ACMH Acmh Ltd

RNS Number:8514E
Absolute Capital Mgmt Holdings Ltd
20 June 2006


                                                                    20 June 2006


                  Absolute Capital Management Holdings Limited
                           ("ACMH" or "the Company")

                        Acquisition of TCA Group Limited


ACMH, the fund management company focused on delivering investment returns
through the management of absolute return funds, today announces the acquisition
of TCA Group Limited ("TCA") a Cayman Islands company providing capital
introduction services and investor relations services primarily to absolute
return focused managers. The acquisition creates significant group distribution
capability for ACMH's funds and consolidates a significant part of its third
party introduction fees within ACMH.

The maximum consideration payable by ACMH is Euro15.7 million, to be satisfied
wholly by the issuance of new ordinary shares and subject to a range of
performance criteria. The maximum consideration represents a multiple of 4.5
times TCA's target EBITDA in 2006 and 2.9 times its 2007 target.

Commenting on the acquisition ACMH's Chairman and Chief Executive Officer Sean
Ewing said: "This is a logical and highly beneficial transaction for ACMH, as it
will be immediately earnings and margin enhancing. Strategically it will bring
in-house sales, marketing and distribution capabilities that were previously
outsourced. TCA also has the ability to grow aggressively through existing and
future relationships with other managers. Acquiring TCA is the first of a number
of bolt-on opportunities we are pursuing."

John Lowry of TCA said, "We are very pleased to be joining the ACMH team. The
hedge fund industry has changed significantly over the last few years with a
growing requirement for managers to have a clear understanding of the evolving
demands of an increasing investor base. As our business has developed
dramatically alongside ACMH, there is significant logic to combine our
complimentary businesses. As well as now acting in-house for ACMH, TCA will
continue to identify and raise capital for other talented investment managers,
and will examine a range of related opportunities from manager seeding to
innovative product manufacturing and distribution across the globe."

Consideration

The acquisition will be financed wholly through the issuance of new ordinary
shares in ACMH in up to five tranches as follows:

Initial consideration   2,500,000 ordinary shares allotted and credited as fully 
                        paid

Earn out 1              Up to 1,500,000 ordinary shares allotted and credited as 
                        fully paid based on target EBITDA of TCA of Euro3.5 million 
                        for the year ended 31 December 2006
Earn out 2              Up to 1,500,000 ordinary shares allotted and credited as 
                        fully paid based on target EBITDA of TCA of Euro5.5 million 
                        for the year ended 31 December 2007
Deferred payment 1      On the third anniversary of the acquisition such number 
                        of shares in ACMH equal to Euro2 million
Deferred payment 2      On the fourth anniversary of the acquisition such number 
                        of shares in ACMH equal to Euro0.5 million

The Earn out consideration shall be allotted in full provided actual EBITDA is
equal to or exceeds 70% of the thresholds shown above. If Actual EBITDA is below
70% of the thresholds the allotments will, subject to the absolute discretion of
ACMH, be pro rated accordingly (such that if actual EBITDA were 69% of the
threshold the allotment will be 69% of the corresponding number of shares shown
above).

The deferred payments are conditional on the continued employment of key
executives of TCA and will be calculated by reference to the average middle
market price for an ordinary share for the 20 consecutive business days ending
two days prior to the date of issue of the respective shares.
  
Assuming all performance criteria is met and the earn out consideration becomes
due in full the maximum consideration for the acquisition, based on the closing
price of an ACMH ordinary share the day prior to this announcement, is Euro15.7
million.

Application will be made shortly for the admission to AIM of the 2,500,000
initial consideration shares. The former shareholders of TCA have provided an
undertaking that, in aggregate, up to a maximum of 500,000 of the initial
consideration shares may be sold or transferred in the 12 months following
completion. The remaining initial consideration shares are subject to a 12 month
lock in arrangement.

Bonus arrangements

Consistent with ACMH's strategy of aligning the long term interests of key
employees with those of its shareholders the majority of remuneration in respect
of TCA staff will be performance related. Key employees of TCA will participate
in bonus pool arrangements similar to those already in place within ACMH. The
level of the bonus pool will be subject to prior approval by ACMH's remuneration
committee.

About TCA

At 31 December 2005, TCA had introduced assets with a value of Euro294 million to
five fund managers. At 30 April 2006 this had increased to Euro447 million in
respect of six fund managers. Historically TCA has been the largest introducer
of assets to funds under the management of ACMH.

TCA has outsourced fulfillment of certain functions, which include due diligence
on fund managers, portfolio analysis and investment allocation recommendations,
to Tara Capital SA ("Tara"), a Geneva based company. The terms of the
arrangement are formalised in an agreement dated 21 March 2006, which provides
for Tara a fixed monthly fee for services provided to TCA to receive a monthly
fee for services provided to TCA.

The senior executives of Tara are John Lowry and Cyril Delamare, with five other
employees engaged in support roles. The agreement between TCA and Tara is
terminable on 30 days notice. However, if such termination occurs prior to the
fourth anniversary of the acquisition of TCA by ACMH, John Lowry and Cyril
Delamare have undertaken to enter into service agreements, in a pre agreed form,
with TCA.

TCA is not required to have its accounts audited or to file them at the Register
of Companies in the Cayman Islands. The following financial information on TCA
has therefore been extracted from unaudited management information. In the 12
months ended 31 December 2005 TCA generated operating profits of USD 3.1 million
from income of USD 4.3 million. Operating profit is stated after a payment to
Tara of USD 0.7 million. At 31 December 2005 TCA had net assets of USD 4.3
million, including share capital of USD 50,000. TCA has declared a pre sale
dividend of Euro4.25 million payable to its former shareholders. TCA will pay this
liability during 2006 as the corresponding assets and liabilities are realised.
As such the principal assets acquired by ACMH are the goodwill associated with
the business of TCA and its entitlement to future commissions in respect of
assets previously introduced by TCA to fund managers, including ACMH.


                                      Ends

Enquiries:

ACMH           Sean Ewing, Chairman and CEO          T: +44 (0)7768255472
Cardew Group   Tim Robertson                         T: 020 7930 0777
               Shan Shan Willenbrock
               David Roach


                      This information is provided by RNS
            The company news service from the London Stock Exchange

END
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