TIDMEWG
RNS Number : 7208V
European Wealth Group Limited
07 November 2017
European Wealth Group Limited
("European Wealth" or the "Company" and, together with its
subsidiaries,
the "EWG Group")
Acquisition of Newbridge and Funding
European Wealth Group Limited (AIM: EWG, EWGL), the integrated
wealth management group, announces that, further to the
announcement made on 10 October 2017, the Company has today signed
the stock purchase agreement (the "SPA") to acquire the entire
issued share capital of KPI US Holdco Inc ("KPI US") from KPI
(Nominees) Limited ("Kingswood") (the "Acquisition"). Prior to the
signing of the SPA, KPI Newbridge Holdings, Inc (a wholly owned
subsidiary of KPI US) has entered into a separate stock purchase
agreement to become 100% owner of Newbridge Securities Corporation
and Newbridge Financial Services Group, Inc. (together "Newbridge")
(the "Newbridge Acquisition").
Under the terms of the SPA, the Company will pay Kingswood an
initial consideration of US$1.00 for KPI US and will assume
liabilities relating to the Newbridge Acquisition totalling US$17.6
million (the "Newbridge Acquisition Liabilities").
As previously disclosed, completion of the Acquisition and of
the Newbridge Acquisition ("Completion") is conditional on receipt
of regulatory approval from the Financial Industry Regulatory
Authority ("FINRA") ("FINRA Approval"), the applicable regulatory
authority in the US. The signing of the SPA enables the FINRA
Approval process to commence. Only upon Completion will the
Newbridge Acquisition Liabilities become payable by the
Company.
The Newbridge Acquisition Liabilities comprise:
- US$12.635 million payable on Completion to the current owners of Newbridge;
- the funding of a US$2.0 million promissory note that will be
released to the current owners of Newbridge over a three year
period subject to deductions for any specified warranty claims;
and
- the payment (or, where applicable, reimbursement) of US$3.0
million of costs incurred by KPI US and/or by KPI Newbridge
Holdings, Inc. in relation to the Newbridge Acquisition and in
relation to its preparation.
In addition, Kingswood will receive deferred consideration in
relation to Newbridge in the form of an earn-out based on the
future EBITDA performance of Newbridge over five years to 31
December 2022 (the "Earn-out"). The Earn-out reflects the strategic
plan developed for Newbridge by Kingswood. The Earn-out is capped
at US$25.0 million over the five year period and is calculated as a
percentage of the EBITDA achieved by Newbridge (in each of the five
years to 31 December 2022) over a threshold EBITDA figure per year
of US$3.62 million (the "EBITDA Threshold Figure"). If the EBITDA
Threshold Figure is not reached in any given year, no earn-out
payment will be due in respect of that year. Kingswood has the
option to elect to receive ordinary shares in the Company instead
of the cash payments payable under the Earn-out, subject to
relevant shareholder and regulatory approvals, at the average
closing price of an ordinary share for the 20 business days prior
to an election to receive ordinary shares.
Funding
Concurrently with the SPA (and in order to fund the Newbridge
Acquisition and the development of the EWG Group), the Company has
also entered into a facilities agreement (the "Facilities
Agreement") with Kingswood (the "Funding"). The Funding will
comprise a convertible term loan facility comprising a GBPGBP10.00
million facility and a US$5.0 million facility (the "Term Loan
Facility") together with two convertible working capital term
facilities - one in the sum of US$2.0 million ("Facility A") and
the other in the sum of GBP2.0 million ("Facility B").
Term Loan Facility
The key terms of the Term Loan Facility are as follows:
-- Total quantum: GBPGBP10.0 million and US$5.0 million.
-- Interest rate of 7.5% per annum from the date of drawdown.
-- Repayable three years from the date of FINRA Approval.
-- Repayable by the Company in whole or in part at any time without penalty.
-- Either the Company or Kingswood may request a conversion at any time.
-- The conversion terms require shareholder approval (which will
be sought at an Extraordinary General Meeting of the Company, to be
convened in the coming weeks) and applicable regulatory approvals
from the FCA and FINRA. If shareholders do not approve the
conversion terms, the Funding will be repayable forthwith.
-- The Company may not however require conversion unless there
is also a Rule 9 Waiver in place confirming that Kingswood does not
need to make a takeover offer (to the Company's other shareholders)
as a result of converting - it is intended that this Rule 9 Waiver
will also be sought at the Extraordinary General Meeting referred
to above.
-- The conversion price will be the lower of 16.5 pence (being
the mid-market close price on the last business day before the
initial announcement of the Newbridge Acquisition on 10 October
2017) 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.
-- It is intended that (so far as is practicable) participation
in the Term Loan Facility will be offered to the Company's larger
shareholders on a proportionate participation basis, subject to a
minimum proportionate participation level per shareholder of
GBP100,000 - shareholders will be contacted shortly on this
participation by way of letter (and ahead of receiving the
documents for the Extraordinary General Meeting).
-- The full amount of the Term Loan Facility is underwritten by Kingswood.
-- Kingswood will receive an underwriting fee of 1%, an
arrangement fee of 0.75% and a non-utilisation fee of 0.5%.
-- The consent of Kingswood is required for the payment of any
dividends by the Company until the Term Loan Facility (and Facility
A and Facility B) have been repaid.
Facility A
-- US$2.0 million working capital facility
-- Interest rate of 7.5%
-- Repayable three years from the date of FINRA Approval
-- Can only be used to fund working capital requirements of Newbridge
-- Convertible on the same terms and conditions as the Term Loan Facility
Facility B
-- GBPGBP2.0 million working capital facility
-- Interest rate of 7.5%
-- Repayable three years from the date of FINRA Approval
-- Can only be used to fund working capital requirements of the Company's UK business
-- Convertible on the same terms and conditions as the Term Loan Facility
Related Party Transactions
KPI US is currently owned and controlled by Kingswood, a
substantial shareholder of European Wealth, and therefore the
Acquisition is a related party transaction for the purposes of the
AIM Rules. The entry into the Funding by the Company with Kingswood
is also therefore a related party transaction for the purposes of
the AIM Rules.
The Independent Directors, being Kenneth ("Buzz") West, Marianne
Ismail and Simon Ray, consider, having consulted with the Company's
nominated adviser, finnCap, that the terms of the Acquisition and
the Funding are each fair and reasonable insofar as the Company's
shareholders are concerned.
Newbridge and rationale for the Acquisition
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$28.0 million and profit before tax of US$(0.5)
million. As at 31 December 2016, Newbridge had net cash of US$0.7
million and total gross assets of US$2.5 million. 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 Completion the EWG Group will have approximately
20,000 clients and in excess of US$4.0 billion AUM. The Board
believes that this enlarged platform will benefit from significant
operational synergies, leveraging its global distribution power to
retail and institutional investors while providing regulatory
efficiencies across the EWG Group. It will benefit from economies
of scale through integrated product development and technical
support.
Rebranding to Kingswood
As noted in the announcement on 10 October 2017 the Company has
decided to rebrand to Kingswood with effect from Completion and
this name change (which requires the approval of the Company's
shareholders) will be proposed for approval at the Extraordinary
General Meeting referred to above.
Commenting on the Acquisition and Funding, CEO of European
Wealth, Marianne Ismail, said:
"This is a unique opportunity to invest in an established,
well-positioned and nationally represented US company. It
significantly increases our global footprint by gaining immediate
access to the largest wealth management market in the world, which
we intend to build and scale substantially.
This acquisition of Newbridge will help us deliver a
differentiated strategy in the financial services arena. It will
empower EWG to diversify and grow its revenue base, international
position and influence to attract more clients, cross-sell products
and significantly increase our AUM.
"We are ambitious to grow both organically and dynamically by
acquisition. We anticipate following this deal with further
exciting accretive acquisitions in the future, strengthening our
position in major international markets, product offering and
AUM."
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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