REG - Digital 9 Infrastr. - Appointment of new investment manager and AIFM

Digital 9 InfrastructureAnnouncement

11/10/2024 07:00

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RNS Number : 7888H  Digital 9 Infrastructure PLC  11 October 2024

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK'S
MARKET ABUSE REGULATION. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, SUCH
INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

 

 

11 October 2024

 

DIGITAL 9 INFRASTRUCTURE PLC

 

("D9" or the "Company" and, together with its subsidiaries, the "Group")

 

Appointment of new investment manager and AIFM

 

The Board of D9 is pleased to announce that it has entered into an agreement
to appoint InfraRed Capital Partners Limited ("InfraRed") as the Company's
investment manager and AIFM in charge of implementing D9's previously
announced managed wind-down.

 

The appointment is subject to regulatory approvals and third-party consents.
The Board anticipates the appointment will become effective in Q4 2024. Triple
Point Investment Management LLP ("Triple Point") will continue to manage the
D9 portfolio until the management of D9 transitions to InfraRed.

 

Investment management review

 

The appointment of InfraRed concludes the investment management review
commenced by the previous Board as announced on 25 March 2024. This included
an extensive review of the Company's existing management arrangements,
engagement with a number of high-quality investment management firms, a
rigorous selection process, and consultation with D9's major shareholders. The
Board wishes to thank all parties who participated in the process.

 

In reaching its decision, Panmure Liberum Limited ("Panmure Liberum") provided
the Board with an independent review of the investment management arrangements
which included evaluating the options available to the Company, comprising:
(i) continuing to be managed by Triple Point on different fee arrangements;
(ii) being managed by a new investment manager; or (iii) becoming a
self-managed alternative investment fund.

 

The Board firmly believes that the appointment of InfraRed will offer
shareholders a variety of benefits, as set out below, as the Directors seek to
realise value for D9 shareholders from the implementation of an orderly
managed wind-down of the Company's remaining portfolio of assets.

 

Background to InfraRed

InfraRed is an international infrastructure investment manager, with more than
160 professionals operating worldwide from offices in London, New York,
Sydney, Seoul and Madrid. Over the past 25 years, InfraRed has established
itself as a highly successful developer and custodian of infrastructure assets
that play a vital role in supporting communities.

 

InfraRed is an experienced manager of listed investment trusts, having been
the investment manager of HICL Infrastructure plc ("HICL"), a FTSE 250 core
infrastructure investor with a market capitalisation of c.£2.7 billion, since
2006. InfraRed also manages The Renewables Infrastructure Group Limited
("TRIG"), a FTSE 250 constituent with a market capitalisation of c.£2.6
billion, and one of the first renewable energy investment companies listed on
the London Stock Exchange, since 2013.

 

Benefits to D9 shareholders

 

The Board's decision to appoint InfraRed as the Company's new investment
manager was guided by several criteria given the requirement for an orderly
managed wind-down. The Board believes the appointment will provide the
following benefits to D9 shareholders:

 

·   Extensive listed companies experience, as the manager of two of the
largest and longest-established UK-listed infrastructure investment companies,
given a combined market capitalisation of over £5.3 billion and HICL's
listing dating back to 2006.

·    Access to a team of highly specialised and experienced investment
professionals for D9, headed by James O'Halloran, a Partner in the European
investments team with over 20 years of infrastructure investment M&A
experience across a range of strategies, including flagship investment
companies.

 

o  James played a key role in the launch of HICL in 2006 and has been leading
its investment and divestment activities for the last 18 years. James has been
responsible for the delivery of £2 billion of new investments and £1 billion
of divestments on behalf of HICL.

 

o  Richard Crawford, who was previously Fund Manager for TRIG for 11 years
and also worked with James on HICL's IPO, will be providing support to the
InfraRed team managing D9 in his capacity as senior adviser at InfraRed. These
professionals will be supported by a strong, well-resourced platform of over
160 employees and partners.

 

·    Expertise in digital infrastructure having completed 8 digital
infrastructure investments and bringing deep experience investing in and
managing digital and telecoms operational assets and businesses, via core and
value-add strategies.

 

·      Specific knowledge of Arqiva Group ("Arqiva") with existing
knowledge of its business plan, management team, and co-shareholders to seek
to achieve maximum value from D9's investment in Arqiva.

 

·     Strong track-record of accretive divestments, having disposed of
£1.7 billion of assets since the start of 2023 at an 11% premium to carrying
value, over five funds, three continents and across both core and value-add
strategies. This also includes extensive experience of executing transactions
on a stand-alone basis, drawing on deep relationships with a range of
financial and strategic investors.

 

·   Highly relevant experience in delivering debt solutions for both
listed investment companies and growth-orientated portfolio companies, with an
in-house treasury function and deep lender relationships.

 

Terms of appointment

 

Pursuant to the terms of the new investment management agreement (the "new
IMA"), InfraRed will receive a fixed annual management fee of £3.75 million
for the first 36 months of InfraRed's appointment and a reduced management fee
of £1.75 million per annum thereafter until the Group's last asset is sold.
InfraRed has committed to use 10% of its annual management fee (net of
applicable taxes) to acquire ordinary shares in the capital of D9 in the
secondary market, unless it would be unlawful to do so. Any ordinary shares
acquired by InfraRed pursuant to these arrangements will be subject to lock-in
and orderly market provisions. Following the sale of the final asset, a fee of
£100,000 per month will be payable until the earlier of (i) the Company being
delisted; and (ii) 6 months from the date of completion of the sale of the
final asset.

 

To appropriately align InfraRed with D9 shareholder outcomes, InfraRed will
also be entitled to receive a performance fee based on distributions made to
shareholders in excess of £225 million. InfraRed will be entitled to a
performance fee of 3.5% of any distributions above £225 million, when
aggregate distributions are in excess of £225 million but less than £300
million, and 4.75% of any distributions above £300 million when aggregate
distributions are in excess of £300 million.

 

The terms of the new IMA provide that distributions to D9 shareholders will be
assessed only after repayment of the Company's revolving credit facility, any
third-party financing, and any accrued liabilities of the Company. InfraRed
will also be entitled to receive certain fees in the event of the termination
of its appointment in prescribed circumstances. Any performance fees payable
to InfraRed shall not exceed, in aggregate, £15 million.

 

The new IMA shall be terminable by either party by serving 6 months' notice,
with such notice not to expire earlier than 24 months from the effective date
of appointment of InfraRed.

 

The appointment of InfraRed under the new IMA is conditional upon, inter alia,
the required approval of the Jersey Financial Services Commission and the
Financial Conduct Authority's regulatory clearances to act as the Company's
AIFM.

 

Expected timing of InfraRed's appointment

 

InfraRed's appointment as investment manager and AIFM is currently expected to
become effective in Q4 2024, subject to obtaining necessary regulatory
approvals and certain third-party consents. The Board has considered the views
expressed by D9's major shareholders during the investment management review
and looks forward to confirming InfraRed's appointment once regulatory
approvals and third-party consents are received.

 

In light of timing constraints surrounding certain key workstreams to progress
the Company's orderly managed wind-down, and cognisant of the need for an
orderly transition of responsibilities from Triple Point to InfraRed, the
Company has also entered into an interim support services agreement with
InfraRed pursuant to which InfraRed will be engaged to work on these key
deliverables with immediate effect.

 

The interim support services agreement provides for InfraRed to be paid the
same fixed annual fee that will be payable to it under the new IMA and the new
IMA will replace this interim support services agreement once all required
regulatory approvals and third-party consents are received.

 

As announced on 30 April 2024, the Company provided notice to terminate the
investment management agreement with Triple Point to take effect on 31 March
2025 in line with its contractual terms. Triple Point continues to work
cooperatively with the Company on its approach to an orderly handover of its
obligations and an earlier transition to InfraRed. As stated in the Company's
2024 interim report, the Company is in discussions with Triple Point regarding
revised commercial terms.

 

Eric Sanderson, Chairman of Digital 9 Infrastructure plc, commented: "We are
pleased to welcome InfraRed as D9's new investment manager and look forward to
working with the team during the managed wind-down. Sale processes for D9's
wholly-owned assets are progressing, albeit at a slower pace than we had
anticipated. I would like to thank Triple Point for cooperating with the Board
in the transfer of responsibilities to InfraRed."

 

James O'Halloran, Partner at InfraRed, commented: "InfraRed's 25-year history
as a value-add investor, including in digital infrastructure, coupled with its
deep expertise as the long-standing manager of two pre-eminent listed
infrastructure investment companies and successful disposal track record over
the last 18-months, will be brought to bear as we seek to deliver for D9's
shareholders. We are looking forward to working closely with the Board to
maximise shareholder value."

 

ENDS.

 

Contacts

 Digital 9 Infrastructure plc                                                via FTI Consulting

 Eric Sanderson
 Panmure Liberum Limited (Financial Adviser)  +44 (0) 203 100 2222

 Chris Clarke

 Darren Vickers
 J.P. Morgan Cazenove (Corporate Broker)      +44 (0) 20 7742 4000

 William Simmonds

 Jérémie Birnbaum
 FTI Consulting (Communications Adviser)      dgi9@fticonsulting.com (mailto:dgi9@fticonsulting.com)

 Mitch Barltrop                               +44 (0) 7807 296 032

 Maxime Lopes                                 +44 (0) 7890 896 777

 

LEI: 213800OQLX64UNS38U92

 

The person responsible for arranging the release of this announcement on
behalf of the Company is Helen Richardson, Company Secretary.

 

About Digital 9 Infrastructure plc

 

Digital 9 Infrastructure plc (DGI9) is an investment trust listed on the
London Stock Exchange and a constituent of the FTSE All-Share, with the ticker
DGI9. The Company's investment objective is to undertake a managed wind-down
of the Company and realise all existing assets in the Company's portfolio in
an orderly manner. For more information, please visit www.d9infrastructure.com
(http://www.d9infrastructure.com) .

 

 

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