13th Mar 2008 07:00
Merchant House Group PLC13 March 2008 MERCHANT HOUSE GROUP PLC (the "Company") ANNOUNCES NOTICE OF EGM AND PROGRESS ON RECRUITMENT OF A BROKING TEAM AND FUNDRAISING Merchant House Group PLC, the AIM listed Financial Services business is pleasedto announce that it has today posted a circular to shareholders convening an EGMin order to raise up to £2.5 million by the issue of Convertible PreferenceShares of £1 each to enable the recruitment of a new broking team. The Companyis seeking an authority to issue up to £4 million of Convertible PreferenceShares which upon conversion will result in an additional 160,000,000 OrdinaryShares based on an effective conversion price of 2.5 pence per Ordinary Share. Martin Eberhardt, Chairman of Merchant House Group has written to shareholdersas follows; "I am writing to you to explain the latest - and perhaps most significant -phase in the Company's redevelopment plans and to seek shareholder approval forresolutions that are necessary to put these plans into effect. A GeneralMeeting, at which the resolutions will be put to shareholders, will take placeon 7 April 2008 ("General Meeting"). When I last wrote to you in October 2007 I explained that the Board had decidedto broaden the scope of the business and to cut overheads significantly. As youmay be aware, we have now established subsidiary or associated companies inpersonal wealth management and corporate legal services, strengthened ourcorporate finance team through the recruitment of highly experienced associatesand steps are in hand for the further development of our asset financeassociate, Merchant House Finance Limited. At the core of these plans is the development of the stockbroking activities ofMerchant Capital Limited, our corporate finance and stockbroking subsidiary.Merchant Capital became a member of the London Stock Exchange but so far hasoperated on a limited scale. It has recently, however, received the approval ofFSA to enable it to offer stockbroking facilities to private clients and plansare in hand to enable it to offer a full stockbroking service. It is planned to provide retail and corporate broking services on a significantscale and the Directors expect to bring in a team to develop and market theseservices, together with a group of experienced brokers, shortly after theGeneral Meeting. The board policy, as stated on a number of occasions, is to incentivise the newteams to control overheads and attract the best team members. This policy willapply equally to a new broker team and the Board anticipates that a substantialincentive warrant/option package will be put in place for such a new team withan appropriate lock-in period and that such warrants/options will be exercisableat a price higher than the current share price. The Directors believe that there will be continuing demand for the services ofsuch firms, both from private clients and smaller companies, notwithstandingrecent market volatility. They expect this development to become the major partof the Group's business and also to become a driver for the development of itscorporate finance, wealth management and associated asset management activities. The Directors believe also that, in order to finance this planned newdevelopment on a sufficient scale, significant additional funds will berequired. Plans are in hand to raise this additional capital and the Directorshave decided that this can best be raised through the issue of convertiblepreference shares ("Convertible Preference Shares"), the principal terms ofwhich are described in the Schedule to this letter and which are fully describedin Resolution 4. While these securities will provide an 8% coupon to convertiblepreference shareholders, they will also be less dilutive to ordinaryshareholders than an equity fundraising would be in view of the Company'scurrent share price since they will be convertible at any time after 30 June2011 at an effective conversion price of 2.5p per ordinary share. It is alsoimportant to note that the Company will have the option in future to redeem theConvertible Preference Shares at its discretion, should the then directors deemit beneficial to do so at any time prior to 30 June 2011 at a premium of £2.00per Convertible Preference Share. If shareholders approve the resolutions at the General Meeting, the plans toraise additional capital and to bring on board the broking team will immediatelybe put in hand, thus completing the implementation of the strategy I outlined inmy Interim Statement of 28 September 2007. GENERAL MEETING You will find at the end of this document a notice of General Meeting, convenedfor 11.00 am on 4 April 2008. The purpose of the General Meeting is to considerand, if thought fit, to pass resolutions to increase the authorised sharecapital of the Company, amend the Articles of Association to create theConvertible Preference Shares and authorise the Directors to allot shares anddisapply the statutory pre-emption rights. A summary of the rights of theConvertible Preference Shares is set out in the Schedule to this letter and fulldetails are set out in Resolution 4. The purpose of Resolutions 1 and 2 is to enable the Company to issue theproposed Convertible Preference Shares and to issue such number of ordinaryshares as would result from the conversion of the Convertible Preference Shares,together with such additional number of ordinary shares as would arise from theexercise of existing rights to ordinary shares relating to arrangements that theCompany has already entered into (these arising in relation to unconvertedsecured and unsecured loan notes, unexercised warrants and the future conversionof shares in Merchant Capital Limited held or prospectively to be held by theESOP), together with such number of ordinary shares as would result from theconversion of warrants/options which the Directors believe may in due course begranted in relation to the new broking team. Authority is being sought to issueConvertible Preference Shares up to the full amount of convertible preferenceshare capital that it is proposed to create, although a somewhat smaller amountof new capital may initially be raised. In addition, authority is being soughtin respect of an additional 21,354,229 ordinary shares (representing 26% of thepresent issued share capital) to enable the Company to issue options or to takeadvantage of other opportunities that may arise. The purpose of Resolution 3 (which is a Special Resolution) is to enable theCompany to issue securities pursuant to Resolution 2 wholly for cash as ifsection 89(1) of the Companies Act 1985 did not apply. The purpose of Resolution 4 (which is also a Special Resolution) is to amend thearticles of Association of the Company to create the Convertible PreferenceShares ACTION TO BE TAKEN A Form of Proxy is enclosed with this document for use by Shareholders at theGeneral Meeting. Whether or not you intend to be present at the General Meeting, you arerequested to complete and return the Form of Proxy as soon as possible and inany event so as to reach Share Registrars Limited, no later than 11.00 am on 2April 2008. Completion and return of the Form of Proxy will not preclude aShareholder from attending the meeting and voting in person, should he or shewish to do so. RECOMMENDATION The Directors, consider that the passing of the resolutions is in the bestinterests of the Company and its members as a whole and is most likely topromote the success of the Company for the benefit of its members as a whole. Accordingly, the Directors unanimously recommend Shareholders to vote in favourof the Resolutions to be proposed at the General Meeting." End. For more information please contact; James Holmes, Director, Merchant House Group Plc 020 7332 2200 Alex Borrelli, Nominated Adviser, Shore Capital. & Corporate Ltd 020 7408 4090 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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