Mercia Asset Regulatory News (MERC)

4 Oct 2007 07:00

Merchant Securities PLC04 October 2007 4 October 2007 News release Merchant Securities plc ("MS" or "the Company") Acquisition of John East & Partners Limited group, placing to raise £1.5 million and appointment of a new director The Acquisition MS is pleased to announce that it has entered into an agreement (the "Agreement") to acquire the entire issued ordinary share capital of -- East, WorlidgeHoldings Limited (the "Acquisition") for a consideration of £4.9 million, ofwhich £2.3 million shall be satisfied in cash and the remaining £2.6 million tobe satisfied by the issue of 7,428,571 new ordinary shares of 10p in the capitalof the Company ("Consideration Shares"). The Agreement is conditional upon theadmission to AIM of the Consideration Shares. Further consideration may become payable in cash on a pound for pound basisfollowing the sale of investments owned by East, Worlidge Holdings Limited ("EWH") and the cash consideration will be adjusted, on a pound for pound basis, tothe extent that EWH's net current assets exceed, or fall short of, £900,000.MS has also agreed to acquire the B share capital of EWH for a cashconsideration of £186, 045. The only asset attributable to the EWH B shares iscash of £186,045 arising from a sale of shares in the London Stock Exchange plc. EWH is the holding company for John East & Partners Limited ("JEP"). JEP is amember firm of the London Stock Exchange, specialising in providing corporatefinance advice and raising capital for smaller public companies and companiesseeking a public listing. It is authorised to act as a nominated adviser tocompanies whose shares are quoted on AIM and is currently nominated adviser to33 AIM companies (and broker to 22 of these companies), a sponsor to companieswhich are officially listed and is retained financial adviser to one suchcompany and is a corporate adviser to Plus market companies and has one suchretained client. Its scope of work is broad and covers IPO advice andfundraising, secondary fundraisings, public company takeover transactions andthe provision of general financial advice. JEP was shortlisted by GrowthCompany Investor for the AIM adviser of the year award in 2003, 2004, 2005 and2007. JEP employs 11 members of staff, of which seven are employed in corporatefinance, one in institutional distribution and three in administration, financeand compliance. In the year ended 31 December 2006, EWH earned a consolidated net profit beforeexceptional items and taxation of £452,000 on turnover of £2.36 million and hadconsolidated net assets attributable to ordinary shareholders on that date of£859,000 Its unaudited management accounts for the eight month period ended 31August 2007, showed a consolidated net profit before exceptional items andtaxation of £461,000 for the period and consolidated net assets attributable toordinary shareholders of £1.227 million on that date. EWH's shareholders areJohn East, David Worlidge and members of his family, Simon Clements and his wifeand Marylebone Property Holdings Limited. On completion of the Acquisition, John East will join the Board of the Company,John East and David Worlidge will join the board of Merchant Securities GroupLimited ("MSGL"), the Company's operating subsidiary and Tony Fabrizi, ChiefExecutive of MS, will join the Board of JEP. It is intended that JEP will continue as a separate commercial entity operatingin the ordinary course of business. However, there are a number of benefitswhich the directors of MS believe will accrue to the enlarged group as a resultof the Acquisition. In particular, they believe that: • MSGL's fund raising capabilities in the private equity and pre-IPOmarkets and its corporate finance activities will benefit significantly from theaddition of a nominated adviser to the group, providing the opportunity forincreased activity generally and greater client retention; • JEP's institutional distribution activities will benefit from theinstitutional trading, research activities and private equity capability ofMSGL; • additional business opportunities will result from the ability tooffer a fully integrated service and referrals of clients across the group; • the Acquisition will provide the group with greater critical mass,provide economies of scale and raise the profile of both MS and JEP; and • as a member of a publicly quoted group, JEP will be able to useshare incentives to reward and retain its high calibre team and attractadditional executives. The Placing In order to settle part of the cash element of the consideration, MS has raised£1.5 million by a placing (the "Placing") of 4,298,700 new MS ordinary shares of10p in the capital of the Company at 35p per share ("Placing Shares"). As partof the placing, each director of the Company has agreed to subscribe for PlacingShares. Their subscriptions, consequent shareholdings and percentageshareholdings of the Company's share capital following the subscription, are asfollows: Shares subscribed Consequent Percentage shareholding shareholding %John Green (non-executive chairman) 42,857 125,431 0.40Tony Fabrizi (chief executive) 500,000 5,458,001 17.52Patrick Claridge (chief operating officer) 357,142 1,348,028 4.32Steven Whelton (finance director) 28,571 61,601 0.19Charles Price (non-executive director) 85,714 416,009 1.33John East (proposed director) 143,229 3,495,000 11.22 The total contribution of the directors is £405,130 and, following completion ofthe Acquisition and Placing, the board's aggregate shareholding (including thatof John East) will be 10,904,070 Shares, equivalent to approximately 35 per centof the enlarged MS issued share capital. The Placing Shares and the Consideration Shares will, when issued, rank paripassu in all respects with the existing Ordinary Shares in issue, including theright to receive any dividends and other distributions declared following theiradmission to trading on AIM. It is expected that admission of the Placing Shares and the Consideration Sharesto trading on AIM will become effective and that dealings will commence on 9October 2007. Appointment of Director John Richard Alan East, aged 58, has entered into a new service agreement withJEP as Executive Chairman dated 3 October 2007, for an initial period of 12months, subject to termination on six months' notice thereafter by either party.The agreement provides for an initial annual salary of £150,400 per annum. Inaddition to his salary, the Company will pay for private medical insurance forJohn East and his family and contribute to his personal pension at the rate of15 per cent. of his annual salary per annum. Under the terms of an engagementletter dated 3 October, 2007, John East has been appointed, conditional upon thecompletion of the Acquisition of EWH, as a director of the Company. John East's current directorships are set out below: East, Worlidge Holdings Limited John East & Partners Limited Vestry Nominees Limited Barwood Securities Limited Carlton Club (London) Limited Carlton Club (Trustees) Limited Carlton Club Collection Limited Mr East was a director of The Guidehouse Group plc which was placed intoadministrative receivership (along with a number of its subsidiaries, of whichhe was also a director) on 18 December 1991. The estimated total deficiency asregards creditors was £2.42 million. He has confirmed that there are no othermatters to be disclosed in relation to Schedule 2 (g) of the AIM Rules. Following completion of the Acquisition and the Placing, John East will hold3,495,000 MS ordinary shares, equivalent to 11.22 per cent of the enlarged MSordinary share capital. As all the directors of MS are participating in the Placing this constitutes arelated party transaction under Rule 13 of the AIM Rules for Companies. Thedirectors of MS having consulted with their nominated adviser, Arden PartnersLimited, consider that the terms of the Placing are fair and reasonable insofaras shareholders of MS are concerned. Merchant Securities' Chief Executive Officer Tony Fabrizi commented: "We believe that the Acquisition represents a transforming change for thebusiness and will deliver significant benefits across the group. JEP has been ahighly respected Nomad for many years and it's our joint aspiration to developthe Nomad and institutional business together to provide a high calibre serviceaimed at UK small companies. We are also delighted to welcome John East to the Board of the Company andbelieve that his experience will be invaluable to the business. Overall, weintend to use this transaction as a platform to build a broadly based financialservices group that provides services to corporate clients, institutionalinvestors and private investors." John East, Executive Chairman of JEP, commented: "We are delighted to be joining forces with Merchant Securities and becoming apart of the Merchant Securities Group. We believe that the enhanced range ofexpertise and services available across the enlarged group will bringconsiderable benefit to our clients and other stakeholders" About Merchant Securities plc Merchant Securities plc provides a range of financial service products andadvice to high net worth private clients, institutions and small businesses. TheCompany's main operating subsidiary, Merchant Securities Group Limited , isauthorised by the Financial Services Authority and provides a variety ofservices, including asset and advisory management to high net worth privateclients, sales trade institutional investors, and private equity funding andcorporate advice for small UK companies. For further information, please contact: Merchant Securities plc Tel: 020 7375 9010Tony Fabrizi (Chief Executive Officer) John East & Partners Limited Tel: 020 7628 2200John East (Executive Chairman) Broadgate Tel: 020 7726 6111Roland Cross/Emma Murphy Arden Partners Limited Tel: 020 7398 1600Paul Davies This information is provided by RNS The company news service from the London Stock Exchange