Investment manager bids for Prospect Japan

The independent directors of Prospect Japan Fund today announce that they are in preliminary discussions in respect of a possible offer by Prospect for the entire issued and to be issued share capital of Prospect Japan Fund (the “Possible Offer”).

The independent directors of Prospect Japan Fund, who have received financial advice from Stockdale Securities Limited, consider it appropriate that the Possible Offer is progressed and put to Prospect Japan Fund shareholders in due course. Accordingly, the independent directors have instructed advisers and are currently co-operating with Prospect and its advisers, so that the Possible Offer can be worked up into a proposal which can then be put to shareholders to decide upon, in due course.

Prospect, a Japanese company listed on the Tokyo Stock Exchange (Tokyo Stock Exchange code: 3528) is the parent company of the investment manager and investment adviser to Prospect Japan Fund.

The Possible Offer under consideration, discussion and evaluation by both parties is a securities exchange offer at a ratio of 2.5 Prospect ordinary shares in exchange for each Prospect Japan Fund share. This ratio would give an implied value for the entire existing issued share capital of approximately US$133.2 million (based on the middle market closing price of approximately US$0.577 per Prospect share on 6 January 2017, being the last business day in Japan prior to the date of this announcement and using an exchange rate of 116.1 ¥/US$).

At the value implied by the ratio, the possible offer, if made, would represent a premium of approximately:

  • 52.7 per cent. to the middle market closing price of US$0.945 per Prospect Japan Fund share on 9 January 2017, being the last business day in London prior to the date of this announcement;
  • 55.4 per cent. to the volume weighted average price for Prospect Japan Fund shares of US$0.928 over the three month period ended on and including 9 January 2017; and
  • 14.4 per cent. to the last published net asset value per share of US$1.261 on 6 January 2017.

Prospect reserves the right to vary the form of the proposed consideration. Prospect also reserves the right to make an offer at any time on less favourable terms, under the following circumstances:

  1. with the agreement and recommendation of the independent directors of Prospect Japan Fund; and/or
  2. to the extent that Prospect Japan Fund declares, makes or pays any dividend or distribution or other payment to its shareholders; and/or
  3. if a third party announces a possible or firm intention to make an offer for Prospect Japan Fund on terms less favourable than the value implied by the Exchange Ratio.

Prospect believes that the Possible Offer, if completed, would create a strong platform for future growth and value creation. In particular,  portfolio companies span a number of industry sectors where Prospect is already active and has considerable experience and expertise, including real estate, finance and construction.  As such, Prospect believes that there are clear synergistic benefits and cost savings which should serve to accelerate the delivery of the enlarged group’s growth strategy to capitalise on opportunities arising from ongoing structural changes and reforms in Japan.

Prospect further believes that the stronger balance sheet of the enlarged group and enhanced debt capacity should serve to facilitate access to potential acquisition debt financing and growth capital to help drive potential beneficial corporate activity and change in the fund’s investee companies. Prospect also believes that the enlarged group would be well positioned to generate returns for shareholders from the combined asset portfolios over the medium to longer term, improve liquidity and significantly reduce or eliminate the prevailing sizeable market discounts to the underlying net asset values of the two groups’ investments.

PJF : Investment manager bids for Prospect Japan

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