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ProVen VCTs - Disposal of Chess Technologies

Sophisticated and complex high-risk tax-sensitive investments in small companies: handle with care
james188
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ProVen VCTs - Disposal of Chess Technologies

#186378

Postby james188 » December 12th, 2018, 2:34 pm

Cohort PLC (an AIM listed technology company which has a large customer base in the international defence sector) issued an RNS first thing this morning, announcing that it had bought a 81.84% stake in Chess Technologies for an up front payment of £20.1 million, with a deferred earn-out payment of up to £12.7 million dependent on subsequent performance payable in 2021 and acquisition of the balance 18.16% stake in the business for up to £9.1 million dependent on subsequent performance, again in 2021. The balance 18.16% stake is all held by management, so it looks as if the two ProVen VCTs - who have been invested in Chess for quite some time - have been bought out completely (shares and loan notes).

ProVen/Beringea have now issued their own press release, although it does not give any details on the financials and what return the two VCTs have made on the up front payment. However, we were told in the 2018 ARs that ProVen VCT held 13.3% of the equity in Chess and that ProVen Growth held 19.9%; it is/was ProVen Growth's largest holding by value. I saw that both valuations were then materially reduced in the recent half-yearly reports and it rather looks as if that was a reflection of the terms then being negotiated with Cohort, although basic maths suggests that both VCTs will see a very decent return on their investments, with the added prospect of a top-up payment in just under three years.

It will be interesting to see what is said about the deal when the top-up offers are launched - and whether the up-front payment is paid out by SD to existing holders or added to the pot and simply factored into the NAV. Pure speculation, but perhaps the top-up offers were held back until this deal was done.

james188
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Re: ProVen VCTs - Disposal of Chess Technologies

#192853

Postby james188 » January 11th, 2019, 6:55 pm

So, the offers have finally been launched this evening and we now know that new shareholders, together with existing holders, will benefit from the Chess Technologies sale proceeds. Actually, I don't have an issue with that.

As to the sale, timing is everything. Whilst the ProVen VCTs secured a very decent exit, I understand that the Chess Technologies' equipment/IT was used to sort out the drone problems at Gatwick. We have since heard that both Gatwick and Heathrow - and no doubt others - have bought solutions which doubtless benefit Cohort (which acquired Chess). Cohort must be very pleased with the acquisition. However, ProVen provided for further earn-out consideration, so there will hopefully be more good news to follow.

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Re: ProVen VCTs - Disposal of Chess Technologies

#194540

Postby Vulgaris » January 18th, 2019, 3:09 pm

..... and Proven's new offers have opened.....

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Re: ProVen VCTs - Disposal of Chess Technologies

#194604

Postby bnmlp » January 18th, 2019, 5:53 pm

I don't see anything in the offer documents that indicate that the sale proceeds of Chess Technologies will be shared with newly issued shares.
- the new shares are targeted to be first issued on 1st March
- present financial year ends 28th Feb
- states NAV used for pricing formula takes into account (if) any dividends
- easy to have a qualifying dividend reference date for existing shareholders prior to the first allocation.

I expect the above to happen since it is the norm for a sizeable disposal.
Have I missed an clear statement to the contrary?
Cheers bnmlp

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Re: ProVen VCTs - Disposal of Chess Technologies

#194694

Postby naflod » January 18th, 2019, 9:45 pm

Hi bnmlp

ProVen traditionally pay dividends in July and November, so I would expect that subscribers will benefit from the proceeds of Chess Technologies.

naflod

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Re: ProVen VCTs - Disposal of Chess Technologies

#195000

Postby BusyBumbleBee » January 20th, 2019, 11:41 am

One would hope that the full sale value of the disposal is included in the current NAV. However, existing shareholders - while not losing anything by this are losing some ready cash from the dividend in exchange for the increase in NAV. Most of us, I suspect would rather have the cash.


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