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Pollen Street Secured Lending plc (PSSL) announced a further extension of its ‘Put Up or Shut Up’ (PUSU) deadline in order to continue talks with Waterfall Asset Management LLC (Waterfall) regarding a possible offer for PSSL. The new deadline will give Waterfall until 11 August to make a firm offer or walk away from the deal. This is the fifth extension the company has sought since announcing the possible offer on 25 February 2020, which would value the company at 900 pence per PSSL share, subject to confirmatory due diligence and fulfilling other standard conditions. Alongside the support of the board, the possible offer also had support of PSSL’s largest shareholder, Invesco, who had provided an irrevocable undertaking to vote in favour of the transaction in the event a firm offer is made, in respect of its 26.4% holdings in the company. Invesco have extended the undertaking until 21 August, confirming their continued support of the deal.
The transaction had hit a bump before the announcement was formally made when PSSL notified its investment manager, PSC Credit Holdings LLP (PSC) of the approach in January and requested certain of its own company information in order to assess what due diligence materials to pass on to Waterfall. PSC failed to provide the requested material and PSSL served a 12 month notice of termination to the investment manager and imposed operational restriction, claiming, alongside PSC’s failure to comply a ‘number of other serious governance issues have arisen’.
PSC have defended its position claiming that the due diligence requested was ‘highly unusual’, would not be in the best interest of the company shareholders and could have ‘significant potential to undermine shareholder value’. This was because sharing the information would constitute a breach of confidentiality provisions contained in underlying transaction documentation and would provide Waterfall, a competitor, with highly sensitive information should the offer be unsuccessful. Resultantly, PSC claimed it had requested confidentiality and indemnity protections for the company, which PSSL refused.
PSC has said the following regarding the termination:
“We are deeply disappointed that the Board has elected to take this action, especially given their continued re-iteration as to their satisfaction with the professional management of the Company and performance since PSC assumed management in September 2017. Since PSC took over as manager of the Company, we have more than doubled earnings per share and in light of the Company’s sustained improved performance, we made a recommendation to the Board in December 2019 to increase its interim dividend payment to 15p per share. We note that the Board has determined to maintain the dividend at 12p per share despite the underlying improvement in the assets.”
PSC has also refuted allegations that it has breached its investment management agreement, according to PSSL, and has since taken legal action.
The ongoing dispute between PSSL and the investment manager has ultimately led to the continued delay in regard to the possible offer, and PSSL has stipulated that PSC ‘is trying to ensure that this bid will not proceed’. Furthermore, PSSL states that PSC is misleading shareholders regarding the matter and painting PSSL board as ‘uncommercial, legalistic and unprepared to enter into constructive dialogue.’ The board of PSSL further went on to state there is no conflict or reason for them to be pushing the deal with waterfall, however, PSC may have a reason for not wanting the deal to go through, stating: ‘It is not us who face the prospect of losing an investment management agreement (which paid out £13.9 million in the year ended 31 December 2018) if the potential bid goes through.’
Waterfall have confirmed they remain committed to pursuing the possible offer.
Market Tracker will continue to monitor this transaction as it develops.
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Market Tracker is a unique service for corporate lawyers housed within Lexis®PSL Corporate. It features a powerful transaction data analysis tool for accessing, analysing and comparing the specific features of corporate transactions, with a comprehensive and searchable library of deal documentation across 14 different deal types. The Market Tracker product also includes news and analysis of key corporate deals and activity and in-depth analysis of recent trends in corporate transactions.
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