Harwood Capital LLP / Journey Group Plc


Recommended mandatory cash offer for Journey Group plc by Jaguar Holdings Limited, on behalf of Harwood Capital LLP





Harwood Capital LLP


In August 2016, Strand Hanson was appointed by Harwood Capital LLP (“Harwood”), a 29.9% shareholder in Journey Group Plc (“Journey” or the “Company”), an airline services provider, to act as sole Financial Adviser in relation to Jaguar Holdings Limited’s (“Jaguar”) recommended offer for Journey at 240 pence per share, valuing the Company at approximately £28.4 million (the “Offer”) and representing a premium of c.18% to the share price of Journey at the time of the Offer. The Offer was structured as all cash, with an unlisted securities alternative, and was a complex takeover process, with a successful contractual offer following a lapsed UK court-driven Scheme of Arrangement (the “Scheme”).


Harwood had been a significant investor in Journey since the Company’s 2007 restructuring, where Strand Hanson, acting then as Sponsor and Financial Adviser to the Company, which, at that time was listed on the Main Market of the London Stock Exchange, advised Journey on a fully underwritten convertible bond offering which was cornerstoned by Harwood.

The Offer was initially launched as a Scheme, requiring, inter alia, a majority in number / 75% by value 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 number, the vote was comfortably passed, the requisite 75% value threshold for the Court Meeting was not reached, with a vote of c.68% in favour being achieved, leading to the Scheme lapsing.

Ordinarily, following a lapsed Scheme, Harwood and its bid vehicle, Jaguar, would, under the rules of the City Code on Takeovers & Mergers (the “Code”), have been prohibited 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 c.68% by value, Strand Hanson, on behalf of Harwood, and with the support of the Board of Journey, obtained a dispensation from the Takeover Panel to allow Harwood to announce a possible offer for Journey, at the same price (but to be structured as a contractual offer), on the day immediately after the lapsing date, with a firm offer announcement being released 5 business days thereafter.

Harwood, via Jaguar, proceeded to make this new offer for Journey via a voluntary contractual offer route, at the same price of 240 pence per share with a lower, 50%, acceptance condition. On launch of the Offer, Harwood’s clients’ shareholdings and irrevocable undertakings obtained represented c.40% of the Company’s issued share capital.

Following launch of the 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 a further change to the structure of the transaction to become a Rule 9 Offeror rather than a voluntary offer under Rule 10 of the Code, as a result of Harwood’s clients’ shareholdings exceeding 30% and, including irrevocable undertakings, Harwood controlling 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 clients’ shareholdings to 48% (59% including irrevocables).

As a result, the Rule 9 Offer went wholly unconditional a week later on 16 November 2016, with the dissident major shareholder, who had voted down the Scheme, ultimately accepting the Rule 9 Offer to avoid being left with an unlisted minority position in the Company.

In light of the unexpected rejection of the initial Scheme, Strand Hanson was delighted to have been able to restructure the transaction by swiftly agreeing with the Takeover Panel that the particular case facts justified the relevant derogation being granted, thereby allowing the successful consummation of this transaction for Harwood, at the same offer price as originally proposed under the Scheme.

Following successful completion of the Offer, Strand Hanson also advised on the disposal of Journey’s Products Division to Galileo Group for an undisclosed amount.