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Case Study

ico-other.pngHarwood Capital LLP / Journey Group Plc

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Complex takeover offer, with a successful Contractual Offer following an unsuccessful Scheme of Arrangement

In August 2016, Strand Hanson was appointed by Harwood Capital LLP (“Harwood”), a 29.9% shareholder in Journey Group Plc (“Journey” or the “Company”), to act as Financial Adviser in relation to Harwood’s recommended offer for Journey at 240 pence per share, valuing the Company at £28.4 million (the “Offer”). The Offer was structured as all cash, with an unlisted securities alternative.

Harwood had been a significant investor in Journey,  an airline services provider, since the Company’s 2007 restructuring, when the Company was still listed on the Main Market of the London Stock Exchange, where Strand Hanson, as Sponsor and Financial Adviser, advised the Company on a fully underwritten convertible bond offering, which was cornerstoned by Harwood.

The Offer was initially launched as a court driven Scheme of Arrangement, requiring a 75% vote in favour of the transaction. However, a major institutional shareholder, holding c.12%, reversed its voting intention shortly before the requisite shareholder meetings and then attended the meetings in person to vote against the Scheme. As a result, whilst, by numbers, the vote was comfortably passed, the 75% threshold for the Court Meeting was not reached, with a vote of 68% in favour being achieved, leading to the Offer not being approved. 

Ordinarily, following a lapsed Scheme, Harwood would, under the rules of the City Code on Takeovers & Mergers (the “Code”), have been locked-out from announcing a possible offer or making a renewed bid for the company for a twelve month period. However, given the support of the majority of shareholders by number and 68% by value, Strand Hanson, on behalf of Harwood, and with the support of the Board of Journey, obtained a dispensation from the Panel to allow Harwood to announce a possible offer for Journey, at the same price, on the day immediately after the shareholder meetings, with a firm offer announcement being released 5 business days later. 

Harwood proceeded to make this new offer for Journey via the contractual offer mechanism, at the same price of 240 pence per share (the “Contractual Offer”) with a lower, 50%, acceptance condition. On launching the Contractual Offer, Harwood’s clients' shareholdings and irrevocable undertakings obtained represented c.40% of the Company’s issued share capital.

Following the launch of the Contractual Offer, Harwood became aware of a large shareholder in Journey which was a potential seller of its position.  Accordingly, to further de-risk the transaction, Strand Hanson advised Harwood on the market purchase of this further 13.1% of Journey's issued share capital, at the offer price of 240 pence per share, which involved Harwood triggering a mandatory offer under Rule 9 of the Code (the “Rule 9 Offer”). This required the issue of a Rule 9 offer document, as Harwood then held direct shareholdings in excess of 30% and, including irrevocable undertakings, controlled shares representing c.54% of the Company’s issued share capital.  The following day, Harwood purchased a further c.5% of Journey’s share capital, bringing its direct shareholdings to 48% (59% including irrevocables).

As a result, the Contractual Offer went unconditional a week later, with the dissident shareholder, who had voted down the Scheme, ultimately accepting the Offer as, otherwise, it would have been left with an unlisted minority position in the Company.

Following the successful completion of the Contractual Offer, Strand Hanson also advised on the disposal of Journey’s Products Division to a private company operating in the sector for an undisclosed amount.