Polar Capital Holdings plc
20 November 2019
Partial Crystallisation of Business Unit and issue of shares
Polar Capital Holdings plc ("Polar Capital" or the "Company") announces the partial crystallisation of a set of Preference Shares held by Andrew Holliman and Richard Wilson, co-heads of the Polar Capital North America Team and managers of the Polar Capital North American Fund. This partial crystallisation is expected to be immediately earnings enhancing for shareholders. Based on the results for the financial year ended 31 March 2019, the impact of the crystallisation would have been an earnings enhancement of around 1p per share1.
Background
As set out at the time of the Company's admission to AIM, Polar Capital has structured its fund management operations in such a way that the fund management teams are placed in separate business units. Each business unit is a separate profit centre and the fund managers responsible receive each year a payment which comprises a share of their unit's core operating profit (operating profit before performance fees and related distributions) and performance fees.
In addition to the remuneration structure described above, each fund management team is offered the prospect of an interest in the capital of the Company through the purchase of an individual class of preference shares in Polar Capital Partners Limited, a wholly owned subsidiary of the Company. These preference shares have been structured in such a way as to become convertible upon the occurrence of certain events, known as crystallisation events, into cash or, at the option of the Company, ordinary shares at a ratio that is intended to be earnings enhancing for the Group. At the election of the holders of the preference shares, they may crystallise all or part of their preference shares, or retain the balance, if any, for a further crystallising event at a subsequent date.
From the effective date of crystallisation, the fund managers concerned cease to be eligible to receive a proportion of their share of the business unit's core operating profit which has been crystallised and simultaneously going forward will receive a proportionally reduced interest in their performance fees.
North American Team business unit crystallisation
Andrew Holliman and Richard Wilson have elected to crystallise one third of their preference shares in relation to the Polar Capital North American Fund.
Under the terms of the preference shares the partial crystallisation value is calculated as at 31 March 2019 and either satisfied in cash, or at the option of the Company, by issue of new ordinary shares. The Company has elected to satisfy the consideration by the issue of new ordinary shares.
The partial crystallisation is in relation to the crystallisation period ended 31 March 2019. The initial crystallisation value is to be satisfied by the issue of up to 1,442,064 new ordinary shares, in tranches as described below. This value is re-calculated at each of the first, second, and third anniversaries of 31 March 2019, based on the profits of the business unit in the 12 months ended on the respective anniversary. If the result of the re-calculation provides for a smaller cash or share consideration, then the amounts paid or shares issued to the owners of the preference shares are adjusted accordingly. The effect of such re-calculation is to adjust downwards any consideration and there can never be an increase in the Crystallisation Value. In return for this delivery of new ordinary shares, the North American team will be forfeiting one third of the interest in their core operating profit in relation to the Polar Capital North American Fund for the financial year ended 31 March 2019.
Under the terms of the preference shares 10 percent of the new ordinary shares are issued immediately with the balance of 30 percent of the new ordinary shares due (subject to the re-calculation described above) on or as soon as practicable after each crystallisation anniversary.
As a result, the Company will issue a total of 144,206 new ordinary shares in respect of this partial crystallisation which will rank pari passu with the Company's existing ordinary shares at the time of issue.
The Company's current issued share capital is 96,464,735 ordinary shares and following admission of the new ordinary shares the total ordinary shares in issue will be 96,608,941.
Mr Holliman and Mr Wilson retain two-thirds of their class of preference shares which remain convertible upon certain future events and reflect the continued economic interest that the managers have in the North American business unit.
1 Presented for illustrative purposes based on the year end results for 31 March 2019 and assuming the partial crystallisation occurred as at 31 March 2019.
For further information please contact:
Polar Capital +44 (0)20 7227 2700
Gavin Rochussen (Chief Executive)
John Mansell (Executive Director)
Samir Ayub (Finance Director)
Numis Securities Limited - Nomad and Joint Broker +44 (0)20 7260 1000
Charles Farquhar
Stephen Westgate
Kevin Cruickshank (QE)
Peel Hunt LLP - Joint Broker +44 (0)20 7418 8893
Guy Wiehahn
Andrew Buchanan
Camarco +44 (0)20 7757 4995
Ed Gascoigne-Pees
Monique Perks
