JZ Capital Ptnrs Ltd Notice of EGM

 
TIDMJZCP TIDMJZCN 
 
JZ CAPITAL PARTNERS LIMITED (the "Company") 
 (a closed-ended investment company incorporated with limited liability under 
              the laws of Guernsey with registered number 48761) 
 
                           LEI 549300TZCK08Q16HHU44 
 
                    Notice of Extraordinary General Meeting 
 
                                      and 
 
                       Recommended Proposals to approve 
The Company's proposed acquisition of a 27.696% ownership interest and related 
                                  investments 
                         in Deflecto Holdings, LLC and 
            The Company's proposed investments in JZI Fund IV, L.P. 
 
 
6 June 2018 
 
Notice of Extraordinary General Meeting 
 
Notice is hereby given that the Extraordinary General Meeting ("EGM") of the 
Company will be held at the offices of Northern Trust International Fund 
Administration Services (Guernsey) Limited, Trafalgar Court, Les Banques, St 
Peter Port, Guernsey GY1 3QL, Channel Islands at 1.30 p.m. on 26 June 2018 (or 
as soon thereafter as the Annual General Meeting of the Company convened for 
the same day and place has been concluded or adjourned). 
 
The purpose of the EGM is to consider and, if thought fit, approve the 
Company's proposed: (i) acquisition of a 27.696 per cent. ownership interest 
and related initial and additional investments in Deflecto Holdings, LLC 
("Deflecto") (the "Deflecto Proposal"), and (ii) investments in JZI Fund IV, 
L.P. ("Fund IV") (the "Fund IV Proposal" and together with the Deflecto 
Proposal, the "Proposals"). 
 
Both of the Proposals would be considered related party transactions under 
Chapter 11 of the Listing Rules (with which the Company voluntarily complies 
and insofar as the Listing Rules are applicable to the Company by virtue of its 
voluntary compliance) and therefore shareholder approval is required for the 
Proposals which will be sought at the EGM. 
 
Deflecto Proposal 
 
The Company intends to acquire from Edgewater Growth Capital Partners 
("Edgewater") a 27.696 per cent. ownership interest in Deflecto for an amount 
of initial consideration of approximately US$23.175 million payable to 
Edgewater upon completion of the acquisition. The initial consideration 
comprises approximately US$22.5 million payable to Edgewater plus an additional 
amount of approximately US$675,000 as reimbursement to Edgewater for costs 
incurred by it since the acquisition of its ownership interest in Deflecto in 
2017. Following completion of the acquisition, the ownership interests in 
Deflecto will be held 52.304 per cent. by Edgewater, 27.696 per cent. by the 
Company, and 20 per cent. in aggregate by existing and future management of 
Deflecto. 
 
Deflecto is a diversified, highly scalable and global US company that designs, 
manufactures and sells innovative plastic products to multiple industry 
segments, including point-of-purchase/point-of-sale, safety, floor protection, 
office products and air distribution. The business is headquartered in 
Indianapolis, Indiana, USA and has operations elsewhere in the United States, 
Canada, the United Kingdom, China and India. It serves a range of customers 
across multiple channels including big box retailers, drug and convenience 
stores, wholesalers and distributors, and original equipment manufacturers. 
Prior to its acquisition by Edgewater in 2017 and since 1985, Deflecto was 
owned by Jordan Industries International LLC, a company owned approximately 50 
per cent. by David Zalaznick and Jay Jordan together being also the founders 
and principals of the Company's investment adviser, Jordan/Zalaznick Advisers, 
Inc. ("JZAI") with the balance of the company's ownership interests being owned 
by their respective affiliates which included a small minority stake of less 
than 0.1 per cent. owned by the Company. JZAI is therefore intimately familiar 
with the Deflecto business and its operations for over the past 25 years. 
 
Deflecto has gross assets of US$153.480 million as at 31 December 2017 and net 
sales and EBITDA of US$151.347 million and US$15.082 million respectively for 
the financial year ended 31 December 2017. These figures all of which are 
unaudited are presented as the total gross assets of and net sales and EBITDA 
attributable to the whole of Deflecto and not the proportionate 27.696 per 
cent. ownership interest proposed to be acquired by the Company. Existing 
members of the management team of Deflecto run the Deflecto business and the 
key individuals important to the business are Jim Farrell and Bob Flynn as a 
senior leader and chief financial officer of Deflecto respectively. 
 
In addition to the initial consideration payable by the Company to Edgewater, 
the Company intends to make investments in Deflecto jointly with Edgewater on a 
pro rata basis according to their respective ownership interests (as between 
themselves and excluding Deflecto management), being joint investments in the 
proportions of 34.62 : 65.38 economically (the "Deflecto JZCP/Edgewater 
Ownership Proportions"). The joint investments are intended to be made: 
 
  * firstly in the form of the Company making an initial working capital 
    contribution to Deflecto in an amount of approximately US$5 million with 
    Edgewater also making its own contribution to Deflecto's working capital 
    pro rata according to the Deflecto JZCP/Edgewater Ownership Proportions. 
    The working capital contributions are to be made by the Company and 
    Edgewater at the same time as the payment of the initial consideration; and 
 
  * thereafter in the form of the Company making additional joint investments 
    in Deflecto from time to time in an amount of up to approximately US$31.825 
    million with Edgewater also making its own additional joint investments in 
    Deflecto at the same time pro rata according to the Deflecto JZCP/Edgewater 
    Ownership Proportions. The additional joint investments are to be made by 
    the Company and Edgewater principally for the purpose of funding 
    complementary acquisitions to be made by Deflecto. 
 
The total amount of the initial consideration payable to Edgewater together 
with the initial and further joint investments in Deflecto in each case to be 
made by the Company are not to exceed an amount of up to US$60 million. 
 
Edgewater from whom the Company is acquiring its ownership interest in Deflecto 
and making its related joint investments alongside is a substantial shareholder 
of the Company and therefore a related party of the Company under the Listing 
Rules. The Board believes that the Deflecto Proposal represents an attractive 
investment opportunity for the Company particularly given JZAI's knowledge and 
understanding of the Deflecto business and the Company's considerable 
experience of co-investing with Edgewater. 
 
Fund IV Proposal 
 
JZAI, the Company's investment adviser, intends to establish Fund IV which will 
be a Cayman Islands exempted limited partnership. The general partner of Fund 
IV will be JZI Fund IV GP, L.P. ("Fund IV GP") which will also be a Cayman 
Islands exempted limited partnership and of which JZAI will be the general 
partner. Fund IV will be managed by JZ Asset Management, LLC ("JZAM"), acting 
through JZ Asset Management UK LLP. JZAI is JZAM's managing member. 
 
Fund IV will be a new pan European microcap buyout fund and a follow-on fund to 
EuroMicrocap Fund 2010, L.P. and JZI Fund III, L.P. and is being established to 
expand and diversify the Company's investments in Western Europe with 
acquisitions intended to be made with a focus on buyouts and build-ups of 
companies and in growth company platforms in the microcap market. Key 
individuals important to Fund IV are the founders and principals of JZAI, David 
Zalaznick and Jay Jordan, as well as Miguel Rueda who is the managing partner 
of JZ International Ltd. 
 
It is intended that JZAI will target aggregate capital commitments to make 
investments in Fund IV of approximately EUR650 million (subject to a hard cap of 
EUR800 million). The first closing of Fund IV is targeted to occur in or around 
Q3 2018. 
 
In light of the above, the Company is intending to make investments in Fund IV 
jointly with David Zalaznick and Jay Jordan and various members of the JZAI 
European investment team (together, the "Fund IV Principals"). Specifically, 
the Company intends at or about the time of the first closing of Fund IV to 
undertake a capital commitment to make investments in Fund IV (through Fund IV 
GP) of up to EUR64 million. At or around the same time, the Fund IV Principals 
would also undertake a capital commitment to make investments in Fund IV (also 
through Fund IV GP) of up to EUR20 million. Both the Company's and the Fund IV 
Principals' capital commitments taken together shall not however exceed in 
aggregate approximately EUR80 million of which at JZAI's discretion the Company's 
commitment shall be between approximately 75 - 80 per cent. and the Fund IV 
Principals' commitment shall be between approximately 20 - 25 per cent. in each 
of such aggregate amount. As such, the Company would be investing jointly with 
the Fund IV Principals in Fund IV (all through Fund IV GP) in the proportions 
of between approximately 75 : 25 and 80 : 20. The joint investments by the 
Company and the Fund IV Principals in Fund IV will therefore be made on a 75 - 
80 : 25 - 20 basis economically. It is anticipated that the balance of the 
targeted aggregate capital commitments to Fund IV will be fulfilled by other 
third party co-investors extending capital commitments to make investments in 
Fund IV. 
 
Each of the Fund IV Principals alongside whom the Company is proposing to make 
its joint investments in Fund IV are related parties of the Company under the 
Listing Rules. Following the Company's investments in EuroMicrocap Fund 2010, 
L.P. and JZI Fund III, L.P., the Board considers that the participation in 
further investment opportunities in Europe via Fund IV, and in particular the 
increased diversification and access to third party co-investors offered by

this investment, also represents an attractive investment opportunity for the 
Company. 
 
Notice of EGM and Shareholder Circular 
 
Further details of both Proposals are included in the Notice convening the EGM 
and the circular of the Company in connection with the Proposals. 
 
In particular, shareholders should note that, as detailed in the circular, 
whilst the Listing Rules provide for written confirmation to be obtained from a 
sponsor that the terms of a related party transaction are fair and reasonable 
as far as shareholders are concerned, such a confirmation has only been 
received in relation to the Fund IV Proposal and not the Deflecto Proposal. 
 
This is because, whilst the Company has sought to obtain a fair and reasonable 
written confirmation for Deflecto, it has been unable to do so at a cost which 
can be justified relative to the size of the investment that the Company 
proposes to make as part of the Deflecto Proposal and within the time 
constraints needed to be met in order to transact on and complete the 
transaction on the terms negotiated. The Company understands that the costs and 
time for obtaining a fair and reasonable written confirmation can often be 
greater for a related party transaction that concerns an acquisition such as 
the Deflecto Proposal as opposed to a co-investment in the case of the Fund IV 
Proposal, which can be attributed to the additional due diligence and valuation 
work that may need to be undertaken on the target the subject of the 
acquisition. 
 
The Company has therefore decided to depart from the requirement to obtain a 
fair and reasonable written confirmation on this occasion but notwithstanding 
that the Board, which has been so advised by the Company's investment adviser, 
JZAI nevertheless considers the Deflecto Proposal to have been negotiated on 
arm's length terms. That negotiation has been undertaken on the Company's 
behalf by JZAI, the founders and principals of which are also substantial 
shareholders of the Company and whose combined shareholding exceeds that of 
Edgewater's. JZAI has a selective and disciplined approach to investing which 
is applied across all investments including in the case of Deflecto. In 
addition, JZAI has also provided written confirmation to the Company that the 
terms of the Deflecto Proposal are fair and reasonable as far as ordinary 
shareholders are concerned. JZAI is ideally placed to assess the value and 
merits of the Deflecto Proposal given its historic links and resultant in-depth 
knowledge and understanding of the Deflecto business. Shareholders are also 
reminded that the Company is not subject to, but rather voluntarily complies 
with, the Listing Rules and, save for the absence of a fair and reasonable 
written confirmation in a form prescribed by the Listing Rules, the Deflecto 
Proposal is otherwise being treated in accordance with the Listing Rules 
including the requirement to obtain shareholder approval. The Directors of the 
Company, who have been so advised by JZAI, consider this departure is justified 
for the aforementioned reasons and is in the best interests of the Company and 
the ordinary shareholders. The Company otherwise intends to continue to comply 
voluntarily with the requirements of the Listing Rules. 
 
The Notice convening the EGM is being distributed to members of the Company and 
will shortly be uploaded to the Company's website at www.jzcp.com. Copies of 
the circular the Company is posting to shareholders are available for viewing, 
during normal business hours, at the registered office of the Company at 
Trafalgar Court, Les Banques, St Peter Port, Guernsey GY1 3QL and will shortly 
be available for viewing at www.morningstar.co.uk/uk/nsm. The notice convening 
the EGM is also included within the circular. 
 
                                     Ends 
 
For further information: 
 
William Simmonds                       +44 (0)20 7742 4000 
J.P. Morgan Cazenove 
 
Kit Dunford / Jack Rodway              +44 (0)20 3727 1143 / 3319 5726 
FTI Consulting 
 
David Zalaznick                        +1 212 485 9410 
Jordan/Zalaznick Advisers, Inc. 
 
Paul Ford                              +44 (0) 1481 745383 
Northern Trust International Fund 
Administration Services (Guernsey) 
Limited 
 
 
About JZCP 
 
JZ Capital Partners ("JZCP") is one of the oldest closed-end investment 
companies listed on the London Stock Exchange. It seeks to provide shareholders 
with a return by investing selectively in US and European microcap companies 
and US real estate. JZCP receives investment advice from Jordan/Zalaznick 
Advisers, Inc. ("JZAI") which is led by David Zalaznick and Jay Jordan. They 
have worked together for more than 35 years and are supported by teams of 
investment professionals in New York, Chicago, London and Madrid. JZAI's 
experts work with the existing management of microcap companies to help build 
better businesses, create value and deliver strong returns for investors. For 
more information please visit www.jzcp.com. 
 
 
 
END

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June 06, 2018 11:12 ET (15:12 GMT)

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