London Capital Group Holdings Plc and wholly owned subsidiary Tradex entered a conditional agreement to sell 91.5% of unit London Capital Group Ltd.'s entire issued share capital and 100% of the issued share capital of subsidiaries held by LCG Holdings and/or Tradex to SLCG International.
The consideration for the deal will be the issuance to SLCG International by LCG Ltd. of unsecured perpetual loan notes amounting to roughly £4.6 million.
The notes carry a fixed-rate coupon of 8% annually payable twice a year in two equal installments in arrears on May 25 and Nov. 25, with the first payment to be Nov. 25, 2018. They may only be redeemed after LCG Ltd. becomes insolvent or if it is otherwise put into liquidation, subject to the grant of relevant permission by U.K. Financial Conduct Authority, with any accrued but unpaid interest to be paid upon redemption.
The consideration is based on the aggregate of LCG Holdings' market capitalization at a price of 1.3315 pence per share, which represents the six-month volume-weighted average price of the shares as of Feb. 23, and a premium of approximately 40% compared to the group's share price at the close of trading March 4.
The deal is subject to approvals from shareholders of LCG Holdings and from the FCA.
LCG Holdings will retain an 8.5% stake in LCG Ltd. through Tradex following completion of the transaction.
At the deal's completion, LCG Holdings and Tradex will enter into a call option agreement under which Tradex will grant a call option to SLCG International to acquire the remaining 8.5% of LCG Ltd.'s issued share capital for £430,676, to be satisfied by the issuance of further loan notes, with the call option to expire 12 months after the transaction's completion. The total consideration received by LCG Holdings will increase to approximately £5.1 million once SLCG exercises the call option.
LCG Holdings noted that it would become a cash shell should the call option be exercised at such time when it has not made another acquisition in line with its investment strategy. It would then be required to carry out a reverse takeover within six months of becoming a cash shell or be readmitted to trading on the NEX Exchange as an investment vehicle, failing which, LCG Holdings' ordinary shares would be suspended from trading on the exchange.
After no more than six months of suspension, the company's ordinary shares would then be cancelled from trading on the exchange.
LCG Holdings also noted that it will benefit from a cost indemnity from LCG Ltd. in connection with maintaining the trading in the ordinary shares on the NEX Exchange until the earlier of either six months from the transaction's close, or LCG Holdings' completion of a transaction constituting a reverse takeover.
Following the completion of the transaction, LCG Holdings said it would remain as an investment vehicle and that it would continue to seek investment opportunities and acquisitions in the U.K. as part of its current strategy to invest in financial technology firms, businesses and assets.
SLCG International is principally controlled by LCG Holdings CEO Charles-Henri Sabet.
