TIDMWAFR
RNS Number : 8383X
Virgata Services Ltd
06 May 2021
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA OR
JAPAN OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD BE
UNLAWFUL.
FOR IMMEDIATE RELEASE
6 May 2021
FIRM CASH OFFER
BY
VIRGATA SERVICES LIMITED
FOR
WALLS & FUTURES REIT PLC
Publication and posting of Offer Document
On 8 April , Virgata Services Limited ("Virgata") announced the
terms of its firm cash offer ("Offer") to acquire the entire issued
and to be issued ordinary share capital of Walls & Futures REIT
plc ("Walls & Futures").
Further to that announcement, Virgata is pleased to announce
that the offer document ("Offer Document") is today being published
by the company with a form of acceptance ("Form of
Acceptance").
Offer Summary
-- Under the terms of the Offer, which will be subject to the
Conditions and further terms to be set out in the Offer Document,
Walls & Futures' Shareholders will be entitled to receive:
for each Walls & Futures Share: 50 pence in cash
-- The Offer values the entire issued ordinary share capital of
Walls & Futures at approximately GBP1.9 million and represents
a material premium of approximately:
o 42.9 per cent. to the Closing Bid Price of 35 pence per Walls
& Futures Share on 7 April 2021, being the last Business Day
before the commencement of the Offer Period; and
o 25 per cent. to the Closing Mid Price of 40 pence per Walls
& Futures Share on 7 April 2021, being the last Business Day
before the commencement of the Offer Period.
-- The Offer Document and Form of Acceptance will be posted to
Walls & Futures Shareholders today, with the first closing time
and date of the Offer at 1.00 p.m. on 27 May 2021
-- 10 June 2021 is the earliest date on which the Offer is
expected to become or declared unconditional in all respects
Why Virgata believes Walls & Futures Shareholders should
accept the Offer
Summary
-- Your Directors tell you to reject the Offer because it is
below the calculated net asset value of the Company
Unfortunately, the net asset value is not relevant to you as a
Walls & Futures Shareholder as you can only sell your Walls
& Futures Shares at the market Bid Price, a price that has
traded at a significant, and increasing, discount to the net asset
value
-- The ongoing operating costs of Walls & Futures (cost of
sales and administrative expenses) far exceed the net rental income
received by the Company each year. In the year ended 31 March 2020,
net rental income was GBP138,036, whilst the cost of sales and
administrative expenses was GBP289,011 (of which Directors salaries
were GBP108,000)
As a result of costs exceeding income, Virgata believes that
Walls & Futures needs to spend cash from property sales, or
sell properties, to fund the ongoing costs of the Company
-- Your Directors have proved unable to attract enough new capital to scale the business
Virgata believes Walls & Futures needs investment to scale
the business. At IPO, and more recently, your Directors have
targeted fundraises of, in aggregate, over GBP3.0 million, but have
only raised just over GBP1.3 million.
Your Directors rejected a GBP2.0 million investment from
Virgata.
The Offer
The Offer provides Walls & Futures Shareholders the
opportunity of receiving 50 pence in cash (with no transaction
fees) for each Walls & Futures Share held.
Your Directors have stated that the Offer is at a material
discount to the unaudited net asset value of the Company, as
reported on 27 April 2021, which Virgata does not dispute.
However, this figure is unfortunately not relevant to you as a
Walls & Futures Shareholder as your shares cannot be sold at
this price and, to date, Virgata believes your Directors have set
out no credible path or strategy to narrow the gap between what you
can sell your shares for in the market and Walls & Futures'
published net asset value. Without the Offer from Virgata, the
options open to Walls & Futures Shareholders are to either sell
your shares at the market Bid Price or retain your shares in a
Company that has paid no dividends since IPO and whose share price
has consistently declined.
Virgata would urge Walls & Futures Shareholders to read in
detail the section of the Offer Document titled "Why Virgata
believes Shareholders should accept the Offer" on pages 7 to 13.
This provides key information around the performance of your
Directors and why Virgata believes it is in a Walls & Futures
Shareholder's best interests to accept the 50 pence cash offer made
by Virgata.
Some of the key information set out includes:
Net Asset Value
At IPO in 2016, Walls & Futures acquired a portfolio of
three (3) properties worth in aggregate GBP2.18 million. Since
2016, the Directors have sold two of these three properties at a
total of GBP169,000 LESS than their market values at IPO.
- 234 Durnsford Road sold for GBP656,000 (before costs),
GBP79,000 LESS than the GBP735,000 market value at IPO; and
- 54 Elsenham Street (Upper Floor Flat) sold for GBP660,000
(before costs), GBP90,000 LESS than the GBP750,000 market value at
IPO.
The Company now has three properties, the minimum required to
retain REIT status. To retain REIT status, Virgata believes the
Company must acquire another property, before being able to dispose
of 54 Elsenham Street (Ground Floor Flat).
As the Company confirmed on 27 April 2021, cash at 31 March 2021
was GBP658,468, however, each year since IPO, the net property
income of the Company is materially lower than the operating costs
of the Company.
If the Company had the same level of cash outflows from
operations in the year to 31 March 2022 as it did for the year to
31 March 2020 (the latest publicly available figure), the estimated
cash left in the Company at 31 March 2022 would be GBP488,783. This
is less than the total amounts spent on either the Stroud property
(GBP676,667) or the Didcot property (GBP657,314).
As a result, Virgata believes that the Directors cannot scale
the business without borrowing money or issuing more Walls &
Futures Shares. As a result, Virgata believes net property income
will continue to be less than the operating costs of the
Company.
Inability to raise capital to scale the Company
The Directors targeted a GBP2.0 million fundraise at IPO,
however, only raised GBP1.03 million. In February 2018 the
Directors targeted a fundraise of GBP1.05 million, however, only
raised GBP0.30 million.
On 6 April 2021, Virgata offered to invest GBP2.0 million at 50
pence per Walls & Futures Share, a 15 pence premium to the
Closing Bid Price on that date, but your Directors rejected the
proposal without discussion. This injection of cash would have
provided significant scale to Walls & Futures and would have
provided your Company with more available cash than it has raised,
in aggregate, since the IPO.
Poor operational performance
Over the Review Period the Directors have substantially
overspent, with total net property income of GBP422,215, compared
to Director Payments of GBP420,010 and the total cash outflow from
operations being GBP755,920.
i.e. there are significantly more costs in the business than net
property income.
In the year ended 31 March 2020, the Company generated net
property income of GBP138,036 compared to total cost of sales and
administrative expenses of GBP289,011.
i.e. net property income needs to rise by 109% i.e. more than
double, to break even
Significant underperformance of the Shares and a lack of
liquidity
Following the IPO, the Directors stated that;
"Our target is to deliver a long-term annual net return of 7 -
9% of which 3 - 4% will be paid in the form of a dividend."
The Walls & Futures share price at IPO was 100 pence
compared to the Closing Bid Price on 7 April 2021, the last
Business Day before the commencement of the Offer Period, of 35
pence. That is 65 pence LOWER.
To add to which, the Company has paid GBP0 dividends since IPO,
despite targeting a 3-4% yield.
In fact, the total value of shares traded (excluding direct
placings) since the IPO and up to 7 April 2021, being the last
Business Day prior to the commencement of the Offer Period is
GBP335,622 - that is less than the Directors Payments over the same
period of GBP420,010.
Since IPO, the Directors (and persons closely associated with
them) have acquired a total of 114,350 Walls & Futures Shares
at a total cost of GBP81,206. The Executive Directors, despite each
being paid GBP50,000 per annum, have acquired, in total GBP29,912
of Walls & Futures Shares.
If Walls & Futures Shares are so significantly undervalued,
why have the Directors not acquired more Walls & Futures
Shares?
Virgata believes, that your Directors have offered no credible
plan or strategy to scale your Company, generate a profit from
operations, pay a dividend or close the gap between the Walls &
Futures share price and the net asset value, as a result,
Virgata urges Walls & Futures Shareholders to review in
detail the Offer Document and Form of Acceptance, before then
accepting the Offer.
Action to be taken
To accept the Offer in respect of Walls & Futures Shares
held in uncertificated form (i.e. in CREST), Walls & Futures
Shareholders should follow the procedure for Electronic Acceptance
through CREST so that the Transfer to Escrow (TTE) instruction
settles as soon as possible and, in any event, not later than 1.00
p.m. (London time) on 27 May 2021. If Walls & Futures
Shareholders hold any Walls & Futures Shares through a CREST
sponsored member, they should contact their CREST sponsor as only
their CREST sponsor will be able to send the necessary TTE
instruction to Euroclear.
To accept the Offer in respect of Walls & Futures Shares
held in certificated form, Walls & Futures Shareholders must
complete the Form of Acceptance in accordance with the instructions
set out in the Offer Document and on the Form of Acceptance. The
completed, signed and (where applicable) witnessed Form of
Acceptance must be returned, together with relevant document(s) of
title for their Walls & Futures Shares, to the Receiving Agent,
Neville Registrars, at Neville House, Steelpark Road, Halesowen,
B62 8HD by post or (if between 9.00 a.m. and 5.00 p.m. (London
time) Monday to Friday (excluding public holidays in England and
Wales)) by hand as soon as possible and in any event so as to be
received by no later than 1.00 p.m. (London time) on 27 May
2021.
Full instructions on how to accept the Offer are set out in the
Offer Document and (for holders of Walls & Futures Shares in
certificated format) the Form of Acceptance.
Copies of the Offer Document and the Form of Acceptance will be
available on Virgata's website at
https://www.virgatagroup.com/westminster and Walls & Futures' website at https://reit.wallsandfutures.com/investors/ . Further copies of the Offer Document and the Form of Acceptance may be obtained (by Walls & Futures Shareholders) by contacting Neville Registrars during business hours on +44 (0)121 585 1131 or by submitting a request in writing to the Registrar at Neville Registrars, Neville House, Steelpark Road, Halesowen, B62 8HD.
Words and expressions defined in the Offer Document shall,
unless the context provides otherwise, have the same meanings in
this announcement.
For further information, please contact:
Virgata Services Limited
Jordi Goetstouwers Tel: +44 (0) 208 123 9740
Andrew Hilbert Tel: +44 (0) 7748 638 542
Cairn Financial Advisers LLP (financial adviser to Virgata)
James Lewis / Sandy Jamieson Tel: +44 (0) 207 213 0880
Important notice related to financial adviser
Cairn Financial Advisers LLP, which is authorised and regulated
in the United Kingdom by the Financial Conduct Authority, is acting
exclusively for Virgata and for no one else in connection with the
Offer or any matters referred to in this announcement and will not
be responsible to anyone other than Virgata for providing the
protections afforded to its clients nor for providing advice in
relation to the Offer, the contents of this announcement or any
other matters referred to in this announcement.
Disclosure requirements of the Code
Under Rule 8.3(a) of the Code, any person who is interested in
1% or more of any class of relevant securities of an offeree
company or of any securities exchange offeror (being any offeror
other than an offeror in respect of which it has been announced
that its offer is, or is likely to be, solely in cash) must make an
Opening Position Disclosure following the commencement of the offer
period and, if later, following the announcement in which any
securities exchange offeror is first identified. An Opening
Position Disclosure must contain details of the person's interests
and short positions in, and rights to subscribe for, any relevant
securities of each of (i) the offeree company and (ii) any
securities exchange offeror(s). An Opening Position Disclosure by a
person to whom Rule 8.3(a) applies must be made by no later than
3.30 p.m. (London time) on the 10th business day following the
commencement of the offer period and, if appropriate, by no later
than 3.30 p.m. (London time) on the 10th business day following the
announcement in which any securities exchange offeror is first
identified. Relevant persons who deal in the relevant securities of
the offeree company or of a securities exchange offeror prior to
the deadline for making an Opening Position Disclosure must instead
make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes,
interested in 1% or more of any class of relevant securities of the
offeree company or of any securities exchange offeror must make a
Dealing Disclosure if the person deals in any relevant securities
of the offeree company or of any securities exchange offeror. A
Dealing Disclosure must contain details of the dealing concerned
and of the person's interests and short positions in, and rights to
subscribe for, any relevant securities of each of (i) the offeree
company and (ii) any securities exchange offeror, save to the
extent that these details have previously been disclosed under Rule
8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies
must be made by no later than 3.30 p.m. (London time) on the
business day following the date of the relevant dealing.
If two or more persons act together pursuant to an agreement or
understanding, whether formal or informal, to acquire or control an
interest in relevant securities of an offeree company or a
securities exchange offeror, they will be deemed to be a single
person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree
company and by any offeror and Dealing Disclosures must also be
made by the offeree company, by any offeror and by any persons
acting in concert with any of them (see Rules 8.1, 8.2 and
8.4).
Details of the offeree and offeror companies in respect of whose
relevant securities Opening Position Disclosures and Dealing
Disclosures must be made can be found in the Disclosure Table on
the Takeover Panel's website at www.thetakeoverpanel.org.uk,
including details of the number of relevant securities in issue,
when the offer period commenced and when any offeror was first
identified. You should contact the Panel's Market Surveillance Unit
on +44 (0)20 7638 0129 if you are in any doubt as to whether you
are required to make an Opening Position Disclosure or a Dealing
Disclosure.
Publication on websites
A copy of this announcement and the display documents required
to be published pursuant to Rule 26.1 and 26.2 of the Code will be
made available, free of charge and subject to certain restrictions
relating to persons resident in Restricted Jurisdictions, on
Virgata's website at www.virgatagroup.com/westminster by no later
than 12.00 noon (London time) on the business day following the
release of this announcement.
For the avoidance of doubt, neither the contents of such website
nor the content of any other website accessible from hyperlinks on
such websites is incorporated into, or forms part of, this
announcement.
In accordance with Rule 30.3 of the Code, a person so entitled
may request a hard copy of this announcement, free of charge, by
contacting Neville Registrars Limited on 0121 585 1131 (+44 (0) 121
585 1131). For persons who receive a copy of this announcement in
electronic form or via a website notification, a hard copy of this
announcement will not be sent unless so requested. In accordance
with Rule 30.3 of the Code, a person so entitled may also request
that all future documents, announcements and information to be sent
to them in relation to the Offer should be in hard copy form.
Overseas jurisdictions
The distribution of this announcement in jurisdictions other
than the United Kingdom and the ability of Walls & Futures'
Shareholders who are not resident in the United Kingdom to
participate in the Offer may be affected by the laws of relevant
jurisdictions. Therefore any persons who are subject to the laws of
any jurisdiction other than the United Kingdom or Walls &
Futures' Shareholders who are not resident in the United Kingdom
will need to inform themselves about, and observe, any applicable
legal or regulatory requirements. Any failure to comply with the
applicable restrictions may constitute a violation of the
securities laws of any such jurisdiction. Further details in
relation to overseas Walls & Futures' Shareholders will be
contained in the Offer Document.
The Offer is not being, and will not be, made available,
directly or indirectly, in or into or by the use of the mails of,
or by any other means or instrumentality of interstate or foreign
commerce of, or any facility of a national state or other
securities exchange of, any Restricted Jurisdiction unless
conducted pursuant to an exemption from the applicable securities
laws of such Restricted Jurisdiction.
Accordingly, copies of this announcement and all documents
relating to the Offer are not being, and must not be, directly or
indirectly, mailed, transmitted or otherwise forwarded, distributed
or sent in, into or from any Restricted Jurisdiction except
pursuant to an exemption from the applicable securities laws of
such Restricted Jurisdiction and persons receiving this
announcement (including, without limitation, agents, nominees,
custodians and trustees) must not distribute, send or mail it in,
into or from such jurisdiction. Any person (including, without
limitation, any agent, nominee, custodian or trustee) who has a
contractual or legal obligation, or may otherwise intend, to
forward this announcement and/or the Offer Document and/or any
other related document to a jurisdiction outside the United Kingdom
should inform themselves of, and observe, any applicable legal or
regulatory requirements of their jurisdiction.
Forward-looking statements
This announcement may contain certain "forward-looking
statements" with respect to Virgata Walls & Futures and/or the
Walls & Futures Group. These forward-looking statements can be
identified by the fact that they do not relate only to historical
or current facts. Forward-looking statements often use words such
as 'anticipate', 'target', 'expect', 'estimate', 'intend', 'plan',
'goal', 'believe', 'will', 'may', 'should', 'would', 'could' or
other words or terms of similar meaning or the negative thereof.
Forward-looking statements include statements relating to the
following: (i) future capital expenditures, expenses, revenues,
earnings, synergies, economic performance, indebtedness, financial
condition, dividend policy, losses and future prospects; (ii)
business and management strategies and the expansion and growth of
Virgata or the Walls & Futures Group and potential synergies
resulting from the Acquisition; and (iii) the expected timing and
scope of the Acquisition.
These forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause actual
results, performance or developments to differ materially from
those expressed in, or implied by, such forward-looking statements.
These forward-looking statements are based on numerous assumptions
regarding present and future strategies and environments. You are
cautioned not to place undue reliance on such forward-looking
statements, which speak only as of the date of this announcement.
All subsequent oral or written forward-looking statements
attributable to Virgata, Walls & Futures and/or the Walls &
Futures Group or any person acting on their behalf (respectively)
are expressly qualified in their entirety by the cautionary
statement above. Should one or more of these risks or uncertainties
materialise, or should underlying assumptions prove incorrect,
actual results may vary materially from those described in this
announcement. Virgata, Walls & Futures and/or the Walls &
Futures Group assume no obligation to update publicly or revise
forward-looking or other statements contained in this announcement,
whether as a result of new information, future events or otherwise,
except to the extent legally required.
Rounding
Certain figures included in this announcement have been
subjected to rounding adjustments. Accordingly, figures shown for
the same category presented in different tables may vary slightly
and figures shown as totals in certain tables may not be an
arithmetic aggregation of the figures that precede them.
No profit forecasts or estimates
No statement 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 for Virgata or Walls & Futures, as
appropriate, for the current or future financial years would
necessarily match or exceed the historical published earnings or
earnings per share for Virgata or Walls & Futures, as
appropriate.
Information relating to Walls & Futures' Shareholders
Walls & Futures' Shareholders should be aware that
addresses, electronic addresses and certain other information
provided by Walls & Futures' Shareholders and other relevant
persons for the receipt of communications from Walls & Futures
may be provided to Virgata during the Offer Period as required
under Section 4 of Appendix 4 to the Code.
Bases and sources of information
1. The valuation of Walls & Futures property portfolio at
IPO has been extracted from the independent valuation report
produced by John D Wood and incorporated into the admission
document, dated 28 July 2016
2. The disposal proceeds of GBP656,000 (before costs) for 234
Durnsford Road has been extracted from the Walls & Future RNS
announcement dated 12 June 2020
3. The disposal proceeds of GBP660,000 (before costs) for 54
Elsenham Street (Upper Floor Flat) has been extracted from the
Walls & Future RNS announcement dated 8 January 2021
4. The Company's cash balance of GBP658,468 has been extracted
from the Walls & Futures RNS announcement dated 27 April
2021
5. The projected cash balance of Walls & Futures at 31 March
2022 of GBP488,783 has been calculated by subtracting the operating
cash outflow of the Company (extracted from the annual report and
accounts of the Company for the 12 months ended 31 March 2020
(GBP169,685)) from the stated cash balance at 31 March 2021 of
GBP658,468
6. The total amount spent by the Company on the Stroud property
of GBP676,667 was extracted from the Company's annual report and
accounts for the 12 months ended 31 March 2018, being the "Cash
flows from investing activities" relating to the "Purchase of
investment property"
7. The total amount spent by the Company on the Didcot property
of GBP657,314 was extracted from the Company's annual report and
accounts for the 12 months ended 31 March 2020, being the "Cash
flows from investing activities" relating to the "Purchase of
investment property"
8. The Directors targeted fundraise at IPO of GBP2.0 million is
extracted from the IPO admission document dated 28 July 2016 and
the actual amount raised is extracted from the Walls & Futures
RNS announcement dated 29 November 2016
9. The Directors targeted fundraise in February 2018 of GBP1.05
million is extracted from the Walls & Futures RNS announcement
dated 13 February 2018 and the actual amount raised is an aggregate
of the initial close fundraise of GBP222,603 announced on 4 April
2018 and the extended deadline fundraise of GBP80,080 announced on
23 May 2018
10. Net property income over the Review Period is the summation
of the net property income generated by the Company and disclosed
in each of the annual report and accounts of the Company during the
Review Period
11. Director Payments over the Review Period is the summation of
the total amounts paid to the directors of Walls & Futures
(being Mr J McTaggart, Mr D White and Mr P Wylie), including social
security costs paid by the Company, as well as payments made to
Wigmore Jones Limited (a company whose two directors, per Companies
House, are Mr J McTaggart and Mrs H McTaggart), as disclosed in the
annual report and accounts of Walls & Futures for the Review
Period
12. Total cash generated (or the total cash outflow) from
operations is the summation of "Cash generated from operations"
extracted from the annual report and accounts of the Company for
the Review Period
13. The following statement "Our target is to deliver a
long-term annual net return of 7 - 9% of which 3 - 4% will be paid
in the form of a dividend." was contained in "The Note to Editors"
statement in Walls & Futures Final Results for the period ended
31 March 2017 RNS announcements released on 29 August 2017 and
subsequent announcements. It was not contained in the Final Results
for the Year to 31 March 2019 RNS announcement released on 20
August 2019 or any announcement after that date
14. Total dividends paid of GBP0 has been calculated by
aggregating the total dividends declared figures from the annual
report and accounts of Walls & Futures for the Review
Period
15. The total value of Walls & Futures Shares traded
(excluding direct placings) between the IPO and 7 April 2021, being
the last Business Day prior to the commencement of the Offer
Period, has been calculated by multiplying the volume of Walls
& Futures Shares traded by the transaction price, as disclosed
on the Aquis Stock Exchange website
https://www.aquis.eu/aquis-stock-exchange/for-investors/trades?securityidaqse=WAFR
16. The total number and value of shares acquired by the
Directors (and persons closely associated with them) and the total
shares acquired by the Executive Directors has been calculated from
figures extracted from Walls & Futures Directors Dealings RNS
announcements dated 2 February 2017, 17 February 2017, 26 April
2017, 13 September 2017, 4 June 2019, 12 February 2020 and 8
January 2021
17. The Executive Directors' salaries of GBP50,000 each per
annum has been extracted from the IPO admission document dated 28
July 2016
18. Financial information relating to Walls & Futures has
been extracted from the audited financial statements of Walls &
Futures for the financial years ended 31 March 2017, 31 March 2018,
31 March 2019 and 31 March 2020.
19. References to the value of the Offer for the whole of the
issued ordinary share capital of Walls & Futures are based on
the 3,755,086 Walls & Futures Shares in issue at close of
business on the Latest Practicable Date (5 May 2021) and the Offer
Price of 50 pence per Walls & Futures Share.
This information is provided by RNS, the news service of the
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