TIDMESG
RNS Number : 0852B
eServGlobal Limited
04 June 2019
eServGlobal Limited ("eServGlobal" or the "Company")
Proposed Sale of eServGlobal core business and proposed change
of name
4 June 2019
eServGlobal (LSE: ESG.L & ASX: ESV.AX), a pioneering digital
transactions technology Company, is pleased to announce that it has
signed a conditional sale and purchase agreement (the "SPA") to
sell its core, eServGlobal operating business and associated assets
(the "Core Business") to Seamless Distribution Systems AB
("Seamless") (the "Transaction") which is subject to shareholder
approval. Following the Transaction, the Company's only trading
activity will be the management of its 35.68 per cent. stake in
HomeSend SCRL ("HomeSend"). The Transaction will have no impact of
the Company's investment in HomeSend and the Board does not intend
to acquire any further operating businesses post completion of the
Transaction. The Board is also seeking shareholder approval of a
change of the Company's name to "Wameja Limited".
The Transaction is deemed to be a "fundamental change of
business" as described in Rule 15 of the AIM Rules for Companies
and a disposal of the Company's main undertaking within the meaning
of ASX Listing Rule 11.2, therefore, the Company is required to
seek the consent of the Company's shareholders, which it is doing
by way of a resolution to be proposed at an extraordinary general
meeting. Should the Transaction complete, the Company will continue
to trade on AIM as an operating company rather than an investing
company. The Transaction is conditional upon shareholder
approval.
A Notice of Extraordinary General Meeting ("EGM") and
accompanying explanatory memorandum, which will provide further
details of the proposed Transaction, will, subject to ASX review,
be sent to shareholders soon and will be available on the Company's
website at https://www.eservglobal.com/investors.
Transaction highlights:
Subject to shareholder approval, the Company has agreed to sell
its shareholding in eServGlobal Holdings SAS and PT eServGlobal
Indonesia to Seamless on the following terms and conditions:
1. The purchase price is EUR2,000,000 in cash, subject to the following adjustment:
a. The purchase price shall be reduced to the extent that the
equity value (being total assets less total liabilities) of the
Core Business, at 30 April 2019, as calculated in accordance with
agreed accounting standards and policies, is less than a target
amount of EUR3,594,000. The maximum adjustment is EUR500,000.
b. There is no adjustment to increase the purchase price.
2. The only condition precedent to completion is that the
Transaction and the proposed change to the Company's name are
approved by the Company's shareholders. Seamless may terminate the
SPA if the Transaction is not approved by 60 days from the date of
this announcement and, in certain circumstances, including if the
agreed equity value as at 30 April 2019 is less than
EUR3,094,000.
The Company has received undertakings from certain shareholders
in respect of 501,433,371 Ordinary Shares in aggregate to vote in
favour of the resolutions, representing approximately 41.4 per
cent. of the entire issued share capital of the Company. Further
details in respect of the undertakings can be found below.
Post Completion
In 2020, the Directors expect that the annualised ordinary
course operating expenses will be reduced to approximately
EUR300,000 per year through the outsourcing of the back office and
finance function and the reduction of Board and management
expenses.
It is expected that Andrew Hayward will cease as a Director and
Chief Financial Officer on or about the time that the Transaction
completes ("Completion") and that John Conoley will cease in his
executive role within six months of Completion (with the Chairman's
role reverting to a non-executive position).
After transaction costs, the Directors expect that the Company
will, following Completion, have cash and receivables as set out
below.
Estimated cash and cash equivalents post completion (after
taking into account the purchase price less deal related costs) is
expected to be approximately EUR13 million. Of this amount, EUR9
million is allocated to existing credit facilities in place for
HomeSend as well as a further EUR2.2 million of expected HomeSend
working capital requirement.
In addition to the HomeSend commitments, the remaining cash will
be applied towards restructuring costs of the Company subsequent to
completion of the Transaction (approximately EUR1 million) and
ongoing operating expenses.
On Completion, all of the 11,000,000 executive options and
6,575,000 employee options will vest and be available to exercise.
The exercise price is A$0.21. The Board has resolved, pursuant to
the terms of the options, to extend the exercise period to the
current expiry date of the options for each holder who ceases
employment with the Company as a result of Completion (the options
would otherwise have expired 90 days after the holder ceased
employment with the Company). Completion will not have any impact
on the performance options in issue.
Commenting on the Transaction, John Conoley, Executive Chairman
of eServGlobal, said:
"We are pleased to have found a good home for our core business
with the acquisition by Seamless. We have worked hard to reshape
the core business into an asset that now has greater value as part
of a complementary entity within the Seamless organisation. This is
good for our customers, and importantly should provide better
opportunity for many of our people who have worked hard to get the
company to this point. I wish Seamless well in the future. Looking
forward, the focus of the eServGlobal Board will solely be on its
relationships with HomeSend and Mastercard as the Board continues
to seek to maximise the value of the asset for eServGlobal
shareholders."
This announcement contains inside information as stipulated
under the Market Abuse Regulation (EU) No. 596/2014.
For further information, please contact:
eServGlobal www.eservglobal.com
John Conoley, Executive Chairman investors@eservglobal.com
Tom Rowe, Company Secretary
Andrew Hayward, Chief Financial Officer
Alison Cheek, VP Corporate Communications
finnCap Limited (Nomad and Broker) www.finnCap.com
Corporate Finance: Jonny Franklin-Adams / T: +44 (0) 20 7220
Anthony Adams / Hannah Boros 0500
Corporate Broking: Tim Redfern / Richard Chambers
PricewaterhouseCoopers LLP (Financial advisor www.pwc.com
to eServGlobal) T: +44 (0) 20 7583
Jon Raggett 5000
Tulchan Communications LLP www.tulchangroup.com
Jonathan Sibun / Matt Low T: +44 (0)207 353 4200
PricewaterhouseCoopers LLP ("PwC"), which is authorised and
regulated in the United Kingdom by the Financial Conduct Authority
("FCA"), is acting exclusively for eServGlobal in relation to the
Transaction and for no-one else in connection with the Transaction
or the matters referred to in this announcement and will not be
responsible to any person other than eServGlobal for providing the
protections afforded to clients of PwC, nor for providing advice in
relation to the Transaction nor to the matters referred to herein.
Neither PwC nor any of its members owes, accepts or assumes any
duty of care, liability or responsibility whatsoever (whether
direct or indirect, whether in contract, in tort, under statute or
otherwise) to any person who is not a client of PwC in connection
with the matters referred to in this announcement, or
otherwise.
About eServGlobal
eServGlobal (AIM:ESG, ASX:ESV) is a pioneering digital financial
transactions technology company, enabling financial and
telecommunications service providers to create smoother
transactions for their customers through deep technical expertise
and rapid implementation. Built on the latest technology platforms,
eServGlobal offers a range of transaction services including
digital wallets, commerce, remittance, recharge, rapid service
connection and business analytics. eServGlobal combines more than
30 years' experience, with an agile, future-focused mindset, to
align with the requirements of customers and partners around the
globe.
Together with Mastercard, eServGlobal is a joint venture partner
of the HomeSend global payment hub, enabling cross-border transfer
between bank accounts, cards, mobile wallets, or cash outlets from
anywhere in the world.
Background to the Transaction and Use of Proceeds
The Core Business has made significant progress over the last
few years in terms of reducing its cost base, entering FY19 with an
annualised cost base and breakeven point of EUR10 million, albeit
the timing and cost of this right-sizing exercise have proved
greater than initially anticipated. Despite revenue falling short
of market expectations in FY18 due to various contract delays, the
Company has since announced contract wins for the Core Business
with new and existing customers and the Core Business entered FY19
with a strong pipeline. The Board has determined, however, that it
is in the best interest of shareholders to dispose of the Core
Business and is pleased that the investment and efforts made to
date in positioning the business as an asset have resulted in the
realisation of value for shareholders through the Transaction.
The Company has undertaken an extensive sale process with the
help of its advisers for the sale of the Core Business. The terms
and conditions of the Transaction are the most commercially
advantageous to the Company that have been obtained.
It has been apparent for some time that the Company's
shareholders have considered the inherent value of the Company to
lie with its investment in HomeSend. The Transaction will enable
the Company to focus its resources on realising the future value of
the Company's stake in HomeSend and to provide ongoing support for
the growth of HomeSend. The Company will retain its two seats on
the HomeSend Board, currently held by John Conoley, Executive
Chairman, and James Hume, Chief Operating Officer.
Given the significantly reduced cost base of the Company going
forward, Board is reviewing all operating costs of the Company and
following the completion of the Transaction there will be
significant cost reductions across all aspects of the Company. A
further update on the Company's ongoing strategy will be provided
in due course.
Financial information on eServGlobal
In the audited results for the year ended 31 December 2018, the
Core Business generated revenue of EUR7.1m (A$11.2m), gross profit
of EUR2.3m (A$3.5m) and adjusted EBITDA loss of EUR3.9m
(A$6.2m).
Information on Seamless
Seamless Distribution Systems AB is a technology and digital
distribution company, providing technology solutions to mobile
operators and retail distributors in 30 countries. Based in Sweden,
Seamless is listed on Nasdaq First North Premier (Ticker: SDS) and
has a global presence in over 30 countries with specliased focus in
the emerging markets of Africa, Americas, Europe, Asia and Middle
East. Seamless operates a proprietary Transaction Switch platform,
branded as ERS 360deg, which is a multi-access electronic
transaction platform, hosting end-to-end functional solutions for
retail distributors, telecom operators and other service
providers.
Change of Name
The terms of the sale of the Core Business require that the
Company cease to use the name "eServGlobal."
The Board intends to obtain Shareholder approval at the EGM to
change the Company name to "Wameja Limited". If approved, the
Directors intend to apply to Australian Securities and Investments
Commission for the change of name on Completion.
Intentions to vote in favour
The Directors consider the passing of the resolutions to approve
the Transaction and to change the Company's name (the
"Resolutions") to be proposed at the EGM to be in the best
interests of the Company and its shareholders as a whole and,
accordingly will unanimously recommend that shareholders vote in
favour of the Resolutions. Furthermore, certain institutional
investors, including Lombard Odier Asset Management (Europe)
Limited, Toscafund Asset Management LLP, AXA Investment Managers UK
Limited, Herald Investment Management Limited, Canaccord Genuity
Wealth Management, have undertaken to vote in favour of the
Resolutions to be proposed at the EGM in respect of their aggregate
shareholdings of 501,433,371 Ordinary Shares, representing
approximately 41.4 per cent. of the issued share capital of the
Company.
Further information on the SPA
1. Prior to completion, the Company has agreed, amongst other
obligations customary in a transaction of this type, to:
a. Regularly consult with Seamless regarding the conduct of the Core Business.
b. Not terminate any material agreement.
c. Only enter into agreements and undertaking on terms and
conditions customary for the Core Business and not change prices or
discount terms.
d. Not materially change the terms of any employment
arrangements and not hire or dismiss any employees without
Seamless' agreement.
e. Not increase the indebtedness of eServGlobal Holdings SAS,
its subsidiaries or PT eServGlobal Indonesia or dispose of any
assets, other than in the ordinary course of business.
2. The Company has given warranties to Seamless which are
reasonable in the circumstances taking into account the
jurisdictions in which the Core Business operates, the nature of
the Core Business and the liabilities being acquired by Seamless as
a share sale rather than asset sale. The warranties include:
a. No infringement of third party intellectual property rights.
b. Compliance with laws regarding data protection.
c. Anti-money laundering and terrorism financing,
anti-corruption and trade sanctions ("Anti-Corruption
Warranties").
d. Compliance with tax laws.
e. Compliance with employment laws
f. Accuracy and completeness of information provided by the
Company and its subsidiaries during the due diligence process.
The warranty claim period is until 31 January 2024 in respect of
tax warranties and certain fundamental warranties relating to title
to assets and authority to enter into the agreement with a period
of twelve months from Completion for the balance of the
warranties.
The warranty claims, other than claims under fundamental
warranties relating to title to assets and authority to enter into
the agreement and Anti-Corruption Warranties, are limited to a
total amount of EUR1,000,000 less the amount of any adjustment made
to the purchase price under 1(a) above or less any amount by which
the equity value exceeds EUR3,594,000 subject to a maximum
reduction of EUR500,000.
Claims under fundamental warranties relating to title to assets
and authority to enter into the agreement are limited to the
adjusted purchase price less any amount received by Seamless under
a non-fundamental warranty or less any amount by which the equity
value exceeds EUR3,594,000, subject to a maximum reduction of
EUR500,000. The Anti-Corruption Warranties are uncapped.
3. The Company has given an indemnity to Seamless in relation to
certain operational employment matters.
4. Until Completion, the Company has agreed that it will not
solicit, initiate, encourage, assist, discuss or enter into any
agreement, understanding or arrangement with respect to any offer,
negotiation or proposal from any third party for the sale of the
Core Business or sale of the shares in eServGlobal Holdings SAS or
PT eServGlobal Indonesia.
5. Seamless is entitled to the following break fees if the
agreement to acquire the Core Business is terminated by Seamless in
the following circumstances:
a. A breach of warranty by the Company with an estimated impact
to the equity value of eServGlobal Holdings SAS as at completion of
or exceeding EUR200,000.
b. The Company accepting an offer in breach of the non-solicit
obligations described in paragraph 4 above; or,
c. the Directors withdrawing their recommendation to shareholders to approve the Transaction.
The break fee is EUR200,000 in respect to paragraph 5(a), being
a reasonable estimate of the fees, expenses and internal costs
incurred by Seamless in conducting extensive due diligence of the
Core Business and the negotiation of the terms of the sale and
purchase.
The break fee, in respect to paragraph 5(b), is the difference
between the purchase price payable by Seamless and the value of
consideration payable under the offer accepted in breach of the
obligations described under paragraph 4 but shall be a minimum of
EUR700,000 but no more than EUR1,000,000.
The break fee in respect of paragraph 5 (c) is EUR700,000.
There is no break fee if the shareholders do not approve the
Transaction.
6. The Company has agreed that it will not for a period of three
years from completion directly or indirectly conduct, hold an
interest in or in any other way promote a business activity that
competes with any of the activities of the Core Business. The
Company's involvement in HomeSend is specifically excluded from
this restraint.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
MSCEANKLESSNEEF
(END) Dow Jones Newswires
June 04, 2019 06:01 ET (10:01 GMT)
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