11 Dec 2009 07:00
Formation Group PLC (the "Company")
Disposal of Wealth Management businesses
Formation Group PLC ("the Group") has today announced the disposal of the assets of Formation Wealth Solutions Ltd ("FWS") and certain of the assets of its other wealth management businesses; Formation Asset Management Ltd ("FAM").
These disposals are in line with the Group's strategy to concentrate its efforts in the property sectors and follows the disposal of all its other non-property based businesses in August of this year.
Wealth FX which is owned by Ian Battersby, a FAM board director, has acquired the assets of FWS. These are essentially the contracted client incomes in the business. The consideration, which is payable over a 5 year period, is expected to be in the region of £225,000 which represents a multiple of 1.5x annual income spread over 3 key contracts. This figure is predicated on these investment products performing in line with expectation. Ian will step down from the board of FAM with immediate effect.
Certain of the assets of FAM, again, contracted client income streams are being acquired by Iain Muffitt who is a director of FAM (and will also leave the FAM board with immediate effect) Iain will also pay a multiple of approximately 1.5x the contracted value over a 3 year period. This FAM asset disposal also includes percentage payments to the Group for new business incomes derived by Iain from the clients transferring across to him. It is difficult to place a precise figure on the total consideration the Group expects to realise from this FAM asset deal. It is hoped that with contracted income and the negotiated new business portion, the total over the period will be in the region of £125,000. The company remains in discussions with another third party in respect of other contracted income assets of FAM.
Both FAM and FWS will be retained by the Group for a period of time in order to wind down these companies and in FAM's case, in accordance with its regulatory framework as a directly authorised FSA business. The businesses will cease trading new business with immediate effect and FAM will cease all regulated activities in line with the conclusion of its other FAM asset deal discussions. Clients of both companies are being communicated with to explain these changes.
The above transactions are related party transactions under the AIM Rules as Ian Battersby was a director of the Company within the last 12 months and Iain Muffitt is a director of a subsidiary undertaking. Where a company enters into a related party transaction the director's independent to the transaction must state, after consultation with its nominated adviser, that the terms of the transaction are fair and reasonable insofar as its shareholders are concerned.
The directors of the Company consider, after consultation with Zeus Capital the Group's nominated adviser, that the terms of these disposals are fair and reasonable insofar as its shareholders are concerned.
Commenting, John Lawrence, Non-Executive Chairman, Formation Group PLC said; "These disposals 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 this FAM asset disposal 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 exiting directors 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
FRM.L (FRM)