TIDMCIN
RNS Number : 5499Y
City of London Group PLC
10 September 2020
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,
OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE
OR DISPOSE OF ANY SECURITIES IN CITY OF LONDON GROUP PLC OR ANY
OTHER ENTITY IN ANY JURISDICTION. NEITHER THIS ANNOUNCEMENT NOR THE
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
RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION,
DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED
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OR DISTRIBUTION WOULD BE PROHIBITED BY ANY APPLICABLE LAW.
CITY OF LONDON GROUP PLC
("COLG" or "the Company")
Business Update and Capital Raise
The Board of COLG (AIM:CIN) is pleased to announce today a
business update and a conditional capital raise of up to GBP30
million to be conducted by way of a subscription and placing of new
ordinary shares in the capital of COLG.
Summary
-- The Company's subsidiary, Recognise Financial Services
Limited ("Recognise"), is progressing with its application to the
Prudential Regulation Authority ("PRA") for a banking licence. As
announced on 23 July 2020, Recognise has now received its Total
Capital Requirement ("TCR") letter from the PRA. This letter set
out the capital requirements Recognise would be subject to if it
receives its Authorisation with Restriction as a Bank. This is
expected later in the year following completion of the capital
raise, which COLG anticipates will be shortly after the Company's
annual general meeting to be held on 30 September 2020.
-- The capital raise has two components. The Company has today
entered into an agreement with an investment company, Parasol V27
Limited (the "Investor"), which is an affiliate and under the
management of RG Advisors, under which the Investor has
conditionally agreed with the Company to subscribe for 31,250,000
new ordinary shares at a subscription price of 80 pence per new
ordinary share in cash for aggregate gross proceeds to the Company
of GBP25,000,000 (the "Subscription").
-- In addition, the Company is intending, subject to demand, to
place up to a further 6,250,000 new ordinary shares to certain
existing shareholders and potential new investors at an issue price
of 80 pence per share to raise gross proceeds of up to GBP5,000,000
(the "Placing").
-- The Subscription is conditional upon, among other things, the
approval of the Financial Conduct Authority ("FCA") and the PRA in
accordance with the FCA's usual procedures upon a change of
controller of a regulated entity.
Commenting on the capital raise, Colin Wagman, Chairman of COLG,
said:
"Today's announcement of the conditional subscription of GBP25
million is a tremendous endorsement of our strategy and our team,
and the excellent progress we have made to date in readying a new
bank for the UK's under-served SME community."
Michael Goldstein, CEO of COLG, said:
"Given the highly challenging environment facing the world
economy today, we are delighted to have achieved this level of
support from a prestigious global investor. This acknowledges the
quality of what we have delivered as a business thus far, the
excellent plan we have in place, and the fantastic team we have
built to do this, as well as the importance of the UK's
under-banked SME sector to our national economy. We are also
confident of raising the additional capital to provide the
necessary investment to get us beyond the next stage of
development."
Jason Oakley, CEO of Recognise, added:
"Today's announcement represents another significant milestone
on Recognise's pathway to becoming a fresh new face in the UK SME
banking market, built on solid foundations by a very strong team
with a credible and differentiated business plan, and an exciting
future. UK entrepreneurs will play a key role in creating and
supporting UK economic growth, and to do so they need a banking
sector that is aligned to their needs and way of thinking. With the
experience and expertise we have at our disposal, and with the
support and commitment of all our shareholders, we believe that we
can be at the forefront of that and play a major role in helping
the UK small business sector get back on its feet."
Background to the Capital Raise - The SME opportunity
COLG believes that the underserved small-to-medium enterprise
(SME) lending segment in the UK represents a significant
opportunity. The growth of the banking sector has accelerated over
the last decade and it continues to evolve. At the same time, the
SME sector - now with over 5.7m businesses in the UK - is
witnessing change when it comes to securing funding and savings
needs.
The UK's existing large and well-established banks have, in
recent years, moved away from small business relationship
management and the experience of personal touch and understanding.
By contrast, the new group of challenger banks has seized the
opportunity and finally gained the traction they needed to fill
this void. Recognise has validated its market approach through
primary external market research of SME owners and the important
commercial broker network.
It has in place the governance, infrastructure and key personnel
to be able to commence lending in its own name in order to play a
role in helping UK entrepreneurs and SMEs recover and re-build
their businesses following the disruption caused by COVID-19.
Recognise, and its highly experienced management team, will target
the vital but underserved SME lending market offering service
excellence, speed, flexible structuring and the key component of
personal service through dedicated relationship managers. It
combines the agility and flexibility of a cloud-based lending
platform with the human touch, the latter so often neglected by the
established lenders.
The Board of COLG remains confident that as UK businesses emerge
from the COVID-19 pandemic, there will again be strong market
demand for SME specialist lending and new opportunities for growth.
Recognise will not be burdened with a pre-COVID-19 legacy loan book
and will be keen to build its lending portfolio by supporting well
established businesses with business plans tailored to the
post-COVID environment. In this context the original business plan
for Recognise remains just as relevant, if not more so, than when
first constructed.
Recognise is progressing with its application to the Prudential
Regulation Authority for a banking licence. As announced on 23 July
2020, Recognise has now received its TCR letter from the PRA. This
letter sets out the capital requirements Recognise would be subject
to if it receives its Authorisation with Restriction as a Bank.
This is expected later in the year following completion of the
capital raise, which COLG anticipates will be shortly after the
Company's annual general meeting to be held on 30 September
2020.
COLG has today published an updated corporate presentation on
its website which can be accessed here:
https://www.cityoflondongroup.com/new-investor/
Details of the Proposed Capital Raise
COLG is financing Recognise's growth through an equity capital
raise. The capital raise has two components, the Subscription and
the Placing with all proceeds down-streamed to Recognise.
The Subscription
The Company has today entered into an agreement with the
Investor under which the Investor has agreed with the Company to
subscribe for 31,250,000 new ordinary shares at a price of 80 pence
per share in cash, resulting in aggregate gross proceeds to the
Company of GBP25,000,000.
The Investor is an investment company, Parasol V27 Limited,]
which is an affiliate and under the management of RG Advisors, the
private family office of Ms Ruth Parasol, who also has extensive
real estate interests in Europe and the United States as well as
asset management, globally diversified investments in private and
public markets. As part of the Subscription, the Investor will have
the right to nominate directors to the Boards of COLG and of
Recognise. The Investor has nominated Ms Ruth Parasol (Chair of RG
Advisors) and Ms Nyreen Llamas (Senior Advisor at RG Advisors) to
serve as a Directors on the Board of COLG.
Completion of the Subscription is conditional upon a number of
things including the following:
-- all required regulatory authorisations and approvals being obtained, including:
o the FCA and PRA approval(s) of any required controller
application(s) as regards the Subscriber's interest in
Recognise;
o the FCA's approval(s) of any required change(s) in control of
the Company's existing FCA authorised subsidiaries;
o the PRA confirming that Recognise's proof of capital is
acceptable;
-- the Company and each member of the Group having carried on
its business in the ordinary and usual course and there having been
no Material Adverse Change and the Company and no other member of
the Group having entered into or assumed or incurred any contract,
commitment, borrowing, indebtedness in the nature of borrowing,
guarantee, liability (including contingent liability) or entered
into any transactions not in the ordinary course of business and
which, in each case, results in a Material Adverse Change. For this
purpose Material Adverse Change means any material adverse change
in, or any development likely to result in a material adverse
change in or materially and adversely affecting, the condition
(financial, operational, legal or otherwise), shareholders' equity,
earnings, results, management, business, affairs, solvency,
liquidity position, funding position or prospects of the Group
taken as a whole, whether or not arising in the ordinary course of
business provided that any event, circumstance or change arising
out of COVID-19 or any related pandemic shall not be a Material
Adverse Change;
-- there being no material breach of warranty or undertaking by
the Company under the Subscription agreement; and
-- there being no competing offer or alternative proposal for
the Company that becomes or is declared wholly unconditional prior
to completion of the Subscription.
Depending on the eventual size of the Placing, the Investor's
resulting shareholding in the Company is expected to be between
34.6% and 39.9% of COLG's enlarged share capital following
completion of the capital raise. The Investor has agreed to a
lock-up (subject to customary exceptions) in respect of its shares
for a period of 12 months following completion of the
Subscription.
With effect from completion of the Subscription, the Investor
will enter into a relationship agreement with the Company which
will impose certain restrictions on the Investor to ensure that the
Company can operate its business independently of the Investor. In
addition, for so long as the Investor holds 20% or more of the
issued share capital, the Investor shall have the right to nominate
two directors (and two observers) to the board of COLG. For so long
as it holds 10% or more of the issued share capital, the Investor
shall have the right to nominate one director (and observer) to the
Board. Subject to the prior approval of the PRA, which the Company
will use all reasonable endeavours to obtain, for so long as the
Investor holds 10% or more of the issued share capital the Investor
shall have the right to nominate one director (and observer) to the
board of Recognise. In addition, for so long as the Investor holds
more than 30% of the issued share capital, COLG shall, at the
request of a director nominated by the Investor, convene a general
meeting at which certain reserved matters shall be proposed for
consideration and, if thought fit, approved by Shareholders. COLG
has agreed that it will not increase the size of the Board without
the Investor's approval (not to be unreasonably withheld).
Pursuant to the terms of a lock-up agreement to be entered into
between the Company and Max Barney Investments Limited ("MBIL"),
MBIL has agreed to a lock-up (subject to customary exceptions) in
respect of its shares in the Company for a period of 12 months
following completion of the Subscription. Under that same
agreement, for as long as MBIL holds 10% or more of the issued
share capital, MBIL shall have the right to appoint a director to
the Board of COLG until the later of the expiry of that lock-up
agreement and repayment in full of its preference shares in Credit
Asset Management Limited. In addition, DV4 Limited ("DV4") has
agreed to an orderly markets undertaking in respect of its shares
in the Company for a period of 12 months following completion of
the Subscription. DV4 will also have the right, for so long as it
holds 10% or more of the Company's issued share capital, to appoint
an observer to the COLG Board.
The Placing
In addition to the Subscription, the Company intends to seek to
raise, through the Placing, up to GBP5,000,000 through the issue of
up to a further 6.25 million shares at a price of 80 pence per
share. The Placing will give a limited opportunity for certain
existing shareholders and potential new investors to invest at the
same price as the Investor at the Company's discretion. Although it
is expected that the Placing will complete at the same time as the
Subscription, the timing and the final number of shares to be
issued will be determined by the Company in its absolute discretion
and further details will be announced in due course. The Placing
will not be underwritten in whole or in part.
Approvals in connection with the capital raise
Completion of the Subscription and the Placing is conditional
upon the granting by special resolution of the Company's
shareholders of sufficient authority to the directors to allot and
issue the relevant new shares (among other things). As announced on
18 August 2020, the Board is seeking authority at the Company's
2020 annual general meeting, to be held on 30 September 2020, to
issue up to 50,000,000 new shares, which will be sufficient
authority for the Subscription and the Placing if the relevant
resolutions are passed.
The Company intends to apply for admission to trading of the
Subscription shares and, if applicable, the Placing shares, on the
AIM Market of the London Stock Exchange in due course. Further
announcements regarding the progress of the capital raise will be
made by the Company in due course.
Takeover Code
COLG is subject to the City Code on Takeovers and Mergers (the
"Takeover Code") which is administered by the Panel on Takeovers
and Mergers (the "Takeover Panel"). Under Rule 9 of the Takeover
Code, if any person acquires an interest in shares which, when
taken together with shares in which he and persons acting in
concert with them are already interested, carry 30% or more of the
voting rights of a company which is subject to the Takeover Code,
that person is normally required to make a general offer in cash to
all shareholders in the company at the highest price paid by them
or any person acting in concert with them for an interest in such
shares within the preceding 12 months. Rule 9 also provides that if
any person, together with persons acting in concert with them, is
interested in shares which in the aggregate carry not less than 30%
of the voting rights of a company which is subject to the Takeover
Code but does not hold shares carrying more than 50% of such voting
rights, 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 such company in
which he is interested, that person is normally required to make a
general offer in cash to all shareholders in the company at the
highest price paid by him or any person acting in concert with them
for an interest in such shares within the preceding 12 months.
Under Note 1 on the Notes on the Dispensations from Rule 9, the
Takeover Panel will normally waive the requirement for a general
offer to be made in accordance with Rule 9 (a "Rule 9 offer") 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 ("the Independent
Shareholders") pass an ordinary resolution on a poll at a general
meeting ("a Whitewash Resolution") approving such a waiver. The
Takeover 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 the company's
shares capable of being voted on such a resolution confirm in
writing that they would vote in favour of the Whitewash Resolution
were one to be put to the shareholders of the company at a general
meeting.
Following the transaction, the Investor will own between 30% and
50% of the issued ordinary shares in COLG. This would ordinarily
trigger an obligation on its part to make a general offer for the
entire issued share capital of the Company in accordance with Rule
9 of the Takeover Code. The Takeover Panel has given a waiver of
Rule 9 of the Takeover Code in order to permit the capital raise to
proceed without a general offer needing to be made by the Investor
on the basis that independent shareholders, who together hold over
50% of the shares currently in issue, have confirmed that they
would not accept such an offer and would vote in favour of a
whitewash resolution at a general meeting of the Company if it were
held.
Two independent shareholders, DV4 and MBIL, in the Company hold
in aggregate 31,496,482 ordinary shares in the issued share capital
of the Company, representing 76.08% of the Company's issued share
capital carrying voting rights, and have absolute discretion over
the manner in which these shares are voted. These shares are held
free of all liens, pledges, charges and encumbrances. Save for the
fact that the two shareholders and the Investor will be
shareholders in the Company following completion of the
Subscription and other than the existence of irrevocable
undertakings to exercise their votes as shareholders in order to
effect the Subscription and the lock-up agreement described above,
there is no connection between DV4, MBIL and the Investor. The two
shareholders do not have any interest or potential interest,
whether commercial, financial or personal, in the outcome of the
Fundraising, and they are both an Independent Shareholder of the
Company as defined above.
In connection with the Subscription, DV4 and MBIL have:
(a) consented to the Takeover Panel granting a waiver from the
obligation for the Investor to make a Rule 9 offer to the
shareholders of the Company;
(b) consented to the Panel dispensing with the requirement that
the waiver from such obligation be conditional on a Whitewash
Resolution being approved by Independent Shareholders of the
Company at a general meeting; and
(c) would vote in favour of a Whitewash Resolution to waive the
obligation for the Investor to make a Rule 9 offer were one to be
put to the independent shareholders of the Company at a general
meeting.
Further share issuances
The Company is planning to issue a total of 5,807,000 new
ordinary shares to the Company's employee benefit trust to satisfy
future share awards to COLG employees.
Market Abuse Regulation
This announcement is released by the Company and contains inside
information for the purposes of the Market Abuse Regulation (EU)
596/2014 ("MAR") and is disclosed in accordance with the Company's
obligations under Article 17 of MAR. The person who arranged for
the release of this announcement on behalf of the Company was
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
finnCap Ltd (Joint Broker) Tel. +44 (0)20 7220
0500
Jonny Franklin-Adams / Anthony Adams / Kate Washington
(Corporate Finance)
For media enquiries, please contact:
David Masters, Lansons; DavidM@lansons.com
Sarah Oppler, Lansons; SarahO@lansons.com +44 (0)7825 427514
Or email colg@lansons.com +44 (0)7530 627765
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 does not constitute and is not intended to
form part of, and under no circumstances is to be construed or read
as, a prospectus, offering memorandum or an advertisement relating
to the Company, the Placing nor does it constitute or contain any
invitation or offer to any person, or any public offer, to
subscribe for, purchase or otherwise acquire any securities in the
Company or advise persons to do so in any jurisdiction, nor shall
this announcement nor any part of it form the basis of or be relied
on in connection with any contract to acquire securities in the
Company or as an inducement to enter into any contract or
commitment with the Company. No public offering of securities is
being made in the United States, the United Kingdom or elsewhere in
connection with the Placing. No prospectus will be made available
in connection with the Placing and no such prospectus is required
to be published. The information regarding the Placing set out in
this announcement is for information purposes only and is directed
only at persons who are: (a) persons in Member States of the
European Economic Area who are qualified investors (within the
meaning of article 2(e) of the Prospectus Regulation ("Qualified
Investors"); and (b) in the United Kingdom, Qualified Investors who
are also persons who: (i) have professional experience in matters
relating to investments falling within the definition of
"investment professionals" in article 19(5) of the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2005, as
amended (the "Order"); or (ii) are persons falling within article
49(2)(a) to (d) ("high net worth companies, unincorporated
associations, etc") of the Order; or (iii) are persons to whom it
may otherwise be lawfully communicated (all such persons together
being referred to hereinafter as "relevant persons"). The
information regarding the Placing set out in this announcement must
not be acted on or relied on by persons who are not relevant
persons. Any investment or investment activity to which this
announcement relates is available only to relevant persons and will
be engaged in only with relevant persons.
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
this announcement. Apart from the responsibilities and liabilities,
if any, which may be imposed on Peel Hunt by the Financial Services
and Markets Act 2000, or the regulatory regime established
thereunder, Peel Hunt accepts no responsibility whatsoever, and
makes no representation or warranty, express or implied, for the
contents of this announcement including its accuracy, completeness
or verification or for any other statement made or purported to be
made by it, or on behalf of it, the Company or any other person, in
connection with the Company and the contents of this announcement,
whether as to the past or the future. Peel Hunt accordingly
disclaims all and any liability whatsoever, whether arising in
tort, contract or otherwise (save as referred to above), which it
might otherwise have in respect of the contents of this
announcement or any such statement.
In connection with the proposals referred to in this
announcement, Peel Hunt and its respective affiliates may act as
investors for their own accounts, may subscribe for or purchase
ordinary shares in the Company and in that capacity may retain,
purchase, sell, offer to sell or otherwise deal for their own
accounts in such ordinary shares and other securities of the
Company or related investments in connection with such proposals or
otherwise. Accordingly, references to the ordinary shares being
offered, subscribed, acquired or otherwise dealt in should be read
as including any offer to, or subscription, acquisition, or dealing
by Peel Hunt and any of its respective affiliates acting as
investors for their own accounts. In addition, Peel Hunt or its
respective affiliates may enter into financing arrangements and
swaps in connection with which it or its affiliates may from time
to time acquire, hold or dispose of ordinary shares. Peel Hunt has
no intention to disclose the extent of any such investment or
transactions otherwise than in accordance with any legal or
regulatory obligations to do so.
Forward-Looking Statements
This announcement includes certain statements which may be
forward-looking statements within the meaning of the securities
laws of certain applicable jurisdictions. These forward-looking
statements can be identified by the use of forward-looking
terminology, including, but not limited to, terms such as "aim",
"anticipate", "assume", "believe", "continue", "could", "estimate",
"expect", "forecast", "guidance", "intend", "may", "outlook",
"plan", "predict", "project", "should", "will" or "would" or, in
each case, their negative, or other variations or comparable
terminology.
These forward-looking statements include, but are not limited
to, all statements other than statements of historical facts and
include statements regarding the Company's intentions, beliefs or
current expectations concerning, among other things, Company and
its subsidiaries' respective future financial conditions and
performance, results of operations and liquidity, strategy, plans,
objectives, prospects, growth, goals and targets, future
developments in the markets in which the Company and its
subsidiaries participate or are seeking to participate, and
anticipated regulatory changes in the industries in which the
Company and its subsidiaries operate. By their nature,
forward-looking statements involve known and unknown risks,
uncertainties and other factors because they relate to events and
depend on circumstances that may or may not occur in the future.
Readers are cautioned that forward-looking statements are not
guarantees of future performance and are based on numerous
assumptions. Given these risks and uncertainties, readers should
not rely on forward looking statements as a prediction of actual
results.
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