15 Dec 2009 07:00
Formation Group PLC (the "Group")
Further disposal of Wealth Management assets
Formation Group PLC ("the Group") has today announced the final disposal of assets of Formation Asset Management Ltd ("FAM").
This disposal follows similar agreements announced last week and is in line with the Group's strategy to concentrate its efforts in the property sectors following the disposal of all its other non-property based businesses in August of this year.
The assets disposed of as part of this deal are again contracted client income streams which have been acquired by Castlegate Capital LLP ("Castlegate") which is controlled by David McKee and Kevin McMenamin, both employees of FAM. Similar to the other deals announced, Castlegate will pay a multiple of approximately 1.5x the contracted income value over a 3 year period and in addition, a percentage payment to the Group for new business incomes derived by the clients transferring across to Castlegate. For this reason, it is difficult to place a precise figure on the total consideration the Group expects to realise from this deal though it is hoped that with contracted income and the negotiated new business portion, the total over the 3 year period will be in the region of £225,000.
FAM will be retained by the Group for a period of time in order to wind it down in accordance with its regulatory framework as a directly authorised FSA business. The business will cease trading new business with immediate effect. Clients of the company are being communicated with to explain these changes.
Commenting, John Lawrence, Non-Executive Chairman, Formation Group PLC said; "All of the wealth management disposals now enable the Group to focus on its core property businesses whilst continuing to address the well documented potential property contingent liabilities it has on its balance sheet.
We disclosed some investment client claims within FAM as part of our circular to shareholders in June. FAM continues to liaise with its insurers and lawyers with regard to these matters and these issues were taken into consideration when balancing our obligations to shareholders, clients and staff. As 'goodwill / people' businesses, realising value from the wealth management sector is a challenge. Monies achieved from all FAM asset disposals will remain within the Limited company until such time as all creditors are dealt with to the best ability of FAM. I would like to thank both former employees for their contribution and wish them and their respective clients well for the future."
Enquiries:
Formation Group plc Tel: 020 7920 7590
John Lawrence MBE
Mike Wallwork
Zeus Capital Tel: 0161 831 1512
Ross Andrews / Tom Rowley