TIDMEVOL TIDMASTR
RNS Number : 0140B
Evolve Capital PLC
10 February 2011
10 February 2011
Evolve Capital plc
("Evolve" or the "Company")
Sale of Rowan Dartington & Co. Limited by Astaire Group
PLC
The Board of Evolve notes the announcement released earlier
today by Astaire Group PLC ("Astaire"), a company in which Evolve
has a 53.6 per cent. interest, in relation to the conditional sale
of Rowan Dartington & Co. Limited ("Rowan Dartington") to a new
company formed by a consortium of private investors led by Graham
Coxell (the "Sale").
Under the AIM Rules for Companies the Sale represents a
fundamental change of business for both Astaire and Evolve.
Accordingly general meetings of Astaire and Evolve will be convened
to approve the Sale. Evolve will shortly be sending a circular to
shareholders convening a general meeting of the Company where a
resolution will be proposed to approve the Sale.
The full text of the announcement released by Astaire (which
includes in full the terms of the Sale) is set out below.
For further information please contact:
Evolve Capital plc Tel: 020 7937 4445
Oliver Vaughan, Chairman
Allenby Capital Limited Tel: 020 3328 5656
Nick Naylor
Nick Athanas
"
Astaire Group PLC
Recommended sale of Rowan Dartington
and
proposed investing policy
For immediate release
10 February 2011
The Board of Astaire Group PLC ("Astaire") announces that a
conditional contract has been signed for the sale of Rowan
Dartington & Co. Limited to a new company formed by a
consortium of private investors led by Graham Coxell.
1. Introduction
On 15 July 2010 the Astaire Group Board announced that
discussions were in progress which may lead to the sale of the
Group's main operating businesses. Since that time Astaire
Securities, a stockbroking and corporate finance advisory business
has been sold and a conditional contract for the sale of Dowgate
Capital Stockbrokers Limited has been signed.
Under the AIM Rules, the disposal of a business which represents
over 75% of an AIM quoted company's gross assets, pre tax profit,
turnover, capitalisation or gross capital is treated as a
fundamental change in that company's business and must be
conditional on its shareholders' approval. The proposed sale of
Rowan Dartington represents such a fundamental change in the
business of both the Astaire Group and of its 53% holding company,
Evolve Capital PLC. Accordingly general meetings of the Astaire
Group and Evolve will be convened to approve it.
The Board have concluded that it would be premature for the
Company to seek to delist its Shares from trading on AIM at this
stage but rather that Shareholders should have the opportunity to
see the completion of the sale of Dowgate Capital Stockbrokers and
the sale of Rowan Dartington and seek a liquidity event for
themselves at that stage if they so wish. The Board will keep any
future potential delisting of the Astaire Group under review going
forward.
Following completion of the proposed Sale, Astaire Group will
become an "investing company" as defined in the AIM Rules as a
result of the disposal of substantially all of its trading
businesses. A resolution will be proposed at the General Meeting to
approve the Astaire Group Investing Policy.
This announcement describes the recent sales of Astaire
Securities and Dowgate Capital Stockbrokers and sets out the
background to the Sale and the reasons why the Directors
unanimously recommend that Shareholders vote in favour of the Sale
and the Investing Policy at the General Meeting.
2. Background
The Astaire Group Board announced on 15 July 2010 that it had
completed a strategic review of its businesses and concluded the
following:
(i) that the operating businesses have good potential given the
right corporate environment; and
(ii) that there is a considerable momentum to make a clean break
from the current corporate structure.
The Sale follows a period of considerable activity exploring
alternative proposals for the Astaire Group as a whole and for its
constituent parts. Negotiations which were intended to result in
the Astaire Group as a whole having a new direction and a new
controlling shareholder failed to reach a mutually satisfactory
conclusion for several reasons, including difficulties in
ring-fencing Astaire Securities from a contingent litigation
liability to Izodia PLC at that time. As these difficulties
emerged, the Board resolved to follow up approaches from potential
purchasers of the constituent parts of the Group and established a
process for the submission of offers, the selection of preferred
bidders and, eventually, reaching agreement for the sale of both
Astaire Securities and Rowan Dartington, as well as agreeing a
transaction for DCS.
3. Sale of Astaire Securities
The strategy adopted by Evolve following its acquisition of
Astaire Group (then called Blue Oar PLC) during the winter of
2008-9 did not prove successful against the background of
continuing difficult market conditions. Litigation by Izodia PLC
against CS Holdings, an intermediate holding company within the
Group which held 99.9% of the issued share capital of Astaire
Securities created an atmosphere of uncertainty at Astaire
Securities, causing damage in terms of staff morale and client
relationships. As this business is dependent on its staff and
clients, a decision was made to sell it so that it could enjoy
better prospects as part of a purchaser's more stable group and to
enable the Astaire Group to realise some value for it. After
considering several proposals, contracts were exchanged for the
sale of Astaire Securities to Sandfire Capital Inc. on 15 October
2010 and the sale was completed on 22 October 2010.
When the sale was announced on 15 October 2010, Astaire
Securities acted as Nominated Adviser and / or broker to over 40
companies, most of which were quoted on AIM. Its turnover, losses
and assets as at the dates shown were:-
Year ended Year ended 6 months ended
31 Dec 2008 31 Dec 2009 30 June 2010
(audited) (audited) (unaudited)
GBP'000 GBP'000 GBP'000
---------------------- ------------- ------------- ---------------
Turnover 6,318 5,259 2,897
---------------------- ------------- ------------- ---------------
Pre tax loss 2,914 1,934 635
---------------------- ------------- ------------- ---------------
Net assets at period
end 4,565 2,938 2,446
---------------------- ------------- ------------- ---------------
The pre-tax loss for the first half of 2010 is shown after
accounting for exceptional costs of GBP250,000 for restructuring
and redundancies.
The consideration due from the Sandfire Capital Inc. was GBP2.45
million comprising GBP2 million cash which was received on
completion and GBP450 000 to be placed in an escrow account in
relation to Astaire Securities' continuing eligibility for
Nominated Adviser status and against any warranty claims or
shortfall in the proceeds of the sale of certain assets below their
book value. In addition to containing warranties in favour of the
purchaser, as is normal for this type of contract, the sale and
purchase agreement, which was signed on 15 October 2010, contains a
tax indemnity. CS Holdings' exposure under the tax indemnity is
intended to be mitigated by the transfer of tax losses within the
Astaire Group. It was announced today that Astaire Securities,
which has changed its name to Northland Capital Partners Limited,
has been approved by London Stock Exchange as a continuing
Nominated Adviser, conditional on continued compliance with the
obligations of a nominated adviser set out in the AIM Rules for
Nominated Advisers, following its change of ownership, thereby
satisfying conditions for the release of the GBP350,000 out of the
escrow account to Astaire.
The effect of the sale of Astaire Securities was to reduce the
Astaire Group's trading losses. While the receipt of the cash
proceeds strengthened the Astaire Group consolidated balance sheet,
the net cash proceeds will be retained by CS Holdings as explained
below. Astaire will record a loss on disposal in the range GBP0.8
million to GBP1.4 million, the exact amount of which will depend on
the amounts released to Astaire from the escrow accounts.
The sale proceeds (net of transaction related costs) are held by
CS Holdings pending the outcome of the litigation, which is being
vigorously defended. Transaction related costs include a liability
in respect of a staff retention plan amounting to between
GBP182,172 and GBP269,987 (depending on the amounts eventually
released to CSH from escrow), legal and financial advisor fees.
Astaire Securities was named as a defendant in the claim by
Izodia PLC, but in order to effect the sale Astaire Securities
agreed, on a without prejudice basis, to a payment of GBP37,000 in
full and final settlement of any claim against Astaire Securities
and with no admission of fault or liability on the its part and
without discharging Izodia's claim against CS Holdings.
4. Sale of Dowgate Capital
Dowgate Capital Stockbrokers Limited was acquired as part of the
Dowgate Capital PLC group in July 2009. Its business activity is
the provision of private client stockbroking services.
The conditional sale of Dowgate Capital Stockbrokers Limited
("Dowgate") to 3B Capital Limited ("3B Capital") was agreed and
announced on 24 December 2010.
The contract provides for the sale of the whole of the issued
share capital of Dowgate to 3B Capital for GBP900,000 of which
GBP675,000 is payable in cash at completion and the balance of
GBP225,000 is due no later than 30 June 2012 subject to any claims
against the warranties and indemnities provided by Astaire. 3B
Capital is a new company formed by Beavis Morgan LLP and employees
of Dowgate, including two directors, Neil Badger and Clive Mattock,
who have together subscribed GBP82,502 (which will represent 25 per
cent. of 3B's issued share capital following completion). Neil
Badger and Clive Mattock will join the board of 3B Capital. In view
of these directors' participation in 3B Capital, the sale of
Dowgate is categorised as a transaction with a related party in
accordance with the AIM Rules. The Directors of Astaire, none of
whom has any interest in the sale of Dowgate, consulted Fairfax
I.S. PLC (Nominated Adviser to Astaire Group PLC) and announced
when the sale of Dowgate was announced that they consider the terms
of the transaction to be fair and reasonable insofar as Astaire
Shareholders are concerned.
Dowgate has 13 staff including investment consultants providing
private client investment advice and stockbroking services from its
offices in Crawley. Its turnover for the year ended 31 December
2009 was GBP2.36 million and its loss before tax for that period
was GBP0.33 million. The consideration represents a small discount
to Dowgate's unaudited net assets as at 30 November 2010 which
amounted to approximately GBP941,000 after adjusting for a
pre-disposal dividend. The sale and purchase contract contains
certain warranties and indemnities which expire on various dates
between 31 December 2011 and 30 June 2012. Any claims under the
warranties and indemnities may only be made against the GBP225 000
deferred consideration referred to above, which will be held in an
escrow account.
The contract is conditional on an application being made and the
FSA granting consent for 3B Capital and Beavis Morgan LLP to
control Dowgate a Regulated Firm. Such consent has recently been
received and completion is expected to take place early next
week.
The effect of the disposal on Astaire was to increase its cash
balances and leave the Astaire Group with only one remaining
operating division - Rowan Dartington, The proceeds of the sale of
Dowgate will be retained to cover any potential liabilities in DCL
and any regulatory capital requirements which may arise at Rowan
Dartington pending its disposal.
5. Rowan Dartington
Rowan Dartington is a private client wealth management and
stockbroking business, headquartered in Bristol with 6 branch
offices. It provides a wide range of services including
discretionary portfolio management, execution-only share dealing,
spread betting and trading in specialised instruments such as CFDs
(contracts for differences). Rowan Dartington advises clients on
tax efficient investing. As well as dealing directly with private
clients, charities and pension funds, it has a dedicated team
providing investment management services to a network of
independent financial advisers for the benefit of their clients.
Settlement and nominee services are handled in-house.
As previously disclosed, Rowan Dartington suffered from
shortcomings in a back office system, which led to substantial
remediation costs and a GBP511,000 fine from the Financial Services
Authority announced on 7 June 2010 and a provision of GBP1.04
million in respect of potentially irrecoverable debtor balances.
Although no clients lost money as a result of this, remedial action
relating to internal record keeping as well as the system failures
have taken their toll on management and staff morale as well as
having a financial impact. Above all, Rowan Dartington is a
"relationship business" dependent on the rapport between front
office staff and clients and this led to the Astaire Group Board
favouring an offer with the strongest support from key revenue
generating personnel as being the most likely to be capable of
reaching a satisfactory conclusion and give long term value to
Shareholders, even though it does not result in any initial cash
consideration being received.
Rowan Dartington had discretionary managed portfolios with a
value of approximately GBP227 million as at 31 December 2010 and
holds further securities registered in its nominee accounts on
behalf of other clients. Its turnover, losses and assets as at the
dates shown were:-
Year ended Year ended Year ended
31 Dec 2008 31 Dec 2009 31 Dec 2010
(audited) (audited) (draft & unaudited)
GBP'000 GBP'000 GBP'000
--------------- ------------- ------------- ---------------------
Turnover 5,880 6,147 6,469
--------------- ------------- ------------- ---------------------
Pre tax loss 1,361 2,319 1,092
--------------- ------------- ------------- ---------------------
Net assets at
year end 3,971 1,664 1,617
--------------- ------------- ------------- ---------------------
Over the last 12 months, efforts have been made to reduce
operating costs such that apart from exceptional costs including
the recently notified additional FSCS levy of approximately
GBP250,000. Rowan Dartington is currently operating at or around
break-even level. The Astaire Group Board believes there is
significant scope for improvement in Rowan Dartington's performance
under its new direction and ownership following the sale. This is
expected to be achieved by the appointment of a Chief Executive who
is a significant shareholder in the new ownership structure of the
business, a reincentivised employee pool, additional capital and
the ability to recruit new account managers who bring new clients
to the company. The incentive arrangements for employees comprise
the investment of GBP200,000 for loan notes and up to 15% of the
issued share capital of the purchaser, Rowan Dartington Holdings
Limited ("RDH"). A further GBP600,000 of working capital is being
put in by a consortium of private investors led by Graham
Coxell.
6. Terms of the proposed Sale
RDH is a new company formed to buy Rowan Dartington, will,
subject to certain conditions, acquire 100 per cent. of the issued
share capital of Rowan Dartington. Key terms of the proposed sale
documentation are set out below:
-- The consideration will comprise GBP1,000,000 in loan notes
issued by RDH and shares in RDH representing 30% of its equity
share capital. No cash consideration will be payable on
completion;
-- The remaining 70% of RDH will be owned by a consortium of
private investors led by Graham Coxell and existing staff of RD who
will collectively invest GBP800,000 in RDH loan notes to provide
the business with working capital going forward;
-- The RDH loan notes are zero coupon and are repayable on the
fifth anniversary of completion or, if earlier, a sale of RDH or
Rowan Dartington;
-- Rowan Dartington's regulatory capital level will be tested at
completion and Astaire will make a payment to RDH if it is below an
agreed target level of GBP1,300,000;
-- Additional consideration of up to GBP1,000,000 in cash is
payable to Astaire should Rowan Dartington locate any of the
irrecoverable debtor balances prior to 30 June 2011;
-- On completion, Astaire will pay approximately GBP650,000 in
cash into an escrow account. This will be used to fund the purchase
of certain Isambard investments. The investments purchased will be
transferred into the name of Astaire;
-- In the event that a specified contingent liability
crystalises within RD and Astaire elects to fund the cash costs of
this, Astaire has the right to subscribe GBP100,000 in cash for a
further GBP200,000 in loan notes
-- The completion of the Sale is subject to (i) the approval of
Astaire Group Shareholders at the General Meeting (ii) the passing
of a resolution approving the Sale at a general meeting convened by
Evolve and (iii) the granting of controller consent by the FSA to
RDH and its controlling shareholders;
-- Astaire has given certain warranties and indemnities,
including a tax indemnity, effective for a period of between three
and five years to RDH. Liability under these is capped at
GBP1,000,000 and Astaire can elect to satisfy any claim by giving
up RDH loan notes on the basis of GBP2 in loan notes for each GBP1
of claim and, should the RDH loan note be fully cancelled or
transferred, by giving up its equity stake in RDH on the basis of
0.3% of RD Newco for each GBP5,000 of claim. Thus, should it
choose, Astaire can satisfy its maximum liability under the
warranties and indemnities without making further cash
payments;
-- Astaire has also given a non-compete and non-solicitation of
staff undertaking for three years following completion;
-- Astaire and the other RDH shareholders will enter into a
shareholders' agreement. Under this agreement and RDH's articles of
association;
-- Astaire will have the right to appoint a director to the
board of RDH and to receive certain financial information to
monitor its investment in RDH;
-- Astaire will have certain minority protection rights;
-- Astaire will have certain pre-emption rights on the issue of
new shares or other securities by RDH;
-- Astaire agrees not to hold any interest in any competing
business or solicit employees of Rowan Dartington while it remains
a shareholder in RDH .
7. Effect of the sale on Astaire Group and Investing Policy
On completion of the Sale (and subject to completion of the
Dowgate disposal), Astaire Group will no longer consolidate any
trading companies. Astaire Group's assets following the Sale are
estimated to comprise approximately GBP930,000 in cash (including
approximately GBP400,000 held within DCS, which would leave the
Group on completion of that sale), its investment in CS Holdings,
which (as explained above) holds a further GBP3 million in cash
pending payment of legal fees and resolution of the litigation plus
a further GBP362,000 (net) due under the Astaire Securities sale
escrow arrangements and options / warrants in a number of quoted
companies, the preference shares and loan stock referred to in
paragraph 6 above and some other investments (including the
Isambard investments referred to above) that may not be readily
realisable. Astaire Group's assets would also be increased by the
successful completion of the sale of DCS by GBP675,000 (before
expenses) and the further GBP225,000 held in escrow. The Astaire
Group Board considers it inappropriate to invest the cash held by
CS Holdings in anything other than low risk bank deposits and
liquid money market instruments pending the outcome of the
litigation.
If and when the DCS sale proceeds are received and as and when
the Izodia litigation has been resolved, and having regard to all
the warranty periods and escrow arrangements, as well as any
obligations DCL may have in respect of a lease on premises at 46
Worship Street, London, EC2A 2EA and dealing with the taxation
matters referred to above, the Astaire Group Board will consider
steps to return any available excess cash to Shareholders. Due to
its accumulated losses, Astaire Group would not be able to make any
distributions without first seeking approval from Shareholders and
from the court for a reduction of capital. Tax considerations for
Shareholders would also be taken into account.
As explained above, following completion of the Sale, Astaire
Group will become an "investing company" as defined in the AIM
Rules as a result of the disposal of substantially all of its
trading businesses.
In the context of the Company's strategic intention to seek to
return any available excess cash to shareholders and the deferred
nature of any cash consideration receivable under the arrangements
relating to Rowan Dartington, the Company's investing policy is to
continue to hold its present investments until they can be
realised, acquiring additional investments only when contractually
required to do so (for example in relation to the Isambard
Investments referred to in paragraph 6 above) or in order to obtain
value for any warrants and options which are "in the money" (i.e.
capable of being exercised to buy securities at prices which give
Astaire a profit on disposal).
The Astaire Group's investments include both quoted and unquoted
securities such as warrants to acquire quoted shares, an investment
in Euroclear PLC and sundry holdings owned by companies acquired by
Astaire Group as well as its ongoing investment in RDH shares and
loan notes described in paragraph 6, following the completion of
the Sale.
In view of the nature of the investments and the intention to
wind down the portfolio, the investing policy does not include any
specific exposure limits to individual investments. Generally the
management of the investments will be passive in nature, (i.e. with
no active involvement by Astaire in the underlying investee
companies). However, this will not preclude Astaire from appointing
directors to investee companies (as is intended in respect of RDH
as part of its investment monitoring process) or from taking any
steps it sees fit to protect the value of its investments or to
promote their disposal. Astaire does not intend to take on any
gearing, other than short term use of overdraft facilities as part
of its normal cash flow management.
While the Board intend to sell its present investments and any
new investments as soon as reasonably practicable with a view to
returning cash to shareholders, it does not intend to dispose of
any investments at forced sale prices in order to accelerate this
process. The proposed investing policy contains no specific
deadlines for any disposals as the Board considers that these could
be detrimental to their efforts to secure reasonable prices. The
cash held by Astaire Group (including the proceeds of any
disposals) will be held in bank deposits or invested in liquid
securities. Such liquid securities may include equity investments
but are likely to be predominantly debt instruments such as
gilts.
In due course the Board will be reviewing its remaining cost
base and may also consider as a part of this putting proposals to
Shareholders for delisting the Company's Shares from trading on
AIM.
8. Recommendation
The Astaire Group Directors consider the terms of the Sale to be
fair and reasonable. The Astaire Group Directors unanimously
recommend that Shareholders vote in favour of the resolutions to be
proposed at the General Meeting.
DEFINITIONS
The words and expressions set out below have the following
meanings throughout this announcement unless the context requires
otherwise:-
"AIM" the AIM Market operated by the
..................................... London Stock Exchange
.....................
"AIM the AIM Rules for Companies
Rules"............................... published by the London Stock
.................... Exchange from time to time
"Astaire Group" or "Company" Astaire Group PLC, incorporated
............... in England and Wales with registered
number 1796133 and its subsidiary
undertakings
"Astaire Group Directors" or "Astaire the directors of Astaire Group
Group Board" or PLC
"Board"..............................
.........................
"Astaire Securities" Astaire Securities PLC
"Conditions" the conditions to the Sale as
..................................... set out in paragraph 6
............
"CS Corporate Synergy Holdings Limited
Holdings"............................
....................
"Dowgate Capital" or Dowgate Capital Limited, the
"DCL"............ parent company of DCS
"Dowgate Capital Stockbrokers" Dowgate Capital Stockbrokers
or "DCS"............ Limited
"Evolve" Evolve Capital PLC, incorporated
in England and Wales with registered
number 6383902
"FSA" or "Financial Services the Financial Services Authority
Authority".................. of the UK in its capacity as
the competent authority for
the purposes of FSMA
"General Meeting" the general meeting of Astaire
..................................... Group to be convened to approve
..... the Sale and the proposed Investing
Policy
"Group" Astaire Group and its subsidiaries
"Investing the investing policy of the
Policy".............................. Company following completion
.............. of the Sale as described in
paragraph 7
Isambard Investments Investments purchased by the
Isambard Fund, a collective
investment scheme promoted by
Rowan Dartington
"London Stock Exchange" London Stock Exchange plc
.................................
"RDH"................................ Rowan Dartington Holdings Limited,
............................. incorporated in England and
Wales with registered number
7470226 (being the company which
is acquiring Rowan Dartington
from Astaire Group0
"Rowan Dartington" Rowan Dartington & Co. Limited
.....................................
.
"Sale" the proposed acquisition by
..................................... RDH of all of the issued and
..................... to be issued ordinary shares
of Rowan Dartington
"Share(s)"........................... the ordinary shares of 0.1 pence
.......................... each in the capital of Astaire
Group
"Shareholders" the holders of Shares
..................................... "
.........
This information is provided by RNS
The company news service from the London Stock Exchange
END
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