Arbuthnot Regulatory News (ARBB)

THIS ANNOUNCEMENT (INCLUDING THE APPENDIX) AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.

FURTHER, THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND SHALL NOT CONSTITUTE AN OFFER TO SELL OR ISSUE OR THE SOLICITATION OF AN OFFER TO BUY, SUBSCRIBE FOR OR OTHERWISE ACQUIRE ANY NEW ORDINARY SHARES OF SECURE TRUST BANK PLC IN ANY JURISDICTION IN WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.

This announcement should be read in its entirety. In particular, you should read and understand the information provided in the 'Important Notices' section.

19 June 2014

Arbuthnot Banking Group PLC ("Arbuthnot" or the "Company")

Proposed sale of 1,041,667 ordinary shares in Secure Trust Bank PLC ("Secure Trust Bank")

Arbuthnot today announces the proposed sale of 1,041,667 ordinary shares in Secure Trust Bank (the "Sale Shares"), representing 6.7 per cent. of Secure Trust Bank's existing issued share capital to institutional investors at a price of £24.00 per Sale Share (the "Sale"), which represents a 3.81 per cent. discount to Secure Trust Bank's closing price as of 19 June 2014, on the terms of a placing agreement expected to be entered into following the release of this Announcement.

Secure Trust Bank, a subsidiary of the Company, has also today announced a proposed placing (the "Placing") of 2,083,333 new ordinary shares in Secure Trust Bank (the "Placing Shares") to institutional investors, at a price of £24.00 per Placing Share. The terms and conditions of the Placing and Sale are set out in the separate announcement Secure Trust Bank has made today.

The Placing and the Sale, when completed, will reduce the Company's interest in Secure Trust Bank from 67.0 per cent. of the existing issued share capital to 53.26 per cent. of Secure Trust Bank's Enlarged Issued Share Capital and will generate gross proceeds of £25.0 million for Arbuthnot.

The proposed Sale is conditional upon resolutions being passed by Secure Trust Bank's shareholders at the Secure Trust Bank General Meeting and admission of the Placing Shares to trading on AIM.

The Company supports the Placing and has undertaken to vote in favour of the resolutions to be proposed at the Secure Trust Bank General Meeting.

At the time of Secure Trust Bank's admission to trading on AIM in November 2011 the Company indicated that over time it would be willing to see its interest in Secure Trust Bank be further diluted to allow Secure Trust Bank to grow, as the opportunities arose, in an appropriate way to enhance value for all Shareholders. The growth of Secure Trust Bank in the last two and half years and the current opportunities available to Secure Trust Bank to expand in the banking market have led to the position where the Directors of the Company believe that now is the right time to allow Secure Trust Bank to raise capital. In addition, with growth momentum in Arbuthnot Latham & Co., Limited ("Arbuthnot Latham & Co"), the Company's private banking business, the Directors believe that Arbuthnot should realise a proportion of its investment in Secure Trust Bank, to generate capital to build its businesses.

It is anticipated that the Sale, when completed, will raise approximately £24.4 million, net of estimated expenses, for the Company. The Company intends to use the proceeds and capital generated from the Sale to support the growth of Arbuthnot Latham & Co and to invest in, and develop over time, other businesses in accordance with the Company's strategy.

The Sale, when completed, is not expected to be accounted for as part of the profit before tax for the consolidated group accounts, but will directly increase the reserves and accordingly the regulatory capital resources of the Group. As a result of the Placing and the Sale the net assets of the consolidated group are expected to increase by £73.15m, as will the regulatory capital resources of the group.

It is proposed that the Sale Shares and Placing Shares will be placed with institutional investors. Completion of the Sale is expected to occur on 9 July 2014. Secure Trust Bank has also made an announcement today, which should be read in conjunction with this Announcement.

The proposed Sale will be treated as a substantial transaction under AIM Rule 12. Secure Trust Bank is, and following the Placing it is anticipated that it will remain, a subsidiary of Arbuthnot and accordingly its results will continue to be consolidated into the Arbuthnot Group financial statements. For the 2013 financial year Secure Trust Bank reported an underlying profit before tax of £25.2m and as a shareholder Arbuthnot received a dividend of 62.0 pence per Secure Trust Bank ordinary share. 

Arbuthnot has confirmed that, following completion of the Transaction, it does not intend to sell any further ordinary shares in Secure Trust Bank before 19 December 2014, other than with the agreement of the Bookrunners.

Pursuant to the terms of the Placing Agreement, to be entered into following the release of this announcement, Oriel Securities agrees, as placing agent for each of the Company and Secure Trust Bank, to use its reasonable endeavours to procure placees for the Placing Shares and the Sale Shares at the Placing Price. Indicative commitments have been received from institutional investors for all of the Placing Shares and Sale Shares at the Placing Price.

Oriel Securities will receive a commission from the Company in respect of the Placing Shares and is entitled to reimbursement of expenses incurred by it.

The Placing Agreement will be conditional upon, inter alia, the resolutions to be proposed at the Secure Trust Bank General Meeting granting the Secure Trust Bank Board the additional authority required to allot the Placing Shares and to dis-apply pre-emption rights which would otherwise apply to the allotment of the Placing Shares and Admission becoming effective on or before 8.00 a.m. on 9 July 2014 (or such later time and/or date as the Company, Secure Trust Bank and Oriel Securities may agree, but in any event by no later than 8.00 a.m. on 31 July 2014). The sale of the Sale Shares and Admission of the Placing Shares are interconditional.

The Placing Agreement will contain warranties from the Company in favour of Oriel Securities in relation to, inter alia, the accuracy of the information about Arbuthnot contained in the Secure Trust Bank Circular and the announcements made in respect of the Placing and in relation to the Sale Shares. In addition, Arbuthnot will agree to indemnify the Bookrunners and certain other parties related to the Bookrunners in relation to certain liabilities they may incur in respect of the sale of the Sale Shares. Arbuthnot's liability under the indemnity is capped as to time and amount.

The Placing Agreement will also contain warranties from Secure Trust Bank in favour of Oriel Securities in relation to, inter alia, the accuracy of the information contained in the Secure Trust Bank Circular and announcements made in respect of the Placing and certain other matters relating to the Secure Trust Bank group and its business. In addition, Secure Trust Bank will agree to indemnify the Bookrunners and certain other parties related to the Bookrunners in relation to certain liabilities they may incur in respect of the Placing.

Oriel Securities will have the right to terminate the Placing Agreement in certain circumstances prior to Admission, including for changes in certain market and economic conditions or in the event of a breach of the warranties set out in the Placing Agreement.

Application will be made for the Placing Shares to be admitted to trading on AIM. It is expected that such admission will become effective and that dealings in the Placing Shares will commence on AIM at 8.00 a.m. on 9 July 2014. The Sale Shares are already admitted to trading on AIM.

The Placing is not being underwritten.

The capitalised terms used in this Announcement have the meaning set out in Appendix 1 to this Announcement.

Expected timetable

Secure Trust Bank General Meeting 11.00 a.m. on 8 July 2014

Anticipated date of completion of the Sale 9 July 2014

Enquiries:

Arbuthnot Banking Group PLC 0207 012 2400

Henry Angest (Chairman and Chief Executive Officer)

Andrew Salmon (Chief Operating Officer)

James Cobb (Group Finance Director)

David Marshall (Director of Communications)

Oriel Securities Limited (Sole placing agent and joint bookrunner) 0207 710 7600

Robin Mann

Gareth Hunt

Stewart Wallace

Keefe, Bruyette & Woods Limited (Joint bookrunner) 0207 663 3161

Charles Lucas

Canaccord Genuity Limited (NOMAD) 0207 523 8000 / 0207 665 4500

Lawrence Guthrie

Sunil Duggal

Bell Pottinger 0207 861 3917

Ben Woodford

Dan de Belder

IMPORTANT NOTICES

This Announcement has been issued by, and is the sole responsibility of, the Company.

This Announcement does not constitute, and the Company is not making, an offer to the public of transferable securities within the meaning of sections 85 and 102B of the Financial Services and Markets Act 2000 ("FSMA"). This Announcement is therefore not an approved prospectus for the purposes of section 85 of FSMA, and has not been prepared in accordance with the prospectus rules of the Financial Conduct Authority ("FCA") and as such neither its contents nor its issue have been approved by the FCA or by any authority which would be a competent authority for the purposes of any legislation that implements the Prospectus Directive.

This Announcement and the information contained herein is not for release, publication or distribution, in whole or in part, directly or indirectly, in or into the United States (including its territories and possessions, any state of the United States and the District of Columbia), Australia, Canada, Japan, the Republic of South Africa or any other state or jurisdiction into which the same would be unlawful. This Announcement is for information purposes only and shall not constitute an offer to buy, sell, issue, or acquire, or the solicitation of an offer to buy, sell, issue, or acquire any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdictions.

This Announcement does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any securities in the United States, Australia, Canada, Japan or the Republic of South Africa or any other jurisdiction in which such offer, solicitation or sale would be unlawful. In particular, the Placing Shares and Sale Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act") and may not be offered, sold or transferred, directly or indirectly, within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and the securities laws of any state or other jurisdiction of the United States. No public offering of the Placing Shares or Sale Shares is being made in the United States, Australia, Canada, Japan or the Republic of South Africa.

Oriel Securities Limited, which is authorised and regulated in the United Kingdom by the FCA, is acting as placing agent and joint bookrunner to the Company in connection with the Sale and is acting exclusively for the Company and for no one else (other than Secure Trust Bank) in relation to the Sale and will not be responsible to any person other than the Company and Secure Trust Bank for providing the protections afforded to its clients or for advising any other person in relation to the Sale or any matter referred to in this Announcement.

Keefe, Bruyette & Woods Limited, which is authorised and regulated in the United Kingdom by the FCA, is acting as joint bookrunner to the Company in connection with the Sale and is acting exclusively for the Company and for no one else (other than Secure Trust Bank) in relation to the Sale and will not be responsible to any person other than the Company and Secure Trust Bank for providing the protections afforded to its clients or for advising any other person in relation to the Sale or any matter referred to in this Announcement.

Canaccord Genuity Limited, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is the Company's Nominated Adviser. The responsibilities of Canaccord Genuity Limited, as Nominated Adviser under the AIM Rules and the AIM Rules for Nominated Advisers, are owed solely to the London Stock Exchange and are not owed to the Company, any Shareholder or any Director of the Company or to any other person in respect of his or her decision to vote in favour of the Resolution. Canaccord Genuity Limited is acting exclusively for the Company and for no one else in relation to the Sale and will not be responsible to any person other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Sale.

No representation or warranty, express or implied, is or will be made by or on behalf of any of Canaccord Genuity Limited, Oriel Securities Limited or Keefe, Bruyette & Woods Limited, and no responsibility or liability is or will be accepted by any of Canaccord Genuity Limited, Oriel Securities Limited or Keefe, Bruyette & Woods Limited or any of their respective affiliates, as to the accuracy, completeness or verification of the information set out in this Announcement, and nothing contained in this Announcement is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or the future. Canaccord Genuity Limited, Oriel Securities Limited or Keefe, Bruyette & Woods Limited and each of their respective affiliates accordingly disclaim, to the fullest extent permitted by law, all and any liability whether arising in tort, contract or otherwise which they might otherwise have in respect of this Announcement or any such statement.

Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this Announcement.

This Announcement contains (or may contain) certain forward-looking statements with respect to certain of the Company's current expectations and projections about future events. These statements, which sometimes use words such as "aim", "anticipate", "believe", "intend", "plan", "estimate", "expect" and words of similar meaning, reflect the directors' beliefs and expectations and involve a number of risks, uncertainties and assumptions that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Statements contained in this Announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The information contained in this Announcement is subject to change without notice and, except as required by applicable law, the Company does not assume any responsibility or obligation to update publicly or review any of the forward-looking statements contained herein. You should not place undue reliance on forward-looking statements, which speak only as of the date of this Announcement. No statement in this Announcement is or is intended to be a profit forecast or to imply that the earnings of the Company for the current or future financial years will necessarily match or exceed the historical or published earnings of the Company.

APPENDIX 1

DEFINITIONS

The following definitions and technical terms apply throughout this document, unless the context otherwise requires: