Harwood Capital fails to make a splash with possible GYG offer

Harwood Capital fails to make a splash with possible GYG offer

On 9 April 2021, Harwood Capital LLP (Harwood) announced that it was in the preliminary stages of evaluating a possible offer for GYG plc (GYG). The offer of 92.5 pence per GYG share, which is expected to include an unlisted securities alternative, values GYG at approximately £43m and represents a 10.78% premium to GYG’s share price one day prior to the announcement.

Harwood, who itself holds a 20.62% interest in GYG, confirmed it has received support for the possible offer via a non-binding letter of intent by GYG’s largest institutional shareholder, Lombard Odier Asset Management (Europe) Limited (‘Lombard’), who hold a 26.89% stake in GYG.

GYG has been battling choppy waters as of late, with the numerous lockdowns resulting from the pandemic taking a toll on its business. The company reported that its expected revenues for the year are slightly below market expectations, due to a number of project delays caused by the pandemic. However, despite this, the company did highlight that its order books were strong and that GYG has won several contracts.

GYG has since responded to the approach, advising shareholders to take no further action while the board evaluated the unsolicited approach with its advisers.

Within the announcement, GYG also highlighted that the offer was subject to ‘material pre-conditions’ including satisfactory completion of due diligence, which is expected to take up to six weeks. Furthermore, GYG emphasised that the offer by Lombadier was non-binding and only indicative of Lombadier’s current intention, with Lombadier reserving the right to change its intention or dispose of the shares which are subject to the letter of intent.

Due to the expected conclusion of the unlisted securities alternative, the offer would have to be structured by way of scheme of arrangement, meaning it would require approval of shareholders representing 75% of GYG’s share capital. GYG highlighted that this threshold would not include Harwood’s 20.62% stake, who would not be entitled to vote.

Harwood has until 7 May 2021 to confirm whether it will be making a firm offer for GYG.

Market Tracker will continue to monitor this transaction as it develops. 

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