TIDMCIN
RNS Number : 4779J
City of London Group PLC
23 August 2021
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO
CONSTITUTE INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE
MARKET ABUSE REGULATION (EU) NO. 596/2014. UPON THE PUBLICATION OF
THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE
IN THE PUBLIC DOMAIN.
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CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMATION,
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OR DISPOSE OF ANY SECURITIES IN CITY OF LONDON GROUP PLC OR ANY
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FACT OF ITS DISTRIBUTION, SHALL FORM THE BASIS OF, OR BE RELIED ON
IN CONNECTION WITH ANY INVESTMENT DECISION IN RESPECT OF CITY OF
LONDON GROUP PLC.
THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS
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CITY OF LONDON GROUP PLC
("COLG" or "the Company")
Capital Raise and Restructure of the Group
The Board of COLG (AIM:CIN) is pleased to announce today a
capital raise of GBP11.4 million through a share subscription and a
raise of up to GBP6.9 million through an open offer of new Ordinary
Shares of COLG ("Ordinary Shares").
These changes are an important part of the Company's approach to
establishing a new UK SME bank, Recognise Bank Limited
("Recognise"), a subsidiary of the Company.
The Company expects that the capital raise will lead to the
removal of deposit restrictions and the full authorisation of
Recognise Bank by the Prudential Regulation Authority ("PRA"). This
in turn will enable Recognise to offer retail savings products to
both personal and business customers.
The development of Recognise is central to COLG's strategy and
in part addresses the funding gap experienced by underserved UK
SMEs. As announced in November 2020, Recognise was granted
Authorisation with Restrictions ("AwR") by the PRA, one of the
first banks to be authorised post pandemic.
As previously reported, the Company has been in the process of
disposing of its interest in Milton Homes Limited. It anticipates
this disposal exchanging contracts within the next few days.
Since November 2020, Recognise has launched four lending
products and received over GBP750 million of lending enquiries,
through commercial brokers, other intermediaries and directly from
its relationship managers; and is executing against its goal of
lending cGBP1.3 billion over five years.
Michael Goldstein, CEO of COLG, commented:
"We are very pleased to have completed the final step for the
PRA to lift the deposit restrictions for Recognise, a major
milestone for both COLG and Recognise. Becoming a fully authorised
bank has been our primary objective for some time, and will enable
us to deliver against our key strategic goals and growth targets.
Since the launch of Recognise, the business has grown the employee
base to 60 high calibre members and secured a strong executive
team, led by Jason Oakley as CEO, who between them, have over 200
years banking experience.
"This latest capital raise and expected sale of Milton Homes
will enable us to realise our strategic ambitions for Recognise
Bank, namely increasing the size of the loan book with access to
funding from depositors through our business and personal saving
products. This has been our goal for three years, and the sale of
Milton Homes will enable the group to streamline its focus on the
next stage of Recognise's growth.
"The latest fundraise demonstrates the support that we enjoy
from shareholders for our ultimate strategic goal, to build the
UK's leading SME Bank, supporting the needs of local
businesses."
Summary
-- Conditional capital raise of GBP11.4 million through a share
subscription and a raise of up to GBP6.9 million through an open
offer:
o Two of the Company's major shareholders, Parasol V27 Limited
("PV27") and Max Barney Investments Limited ("MBIL") (together the
"Subscribers"), have agreed to subscribe for 18.9 million new
Ordinary Shares at a subscription price of 60 pence per new
Ordinary Share in cash for aggregate gross proceeds to the Company
of GBP11.4 million (the "Subscription"). In addition, the
Subscribers will receive warrants to subscribe for 9.4 million
shares at an exercise price of 69 pence per new Ordinary Share over
the next three years.
o In addition, a proposed open offer to qualifying shareholders
on the same pricing terms as the Subscription will be launched
following completion of the Subscription to raise gross proceeds of
up to GBP6.9 million (the "Open Offer"). Shareholders who subscribe
for shares in the Open Offer will also receive warrants on the same
terms as the Subscribers.
-- The capital raise is conditional upon, amongst other things,
shareholder approval to grant the directors sufficient authority to
allot the shares.
-- The Company will convene a general meeting in relation to the
capital raise. The Company has received irrevocable undertakings
from four shareholders, PV27, MBIL, DV4 Limited ("DV4") and Jason
Oakley, to vote in favour of the resolutions to be proposed at the
general meeting. These four shareholders hold in aggregate 81.87%
of the current issued capital of the Company.
-- The Company intends to issue 5,152,794 shares to the trustee
of its employee benefit trust ("EBT") to enable share awards to be
made under the Company's share incentive schemes.
-- The Company's subsidiary, Recognise Bank Limited
("Recognise"), is well advanced towards meeting mobilisation
conditions that will lead to the removal of the deposit
restrictions currently in place. This follows the receipt of AwR
from the PRA, as announced on 11 November 2020.
-- The proceeds of the capital raise will be used to meet
capital requirements and lift deposit restrictions.
Details of the Proposed Capital Raise
The capital raise has two components, the Subscription and the
Open Offer.
The Subscription
The Company has entered into agreements with the Subscribers to
raise GBP11.4 million through a direct share subscription. PV27, an
existing shareholder and an investment company which is an
affiliate and under the management of RG Advisors, the private
family office of Ms Ruth Parasol, will invest GBP10.4 million,
subscribing for 17,250,000 new shares in the Company at a price of
60 pence per share. MBIL, an existing shareholder, will invest GBP1
million by way of a subscription for 1,666,667 shares at the same
price of 60 pence per share.
As part of these agreements PV27 and MBIL will receive warrants
over 8,625,000 and 833,333 new Ordinary Shares respectively (one
share warrant for every two shares subscribed under the
Subscription). These warrants will allow the holder to subscribe
for an agreed number of shares at 69 pence per share exercisable
over a three-year period from completion of the Subscription ("the
Warrants"). The Subscription is expected to complete in September
2021, which would mean that the Warrants will be exercisable until
September 2024.
PV27's shareholding in the Company following the Subscription,
Open Offer and the issue of shares to the EBT will depend on how
many shares are issued under the Open Offer. If there is no take-up
in the Open Offer, PV27's shareholding will be 46.3%. If PV27
exercises its Warrants in full and MBIL does not and there are no
further share issues, then PV27's resulting shareholding will be a
maximum of 49.998%.
In order to execute PV27's subscription, the Company has also
successfully applied, on behalf of PV27, to the Panel on Takeovers
and Mergers (the "Panel") for a dispensation from the requirement
to make a general offer under Rule 9 of the City Code on Takeovers
and Mergers (the "Code") which would otherwise have arisen as a
result of the exercise of Warrants issued and the issue of new
Ordinary Shares to PV27 pursuant to the subscription. This
dispensation was granted pursuant to Note 5(c) on the Notes on
Dispensations from Rule 9.
As announced by the Company on 10 September 2020, PV27 has
entered into a relationship agreement with the Company which will
impose certain restrictions on PV27 to ensure that the Company can
operate its business independently of PV27. With effect from
completion of the Subscription, PV27 will enter into a similar
relationship agreement with Recognise. Subject to the prior
approval of the PRA, which the Company will use all reasonable
endeavours to obtain, for so long as the PV27 holds 10% or more of
the Ordinary Shares of COLG, PV27 shall have the right to nominate
one director (and observer) to the board of Recognise. In addition,
for so long as PV27 holds more than 30% of the Ordinary Shares of
COLG, COLG shall, at the request of a director nominated by PV27,
convene a general meeting at which certain reserved matters shall
be proposed for consideration.
PV27 has agreed that its shares will be subject to a 12-month
lock up period (subject to customary exceptions) following the
Subscription.
CAML Preference Share Purchase
Related to the Subscription by MBIL, COLG has entered into an
agreement to purchase GBP1 million of accumulated preference
dividend in Credit Asset Management Limited ("CAML Prefs"), a
subsidiary of the Group, from HPB Pension Trust ("HPB") on
completion of the Subscription. HPB is connected to MBIL. The
original preference share agreement was announced in 2015.
The Open Offer
In addition to the Subscription, the Company intends to
undertake an Open Offer to Qualifying Shareholders to raise up to
GBP6.9 million. The Open Offer will give Qualifying Shareholders
the opportunity to invest in new Ordinary Shares at the same price
as PV27 and MBIL under the Subscription. Subscribers in the Open
Offer will also receive Warrants on the same basis as PV27 and MBIL
(one Warrant for every two Open Offer shares subscribed).
PV27 has undertaken that it will not subscribe for shares in the
Open Offer, so that other shareholders will have the opportunity to
apply to subscribe for shares over and above their pro-rata
entitlement.
It is expected that the Open Offer will be launched after the
conditions required by the Subscription have been met. A further
announcement on this will be made in due course.
Further share issuances
The Company intends to issue a total of 5,152,794 new Ordinary
Shares to the trustees of the Company's EBT to satisfy future share
awards to COLG employees. This represents 6.4% of the Company's
current shares outstanding or 6.0% of the shares outstanding
immediately after this issue but excluding any of the share
issuances related to the Subscription, Open Offer or Warrants.
Approvals in connection with the Subscription and Open Offer
Completion of the Subscription, the Open Offer and the issue of
the Warrants is conditional, inter alia, upon the passing of
certain ordinary and special resolutions by the Company's
shareholders at a general meeting to give the directors sufficient
authority to allot and issue the relevant shares.
A resolution is also being proposed to amend the articles of
association of the Company so that further issues of shares by the
Company may not be made at a price of less than 60 pence per share
except with the approval of 85% of the Company' shareholders, or if
an 80% or greater majority of the Directors of the Company
including all of the independent non-executive directors resolve
that a fundraising at a price below 60 pence per share is the only
reasonable prospect for a regulated subsidiary of the Company
either (i) to avoid insolvency or a breach of the applicable
capital adequacy rules or (ii) wind down the operations of such
company in an orderly manner.
The Company will publish a shareholder circular including a
notice of general meeting with details of these resolutions in due
course.
The Company intends to apply for admission to trading of the new
Ordinary Shares issued pursuant to the Subscription and, if
applicable, the Open Offer, on the AIM Market of the London Stock
Exchange. Further announcements regarding the progress of the
Subscription and Open Offer will be made by the Company in due
course.
Related Party Transaction
PV27 and MBIL are both deemed to be related parties of COLG
under the AIM Rules for Companies, as they each hold in excess of
10% of the total voting rights of the Company. As such, their
respective subscriptions for new Ordinary Shares pursuant to the
Capital Raising, constitute related party transactions under Rule
13 of the AIM Rules for Companies. Additionally, due to HPB being a
connected to MBIL, the CAML Preference Share Repurchase also
represents a related party transaction (together the "Related Party
Transactions").
The independent directors of the Company, having consulted with
Peel Hunt LLP in its capacity as the Company's nominated adviser
for the purposes of the AIM Rules, consider the terms of the
Related Party Transactions to be fair and reasonable insofar as the
Company's shareholders are concerned.
Board Changes
Andy Crossley, who joined the COLG Board in 2015 as a
non-executive director, will be stepping down from his position at
the General Meeting. The Board would like to thank Andy for his
contribution over the last six years and wish him well in his
future endeavours.
Rule 9 of the Code and the accelerated whitewash procedure
PV27's shareholding in the Company following the Subscription,
Open Offer and the issue of shares to the EBT will depend on how
many shares are issued under the Open Offer. If there is no take-up
in the Open Offer, PV27's shareholding will be 46.3%. If PV27
exercises its Warrants in full and MBIL does not and there are no
further share issues, then PV27's resulting shareholding will be a
maximum of 49.998%.
The subscription by PV27 gives rise to certain considerations
under the Code. Brief details of the Panel, the Code and the
protections they afford are described below. The Code is issued and
administered by the Panel. The Code applies to all takeover and
merger transactions, however effected, where the offeree company,
inter alia, has its registered office in the United Kingdom and any
of its securities are admitted to trading on a UK regulated market
or UK multilateral trading facility. The Code applies to the
Company, and as such its shareholders are entitled to the
protections afforded by the Code. The Code and the Panel operate to
ensure fair and equal treatment of shareholders in relation to
takeovers, and also provide an orderly framework within which
takeovers are conducted.
Under Rule 9 of the Code, where any person acquires, whether by
a series of transactions over a period of time or not, an interest
in shares which (taken together with shares in which persons acting
in concert with them are interested) carry 30% or more of the
voting rights of a company that is subject to the Code, that person
is normally required to make a general offer to all the holders of
any class of equity share capital or other class of transferable
securities carrying voting rights in that company to acquire the
balance of their interests in the company .
Rule 9 of the Code also provides that, among other things, where
any person, together with persons acting in concert with them, is
interested in shares which in aggregate carry not less than 30% of
the voting rights of a company that is subject to the Code, but
does not hold shares carrying more than 50% of the voting rights of
that company and such person, or any person acting in concert with
them acquires an interest in any other shares which increases the
percentage of shares carrying voting rights in which they are
interested, such person will normally be required to make a general
offer to all the holders of any class of equity share capital or
other class of transferable securities carrying voting rights of
that company to acquire the balance of their interests in the
company.
An offer under Rule 9 must be in cash (or with a cash
alternative) and must be at the highest price paid within the
preceding 12 months for any shares in the company by the person
required to make the offer or any person acting in concert with
them.
Dispensation from Rule 9 of the Code
Under Note 1 on the Notes on Dispensations from Rule 9, the
Panel will normally waive the requirement for a general offer to be
made in accordance with Rule 9 if, inter alia, those shareholders
of the company who are independent of the person who would
otherwise be required to make an offer and any person acting in
concert with them and do not have any interest in the transaction
which may compromise their independence (the "Independent
Shareholders") pass an ordinary resolution on a poll at a general
meeting (a "Whitewash Resolution") approving such a waiver.
Under Note 5(c) on the Notes on Dispensations from Rule 9, the
Panel may waive the requirement for a Whitewash Resolution to be
considered at a general meeting (and for a circular to be prepared
in accordance with Section 4 of Appendix 1 to the Code) if
Independent Shareholders holding more than 50% of a company's
shares capable of being voted on such a resolution confirm to the
Panel in writing that they approve such a waiver and would vote in
favour of a Whitewash Resolution were one to be put to the
shareholders of the company at a general meeting.
In accordance with Note 5(c) on the Notes on Dispensations from
Rule 9, Independent Shareholders holding shares carrying more than
50% of the voting rights of the Company which would be capable of
being cast on a Whitewash Resolution have confirmed in writing to
the Panel that they approve the proposed waiver and would vote in
favour of any resolution to that effect at a general meeting.
Accordingly, PV27 has been granted a dispensation by the Panel from
making a mandatory offer under Rule 9 of the Code in relation to
its subscription.
Following the Subscription, Open Offer and exercise of PV27's
warrants , PV27 will have an interest in shares in the Company of
not less than 30% of the voting rights of the Company but will not
hold shares carrying more than 50% of such voting rights, as set
out above. Under Rule 9 of the Code, if PV27, or any person acting
in concert with PV27 acquires an interest in any other shares which
increases the percentage of shares carrying voting rights in which
it is interested, it will normally be required to make a general
offer to all the holders of any class of equity share capital or
other class of transferable securities carrying voting rights of
the Company to acquire the balance of their interests in the
Company.
Market Abuse Regulation
This announcement is released by the Company and contains inside
information for the purposes of Article 7 of the Market Abuse
Regulation (EU) 596/2014 (as transposed into the laws of the United
Kingdom) ("MAR") and is disclosed in accordance with the Company's
obligations under Article 17 of MAR.
For the purposes of MAR and Article 2 of Commission Implementing
Regulation (EU) 2016/1055 (as transposed into the laws of the
United Kingdom), the person responsible for arranging the release
of this announcement on behalf of the Company is Michael Goldstein,
Chief Executive Officer.
LEI: 2138003UW63TMQ5ZFD85
Enquiries
C ity of London Group plc
Michael Goldstein, Chief Executive Officer +44 (0)20 3988 6501
Ben Peters, Director of Investor Relations +44 (0)20 3988 6500
Peel Hunt LLP (Nominated Adviser and
Joint Broker) +44 (0)20 7418 8900
James Britton, Rishi Shah
For media enquiries, please contact:
Heather Armstrong heather.armstrong@tavistock.co.uk
Tim Pearson / 07929-116860
Or email colg@tavistock.co.uk
Important Information and Notices
This announcement has been issued by and is the sole
responsibility of the Company. This announcement and the
information contained in it are for information purposes only. No
reliance may or should be placed by any person for any purpose
whatsoever on the information contained in this announcement or on
its accuracy or completeness. The information in this announcement
is subject to change.
The distribution of this announcement into jurisdictions other
than the United Kingdom may be restricted by law, and, therefore,
persons into whose possession this announcement comes should inform
themselves about and observe any such restrictions. Any failure to
comply with any such restrictions may constitute a violation of the
securities laws of such jurisdiction. This announcement does not
constitute a recommendation concerning any securities in the
Company.
This announcement is for information purposes only and does not
constitute an offer to sell or issue, or the solicitation of an
offer to buy, acquire or subscribe for shares in the capital of the
Company. No prospectus will be made available in connection with
the matters contained in this announcement and no such prospectus
is required to be published (in accordance with Prospectus
Regulation (EU) 2017/1129 (as supplemented by Commission Delegated
Regulation (EU) 2019/980 and Commission Delegated Regulation (EU)
2019/979), as amended from time to time and as transposed into the
laws of the United Kingdom pursuant to the European Union
(Withdrawal) Act 2018 and the European Union (Withdrawal Agreement)
Act 2020). Members of the public are not eligible to take part in
the Subscription.
Peel Hunt LLP ("Peel Hunt") is authorised and regulated by the
Financial Conduct Authority in the United Kingdom. Peel Hunt is
acting solely as nominated adviser, under the AIM Rules, for the
Company and no one else in connection with the contents of this
announcement and will not regard any other person (whether or not a
recipient of this announcement) as its client in relation to the
contents of this announcement nor will it be responsible to anyone
other than the Company for providing the protections afforded to
its clients or for providing advice in relation to the contents of
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END
IOESEFFSDEFSESA
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