TIDMEWG
RNS Number : 2379T
European Wealth Group Limited
10 October 2017
European Wealth Group Limited
("European Wealth" or the "Company")
Proposed acquisition, proposed financing and proposed change of
name
European Wealth Group Limited (AIM: EWG, EWGL), the integrated
wealth management group, announces that it has today agreed
detailed heads of terms (the "Heads of Terms") to acquire the
entire issued share capital of KPI US Holdco Inc ("KPI US") (the
"Acquisition"). Subject to entering into a final Acquisition
agreement, completion of the Acquisition will be conditional on,
inter alia, KPI US having in turn become the 100% owner of
Newbridge Securities Corporation and Newbridge Financial Services
Group, Inc, (together "Newbridge") (the "Newbridge Acquisition"), a
US based national broker-dealer and registered investment adviser
platform.
KPI US is owned and controlled by KPI (Nominees) Limited
("Kingswood"). Kingswood is a related party of the Company for the
purposes of the AIM Rules by virtue of being a 39.99% shareholder
in European Wealth.
Subject to the entry into of the Acquisition agreement, the
Company will fund the initial consideration of US$14.6m (the
"Initial Consideration") payable by KPI US in connection with the
Newbridge Acquisition using the proceeds of a convertible loan from
Kingswood (further details of which are set out below). US$2.0
million of the Initial Consideration will be held in escrow to
cover any potential warranty claims, for phased release from escrow
over a period of three years from the completion of the Newbridge
Acquisition. The Acquisition and the Newbridge Acquisition would
complete simultaneously. The Company has also agreed to reimburse
KPI US for its expenses incurred in relation to the Newbridge
Acquisition. In addition there is expected to be an element of
deferred consideration payable by the Company to Kingswood in
connection with the Acquisition depending on the future performance
of the Newbridge business over a five year period from the
completion of the Acquisition.
The Acquisition will be subject to regulatory approval from the
Financial Industry Regulatory Authority ("FINRA"), the applicable
regulatory authority in the US, and the Acquisition is expected to
close in late 2017 or early 2018.
Newbridge
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$28.0m and profit before tax of US$(0.5)m. As at 31
December 2016, Newbridge had net cash of US$0.7m and total gross
assets of US$2.5m. 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 the successful completion of the Acquisition the
Company will have approximately 20,000 clients and in excess of
US$4 billion AUM. The board believes that following completion of
the Acquisition the enlarged platform will benefit from significant
operational synergies, leveraging its global distribution power to
retail and institutional investors while providing regulatory
efficiencies across the Group. It will benefit from economies of
scale through integrated product development and technical
support.
Proposed financing
Under the Heads of Terms, the Company proposes to fund the
Initial Consideration and the costs of the Acquisition by entering
into a convertible loan in the sum of US$17.6 million with
Kingswood (the "Convertible Loan"). Kingswood will also be
providing two revolving working capital facilities to the Company -
one (in the sum of US$2.0 million) to be used exclusively for the
Newbridge business post Acquisition and the other (in the sum of
GBP2.0 million) exclusively for the Company's UK business.
The terms of the Convertible Loan are proposed to be as
follows:
-- Total quantum US$17.6 million
-- Interest rate of 7.5% per annum from the date of drawdown
-- Repayable 3 years from the date of approval from FINRA for the Acquisition
-- The Company can repay the Convertible Loan in whole or in part at any time without penalty
-- The Convertible Loan is convertible by either the Company or
by Kingswood subject to shareholder approval of the necessary
authorities for the issue of new shares and subject to any other
applicable regulatory approvals
-- The conversion price will be the lower of 16.5 pence, being
the mid-market close price on the last business day before this
announcement, 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
-- If the Acquisition does not complete, then any amount of the
Convertible Loan that has been drawn down will be repaid without
interest
The Company will also be exploring with Kingswood the
possibility of offering participation in the Convertible Loan to
other shareholders in the Company who express an interest in
participating.
The Company will now focus on moving as quickly as possible from
the Heads of Terms (which, although finalised, are not legally
binding) to agreeing binding legal documentation with Kingswood (to
cover both the Acquisition and the Convertible Loan) and to
finalising the applicable application to FINRA.
Proposed change of name
The Board believes that, given the proposed changes to European
Wealth's group structure, this is an appropriate time to change the
Company's name. Subject to shareholder approval, the Board is
proposing to change the Company's name to Kingswood Limited, under
which every activity of the Company will be branded.
Further announcements regarding each of the Acquisition, the
Company's financing and the proposed name change will be made in
due course, as appropriate, including for the related party
procedures pursuant to Rule 13 of the AIM Rules once final
documentation has been agreed.
Commenting on the proposed Acquisition, CEO of European Wealth,
Marianne Ismail, said:
"We are ambitious to grow organically and energetically by
acquisition. This is our first key step to deliver a profitable and
differentiated strategy in the financial services arena.
"Newbridge presents a unique opportunity to invest in an
established, well-positioned company that significantly increases
our global footprint by gaining immediate access to the largest
wealth management market in the world. We are confident that the
proposed acquisition will allow us to accelerate our growth path
towards our stated ambition of becoming a global vertically
integrated financial services platform.
"It will empower us to benefit from increased scale, enhance our
product proposition and leverage operational efficiencies to
attract more clients, and significantly increase our AUM."
Commenting on the proposed Acquisition both Leonard Sokolow,
Chairman of Newbridge, and Thomas Casolaro, CEO of Newbridge,
stated:
"We believe that the proposed combination of our two businesses
represents an exciting opportunity to grow a truly global business
focused on delivering innovative products to our clients. European
Wealth benefits from supportive shareholders, and with their
backing, we can aim to rapidly build our product offering and
global footprint, and ultimately, enhance our returns to
shareholders."
For further details, please contact:
European Wealth Group +44 (0)20 7623
Limited 2368
Marianne Ismail
Hugo Evans
finnCap Ltd (Nomad
and Broker) +44 (0)20 7220 0500
Adrian Hargrave
Scott Mathieson
Anthony Adams
Redleaf Communications +44 (0)20 7382 4730
Emma Kane
Robin Tozer
This information is provided by RNS
The company news service from the London Stock Exchange
END
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