Marwyn Value Investors Ltd (LON:MVI) has noted the announcement made by Zegona Communications plc, an indirect investment of MVIL, in relation to Zegona’ s intention to return £335 million to its shareholders in cash via a capital return following receipt of the proceeds from the acquisition of Euskaltel, S.A., Zegona’s Spanish telecommunications investment, by MasMovil Ibercom, S.A.U.
Zegona’ s announcement states that the capital return will be implemented using the mechanism which the Zegona directors believe offers the best combination of timeliness, cost effectiveness and tax efficiency and that Zegona is committed to completing the capital return as soon as is reasonably practicable. It also states that the capital return is dependent on the closing of MasMovil’s Offer, which is subject to regulatory clearances and to acceptance of the Offer by a number of shares representing at least 75% plus one share of the total outstanding share capital of Euskaltel, and on the approval of Zegona shareholders of the actions required for the capital return. The Spanish tender offer process is expected to take around 6 months from announcement to settlement. However, this timeline can be impacted by any delays in regulatory reviews and approvals and if there are competing offers. The capital return will be conditional upon the closing of MasMovil’s Offer and subject to all applicable laws and regulations, including the receipt of the required shareholder and court approvals and such other third-party approvals as reasonably required, which the Company has undertaken to use all reasonable endeavours promptly to procure.
Zegona’ s announcement also includes the following disclosure regarding Marwyn ‘ s intentions:
“Marwyn supports proposals
· Marwyn Investment Management LLP supports the Company’s plans and timing for the distribution of proceeds to shareholders. These plans also have the support of other significant shareholders with whom Zegona has consulted
· Marwyn has confirmed that its concerns have been addressed and, as a result, has withdrawn its request for a General Meeting, which was announced on 4 May 2021
· Marwyn strongly supports management’s intention to re-invest in the ongoing Zegona business and has agreed to vote in favour of all resolutions at the forthcoming AGM”
The Marwyn funds collectively hold 42,062,035 Zegona ordinary shares, of which, as at 7 May 2021 (being the latest available published Net Asset Value information), 30,155,939 are attributable to the Company’s ordinary shareholders (representing 13.77% of Zegona’s issued share capital) and 4,437,973 are attributable to the Company’s realisation shareholders (representing 2.03% of Zegona’s issued share capital).
If the return of capital by Zegona takes place, the quantum received by the Marwyn funds would be £64.35 million. The use of any such proceeds will be in accordance with the Ordinary Share Distribution Policy for amounts attributable to the Company’s ordinary shareholders and the terms of the Company’s realisation class for amounts attributable to the Company’s realisation shareholders.
Under the Ordinary Share Distribution Policy, when the Marwyn funds dispose of an asset for a net capital gain and the Company has not already returned to ordinary shareholders an aggregate amount in excess of 50 per cent. of that gain and any previous such gains, such an amount will be distributed to ordinary shareholders. Since the sale of Entertainment One in 2015, the Company has returned over £37.9 million to ordinary shareholders (through a combination of dividends and share purchases) and crystallised net capital gains of £35.7 million (including the estimated capital gain arising from this return of capital of £7.3 million), 50 per cent. of which equates to £17.8 million. As the Company has already returned significantly in excess of the amount required, no further distribution is required to be made to ordinary shareholders under the Ordinary Share Distribution Policy.
Should Zegona’s return of capital be effected, Marwyn Investment Management LLP, as manager to the Marwyn funds, intends to use the proceeds attributable to the Company’s ordinary shareholders to support its acquisition vehicles and take advantage of the significant market opportunity presented through a strong pipeline of potential acquisition targets, in line with the funds’ investment strategy,
Under the terms of the Company’s realisation class, subject to any cash held back for reasonable working capital purposes, any cash generated from the realisation of assets is to be distributed to realisation shareholders (net of any relevant incentive allocation payments). The Company will make a further announcement should Zegona’s return of capital be completed to inform realisation shareholders of the process by which such capital shall be returned to them.
Zegona’s announcement can be viewed at: