Posting of Defence Document
July 13 2006 - 5:32AM
UK Regulatory
RNS Number:1409G
Baltimore PLC
13 July 2006
Baltimore Plc
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES OF
AMERICA, CANADA, AUSTRALIA OR JAPAN
FOR IMMEDIATE RELEASE
Baltimore Plc ("Baltimore")
Posting of circular advising Baltimore Shareholders to reject the Oryx Offer
The Baltimore Board announces that it is today posting a circular (the
"Circular") setting out its detailed response to the Oryx Offer Document and
recommending that Baltimore Shareholders reject the Oryx Offer in favour of an
alternative transaction with International Assets.
The text of the letter from David Buchler the Chairman of Baltimore, contained
in the Circular is set out below:
A Letter from the Chairman of Baltimore Plc
BALTIMORE PLC
Registered in England and Wales with registered number 02643615
Directors: Registered office:
David Buchler c/o Piper Smith Watton
Tim Lovell 69 Eccleston Square
John Radziwill London SW1V 1PJ
Chris Wallis
George Wardale
13 July 2006
To Baltimore shareholders and, for information only, to Baltimore optionholders
Dear Shareholder
Offer by Oryx International Growth Fund Limited for Baltimore Plc
Background
On 27 June 2006, Oryx announced its firm intention to make an offer to acquire
from Baltimore shareholders all of their shares in Baltimore in consideration
for the issue of Oryx C shares. No prior approach was made by Oryx to the
Baltimore Board or its advisors, as is required by the City Code.
Three days after this announcement, on 30 June 2006, the Baltimore Board
announced the terms of a transaction with International Assets Holding
Corporation (with which it had been negotiating for the previous four weeks).
Under this transaction, INTL has agreed to make an investment in up to 30
million new and existing Baltimore Shares (or interests in such shares) at a
premium to the current market value of a Baltimore Share. It will also receive 5
year warrants to subscribe for a further 28,370,000 Baltimore Shares at a more
significant premium. In addition, INTL has agreed to enter into a consultancy
agreement with Baltimore, providing Baltimore with access to INTL's experienced
management team.
The INTL transaction is conditional upon the unsolicited Oryx Offer lapsing or
being withdrawn.
The Oryx Offer was formally made on 5 July 2006.
This letter explains why the Independent Directors believe that it is in the
interests of Baltimore shareholders to reject the Oryx Offer in favour of the
proposed transaction with INTL. Because of John Radziwill's interest in INTL (as
described below) he has not participated in the recommendation contained in this
document to reject the Oryx Offer.
The Oryx Offer
The Independent Directors believe that the all-share Oryx Offer represents
little more than an opportunistic attempt by the management of Oryx to gain
control of the cash and assets of Baltimore at no premium to their actual value,
at no guaranteed price and at no cost to Oryx.
In particular, we would draw Baltimore shareholders' attention to the following
key points of the Oryx Offer:
* All of the transaction costs of the Oryx Offer (both those of Oryx as
well as those of Baltimore), which the Independent Directors estimate to be
in excess of #1.4 million, will be borne entirely by Accepting Baltimore
Shareholders. All of the associated costs of effectively closing down
Baltimore's operations, which the Baltimore Board estimates to be
approximately #1 million, will be borne by all Baltimore shareholders
* There may not be much liquidity in the Oryx C Shares until they are
converted into Oryx Ordinary Shares, which may not be until 31 December 2007
* The Offer Document states that the Oryx Offer represents a premium to
the closing Baltimore Share price on 26 June 2006 (the dealing day
immediately prior to the announcement of the Oryx Offer) of between 19.3 per
cent. and 30.7 per cent. The Independent Directors believe that this is
highly misleading
* The reality of the situation is that the number of Oryx Ordinary Shares
which Accepting Baltimore Shareholders will receive upon conversion of the
Oryx C shares with which they will initially be issued under the Oryx Offer
will depend upon the NAV of Baltimore at the time when the conversion
calculation is made. This is expected to be following the proposed
liquidation of at least 80 per cent. of Baltimore's existing investment
portfolio or, if earlier, 31 December 2007
* There is no incentive for Oryx management to secure reasonable value for
Baltimore's existing investment portfolio and, as such, Baltimore
shareholders may end up receiving no premium or even suffering a discount on
a per share basis to the Baltimore Share price as at 26 June 2006. It is
also noted that Oryx management will own only a negligible number of the
Oryx C shares being offered to Baltimore shareholders
* The Independent Directors perceive that there is a risk that the current
tax losses of Baltimore (estimated at some #1.2 billion) could be lost in
the event of the Oryx Offer becoming or being declared wholly unconditional.
Despite what Oryx states in its Offer Document, these tax losses do have a
potential value to Baltimore
* The Oryx Offer does not raise any additional cash for Baltimore
* Under Oryx's Articles of Association, a resolution must be put to Oryx
shareholders at Oryx's Annual General Meeting in 2007 to wind up Oryx. If
Oryx shareholders do not pass such a resolution, a similar resolution must
be proposed every two years thereafter. Prior to the conversion of the Oryx
C shares into Oryx Ordinary Shares, any such resolution will require the
separate class consent of the Oryx C shareholders
Oryx has stated in the Offer Document that it will enter into a consultancy
agreement with Duncan Soukup to assist with the liquidation of Baltimore's
existing investments. As shareholders may be aware, Baltimore has commenced
legal proceedings against Mr Soukup, a former director of Baltimore, relating to
various matters in connection with his management of the Baltimore Group. The
Offer Document makes no reference to the fee paid to Mr Soukup under the
proposed consultancy arrangement which Oryx states is to be negotiated. Nor does
it deal with how outstanding claims between Mr Soukup and the Company will be
resolved if the Oryx Offer is successful. Both these matters will have a direct
impact on the number of Oryx Ordinary Shares that Accepting Baltimore
shareholders will ultimately receive.
Effect of the Oryx Offer on Baltimore employees
The Baltimore Board notes that Oryx has stated in its Offer Document that it
does not expect there to be any requirement for the Directors of Baltimore or
any of its employees to be involved in the management or conduct of Baltimore's
business if the Oryx Offer is successful.
The INTL transaction
The INTL transaction is conditional upon the Oryx Offer lapsing or being
withdrawn on or before 28 September 2006.
Under the terms of the proposed INTL transaction, INTL will acquire the existing
12,617,700 Baltimore Shares owned by one of Baltimore's subsidiaries and
(subject to obtaining the consent of the relevant counterparty) the contract for
differences ("CFD") which Baltimore carries over 8,977,500 Baltimore Shares
(which arose as a result of the completion of the acquisition of Acquisitor
Holdings Limited (now Baltimore Bermuda Limited) earlier this year).
The aggregate consideration to be paid by INTL for these existing shares and for
the CFD will be 18 pence per Baltimore Share together with deferred
consideration of up to 3.61 pence per Baltimore Share dependent upon the amount
realised within the next 2 years from the sale of the Company's existing
investment portfolio. INTL will also subscribe for 8,404,800 new Baltimore
Shares for a subscription price of 18 pence per share.
In addition, INTL will be issued 28,370,000 warrants (each warrant representing
one share) with a term of 5 years and an exercise price of 24 pence (an
approximate 48 per cent. premium to the closing mid-market price of a Baltimore
Share on 29 June 2006, the dealing day immediately prior to the announcement of
the INTL transaction). Baltimore will be entitled to require INTL to exercise
the warrants in the event that the Baltimore Shares trade (on average) at a 30
per cent. premium to the exercise price over a 3 consecutive month period.
INTL will receive the right to appoint 20 per cent. of the directors to the
Baltimore Board for so long as it retains at least 10 per cent. of the issued
Baltimore Shares (or 8 per cent. if the consent of the relevant counterparty to
the CFD is not obtained to its transfer to INTL).
As part of the proposals, INTL will also enter into a consultancy agreement with
Baltimore and INTL's senior management will join Baltimore's investment
committee, thus providing access to the financial expertise established at INTL.
In order to minimise fixed overheads, under the consultancy agreement, INTL will
receive an annual fee of 1 per cent. of managed assets and a 10 per cent. share
of profits related to the managed assets. The 10 per cent. share will be subject
to a hurdle rate based on LIBOR and a high water mark.
INTL is a NASDAQ-listed financial services company that has been among the best
performing financial stocks in the US, having appreciated substantially since
the current management team took over some three years ago. Through its rapidly
growing asset management activities, INTL now manages in excess of US$350
million in third party funds. INTL will provide Baltimore with access to the
proven financial investment skills and expertise of the INTL investment
managers.
Mr O'Connor joined International Assets Holdings Corporation as CEO in 2002. Mr
O'Connor made a significant personal investment in the Company at the time of
his joining and was responsible for defining and executing a strategy to
establish a profitable and growing niche financial services firm. Over the last
three years the Company has established 5 niche business units and has
significantly expanded revenues and profitability. This growth has been
reflected in the substantial share price gains over this period.
Mr O'Connor was previously an Executive Director of Standard Bank London
("SBL"). Mr O'Connor was one of the founding executives of SBL, which is now a
recognised player in the global commodities (mainly metals) and emerging
markets. As SBL's Chief Executive - Americas, Mr O'Connor had specific
responsibility for building, from the ground up, a capital markets trading and
originations business and a metals trading business. In addition, Mr O'Connor
was responsible for establishing an asset management business for SBL.
The Independent Directors consider this alternative transaction with INTL is
superior to the Oryx Offer for the following reasons:
* It will result in an immediate raising of capital for Baltimore.
* As part of the INTL transaction, Baltimore intends to reduce fixed
overheads.
* It will provide access to a proven management team with a track record
of creating superior shareholder value (see Summary Performance Statistics
on pages 9 and 10 of the Oryx Offer Document).
* It will provide access to a wide range of potential investment
opportunities.
* It will preserve Baltimore's current tax losses of approximately #1.2
billion.
John Radziwill is a shareholder and director of both INTL and Baltimore but has
taken no part in either the Baltimore Board's or the INTL Board's final approval
of the INTL arrangements.
Further details of the INTL transaction are set out at paragraph 4.1(a) of the
Appendix to the Circular.
Summary
The Independent Directors view the current situation as a clear alternative
between: A transaction with INTL that provides:
* immediate and substantial cash to Baltimore;
* access to a management team that has, since its involvement with INTL, a
superior track record in delivering total shareholder returns when compared
with Oryx and the two other funds managed by Oryx's investment manager and
which are referred to in Oryx's Offer Document; and
A transaction with Oryx in which:
* There is no cash raised for Baltimore;
* Accepting Baltimore Shareholders will assume all of the costs and risks
of the transaction;
* all Baltimore shareholders will assume the costs associated with
effectively winding up Baltimore's operations; and
* there is no guaranteed price compared to the current Baltimore Share
price.
Recommendation
The Independent Directors, who have been so advised by Seymour Pierce, firmly
believe that the Oryx Offer does not provide fair value for your Baltimore
Shares and recommends that you reject the Oryx Offer and not sign any documents
which Oryx or its advisors send you. In providing its advice to the Independent
Directors, Seymour Pierce has taken into account the commercial assessments of
the Independent Directors.
None of the Directors currently intend to accept the Oryx Offer in respect of
their own shareholdings.
Yours sincerely
David Buchler
Further details of the matters referred to in this announcement are set out in
the Circular which is being posted to Baltimore Shareholders today and copies of
which will be available for collection at the offices of Seymour Pierce Limited
at Bucklersbury House, 3 Queen Victoria Street, London, EC4N 8EL and will be
available on Baltimore's website (www.baltimoreplc.com) shortly.
Enquiries:
Tim Lovell
Baltimore Plc 020 7259 1300
Jonathan Wright
William Tebbit
Seymour Pierce Limited 020 7107 8000
Nick Lambert
Bell Pottinger Corporate & Financial 020 7861 3232
Terms used in the announcement shall, unless the context otherwise requires,
have the same meaning given to them in Appendix 1 to this announcement.
Seymour Pierce Limited ("Seymour Pierce"), which is authorised and regulated by
the Financial Services Authority in the United Kingdom, is acting for Baltimore
in connection with the Offer and no one else and will not be responsible to
anyone other than Baltimore for providing the protections offered to Clients of
Seymour Pierce nor for providing advice in relation to the Offer.
Seymour Pierce has given and not withdrawn its written consent to the
publication in this announcement of its name in the form and context in which it
appears.
This announcement contains statements that are or may be forward-looking with
respects to the financial condition, results of operations and businesses of
Baltimore. These forward looking statements include risk and uncertainty because
they relate to events and depend on circumstances that will occur in the future.
There are a number of factors which could cause or may cause actual results or
developments to differ materially from those expressed or implied by such
forward-looking statements.
The Oryx Offer is not being made, directly or indirectly, in or into or by use
of the emails of, or by any means or instrumentality (including, without
limitation, facsimile transmission, electronic mail, telex or telephone) of
interstate or foreign commerce of, or any facilities of a national securities
exchange of, the United States, or any Restricted Jurisdiction and the Oryx
Offer will not capable of acceptance by any such use, means, instrumentality or
facility, directly or indirectly from or within the United States or any other
Restricted Jurisdiction. Accordingly neither this document nor the Circular are
being, and must not be, mailed or otherwise forwarded, transmitted, distributed
or sent in, into or from the United States or any other Restricted Jurisdiction.
All Baltimore shareholders or other persons (including nominees, trustees or
custodians) who would or otherwise intend to, or may have a contractual or legal
obligation to, forward the Circular to any jurisdiction outside the United
Kingdom, should refrain from doing so and seek appropriate professional advice.
APPENDIX 1
DEFINITIONS
Accepting Baltimore Shareholders Baltimore shareholders who accept
the Oryx Offer
Baltimore or Company Baltimore plc
Baltimore Board or Board the board of directors of Baltimore
Baltimore Group Baltimore and its subsidiaries
Baltimore Shares the ordinary shares of 1.25p each
in the capital of the Company
Baltimore shareholder a holder of Baltimore Shares
City Code the City Code on Takeovers and
Mergers
Directors the directors of the Company whose
names are set out in paragraph 2 of
the Appendix
INTL or International Assets International Assets Holdings
Corporation
Independent Directors the Directors, other than John
Radziwill
NAV Or Net Asset Value the aggregate value of the net
assets of a company (that is, the
value of its assets less the value
of its liabilities) calculated in
accordance with that company's
accounting policies
Offer Document the offer document dated 5 July
2006 detailing the terms and
conditions of the Oryx Offer
Oryx Oryx International Growth Fund
Limited
Oryx C shares the Oryx C shares to be issued
pursuant to the Oryx Offer
Oryx Offer the offer made by Arbuthnot
Securities Limited on behalf of
Oryx to acquire all of the issued
and to be issued Baltimore Shares
on the terms and subject to the
conditions set out in the Offer
Document and including, where the
context so permits, an subsequent
revision, variation, extension or
renewal of such offer
Oryx Ordinary Shares the ordinary shares of 50p each in
the capital of Oryx
Oryx shareholder a holder of Oryx Ordinary Shares
Restricted Jurisdictions Australia, Canada, Japan and the
Republic of South Africa
Seymour Pierce Seymour Pierce Limited
total shareholder return the theoretical growth in value of
a shareholding over a specified
period, assuming that dividends are
re-invested to purchase additional
shares in the relevant company at
the closing price on the
ex-dividend date
This information is provided by RNS
The company news service from the London Stock Exchange
END
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