JZ CAPITAL PARTNERS LIMITED
(the "Company")
(a closed-end collective investment scheme incorporated with
limited liability under the laws of Guernsey with registered number 48761)
LEI: 549300TZCK08Q16HHU44
Notice of
Extraordinary General Meeting
and
Recommended
Proposals in respect of:
Buy Back
Authorities relating to a Tender Offer (or a series of Tender
Offers) and resultant Off-Market Acquisitions
and
The Company's
proposed investments in Spruceview Capital Partners
29 May
2019
Unless otherwise defined herein,
capitalised terms used in this document have the meanings given to
them in the circular published by the Company dated 29 May 2019 (the "Circular").
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 1.15
p.m. on 27 June 2019 (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) return of capital to Ordinary
Shareholders by way of a Tender Offer (or a series of Tender
Offers) and resultant Off-Market Acquisitions in respect of the
Company's Ordinary Shares (the "Buy Back Proposal"), and
(ii) investments in Spruceview Capital Partners jointly with
David W. Zalaznick and John (Jay) W. Jordan II (together, the JZAI
Founders who are the founders and principals of Jordan/Zalaznick
Advisers, Inc., the Company's investment adviser) (or their
respective affiliates) which would be considered a Related Party
Transaction of the Company 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) ("Spruceview Capital Partners") (the
"Spruceview Proposal" and together with the Buy Back
Proposal, the "Proposals") and as more fully described
below.
Buy Back Proposal
As announced by the Company on 8 May
2019, among other strategic initiatives, the Company intends
to return, by way of a Tender Offer (or a series of Tender Offers),
approximately US$100 million of
capital to Ordinary Shareholders at a maximum discount to net asset
value of 5 per cent.
The Buy Back Authorities which the Company is requesting as part
of the Buy Back Proposal are intended to allow the Company to
return capital to Ordinary Shareholders by way of a Tender Offer
(or a series of Tender Offers) and resultant Off-Market
Acquisitions in respect of the Company's Ordinary Shares.
The Tender Offers are intended to be generated from the proceeds
of realisations that are planned for this calendar year and the
next. As announced on 8 May, the Company also intends to use
certain of the proceeds from such realisations to reduce the
Company's debt by approximately US$100
million during the same period.
As the Tender Offers are intended to take place over the course
of this calendar year and the next, the Board may request further
approvals from Ordinary Shareholders for the same purpose in the
future.
The Buy Back Authorities needed to effect Tender Offers are
being sought in the form of:
- a general authority to make Market Acquisitions of Ordinary
Shares by way of a Tender Offer (or a series of Tender Offers)
(being the Market Acquisition Authority); and
- an authority to make Off-Market Acquisitions of Ordinary Shares
as a result of any Market Acquisitions of Ordinary Shares made by
way of any Tender Offers (being the Off-Market Acquisition
Authority),
in each case, as set out and described in further detail
below.
Market Acquisition Authority
The Market Acquisition Authority will give the Company authority
to make Market Acquisitions of Ordinary Shares by way of a Tender
Offer (or a series of Tender Offers).
The maximum number of Ordinary Shares which may be purchased
under the Market Acquisition Authority is 12,091,959 Ordinary
Shares representing approximately 14.99 per cent. of the Ordinary
Shares in issue as at 28 May
2019.
The minimum and maximum prices that may be paid for each
Ordinary Share purchased pursuant to the Market Acquisition
Authority will be 95 per cent. and 100 per cent. respectively of
the Company's net asset value (before dividends) per Ordinary Share
by reference to the Company's most recently announced net asset
value announced via a Regulatory Information Service prior to the
announcement of any Tender Offer. Such minimum and maximum
prices are to be adjusted for any disposal or buy back of Shares to
the extent not taken into account in such most recently announced
net asset value figure translated into sterling by reference to the
exchange rate quoted by Bloomberg as at market close on the tender
closing date in respect of any Tender Offer.
Off-Market Acquisition Authority
The Off-Market Acquisition Authority will give the Company
authority to make Off-Market Acquisitions of Ordinary Shares as a
result of any Market Acquisitions of Ordinary Shares made by way of
any Tender Offers.
The Off-Market Acquisitions are to be made under the Off-Market
Acquisition Authority in pursuance of the terms of a contract
included in the Company's Articles of Incorporation and as
prescribed by an arrangement included within the Articles referred
to as the CFC Buy Back Arrangement. The CFC Buy Back Arrangement
applies in circumstances where the Company makes acquisitions of
its Ordinary Shares pursuant to a Market Acquisition Authority
including in the case of a Tender Offer. Shareholders are reminded
that the purpose of any Off-Market Acquisitions and the CFC Buy
Back Arrangement is to allow the Company to make acquisitions of
its Ordinary Shares in a way that reduces the risk of the Company
being or becoming a Controlled Foreign Corporation.
The price that each large US Ordinary Shareholder to whom the
CFC Buy Back Arrangement applies will be entitled to receive (and
that will be paid by the Company) for each Ordinary Share acquired
by the Company under the CFC Buy Back Arrangement is the CFC Buy
Back Arrangement Price. The CFC Buy Back Arrangement Price is the
volume weighted average price payable per Ordinary Share agreed to
be purchased by the Company on the relevant trading day pursuant to
a Market Acquisition Authority. The CFC Buy Back Arrangement Price
is therefore expected to be the same as the price per Ordinary
Share described above at which the Company's Ordinary Shares are
bought back pursuant to the Market Acquisition Authority.
Further details of the CFC Buy Back Arrangement are included in
the Circular of the Company published in connection with the
Proposals as well as a separate circular published by the Company
dated 20 April 2017.
Each of the Buy Back Authorities are proposed in addition to any
subsisting authorities of the Company to buy back the Company's
Shares including any buy back authorities that may be granted by
Ordinary Shareholders at the Company's forthcoming Annual General
Meeting to be held on 27 June 2019.
If granted by Ordinary Shareholders, the Buy Back Authorities will
expire at the conclusion of any extraordinary general meeting of
the Company to renew them or on 27 December
2020, whichever is the earlier.
The details of any Tender Offer, including the eligibility of
those Ordinary Shareholders entitled to participate, how certain
Ordinary Shareholders may participate and the Tender Offer terms
and conditions, will be sent to Shareholders by separate
shareholder circular(s) at the time the Company decides to
undertake a Tender Offer under the Market Acquisition Authority if
granted by Ordinary Shareholders.
Spruceview Proposal
As mentioned above, the Company is also proposing to make
further investments jointly with the JZAI Founders (or their
respective affiliates) in Spruceview Capital Partners which
includes its affiliated funds from time to time, and in particular
CERPI. The joint investment is intended to be used for both
Spruceview Capital Partners' general corporate purposes and
investments in its affiliated funds from time to time, and in
particular CERPI. CERPI is an investment fund established and
managed by Spruceview Capital Partners for its client, a Mexican
retirement fund administrator.
Spruceview Capital Partners, a portfolio investment of the
Company in which it has made previous joint investments with the
JZAI Founders (or their respective affiliates), is an asset
management business in the United
States and aims to address the demand from corporate
pensions, endowments, family offices and foundations for fiduciary
management services through an Outsourced Chief Investment Officer
model as well as specific products per asset class. Spruceview has
developed significant client relationships by creating
particularised strategies and funds for its targeted client base,
including in Canada and
Mexico. In 2018, Spruceview
launched a US middle market private equity fund-of-funds and
continues to provide investment oversight to a European private
credit fund-of-funds and portfolios for family office clients. Also
in 2018, Spruceview expanded its mandate with an international
packaged foods company to provide investment oversight to the
pension funds of its Mexican subsidiary, in addition to those of
its Canadian subsidiary, which Spruceview has advised since 2016.
As mentioned above, Spruceview Capital Partners also established
CERPI for its client, a Mexican retirement fund administrator. As
the general partner of CERPI, Spruceview Capital Partners was
required to make co-investments in CERPI. These investments were
permitted to be made by various affiliates of Spruceview Capital
Partners, including the Company and the JZAI Founders.
As also mentioned above, the Company has made previous joint
investments in Spruceview Capital Partners with the JZAI Founder
(or their respective affiliates), of US$30
million in total (with US$30
million also being contributed by the JZAI Founders (or
their respective affiliates)). Shareholders should also note, in
March 2019 the Company further
increased its investment together with the JZAI Founders (or their
respective affiliates) in Spruceview Capital Partners by an
additional US$1.475 million from the
Company (with a further US$1.475
million to be contributed by the JZAI Founders (or their
respective affiliates)). This increase was considered by the
Company not to be a material change to the terms of the existing
shareholder approval and, therefore, Ordinary Shareholder approval
was not obtained for such increase. All of the Company's increased
investment of US$1.475 million, has
been used to support Spruceview Capital Partner's share of the
above mentioned co-investment in CERPI.
The Company is now proposing to invest a further US$15 million (with a further US$15 million to be contributed by the JZAI
Founders (or their respective affiliates)) in Spruceview Capital
Partners which includes its affiliated funds from time to time, and
in particular CERPI. As with the previous joint investments in
Spruceview Capital Partners, the proposed joint investment will be
on the same terms and conditions as between the Company and the
JZAI Founders, being 50:50 economically, but with certain
structural features intended to afford each side appropriate US tax
protections. The joint investment is intended to be used for
Spruceview Capital Partners' general corporate purposes and
investments in its affiliated funds from time to time, and in
particular to support Spruceview Capital Partners' share of any
further co-investment required in CERPI.
The Company's proposed investments in Spruceview Capital
Partners, being a material change to the terms of the existing
shareholder approval, would be considered a Related Party
Transaction 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).
Jordan/Zalaznick Advisers, Inc. ("JZAI") is the Company's
investment adviser and, under the Listing Rules, would therefore be
considered a Related Party of the Company. As founders and
principals of JZAI, the JZAI Founders are associates of JZAI and
would also be considered Related Parties of the Company. In
addition, each of the JZAI Founders are substantial shareholders of
the Company as they are each entitled to exercise or to control the
exercise of 10 per cent. or more of the votes able to be casted at
a general meeting of the Company. As such, each of the JZAI
Founders are considered to be Related Parties of the Company on
this basis as well. The Company's proposed investments in
Spruceview Capital Partners which involves the JZAI Founders as
Related Parties of the Company would be considered to be
arrangements whereby the Company and its Related Parties invest in
or provide finance to another undertaking or asset. Accordingly,
the JZAI Founders as Related Parties and the Spruceview Proposal as
arrangements between them would be considered a Related Party
Transaction under Chapter 11 of the Listing Rules, insofar as the
Listing Rules are applicable to the Company by virtue of its
voluntary compliance with the same.
As such, the Spruceview Proposal, as a Related Party Transaction
of the Company, requires approval of Ordinary Shareholders for the
Company to invest together with the JZAI Founders in Spruceview
Capital Partners.
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 published in
connection with the Proposals.
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.
For further information:
Ed Berry / Kit
Dunford
FTI Consulting |
+44 (0) 20 3727 1046 / 1143 |
David Zalaznick
Jordan/Zalaznick Advisers, Inc. |
+1 (212) 485 9410 |
Sam Walden
Northern Trust International Fund Administration Services
(Guernsey) Limited |
+44 (0) 1481
745385 |
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.