a
significant effect on HSBC Life (UK)'s financial position or profitability.
Part D - Related Party Transactions
Group
There have been no related party transactions between the Group and its
related parties during the period since 31 December 2024.
APPENDIX 3
DEFINITIONS
The following definitions apply throughout this announcement unless the
context requires otherwise:
"Acquisition" means the acquisition by the Company of the HSBC Life (UK) from HSBC Bank
pursuant to the Share Purchase Agreement
"Admission" means Admission of the New Ordinary Shares and Admission of the Rights (Nil
and Fully Paid);
"Admission of the New Ordinary Shares" means the admission of the New Ordinary Shares to: (i) listing on the equity
shares (commercial companies) category of the Official List; and (ii) trading
on the London Stock Exchange's main market for listed securities
"Admission of the Rights (Nil and Fully Paid)" means the admission of the Rights (nil and fully paid) to trading on a
multi-lateral trading facility of the London Stock Exchange
"Amended and Restated Facilities Agreement" means the amended and restated facility agreement entered into by the Company,
National Westminster Bank plc and ABN AMRO Bank N.V on 3 July 2025
"Amended RCF" means the three year £150,000,000 multicurrency revolving facility made
available to the Company under the Amended and Restated Facilities Agreement
"Board" means the board of directors of the Company
"Company" or "Chesnara" means Chesnara plc a company incorporated in England and Wales (Company
Registration Number: 04947166) and having its registered office at 2(nd)
Floor, Building 4 West Strand, Preston, PR1 8UY
"Completion" means completion of the Acquisition pursuant to the terms of the Share
Purchase Agreement
"Countrywide Assured" means Countrywide Assured plc, a company incorporated in England and Wales
(Company Registration Number 02261746) and having its registered office at
2(nd) Floor, Building 4 West Strand Road, Preston, Lancashire, England, PR1
8UY
"CSM" means Contractual Service Margin as recognised under IFRS 17
"Directors" means the statutory directors of the Company, from time to time
"Eligible Own Funds" means Own Funds that can be used to meet the Solvency Capital Requirement
"Eligible Solvency II Own Funds" means Solvency II Own Funds that can be used to meet the Solvency Capital
Requirement
"Enlarged Group" means the Group following Completion of the Acquisition
"Excluded Shareholders" means, subject to certain exceptions, Shareholders who have registered
addresses in, who are incorporated in, registered in, or otherwise resident or
located or resident in, any Excluded Territory or, subject to certain limited
exceptions in the United States of America
"Excluded Territories" means Australia, Canada, Japan, South Africa and any other jurisdiction where
the extension or availability of the Rights Issue (or any transaction
contemplated thereby and any activities carried out in connection therewith)
would breach applicable law and "Excluded Territory" means one of them
"Existing Ordinary Shares" means, in relation to a particular date, the Ordinary Shares in issue at that
date
"FCA" means the Financial Conduct Authority
"Fully Paid Rights" means the rights to acquire New Ordinary Shares, fully paid
"Global Coordinator" means RBC Europe Limited
"HSBC Life (UK)" or "Target" means HSBC Life (UK) Limited
"HSBC Bank" or "Seller" means HSBC Bank plc
"Joint Bookrunners" means RBC Europe Limited, ABN AMRO Bank N.V., in cooperation with ODDO BHF
SCA, and Panmure Liberum Limited
"LSE" or "London Stock Exchange" means London Stock Exchange Group plc
"New Ordinary Shares" means the new Ordinary Shares to be issued by the Company pursuant to the
Rights Issue
"Nil Paid Rights" means rights to acquire New Ordinary Shares, nil paid
"Official List" means the official list maintained by the FCA
"Ordinary Shares" means the ordinary shares of 5 pence each in the capital of the Company and
includes, where the context requires, the New Ordinary Shares
"Own Funds" means, in accordance with the UK's regulatory regime for insurers, the sum of
the individual capital resources for each of the regulated related
undertakings less the book-value of investments by the Company in those
capital resources
"PRA" means the Prudential Regulatory Authority
"Prospectus" means the prospectus to be published by the Company in connection with the
Rights Issue
"Qualifying Shareholder" means holders of Ordinary Shares on the register of members of the Company at
the Record Time with the exclusion of the Excluded Shareholders
"Record Time" means 6.00 pm on 1 July 2025, being the date on which a Shareholder must hold
Ordinary Shares to be a Qualifying Shareholder
"Rights Issue" means the offer by way of rights to Qualifying Shareholders to acquire New
Ordinary Shares in the Company, subject to the terms and conditions of the
Prospectus
"Silicon" means Silicon NV
"Shareholder" means a holder of Ordinary Shares from time to time (and Shareholders shall be
construed accordingly)
"Share Purchase Agreement" the share purchase agreement entered into by the Company, as the buyer and
HSBC Bank, as the seller to acquire the entire issued and to be issued share
capital of HSBC Life (UK)
"Solvency II" means the fundamental review of the capital adequacy regime for the European
insurance industry. Solvency II aims to establish a set of EU-wide capital
requirements and risk management standards and has replaced the Solvency I
requirements
"Solvency Coverage Ratio" means the ratio of an insurance company's eligible capital to its regulatory
capital requirement
"Transitional Services Agreement" means the transitional services agreement to be entered into between the
Company and the Seller on or around the date of Completion;
"UK Listing Rules" means the UK Listing Rules made under Part VI of FSMA (as set out in the FCA
Handbook), as amended from time to time
"Underwriters" means RBC Europe Limited and ABN AMRO Bank N.V., in cooperation with ODDO BHF
SCA
"VAT" means value added tax
ENDS
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