NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATION OF SUCH JURISDICTION
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION 596/2014 ("MAR")
3 March 2019
Daily Mail and General Trust plc (DMGT)
Proposed distributions of shares in Euromoney Institutional Investor PLC (Euromoney) and £200m to DMGT's shareholders
DMGT today announces proposed distributions (the 'Proposed Distributions') to return all of DMGT's shares in Euromoney (the 'Euromoney Shares' and the 'Euromoney Distribution') together with £200m of cash (the 'Cash Distribution') to certain holders of DMGT's 'A' Ordinary Non-Voting Shares ('A Shares'). This follows a review by the DMGT Board that concluded that the Group's capital and cash resources are in excess of its current requirements and that a significant distribution to shareholders, equivalent to c.£896m¹, is appropriate. The number of A Shares in the capital of DMGT will be reduced as part of the implementation of the Proposed Distributions.
"The Proposed Distributions that we have announced today are fully aligned with our strategic priorities of increasing the focus of our portfolio and maintaining financial flexibility, whilst at the same time improving the efficiency of our balance sheet", said Paul Zwillenberg, CEO of DMGT. "In total, the distributions will result in almost £900m of assets being returned to shareholders, who will benefit from direct ownership of Euromoney while retaining exposure to a simplified DMGT Group."
Since Rothermere Continuation Limited ('RCL') and Rothermere Investments Limited ('RIL') exist primarily to hold the Rothermere family's interests in DMGT, the A Share holdings of the Rothermere Affiliated Shareholders² will not participate in the Euromoney Distribution and they will limit their receipt of the Cash Distribution. The voting Ordinary Shares will not participate in any of the Proposed Distributions.
The terms of the Euromoney Distribution are such that Fully Participating Shareholders³ will benefit from a 14.5% discount to the 30 day volume weighted average market value of the Euromoney Shares relative to the 30 day volume weighted average market value of the A Shares (as quantified using the Mid-Market Prices of Euromoney Shares and A Shares up until the close of business on 1 March 2019).
The economics of the Proposed Distributions are that, in respect of the A Shares held as at the Conversion Record Time, being 6.00p.m. on 29 March 2019:
Fully Participating Shareholders³ for each A Share held: will receive 0.19933 of an Euromoney Share and 68.13p in cash, and there will be a reduction of 0.46409 of an A Share5.
Rothermere Affiliated Shareholders for each A Share held: will receive 25.53p in cash, and there will be a reduction of 0.03946 of an A Share5.
The number of A Shares held by each A Shareholder will be reduced by an amount commensurate in value to the Proposed Distributions received by each A Shareholder, after taking account of the benefit of the discount on the Euromoney Distribution, resulting in a reduction in the number of A Shares in issue.
Currently, DMGT shareholders hold interests in the Euromoney Shares indirectly via DMGT. Following the Proposed Distributions, Fully Participating Shareholders will hold Euromoney Shares directly. This will allow Fully Participating Shareholders to determine individually the extent to which they wish to remain interested in Euromoney, a listed company that will be wholly independent of DMGT. Furthermore, the performance of DMGT shares in the future will be unaffected by the performance of Euromoney, becoming largely dependent on the controlled, managed businesses of DMGT.
As the Proposed Distributions do not result in all shareholders receiving the same distribution, the DMGT Board has established an Independent Committee of independent non-executive directors to assess the fairness of the Proposed Distributions to the Fully Participating Shareholders.
"The Independent Committee believes that the Proposed Distributions are in the best interests of the Fully Participating Shareholders", said Kevin Parry, Chairman of the Independent Committee. "We unanimously recommend that Fully Participating Shareholders vote in favour of the Proposed Distributions."
Rothermere Affiliated Shareholders²
Under the Proposed Distributions, the Rothermere Affiliated Shareholders will receive £17m in aggregate in cash. This amount is 65% less than the amount they would have received had they participated fully in the Cash Distribution alongside Fully Participating Shareholders (i.e. if the £200m had been distributed pro rata amongst all holders of A Shares and Ordinary Shares). Also, £17m is 92% less than the value they would have received if they had participated fully in the Proposed Distributions (i.e. if the Euromoney Shares and the £200m had been distributed pro rata amongst all holders of A Shares and Ordinary Shares).
The effect of the Rothermere Affiliated Shareholders receiving a smaller proportion of the Proposed Distributions than the Fully Participating Shareholders is that the Rothermere Affiliated Shareholders' holdings of A Shares will be reduced by a smaller proportion than the Fully Participating Shareholders' holdings following the settlement of the Proposed Distributions. This will result in their proportionate interest in the total number of A Shares in issue increasing from 20% of the issued A Shares before the Proposed Distributions to 30% after the Proposed Distributions; and their combined shareholding of A Shares and Ordinary Shares increasing from 24% of the issued A Shares and Ordinary Shares before the Proposed Distributions to 36% after the Proposed Distributions6.
As a result of the discount on the Euromoney Shares being distributed to the Fully Participating Shareholders, the resulting increase in the Rothermere Affiliated Shareholders' stake in A Shares is 2.6% points less than it would have been without such discount. As such, the Proposed Distributions will result in an increased alignment of the economic and voting interests in DMGT for the Rothermere Affiliated Shareholders, including RCL which controls the voting rights attaching to all of the Ordinary Shares.
Background to the Proposed Distributions
Until December 2016, DMGT held two very significant stakes in publicly listed companies: (i) a c.67% stake in Euromoney and (ii) a c.31% stake in ZPG Plc ('ZPG'). These two holdings represented approximately half of the total equity value of DMGT and whilst DMGT had board representation at both companies, it did not have direct management control. For the last two years, the DMGT Board has had a clear strategy of increasing the focus of the DMGT portfolio to allow it to concentrate on DMGT's wholly owned businesses.
In the first instance, DMGT reduced its stake in Euromoney from c.67% to c.49% via a share placing (and associated share buy-back by Euromoney) of an 18% share of Euromoney in the market in December 2016, realising proceeds of £317m. In 2018, DMGT agreed to accept an offer at a 38% premium from Silver Lake for ZPG, which enabled DMGT to dispose of its stake in ZPG for £642m in cash. The DMGT Board has now determined that DMGT should dispose of its remaining stake in Euromoney.
The DMGT Board has determined that returning £200m of cash to DMGT shareholders to improve the efficiency of DMGT's balance sheet is compatible with being able to operate within its long-standing stated practice of limiting gearing to a preferred upper limit of a 2.0x net debt:EBITDA ratio whilst allowing DMGT shareholders to put the surplus capital and cash to use elsewhere.
Impact of the proposed distributions
The DMGT Board has considered its wider stakeholder obligations and will make available £117m from the Group's cash resources to the Group's defined benefit pension schemes. As at 31 March 2018, the pension schemes were approximately 96% funded on an ongoing funding basis. Pension scheme asset and liability values are inherently volatile and fluctuate over time meaning that deficits and surpluses may emerge at future valuation dates. In light of the forthcoming actuarial valuation as at 31 March 2019, the Chief Financial Officer is working with the trustees of the pension schemes to finalise these arrangements.
The Cash Distribution and the additional funding arrangements for the pension schemes will leave DMGT in a net debt position. On a pro forma basis, treating these two cash outflows as effective at the start of the 2018 financial year, net debt would have been £88m as at 30 September 2018 and the net debt:EBITDA ratio would have been 0.4x. This level of gearing still gives the Group the strategic flexibility to continue to invest in and grow its core businesses.
The table below shows an illustrative pro forma restatement of DMGT's key affected financial metrics for FY 2018, assuming the Proposed Distributions and additional funding of the Group's defined benefit pension schemes had taken place in full on 1 October 2017. No other adjustments have been made:
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FY 2018 Reported
FY 2018 Pro forma
Share of adjusted operating profits of JVs and associates
Adjusted profit before tax
Adjusted EBITDA (excl. JVs and associates)
Adjusted EBITDA (incl. JVs and associates)
Adjusted earnings per share
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As at 30 September 2018:
Investments in associates
Net cash / (debt)
Pension schemes' surplus [IAS 19 (Revised)]
A 2.0% effective interest rate is assumed for both the loss of interest receivable and the incremental interest payable due to the change from a net cash to a net debt position.
DMGT's net debt:EBITDA ratio is based on EBITDA including JVs and associates.
The movements in net cash and pension schemes' surplus include the full amount being made available to the Group's defined benefit pension schemes.
The movement in net cash includes the benefit of a £29m, 36% reduction in dividend cash outflows, from £81m to £52m, exceeding a £17m reduction in dividend cash inflows as a result of the Euromoney Distribution.
If the Proposed Distributions become effective, DMGT will not be amending its current dividend policy on a per share basis and will aim to continue to grow the dividend in real terms and, in the medium term, to distribute around one-third of the Group's adjusted earnings. As a result of the Proposed Distributions and associated reduction in the number of A Shares cancellations, there will be a reduction in the aggregate cost of dividends paid by DMGT, reflecting the 36% reduction in DMGT's capital base (excluding shares held in Treasury).
Following the Proposed Distributions, Euromoney will become an entirely independent company with 100% of its shares trading freely in the market. DMGT's representatives on the board of Euromoney, Kevin Beatty and Tim Collier, will resign from the board of Euromoney immediately after the Proposed Distributions are made. There are no expected changes to the DMGT Board as a result of the Proposed Distributions. The Proposed Distributions will allow Euromoney's board to determine its strategy without having to consider DMGT's interests as a shareholder.
Benefits of the Proposed Distributions
At present, DMGT's stake in Euromoney represents 30% of the total equity value of DMGT. The Board believes and has received feedback from shareholders to the effect that the value of DMGT is not fully optimised because the current holding structure, where investors have an indirect holding in Euromoney via DMGT, results in a discount being applied to the market price of the A Shares. The Proposed Distributions allow DMGT to resolve this while also simplifying the DMGT Group. Further, DMGT management will have more time to dedicate to DMGT's wholly owned businesses.
The Proposed Distributions and associated reduction in the number of A Shares will improve key financial metrics including DMGT's dividend coverage ratio and earnings per share on a pro forma basis.
The implementation of the Proposed Distributions requires four separate shareholder approvals:
1) The first approval required is by the holders of the Ordinary Shares, who have to approve the Euromoney Distribution and various matters required to effect the Proposed Distributions, including agreeing to vary their rights so as not to participate in the Proposed Distributions. DMGT has received an irrevocable undertaking pursuant to which the Ordinary Shareholders have committed to vote in favour of the resolutions at the General Meeting to be held on 4 March 2019.
2) The second approval required is by the requisite majority of Rothermere Affiliated Shareholders who have to consent to the variation of their rights as a result of their participation in the Proposed Distributions being limited. Such requisite majority have signed irrevocable undertakings to consent to the variation of their rights by way of written consent following the General Meeting to be held on 4 March 2019.
3) The third approval required is by the Fully Participating Shareholders who have to consent to the variation of their rights as a result of receiving a greater proportion of the Proposed Distributions and consequently a greater reduction of their holding of A Shares (the 'Resolution'). For these purposes, approval by 75% or more by value of votes cast in person or by proxy by the Fully Participating Shareholders at a class meeting at 2.30 p.m. on 26 March 2019 (the 'Class Meeting') will be required for the Proposed Distributions to be implemented.
4) A fourth approval is required by the trustee of the Employee Benefit Trust. In accordance with normal practice, the Employee Benefit Trust will not participate in the Proposed Distributions and is due to consent to the variation of its rights accordingly on 4 March 2019.
DMGT has received written expressions of support7 to vote in favour of the Resolution, in respect of an aggregate of 105 million A Shares held by Fully Participating Shareholders, equivalent to 39% of the votes eligible to be cast at the Class Meeting.
The Proposed Distributions are subject to the DMGT Board and, so far as the Fully Participating Shareholders are concerned, the Independent Committee, continuing to believe that the Proposed Distributions are in the best interests of DMGT and the Fully Participating Shareholders.
The Independent Committee, which has been so advised by Lazard, J.P. Morgan Cazenove and Credit Suisse, considers the terms of the Proposed Distributions to be fair and reasonable so far as Fully Participating Shareholders are concerned. In providing financial advice to the Independent Committee, Lazard, J.P. Morgan Cazenove and Credit Suisse have relied on the Independent Committee's commercial assessment of the Proposed Distributions.
The Independent Committee believes that the Proposed Distributions are in the best interests of the Fully Participating Shareholders. Accordingly, the Independent Committee unanimously recommends that the Fully Participating Shareholders vote in favour of the Resolution, as they intend to do in respect of their own beneficial holdings of A Shares.
On 24 January 2019, DMGT released its 'First Quarter Trading Update FY 2019'. DMGT confirms that trading continues to be in line with the Board's expectations. If the Proposed Distributions are not approved, guidance for FY 2019 remains unchanged. If the Proposed Distributions are approved, the share of adjusted operating profits from joint ventures and associates would be expected to be around £15m, rather than at least £40m. Based on the Board's current expectations, all other guidance for FY 2019 remains unchanged.
A circular will be made available to the Fully Participating Shareholders in connection with the Proposed Distributions, together with notice of the Class Meeting. Fully Participating Shareholders will also receive a form of proxy in connection with the Class Meeting. These documents will be available at the registered office of DMGT and on www.dmgt.com.
1. Proposed Distributions total £896m comprised of £696m of Euromoney Shares, as quantified at the mid-market price at the close of business on 1 March 2019 as published on the London Stock Exchange, and £200m of cash.
2. Rothermere Affiliated Shareholders are comprised of RCL, RIL, the WM Trust, the Rothermere Foundation and Lord Rothermere (including any custodian or nominee to the extent that A Shares are held on their behalf by such custodian or nominee).
3. Fully Participating Shareholders are all holders of A Shares other than Rothermere Affiliated Shareholders² and the DMGT Employee Benefit Trust (including, in each case, any custodian or nominee to the extent that A Shares are held on their behalf by such custodian or nominee).
4. For details of the potential implications of trading in A Shares on or around the Conversion Record Time, please refer to Part II (Further information on the Proposal) of the circular that will be made available to Fully Participating Shareholders on 5 March 2019.
5. Due to the legal and settlement mechanics by which the Proposed Distributions are delivered to Fully Participating Shareholders and the Rothermere Affiliated Shareholders (including the rounding of fractional entitlements), this example cannot be accurately extrapolated for larger holdings of A Shares. It is included here simply as an approximate guide to the economic impacts of the Proposed Distributions. Also, the mechanics of the Euromoney Distribution are such that there will be two stages of rounding; the maximum total exposure that any Fully Participating Shareholder has to the impact of such roundings on any one individual holding is an amount equal to the closing market price of Euromoney Shares at the Conversion Record Time. The Cash Distribution will be subject to one stage of rounding. For full details of the relevant rates, calculations and roundings required to calculate the precise economic outcome of the Proposed Distributions on a particular holding of A Shares, please refer to Part II (Further information on the Proposal) of the circular which is expected to be published on 5 March 2019.
6. For the purposes of calculating the percentage figures, A Shares held in Treasury are excluded from the total number of A Shares.
7. Written expressions of support have been received from Lindsell Train Limited, Majedie Asset Management Limited, Artemis Investment Management LLP (acting in its capacity as investment adviser to certain funds) and Schroder Investment Management Limited.
8. There are currently 337.5 million A Shares in issue, excluding 4.7 million held in Treasury, and 19.9 million Ordinary Shares in issue. Following the Proposed Distributions, it is expected that there will be 210.2 million A Shares in issue, excluding 4.7 million held in Treasury, and 19.9 million Ordinary Shares. The number of A Shares held by Rothermere Affiliated Shareholders is currently 66.6 million and is expected to be 64.0 million following the Proposed Distributions. The DMGT Employee Benefit Trust currently holds 2.3 million A Shares.
9. Please note that certain figures in this document have been subject to rounding adjustments.
For analyst and institutional enquiries:
Tim Collier, Chief Financial Officer
+44 20 3615 2902
Adam Webster, Head of Investor Relations
+44 20 3615 2903
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Will Lawes / Philippe Noël / Nicholas Shott
J.P. Morgan Cazenove
Hugo Baring / Bill Hutchings
+44 20 7187 2000
+44 20 7742 4000
Gillian Sheldon / Antonia Rowan / James Green
+44 20 7888 8888
For media enquiries:
Tim Burt, Teneo
+44 7583 413254
Doug Campbell, Teneo
+44 7753 136628
Paul Durman, Teneo
+44 7793 522824
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DMGT manages a diverse, multinational portfolio of companies, with total revenues of around £1.4bn, that provide businesses and consumers with compelling information, analysis, insight, events, news and entertainment. DMGT is also a founding investor and the largest shareholder of Euromoney Institutional Investor PLC.
Person responsible for arranging the release of this announcement:
Fran Sallas, Company Secretary
+44 20 3615 2904
UNITED STATES AND OVERSEAS SHAREHOLDERS
The implications of the Proposed Distributions for, and the distribution of this announcement to, overseas DMGT shareholders may be affected by the laws of the relevant jurisdictions in which such overseas DMGT shareholders are located. Such overseas DMGT shareholders should inform themselves about, and observe, all applicable legal requirements.
It is the responsibility of any person into whose possession this announcement comes to satisfy themselves as to their full observance of the laws of the relevant jurisdiction in connection with the Proposed Distributions and the distribution of this announcement, including the obtaining of any governmental, exchange control or other consents that may be required and/or compliance with other necessary formalities that are required to be observed and the payment of any issue, transfer or other taxes due in such jurisdiction.
Overseas DMGT shareholders should consult their own legal and tax advisers with respect to the legal and tax consequences of the Proposed Distributions in their particular circumstances.
The Euromoney Shares have not been and will not be registered under the US Securities Act or under the securities laws of any state or other jurisdiction of the United States and may not be resold within the United States, except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. At the time of the Euromoney Distribution, the Euromoney Shares will not be listed on any securities exchange in the United States, and it is expected that Euromoney will rely on the exemption from registration under the US Securities Exchange Act, provided by Rule 12g3-2(b) thereunder.
NOTE ON FORWARD-LOOKING STATEMENTS
This announcement contains statements which are, or may be deemed to be, "forward-looking statements" which are prospective in nature. All statements other than statements of historical fact are forward-looking statements. They are based on current expectations and projections about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "plans", "expects", "is expected", "is subject to", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", "believes", "targets", "aims", "projects" or words or terms of similar substance or the negative thereof, as well as variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Forward-looking statements include statements relating to (a) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects, (b) business and management strategies and the expansion and growth of DMGT's operations, and (c) the effects of global economic conditions on DMGT's business. Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors may cause the actual results, performance or achievements of DMGT to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
Other than in accordance with its legal or regulatory obligations (including under the Listing Rules and the Disclosure and Transparency Rules), DMGT is not under any obligation and DMGT expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Lazard & Co., Limited, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom, is acting exclusively for the Independent Committee and for no one else in connection with the Proposed Distributions and will not be responsible to anyone other than the Independent Committee for providing the protections afforded to its clients or for providing advice in connection with the Proposed Distributions. Neither Lazard & Co., Limited nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Lazard & Co., Limited in connection with this document, any statement contained herein, the Proposed Distributions or otherwise.
J.P. Morgan Securities plc (which conducts its UK investment banking business as J.P. Morgan Cazenove and which is authorised in the United Kingdom by the Prudential Regulation Authority and regulated in the United Kingdom by the Prudential Regulation Authority and the Financial Conduct Authority), is acting as financial adviser exclusively to DMGT and no one else in connection with the Proposed Distributions and will not regard any other person as its client in relation to the Proposed Distributions and shall not be responsible to anyone other than DMGT for providing the protections afforded to clients of J.P. Morgan Cazenove, or for providing advice in connection with the Proposed Distributions or any matter referred to herein.
Credit Suisse International is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Credit Suisse is acting exclusively for the Independent Committee and for no one else in connection with the Proposed Distributions and will not be responsible to anyone other than the Independent Committee for providing the protections afforded to its clients or for providing advice in connection with the Proposed Distributions. Neither Credit Suisse nor any of its affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Credit Suisse in connection with this document, any statement contained herein, the Proposed Distributions or otherwise.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.