Recommended Cash Acquisition of Sigma Capital Group plc by Six Bidco Ltd

(a wholly-owned indirect subsidiary of investment funds managed by PineBridge Benson Elliot LLP) to be effected by means of a scheme of arrangement under Part 26 of the Companies Act 2006

Summary

  • The boards of Six Bidco Ltd (“Bidco”) and Sigma Capital Group plc (“Sigma”) are pleased to announce they have reached agreement on the terms and conditions of a recommended cash offer by Bidco for the entire issued and to be issued share capital of Sigma (the “Acquisition”).
  • Under the terms of the Acquisition, each Sigma Shareholder will be entitled to receive:

for each Sigma Share 202.1 pence in cash (the “Cash Offer”)

  • The price per Sigma Share under the terms of the Cash Offer represents a premium of approximately:
    • 35.6 per cent. to the closing price of 149.0 pence per Sigma Share on 10 June 2021 (being the Last Practicable Date);
    • 37.1 per cent. to the volume weighted average price of 147.5 pence per Sigma Share for the three months to 10 June 2021 (being the Last Practicable Date); and
    • 44.9 per cent. to the volume weighted average price of 139.5 pence per Sigma Share for the six months to 10 June 2021 (being the Last Practicable Date).
  • The Acquisition values the entire issued ordinary share capital of Sigma at approximately £188.4 million on a fully diluted basis.
  • During late 2020, in light of the strategic progress Sigma had made during the year, notwithstanding the COVID-19 crisis, Sigma’s Directors decided to review the strategic options and relative benefits of the various routes available to the business to fund its future growth and maximise shareholder value. Recognising the attractiveness of Sigma as a platform for investors with access to greater capital availability, the Sigma Directors decided to appoint Rothschild & Co to run a private sale process for Sigma in order to maximise value for Sigma’s shareholders. This process attracted participation from multiple well-funded parties and Sigma provided interested parties with access to due diligence information through a virtual data room and a series of management sessions. Following a period of review, further discussions with its advisers and a thorough evaluation of the proposals received by Sigma, including follow-up discussions with the relevant interested parties, the Independent Sigma Directors believe that the all-cash offer from Bidco represents the most attractive option for all Sigma Shareholders in terms of value, the form of consideration offered and execution certainty. Discussions with all other interested parties have terminated.
  • If, on or after the date of this Announcement and before the Effective Date, any dividend and/or other distribution and/or other return of capital is declared, made or paid or becomes payable in respect of Sigma Shares, Bidco reserves the right to reduce the consideration payable under the terms of the Cash Offer by an amount up to the amount of such dividend and/or distribution and/or return of capital, in which case any reference in this Announcement to the consideration payable under the Cash Offer will be deemed to be a reference to the consideration as so reduced. Any exercise by Bidco of its rights referred to in this paragraph shall be the subject of an announcement and, for the avoidance of doubt, shall not be regarded as constituting any revision or variation of the terms of the Acquisition. In such circumstances, Sigma Shareholders would be entitled to retain any such dividend, distribution or other return of capital declared, made or paid or which becomes payable.
  • The Acquisition is intended to be effected by way of a Scheme. However, Bidco reserves the right to elect (with the consent of the Panel) to implement the Acquisition by way of an Offer.
  • The Acquisition is conditional, amongst other things on: (i) the Scheme becoming unconditional and Effective (including, without limitation, its approval by a majority of Scheme Shareholders present and voting (in person or by proxy) representing 75 per cent. or more in the value of the Scheme Shares held by such Scheme Shareholders who are permitted to vote pursuant to the Code, applicable law or the Court whose sanction is required for the Scheme; and (ii) the passing of the Ordinary Resolution at the General Meeting, which will require the approval of Independent Sigma Shareholders controlling more than 50 per cent. of the votes cast at the General Meeting. These Conditions are not capable of being waived by Bidco.
  • As certain Sigma Directors, being Ian Sutcliffe, Graham Barnet, Michael McGill and Gwynn Thomson, will have a personal interest in the Reinvestment and Incentive Arrangements (and consequently the Acquisition more generally), the Board of Sigma has constituted a committee comprised of the Independent Sigma Directors for the purpose of evaluating and recommending the Acquisition.

Recommendation

  • The Independent Sigma Directors believe that Sigma can continue to execute its current strategy by leveraging its strong brand, relationships, and expertise. However, in order to deliver its next phase of growth, Sigma would require consistent access to capital to invest in scale into UK PRS product and further grow the business through forming new housebuilder partnerships, expanding operations into new regional markets and widening its rental product offering. The Independent Sigma Directors believe the Acquisition will accelerate the delivery of these strategic benefits to Sigma’s business at a rate which would be otherwise difficult to achieve as a standalone AIM-listed company.
  • Based on the Cash Offer of 202.1 pence per Sigma Share, the last one, three and five years’ total shareholder returns (as measured by share price growth and dividends reinvested) are 115.5 per cent. per annum, 17.5 per cent. per annum and 19.0 per cent. per annum respectively on a compound annual growth rate basis. The Independent Sigma Directors believe that crystallising a cash return at this level is in the best interests of all Sigma Shareholders.
  • The Independent Sigma Directors, who have been so advised by Rothschild & Co as to the financial terms of the Acquisition, unanimously consider the terms of the Acquisition to be fair and reasonable. In providing its advice to the Independent Sigma Directors, Rothschild & Co has taken into account the commercial assessments of the Independent Sigma Directors. Rothschild & Co is providing independent financial advice to the Independent Sigma Directors for the purposes of Rule 3 of the Takeover Code.
  • Accordingly, the Independent Sigma Directors intend to recommend unanimously that (a) Scheme Shareholders (to the extent permitted to vote pursuant to the Code, applicable law or the Court whose sanction is required for the Scheme) vote in favour of the Scheme at the Court Meeting; (b) Independent Sigma Shareholders vote in favour of the Ordinary Resolution to be proposed at the General Meeting; and (c) Sigma Shareholders vote in favour of the Special Resolution to be proposed at the General Meeting, as the Independent Sigma Directors who are interested in Sigma Shares have irrevocably undertaken to do in respect of their own beneficial holdings (and those of their connected persons) in respect of which they control the voting rights amounting to 962,270 Sigma Shares representing, in aggregate, approximately 1.1 per cent. of the ordinary share capital of Sigma in issue on the Last Practicable Date.
  • As a result of their interest in the Reinvestment and Incentive Arrangements, Ian Sutcliffe, Graham Barnet, Michael McGill and Gwynn Thomson are not entitled to vote their Sigma Shares on the Ordinary Resolution but have undertaken to vote on all other Resolutions to the extent permitted to do so under the Takeover Code, law or the Court whose sanction is required for the Scheme. For the purposes of Rule 16.2 of the Takeover Code, Rothschild & Co has confirmed that, in its opinion, the terms of the Reinvestment and Incentive Arrangements are fair and reasonable so far as the Sigma Independent Shareholders are concerned. In providing their opinion, Rothschild & Co has taken into account the commercial assessments of the Independent Sigma Directors.

Background to and reasons for the Acquisition

  • PineBridge Benson Elliot believes that Sigma is a market-leading vertically integrated PRS delivery and operating platform, which benefits from a leading position in the rapidly growing UK single-family rental market.
  • Having delivered c.5,400 homes to date, Sigma’s platform has recently entered into new long-term partnerships with housebuilder delivery partners and end investors in the UK, with expansion plans to deploy further capital towards new PRS opportunities. Bidco aims to build on this solid foundation, and intends to continue to grow the business and the success already achieved through Sigma’s partnerships with PRS REIT and EQT Real Estate by providing capital backing, investment, strategic support and expertise in Sigma’s target geographic markets. Sigma and Bidco believe that their proposed combination will allow Sigma to expand upon its historical levels of PRS homes delivery.
  • Over its history, PineBridge Benson Elliot has built a track record of successfully acquiring and scaling real estate investments in Europe in close partnership with talented and driven management teams. PineBridge Benson Elliot believes the Acquisition will bring clear strategic benefits in delivering the shared ambition of developing large scale and high-quality single-family homes at affordable rents in the UK, and that its financial and operational backing could therefore give Sigma greater scale to invest in the growing residential rental market.

Irrevocable undertakings / Letters of Intent

  • In total, including the irrevocable undertakings from the Independent Sigma Directors described below, as well as irrevocable undertakings from Management Directors, Bidco has procured irrevocable undertakings to vote (or, where applicable, procure voting) in favour of the Scheme at the Court Meeting and the Resolutions to be proposed at the General Meeting (or in the event that the Acquisition is implemented by an Offer, to accept or procure acceptance of such Offer) in respect of, in aggregate, 39,634,121 Sigma Shares, representing approximately 44.2 per cent. of the existing issued ordinary share capital of Sigma as at the Last Practicable Date.
  • The Independent Sigma Directors have irrevocably undertaken to vote (or, where applicable, procure voting) in favour of the Scheme at the Court Meeting and the Resolutions to be proposed at the General Meeting (or in the event that the Acquisition is implemented by an Offer, to accept or procure acceptance of such Offer) in respect of their own beneficial holdings totalling 962,270 Sigma Shares in aggregate, representing approximately 1.1 per cent. of the existing issued ordinary share capital of Sigma as at the Last Practicable Date. The Management Directors have irrevocably undertaken to vote (or, where applicable, procure voting, in each case to the extent permitted pursuant to the Code, applicable law or the Court whose sanction is required for the Scheme) in favour of the Scheme at the Court Meeting and the Resolutions to be proposed at the General Meeting (or in the event that the Acquisition is implemented by an Offer, to accept or procure acceptance of such Offer) in respect of their own beneficial holdings totalling 7,577,094 Sigma Shares in aggregate, representing approximately 8.5 per cent. of the existing issued ordinary share capital of Sigma as at the Last Practicable Date.
  • Bidco has also received non-binding letters of intent from Hargreave Hale Limited (on behalf of Marlborough UK Micro-Cap Growth Fund and Marlborough Nano-Cap Growth Fund) and River and Mercantile Asset Management LLP to vote in favour of the Scheme at the Court Meeting and the Resolutions to be proposed at the General Meeting (or in the event that the Acquisition is implemented by an Offer, to accept or procure acceptance of such Offer) in respect of, in aggregate, 15,060,000 Sigma Shares, representing approximately 16.8 per cent. of the existing issued ordinary share capital of Sigma as at the Last Practicable Date.
  • Therefore, Bidco has received irrevocable undertakings and letters of intent in respect of, in aggregate, 54,694,121 Sigma Shares, representing approximately 61.0 per cent. of the existing issued ordinary share capital of Sigma as at the Last Practicable Date.

Information on Bidco and PineBridge Benson Elliot

  • Bidco is a limited company registered in England and Wales and was incorporated on 31 May 2021. Bidco was formed for the purposes of the Acquisition and is a wholly-owned indirect subsidiary of investment funds managed by PineBridge Benson Elliot. Bidco has not traded since its date of incorporation, nor has it entered into any obligations other than in connection with the Acquisition.
  • PineBridge Benson Elliot is a pan-European real estate private equity specialist, applying two decades of investment experience, deep market knowledge and in-house operational expertise to generate sustained investment outperformance. The UK-based, FCA-regulated fund manager has c.$3.2 billion of managed equity and holds a diversified real estate portfolio, currently comprised of office, retail, hotel and residential assets in the UK, France, Germany, Italy, Spain, Belgium and Central Europe.
  • Founded in 2005 as Benson Elliot Capital Management LLP, Benson Elliot was acquired in December 2020 by PineBridge Investments, a private, global asset manager with $133.0 billion in assets under management (as at March 2021). For more information please visit www.pinebridge.com/en-uk/institution/capabilities/alternatives/pinebridge-benson-elliot.

Information on Sigma

  • Sigma is a PRS, residential development, and urban regeneration specialist, with offices in Edinburgh, Manchester and London. Sigma’s principal focus is on the delivery of large scale housing schemes for the private rented sector. Sigma has a well-established track record in assisting with property related regeneration projects in the public sector, acting as a bridge between the public and private sectors.
  • Sigma has created an unrivalled PRS platform, which sources sites and brings together construction resource to develop them, enabling Sigma to deliver an integrated solution to partners. As well as sourcing sites and managing all stages of the planning and development process, Sigma also manages the rental of completed homes through its award-winning rental brand, ‘Simple Life’.

Timetable and conditions

  • It is intended that the Acquisition will be implemented by way of a Scheme (although Bidco reserves the right to effect the Acquisition by way of an Offer, subject to the consent of the Panel). Accordingly, the terms of the Acquisition will be put to Scheme Shareholders at the Court Meeting to the extent such Scheme Shareholders are permitted to vote pursuant to the Code, applicable law or the Court whose sanction is required for the Scheme. Independent Sigma Shareholders will also be asked to vote in favour of the Ordinary Resolution to be proposed at the General Meeting, and all Sigma Shareholders will be asked to vote in favour of the Special Resolution to be proposed at the General Meeting (which is expected to take place immediately following the Court Meeting). The Meetings are required to enable eligible Sigma Shareholders to consider and, if thought fit, vote in favour of resolutions to approve the Scheme and its implementation. In order to become Effective, the Scheme must be approved at the Court Meeting by a majority in number of Scheme Shareholders, present and voting to the extent permitted pursuant to the Code, applicable law or the Court whose sanction is required for the Scheme, whether in person or by proxy, representing 75 per cent. or more in nominal value of the Scheme Shares held by those Scheme Shareholders. Insofar as they are the registered holders of Scheme Shares, the Management Team, should they not be permitted to vote at the Court Meeting, have undertaken to be bound by the Scheme. The Scheme also requires the passing of the Resolutions at the General Meeting. The Scheme is expected to become Effective in Q3 of the calendar year 2021.
  • The Acquisition will be on the terms and subject to the Conditions set out in Appendix 1 to the full announcement. Full details of the Acquisition will be provided in the Scheme Document. It is expected that the Scheme Document, containing further information about the Acquisition and notices of the Meetings, together with the associated forms of proxy, will be posted to Sigma Shareholders within 28 days of this Announcement (or such later time as Sigma, Bidco and the Panel agree) and the Meetings are expected to be held shortly thereafter. An expected timetable of key events relating to the Acquisition will be provided in the Scheme Document. The Scheme Document will also contain valuation reports on certain of Sigma’s real estate assets in accordance with Rule 29 of the Takeover Code.

Commenting on the Acquisition, Graham Barnet, the Chief Executive Officer and Founder of Sigma, said:

“We are delighted that our independent directors intend to recommend this offer from PineBridge Benson Elliot, having reviewed a number of options from other parties. We know the team well and believe that our complementary skills, experience and sector knowledge, as well as PineBridge Benson Elliot’s capital backing, will make a powerful combination, and enable Sigma to expand its activities significantly.

“Sigma has been a pioneer in the delivery of new, single-family homes in the private rented sector, creating an unrivalled property delivery and management platform. We believe we have delivered one of the largest number of new family rental homes in the UK. We also manage the rental of thousands of homes for our partners. The need for high-quality, professionally-managed rental homes remains a critical unmet need in the UK, and we look forward to developing our model further in this exciting next step with PineBridge Benson Elliot.”

Commenting on the Acquisition, David Sigsworth, the Senior Independent Non-Executive Director of Sigma, said:

“Following a competitive sale process initiated by the Company in line with its strategic growth plans, which attracted strong interest from multiple well-funded parties, the Independent Sigma Directors believe the cash offer of 202.1 pence per share from Bidco is highly attractive and in the interests of all Sigma Shareholders. The offer presents an opportunity for Sigma Shareholders to crystallise a meaningful premium today to various share price based metrics and the Independent Sigma Directors intend to recommend the offer unanimously. The Independent Sigma Directors believe Bidco and PineBridge Benson Elliot can provide Sigma with the platform required to capitalise on the significant market opportunity in the UK residential real estate sector.”

Commenting on the Acquisition, Joseph De Leo, Managing Partner of PineBridge Benson Elliot said:

“Having spent the last number of months growing our understanding of the Company’s many strengths and its strategic priorities as it strives to unlock its potential, we believe that the combination of our capital backing; strategic support; deep expertise; and track record can be an effective catalyst for achieving Sigma’s growth ambitions over the coming years. Sigma operates in an important part of the market that has shown remarkable resilience over the past year and, in partnership, we can further build on the successful UK housing platform the Sigma team have established. We are pleased that the independent members of the Sigma Board have unanimously recommended our proposal and that the major Sigma shareholders have endorsed the Board’s decision by adding their strong support.”

This summary should be read in conjunction with, and is subject to, the following full announcement and the Appendices. The Acquisition will be subject to the Conditions and other terms set out in this Announcement and to the full terms and conditions which will be set out in the Scheme Document. The Conditions to, and certain further terms of, the Acquisition are set out in Appendix 1 to the full announcement. The sources and bases of calculation of certain information contained in this Announcement are set out in Appendix 2 to the full announcement. Details of irrevocable undertakings and letters of intent received by Bidco are set out in Appendix 3 to the full announcement. Certain terms used in this Announcement are defined in Appendix 4 to the full announcement.

View the full announcement and appendices here.

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