21st Feb 2006 07:02
Jelf Group PLC21 February 2006 21 February 2006 JELF GROUP plc Acquisition and Share Placing ACQUISITION OF GOSS GROUP LIMITED PROPOSED PLACING OF 6.9m NEW ORDINARY SHARES AT 106p per share RAISING £7.3m Jelf Group plc ("the Company") is delighted to announce the acquisition ("theAcquisition") of Goss Group Ltd ("Goss") for an initial consideration of £6.254million. Goss was established in 1921 in Reading and over the years hasdeveloped a significant insurance brokerage business and has added a financialservices division to complement this business. It employs around 170 staff in five locations. The majority of staff are locatedin Reading and Guildford with smaller offices existing in Cheltenham, NewtonAbbot and Taunton. Premium income has steadily increased to circa £46.2m in 2005which has been achieved in part by four acquisitions in the past six years. In addition the Company announces it is simultaneously raising £7,319,287 frominstitutional and other investors via a placing of 6,904,988 New Ordinary Sharesat 106p per share ("The Placing Price"). The Company has also placed 467,000Existing Ordinary Shares with institutional and other investors at The PlacingPrice. A shareholders' circular will be posted today and includes a Notice of an AnnualGeneral Meeting ("AGM") of the Company which is to be held on 21 March 2006. Highlights •The combination of Goss and Jelf Group ("the Enlarged Group") will make the Enlarged Group a leading force in the commercial insurance, corporate healthcare and employee benefits markets in the south of England and Wales •The combined corporate healthcare premiums will increase to £50m consolidating its position in the top 5 in this sector (based on volumes of business on risk with BUPA, excluding Nationals) •The combined commercial insurance book of business will now generate over £75m in annual premiums which would have placed the Enlarged Group in the top 10 of Insurance Age's 'Top 100 Independent Broker Survey 2005' •The combined financial services operation will now have annual turnover in excess of £10m establishing the Enlarged Group in the top 40 in this sector (Source: Based on published results in the Financial Adviser Regional Adviser Survey, Nov 2005) •The proposed Placing of New Ordinary Shares will assist in the financing of the Acquisition, the repayment of Goss's current indebtedness and provide working capital for the Enlarged Group Alex Alway, Group Chief Executive, Jelf Group plc, said "The strategic rationale for this consolidating acquisition is compelling. Thisacquisition not only enjoys an excellent strategic fit in respect of bothgeography and people, but also offers opportunities for enhanced margins as adirect result of the Enlarged Group's increased buying power, identified costsavings and multiple cross-selling opportunities". Enquiries:Alex Alway, Group Chief Executive, Jelf Group plcJohn Harding, Group Finance and Operations Director, Jelf Group plc01454 272799 Alastair Cade/Jonny Franklin-Adams, Daniel Stewart & Company plc020 7776 6550 Ian Seaton, Bankside Consultants020 7367 8891 Background to the Company The Company is an established corporate intermediary based in the West Countryand Wales offering a range of corporate services principally in the areas ofcommercial insurance, healthcare and financial services. Since incorporation,the Company has expanded the business both organically and through targetedacquisitions. Since the Company's flotation on AIM in October 2004, it has actively pursued anacquisition strategy, focusing on the West Country and Wales. As a result of anumber of strategic appointments and acquisitions utilising existing cash flowsand funds raised at the time of flotation, this strategy is delivering bothorganic and acquired growth. Today the Group operates from 10 offices, advising over 6,500 corporate clients. Information on Goss Goss was established in 1921 in Reading and over the years has developed asignificant insurance brokerage business and has added a financial servicesdivision to complement this business. It employs around 170 staff in fivelocations. The majority of staff are located in Reading and Guildford withsmaller offices existing in Cheltenham, Newton Abbot and Taunton. Premium incomehas steadily increased to circa £46.2 million in 2005 which has been achieved inpart by four acquisitions in the past six years. The voting share capital of Goss is owned by three individuals, all of whom willbe staying with the combined business following the Acquisition. A briefbiography of each of the Vendors is given below: Michael J King, BA (Hons), Chairman, is a Chartered Insurance Broker with over40 years experience in the insurance industry having been with Goss since 1967.He is a fellow of the Chartered Insurance Institute (CII) and owns 70 per cent.of the "A" Shares. Michael F Heard is managing director of the Financial Services Division and is aChartered Insurance Practitioner. He joined Goss in 1981 after 12 years with SunAlliance and joined the main board of Goss in 1986. He is a fellow of the CII.Michael owns 25 per cent. of the "A" Shares. Jeremy V.H. Wilson, MBA, is managing director of the General Insurance Division.He has worked for nearly 30 years in the insurance industry and joined Goss in1987, becoming managing director of the Insurance Division in 1999. He is anassociate of the CII and a Chartered Insurance Broker. He owns 5 per cent. ofthe "A" Shares. Reasons for the Acquisition The Acquisition is in line with the Company's stated strategy of acquiringinsurance intermediaries and the Directors believe it to be a good fit with theCompany for the following reasons: • Strong corporate focus; • Good geographical fit with little overlap between the two businesses; • Greater insurance business buying power generating increased commission rates; • Generation of cost savings by the removal of certain overheads; and • Generation of cross selling opportunities. In addition to the above there is a strong cultural fit between the twobusinesses which will be essential in ensuring a smooth integration and thecapture of benefits. As a result the Directors believe that the Acquisition should deliver increasedprofits to the Group. •The combined corporate healthcare premiums will increase to £50m consolidating its position in the top 5 in this sector (based on volumes of business on risk with BUPA, excluding Nationals) •The combined commercial insurance book of business will now generate over £75m in annual premiums which would have placed the Enlarged Group in the top 10 of Insurance Age's 'Top 100 Independent Broker Survey 2005' •The combined financial services operation will now have annual turnover in excess of £10m establishing the Enlarged Group in the top 40 in this sector (Source: Based on published results in the Financial Adviser Regional Adviser Survey, Nov 2005) Details of the Acquisition Goss's issued share capital comprises the "A" Shares and the "B" Shares. The "B"Shares have been issued to employees but do not carry any voting rights orrights to attend general meetings. Under the terms of the Acquisition Agreement, Jelf has conditionally agreed toacquire the "A" Shares for an initial consideration of £6,254,000 of which£2,034,000 is payable in cash on Completion and £4,220,000 will be satisfied byway of the issue of 3,981,132 New Ordinary Shares, credited as fully paid, atthe Placing Price per share. Additional cash consideration may also be payable up to a maximum of £2,676,000.Payment of such additional consideration is dependent on Goss achieving certainincome levels over a period of 2 years following Completion. Under the terms of the Acquisition Agreement, following exchange of contracts,the Vendors have agreed to make an offer to purchase the "B" Shares from theemployees and has further committed to transfer such purchased "B" Shares to theCompany in accordance with the terms of the Acquisition Agreement. Following Completion, completion accounts ("the Completion Accounts") will bedrawn up to determine the value of the net tangible liabilities of Goss and itsgroup companies on Completion ("Net Tangible Liabilities") according to theterms of the Acquisition Agreement. The amount of the Net Tangible Liabilitiesexpected, as at Completion, is £3,400,000 ("the Minimum"). In the event that theNet Tangible Liabilities as at Completion are determined to be more than theMinimum, such excess will be payable in cash by the Vendors to the Company. Ifthe Net Tangible Liabilities as at Completion is determined to be less than theMinimum then, payment of a sum equal to the deficit will be payable in cash bythe Company to the Vendors. Further Acquisitions As previously stated, the Board is actively pursuing a policy of growth throughacquisition. The Board is aware of a number of opportunities some of which,after careful consideration and due diligence, the Company hopes to be able toacquire in due course. Use of proceeds The proposed Placing of New Ordinary Shares will assist in the financing of theAcquisition, the repayment of Goss's current indebtedness and provide workingcapital for the Enlarged Group. The funds raised by the Company from the placing of the New Placing Shares willbe applied as follows: £'000 ------------------------------------ ------Pay the initial cash consideration for Goss 2,034------------------------------------ ------Repayment of existing Goss indebtedness 3,400------------------------------------ ------Expenses of the transaction 650------------------------------------ ------Expected integration costs 200------------------------------------ ------Surplus capital available for additional expansion and working capitalby the Enlarged Group 1,035------------------------------------ ------ ------------------------------------ ------Total 7,319------------------------------------ ------ Financial record of Goss The table below is a summary of the financial information relating to the assetsof Goss that the Company is acquiring: Year ended Year ended 9 months ended------------- ----------- ----------- ----------- 31 December 31 December 30 September------------- ----------- ----------- ----------- 2003 2004 2005------------- ----------- ----------- ----------- £ £ £------------- ----------- ----------- -----------Turnover 9,282,858 10,260,445 7,603,187------------- ----------- ----------- -----------EBITDA 1,354,538 1,304,611 1,237,911------------- ----------- ----------- ----------- Current trading and prospects of the Enlarged Group In the accompanying statement to the preliminary results for the Company for thetwelve month period to 30 September 2005, which was released on 26 January 2006,Chris Jelf, Chairman, said that the Company will continue with its strategy ofstrengthening its market position by both acquiring and consolidatingbusinesses, and creating value through organic growth activities and thatcurrent trading in the Company's three divisions is on budget. During the firstquarter a small healthcare benefits consultancy was acquired and in addition tothis a team of corporate advisers based in Swindon joined the Company. Details of the Placing The Company is proposing to raise approximately £7.3 million, before expenses,by way of a Placing to institutional and other investors, through the issue of6,904,988 New Ordinary Shares at a price of 106 pence per Placing Share pursuantto the Placing Agreement. In addition 467,000 existing Ordinary Shares will beincluded in the Placing. J.M. Finn, as agent for the Company, has agreed to useits reasonable endeavours to procure subscribers for the New Placing Shares andas agent for certain existing shareholders has agreed to use reasonableendeavours to procure purchasers of the Sale Placing Shares. The Placing isconditional, inter alia, on the passing of Resolutions 9 and 10 as set out inthe AGM Notice. The allotment and issue of 4,074,800 of the New Placing Sharesto be subscribed by venture capital trusts and investors seeking the benefit ofthe Reliefs (Qualifying Placing Shares) is not subject to Admission orCompletion. The placing of the remaining Placing Shares (not being QualifyingPlacing Shares) is conditional upon Admission taking place by 8.00 a.m. on 22March 2006, or such later time, being not later than 4 April 2006, as J.M. Finnand Daniel Stewart may agree with the Company. On Admission, the Directors (and persons associated with them in accordance withthe AIM Rules) will hold, in aggregate, approximately 32.2 per cent. of theEnlarged Share Capital. AGM The Notice of AGM was sent to Shareholders yesterday convening the AGM to beheld at the Kendleshire Golf Club, Henfield Road, CoalpitHeath, Bristol BS36 2UYat 10.00 a.m. on 21 March 2006. Directors' Interests Michael King has agreed to become a Director of the Company on Completion. David Walker intends to subscribe for 200,000 Placing Shares as detailed below.Subject to the Placing, Peter Elliott intends to sell 200,000 Existing OrdinaryShares as detailed below. The interests of the Directors and the proposed director of the Company as atthe date of this announcement and at Admission are and will be: At the date of this announcement Following Admission Number of Percentage of Number of Percentage of Existing Existing Ordinary Shares Enlarged Share Ordinary Shares ordinary Shares ----------- Capital ----------- ----------- -----------ChristopherJelf* 2,767,657 20.5 2,767,657 11.4----------- ----------- ----------- ----------- -----------Alexander Alway 1,080,800 8.0 1,080,800 4.4----------- ----------- ----------- ----------- -----------Peter Elliott** 661,274 4.9 461,274 1.9----------- ----------- ----------- ----------- -----------John Harding 201,600 1.5 201,600 0.8----------- ----------- ----------- ----------- -----------David Walker 200,000 1.5 400,000 1.6----------- ----------- ----------- ----------- -----------Michael King*** 0 0 2,945,283 12.1----------- ----------- ----------- ----------- ----------- * In addition 205,800 Ordinary Shares which are registered in the name of HazellCarr Pensions Services Limited (trustees of the Company's self administeredpension scheme), are beneficially owned by Christopher Jelf through his interestin that company's small self administered pension scheme. Hazell Carr Pensions Services Limited (as trustees of the Company's small selfadministered pension scheme) is the registered holder of 714,700 Ordinary Sharesamounting to 5.3 per cent. of the Company's issued share capital at the date ofthis document. ** In addition 72,100 Ordinary Shares which are registered in the name of HazellCarr Pensions Services Limited (trustees of the Company's small selfadministered pension scheme), are beneficially owned by Peter Elliott throughhis interest in that company's small self administered pension scheme. *** 99,057 of these shares are to be transferred by Michael King to thirdparties following Completion. APPENDIX Michael James King holds or has held directorships in the five years precedinghis appointment at the Company as follows: Current Directorships Goss Group LimitedGoss & Co. (Insurance Brokers) LimitedGoss & Co. (Financial Services) LimitedPetline LimitedM.W.F. Carter LimitedAccess Underwriting LimitedAccess Underwriters LimitedCream Design LimitedTravel Incorporate LimitedProtocol Group LimitedProtocol Business Development LimitedProtocol Management Services LimitedJohn Holt & Partners (Financial Services) LimitedPendleton May (Holdings) LimitedPendleton May Insurance Brokers LimitedPendleton May Financial Services LimitedC&I Insurance Services LimitedCommercial & International Insurance Consultants LimitedGoring and Streatley Travel LimitedChampion Seafoods Limited Past Directorships None There are no other matters to be disclosed in relation to Schedule 2 paragraph(g) of the AIM Rules. DEFINITIONS The following definitions apply throughout this announcement, except where thecontext requires otherwise. "A Shares" the 500,000 issued and paid up ordinary shares of £1 each in the share capital of Goss"Acquisition" the proposed purchase of the "A" Shares of Goss, pursuant to the Acquisition Agreement"Acquisition the conditional agreement dated 20 February 2006 between theAgreement" Vendors (1) and the Company (2) relating to the Acquisition"Admission" the admission of the New Ordinary Shares to trading on AIM becoming effective in accordance with the AIM Rules"AIM" the AIM market operated by the London Stock Exchange"AIM Rules" the rules of the London Stock Exchange governing the admission of securities to AIM"Annual the annual general meeting of the Company convened for 21 MarchGeneral 2006 (or any adjournment thereof)Meeting" or"AGM""B Shares" the 5,570 issued and paid up "B" ordinary shares of £1 each in the share capital of Goss"Bank" The Royal Bank of Scotland plc"Bank the £7,250,000 facilities to be granted to Jelf by the BankFacility""Board" or the board of directors of the Company"Directors""Completion" Completion of the Acquisition Agreement which will occur automatically upon Admission (when all conditions of the Acquisition Agreement will have been satisfied or waived)"Consideration the 3,981,132 new Ordinary Shares to be issued on Completion,Shares" credited as fully paid, pursuant to the terms of the Acquisition Agreement"Daniel Daniel Stewart & Company plcStewart""Enlarged the Group as enlarged by the AcquisitionGroup""Existing the 13,495,120 existing Ordinary Shares in issue at the date ofOrdinary this announcementShares""Enlarged the issued share capital of the Company following Admission, asShare Capital" enlarged by the issue of the New Ordinary Shares"Goss" Goss Group Limited"J.M. Finn" J.M. Finn & Co"Group" the Company and its subsidiaries"Jelf" or the Jelf Group plc"Company""London Stock London Stock Exchange plcExchange""New Ordinary together, the Consideration Shares and the New Placing SharesShares""New Placing the 6,904,988 new Ordinary Shares which are part of the PlacingShares""Notice of the notice of AGM set out at the end of this documentAGM""Ordinary ordinary shares of 1p each in the capital of the CompanyShares""Placing" the conditional placing by J.M. Finn, on behalf of Jelf, of the Placing Shares at the Placing Price to certain institutional and other investors, pursuant to the terms of the Placing Agreement"Placing the conditional placing agreement dated 20 February 2006 betweenAgreement" Daniel Stewart (1), J.M. Finn (2), the Company (3) and the Directors (4) relating to the Placing"Placing 106p per Placing SharePrice""Placing the New Placing Shares and the Sale Placing SharesShares""Qualifying 4,074,800 of the New Placing Shares to be subscribed by venturePlacing capital trusts and investors seeking to take the benefit of theShares" Reliefs"Reliefs" relief available under Schedule 28B and Section 842AA of the Income and Corporation Taxes Act 1988 (Venture Capital Trusts), or under Chapter III of Part VII of the Income and Corporation Taxes Act 1988 and Sections 150A-150D and Schedule 5B and 5BA of Taxation of Chargeable Gains Act 1992 (Enterprise Investment Scheme)"Resolutions" the resolutions to be proposed at the AGM as set out in the Notice of AGM"Sale Placing means 467,000 existing Ordinary Shares which are the subject ofShares" the Placing"Shareholders" holders of Ordinary Shares"Vendors" Michael King, Michael Heard and Jeremy Wilson This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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