TIDMLZYE
RNS Number : 8924J
LZYE Group PLC
18 June 2014
Embargoed for release at 7.00a.m. on 18 June 2014
LZYE Group Plc ("LZYE" or the "Company")
Board Changes, Appointment of Nominated Adviser and Broker, New
Investing Policy, Proposed Capital Reorganisation, Disposal of
Subsidiary, subscription of new ordinary shares and Convertible
Loan Notes
LZYE announces the following:
Board Changes
Michelle Lai has resigned from the Board with immediate effect.
Ajay Rajpal has been appointed as non-executive Chairman and Edward
Ng as a non-executive director.
Brief details on the new directors are as follows:
Ajay Rajpal ACA (aged 44) Non-Executive Chairman
Ajay is a Chartered Accountant, with a broad-ranging commercial
experience developed through an international career with blue chip
companies, having had extensive experience in the US, Europe,
Middle East and Far East, with a particular expertise in M&A,
financial management and insolvency/restructuring. Recent work
experience has focussed on providing Board representation and
finance director services for AIM-listed and private companies
based in the Far East. Ajay is a non-executive director of New
Trend Lifestyle Group Plc and Zibao Metal Recycling Holdings
Plc.
Edward Ng (aged 51) Non-Executive Director
Edward is a professional fund manager, licensed by the Hong Kong
Securities and Futures Commission, to advise on securities and
asset management. He holds office as a director of a number of
companies engaged in fund management and investment. His principal
role is as a consultant to Kingsway SW Asset Management Limited, a
member of the Sunwah Kingsway Group.
The Directors have experience of running small cap companies and
making acquisitions and they will use this experience to identify
appropriate targets, carry out due diligence and negotiate
acquisitions for the Company to pursue its new investing
policy.
The new Board intends to appoint a third independent
non--executive director in the near future.
Further disclosure relating to the directors (as required by the
AIM Rules) is set out at the end of this announcement
Appointment of Nominated Adviser and Broker
SPARK Advisory Partners Limited has been appointed as the
Company's nominated adviser and SI Capital Limited as the Company's
broker with immediate effect.
Previous Operating Business
The Company announced, on 6 January 2014, the cessation of its
education services businesses and, on 3 April 2014, it was
announced that there was no prospect of educational services
recommencing. On 17 June 2014, the Company entered into a
conditional agreement to divest its interest in LYZE Investments
Limited, the holding company of the subsidiaries that had conducted
the educational services business, for a nominal consideration to
Majestic, a company in which Michelle Lai, the former Chief
Executive, is owner and director. This disposal is conditional upon
independent Shareholders' approval, which will be sought at a
General Meeting to be convened shortly.
Creditors' Compromise Arrangements
As announced on 19 May 2014, the Company has sought to enter
compromise arrangements with all of its creditors. The vast
majority (in number and value) of these creditors have agreed to
compromise amounts owing to them. Creditors of the Company have
conditionally agreed to compromise their debts such that the
aggregate amount to be settled in respect of those creditors of the
Company amounts to cHK$4.3 million (cGBP0.33 million). These
agreements are conditional upon the compromised amounts being
settled following the forthcoming General Meeting (but no later
than three months after the date of the respective compromise
agreements). Amounts owing to ISF Asset Manager under their
compromise arrangement will be used to indemnify the Company
against, inter alia, undisclosed liabilities within the
Company.
The Company has arranged to introduce new investment totalling
cGBP556,000 into the Company in the form of a subscription of
cGBP59,000 for New Ordinary Shares by a new investor, Ideal Team
Ventures Limited ("Ideal Team") and a subscription of cGBP497,000
for new Convertible Loan Notes by the investors, Ideal Team and
Kingsway Lion Spur Technology Limited ("KLST"). These subscriptions
are conditional upon Shareholders' approval of the Resolutions at
the General Meeting.
Fundamental Change of Business and Admission to Trading on
AIM
As a result of the cessation of the education services business
on 3 January 2014, triggered by the sale of the Homantin Centre,
and the proposed Disposal of LZYE Investment Limited - which owns
all the LZYE Group's subsidiary companies that conducted that
business - there has been a fundamental change of the Company's
business and the Company falls to be treated as an investing
company in accordance with the AIM Rules. The new investing policy
is set out below:
New Investing Policy
Business Sector
The Company's Investing Policy is to procure suitable
acquisition and investment opportunities in quoted and unquoted
businesses, or to invest in projects that are in the technology,
media and internet sectors, which may involve the development and
delivery of education platforms or the provision of internet based
services.
The Directors will seek opportunities that offer high growth
potential and returns, and will monitor its investments by ensuring
that each investment has the appropriate management in place, with
effective reporting to the Company.
Source of Acquisitions
The Company does not have an Investment Manager, as defined in
the AIM Rules for Companies. The Directors will source investments
by means of their connections and their expertise in identifying
and conducting such acquisitions. They may also engage advisers and
intermediaries to source suitable opportunities. The Directors have
experience in the evaluation of small cap companies and the Company
is considered to have sufficient available working capital for the
Directors to conduct the due diligence and other preparatory work
needed to conduct a transaction of this kind.
Geography
The Company will have an investment focus on Asia, including but
not limited to Hong Kong, Singapore and China.
Share v Asset Purchases
The Company will aim to acquire shares in the target businesses,
though it does not rule out the acquisition of assets if the trade
can also be acquired. The proposed investments to be made by the
Company will be of the entire target businesses (although
significant controlling positions will also be considered) and may
be in quoted or unquoted companies as well as business partnerships
and other business holding structures. The Company's financial
resources are expected to be invested initially in one investment
which will be deemed to be a reverse takeover under the AIM Rules
and Shareholder approval will be required. Investments will be made
with a view to yielding returns over the medium to long-term.
Active v Passive Investment
The Board will seek active investments in most cases and will
seek to hold these investments to create long-term shareholder
value. The Company will seek to use the expertise and experience of
its Board to add value to acquired targets. It is anticipated that
the Board will be actively involved in the management of the
acquired targets, and supplement target management and its own
Board with suitable executive directors as appropriate. Investments
of this kind are likely to be held in the long-term with a view to
development and capital growth.
Gearing/Funding
The Company is likely to seek further equity fundraising to
implement its investing policy, although this is likely to be
undertaken at the same time as the first acquisition. The Company
may elect to raise further capital following the acquisition either
by way of equity or debt subject to the cash requirements
appropriate for growing the business. The Directors would expect to
offer shares in the Company in exchange for the acquisition of
businesses and assets, but would need to satisfy any requirement
for cash consideration or future funding of the resulting group by
raising additional funding by means of placing of shares in the
Company and, if required, by issuing debt securities or incurring
borrowings.
The Company would not contemplate investments or acquisitions
that carried a high degree of contingent risk or liability that is
capable of imposing financial obligations upon the Company that it
could not reasonably expect to meet. The Company would also not
entertain investments or acquisitions that would cause the Company
to cease to be admitted to trading on AIM or listed on any
comparable securities exchange.
Timing of Investment
Under the AIM Rules, the Company will have to make an
acquisition or acquisitions which constitute a reverse takeover
under AIM Rule 14 or otherwise implement the above investing policy
(once approved at the General Meeting) to the satisfaction of the
London Stock Exchange within twelve months of becoming an investing
company (i.e. by 3 January 2015). The Company aims to meet this
criterion within this timeframe.
As required by the AIM Rules, at each annual general meeting of
the Company, shareholder approval of its investing policy will be
sought.
The Board believes that there are a number of opportunities
within the targeted sectors and is confident in identifying
suitable candidates over the coming months.
Sale of Shares by ISF
As previously announced, ISF has pledged 100,000,000 Ordinary
Shares (representing 40.53 per cent. of ordinary shares in the
Company - out of its 49.69 per cent. holding) as security for loans
advanced by Kingsway Finance to ISF. On 17 June 2014, ISF agreed to
sell 69,077,778 shares (comprising 28 per cent. of the current
share capital, and 19.6 per cent. post the Share Subscription), to
Tang Sai Wai Selwyn. This sale will reduce ISF's holding to
53,508,085 shares representing 21.69 per cent. of the current share
capital (and 15.83 per cent. post the Share Subscription). Kingsway
Finance still retains a pledge over 30,922,222 shares owned by
ISF.
Disposal of LZYE Investment Limited
It has been conditionally agreed that the Company will dispose
of LZYE Investment Limited, the company which holds all the LZYE
Group's subsidiaries, to Majestic for a sum of GBP1 in cash. ISF
has also signed a compromise and indemnity agreement under which it
has indemnified IZYE, inter alia, for any outstanding undisclosed
liabilities within the Company. As Majestic is a related party
(given Michelle Lai, the former CEO of LZYE, is a director and
owner of all of the issued shares of Majestic and also as
substantial shareholder in the Company), this Disposal has been
considered by the Board in consultation with the Company's
nominated adviser, SPARK Advisory Partners Limited.
In the most recent financial year ended 31 March 2013, for which
audited figures are available LZYE Investment recorded a loss of
HK$26.01m and showed net liabilities at 31 March 2013 of HK$1.61
million. As reported in the Company's most recent interim results
for the six months to 30 September the Group posted unaudited
losses of HK$11.5 million, and all of the trading was conducted
through the operating business owned by LZYE Investment.
The Directors, having consulted with SPARK Advisory Partners
Limited, consider that the terms of the Disposal of LZYE Investment
to Majestic are fair and reasonable as far as Shareholders are
concerned. The Disposal is subject to approval by Shareholders at
the General Meeting. ISF will not be permitted to vote its shares
in relation to the resolution to approve the Disposal.
New Investment
The Company has entered into an agreement with Ideal Team under
which Ideal Team will subscribe GBP59,735 for a total of 105,726
New Ordinary Shares at an issue price of GBP0.565 per New Ordinary
Share following the proposed Capital Reorganisation detailed below,
and will advance GBP357,384 to subscribe for Convertible Loan
Notes. In addition, KLST (a subsidiary of Sunwah Kingsway) will
advance GBP139,040 to subscribe for Convertible Loan Notes. The
subscription for New Ordinary Shares and Convertible Loan Notes is
conditional upon approval of the Resolutions at the GM. The funds
raised will enable the Company to settle the Creditors' Compromise
Arrangements and to provide the Company with sufficient working
capital to seek the implementation of its proposed Investing
Policy.
Creditor Compromises have been agreed by Creditors, which reduce
the amount payable to these parties to cHK$4.3m (cGBP0.33 million)
(using yesterday's closing exchange rate of c$HK13.14:GBP1).
Subject to the Proposals being approved, the Investors will invest
in the manner described in this document to provide the Company
with the requisite funding to provide the Company with adequate
working capital to meet its running costs for at least twelve
months.
Subscription for New Ordinary Shares
The Company has entered into an agreement with Ideal Team under
which, subject to implementation of the Proposals, 105,726 New
Ordinary Shares will be issued to Ideal Team at GBP0.565 per share
for a total subscription of GBP59,735. These New Ordinary Shares
issued to the Investors will represent 29.99 per cent. of the
Enlarged Ordinary Share Capital.
Ideal Team is not connected with any of the Directors of the
Company. The Company will make application for the New Ordinary
Shares to be admitted to trading on AIM following the GM.
Convertible Loan Notes
Subject to the implementation of the Proposals, Ideal Team and
KLST have separately agreed that they will subscribe GBP496,424 for
Convertible Loan Notes, GBP357,384 by Ideal Team and GBP139,040 by
KLST. The Convertible Loan Notes are to be interest free, unsecured
and repayable on 30 June 2017. Ideal Team and KLST shall have the
right to convert the principal amount of the Convertible Loan Notes
at any time into an aggregate amount of 632,538 and 246,088 New
Ordinary Shares respectively at the exercise price of GBP0.565 per
share. The New Ordinary Shares to be issued on conversion of the
Convertible Loan Notes (assuming full conversion) would amount to
approximately 51.38 per cent. and 19.99 cent. of the Enlarged
Ordinary Share Capital of the Company, as increased by the issue
thereof. The Convertible Loan Notes are freely transferable and may
be transferred by the Investors to new noteholders who will then be
able to exercise the conversion rights attaching to the Convertible
Loan Notes.
As Edward Ng acts as a director of a subsidiary company of
Sunwah Kingsway he is not regarded as independent. Therefore Ajay
Rajpal, as the sole independent Director, has considered this
subscription with the Company's nominated adviser, SPARK Advisory
Partners Limited.
Having consulted with SPARK Advisory Partners Limited, he
considers that the terms of the subscription for Convertible Loan
Notes by KLST are fair and reasonable as far as Shareholders are
concerned.
Warrants
The Company has agreed to issue a total of 18,466 Warrants
(representing 1.5% of the fully diluted share capital of the
Company) to the persons and in the amounts listed below in partial
settlement of fees due for their services:
Name No of Warrants
SPARK Advisory Partners Limited 6,155
SI Capital 12,311
These Warrants carry the right to subscribe for New Ordinary
Shares at an exercise price of GBP0.565 for each New Ordinary Share
exercisable at any time until 30 June 2019. The Warrants are freely
transferable and may be transferred by the holders to new holders
who will then be able to exercise the Warrants to subscribe for New
Ordinary Shares.
The Takeover Code
The Takeover Code is issued and administered by the Panel on
Takeovers and Mergers. The Takeover Code applies to all takeovers
and merger transactions, however effected, where the offeree
company is, inter alia, a public company with its registered office
in the UK and whose place of central management and control is in
the UK. The Company is such a company and its shareholders are
entitled to the protections afforded by the Takeover Code.
Under Rule 9, when any person, or group of persons acting in
concert, acquires an interest in shares which, when taken together
with shares in which he, or persons acting in concert with him, are
interested, carry 30 per cent. or more of the voting rights of a
company which is subject to the Takeover Code, that person is
normally required to make a general offer in cash to all
shareholders at the highest price paid by him, or any person acting
in concert with him, within the 12 months preceding the date of the
announcement of the offer.
If any of the Investors were to exercise the conversion rights
attached to the Convertible Loan Notes and as a result cause the
holding of New Ordinary Shares (together with the New Ordinary
Shares held by any persons acting in concert with that Investor) to
represent 30 per cent. or more of the issued New Ordinary Shares as
enlarged by the exercise of the Conversion Rights the requirements
of Rule 9 of the Takeover Code ("Rule 9") would be invoked and the
Investors would be required to make a mandatory cash offer for all
of the remaining New Ordinary Shares in issue.
Ideal Team has indicated that it is not their intention to
exercise the conversion rights attached to the Convertible Loan
Notes if, by so doing Ideal Team will be required to make a
mandatory offer under Rule 9. The Convertible Loan Notes are freely
transferable and Ideal Team might elect to transfer all or part of
its holding to a third party, deemed to be not acting in concert
with the Investor, and those persons may convert the Convertible
Loan Notes acquired by them without invoking Rule 9.
Proposed Capital Reorganisation
It is proposed that the issued share capital of the Company will
be restructured, in order to reduce the nominal value (currently
GBP0.01) of the Ordinary Shares. At the outset all of the Existing
Ordinary Shares will be consolidated into Ordinary Shares of GBP10
each on the basis of one new Ordinary Share for every 1,000
Existing Ordinary Shares in issue. The New Ordinary Shares of GBP10
each will then be sub-divided into one New Ordinary Share of
GBP0.001 and one New Deferred Share of GBP9.999.
Following the capital reorganisation the issued share capital of
the Company will consist of 246,707 New Ordinary Shares and 246,707
New Deferred Shares. The New Deferred Shares shall have the special
rights, and shall be subject to the restrictions, set out in the
New Articles of Association of the Company which, it is proposed,
will be adopted pursuant to the Resolutions. The New Deferred
Shares will carry negligible value and will not be admitted to
trading on AIM.
Following the Capital Reorganisation share certificates in
respect of Existing Ordinary Shares will no longer be valid. Share
Certificates in respect of the New Ordinary Shares will be issued
following the Capital Reorganisation or, in the case of
uncertificated holders, Euroclear (UK and Ireland) Limited will be
instructed to credit the CREST participant's account with New
Ordinary Shares.
New Certificates in respect of the New Ordinary Shares will be
despatched to all Shareholders by first class post at the risk of
the Shareholder. No Share Certificates will be issued in respect of
the New Deferred Shares. No fractional payments will be made.
Significant Shareholdings
Set out below is a table which illustrates the Ordinary
Shareholdings of existing and new Shareholders upon implementation
of the Proposals as set out above:
% of Fully diluted % of fully
issued holdings diluted
share upon exercise share
Shareholder New Shares capital CLNs of CLNs capital
Existing Shareholders 177,629 50.41 - 177,629 14.43
Ideal Team 105,726 29.99 632,538 738,264 59.97
KLST - - 246,088 246,088 19.99
Tang Sai Wai Selwyn 69,077 19.60 - 69,077 5.61
TOTAL 352,432 100.00 878,626 1,231,058 100.00
*1 The Investors have indicated that it is not their intention
to exercise the conversion rights attached to the Convertible Loan
Notes if, by so doing that each respective Investor's holding of
Ordinary Shares, (together with others acting in concert with him),
would in aggregate exceed 29.99% of the issued Ordinary Shares of
the Company and as a result would require a mandatory offer to be
made under Rule 9.
*2 Each of Ideal Team and KLST has entered into a relationship
agreement with LZYE and SPARK, details of which will be disclosed
in the forthcoming Circular.
Adoption of New Articles of Association
It is proposed that New Articles of Association are adopted to
replace the Existing Articles of Association in order to reflect
the provisions of the Companies Act 2006 and the Capital
Reorganisation.
Proposed change of Name
It is further proposed that the name of the Company will be
changed at the time of the forthcoming General Meeting. Details of
this new name will be included in the circular which will accompany
the Notice of the meeting.
Restoration of trading
A further announcement concerning the restoration of the
Company's shares to trading on AIM will follow shortly.
Recommendations
The Resolutions to carry out the Proposals are to be put to
Shareholders at the General Meeting. If the Proposals are not
approved by Shareholders it is likely that the Company will be
subject to insolvent liquidation as there are insufficient assets
to repay the Creditors. In this situation it is likely that there
will be no return to Shareholders.
However, Shareholders comprising 51.72 per cent. of the share
capital have given irrevocable undertakings (as set out below) to
vote in favour of the resolutions to be proposed at the forthcoming
General Meeting (with the exception set out in the footnote to the
table below).
Shareholder No. of Shares % of Share Capital
ISF Asset Manager *1 53,508,085 21.69
Tang Sai Wai Selwyn 69,077,778 28.00
New Trend Lifestyle Group Plc 5,000,000 2.03
TOTAL 27,585,863 51.72
*1 shares owned by ISF will not be permitted to vote on the
resolution at the General Meeting to be proposed to approve the
Disposal.
General Meeting
It is proposed that a Circular will be sent to Shareholders in
the near future convening a General Meeting to seek Shareholders'
approval of, inter alia, the Proposals. The General Meeting is
expected to take place in early July.
The following information is given in accordance with paragraph
(g) schedule Two, the AIM Rules for Companies:
Full name and age:
Ajay Kumar Rajpal, ACA (aged 44)
Current Directorships/Partnerships:
Zibao Metals Recycling Holdings PLC
New Trend Lifestyle Group PLC
NAS Corporate Services Limited
Brookmans Park Roads Limited
Past Directorships/Partnerships (previous 5 years)
Tricor PLC
Tricor Supply Side Carbon Limited
Green Fuel Tech Limited
Premier Investment Consultancy FZE
The lunchbox has landed Limited
Disclosures under Aim Rule paragraph g(v)
There is no other information required to be included in
accordance with paragraph (g), schedule Two, the AIM Rules for
Companies.
Full name and age:
Edward Kwan-Mang Ng, 51
Current Directorships/Partnerships:
Advance International Ltd
Bright Promise Limited
Liber Research Community (HK) Company Limited
Focus Win (Shenzhen) Limited
Focus Win (Shunde) Limited
Advance Capital Limited
Warner (HK) Limited
Grand Seasons Inc BVI Limited
Cap Management Limited (Cayman)
Cap Fund and Cap Master Fund (Cayman)
MEC Asian Fund (Cayman)
Focus Win (Guangzhou) Limited
Focus Win (Chongqing) Limited
Focus Win Investment Holdings Limited
Past Directorships/Partnerships (previous 5 years)
None
Disclosures under Aim Rule paragraph g(v)
There is no other information required to be included in
accordance with paragraph (g), schedule Two, the AIM Rules for
Companies.
For further information:
LZYE Group Plc
Ajay Rajpal, Chairman (0)7932 999999
SPARK Advisory Partners Limited
Nominated Adviser
Neil Baldwin 0113 370 8974
Mark Brady
SI Capital Limited
Broker
Andy Thacker 01483 413510
Nick Emerson
DEFINITIONS
The following definitions apply unless the context requires
otherwise:
"AIM" AIM, a market operated by the London
Stock Exchange Plc;
"AIM Rules" the AIM Rules for Companies published
by the London Stock Exchange from time
to time (including, without limitation,
any guidance notes or statements of
practice) which govern the rules and
responsibilities of companies whose
shares are admitted to trading on AIM;
"Board" or "Directors" the directors of the Company
"Capital Reorganisation" the proposed consolidation and subdivision
of the Existing Ordinary Shares,
"Circular" the circular to be issued shortly seeking
approval of the Proposal
"Company" LZYE Group Plc;
"Convertible Loan Notes" the GBP496,424 convertible unsecured
or "CLNs" loan notes 2017 of the Company to be
issued to the Investors
"Creditors" existing creditors of the Company;
"Creditors' Compromise the arrangement, under which amounts
Arrangements" owing by the Company to Creditors are
"Disposal" to be settled
the proposed disposal of LZYE Investment
Limited the owner of all of the Groups
previous operating businesses to Majestic
Hall Investment Limited for GBP1
"Enlarged Ordinary Share the entire issued ordinary share capital
Capital" of the Company consisting of the New
Ordinary Shares in issue following
the Capital Reorganisation and the
New Ordinary Shares to be issued to
Ideal Team;
"Existing Articles of Association" the Articles of Association of the
Company in force at the date hereof;
"General Meeting" or "GM" the general meeting to approve the
Proposals which will be called shortly
"Investment" the Share Subscription and the subscription
for Convertible Loan Notes
"Investor Shares" 105,726 New Ordinary Shares (post Capital
Reorganisation) subscribed at GBP0.565
per New Ordinary Share;
"Investors" Ideal Team and KLST;
"Investing Policy" the proposed investing policy
"ISF" ISF Asset Manager Limited
"Kingsway Finance" Kingsway S W Finance Limited, a company
wholly owned by Sunwah Kingsway
"Kingsway Lion Spur Technology" Kingsway Lion Spur Technology Limited,
or "KLST" an investment company wholly owned
by Sunwah Kingsway
"LZYE Group" LZYE Investment and its subsidiary
companies;
"LZYE Investment" LZYE Investment Limited, a company
"Majestic" registered in Hong Kong;
Majestic Hall Investments Limited,
a company registered in the British
Virgin Islands, whose shares are owned
by Michelle Lai (an ex-director of
the Company);
"New Articles of Association" the proposed new Articles of Association
which are to be approved and adopted
by the Shareholders at the forthcoming
General Meeting;
"New Ordinary Shares" ordinary shares of GBP0.001 each in
the capital of the Company following
the Capital Reorganisation;
"Resolutions" the ordinary and special resolutions
to be proposed at the forthcoming General
Meeting;
"Proposals"
the Disposal, the Capital Reorganisation,
the Investment, the adoption of the
Investing Policy, the adoption of new
articles of association for which the
Company seeks approval at the forthcoming
General Meeting
"Share Subscription" the subscription by Ideal Team for
"Shareholders" 105,726 New Ordinary Shares
the holders of ordinary shares in the
capital of the Company whether Existing
Ordinary Shares or New Ordinary Shares;
"SI Capital" SI Capital Limited, the Company's Stockbroker
"SPARK" Spark Advisory Partners Limited, the Nominated Adviser
of the Company;
"Sunwah Kingsway" Sunwah Kingsway Capital Holdings Limited
This information is provided by RNS
The company news service from the London Stock Exchange
END
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