LONDON (Alliance News) - London Capital Group Holdings PLC Monday said its LCG subsidiary is set to sign a software as a service agreement with Algoweb, which is half owned by its new chairman, under which Algoweb would grant a licence to LCG to use its trading processing product.
London Capital Group Executive Chairman Charles-Henri Sabet and his wife together have a 50% stake in Algoweb.
Sabet was appointed chairman of London Capital Group earlier this month, after the company said would raise up to GBP17.5 million in new financing by issuing convertible loan notes to Sabet's investment company.
London Capital has been in talks with Algoweb about the possible licensing of a straight-through processing trading product to LCG. It has now completed due diligence in connection with the proposed licensing and is now proposing to do a deal once the loan notes are issued and the deal has been cleared by shareholders.
Straight-through processing means an entire trade process can be conducted electronically without the need for manual intervention.
London Caputal Group will pay a fee of GBP780,000 once the deal is signed, and then GBP300,000 before each quarter starting on October 1. The initial term of the deal expires at the end of September, 2017, and is automatically renewed for periods of 36 months unless terminated by either party with at least six months notice. The rolling fee can be increased at the start of each renewal period in line with any increase in the UK's retail price index.
The deal is being backed by the company's independent directors.
"The Independent Directors consider that there is an urgent need for LCG to install the technology offered by Algoweb in the agreement (including the Smarttrade and Algoweb add-ins) in order to improve LCG's execution capabilities," they wrote in the company's statement.
"The Independent Directors believe that, in line with the company's strategy, the agreement offers access to international wholesale FX markets and presents an opportunity for the company to significantly expand and diversify its customer base," they added.
London Capital Group has been going through a difficult period. Its chief operating officer resigned in July; in August the company said it swung to a first half pretax loss, hit by poor market conditions and its move to a new trading platform; and last week Chief Executive Kevin Ashby resigned having introduced Sabet to the company.
It had been the subject of takeover interest from rival Spreadex.com, although that company's interest ended when London Capital group shareholders approved the Sabet financing deal.
It is planning to use the funds to increase its product offering and diversify its client base in the UK and abroad.
London Capital Group shares were down 3.2% at 29.06 pence Monday morning.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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