19th Jan 2015 08:27
LONDON (Alliance News) - Tavistock Investments PLC saw its shares slide early Monday after it did a discounted share placing to raise new funds to bolster the capital position of Standard Financial Group Ltd, which it is acquiring in a move that will boost its wealth advisory business.
In a statement, the company said it had raised a minimum of GBP2.7 million by placing 53.2 million shares, a subscription of 81.8 million shares and an open offer of up to nearly 30.5 million shares, all at 2 pence a share.
Tavistock's shares were down 49.3% at 2.66 pence early Monday, making it the worst-performing stock on the AIM All-Share index
It said it is acquiring Standard Financial, an independent network of financial advisers that generates gross annual revenue of about GBP28 million, in a deal that constitutes a reverse takeover under AIM rules. However, the Financial business got into difficulties with the UK financial services regulator as its systems and controls struggled to keep pace with its rapid growth.
Tavistock thinks the business it is acquiring now has a "robust, effective and compliant systems in place across its business and it is the ambition of its management team is to set industry leading standards for the supervision of advisers".
"However, the commercial legacy of past difficulties has left Financial short of working capital for both regulatory and operational requirements. This situation has enabled the company to negotiate favourable terms for the acquisition which are described below," Tavistock said.
It is paying an initial GBP500,000 in cash for the business, although the vendor has to use GBP52,000 of this to buy the IFA Compliance Ltd subsidiary of Standard Financial. The remaining GBP448,000 will be used to repay outstanding inter-company loans owed by IFA Compliance.
Once the deal is done, Tavistock will provide Standard Financial with GBP500,000 in additional working capital, and could also provide a further GBP500,000, which would take the total funding for the deal to GBP1.5 million.
Tavistock said it has also agreed to offer the sellers GBP2,000 in new Tavistock shares for each adviser who remain in the business once the deal completes through to the end of March 2016.
Tavistock said the deal will immediately boost its adviser numbers to 324, from 23, take its customer numbers to over 65,000, and gross revenue to over GBP30 million.
"Whilst it is not possible to definitively state the level of assets that are currently advised upon by members of the Financial network, the directors believe the amount to be in excess of GBP2.6 billion," it said.
By Steve McGrath; [email protected]; @stevemcgrath1
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