31st Mar 2006 11:06
Arbuthnot Banking Group PLC31 March 2006 Not for release, distribution or publication in whole or in part in or into theUnited States, Canada, Japan, Australia, the Republic of Ireland or South Africa PRESS ANNOUNCEMENT FOR IMMEDIATE RELEASE 31 March 2006 ARBUTHNOT BANKING GROUP PLC ("ARBUTHNOT BANKING GROUP", THE "GROUP" OR THE"COMPANY") PROPOSED PLACING AND OFFERS OF UP TO 710,000 NEW ORDINARY SHARES AT 600 PENCEPER NEW ORDINARY SHARE, APPROVAL FOR WAIVER OF RULE 9 OF THE CITY CODE ANDNOTICE OF EXTRAORDINARY GENERAL MEETING 1. Introduction Following the announcement on 21 March 2006, Arbuthnot Banking Group todayposted a circular to its Shareholders setting out its intention to raise up toapproximately £4.3 million (£4.0 million net of expenses) by the allotment andissue of up to 710,000 New Ordinary Shares at 600 pence per New Ordinary Sharepursuant to the terms of the Placing and Offers. The Placing and Offers comprise (1) a firm placing of 347,305 Placing Shares toFlowidea, a company beneficially owned by Mr Henry Angest, the Chairman ofArbuthnot Banking Group; (2) a placing of 115,136 Vendor Shares with Cherrydene,a company also beneficially owned by Mr Angest; (3) the First Offer of up to247,559 Offer Shares made by Hawkpoint on behalf of the Company to QualifyingEligible Shareholders, on a basis proportional to their shareholdings; and (4)the Second Offer of up to 115,136 Vendor Shares made by Cherrydene to QualifyingInstitutional Shareholders, on a basis proportional to their shareholdings, witha minimum subscription requirement of £35,000. The Offer Shares are beingoffered to Qualifying Eligible Shareholders on the basis of 1 Offer Share forevery 20 Existing Ordinary Shares held on the First Record Date. The VendorShares are being offered to Qualifying Institutional Shareholders on the basisof 1 Vendor Share for every 20 Existing Ordinary Shares held on the SecondRecord Date. The Placing and Offers are conditional, inter alia, on approval bythe Independent Shareholders which will be sought at the Extraordinary GeneralMeeting of the Company to be held on 27 April 2006 at 2:00 p.m. The Issue Pricerepresents an 11.6 per cent. premium to the closing middle market price of 537.5pence per Ordinary Share on 20 March 2006, the last dealing day before theannouncement of the Placing and Offers. The 710,000 New Ordinary Shares willrepresent 5.0 per cent. of the Issued Share Capital of the Company immediatelyprior to their issue. The First Offer has been fully underwritten by Cherrydene subject to there beingno substantial deterioration in the price and/or value of the New OrdinaryShares between the date of the circular and Admission. Unless all Qualifying Eligible Shareholders apply for their pro rataentitlements to Offer Shares and all Qualifying Institutional Shareholders applyfor their pro rata entitlements to Vendor Shares, the percentage interest of MrAngest in the Enlarged Share Capital will increase as a result of his beneficialownership of Flowidea and Cherrydene. As Mr Angest's beneficial holdingcurrently represents more than 30 per cent., and less than 50 per cent. of theIssued Share Capital at the date of the circular, under Rule 9 of the City Code,unless a specific waiver is obtained from the Panel and approved by theIndependent Shareholders, Mr Angest would be obliged to make a mandatory offerfor the Company if his percentage interest in the Company increased. The purpose of the circular is to set out the reasons for, and provide thedetails of, the Placing and Offers and to convene an Extraordinary GeneralMeeting at which the approval of the Independent Shareholders will be sought fora waiver, which the Panel has agreed to give (subject to such approval), fromthe obligation under Rule 9 of the City Code for Mr Angest to make a mandatoryoffer for the Company in consequence of the Placing and Offers. Shareholders should note that if, following the Placing and Offers, Mr Angestholds over 50 per cent. of the total voting rights exercisable at generalmeetings of Arbuthnot Banking Group, he will be free to acquire any number offurther Ordinary Shares without incurring any obligation under Rule 9 to make ageneral offer to Shareholders. It should be noted that Mr Angest has nointention of subsequently taking the Company private. 2. Background to the CompanyArbuthnot is a financial services business providing personal financial servicesunder the Secure Trust brand and private and investment banking under theArbuthnot name. The Company is admitted to trading on AIM and on 20 March 2006,the last dealing date prior to the announcement of the Placing and Offers had amarket capitalisation of approximately £76.5 million with 14.23 million ordinaryshares in issue. The operations of the personal financial services division encompass householdcash management (Secure Homes), personal lending (Secure Trust Bank) andinsurance services (Secure Direct), serving customers primarily in the WestMidlands and North of England. The private banking division provides commercialand private clients with a range of financial products and services includingrelationship banking, fund management and financial planning services. ArbuthnotSecurities provides investment banking services including corporate finance andinstitutional stockbroking. The Group is regulated by the Financial Services Authority. The Company is theparent of two UK authorised banking institutions.For the 12 months to 31 December 2005, the Company reported operating income of£56.3 million, profits before tax of £7.7 million and net assets of £33.1million. 3. Background to and reasons for the Placing and OffersThe net proceeds of the proposed Placing and Offers will be used to fund thedevelopment of a high-quality, full-service, off-shore banking facility inSwitzerland. In recent years, the Group has focused on improving its portfolio of businesses.However, the Board recognises that the Group's lack of an off-shore bankingfacility significantly constrains the services that can be offered, the range ofclients it can attract and the Group's ability to recruit suitable employees.The Board believes the addition of such a facility will greatly improve theability to further develop the performance of the Group's banking operations. Research has been undertaken by the Group to determine the best way of providingan off-shore banking capability, including a review of different jurisdictionsand structures. Based on this research, the Board has concluded that theestablishment of a full-service banking operation in Switzerland is mostappropriate. In the light of this, the Group, working with advisers in Zurich,has developed a detailed plan for the establishment of a Swiss based bankingoperation. A significant investment will be required in applying for a Swiss bankinglicence and establishing the operation. 4. Principal Terms of the Placing and OffersThe Company proposes to raise up to approximately £4.3 million (£4.0 million netof expenses) by the allotment and issue of up to 710,000 New Ordinary Shares at600 pence per New Ordinary Share pursuant to the terms of the Placing andOffers. The Issue Price represents an 11.6 per cent. premium to the closing middlemarket price of 537.5 pence per Ordinary Share on 20 March 2006, the lastdealing day before the announcement of the Placing and Offers. The fundraising has been structured in the form of two offers so as to enablethe Company to raise the level of capital it requires without incurring anobligation to produce a prospectus pursuant to the Prospectus Rules of theFinancial Services Authority and therefore avoiding significant additional cost,while allowing Qualifying Shareholders to participate, should they so desire,pro rata to their shareholdings.The Placing and Offers comprise (1) a firm placing of 347,305 Placing Shares toFlowidea; (2) a placing of 115,136 Vendor Shares with Cherrydene; (3) the FirstOffer of up to 247,559 Offer Shares made by Hawkpoint on behalf of the Companyto Qualifying Eligible Shareholders, on a basis proportional to theirshareholdings, and (4) the Second Offer of up to 115,136 Vendor Shares made byCherrydene to Qualifying Institutional Shareholders, on a basis proportional totheir shareholdings, with a minimum subscription requirement of £35,000. Pursuant to and subject to the terms and conditions of the Placing andUnderwriting Agreement, Flowidea has agreed to a firm placing of 347,305 PlacingShares at the Issue Price and Cherrydene has agreed to a placing of 115,136Vendor Shares at the Issue Price, representing approximately 49 per cent. and16.2 per cent. respectively of the New Ordinary Shares to be issued under thePlacing and Offers, of which the Vendor Shares will be subject to the SecondOffer. In addition, the First Offer has been fully underwritten by Cherrydene. Arrangements have been made with Hawkpoint, as agent on behalf of the Company,subject to the fulfilment of the conditions set out below, to invite QualifyingEligible Shareholders to apply, under the First Offer, for an aggregate of up to247,559 Offer Shares at the Issue Price, on the basis of: 1 Offer Share for every 20 Existing Ordinary Shares registered in the names of the Qualifying Eligible Shareholders on the FirstRecord Date and so in proportion for any other number of Existing OrdinaryShares then held. Arrangements have also been made with Cherrydene which, subject to thefulfilment of the conditions set out below, invites Qualifying InstitutionalShareholders to apply, under the Second Offer, for an aggregate of up to 115,136Vendor Shares at the Issue Price, with a minimum subscription requirement of£35,000, on the basis of: 1 Vendor Share for every 20 Existing Ordinary Shares registered in the names of the Qualifying Institutional Shareholders on theSecond Record Date and so in proportion for any other number of ExistingOrdinary Shares then held. Where appropriate, entitlements of Qualifying Shareholders will be rounded downto the nearest whole number of Offer Shares or Vendor Shares, as the case maybe, and any fractional entitlements to Offer Shares or Vendor Shares, as thecase may be, that would otherwise have arisen, will be disregarded incalculating Qualifying Shareholders' pro rata entitlements. Such fractionalentitlements will not be issued. Qualifying Shareholders should note that the Offers are not a "rights issue" andthat the Application Forms are not a negotiable document and cannot be traded.Qualifying Shareholders should be aware that in the Offers, unlike in a rightsissue, any Offer Shares or Vendor Shares not applied for (or, under the terms ofthe Offers not deemed to be applied for) or which the Company determines not toallocate in accordance with the terms of the Offers, will not be sold in themarket or placed for the benefit of Qualifying Shareholders who do not applyunder the Offers. Furthermore, unless all Qualifying Shareholders apply fortheir Offer Entitlements, the beneficial ownership of Mr Angest will increase. 5. Further information on the Placing and Offers The Placing and Offers are conditional, inter alia, upon:(i) the passing of the Resolution;(ii) there being no substantial deterioration in the price and/or value of the New Ordinary Shares between the date of the circular and Admission; and(iii) Admission having become effective by not later than 8.00 a.m. on 28 April2006 or such later time and/or date as the Company and Hawkpoint may agree (but,in any event, not later than 8.00 a.m. on 11 May 2006). If any of these conditions is not satisfied, the New Ordinary Shares will not beissued under the Placing and Offers and all monies received by the Company'sreceiving agent, Capita Registrars, will be returned to the applicants (at theapplicants' risk and without interest) as soon as possible thereafter. Application will be made to the London Stock Exchange for the New OrdinaryShares to be admitted to trading on AIM. It is expected that Admission willbecome effective and that dealings in the New Ordinary Shares will commence at8:00 a.m. on 28 April 2006. 6. Directors' IntentionsFlowidea has agreed to a firm placing of 347,305 Placing Shares at the IssuePrice and Cherrydene has agreed to a placing of 115,136 Vendor Shares which willbe the subject of the Second Offer. Furthermore, the First Offer has been fullyunderwritten by Cherrydene. The Directors (other than Mr Angest) who are Qualifying Eligible Shareholdersmay or may not take up in full their Offer Entitlements for Offer Shares in theFirst Offer. It is the intention of the Board that the continued employment rights of theemployees of the Group will be safeguarded. 7. Rule 9 of the City Code Rule 9 of the City Code provides that, inter alia, when any person who, takentogether with persons acting in concert with him, holds not less than 30 percent, but not more than 50 per cent. of the voting rights of a company, he mustmake an offer to the holders of any class of equity share capital and any classof voting non-equity share capital in which such person or persons acting inconcert holds shares should he, or any persons acting in concert with him,acquire additional shares. 8. Consequences of Rule 9 As a result of the Placing and the underwriting of the First Offer byCherrydene, it is possible that Mr Angest's percentage interest in the Companymight increase above its current level of approximately 49 per cent. In thiscircumstance, he would be obliged, in the absence of the consent of the Paneland approval of the Independent Shareholders, to make an offer for the ExistingOrdinary Shares not, beneficially owned by him, in accordance with Rule 9 of theCity Code. This offer would need to be in cash and at the highest price paid inthe last twelve months. Unless all Qualifying Shareholders apply for their Offer Entitlements in full,Mr Angest's percentage in the Enlarged Share Capital will increase. Mr Angest is prepared to support the Placing and Offers to ensure that theCompany receives all of the new capital that it is seeking to raise. However, hewould not do so if he might be obliged to make an offer under Rule 9. The Boardhas accordingly consulted the Panel which has agreed, subject to the approval ofthe Independent Shareholders, voting on a poll, to waive the obligation thatwould otherwise arise under Rule 9 for Mr Angest to make a general offer for theOrdinary Shares which Mr Angest does not already beneficially hold. The eventual percentage interest of Mr Angest in the Enlarged Share Capital willdepend on the number of New Ordinary Shares for which valid applications arereceived from Qualifying Shareholders under the Offers. However, under the termsof the Offers, this percentage interest will not increase to more than 51.5 percent. of the Enlarged Share Capital. It should be noted that Mr Angest has nointention of subsequently taking the Company private. Shareholders should note that if, following the Placing and Offers, Mr Angestholds over 50 per cent. of the total voting rights exercisable at generalmeetings of Arbuthnot Banking Group, he will be free to acquire any number offurther Ordinary Shares without incurring any obligation under Rule 9 to make ageneral offer to Shareholders. Neither Mr Angest nor any person acting in concert with him, has dealt for valueduring the period of 12 months preceding the date of the circular, nor intends,prior to 27 April 2006, being the date of the EGM, to deal for value in relevantsecurities of the Company. 9. Background on Mr Angest, Flowidea and Cherrydene Mr Angest led a management buyout of Secure Trust (now renamed Arbuthnot BankingGroup PLC) in 1985 and became Chairman and Chief Executive of the Company. Atthat time, he subscribed for a significant stake in the Company which he hassince maintained. Mr Angest owns a significant part of his beneficial interest in the Companythrough Flowidea, a company of which he is the 100 per cent. beneficial owner,for which the main purpose is to hold nearly all Mr Angest's beneficial holdingin the Company. Mr Angest is also the 100 per cent. beneficial owner of Cherrydene, a companyincorporated to mainly hold shares in the Company. Both Flowidea and Cherrydeneare non-trading companies, which are incorporated in the UK. Other than his directorship of the Company and a number of its subsidiaries, MrAngest has no other material business interests. 10. Recommendations As explained above, Mr Angest will not be voting on the Resolution at the EGM.The Directors (excluding Mr Angest), who have been so advised by Hawkpoint,consider that the Placing and Offers and the Resolution are fair and reasonable.In providing advice to the Directors, Hawkpoint has taken into account theDirectors' commercial assessments. The Directors (excluding Mr Angest) consider that it is in the best interests ofthe Company and its Shareholders as a whole that the Company be able to proceedwith the Placing and Offers without Mr Angest incurring any obligation underRule 9 of the City Code. The Directors (excluding Mr Angest) recommend that Shareholders vote in favourof the Resolution, as they intend to do in respect of their own beneficialholdings of Existing Ordinary Shares, representing in aggregate approximately0.6 per cent. of the Issued Share Capital of the Company at the date of thecircular. 11. Despatch of circular to Arbuthnot Banking Group shareholders A circular setting out details of the Placing and Offers and giving notice of anExtraordinary General Meeting was despatched to Arbuthnot Banking GroupShareholders today. Enquiries:Arbuthnot Banking Group PLC Stephen Lockley 0207 012 2400 Andrew Salmon Hawkpoint Partners Limited Paul Baines 0207 665 4500 Lawrence Guthrie Appendix I EXPECTED TIMETABLE OF PRINCIPAL EVENTS First Record Date for White Application Forms under the First 5.00 p.m. on 17Offer March 2006 Second Record Date for Blue Application Forms under the Second 5.00 p.m. on 17Offer March 2006 Posting date of the circular, the Form of Proxy and the 31 March 2006Application Forms Latest time and date for receipt of Forms of Proxy for the 2.00 p.m. on 25Extraordinary General Meeting April 2006 Latest time and date for receipt of White Application Forms and 3.00 p.m. on 27payment in full under the First Offer April 2006 Latest time and date for receipt of Blue Application Forms and 3.00 p.m. on 26payment in full under the Second Offer April 2006 Extraordinary General Meeting 2.00 p.m. on 27 April 2006 Admission and commencement of dealings in the New Ordinary 8.00 a.m. on 28Shares April 2006 CREST stock accounts credited with New Ordinary Shares in 4 May 2006uncertificated form Share certificates for New Ordinary Shares in certificated form by 9 May 2006despatched This financial promotion is communicated by Arbuthnot Banking Group and theDirectors of Arbuthnot Banking Group accept responsibility for the informationcontained in this financial promotion. To the best of the knowledge and beliefof the Directors (who have taken all reasonable care to ensure that such is thecase) the information contained in this financial promotion is in accordancewith the facts and does not omit anything likely to affect the import of suchinformation. This financial promotion has been approved by Hawkpoint Partners Limited for thepurposes of section 21 of the Financial Services and Markets Act 2000. HawkpointPartners Limited, which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting exclusively for Arbuthnot Banking Groupin connection with the Placing and Offers and no-one else. Neither HawkpointPartners Limited nor Arbuthnot Securities Limited, broker to Arbuthnot BankingGroup, will be responsible to anyone other than Arbuthnot Banking Group forproviding the protections afforded to customers of Hawkpoint Partners Limited orArbuthnot Securities Limited and will not be responsible for providing advice toany such person in relation to the Placing and Offers or the contents of thisfinancial promotion or any other matter referred to herein. The proposed Placing and Offers described in this financial promotion are notbeing made to shareholders with a registered address in, or who are located inany excluded territory. The New Ordinary Shares have not been, nor will they be,registered under the United States Securities Act of 1933 (as amended), or underthe securities laws of any state of the United States or under the applicablesecurities laws of any other Excluded Territory. The New Ordinary Shares may notbe offered or sold, directly or indirectly, in or into the United States or anyother Excluded Territory, or to or for the benefit of any national, resident orcitizen of any other Excluded Territory. There will be no public offer ofsecurities in the United States or any other Excluded Territory. This financial promotion does not constitute an offer of, or the solicitation ofany offer to subscribe for or buy, any of the new ordinary shares to any personin any jurisdiction to whom or in which such offer or solicitation is unlawful.The distribution of this financial promotion in certain jurisdictions may berestricted by law and therefore persons into whose possession this financialpromotion comes should inform themselves about and observe any suchrestrictions. Any failure to comply with these restrictions may constitute aviolation of the securities laws of such jurisdiction. Appendix I DEFINITIONS The following definitions apply throughout this announcement unless the contextrequires otherwise: "Act" or the Companies Act 1985 (as amended) "Companies Act" "Admission" the admission of the New Ordinary Shares to trading on AIM becoming effective in accordance with the AIM Rules"AIM" AIM, a market operated by the London Stock Exchange "AIM Rules" the rules of AIM as set out in the publication entitled "AIM Rules for Companies" published by the London Stock Exchange from time to time "Arbuthnot Arbuthnot Securities Limited, the Company's brokerSecurities" "Associates" has the meaning given to it in section 430E of the Act "Blue the blue application form for use by Qualifying InstitutionalApplication Shareholders in respect of the Second OfferForm" "Capita a trading division of Capita IRG plcRegistrars" "Cherrydene" Cherrydene UK Limited, a company (incorporated in England and Wales with registered number 5281934) beneficially owned entirely by Mr Angest, and whose registered office is at Arbuthnot House, 20 Ropemaker Street, London EC2Y 9AR "City Code" The City Code on Takeovers and Mergers "CREST" the computerised settlement system operated by CRESTCo Limited which facilities the transfer of title to shares in uncertified form "Company" or Arbuthnot Banking Group PLC"ArbuthnotBanking Group" "Directors" or the directors of the Company, at the date of this announcement, "Board" together with, where the context so requires, their families and persons connected with them (within the meaning of section 346 of the Act) "Enlarged Share the issued share capital of the Company as enlarged by the issueCapital" of New Ordinary Shares pursuant to the Placing and Offers "Excluded the United States, Canada, Japan, Australia the Republic ofTerritories" Ireland or South Africa "Existing the 14,234,219 Ordinary Shares in issue at the date of thisOrdinary announcementShares" "Extraordinary the extraordinary general meeting of the Company to be held atGeneral 2.00 p.m. on 27 April 2006Meeting" or"EGM" "First Offer" the invitation to subscribe for Offer Shares at the Issue Price made by Hawkpoint, acting as agent for the Company, to Qualifying Eligible Shareholders "First record 5.00 p.m. on 17 March 2006Date" "Flowidea" Flowidea Limited, a company (incorporated in England and Wales with registered number 2463564) beneficially owned entirely by Mr Angest, and whose registered office is at Arbuthnot House, 20 Ropemaker Street, London, EC2Y 9AR "Form of Proxy" the form of proxy for use by Shareholders in connection with the EGM "FSMA" the Financial Services and Markets Act 2000 (as amended) "Group" the Company and its subsidiaries and associated undertakings "Hawkpoint" Hawkpoint Partners Limited, the Company's nominated adviser "Independent Shareholders other than Mr Angest and his AssociatesShareholders" "Issue Price" 600 pence per Offer Share or 600 pence per Placing Share or 600 pence per Vendor Share, as the case may be"Issued Share all Ordinary Shares in issue from time to timeCapital" "London Stock London Stock Exchange plcExchange" "New Ordinary up to 710,000 New Ordinary Shares to be issued pursuant to theShares" Placing and Offers "Offer the maximum entitlement of each Qualifying Eligible ShareholderEntitlement" to subscribe for Offer Shares pursuant to the First Offer or the maximum entitlement of each Qualifying Institutional Shareholder to subscribe for Vendor Shares pursuant to the Second Offer, as the case may be "Offers" the First Offer and the Second Offer "Offer Shares" up to 247,559 New Ordinary Shares , the subject of the First Offer "Ordinary ordinary shares of 1 penny each in the capital of the CompanyShares" "Overseas Qualifying Shareholders with registered addresses in, or who areShareholders" citizens or residents of jurisdictions outside the United Kingdom "Panel" the Panel on Takeovers and Mergers "Placing" the conditional firm placing of the Placing Shares with Flowidea and the conditional placing of the Vendor Shares with Cherrydene "Placing and the agreement between the Company, Flowidea, Cherrydene andUnderwriting Hawkpoint, relating to the Placing and OffersAgreement" "Placing 347,305 New Ordinary Shares, the subject of the Placing withShares" Flowidea "Qualifying Shareholders on the register of members of the Company on theEligible First Record Date other than Shareholders with a registeredShareholders" address in any of the Excluded Territories, Mr Angest and his Associates and Qualifying Institutional Shareholders "Qualifying certain institutional Shareholders on the register of members onInstitutional the Second Record Date who are able to meet the minimumShareholders" subscription requirement of £35,000 under the Second Offer "Qualifying Qualifying Institutional Shareholders and Qualifying EligibleShareholders" Shareholders "Resolution" the ordinary resolution to be proposed at the EGM "Rule 9" Rule 9 of the City Code "Second Offer" the invitation to acquire Vendor Shares at the Issue Price made by Cherrydene to Qualifying Institutional Shareholders "Second Record 5.00 p.m. on 17 March 2006Date" "Securities the US Securities Act of 1933 (as amended)Act" "Shareholder" a holder of Existing Ordinary Shares "UK" or "United the United Kingdom of Great Britain and Northern IrelandKingdom" "UKLA" or "UK the Financial Services Authority acting in its capacity asListing competent authority for the purposes of the Financial ServicesAuthority" and Markets Act 2000 "US" or "United the United States of America, its territories and possessions,States" any state of the United States of America and the District of Columbia and all other areas subject to its jurisdiction "Vendor Shares" 115,136 New Ordinary Shares, issued to Cherrydene pursuant to the Placing, which are the subject of the Second Offer "White the white application form for use by Qualifying EligibleApplication Shareholders in respect of the First OfferForm" This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Arbuthnot