Acquisition
January 18 2007 - 2:03AM
UK Regulatory
RNS Number:7183P
Absolute Capital Mgmt Holdings Ltd
18 January 2007
18 January 2007
Absolute Capital Management Holdings Limited
("ACM")
Acquisition of Argo Capital Management creating an enlarged
multi strategy group with assets under management
increasing from $1.5 billion to in excess of $2.4 billion
Highlights
* To acquire top quartile debt fund manager Argo Capital Management for
#50.46 million
* Assets under management to increase from $1.5 billion to $2.4 billion
* Immediately earnings enhancing
* Brings global coverage and extends the pool of investment talent
* Adds significant product diversification and revenue from debt/finance
opportunities in emerging markets
* Underlines the scalability of the group's strategy
ACM (AIM: ACMH), the fund management company focused on delivering investment
returns through the management of absolute return funds, today announces the
conditional acquisition of the award winning hedge fund management businesses of
Argo Capital Management comprising Argo Capital Management Limited, a UK
investment advisory company regulated by the Financial Services Authority,
Argonaftis Capital Management (Overseas) Limited, domiciled in Cyprus and
regulated by the Cyprus Securities and Exchange Commission and Argo Capital
Management (Asia) Pte. Limited, domiciled in Singapore (collectively "Argo").
Argo's business is focused on generating absolute returns through the management
of 3 funds investing in emerging market fixed income credit products, distressed
debt, special situations and private equity. The acquisition takes ACM,
primarily a developed markets equity manager, into credit markets for the first
time, and opens up substantial new opportunities in both debt investing and in
emerging markets.
The aggregate consideration payable by ACM under the acquisition agreements is
#50.46 million, to be satisfied by the issue of 12.3 million new ordinary
shares, totaling #43.91 million based on the closing price of an ACM ordinary
share on the day prior to this announcement, and a cash payment of #6.55
million. In addition, up to a maximum of 2,344,000 further shares may be issued
to the vendors prior to 1 September 2007 pursuant to certain performance
conditions set out in the purchase agreements. Immediately following completion,
application will be made for the admission to AIM of the 12.3 million new
ordinary shares which rank pari passu in all respects with the existing shares.
Further to ACM's announcement on 11 December 2006 to return up to Euro20 million to
shareholders post the audit of its 2006 results, ACM's Board confirms that in
light of this transaction, it intends to substantially increase the amount of
such dividend. Under the terms of the purchase agreements, should the increase
to ACM's dividend be less than previously forecast, further cash consideration
of up to #1.23 million will become payable to the vendors.
The acquisition
* The enlarged group will have assets under management in excess of
$2.4 billion:
- As at 1 January 2007 Argo had $882 million of assets under management
and ACM had in excess of $1,550 million of assets under management
* Argo has a consistent and award winning long term record. In 2004 the Argo
Fund was voted by Hedge Fund Review as the Best Performing Single Manager
Fund on a Risk Adjusted Basis over three years. The same fund has
consistently been in the top 10 hedge funds ranked by Sharpe ratio in the
last five years in the MARHedge database. In addition to that, the Argo
Special Situations Fund has been short-listed by the Eurohedge Awards over
the last two years in the High yield and Distressed categories.
- The Argo Fund has delivered average annualized returns of over 18.0%
since its launch in October 2000.
- The Argo Global Special Situations Fund has averaged annualized
returns of 16.0% since its launch in August 2004.
- Both funds have consistently shown top quartile Sharpe ratios (an
industry standard measure of risk adjusted returns). The monthly
volatility of returns is very low, with each fund incurring just 3
down months over their respective lives.
- Argo's 19 employees are expected to remain employed with the group
post completion.
* In the 12 months ended 31 December 2006, Argo generated unaudited
operating profits before bonuses of approximately Euro25.21 million from
revenue of approximately Euro29.07 million (2006 figures subject to audit).
Argo's revenue comes entirely from the management and performance fees
generated by its 3 funds.
* Andreas Rialas, the founder of Argo, will remain CEO of the Argo business
and will be responsible for building up the Debt and Structured Finance
division of the enlarged group. As part of the transaction Andreas and
Kyriakos Rialas have entered into minimum 3 year term service contracts,
details of which are provided below. Andreas Rialas will join the Board of
ACM and serve as ACM's Co-Chief Investment Officer.
* A bonus scheme appropriate to the contribution to the group will be
established for Argo which will be subject to approval by the remuneration
committee.
* The consideration for the acquisition has been determined on the basis
that net current assets of Argo at 31 December 2006 are #1. To the extent
audited net current assets at this date differ, a balancing payment will
become due.
* Completion of the transaction is conditional upon approval from Cyprus
Securities and Exchange Commission to the change in control of Argonaftis
Capital Management (Overseas) Limited. The Board expects to receive this
approval within the next two weeks. ACM has received approval from the UK
Financial Services Authority to the change of control of Argo Capital
Management Limited.
* The enlarged group will benefit from:
- the combination of two award winning and highly successful
alternative asset management firms which together will provide a
broader investment proposition to existing and new investors;
- complementary businesses diversifying the product range across the
enlarged group;
- outstanding track records in each division (Equity and Debt) over 5
years and 6 years respectively;
- a broader geographic presence which will now cover the Cayman
Islands, Switzerland (2 offices), the United Kingdom, Singapore,
Spain, Cyprus, Poland and Brazil;
- increased size and scope of the business and from this the ability to
invest in a broader range of financial instruments over a wider
geographical area - particularly emerging markets; and
- investment returns which are un-correlated to their respective
investment universe, and in which volatility is low.
Investment track record for the 11 funds now managed by the ACM group
Fund AUM $m Annualised
Return * Down months Launch date
ACM FUNDS
Absolute Return Europe Fund 478 16.33 2 out of 58 March 2002
European Catalyst Fund 185 20.59 4 out of 39 October 2003
Absolute Germany Fund 218 20.22 2 out of 36 January 2004
Absolute East West Fund 138 24.66 1 out of 18 July 2005
Absolute Octane Fund 288 46.86 1 out of 18 July 2005
Absolute Large Cap Fund 105 24.85 1 out of 11 February 2006
Absolute India Fund 19 18.77 0 out of 6 July 2006
Absolute Activist Value Fund 120 41.90 0 out of 6 July 2006
ARGO FUNDS
Argo Fund 446 18.49 3 out of 74 October 2000
Argo Global Special Situations Fund 380 16.00 3 out of 28 August 2004
Argo Capital Partners Fund 52 N/A N/A August 2006
Note: * Average annualized growth rate from inception of each fund to end
December 2006. Assets under Management as at 1 January 2007.
Commenting on the acquisition, ACM's Chairman and Chief Executive Officer Sean
Ewing said: "This is an exciting new development for ACM, as it both diversifies
and broadens the fund management activities of the group. The debt and
structured finance market is a key leg to our business model and in Argo we have
acquired an outstanding business with an excellent 6 year track record. Argo's
fundamental and detailed style of investment is complementary and near identical
to the approach ACM applies to equity markets.
Andreas, Kyriakos and the team will add significant strength to our overall
strategy. Together we intend to build the ACM Group into a sizable, scaleable,
and diverse absolute return asset management business whilst we continue to
focus on delivering superior risk adjusted returns to our customers."
Andreas Rialas, CEO of Argo said: "We are very pleased to be joining the ACM
team and look forward to developing our existing business, and creating new
opportunities for the group. Both teams have developed a successful approach to
investing in different asset classes, based on fundamentally similar investment
analysis and trading disciplines.
There was a meeting of minds during our discussions, and the realization that
putting the two businesses together would create substantial opportunities for
growth both in our existing funds and in the development of new funds. On a
personal level, I am very pleased to be joining the Board of ACM and taking on
the role of ACM's Co-Chief Investment Officer".
Enquiries:
ACM
Sean Ewing, Chairman and CEO T: +44 (0)7768 255 472
Solomon Hare Corporate Finance
Nick Reeve T: +44 (0) 117 933 3344
Cardew Group
Tim Robertson T: +44 (0)20 7930 0777
Shan Shan Willenbrock
David Roach
A conference call will be held for analysts and investors at 11.00am (UK time)
today. The call can be accessed by dialling:
UK: T: 0800 358 2705
International T:+44 (0)20 8609 0205
Pin code: 190702#
A conference call will be held for the media at 12.00pm (UK time) today. The
call can be accessed by dialing:
UK: T: 0800 358 2705
International T:+44 (0)20 8609 0205
Pin code: 699842#
About Andreas Rialas
Current directorships and partnerships held by Andreas Rialas, aged 39:
* Argo Capital Management Limited
* Argonaftis Capital Management (Overseas) Limited
* Argo Fund
* Argo Global Special Situations Fund
* Argo Capital Partners Fund
* On-Telecom
* Mayhem Project LLC
* PT Polytama Propindo
There is no further information required to be disclosed under schedule 2 (g) of
the AIM rules.
Andreas Rialas has entered into a service agreement with ACM for the position of
CEO of the Argo business and Co-Chief Investment Officer of ACM. The agreement
is terminable on 6 months' notice by either party subject to an initial fixed
term of 3 years. His salary is initially set at Euro120,000 per annum and is
subject to annual review by ACM's remuneration committee.
About ACM
Absolute Capital Management Holdings Limited is a specialist fund management
company focused on delivering investment returns through the management of
absolute return funds in equities and fixed income products, since inception in
2004. The enlarged company now has offices in the Cayman Islands, Switzerland,
the United Kingdom, Singapore, Spain, Cyprus, Poland and Brazil. Post completion
the group will manage 11 funds and have in excess of $2.4 billion under
management. ACM listed on AIM on 3rd March 2006.
ACM Investment Achievements -
No. 1 Best Hedge Fund Group, 2006 Hedge Fund Reveiw
No. 1 European Event Driven Fund, 2005 Eurohedge
No. 1 Risk Adjusted Long/Short Fund 2005 Barclay Group
No. 1 Germany Fund over 1, 2 and 3 years, 2004 Micropal
No. 1 European Long Short Fund, 2002 HFI
About Argo
Argo was one of the first European emerging markets focused hedge fund groups
with a very diverse group of investors made up of both institutional and High
Net Worth clients. It has always sought to provide clients with a product that
would give them a risk adjusted exposure to emerging markets. The group offers
three different funds as follows:
The Argo Fund invests globally in emerging markets. Argo invests on a
relative-value basis across the whole spectrum of credit products - distressed
debt, bank loans and Eurobonds - in order to maximise the total return in a
diversified sovereign and corporate fixed-income portfolio. The strategy takes
an active long/short approach to reduce volatility. Argo also invests in
distressed debt/special situations where prices may become depressed due to
market sentiment and is experienced in taking proactive positions in corporate
and sovereign restructurings using a deep value bottom up approach.
The Argo Global Special Situations Fund is strategy specific and not bound by
geography, although the majority of its portfolio is in emerging markets and its
broad strategy is to exploit situations where other market participants are
constrained: corporate credit events including credit rating movements;
sovereign defaults; devaluations; regulatory shifts and resulting balance sheet
pressures; and financial restructurings. The result is valuations which
overstate risks and market inefficiencies that create long only, arbitrage or
relative value opportunities.
The Argo Capital Partners fund aims to capture special situations where a 2 to 3
year investment horizon is required. The fund has a 4 year lock up and it only
charges performance fees on realised gains.
Ends.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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