London, November 28
THIS ANNOUNCEMENT INCLUDES INSIDE INFORMATION
BH Macro Limited
(an authorised closed-ended collective investment scheme authorised by the Guernsey Financial Services Commission and established as a non-cellular company limited by shares under the laws of the Island of Guernsey with registration number 46235)
29 November 2016
Tender offer and proposed structural changes
The Board of BH Macro Limited (the “Company”) announces that, following discussion with the Company’s manager, Brevan Howard Capital Management LP (the “Manager”) and certain of the Company’s shareholders, the Company will make a tender offer for up to 100 per cent. of each class of its issued share capital at a price equivalent to 96 per cent. of net asset value for the relevant class as at 28 February 2017 (the “Tender Offer”) and will put forward changes to the Company’s structure and management agreement (the “Structural Changes”) to apply following the Tender Offer.
The Company believes that these proposals have the benefit of enabling shareholders who wish to realise their investment in the Company to do so, while allowing shareholders who wish to remain invested in the Company the benefit of enhanced terms.
1. Tender Offer
The Company will make the Tender Offer for up to 100 per cent. of each class of its issued share capital at a price equivalent to 96 per cent. of net asset value for the relevant class as at 28 February 2017, which represents the Company’s best estimate of the liquidation value of the Company's assets (excluding liquidation expenses). An amount equal to two per cent. of net asset value of the shares tendered will be paid by the Company to the Manager instead of the four per cent of net asset value that would be payable if the Company served notice of termination of the management agreement between the Company and the Manager (the “Management Agreement”) on less than 24 months’ notice.
If valid acceptances are received under the Tender Offer in excess of 66.667 per cent. of shares in issue (or in excess of such greater percentage as may be agreed between the Company and the Manager, but no more than 75 per cent.), the Tender Offer will not proceed and, instead, proposals will be put to shareholders for the liquidation of the Company. The Tender Offer will be subject to other customary conditions, including shareholder approval. If it proceeds, the Company expects that the Tender Offer consideration will be paid to shareholders in April 2017.
Following completion of the Tender Offer, if any of the Company’s share classes has a net asset value below US$25 million (or its equivalent in the relevant currency), the remaining shares of that class will be converted into shares of the largest class following the Tender Offer (which is expected to be the Sterling class).
2. Proposed Structural Changes
If the level of acceptances of the Tender Offer does not lead to the liquidation of the Company and subject to relevant shareholder approvals being obtained, the following changes will be made to the Company’s structure and Management Agreement with effect from 1 March 2017:
For the two year period from 1 March 2017 to 28 February 2019
In the event that a class of the Company’s shares continues beyond completion of the Tender Offer, the following terms will apply with effect from 1 March 2017:
- The management fee payable under the Management Agreement will be reduced from two per cent. per annum of net asset value to one-half per cent. per annum.
- The operational services fee payable at the level of the Company’s investment in Brevan Howard Master Fund Limited (the “Master Fund”) will remain at one-half per cent. per annum of net asset value. The performance fee payable to the Manager under the Management Agreement will remain at 20 per cent. of any appreciation in net asset value per share for the relevant class of shares (subject to high water mark) over any twelve month performance period.
- The management fee and operational services fee concessions announced on 19 October 2016 will continue to apply in respect of performance-related growth in the Company’s net asset value from completion of the Tender Offer.
- The Company will not have the ability to redeem its investment in the Master Fund to finance own share purchases (and therefore would not make any own share purchases in that period) and would be required to pay a redemption fee to the Master Fund of ten per cent. on any other redemptions from the Master Fund (except for any redemptions required by the Company for working capital purposes, in which case no fee will apply).
- The class closure and annual partial capital return provisions contained in the Company’s articles of incorporation will be disapplied in respect of the years ending 31 December 2016, 2017 and 2018.
Class Discontinuation Vote
If, in the period from 1 December 2017 to 30 November 2018, any class of the Company’s shares trades at an average discount at or in excess of eight per cent. of the monthly net asset values over that period, the Company will propose a vote to discontinue the relevant class (the “Class Discontinuation Vote”), to be held prior to 31 January 2019. If the Class Discontinuation Vote is passed by three-quarters of votes cast, the holders of shares of the relevant class would be able to opt to receive:
- 97.5 per cent. of the net asset value per share of the relevant class as at 28 February 2019 as soon as practicable following that date (with the remaining 2.5 per cent. of the net asset value per share payable to the Master Fund); or
- 50 per cent. of the net asset value per share of the relevant class as at 28 February 2019 as soon as practicable following that date and the remaining 50 per cent. as at the 30 May 2019 net asset value, paid as soon as practicable thereafter.
In the event that a Class Discontinuation Vote is held and passed in respect of each class of the Company’s shares then in issue, the Company will be liquidated. If shares of a class remain in issue following the passing of a Class Discontinuation Vote, the Company may continue that class if it remains viable or convert those shares into shares of the largest then remaining class.
From 1 March 2019 onwards
In respect of all classes of the Company’s shares remaining in issue on 1 March 2019 (subject to the outcome of the Class Discontinuation Vote process described above, if any such vote is held), the following terms will apply:
- The management, operational services and performance fees will remain as described above for the period commencing 1 March 2017.
- The Company’s existing class closure provisions will be reinstated starting with the twelve month period ending on 31 December 2019, except that the relevant trigger will be an eight per cent. discount to net asset value over the relevant period, instead of the existing ten per cent. threshold.
- The Company will be permitted to redeem its investment in the Master Fund to finance own share purchases without payment of the ten per cent. redemption fee.
- The notice period for termination of the Management Agreement without cause by both the Company and the Manager will be reduced from 24 months to three months.
3. Extraordinary General Meeting
The Company intends to convene an extraordinary general meeting of shareholders to approve the Tender Offer and the Structural Changes in January 2017. A circular setting out details of the proposals is expected to be published in due course (the “Circular”).
020 7022 6236
J.P. Morgan Cazenove:
020 7742 4000
J.P. Morgan Securities plc, which conducts its UK investment banking activities as J.P. Morgan Cazenove ("J.P. Morgan Cazenove"), which is authorised by the Prudential Regulation Authority and regulated by the Prudential Regulation Authority and the Financial Conduct Authority in the United Kingdom, is acting exclusively for the Company and no-one else in connection with the Tender Offer and will not be responsible to anyone other than the Company for providing the protections afforded to customers of J.P. Morgan Cazenove or for providing advice in relation to the Tender Offer or any matter referred to herein.
This announcement does not constitute an offer or solicitation to acquire or sell any securities in the Company. Any acceptance or other response to the Tender Offer should be made on the basis of the information to be contained in the Circular. The Tender Offer will not be extended into any jurisdiction where to do so may be unlawful or which may otherwise subject the Company or any other person to any unduly onerous obligation.
Notwithstanding the proposals described in this announcement, there is no guarantee that, following the Tender Offer, the Company will make any purchases of its own shares or that any class discontinuation vote will be held. Accordingly, investors should not expect that they will necessarily be able to realise, within a period which they would otherwise regard as reasonable, their investment in the Company, nor can they be certain that they will be able to realise their investment on a basis that necessarily reflects the value of the Company’s investment in the Master Fund.
This announcement is not for distribution in or into the United States, Canada, Australia or Japan or any other jurisdiction in which its distribution may be unlawful. This announcement is not an offer of securities for sale in the United States or elsewhere. The securities of the Company have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States unless registered under the Securities Act or pursuant to an exemption from such registration. The Company has not been and will not be registered under the US Investment Company Act of 1940, as amended, and investors are not entitled to the benefits of that Act. There has not been and there will be no public offering of the Company’s securities in the United States.