TIDMBILL
RNS Number : 5477B
Billing Services Group Limited
31 January 2020
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
31 January 2020
Billing Services Group Limited
("Billing Services Group", "BSG", the "Company" or the
"Group")
Proposed disposal of BSG Wireless business
and
Notice of Special General Meeting
(The definitions of all defined terms in this announcement are
set out below in Appendix III of this announcement)
BSG, a leading provider of telecommunications clearing and
financial settlement products, Wi-Fi data solutions and
verification services, is pleased to announce that following a
competitive sale process, it has entered into a conditional
agreement for the disposal of all of the assets (with limited
exceptions) of the Company's wholly owned subsidiary, BSG Wireless
Limited, to Single Digits Connection, LLC for approximately
US$5,250,000 in cash. For more information on Single Digits, please
see: www.singledigits.com.
The size of the proposed transaction means that the Disposal is
deemed to result in a fundamental change of business under AIM Rule
15 and, consequently, is conditional, amongst other things, on
Shareholder approval at a Special General Meeting to be held at
11.00a.m. on 19 February 2020 at the offices of Reed Smith LLP at
The Broadgate Tower, 20 Primrose Street, London, EC2A 2RS. A
Circular will be distributed to shareholders today (and made
available on the Company's website at www.bsgclearing.com) to
provide, among other things: (i) details of the Transaction; and
(ii) notice of the Special General Meeting to be convened to
consider and, if thought fit, approve the Transaction.
For the avoidance of doubt, assuming Shareholders approve the
Transaction at the Special General Meeting, Billing Services Group
will continue to be classified as an operating company and not a
cash shell pursuant to AIM Rule 15.
It is currently intended that following completion of the
Disposal, the Company will make a cash distribution to Shareholders
in the first quarter of 2020 in a form and an amount to be
determined by the Board, which will take into account other factors
described in the Circular.
Completion of the Disposal is conditional upon, among other
things, approval of the Disposal by the Shareholders. If such
approval is not provided by the Shareholders, the Disposal will not
be completed.
INFORMATION ON THE WIRELESS BUSINESS
BSG Wireless offers three primary services to wireless network
operators:
-- Roaming hub service - this is a managed service for enabling
interconnection between Wi-Fi networks. It enables a customer of a
carrier to use the networks of other operators. The service tracks,
verifies, bills and clears inter-carrier charges;
-- "Find and Connect" mobile app - provides a map of Wi-Fi
network access points in the vicinity of the phone or other device.
The app authenticates the profile of the user and enables the
phone/device to connect seamlessly to the Wi-Fi network; and
-- Hotspot location data service - allows operators to manage
inventory and locations of their active hotspots.
Financial Information IN RELATION TO THE DISPOSAL
In the year ended 31 December 2018 Company generated revenues of
US$16.1 million, EBITDA of US$0.8 million and a net loss of US$7.8
million, of which the Wireless Business contributed revenues of
US$2.9 million, EBITDA of US$0.48 million and a net loss of US$1.35
million.
Principal terms of the Disposal
Under the Disposal Agreement, which was signed on 30 January
2020, BSG Wireless has conditionally agreed to sell all of its
assets (with limited exceptions) to Single Digits.
The purchase price for the BSG Wireless assets is approximately
US$5,250,000 in cash, subject to post-Completion adjustment. The
consideration will be due in cash at Completion with the exception
of US$925,000 of the consideration which is to be held in escrow.
The escrow amount is being provided to satisfy any liability of BSG
Wireless or the Company under the terms of the Disposal Agreement
and will be released to BSG Wireless over a 9 to 18 month period
following Completion subject to any warranty or indemnity claims
made in this period pursuant to the terms of the Disposal
Agreement.
The Disposal is conditional, among other things, upon the
approval of Shareholders at the SGM. The parties may terminate the
Disposal Agreement by mutual consent, in the event of a breach of
warranty, or if Completion has not occurred before 28 February
2020.
Further information on the Disposal and the principal terms and
conditions of the Disposal Agreement are set out in Part III of the
Circular.
Use of Proceeds
The proceeds receivable by the Company from the Disposal are
expected to be approximately US$4.3 million (net of the anticipated
escrow amount and before the payment of fees and other costs).
It is currently anticipated that, dependent on the Company's
circumstances following Completion, a cash distribution will be
made to Shareholders in the first quarter of 2020 in a form and an
amount to be determined by the Directors acting in their
discretion. Any proposed distribution would need to be approved by
the Board and the Shareholders in accordance with the requirements
of the Companies Act.
The Continuing Group following the Disposal
Strategy
If the sale of BSG Wireless is completed, BSG will operate two
business lines: the Wireline Business and the TPV Business.
In light of the secular revenue decline in the Wireline Business
and the absence of any likelihood of a favourable change in trends,
the Company will continue to assess strategic options for the
Wireline Business. The Wireline Business is currently generating a
modest level of EBITDA, but further declines in revenue will
adversely affect profitability. The Company will endeavour to
undertake necessary expense reductions as appropriate, but it has
become increasingly difficult to reduce expenses without
jeopardising the reliability of services. If the Company is unable
to generate earnings or find a buyer on reasonable terms for the
Wireline Business, it will consider the other options available at
that time.
The TPV Business is a relatively stable business which generates
a modest level of EBITDA. The business has multiple competitors,
some of whom could be potential buyers of the business. The Board
will continue to explore all options for the business.
Growth Outlook
Revenue within the Wireline Business is expected to continue to
decline. There is some potential for the TPV Business to experience
increases in revenue, particularly if it is able to increase market
share. However, the potential for added market share is limited by
the highly competitive nature of the TPV industry.
Dividend Policy
The declaration and payment of any future dividends and the
amount of any such dividends will depend upon the Company's
results, financial condition, future prospects, profits being
available for distribution, limitations under any financing
arrangements and any other factors deemed by the Directors to be
relevant at the time, subject always to the requirements of the
Companies Act.
CURRENT TRADING AND FUTURE PROSPECTS
Trading for the eleven months ended 30 November 2019 was in line
with the Board's expectations and consistent with the recent
trading conditions experienced by the Company. Future revenues and
profitability are not readily predictable, as they will largely
depend on completion of the sale of the asset of BSG Wireless, the
composition of the Continuing Group and changes in the number of
LECs that continue to offer third-party billing services.
RECOMMATION AND IRREVOCABLE UNDERTAKINGS
The Directors consider the Disposal to be in the best interests
of the Company and its Shareholders as a whole and accordingly
unanimously recommend that Shareholders vote in favour of the
Resolution to be proposed at the SGM as they intend to do in
respect of their own beneficial holdings amounting, in aggregate,
to 10,638,944 Common Shares, representing approximately 6.46 per
cent. of the Common Shares.
In addition to the Directors, certain other shareholders have
irrevocably undertaken to vote in favour of the Resolution in
respect of the Common Shares in which they are interested,
amounting to, in aggregate, to 93,728,286 Common Shares,
representing 56.88 per cent. of the Common Shares. In total the
Directors and the shareholders who have irrevocably undertaken to
vote in favour of the Resolution represent, in aggregate,
104,367,230 Common Shares totalling 63.34 per cent. of the Common
Shares.
ENQUIRIES:
Billing Services Group Limited
Norman M. Phipps (Chief Executive Officer,
Chief Financial Officer and Executive
Director) +1 210 949 7000
finnCap
Nominated Adviser and Broker 020 7220 0500
Scott Mathieson
Matthew Radley
The information contained in the Appendixes set out below has
been taken from the Circular that is being sent to Shareholders
today and is available on the Company's website at
www.bsgclearing.com.
APPIX I
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Conditional Agreement for Disposal signed 30 January 2020
Circular sent to Shareholders 31 January 2020
Latest time and date for receipt of Form 11.00 a.m. on 14 February
of Direction and CREST Proxy Instructions 2020
from holders of Depositary Interests
Latest time and date for receipt of Form 11.00 a.m. on 17 February
of Proxy and CREST Proxy Instructions from 2020
holders of Common Shares
Special General Meeting 11.00 a.m. on 19 February
2020
Disposal Long Stop Date 28 February 2020
Notes:
1. Each of the times and dates above are indicative only and if
any of the details contained in the timetable above should change,
the revised times and dates will be notified to Shareholders by
means of an announcement through a Regulatory Information
Service.
2. All of the above times refer to Greenwich Mean Time ('GMT') unless otherwise stated.
3. All events listed in the above timetable following the SGM
are conditional on the passing at the SGM of the Resolution.
4. The Company does not hold any shares in treasury.
APPIX II
EXTRACTS FROM THE CIRCULAR
1. Introduction
The Company has today announced that following a competitive
sale process, it has entered into a conditional agreement for the
disposal of all of the assets (with limited exceptions) of BSG
Wireless to Single Digits for approximately US$5,250,000 in
cash.
It is currently intended that following completion of the
disposal, the Company will make a cash distribution to Shareholders
in the first quarter of 2020 in a form and an amount to be
determined by the Board, which will take into account other factors
described in the Circular.
Completion of the Disposal is conditional upon, among other
things, approval of the Disposal by the Shareholders. If such
approval is not provided by the Shareholders, the Disposal will not
be completed.
In addition to providing you with information about the
Disposal, this letter sets out the background to and reasons for
the Disposal. The size of the proposed transaction means that the
Disposal is deemed to result in a fundamental change of business
under the AIM Rules and, consequently, the Shareholders are
required to approve it. Therefore, this letter also explains why
the Directors consider that the proposals are fair and reasonable,
in the best interests of the Company and the Shareholders as a
whole and why the Directors unanimously recommend that you vote in
favour of the Resolution to be proposed at the SGM, as they intend
to do in respect of their own beneficial interests.
Shareholders should read the whole of the Circular and not just
rely on the information contained in this announcement.
2. Information on BSG
2.1 Corporate History
The Company is a leading provider of telecommunications clearing
and financial settlement products, Wi-Fi data solutions and
verification services. The Company currently operates three
businesses: the Wireline Business, the TPV Business and the
Wireless Business.
The Wireline Business was formed in 2003 through the combination
of the two largest LEC billing companies in the US. Following
admission of the Company's Common Shares to trading on AIM in 2005,
the Company acquired the TPV Business in 2006, followed by the
Wireless Business in 2012.
2.2 Information on the Wireline Business
The telecommunications network in the US relies on highly
regulated regional telecommunication carriers or LECs who have a
government-approved quasi-monopoly to provide local landline
telecommunications services within their assigned areas. A 'local'
call is any landline-originated call where the distance between the
initiator and the recipient is within a defined range, (e.g. 25
miles). If a caller initiates a call to a party outside of the
local service area, the initiator needs to have (and pay for) 'long
distance' service. Landline telephone users can obtain long
distance service from their incumbent LEC or from independent LDSPs
that have competitive offerings.
The Company provides an efficient billing option for the LDSPs.
Instead of invoicing customers directly, the LDSP can
electronically submit its call record information to the Company.
BSG has contracts with LECs allowing BSG to submit aggregated call
record information to LECs. After BSG submits call records to the
LECs, the LECs post the long distance charges to the appropriate
consumers' accounts. The added charges for the LDSP's services are
then included in the LEC's monthly invoices sent to its end users.
The LECs collect money for the invoiced long distance services and
remit collected funds to BSG (net of deductions for their fees and
reserves). BSG then distributes the collected funds (net of its
fees and reserves) to the LDSPs. The transaction cycle, called 'LEC
billing' or 'third-party billing', has proven over time to be the
most efficient way for LDSPs to bill and collect funds for their
services.
Not all LECs provide third party billing services. When a LDSP's
charges cannot be billed through a LEC, BSG offers a direct billing
service. Under that service, BSG sends invoices directly to the
call initiator, collects payments and remits the collected funds,
net of fees and reserves, to the appropriate LDSP.
2.3 Information on the TPV Business
BSG's TPV service is used by entities that engage an independent
party to verify that an authorised individual has reached an
agreement to change its service provider. Examples of underlying
transactions include agreements to subscribe to a service, such as
energy utility, cable TV or health care. Verifications can be done
by a live operator who records the confirmation of the terms of the
agreement (e.g. name of party, age of party, agreed price, term of
contract, cancellation fees, etc.). The verifications can also be
made through an automated question and answer sequence in which the
party inputs answers (e.g. 'Press 1 for Yes or 2 for No').
2.4 Information on the Wireless Business
BSG Wireless offers three primary services to wireless network
operators:
-- Roaming hub service - this is a managed service for enabling
interconnection between Wi-Fi networks. It enables a customer of a
carrier to use the networks of other operators. The service tracks,
verifies, bills and clears inter-carrier charges;
-- "Find and Connect" mobile app - provides a map of Wi-Fi
network access points in the vicinity of the phone or other device.
The app authenticates the profile of the user and enables the
phone/device to connect seamlessly to the Wi-Fi network; and
-- Hotspot location data service - allows operators to manage
inventory and locations of their active hotspots.
3. BACKGROUND TO AND REASONS FOR THE DISPOSAL
In 2017, the Company initiated a strategic review to assist the
Board in determining the future composition of the Group, including
its capital structure and business lines. The primary objective of
the review was to maximise shareholder value in light of divergent
trends in the Wireline Business and the Wireless Business. The
Wireline Business has experienced a sustained secular decline in
transaction volume and revenues as a result of declining usage of
wireline telecommunications and cessation of third-party billing by
the largest LECs. In contrast, the Wireless Business has
experienced modest gains in revenue and new clients.
Between 2017 and 2018, in connection with the strategic review,
the Board pursued the sale of the Company as a whole to a single
buyer or, alternatively, the sale of one of more business units to
multiple buyers. Negotiations were held with potential buyers of
the Wireless Business, but the Company was unable to reach a
satisfactory agreement.
In 2019, following a renewed competitive process to sell the
Wireless Business, Single Digits, Inc, the parent company of the
Buyer, expressed interest in purchasing the Wireless Business.
After completing a customary due diligence review of the Wireless
Business, the Buyer made an offer to the Company. After further
negotiations and due consideration, the Board agreed to approve the
sale of the Wireless Business to the Buyer, subject to the approval
of the Company's shareholders.
The Board's decision to sell the Wireless Business under the
terms offered by the Buyer was driven by multiple considerations,
including:
-- the purchase price was deemed reasonable in light of current market conditions;
-- the entire purchase price would be paid in cash;
-- the terms and conditions of the transaction, taken as a
whole, are consistent with normal and customary terms in comparable
transactions; and
-- the transaction is consistent with the objectives of the strategic review.
4. Financial Information IN RELATION TO THE DISPOSAL
In the year ended 31 December 2018 Company generated revenues of
US$16.1 million, EBITDA of US$0.8 million and a net loss of US$7.8
million, of which the Wireless Business contributed revenues of
US$2.9 million, EBITDA of US$0.48 million and a net loss of US$1.35
million.
5. Principal terms of the Disposal
Under the Disposal Agreement, which was signed on 30 January
2020, BSG Wireless has conditionally agreed to sell all of its
assets (with limited exceptions) to Single Digits.
The purchase price for the BSG Wireless assets is approximately
US$5,250,000 in cash. The Disposal Agreement contains warranties
which are customary for a transaction of this nature.
The Disposal is conditional, among other things, upon the
approval of Shareholders at the SGM. The parties may terminate the
Disposal Agreement by mutual consent, in the event of a breach of
warranty, or if Completion has not occurred before 28 February
2020.
Further information on the Disposal and the principal terms and
conditions of the Disposal Agreement are set out in Part III of the
Circular.
6. Use of Proceeds
The proceeds receivable by the Company from the Disposal are
expected to be approximately US$4.7 million (net of the anticipated
escrow amount and before the payment of fees and other costs).
It is currently anticipated that, dependent on the Company's
circumstances following Completion, a cash distribution will be
made to Shareholders in the first quarter of 2020 in a form and an
amount to be determined by the Directors acting in their
discretion. Any proposed distribution would need to be approved by
the Board and the Shareholders in accordance with the requirements
of the Companies Act.
7. The Continuing Group following the Disposal
7.1 Strategy
If the sale of BSG Wireless is completed, BSG will operate two
business lines: the Wireline Business and the TPV Business.
In light of the secular revenue decline in the Wireline
Business, discussed in paragraph 3 above, and the absence of any
likelihood of a favourable change in trends, the Company will
continue to assess strategic options for the Wireline Business. The
Wireline Business is currently generating a modest level of EBITDA,
but further declines in revenue will adversely affect
profitability. The Company will endeavour to undertake necessary
expense reductions as appropriate, but it has become increasingly
difficult to reduce expenses without jeopardising the reliability
of services. If the Company is unable to generate earnings or find
a buyer on reasonable terms for the Wireline Business, it will
consider the other options available at that time.
The TPV Business is a relatively stable business which generates
a modest level of EBITDA. The business has multiple competitors,
some of whom could be potential buyers of the business. The Board
will continue to explore all options for the business.
7.2 Growth Outlook
Revenue within the Wireline Business is expected to continue to
decline. There is some potential for the TPV Business to experience
increases in revenue, particularly if it is able to increase market
share. However, the potential for added market share is limited by
the highly competitive nature of the TPV industry.
7.3 Dividend Policy
The declaration and payment of any future dividends and the
amount of any such dividends will depend upon the Company's
results, financial condition, future prospects, profits being
available for distribution, limitations under any financing
arrangements and any other factors deemed by the Directors to be
relevant at the time, subject always to the requirements of the
Companies Act.
8. CURRENT TRADING AND FUTURE PROSPECTS
Trading for the eleven months ended 30 November 2019 was in line
with the Board's expectations and consistent with the recent
trading conditions experienced by the Company. Future revenues and
profitability are not readily predictable, as they will largely
depend on completion of the sale of BSG Wireless, the composition
of the Continuing Group and changes in the number of LECs that
continue to offer third-party billing services.
9. Special General Meeting
The Disposal is conditional, among other things, upon
Shareholder approval.
A notice is set out at the end of the Circular convening the SGM
to be held at the offices of Reed Smith LLP at The Broadgate Tower,
20 Primrose Street, London, EC2A 2RS at 11.00 a.m. on 19 February
2020. A Resolution will be proposed at the SGM to seek the approval
of the Shareholders to the Disposal and authorise the Directors, or
any committee of Directors, to take all steps to implement the
Disposal.
The authorities conferred by the Resolution will lapse within
the time frame set out in the relevant Resolution.
10. Further information
The expected timetable of principal events for the Disposal is
set out on page 6 of the Circular and in Appendix II above. Further
information regarding the Disposal and the principal terms and
conditions of the Disposal Agreement are set out in Part III of the
Circular.
Your attention is drawn to the further information contained in
Parts II and III of the Circular, the Notice of Special General
Meeting which forms part of the Circular, as well as to the Form of
Proxy which accompanies the Circular. Shareholders should read the
whole of the Circular and not just rely on the information
contained in this announcement.
11. Action to be taken
In addition to the Circular, Shareholders will also be sent the
following documents:
-- a Form of Proxy for use in relation to the SGM; and
-- a reply-paid envelope for use in connection with the return
of the Form of Proxy (in the UK only).
Whether or not you intend to be present in person at the SGM,
you are strongly encouraged to complete, sign and return your Form
of Proxy in accordance with the instructions printed thereon so as
to be received by post or, during normal business hours only, by
hand, at Link Asset Services of The Registry, 34 Beckenham Road,
Beckenham, Kent, BR3 4TU, United Kingdom, as soon as possible but
in any event so as to arrive by not later than 11.00 a.m. on 14
February 2020 if you hold Depositary Interests or 17 February 2020
if you hold Common Shares (or, in the case of an adjournment of the
SGM, not later than 72 hours (if you hold Depositary Receipts) or
48 hours (if you hold Common Shares) before the time fixed for the
holding of the adjourned meeting (excluding any part of a day that
is not a Business Day)).
Appointing a proxy in accordance with the instructions set out
above will enable your vote to be counted at the SGM in the event
of your absence. The completion and return of a Form of Proxy will
not preclude you from attending and voting in person at the SGM, or
any adjournment thereof, should you wish to do so.
12. Recommendation and irrevocable undertakings
The Directors consider the Disposal to be in the best interests
of the Company and its Shareholders as a whole and accordingly
unanimously recommend that Shareholders vote in favour of the
Resolution to be proposed at the SGM as they intend to do in
respect of their own beneficial holdings amounting, in aggregate,
to 10,638,944 Common Shares, representing approximately 6.46 per
cent. of the Common Shares.
In addition to the Directors, certain other shareholders, have
irrevocably undertaken to vote in favour of the Resolution in
respect of the Common Shares in which they are interested,
amounting in aggregate to 93,728,286 Common Shares, representing
56.88 per cent of the Common Shares. In total the Directors and the
shareholders who have irrevocably undertaken to vote in favour of
the Resolution represent in aggregate 104,367,230 Common Shares
totalling 63.34 per cent of the Common Shares.
APPIX III
DEFINITIONS
The following words and expressions shall have the following
meanings in this announcement unless the context otherwise
requires:
'AIM' the market of that name operated by the London
Stock Exchange;
'AIM Rules' the rules for AIM companies as published by the
London Stock Exchange from time to time;
'Board' or 'Directors' the directors of the Company;
'BSG Wireless' BSG Wireless Limited, a company incorporated and
registered in England and Wales with company number
06520674 whose registered office is located at
4 Comet House, Calleva Park, Aldermaston, Berkshire,
RG7 8JA;
'Business Day' any day which is not a Saturday, Sunday or public
holiday on which banks are open for business in
the City of London and Bermuda;
'Buyer' Single Digits Connection LLC;
'Circular' the circular being sent to Shareholders today
and being made available on the Company's website
at www.bsgclearing.com;
'Common Shares' the 164,768,689 common shares of US$1.00 each
in the share capital of the Company;
'Companies Act' the Companies Act of Bermuda 1981, as amended;
'Company' or Billing Services Group Limited, a company incorporated
'BSG' and registered in Bermuda with registered company
number EC36839 whose registered office is located
at Canon's Court, 22 Victoria Street, Hamilton,
HM 12 Bermuda;
'Completion' completion of the Disposal;
'Continuing Group' the Company and its subsidiary undertakings following
Completion;
'CREST' the computerised settlement system to facilitate
transfer of title to or interests in securities
in uncertificated form operated by Euroclear UK
& Ireland Limited;
'Disposal' the proposed disposal of all of the assets (with
limited exceptions) of BSG Wireless pursuant to
the terms of the Disposal Agreement;
'Disposal Agreement' the asset purchase agreement between the Company,
BSG Wireless and Single Digits, dated 30 January
2020, relating to the Disposal;
'Depositary Interests' a depositary interest representing an underlying
Common Share;
'EBITDA' earnings before interest, tax, depreciation and
amortisation;
'Form of Proxy' the form of proxy and direction for use at the
SGM which accompanies the Circular;
'Group' BSG and its subsidiary undertakings, including
BSG Wireless;
'LDSP' long distance service provider;
'LEC' local exchange carrier;
'London Stock London Stock Exchange plc;
Exchange'
'Notice of SGM' the notice of the SGM, which is set out at the
end of the Circular;
'Registrar' Link Asset Services of The Registry, 34 Beckenham
Road, Beckenham, Kent, BR3 4TU;
'Resolution' the resolution to be proposed at the SGM, as set
out in the Notice of SGM;
'SGM' the special general meeting of the Company, notice
of which is set out at the end of the Circular;
'Shareholder(s)' holder(s) of Common Shares;
'Single Digits' Single Digits Connection, LLC, a limited liability
company incorporated in Delaware with file number
7812164 and having its registered office at 4
Bedford Farms Drive, Suite 210, Bedford, NH 03110,
USA;
'TPV' third party verification;
'TPV Business' the business offering TPV services;
'UK' or 'United the United Kingdom of Great Britain and Northern
Kingdom' Ireland;
'US' or 'United the United States of America, its territories
States' and possessions, any state of the United States
of America and the District of Columbia and all
other areas subject to its jurisdiction;
'Wireless Business' the business conducted by BSG Wireless; and
'Wireline Business' the business offering third-party telephone billing
services to LDSPs.
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
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