Kingswood H. Regulatory News (KWG)

European Wealth Group Limited

("European Wealth" or the "Company" and, together with its subsidiaries,the "EWG Group")

Acquisition of Newbridge and Funding

European Wealth Group Limited (AIM: EWG, EWGL), the integrated wealth management group, announces that, further to the announcement made on 10 October 2017, the Company has today signed the stock purchase agreement (the "SPA") to acquire the entire issued share capital of KPI US Holdco Inc ("KPI US") from KPI (Nominees) Limited ("Kingswood") (the "Acquisition"). Prior to the signing of the SPA, KPI Newbridge Holdings, Inc (a wholly owned subsidiary of KPI US) has entered into a separate stock purchase agreement to become 100% owner of Newbridge Securities Corporation and Newbridge Financial Services Group, Inc. (together "Newbridge") (the "Newbridge Acquisition").

Under the terms of the SPA, the Company will pay Kingswood an initial consideration of US$1.00 for KPI US and will assume liabilities relating to the Newbridge Acquisition totalling US$17.6 million (the "Newbridge Acquisition Liabilities").

As previously disclosed, completion of the Acquisition and of the Newbridge Acquisition ("Completion") is conditional on receipt of regulatory approval from the Financial Industry Regulatory Authority ("FINRA") ("FINRA Approval"), the applicable regulatory authority in the US. The signing of the SPA enables the FINRA Approval process to commence. Only upon Completion will the Newbridge Acquisition Liabilities become payable by the Company.

The Newbridge Acquisition Liabilities comprise:

− US$12.635 million payable on Completion to the current owners of Newbridge;

− the funding of a US$2.0 million promissory note that will be released to the current owners of Newbridge over a three year period subject to deductions for any specified warranty claims; and

− the payment (or, where applicable, reimbursement) of US$3.0 million of costs incurred by KPI US and/or by KPI Newbridge Holdings, Inc. in relation to the Newbridge Acquisition and in relation to its preparation.

In addition, Kingswood will receive deferred consideration in relation to Newbridge in the form of an earn-out based on the future EBITDA performance of Newbridge over five years to 31 December 2022 (the "Earn-out"). The Earn-out reflects the strategic plan developed for Newbridge by Kingswood. The Earn-out is capped at US$25.0 million over the five year period and is calculated as a percentage of the EBITDA achieved by Newbridge (in each of the five years to 31 December 2022) over a threshold EBITDA figure per year of US$3.62 million (the "EBITDA Threshold Figure"). If the EBITDA Threshold Figure is not reached in any given year, no earn-out payment will be due in respect of that year. Kingswood has the option to elect to receive ordinary shares in the Company instead of the cash payments payable under the Earn-out, subject to relevant shareholder and regulatory approvals, at the average closing price of an ordinary share for the 20 business days prior to an election to receive ordinary shares.

Funding

Concurrently with the SPA (and in order to fund the Newbridge Acquisition and the development of the EWG Group), the Company has also entered into a facilities agreement (the "Facilities Agreement") with Kingswood (the "Funding"). The Funding will comprise a convertible term loan facility comprising a GBP£10.00 million facility and a US$5.0 million facility (the "Term Loan Facility") together with two convertible working capital term facilities - one in the sum of US$2.0 million ("Facility A") and the other in the sum of £2.0 million ("Facility B").

Term Loan Facility

The key terms of the Term Loan Facility are as follows:

· Total quantum: GBP£10.0 million and US$5.0 million.

· Interest rate of 7.5% per annum from the date of drawdown.

· Repayable three years from the date of FINRA Approval.

· Repayable by the Company in whole or in part at any time without penalty.

· Either the Company or Kingswood may request a conversion at any time.

· The conversion terms require shareholder approval (which will be sought at an Extraordinary General Meeting of the Company, to be convened in the coming weeks) and applicable regulatory approvals from the FCA and FINRA. If shareholders do not approve the conversion terms, the Funding will be repayable forthwith.

· The Company may not however require conversion unless there is also a Rule 9 Waiver in place confirming that Kingswood does not need to make a takeover offer (to the Company's other shareholders) as a result of converting - it is intended that this Rule 9 Waiver will also be sought at the Extraordinary General Meeting referred to above.

· The conversion price will be the lower of 16.5 pence (being the mid-market close price on the last business day before the initial announcement of the Newbridge Acquisition on 10 October 2017) and the average mid-market closing price of a European Wealth share for the 20 business days prior to the applicable notice of conversion being given.

· It is intended that (so far as is practicable) participation in the Term Loan Facility will be offered to the Company's larger shareholders on a proportionate participation basis, subject to a minimum proportionate participation level per shareholder of £100,000 - shareholders will be contacted shortly on this participation by way of letter (and ahead of receiving the documents for the Extraordinary General Meeting).

· The full amount of the Term Loan Facility is underwritten by Kingswood.

· Kingswood will receive an underwriting fee of 1%, an arrangement fee of 0.75% and a non-utilisation fee of 0.5%.

· The consent of Kingswood is required for the payment of any dividends by the Company until the Term Loan Facility (and Facility A and Facility B) have been repaid.

Facility A

· US$2.0 million working capital facility

· Interest rate of 7.5%

· Repayable three years from the date of FINRA Approval

· Can only be used to fund working capital requirements of Newbridge

· Convertible on the same terms and conditions as the Term Loan Facility

Facility B

· GBP£2.0 million working capital facility

· Interest rate of 7.5%

· Repayable three years from the date of FINRA Approval

· Can only be used to fund working capital requirements of the Company's UK business

· Convertible on the same terms and conditions as the Term Loan Facility

Related Party Transactions

KPI US is currently owned and controlled by Kingswood, a substantial shareholder of European Wealth, and therefore the Acquisition is a related party transaction for the purposes of the AIM Rules. The entry into the Funding by the Company with Kingswood is also therefore a related party transaction for the purposes of the AIM Rules.

The Independent Directors, being Kenneth ("Buzz") West, Marianne Ismail and Simon Ray, consider, having consulted with the Company's nominated adviser, finnCap, that the terms of the Acquisition and the Funding are each fair and reasonable insofar as the Company's shareholders are concerned.

Newbridge and rationale for the Acquisition

Newbridge is a US based national broker dealer platform headquartered in Florida. Newbridge has a nationwide network of over 220 professional advisors and associated broker-dealers, over 12,000 clients and approximately US$1.7 billion Assets Under Management ("AUM"). The business has a strong national footprint, with representatives in 46 offices across the US, including a strong presence in key financial centers such as New York.

In the year ended 31 December 2016, Newbridge reported full year revenue of US$28.0 million and profit before tax of US$(0.5) million. As at 31 December 2016, Newbridge had net cash of US$0.7 million and total gross assets of US$2.5 million. Newbridge has actively grown adviser personnel over the last 12 months and the resultant revenue growth, coupled with cost eliminations that will be derived under the Company's ownership model, should deliver significant benefits to European Wealth post-closing.

Following Completion the EWG Group will have approximately 20,000 clients and in excess of US$4.0 billion AUM. The Board believes that this enlarged platform will benefit from significant operational synergies, leveraging its global distribution power to retail and institutional investors while providing regulatory efficiencies across the EWG Group. It will benefit from economies of scale through integrated product development and technical support.

Rebranding to Kingswood

As noted in the announcement on 10 October 2017 the Company has decided to rebrand to Kingswood with effect from Completion and this name change (which requires the approval of the Company's shareholders) will be proposed for approval at the Extraordinary General Meeting referred to above.

Commenting on the Acquisition and Funding, CEO of European Wealth, Marianne Ismail, said:

"This is a unique opportunity to invest in an established, well-positioned and nationally represented US company. It significantly increases our global footprint by gaining immediate access to the largest wealth management market in the world, which we intend to build and scale substantially.

This acquisition of Newbridge will help us deliver a differentiated strategy in the financial services arena. It will empower EWG to diversify and grow its revenue base, international position and influence to attract more clients, cross-sell products and significantly increase our AUM.

"We are ambitious to grow both organically and dynamically by acquisition. We anticipate following this deal with further exciting accretive acquisitions in the future, strengthening our position in major international markets, product offering and AUM." 

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