Last checked at 23 Jun 2017 07:01
THIS ANNOUNCEMENT, INCLUDING THE APPENDICES, AND THE INFORMATION CONTAINED HEREIN, IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, NEW ZEALAND OR THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO DO SO.
THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN THE COMPANY. THIS ANNOUNCEMENT DOES NOT CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES OF EUROPEAN WEALTH GROUP LIMITED IN ANY JURISDICTION IN WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
European Wealth Group Limited
("EWG", the "Company" or the "Group")
Subscription, Fully Underwritten Open Offer and Debt Conversion
Successful Application for Accelerated Whitewash
Current Trading
European Wealth (AIM: EWG, EWGL), the integrated wealth management group that today has released its audited accounts for the year to 31 December 2016, is pleased to confirm that the Company has entered into a subscription and underwriting agreement with Astoria and Kingswood to raise total gross proceeds of approximately £9.2 million.
The Fundraising comprises a subscription by Astoria and Kingswood to raise gross proceeds of £6.14 million through the issue of 48,003,580 New Ordinary Shares at 12.8 pence per New Ordinary Share, and an open offer to shareholders, which is fully underwritten by Astoria and KPI, to raise gross proceeds of approximately a further £3.07m through the issue to Qualifying Shareholders of up to 24,001,790 New Ordinary Shares.
The net proceeds of the Fundraising, being approximately £8.8m,will be used to repay all sums owing under the Kingswood Bridge Facility (as announced on 8 June 2017), approximately £2.0 million of other loans and accrued interest and to settle the potential £1.14m of deferred consideration that is due to be paid out in cash between now and December 2018 to vendors of firms acquired by the Group; leaving the Company debt free with working capital flexibility and balance sheet strength to allow it to pursue its stated strategy. The Board believes that the potential value creation for the medium to long term benefit of Shareholders arising from the Fundraising outweighs the dilutive effects of the Subscription.
Definitions used in this announcement are set out in Appendix 1 hereto.
Successful Application for Accelerated Whitewash
The Board of Directors of the Company is also pleased to announce that it has successfully applied for a dispensation from making a General Offer under Rule 9 of the City Code on Takeovers and Mergers in relation to the Fundraising.
A Rule 9 Waiver has been granted by the Panel as described in further detail below with respect to the issue of the Subscription Shares and Open Offer Shares by the Company.
Background to the Fundraising
Since its inception, the Group has been funded, in part, by debt. In the audited results for the year to 31 December 2016, which were released today, the Group announced further growth in AUM to around £1.65bn, an increase of over 45% from the beginning of last year and over 16% from the beginning of this year. Since revenues lag AUM, this growth will feed through into the results for the latter half of this year and into 2018. Despite this strong performance, the Board believes that the Company's share price has been adversely affected by its capital structure, due to uncertainty over how the debt would be redeemed and concerns that interest payments absorb too much cash flow and reduce the Group's ability to invest in the future.
The Board has explored a number of options and believes that the Fundraising is the best option available to the Group to re-capitalise its balance sheet and build a strong platform from which to pursue its stated strategy more effectively.
Through the Subscription, the Board is pleased to have secured the support of two new major shareholders, Kingswood and Astoria. Both support the Group's vision and intend to play an active role in helping accelerate the development of the business.
KPI (Nominees) Limited
Kingswood is a wholly owned subsidiary of Kingswood Property Finance Limited Partnership ("Kingswood Property Finance"), which is a private investment partnership wholly owned and controlled by Gary Wilder and Jonathan Massing. Formed in 2004, it has undertaken a range of long-term investments and financial transactions including: participating in real estate investments; private equity investments incorporating equity and loan capital to the SME sector; subscribing for equity warrants and options; dealing in financial assets; trading in listed equities, fixed income and currencies. Kingswood Property Finance is managed by its General Partner, Kingswood Investment Partners Limited, which is authorised and regulated by the Financial Conduct Authority.
Astoria Investments Limited
Astoria is an investment company, based in Mauritius and listed on the Stock Exchange of Mauritius (ticker: ATIL.NOOO), the Johannesburg Stock Exchange (ticker: ARA) and the Namibian Stock Exchange (ticker: NRO). Its investments are managed by Anchor Capital (Mauritius) Limited, a subsidiary of Anchor Capital (www.anchorcapital.co.za). Anchor Capital is one of South Africa's fastest growing asset management companies and has established itself as one of South Africa's leading providers of asset management services, in both local and offshore markets.
Current Trading
European Investment Management has had a positive start to the year. Two new revenue generators were recruited in the first three months of 2017 and they should be contributing to the Group's revenue in a very short space of time. The investment management business has recently received all the necessary regulatory authorisations from the FSA in South Africa and the Board expect the speed of clients transferring from Towry to European Investment Management to accelerate over the next few months. Recent political turmoil within South Africa is also expected to accelerate the development of the Group's business in the region. The Fixed Interest team has been awarded mandates over a further £150m since the start of the year, together with some of the existing clients adding additional funds to their portfolios.
Revenues from the Trading team were adversely influenced by a reduction in dealing volumes after the strong run in the last quarter of 2016. May however, saw an upswing in activity producing an exceptional performance, offsetting all the disappointment for the first four months.
Within the financial planning business, the recurring income remains strong but new business has been below expectations over the first quarter. However, as for the Trading team, May was ahead of budget and the Board expects the shortfall in new business to pick up over the remainder of the year.
Overall, it has been an encouraging first five months; the Group's funds under management have continued to grow, with revenues and EBIT on budget and ahead of the same period last year. This progress has been achieved despite the demands of the Fundraising process, which has been quite time consuming for management. Moreover, whilst the Board expects the Group's underlying operating profit to continue increasing, this year will now be adversely affected by the significant costs associated with the Fundraising.
Looking ahead, the Group is on track for achieving its short-term target of £2.0bn of AUM; the benefit of which will reflect in Group revenue as the year progresses and into 2018. With a recapitalised balance sheet and management able to focus solely on the business, the Board is confident that the Company is well placed to exploit the various organic and acquisitive growth opportunities that lie ahead.
The Subscription and Open Offer
The Fundraising has been structured to be available as to one third for Kingswood; one third for Astoria and one third for existing shareholders. This allows both existing shareholders to participate in the Fundraising and two new institutional investors to invest in the Company. The Open Offer permits shareholders who are on the Company's register of members at the close of business on 22 June 2017 to participate through the Open Offer.
Qualifying Shareholders are being given the opportunity to subscribe for the Open Offer Shares at a price of 12.8 pence per Open Offer Share, pro rata to their holdings of existing ordinary shares at the close of business on 22 June 2017 on the basis of 9 Open Offer Shares for every 10 existing ordinary shares.
Qualifying Shareholders are also being given the opportunity, provided they take up their Basic Entitlements in full, to subscribe for up to 18 Open Offer Shares for every 10 Existing Ordinary Shares held under the Excess Application Facility in excess of their Basic Entitlement. This will potentially allow Qualifying Shareholders to maintain their pro-rata shareholding in the Company after the issue of the Subscription Shares and Open Offer Shares.
If the Open Offer is not fully taken up by Qualifying Shareholders, up to 1,562,500 Open Offer Shares will be offered for subscription to employees of the Group at the Issue Price. Kingswood and Astoria will then be required to subscribe for any Open Offer Shares not taken up by Qualifying Shareholders or employees.
Subscription and Underwriting Agreement
Pursuant to the Subscription and Underwriting Agreement each of Kingswood and Astoria have agreed to subscribe for 24,001,790 New Ordinary Shares and to each underwrite half of the Open Offer. If one of the Subscribers exercises its rights to terminate the Subscription and Underwriting Agreement, or in the event that a condition of the Subscription is not fulfilled and one Subscriber does not agree to waive such condition but the other Subscriber does, then in each case the other Subscriber may, at its option, elect to subscribe for some or all of the Subscription Shares and to fulfil some or all of the other Subscriber's underwriting obligations in respect of the Open Offer.
The Subscription and Open Offer are conditional, inter alia, on:
· the passing of the Resolutions at an extraordinary general meeting to be convened by the Company;
· admission of the Subscription Shares and the Open Offer Shares to trading on AIM becoming effective by no later than 8.00 a.m. on 31 August 2017; and
· the conditions in the Subscription and Underwriting Agreement being satisfied or (if applicable) waived and the Subscription and Underwriting Agreement not having been terminated in accordance with its terms prior to Admission.
Accordingly, if any of these conditions are not satisfied or, if applicable, waived, the Fundraising will not proceed.
Under the terms of the Subscription and Underwriting Agreement, each Subscriber is entitled to receive a fee from the Company of 2% of the aggregate gross proceeds of the Subscription subscribed for by the Subscriber and, to the extent that the Subscribers are required to subscribe for Open Offer Shares in accordance with their underwriting obligations, 2% of the gross proceeds of such further subscription.
As at the date of this announcement, the Company has obtained irrevocable undertakings from certain shareholders, including the Directors, to vote in favour of the proposed Resolutions in respect of, in aggregate, 14,832,948 Ordinary Shares, representing 55.62 per cent. of the Existing Ordinary Shares.
Debt Conversion and Related Party Transaction
Kenneth West, the Group Chairman, lent £100,000 to the Company pursuant to an agreement dated 31 March 2016. Under the terms of this agreement, Mr West has the option to convert this loan into equity. The Company and Mr West have entered into the Debt Conversion Agreement pursuant to which, conditional upon the Subscription and Open Offer becoming unconditional in all respects (save only for Admission), the Company will issue Mr West 781,250 New Ordinary Shares at the Issue Price.
The Debt Conversion is deemed a related party transaction pursuant to the AIM Rules. The Independent Directors, having consulted with the Company's nominated advisor, finnCap, consider that the terms of the Debt Conversion Agreement are fair and reasonable insofar as Shareholders are concerned.
FCA Approval
Each Subscriber has received an unconditional approval notice from the FCA confirming that the FCA has no objection to the Subscribers becoming controllers of the Company by virtue of each Subscriber holding between 10% and 50% of the Enlarged Share Capital.
New Directors
Under the Subscription and Underwriting Agreement, Kingswood has the right to nominate two directors to the Board whilst it holds more than 20% of the Company's issued share capital and Astoria has the right to nominate one director whilst it holds more than 20% of the Company's issued share capital.
Admission
Application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM. The New Ordinary Shares will rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid in respect of the Ordinary Shares following Admission. It is expected that Admission will become effective, and that dealings on AIM will commence, at 8.00 a.m. on 20 July 2017.
Waiver of the obligation to make a general offer under Rule 9 of the Code
The Subscription and Open Offer
Following the Subscription and Open Offer, the maximum shareholdings of Kingswood and Astoria and their proposed minimum and maximum voting rights in the Enlarged Share Capital will be as set out in the tables below:
If both parties participate in the Fundraising:
Shareholder | Interest in Existing Ordinary Shares | New Ordinary Shares to be issued through Subscription | Minimum interest in Enlarged Share Capital following Fundraising | Maximum New Ordinary Shares to be issued through Open Offer | Maximum interest in Enlarged Share Capital following Fundraising | |||
Number | % | Number | % | Number | % | |||
Kingswood | 0 | 0.0 | 24,001,790 | 24,001,790 | 24.13 | 12,000,895 | 36,002,685 | 36.20 |
Astoria | 0 | 0.0 | 24,001,790 | 24,001,790 | 24.13 | 12,000,895 | 36,002,685 | 36.20 |
If only one party participates in the Fundraising:
Shareholder | Interest in Existing Ordinary Shares | New Ordinary Shares to be issued through Subscription | Minimum interest in Enlarged Share Capital following Fundraising | Maximum New Ordinary Shares to be issued through Open Offer | Maximum interest in Enlarged Share Capital following Fundraising | |||
Number | % | Number | % | Number | % | |||
Kingswood OR Astoria | 0 | 0.0 | 48,003,580 | 48,003,580 | 48.27 | 24,001,7900 | 72,005,370 | 72.4 |
The Subscription and the Open Offer give rise to certain considerations under the Code. Brief details of the Code and the protection this affords Shareholders will be included in the Circular.
The Panel, based on information provided from the Company, have confirmed that Kingswood and Astoria are not acting in concert for the purposes of the Code.
As set out in the table above, Kingswood and/or Astoria might, as a result of the Subscription and Open Offer acquire shares which carry more than 30% of the voting rights of the Company. The Subscription and Open Offer might, absent Rule 9 Waiver, give rise to an obligation on Kingswood and/or Astoria to make a general offer for the entire issued share capital of the Company.
Waiver of Rule 9 obligation
Under Note 1 on the Notes on the Dispensations from Rule 9, the Panel will normally waive the requirement for a general offer to be made in accordance with Rule 9 (a "Rule 9 offer") if, inter alia, those shareholders of the company who are independent of the person who would otherwise be required to make an offer and any person acting in concert with him and do not have any interest in the Fundraising which may compromise their independence ("the Independent Shareholders") pass an ordinary resolution on a poll at a general meeting ("a Whitewash Resolution") approving such a waiver. The Panel may waive the requirement for a Whitewash Resolution to be considered at a general meeting (and for a circular to be prepared in accordance with Section 4 of Appendix 1 to the Code) if Independent Shareholders holding more than 50 per cent. of the company's shares capable of being voted on such a resolution confirm in writing that they would vote in favour of the Whitewash Resolution were one to be put to the shareholders of the company at a general meeting.
The Company has approached Independent Shareholders holding 10,229,777 Ordinary Shares, being 50.09% of the Company's shares being capable of being voted on such a resolution, and has obtained confirmation in writing (in the form appended to this announcement) that they would vote in favour of the Whitewash Resolution were such a resolution to be put to shareholders of the Company at a general meeting. The Company has subsequently approached the Panel and successfully obtained its permission to waive the requirement for a Whitewash Resolution to be considered at a general meeting and has also now received the Panel's confirmation that the Panel has granted a waiver of the obligation on Kingswood and / or Astoria to make a general offer under Rule 9 of the Code to the extent that such obligation would otherwise arise as a result of the issue of the Subscription Shares and the Open Offer Shares.
Shareholder Circular and Notice of Extraordinary General Meeting
The Company intends to publish and post a circular to shareholders and notice of EGM on or around 26 June 2017, with the EGM expected to be held on 19 July 2017, and a further announcement will be made at this time.
The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.
For further details, please contact:
European Wealth Group Limited | +44 (0)20 7293 0730 |
John Morton | www.europeanwealth.com |
finnCap Ltd (Nomad and Broker) | +44 (0)20 7220 0500 |
Adrian Hargrave |
|
Scott Mathieson |
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FWD Consulting (Financial PR) | +44 (0)20 7280 0651 |
Roddy Watt | +44 (0)7714 770493 |
About European Wealth Group Limited
European Wealth Group Limited (AIM: EWG, EWGL) is the holding company for the integrated wealth management business, European Wealth Management Group Limited. Having commenced trading in 2010, European Wealth has two operating divisions, European Investment Management Limited ("EIM") and European Financial Planning Limited ("EFP"). Both are regulated by the Financial Conduct Authority. EIM has opted for Restricted Adviser status and EFP for Independent Adviser status. Today the Group's head office is in London with an expanding network of offices both in the UK and continental Europe. Core services offered by the Group are financial planning, corporate pension advisory and investment management in both equity and fixed interest instruments. For further information on European Wealth's wealth management and financial planning services, please go to www.europeanwealth.com
APPENDIX 1
Definitions
The following definitions apply throughout this announcement unless the context requires otherwise:
"Admission" | admission of the New Ordinary Shares to trading on AIM; |
"AIM" | the market of that name operated by the London Stock Exchange; |
"AIM Rules" | together, the AIM Rules for Companies and the AIM Rules for Nominated Advisers; |
"Application Form" | the non-CREST Application Form; |
"Astoria" | Astoria Investments Limited, a company incorporated and registered in Mauritius with company number 129785 C1/GBL; |
"AUM" | assets under management: |
"Basic Entitlement(s) | the pro rata entitlement of Qualifying Shareholders to subscribe for 9 Open Offer Shares for every 10 Existing Ordinary Shares registered in their name as at the Record Date, on and subject to the terms of the Open Offer; |
"Board" or "Directors" | Kenneth West, John Morton, Simon Ray, Kish Gopaul and Marianne Hay being the directors of the Company; |
"Circular" | the circular to be posted to Shareholders on 26 June 2017; |
"CLS" | the £4.2m of quoted convertible loan stock, issued by the Company in 2014, which were redeemed on 9 June 2017; |
"Code" | the City Code on Takeovers and Mergers issued by the Panel on Takeovers and Mergers; |
"Company" or "European Wealth" | European Wealth Group Limited, a company incorporated and registered in Guernsey with company number 42316; |
"CREST" | the computerised settlement system (as defined in the CREST Regulations) operated by Euroclear UK & Ireland Limited; |
"Debt Conversion" | the conversion, pursuant to the Debt Conversion Agreement, of the debt of £100,000 owed by the Company to Mr West into 781,250 New Ordinary Shares at the Issue Price; |
"Debt Conversion Agreement" | the agreement between the Company (1) and Mr West (2) pursuant to which Mr West has agreed to convert the debt of £100,000 he is owed by the Company into 781,250 New Ordinary Shares; |
"EGM" or "Extraordinary General Meeting" | the extraordinary general meeting of the Company to be held at the offices of finnCap, 60 New Broad Street, London EC2M 1JJ at 11.00 a.m. on 19 July 2017, notice of which will be included in the Circular; |
"Enlarged Share Capital" | the Company's issued share capital immediately following Admission; |
"Euroclear" | Euroclear UK & Ireland Limited; |
"Excess Application" | Open Offer Shares which may be applied for by Qualifying Shareholders under the Excess Application Facility; |
"Excess Application Facility" | the arrangement pursuant to which Qualifying Shareholders may apply for additional Open Offer Shares in excess of their Basic Entitlement in accordance with the terms and conditions of the Open Offer; |
"Excess Entitlement" | in respect of each Qualifying Shareholder, their entitlement to apply for up to 18 Open Offer Shares for every 10 Existing Ordinary Shares registered in their name as at the Record Date, pursuant to the Excess Application Facility; |
"Existing Ordinary Shares" | the 26,668,656 Ordinary Shares in issue as at the date of this announcement; |
"FCA" | the Financial Conduct Authority; |
"finnCap" | finnCap Ltd, as Financial Adviser, Nominated Adviser and Broker to the Company; |
"Form of Proxy" | the form of proxy attached to the Circular for use by Shareholders in connection with the EGM; |
"FSMA" | Financial Services and Markets Act 2000, as amended; |
"Fundraising" | together, the Subscription and Open Offer; |
"Group" or "European Wealth Group" | the Company and its subsidiaries; |
"Independent Directors" | John Morton, Simon Ray, Kish Gopaul and Marianne Hay; |
"Independent Shareholders" | the Shareholders, other than those Shareholders who are connected with either Subscriber or who have any potential interest (other than in their capacity as a Shareholder), whether commercial, financial or personal, in the outcome of the Fundraising; |
"Issue Price" | 12.8 pence per New Ordinary Share; |
"Kingswood" | KPI (Nominees) Limited, a company incorporated in England and Wales with registered number 5723493; |
"London Stock Exchange" | London Stock Exchange plc; |
"New Ordinary Shares" | the 72,786,620 new Ordinary Shares in the capital of the Company to be issued in connection with the Fundraising and Debt Conversion; |
"Notice of EGM" | the notice of the Extraordinary General Meeting which forms part of the Circular; |
"Open Offer" | the invitation to Qualifying Shareholders to subscribe for the Open Offer Shares at the Issue Price on the terms and subject to the conditions set out in the Circular and in the case of Qualifying Non-CREST Shareholders only, the Application Form; |
"Open Offer Shares" | the 24,001,790 New Ordinary Shares being made available to Qualifying Shareholders pursuant to the Open Offer; |
"Ordinary Shares" | the ordinary shares of 5 pence each in the capital of the Company; |
"Panel" | the Panel on Takeovers and Mergers; |
"Qualifying CREST Shareholders" | Qualifying Shareholders holding Ordinary Shares in uncertificated form in CREST at the Record Date; |
"Qualifying Non-CREST Shareholders" | Qualifying Shareholders holding Ordinary Shares in certificated form at the Record Date; |
"Qualifying Shareholders" | holders of Ordinary Shares on the register of members of the Company at the Record Date with the exclusion of Shareholders with a registered address or who are resident in any Restricted Jurisdiction; |
"Record Date" | close of business on 22 June 2017; |
"Regulatory Information Service" | has the meaning given under the AIM Rules; |
"Resolutions" | the resolutions to be proposed at the EGM, as set out in the Notice of EGM; |
"Restricted Jurisdiction" | each and any of Australia, Canada, Japan, the Republic of Ireland, the Republic of South Africa, New Zealand and the United States and any other jurisdiction where the extension or the availability of the Open Offer would breach any applicable law; |
"Rule 9" | Rule 9 of the Code; |
"Rule 9 Waiver" | the waiver granted by the Panel of the obligation which might otherwise arise under Rule 9 requiring either of the Subscribers to make an offer for all of the issued share capital of European Wealth in connection with the Subscription and the Open Offer; |
"Shareholders" | holders of Existing Ordinary Shares in the Company; |
"Subscribers" | Astoria and Kingswood; |
"Subscription" | the proposed subscription for Subscription Shares by the Subscribers; |
"Subscription and Underwriting Agreement" | the conditional subscription and underwriting agreement dated 22 June 2017 between the Subscribers and the Company, details of which are set out in the letter in this announcement; |
"Subscription Shares" | the 48,003,580 new Ordinary Shares to be subscribed for pursuant to the Subscription; |
"UK" or "the United Kingdom" | the United Kingdom of Great Britain and Northern Ireland; |
"Uncertificated" | recorded on the relevant register or other record of the Ordinary Shares or other security concerned as being held in uncertificated form in CREST, and title to which, by virtue of the CREST Regulations, may be transferred by means of CREST; |
"United States", "United States of America" or "US" | the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia and all areas subject to its jurisdiction; |
"£" | UK pounds sterling, the lawful currency of the United Kingdom; and |
APPENDIX 2
Expected Timetable of Principal Events
Record Date for entitlements under the Open Offer | 6.00 p.m. on 22 June 2017 |
Announcement of the Subscription and the Open Offer | 7.00 a.m. on 23 June 2017 |
Ex entitlement date for the Open Offer | 23 June 2017 |
Dispatch of the Circular, the Form of Proxy and, to Qualifying Non-CREST Shareholders only, the Application Form | 26 June 2017 |
Basic Entitlements and Excess Entitlements credited to stock accounts of Qualifying CREST Shareholders | 27 June 2017 |
Recommended latest time for requesting withdrawal of Basic Entitlements and Excess Entitlements from CREST | 4.30 p.m. on 11 July 2017 |
Latest time and date for depositing Basic Entitlements and Excess Entitlements into CREST | 3.00 p.m. on 12 July 2017 |
Latest time and date for splitting of Application Forms (to satisfy bona fide market claims only) | 3.00 p.m. on 13 July 2017 |
Latest time for receipt of Forms of Proxy | 11.00 a.m. on 17 July 2017 |
Latest time and date for receipt of completed Application Forms from Qualifying Non-CREST Shareholders and payment in full under the Open Offer or settlement of relevant CREST instructions (as appropriate) | 11.00 a.m. on 17 July 2017 |
Extraordinary General Meeting | 11.00 a.m. on 19 July 2017 |
Announcement of the results of the Extraordinary General Meeting and results of the Open Offer | 19 July 2017 |
Issue of New Ordinary Shares | 20 July 2017 |
Admission and commencement of dealings in the New Ordinary Shares expected to commence on AIM | 8.00 a.m. on 20 July 2017 |
CREST accounts expected to be credited in relation to the Open Offer | 20 July 2017 |
Definitive share certificates to be dispatched in relation to the Open Offer by | 27 July 2017 |
Each of the times and dates above is subject to change. Any such change will be notified by an announcement on a Regulatory Information Service.
APPENDIX 3
Form of Independent Shareholders' confirmation in writing
Dear Sirs
RE: European Wealth Group Limited (the "Company")
Introduction
I confirm that I have been made aware of the proposed fundraising whereby the Company will issue up to 72,005,370 new ordinary shares (the "New Ordinary Shares") at a price of 12.8 pence per share by way of a subscription for 48,003,580 New Ordinary Shares (the "Subscription"), of which Kingswood Property Finance Limited Partnership ("Kingswood") will subscribe for 24,001,790 New Ordinary Shares and Astoria Investments Limited ("Astoria") will subscribe for 24,001,790 New Ordinary Shares, together with an open offer of 24,001,790 New Ordinary Shares to existing shareholders in the Company (the "Open Offer"), being underwritten by Kingswood and Astoria (together the "Fundraising"). Should either of Kingswood or Astoria not participate for any reason, the other party will have the right, but not the obligation, to subscribe for all of the New Ordinary Shares pursuant to the Subscription and Open Offer. The Company does not have sufficient authority to issue all of the New Ordinary Shares, therefore both the Subscription and the Open Offer is conditional on the consent of the shareholders of the Company being given in a general meeting to disapply pre-emption rights over and authorise the allotment of the New Ordinary Shares.
Background and reasons for the Fundraising
Since its inception, the Group has been funded, in part, by a high level of debt. At the time of the Group's admission to AIM in May 2014, this debt was aggregated and issued as unsecured convertible loan stock, quoted on AIM with the ticker EWGL.L ("CLS"). As at the end of May 2017, the outstanding principal due under the CLS was £4.2m with approximately £0.5m of accrued interest. In addition, the Group owed a further £1.9m of other loans and accrued interest and up to £1.2m of potential cash deferred consideration payments that fall due in the next 18 months.
These levels of debt have absorbed a significant proportion of the Group's cash flow, as can be seen in the summary of the Group's financial performance set out below:
2016 £000's | 2015 £000's | 2014 £000's | 2013 £000's | |
AUM | 1,500,000 | 1,200,000 | 1,030,000 | 629,000 |
Revenue | 9,412 | 7,653 | 6,673 | 5,821 |
EBITDA | 354 | (69) | (203) | (378) |
Loss after tax | (757) | (991) | (667) | (998) |
On 7 June 2017, the Company entered into the bridge financing facility for £5.25m, which is provided by Kingswood, one of the proposed subscribers, to repay the CLS and the accrued interest and other loans. This facility is available to the Company for 90 days from its constitution, with interest being charged every 30 days. The first 30 days attracts interest of 1% of the facility, the next 30 days attracts interest of 1.25% of the facility, and the final 30 days attracts interest of 1.5% of the facility. In addition, EWG is paying an arrangement fee of 1.5% of the facility and an exit fee of the same.
The Board believes that the use of high levels of debt as part of the Company's capital structure has had an adverse effect on the business as the interest payments have absorbed cash flow and reduced the Group's ability to invest in the future. Despite this, the Group has achieved further growth in AUM to 31 December 2016 to around £1.75bn, which is an increase of over 45% from the beginning of 2015 and over 16% from the beginning of 2016. Since revenues lag AUM, this growth will feed through into the results for the latter half of this year and into 2018.
The Board has explored a number of options and believes that the Fundraising is the best option available to the Group to re-capitalise its balance sheet and build a strong base from which to exploit the opportunities available to it.
Through the Subscription and the underwriting of the Open Offer, the Board is pleased to have secured the support of two new major shareholders, Kingswood and Astoria. Both support the Group's vision and will play an active role in helping accelerate the development of the business. In addition, given the short timeframe prior to the expiration of the convertible loan stock, it has been necessary for the Company to enter into a bridge financing facility in order to finance the business prior to completion of the Fundraising. The proceeds of the Fundraising will be used to repay the bridge financing in full as well as providing additional working capital for the Company.
Kingswood
Kingswood is a private investment partnership wholly owned and controlled by Gary Wilder and Jonathan Massing. Formed in 2004, Kingswood has undertaken a range of long-term investments and financial transactions including: participating in real estate investments; private equity investments incorporating equity and loan capital to the SME sector; subscribing for equity warrants and options; dealing in financial assets; trading in listed equities, fixed income and currencies. Kingswood is managed by its General Partner, Kingswood Investment Partners Limited, which is authorised and regulated by the Financial Conduct Authority. Kingswood is expected to appoint two directors to the Board of the Company upon completion of the Fundraising.
Astoria
Astoria (www.astoria.mu) is an investment company, based in Mauritius and listed on the Stock Exchange of Mauritius (ticker: ATIL.NOOO), the Johannesburg Stock Exchange (ticker: ARA) and the Namibian Stock Exchange (ticker: NRO). Its investments are managed by Anchor Capital (Mauritius) Limited, a subsidiary of Anchor Capital (www.anchorcapital.co.za). Anchor Capital is one of South Africa's fastest growing asset management companies and has established itself as one of South Africa's leading providers of asset management services, in both local and offshore markets. Astoria is expected to appoint one director to the Board of the Company upon completion of the Fundraising.
The Company does not consider Kingswood and Astoria to be acting in concert for purposes of the Takeover Code (the "Code").
Rule 9 of the Takeover Code
I understand that, under Rule 9 of the Code, if any person acquires an interest in shares which, when taken together with shares in which he and persons acting in concert with him are already interested, carry 30% or more of the voting rights of a company which is subject to the Code, that person is normally required to make a general offer in cash to all shareholders in the company at the highest price paid by him or any person acting in concert with him for an interest in such shares within the preceding 12 months.
I also understand that Rule 9 provides that if any person, together with persons acting in concert with him, is interested in shares which in the aggregate carry not less than 30% of the voting rights of a company which is subject to the Code but does not hold shares carrying more than 50% of such voting rights, and such person, or any person acting in concert with him, acquires an interest in any other shares which increases the percentage of shares carrying voting rights in such company in which he is interested, that person is normally required to make a general offer in cash to all shareholders in the company at the highest price paid by him or any person acting in concert with him for an interest in such shares within the preceding 12 months.
I also understand that Rule 9 provides that if any person, together with persons acting in concert with him, holds shares which in aggregate carry more than 50% of the voting rights of the company which is subject to the Code, and any such person, or any person acting in concert with him, acquires an interest in any other shares which increases the percentage of shares carrying voting rights in such company in which he is interested, that person is not normally required to make a general offer in cash to all shareholders in the company.
The Subscription and Open Offer
Following the Subscription and Open Offer, the maximum shareholdings of Kingswood and Astoria and their proposed minimum and maximum voting rights in the enlarged share capital of the Company will be as set out in the table below:
Shareholder | Interest in Existing Ordinary Shares | New Ordinary Shares to be issued through Subscription | Minimum interest in Enlarged Share Capital following Fundraising | Maximum New Ordinary Shares to be issued through Open Offer | Maximum interest in Enlarged Share Capital following Fundraising | |||
Number | % | Number | % | Number | % | |||
Kingswood | 0 | 0.0 | 24,001,790 | 24,001,790 | 24.13 | 12,000,895 | 36,002,685 | 36.20 |
Astoria | 0 | 0.0 | 24,001,790 | 24,001,790 | 24.13 | 12,000,895 | 36,002,685 | 36.20 |
Therefore, following completion of the Fundraising, I understand that if both Kingswood and Astoria participate, each of Kingswood and Astoria could hold 30 per cent. or more of the voting rights of the Company, but will not hold shares carrying more than 50 per cent. of such voting rights. Accordingly, should either of Kingswood or Astoria hold between 30 per cent. and 50 per cent. of the voting rights of the Company, any further increase in that interest by either party will incur an obligation under Rule 9 of the Code to make a general offer.
I also understand that should either of Kingswood or Astoria not participate in the Fundraising for any reason the other party will have the right, but not the obligation, to subscribe for all of the New Ordinary Shares pursuant to the Subscription and Open Offer. In this situation either of Kingswood or Astoria could hold shares representing more than 50 per cent. of the voting rights of the Company and, accordingly, any further increase in that interest by the relevant party will not trigger the requirement for an offer for the remaining shares in the Company under Rule 9. The table below demonstrates the maximum holding for Kingswood and Astoria should either be the only party acquiring New Ordinary Shares pursuant to the Fundraising.
Shareholder | Interest in Existing Ordinary Shares | New Ordinary Shares to be issued through Subscription | Minimum interest in Enlarged Share Capital following Fundraising | Maximum New Ordinary Shares to be issued through Open Offer | Maximum interest in Enlarged Share Capital following Fundraising | |||
Number | % | Number | % | Number | % | |||
Kingswood OR Astoria | 0 | 0.0 | 48,003,580 | 48,003,580 | 48.27 | 24,001,790 | 72,005,370 | 72.40 |
Waiver of Rule 9 obligation
I understand that, under Note 1 on the Notes on the Dispensations from Rule 9, the Takeover Panel ("the Panel") will normally waive the requirement for a general offer to be made in accordance with Rule 9 (a "Rule 9 offer") if, inter alia, those shareholders of the company who are independent of the person who would otherwise be required to make an offer and any person acting in concert with him and do not have any interest in the Fundraising which may compromise their independence ("the Independent Shareholders") pass an ordinary resolution on a poll at a general meeting ("a Whitewash Resolution") approving such a waiver. I also understand that the Panel may waive the requirement for a Whitewash Resolution to be considered at a general meeting (and for a circular to be prepared in accordance with Section 4 of Appendix 1 to the Code) if Independent Shareholders holding more than 50 per cent. of the company's shares capable of being voted on such a resolution confirm in writing that they would vote in favour of the Whitewash Resolution were one to be put to the shareholders of the company at a general meeting.
Confirmations and Acknowledgements
I hereby confirm the following:
1. that I am the beneficial owner of [●] ordinary shares in the issued share capital of the Company representing at the date hereof [●]% of the Company's issued share capital carrying voting rights, and I have absolute discretion over the manner in which these shares are voted. These shares are held free of all liens, pledges, charges and encumbrances;
2. that (a) there is no connection between myself and either of Kingswood or Astoria, (b) I do not have any interest or potential interest (other than in my capacity as a shareholder), whether commercial, financial or personal, in the outcome of the Fundraising, and (c) I am an Independent Shareholder of the Company as defined above; and
3. that, in connection with the Fundraising:
(a) I consent to the Panel granting a waiver from the obligation for either of Kingswood and Astoria to make a Rule 9 offer to the shareholders of the Company;
(b) I consent to the Panel, subject to Independent Shareholders of the Company holding more than 50% of the shares capable of being voted on a Whitewash Resolution to approve the waiver from the obligation for each of Kingswood and Astoria to make a Rule 9 offer giving confirmations in writing in a similar form to this letter, dispensing with the requirement that the waiver from such obligation be conditional on a Whitewash Resolution being approved by Independent Shareholders of the Company at a general meeting; and
(c) I would vote in favour of a Whitewash Resolution to waive the obligation for each of Kingswood and Astoria to make a Rule 9 offer were one to be put to the Independent Shareholders of the Company at a general meeting.
In giving the confirmations referred to above, I acknowledge:
1. that, if the Panel receives such confirmations from Independent Shareholders of the Company holding more than 50% of the shares capable of being voted on a Whitewash Resolution, the Panel will approve the waiver from the obligation for either of Kingswood or Astoria to make a Rule 9 offer without the requirement for the waiver having to be approved by Independent Shareholders of the Company at a general meeting;
2. that if no general meeting is held to approve the Whitewash Resolution to waive the obligation for either of Kingswood or Astoria to make a Rule 9 offer:
(a) there will not be an opportunity for any other person to make any alternative proposal to the Company conditional on such Whitewash Resolution not being approved by Independent Shareholders of the Company;
(b) there will not be an opportunity for other shareholders in the Company to make known their views on the Fundraising; and
(c) there will be no requirement for the Company either (i) to obtain and make known to its shareholders competent independent advice under Rule 3 of the Code on the Fundraising and the waiver of the obligation for either of Kingswood and Astoria to make a Rule 9 offer or (ii) to publish a circular to shareholders of the Company in compliance with Appendix 1 of the Code in connection with this matter.
I consider myself to be a sophisticated investor in relation to equity investments. I confirm that I have had the opportunity to take independent financial advice before signing this letter.
I confirm that I will not sell, transfer, pledge, charge, or grant any option or other right over, or create any encumbrance over, or otherwise dispose of its shares in the Company until at least after the conclusion of the proposed General Meeting to approve the issuance of the New Ordinary Shares pursuant to the Fundraising.
I, the signee, have full power and authority to sign this letter on behalf of [●] which is a binding obligation upon it.
Signed for and on behalf of [●].