REG - Circle Property PLC - Proposed Return of Capital and Notice of EGM

Circle PropertyAnnouncement

20/01/2023 07:00

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RNS Number : 3259N  Circle Property PLC  20 January 2023

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN (TOGETHER, THIS
"ANNOUNCEMENT") IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR
DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM
THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR
ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION
WOULD BE UNLAWFUL.

 

THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR
FORM ANY PART OF AN OFFER TO SELL OR ISSUE, OR A SOLICITATION OF AN OFFER TO
BUY, SUBSCRIBE FOR OR OTHERWISE ACQUIRE ANY SECURITIES IN THE UNITED STATES,
AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR IN ANY OTHER
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NO PUBLIC
OFFERING OF THE B SHARES IS BEING MADE IN ANY SUCH JURISDICTION. ANY FAILURE
TO COMPLY WITH THESE RESTRICTIONS MAY CONSTITUTE A VIOLATION OF THE SECURITIES
LAWS OF SUCH JURISDICTIONS.

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
EU REGULATION 596/2014 (AS AMENDED) (WHICH FORMS PART OF DOMESTIC UK LAW
PURSUANT TO THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 (AS AMENDED)). UPON THE
PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS
INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

 

20 January 2023

Circle Property plc

("Circle", the "Company" or the "Group")

 

Capital Reduction, Proposed Return of Capital and Notice of Extraordinary
General Meeting

 

The Board of Circle Property plc (AIM: CRC), is pleased to announce a Capital
Reduction, proposed Return of Capital through the issue of B Shares and Notice
of Extraordinary General Meeting.

 

The Directors believe that one of the fairest and most efficient ways of
returning cash to Shareholders is by creating B Shares whereby the Company
will be able to make successive bonus issues of redeemable B Shares to
Shareholders and to redeem them shortly thereafter without further action
being required by Shareholders.

 

Subject to the passing of the Resolutions at the Extraordinary General Meeting
and successful application for reporting fund status as detailed below, the
Board expects that the first Return of Capital of not less than £30 million,
being £1.03 per Ordinary Share (such figure being the proposed minimum
quantum of the Return of Capital (i.e. £30 million) divided by the total
number of Ordinary Shares in issue at the relevant record date), will take
place in March 2023.

 

The Return of Capital (including the Capital Reduction and the creation and
capitalisation of the B Shares) requires Shareholder approval of the
Resolutions to be proposed at an Extraordinary General Meeting of the Company
to be held at the offices of Oak Group (Jersey) Limited, 3rd Floor, IFC5
Castle Street, St. Helier, Jersey, JE2 3BY, Channel Islands at 3:00 p.m. on 15
February 2023, to enable this and subsequent capital returns.

 

A copy of the Circular containing more information in relation to the Capital
Reduction, Proposed Return of Capital and Notice of Extraordinary General
Meeting will be posted to Shareholders on 24 January 2023 and will be
available on the Company's website
at https://www.circleproperty.co.uk/investors/reports-and-presentations/2023
(https://www.circleproperty.co.uk/investors/reports-and-presentations/2023)
(http://www.circleproperty.co.uk) shortly.

Terms used in this announcement but which are otherwise undefined shall have
the same meanings as set out in the Circular.  This announcement and the
summary of the Capital Reduction and Proposed Return of Capital should be read
in conjunction with the Circular.

 

Details of the Capital Reduction, Proposed Return of Capital and Notice of
Extraordinary General Meeting

 

Introduction

 

Since admission to AIM in 2016, the Company has suffered from limited
liquidity in the Ordinary Shares and the share price has remained at a
significant discount to the Company's net asset value ("NAV"). Consequently,
on 14 February 2022, the Company announced its strategy to make targeted asset
sales in an orderly manner over a period of two to three years (if not
sooner). The Board stated that it was committed to maximising returns and
delivering value to Shareholders and expected that a minimum of two returns of
capital would be made to Shareholders.

 

As detailed in the Company's Half-year Report released on 7 December 2022, the
Board continues to progress the Company's divestment programme with a view to
returning capital to Shareholders. The Directors believe that one of the
fairest and most efficient ways of returning cash to Shareholders is by
creating B Shares whereby the Company will be able to make successive bonus
issues of redeemable B Shares to Shareholders and to redeem them shortly
thereafter without further action being required by Shareholders.

 

The Company is now well placed to commence the first return of capital
directly to Shareholders in March 2023, ensuring that the Company adheres to
the timeline envisaged in its divestment programme. The Circular gives further
details of how capital can be returned and seeks Shareholder approval for the
Resolutions to be proposed at an Extraordinary General Meeting to be held on
15 February 2023 to enable this and subsequent capital returns.

 

Subject to the passing of the Resolutions at the Extraordinary General Meeting
and successful application for reporting fund status as detailed below, the
Board expects that the first Return of Capital of not less than £30 million,
being £1.03 per Ordinary Share (such figure being the proposed minimum
quantum of the Return of Capital (i.e. £30 million) divided by the total
number of Ordinary Shares in issue at the relevant record date), will take
place in March 2023.

 

Further announcements will be made by the Company in due course.

 

Background

 

In the Half-year Report, the Company announced that approximately 60 per cent
of the Company's property portfolio by value had been sold since the
announcement of the divestment strategy in February 2022 and whilst the
challenging macroeconomic backdrop referenced in the Half-year Report has
continued to impact the broader property investment market, the Company has
continued to achieve a number of sales.

 

Since September 2022, a further four properties (710 Aztec West, Bristol;
Elizabeth House, Staines; Building K3, Kents Hill Business Park; and 36 Great
Charles Street, Birmingham) have been sold at an aggregate value of £13.96
million. The Company's cash balance as at the date of this announcement is
approximately £32.6 million.

 

In addition, contracts have been exchanged to sell the Company's remaining
property in Birmingham (Somerset House, Temple Street), which is expected to
complete in February 2023, for a consideration of £15.18 million. Subject to
the timing of the first Return of Capital and completion of the sale of
Somerset House, the first Return of Capital is expected to be for a minimum of
£30 million and up to approximately £46 million.

 

In addition, the Board anticipates that, subject to market conditions, the
Group's remaining three properties, two in Pavilion Drive, Northampton and
Concorde Park in Maidenhead, should generate proceeds of approximately £19
million, which it is intended will be distributed to Shareholders as soon as
reasonably possible after the last property sale. As announced on 7 December
2022, it is the Board's intention to liquidate all of the Group's remaining
assets before the end of the Company's current financial year, so long as
there remain interested buyers at respectable pricing levels. Further updates
will continue to be made to Shareholders in due course, as and when
appropriate.

 

Reduction of Capital

 

Resolution 1 to be proposed at the Extraordinary General Meeting, if approved,
will approve the reduction of the Company's stated capital from £44,147,091
to £4,414,709.10  by cancelling and extinguishing capital to the extent of
£1.36 (being the reduction in stated capital of £39,732,381.90 divided by
the 29,215,555 Ordinary Shares in issue) on each issued fully paid up ordinary
share of no par value each in the Company, with the resulting reduction moneys
being credited to a special reserve of the Company, the 'capital redemption
reserve' (the "Capital Reduction").

 

In accordance with the Jersey Companies Law, the Capital Reduction will be
supported by a solvency statement to be made by the Directors in advance of
the Extraordinary General Meeting, which will be available for inspection by
Shareholders at the Company's registered office from the date of its
execution.

 

The Capital Reduction shall in no way affect the validity of Shareholders'
existing share certificates or CREST holdings.

 

The Directors will apply the capital redemption reserve created by the Capital
Reduction, as well as the Company's retained earnings reserve, to make
successive bonus issues of redeemable B Shares in order to return capital to
the Shareholders, further details of which are set out below.

 

Return of Capital through B Share Issues

 

Resolutions 2, 3 and 4 relate to the B Share issues to enable the Company to
distribute cash from the proceeds of its disposals to the Shareholders through
issues of B Shares (the "B Share Issues").

 

If Resolution 1 is duly passed, the Shareholders will have approved the
reduction of the Company's issued share capital and the crediting of the
resulting moneys to a newly formed special reserve of the Company. The
Company's objective in so reducing its capital is to create additional
distributable reserves to enable the Company to distribute cash from the
proceeds of its disposals to Shareholders.

 

In order to enable the Directors to create B Shares, the Company's Articles
will need to be amended to include a New Article 167 (B Shares). Resolution 2
would amend the Articles to insert New Article 167, Resolution 3 permits the
Directors to capitalise reserves and Resolution 4 will provide the authority
to allot such B Shares.

 

If Resolutions 2, 3 and 4 are passed, the Company will have a mechanism to
enable it to return cash to Shareholders by the Directors capitalising amounts
standing to the credit of the Company's reserves and then applying the
resulting amounts for the purpose of fully paying up the appropriate number of
B Shares by way of transfer of such sum or sums to the Company's stated
capital account for the B Shares. Such B Shares would then be issued to
Shareholders on the basis of one new B Share for each Ordinary Share held at
the record date for the relevant B Share Issue and, shortly thereafter,
redeeming them and cancelling them. For the avoidance of doubt,
notwithstanding any B Share Issues, Shareholders' holdings of Ordinary Shares
in the Company will not be impacted and the total number of Ordinary Shares in
the Company in issue will not change.

 

Following the redemption and cancellation of the B Shares, the redemption
proceeds will be sent to Shareholders, either through CREST to uncertificated
Shareholders, via BACS to certificated Shareholders who have lodged a BACS
mandate with the Registrars or via cheque to certificated Shareholders who
have not lodged a BACS mandate with the Registrars. No cheques will be
dispatched to any Shareholder from whom the Registrars have received
notification of multiple instances of returned mail.

 

Further details of the B Share Issues are set out below.

 

The structure of the B Share Issues should result in the majority of UK
taxpayers receiving their cash proceeds on redemption of the B Shares as
capital. Part III of the Circular sets out a summary guide to certain
potential tax consequences for Shareholders who are UK residents for tax
purposes.

 

Returning cash to Shareholders via B Share Issues

 

The advantages of returning capital via B Share Issues rather than via a
tender offer are that:

 

·    it reduces costs for the Company, as there should be no need to
prepare further circulars to give effect to future Returns of Capital, as is
the case with tender offers, and no need for the Company to engage a broker to
undertake the tender on its behalf. Details of each Return of Capital would be
notified to Shareholders through an announcement through a Regulatory
Information Service (a copy of which would be posted to Shareholders);

 

·    all Shareholders will automatically participate in the redemption
process and they would be treated equally;

 

·    subject to the Resolutions relating to the Capital Reduction and the
B Share Issues being passed at the Extraordinary General Meeting, Shareholders
would not be required to take any further action to give effect to future
Returns of Capital; and

 

·    there would be greater certainty for the Company regarding the rate
of returns of capital to Shareholders (unlike tender offers, capital returns
under the B Share Issues would be mandatory and would apply to all
Shareholders on a pro rata basis).

 

However, for some Shareholders, there may be some disadvantages in returning
capital via the B Share Issues relating to the timing and mandatory nature of
the scheme. Unlike a tender offer, Shareholders will not be given a choice as
to whether or not to participate in a Return of Capital and, for those
Shareholders who hold Ordinary Shares in the Company through a number of
different vehicles, they would not be given the choice as to which of their
vehicles should participate in a Return of Capital. This could potentially
lead to adverse tax consequences for certain Shareholders as they may not be
able to structure their returns in the most tax efficient manner.

 

Taxation of the B Share Issues

 

Each redemption of B Shares should be treated as a disposal by the Shareholder
of their B Shares for UK tax purposes. This may, subject to the Shareholder's
individual circumstances and any available exemption or relief, give rise to a
chargeable gain (or allowable loss) for the purposes of UK taxation of capital
gains (for individual Shareholders) or corporation tax on chargeable gains
(for corporate Shareholders).

 

Furthermore, Shareholders participating in the B Share Issues are advised to
consider their investment objectives and their own individual financial and
tax circumstances. Shareholders who are in any doubt as to their tax position
should seek advice from their own professional adviser.

 

To mitigate the risk of disposal proceeds from the B Share Issues being taxed
as offshore income gains, the Company will be making the necessary application
for reporting fund status shortly.

 

The Directors have been advised that, as a consequence of the implementation
of the proposed B Share Issues, the Company is likely to be treated as an
"offshore fund" for the purposes of the Taxation (International and Other
Provisions) Act 2010. Under this legislation, any gain arising on the sale,
disposal or redemption of an interest in an offshore fund will be taxed at the
time of such sale, disposal or redemption as income and not as a capital gain.
This does not apply, however, where an offshore fund is accepted by HMRC as a
"reporting fund" throughout the period during which interests in the Company
have been held.

 

The Company will be applying for reporting fund status shortly for the current
and subsequent accounting periods during which the Company is an offshore
fund.

 

A reporting fund must report to each United Kingdom tax resident Shareholder
such Shareholder's share of the income of the offshore fund each year. This
will be taxable in the hands of the Shareholder as income (and, subject to
what is said below regarding offshore funds that invest more than 60 per cent.
of their assets in debt and debt-like investment) as a dividend, regardless of
whether or not it is distributed to the Shareholder.

 

To mitigate the risk of disposal proceeds being taxed as offshore income
gains, the Company will be making the necessary application for reporting fund
status. The Company is expected to be accepted as a reporting fund for as long
as it meets all of the qualifying conditions until notice is given to HMRC
that it intends to leave the regime or HMRC excludes it from participation.

 

Whilst it is currently expected that the Company will be accepted as a
reporting fund by HMRC, if for any reason following confirmation from HMRC
that is not the case, which would result in the proposed B Share Issues being
treated as income rather than capital, the Directors may look to pursue
alternative ways of returning cash to Shareholders.

 

Further details on reporting fund status are set out under the sub-heading
"The Company" in the section "United Kingdom Taxation" in Part III of the
Circular (Taxation). This section also contains further information generally
regarding taxation on the redemption of B Shares.

 

Further information on the B Shares

 

No share certificates would be issued in relation to the B Shares and the B
Shares would not be listed or traded on any exchange.

 

The B Shares would be non-transferable and would have limited rights.

 

Given the very short period of time for which any B Share would be in issue,
it is unlikely that any dividends would become payable on the B Shares. The
rights and restrictions attached to the B Shares are set out in New Article
167, which is set out in Part II of this Circular.

 

Recommendation

 

The Board believes that the Resolutions and the implementation of both the
Capital Reduction and the B Share Issues are in the best interests of the
Company and the Shareholders as a whole.

 

Accordingly, the Board unanimously recommends that Shareholders vote in favour
of the Resolutions to be proposed at the Extraordinary General Meeting, as all
of the Directors holding Ordinary Shares intend so to do in respect of their
beneficial shareholdings.

 

A copy of the Circular, together with the Articles and a draft of the New
Article 167 will be available for inspection (i) on the Company's website:
https://www.circleproperty.co.uk/investors/reports-and-presentations/2023
(https://www.circleproperty.co.uk/investors/reports-and-presentations/2023)
shortly; and (ii) at the Company's registered office during normal business
hours on any Business Day from the date of the Circular until the date of the
Extraordinary General Meeting and will also be available for inspection at the
Extraordinary General Meeting.

 

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

 Posting of the Circular                                                   24 January 2023

 Latest time and date for receipt of Forms of Proxy for the Extraordinary  3:00 p.m. on 13 February 2023
 General Meeting

 Extraordinary General Meeting                                             3:00 p.m. on 15 February 2023

 Completion of the first Return of Capital                                 March 2023

 

DEFINITIONS

The following definitions apply throughout this announcement and the Circular
unless the context requires otherwise:

 "AIM"                                      the market of that name, operated by the London Stock Exchange

 "AIM Rules"                                together, the AIM Rules for Companies and the AIM Rules for Nominated Advisers

 "Articles"                                 the Company's current articles of association (as at the date of this
                                            announcement)

  "B Shares"                                unlisted, redeemable, fixed rate preference shares in the capital of the
                                            Company having the rights and liabilities set out in New Article 167

 "B Share Issues"                           the proposed distributions of the proceeds of the Company's disposals to
                                            Shareholders through issues of B Shares

 "Board" or "Directors"                     the directors of the Company, whose names are set out in the Circular

 "Business Day"                             any day on which banks are generally open in England and Wales for the
                                            transaction of business, other than a Saturday, Sunday or public holiday

 "Cenkos"                                   Cenkos Securities plc, the Company's nominated adviser and broker,
                                            incorporated in England & Wales with company registration number 05210733

 "Circular"                                 the circular to be posted to Shareholders on 24 January 2023

 "CREST"                                    the relevant system (as defined in the CREST Regulations) for paperless
                                            settlement of share transfers and holding shares in uncertificated form, in
                                            respect of which Euroclear UK & International is the operator (as defined
                                            in the CREST Regulations)

 "Company" or "Circle"                      Circle Property plc, a company incorporated in Jersey on 4 December 2015 with
                                            company number 120165

 "CREST Manual"                             the rules governing the operation of CREST as published by Euroclear

 "CREST Regulations"                        the Uncertificated Securities Regulations 2001 (SI 2001/3755) and the
                                            Companies Uncertificated Securities (Jersey) Order 1999 as amended from time
                                            to time, and any applicable rules made under those regulations

 "Euroclear"                                Euroclear UK & International Limited, the operator of CREST

 "Extraordinary General Meeting" or "EGM"   the Extraordinary General Meeting of the Company to be held at the offices of
                                            Oak Group (Jersey) Limited at 3rd Floor, IFC5 Castle Street, St. Helier,
                                            Jersey, JE2 3BY, Channel Islands at 3:00 p.m. on 15 February 2023, notice of
                                            which is set out at the end of the Circular

 "Financial Conduct Authority" or "FCA"     the UK Financial Conduct Authority

 "Form of Proxy"                            the Form of Proxy relating to the Extraordinary General Meeting being sent to
                                            Shareholders (where applicable) with the Circular

 "FSMA"                                     the UK Financial Services and Markets Act 2000 (as amended)

 "Group"                                    the Company and its subsidiary undertakings

 "Half-year Report"                         the Company's interim results for the six-month period ended 30 September 2022

 "Jersey Companies Law"                     the Companies (Jersey) Law 1991 (as amended)

 "London Stock Exchange"                    London Stock Exchange Plc

 "MAR" or "Market Abuse Regulation"         the UK version of the Market Abuse Regulation (Regulation 596/2014)

 "New Article 167"                          new article 167 to be inserted in the Articles pursuant to Resolution 2 at the
                                            EGM

 "Notice of Extraordinary General Meeting"  the notice convening the Extraordinary General Meeting set out at Part V of
                                            the Circular

 "Ordinary Shares"                          ordinary shares of no par value in the capital of the Company

 "Prospectus Regulation Rules"              the prospectus regulation rules of the Financial Conduct Authority made under
                                            Part VI of FSMA

 "Registrars"                               Computershare Investor Services (Jersey) Limited

 "Regulatory Information Service" or "RIS"  one of the regulatory information services authorised by the London Stock
                                            Exchange to receive, process and disseminate information in respect of AIM
                                            quoted companies

 "Resolutions"                              the resolutions proposed to be passed by Shareholders at the Extraordinary
                                            General Meeting, as set out in the Notice of Extraordinary General Meeting at
                                            the end of the Circular

 "Return of Capital"                        the consecutive returns of capital pursuant to the allotment and redemption of
                                            B Shares as contemplated by the Circular

 "Shareholders"                             holders of the Ordinary Shares

 "UK" or "United Kingdom"                   the United Kingdom of Great Britain and Northern Ireland

 "£" or "Sterling"                          pounds sterling, the lawful currency of the United Kingdom

 

Enquiries:

 Circle Property Plc                     +44 (0)20 7930 8503
 John Arnold, CEO

 Edward Olins, COO

 Cenkos Securities plc                  +44 (0)20 7397 8900
 Katy Birkin

 George Lawson

 Radnor Capital                         +44 (0)20 3897 1830

 Joshua Cryer

 Iain Daly

 Camarco                                +44 (0)20 3757 4992
 Ginny Pulbrook

 Toby Strong

 

 

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