TIDMAFHP
RNS Number : 7289M
Cortina Bidco Limited
25 January 2021
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, IN OR INTO ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION .
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
For immediate release.
25 January 2021
RECOMMED CASH ACQUISITION
of
AFH FINANCIAL GROUP PLC
by
CORTINA BIDCO LIMITED
(a newly incorporated company indirectly controlled by funds
managed by Flexpoint Ford LLC)
intended to be effected by means of a Scheme of Arrangement
under Part 26 of the Companies Act 2006
Summary
The board of Cortina Bidco Limited ("Bidco"), a newly
incorporated company indirectly controlled by funds managed by
Flexpoint Ford LLC ("Flexpoint"), and the Independent Directors of
AFH Financial Group Plc ("AFH") are pleased to announce that they
have reached agreement on the terms of a recommended all cash
acquisition of the entire issued, and to be issued, ordinary share
capital of AFH (the "Acquisition").
Under the terms of the Acquisition, each Scheme Shareholder will
be entitled to receive:
for each Scheme Share: 463 pence in cash
In AFH's preliminary results for the year ended 31 October 2020
announced on 18 January 2021, AFH announced that AFH Shareholders
on the register of members at the close of business on 29 January
2021 will receive a first interim dividend of 3 pence per AFH Share
on 16 February 2021 (the "Interim Dividend"). AFH Shareholders on
the register of members as at the close of business on 29 January
2021 will be entitled to receive and retain the Interim Dividend
without any reduction of the consideration payable under the
Acquisition.
The Acquisition Price of 463 pence per Scheme Share (excluding
the Interim Dividend) represents a premium of approximately:
-- 40.3 per cent. to the Closing Price of 330.0 pence per AFH
Share on 1 December 2020 being the date Flexpoint entered into a
confidentiality agreement with AFH;
-- 16.5 per cent. to the Closing Price of 397.5 pence per AFH
Share on the Latest Practicable Date;
-- 34.2 per cent. to the volume-weighted average price of 345.0
pence per AFH Share for the three-month period ended on the Latest
Practicable Date; and
-- 35.9 per cent. to the volume-weighted average price of 340.7
pence per AFH Share for the six-month period ended on the Latest
Practicable Date.
The Acquisition values AFH's entire issued, and to be issued,
ordinary share capital at approximately GBP224.5 million.
The Acquisition is conditional on, amongst other things, the FCA
having notified Bidco and/or AFH of its approval of the change of
control of any UK authorised persons within the AFH Group as a
result of the Acquisition (or the requisite assessment period for
such approval to be provided having elapsed without the FCA having
objected to the Acquisition).
Whilst the Independent Directors remain confident in AFH's
prospects, they believe that partnering with Flexpoint, a leading
US private equity firm with significant financial resources, will
assure the successful delivery of the growth strategy and unlock
the full potential of the group over the long-term. Over the last
few years, AFH's ability to access both equity capital and debt
funding for growth on reasonable terms in a timely manner has faced
challenges on the public markets, which has slowed AFH's growth
meaningfully relative to those privately-owned competitors which
have been able to scale their businesses, both organically and
through M&A, at a faster pace.
The Independent Directors believe this transaction is the most
attractive route for AFH to regain its growth trajectory, and that
it will deliver a number of other strategic benefits in areas such
as digital marketing and systems investment. Against this backdrop,
the Independent Directors believe that the Offer Price reflects
both the value created by AFH's strategy to date, as well as the
value that this strategy is expected to generate in the future.
In light of this, the Independent Directors, who have been so
advised by Keefe, Bruyette & Woods (acting through Stifel
Nicolaus Europe Limited) ("KBW") as to its financial terms,
consider the terms of the Acquisition to be fair and reasonable. In
providing advice to the Independent Directors, KBW has taken into
account the commercial assessments of the Independent Directors.
KBW is providing independent financial advice to the Independent
Directors of AFH for the purposes of Rule 3 of the Code.
Accordingly, the Independent Directors confirm that they intend
unanimously to recommend that AFH Shareholders vote, or procure the
vote, in favour of the Scheme at the Court Meeting and the
Resolutions, as the Independent Directors who are interested in AFH
Shares have irrevocably undertaken to do, or to procure to be done,
in respect of their own beneficial holdings of AFH Shares which are
under their control, amounting, in aggregate, to 311,254 AFH Shares
representing approximately 0.7 per cent. of the issued ordinary
share capital of AFH and approximately 0.8 per cent. of the AFH
Shares eligible to vote at the Court Meeting, in each case, on the
Latest Practicable Date.
Bidco has, in total, received irrevocable undertakings from AFH
Shareholders in respect of a total of 14,182,677 AFH Shares
representing, in aggregate, approximately 33.0 per cent. of the
issued ordinary share capital of AFH (representing approximately
22.1 per cent. of the AFH Shares eligible to vote at the Court
Meeting) on the Latest Practicable Date. These irrevocable
undertakings are described in further detail below.
The AFH Executive Directors have provided irrevocable
undertakings to Bidco such that the AFH executive Directors have
agreed to be bound by the terms of the Scheme and to vote, or
procure the vote, in favour of the special resolution to amend the
Articles at the General Meeting in respect of 6,005,700 AFH Shares
representing, in aggregate, approximately 14.0 per cent. of the
issued ordinary share capital of AFH on the Latest Practicable
Date. These irrevocable undertakings remain binding in the event of
a competing offer.
Bidco has also received irrevocable undertakings from each of
BMO Asset Management Limited, Paul Connor and Philip Mobberley to
vote, or procure the vote, in favour of the Scheme at the Court
Meeting and the Resolutions in respect of 7,865,723 AFH Shares
representing, in aggregate, approximately 18.3 per cent. of the
issued ordinary share capital of AFH on the Latest Practicable
Date.
Flexpoint is a US-based investment firm which has raised over
$4.3 billion in capital and made over 30 investments since 2005.
Flexpoint specialises in the financial services and healthcare
sectors and has expertise in both minority and control structures
across private and public companies. Bidco is a newly incorporated
company registered in the Cayman Islands, which was formed for the
purposes of the Acquisition. Bidco is indirectly controlled by
funds associated with Flexpoint.
The Bidco Directors believe that the management team of AFH has
built an attractive financial planning-led business with a strong,
scaled platform delivering attractive propositions for clients.
Flexpoint aims to support AFH's management in building on this
solid foundation to continue to grow the business both organically
and by acquisition, by providing capital backing, investment,
strategic support and its global expertise as needed.
In view of the extensive experience of the AFH Executive
Directors in the financial advisory sector and their track record
of driving growth and profitability at AFH, the Bidco Directors
believe that the ongoing participation of the AFH Executive
Directors in the business after the Scheme has become Effective is
an important element of the Acquisition and are pleased that the
AFH Executive Directors have agreed to continue in their current
roles following the completion of the Acquisition. As part of the
Management Arrangements: (i) Alan Hudson has agreed to sell for
cash at a price equal to the Acquisition Price 4,294,065 AFH Shares
beneficially owned by him (representing approximately 9.99 per
cent. of AFH's issued ordinary share capital as at the Latest
Practicable Date) to Bidco; (ii) Alan Hudson has agreed to reinvest
GBP8,773,542 in Bidco (represented by 1,638,832 AFH Shares) (on a
fully diluted basis) and 625 Growth Shares) which equates to a 30
per cent. reinvestment of his gross proceeds; and (iii) each of the
other AFH Executive Directors have agreed to reinvest 30 per cent.
of their gross proceeds, pursuant to the Acquisition (net of any
exercise price payable on the exercise of options under the AFH
Share Plans) .
It is intended that the Acquisition will be implemented by means
of a Court-sanctioned scheme of arrangement under Part 26 of the
Companies Act.
The terms of the Acquisition will be put to Voting Scheme
Shareholders at the Court Meeting and, in the case of the Rollover
Resolution, to Independent Shareholders at the General Meeting. In
order to become Effective, the Scheme must be approved by a
majority in number of the Voting Scheme Shareholders, present and
voting at the Court Meeting, either in person or by proxy,
representing at least 75 per cent. or more of the voting rights
held by those Voting Scheme Shareholders. In addition, at the
General Meeting to implement the Scheme: (i) a special resolution
to amend the Articles must be passed by AFH Shareholders
representing at least 75 per cent. of the votes cast on that
resolution; and (ii) an ordinary resolution to approve the Rollover
Arrangements must be passed by the Independent Shareholders
representing a simple majority of the votes cast on that
resolution.
As a result of their respective interests in the Rollover
Arrangements, the AFH Executive Directors are not considered to be
independent for the purposes of the Code. Neither they, nor any of
their respective connected persons nor any person holding AFH
Shares on behalf of any AFH Executive Directors and/or any of their
respective connected persons, will be entitled to vote on the
Rollover Resolution at the General Meeting.
The Acquisition will be on the terms, and subject to the
Conditions, set out in Schedule 1 to this Announcement. Full
details of the Acquisition, and terms and Conditions to which it is
subject, will be set out in the Scheme Document. It is expected
that the Scheme Document, containing further information about the
Acquisition and notices of the Court Meeting and General Meeting,
together with the Forms of Proxy, will be published as soon as
practicable and, in any event, within 28 days of this Announcement
(unless the Panel agrees otherwise). An expected timetable of
principal events will be included in the Scheme Document.
John Wheatley, the Chairman of AFH, said:
"We are pleased to announce this recommended Acquisition by
Flexpoint and Bidco. Since its IPO in 2014, the AFH management team
has been focused on delivering shareholder value through a focus on
organic growth and value accretive acquisitions, completing over 50
acquisitions and growing to over GBP6 billion of funds under
management.
"The Independent Directors believe that the terms of the
Acquisition are compelling, acknowledge the quality and strong
prospects of AFH's business and deliver attractive value to AFH
Shareholders in cash, allowing them to crystallise the value of
their holdings.
"Looking ahead, the Independent Directors believe that Flexpoint
and Bidco will be excellent partners to AFH and support the
continued growth of the business and that the Acquisition is in the
best interests of all stakeholders of the Group. The Independent
Directors of AFH therefore intend unanimously to recommend that
shareholders vote in favour of the resolutions relating to the
Acquisition."
Commenting on the Announcement, Alan Hudson, Chief Executive
Officer of AFH Financial Group plc, said: "Since our IPO in 2014,
AFH has grown to become a leading brand in the financial
planning-led wealth management market. The Executive Directors and
I have always sought to deliver on our strategy of organic and
M&A-led growth, but in recent years this has been curtailed by
being an AIM-quoted company. We believe the offer reflects our
strong track record of increasing shareholder value, Flexpoint's
endorsement of our strategy and confidence in the continued success
of AFH, as well as further investment required in the business.
"Through its portfolio of leading financial services
investments, Flexpoint has demonstrated its strong track record of
partnering with entrepreneurial businesses, and the Executive
Directors and I believe there is a great strategic and cultural fit
for clients, staff and wider stakeholders. With the backing of
Flexpoint's expertise and access to capital, we believe that we
will be able to accelerate the delivery of our strategy.
"The Executive Directors and I believe that the demand for
professional financial planning-led investment service will
continue to grow and that AFH partnered with Flexpoint will be able
to service growing client needs and grow market share."
Steven Begleiter, Managing Director of Flexpoint, said: "We
believe that the UK wealth management market is currently
undergoing an important transition, as regulatory and demographic
trends are driving increasing demand for high quality financial
advice that can be met by IFA firms with a long-term and
client-centric view. In addition, the market is highly fragmented,
which provides an opportunity to service customers better and
create value through consolidation."
Daniel Edelman, Managing Director of Flexpoint, added: "Since
its founding more than 20 years ago, AFH's management team has
demonstrated long-term growth both organically and through
acquisitions. Flexpoint shares the management team's vision for
growth and believes the next phase of AFH's development would be
better conducted in the private domain. We believe our partnership
will strengthen the business and look forward to supporting
management in the future."
This summary should be read in conjunction with, and is subject
to, the full text of the following Announcement (including its
Appendices). The Acquisition will be subject to the Conditions and
certain further terms set out in Schedule 1 and to the full terms
and conditions to be set out in the Scheme Document. Schedule 2
contains the sources and bases of certain information contained in
this summary and the following Announcement. Schedule 3 contains
details of the irrevocable undertakings received by Bidco. Schedule
4 contains the definitions of certain terms used in this summary
and the following Announcement .
Enquiries
Cortina Bidco Limited via Raymond James
Steven Begleiter
Daniel Edelman
Stephane Essama
Raymond James Financial International
Limited (Sole Financial Adviser
to Bidco) +44 (0) 203 798 5700
Dominic Emery
Edward Griffin
Junya Iwamoto
AFH Financial Group Plc +44 (0) 152 757 7775
John Wheatley (Chairman)
Alan Hudson (Chief Executive Officer)
Keefe, Bruyette & Woods (acting
through Stifel Nicolaus Europe
Limited) (Sole Financial Adviser
to AFH) +44 (0) 20 7710 7600
Alistair McKay
Alex Price
Dennis Towers
Tiber Karadag
Shore Capital (Nominated Adviser) +44 (0) 207 408 4090
Hugh Morgan
Daniel Bush
Sarah Mather
Henry Wilcocks
Further information
Raymond James Financial International Limited ("Raymond James"),
which is authorised and regulated in the United Kingdom by the FCA,
is acting as financial adviser to Bidco and no-one else in
connection with the matters described in this Announcement and will
not be responsible to anyone other than Bidco for providing the
protections afforded to clients of Raymond James nor for providing
advice in connection with the matters referred to herein. Neither
Raymond James nor any of its affiliates owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect,
whether in contract, in tort, under statute or otherwise) to any
person who is not a client of Raymond James in connection with this
Announcement, any statement contained herein, the Acquisition or
otherwise.
Stifel Nicolaus Europe Limited, which also trades under the name
Keefe, Bruyette & Woods ("KBW"), and which is authorised and
regulated in the United Kingdom by the FCA, is acting as financial
adviser to AFH and no-one else in connection with the matters
described in this Announcement and will not be responsible to
anyone other than AFH for providing the protections afforded to
clients of KBW nor for providing advice in connection with the
matters referred to herein. Neither KBW nor any of its affiliates
owes or accepts any duty, liability or responsibility whatsoever
(whether direct or indirect, whether in contract, in tort, under
statute or otherwise) to any person who is not a client of KBW in
connection with this Announcement, any statement contained herein,
the Acquisition or otherwise.
Shore Capital and Corporate Limited and Shore Capital
Stockbrokers Limited ("Shore Capital") are authorised and regulated
in the United Kingdom by the FCA. Shore Capital is acting
exclusively for AFH and no one else in connection with the matters
referred to in this announcement and will not be responsible to
anyone other than AFH for providing the protections afforded to
clients of Shore Capital or for providing advice in connection with
the matters referred to in this announcement. Neither Shore Capital
nor any of its subsidiaries or affiliates owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect,
whether in contract, in tort, under statute or otherwise) to any
person who is not a client of Shore Capital in connection with this
announcement or any matter referred to herein.
Kirkland & Ellis International LLP is retained as legal
adviser to Flexpoint and Bidco.
Eversheds Sutherland (International) LLP is retained as legal
adviser to AFH.
The person responsible for arranging for the release of this
Announcement on behalf of AFH is Paul Wright, Chief Financial
Officer .
This Announcement is for information purposes only and is not
intended to and does not constitute, or form part of, an offer,
invitation or the solicitation of an offer to purchase, otherwise
acquire, subscribe for, sell or otherwise dispose of any
securities, or the solicitation of any vote or approval, in any
jurisdiction, pursuant to the Acquisition or otherwise, nor shall
there be any sale, issuance or transfer of securities of AFH in any
jurisdiction in contravention of applicable law. The Acquisition
will be implemented solely by means of the Scheme Document (or, if
applicable, the offer document containing any Offer), which will
contain the full terms and conditions of the Acquisition including
details of how to vote in respect of the Scheme (or, if applicable,
how to accept the Offer). Any vote in respect of the Scheme or
other response in relation to the Acquisition should be made only
on the basis of the information contained in the Scheme Document
(or, if applicable, the offer document containing any Offer).
Overseas jurisdictions
The availability of the Acquisition to AFH Shareholders who are
not resident in, and citizens of, the UK may be affected by the
laws of the relevant jurisdictions in which they are located or of
which they are citizens. Persons who are not resident in the UK
should inform themselves of, and observe, any applicable legal or
regulatory requirements of their jurisdictions.
The release, publication or distribution of this Announcement in
or into jurisdictions other than the UK may be restricted by law
and therefore any persons who are subject to the law of any
jurisdiction other than the UK should inform themselves of, and
observe, any applicable legal or regulatory requirements. In
particular, the ability of persons who are not resident in the UK
to vote their AFH Shares with respect to the Scheme at the Court
Meeting, or to appoint another person as proxy to vote at the Court
Meeting on their behalf, may be affected by the laws of the
relevant jurisdictions in which they are located. Any failure to
comply with the applicable restrictions may constitute a violation
of the securities laws of any such jurisdiction. To the fullest
extent permitted by applicable law, the companies and persons
involved in the Acquisition disclaim any responsibility or
liability for the violation of such restrictions by any person.
This Announcement has been prepared for the purposes of complying
with English Law, the AIM Rules, UK MAR, the rules of the London
Stock Exchange and the Code and the information disclosed may not
be the same as that which would have been disclosed if this
Announcement had been prepared in accordance with the laws of
jurisdictions outside of England.
Copies of this Announcement and the formal documentation
relating to the Scheme and the Acquisition will not be, and must
not be, mailed or otherwise forwarded, distributed or sent in, into
or from any Restricted Jurisdiction or any jurisdiction where to do
so would violate the laws of that jurisdiction and persons
receiving such documents (including custodians, nominees and
trustees) must not mail or otherwise forward, distribute or send
them in or into or from any Restricted Jurisdiction. Doing so may
render invalid any related purported vote in respect of the
Acquisition. If the Acquisition is implemented by way of an Offer
(unless otherwise permitted by applicable law or regulation), the
Offer may not be made, directly or indirectly, in or into or by use
of the mails or any other means or instrumentality (including,
without limitation, facsimile, e-mail or other electronic
transmission, telex or telephone) of interstate or foreign commerce
of, or any facility of a national, state or other securities
exchange of any Restricted Jurisdiction and the Offer will not be
capable of acceptance by any such use, means, instrumentality or
facilities or from within any Restricted Jurisdiction.
Further details in relation to overseas shareholders will be
contained in the Scheme Document.
Additional information for US Holders
US Holders should note that the Acquisition relates to the
securities of an English company and is proposed to be implemented
under a scheme of arrangement under English company law. A
transaction effected by means of a scheme of arrangement is not
subject to the tender offer rules under the US Exchange Act and the
proxy solicitation rules under the US Exchange Act will not apply
to the Acquisition. The Scheme will be subject to UK disclosure
requirements and practices which are different from the disclosure
requirements of the US tender offer and proxy solicitation rules.
The financial information included in this Announcement and the
Scheme Document has been, or will have been, prepared in accordance
with IFRS and thus may not be comparable to financial information
of companies whose financial statements are prepared in accordance
with generally accepted accounting principles in the US. However,
if Bidco were to exercise its right to implement the Acquisition of
the AFH Shares by way of an Offer, such Offer will be made in
compliance with applicable US tender offer and securities laws and
regulations. Such an Offer would be made by Bidco.
The receipt of cash pursuant to the Acquisition by a US Holder
as consideration for the transfer of its Scheme Shares pursuant to
the Scheme may be a taxable transaction for US federal income tax
purposes and under applicable US state and local, as well as
foreign and other, tax laws. Each AFH Shareholder is urged to
consult his, her or its independent professional adviser
immediately regarding the tax consequences of the Acquisition
applicable to him, her or it.
It may be difficult for US Holders to enforce their rights and
claims arising out of the US federal securities laws since Bidco
and AFH are located in countries other than the US and some or all
of their officers and directors may be residents of countries other
than the US. US Holders may not be able to sue a non-US company or
its officers or directors in a non-US court for violations of US
securities laws. Further, it may be difficult to compel a non-US
company and its affiliates to subject themselves to a US court's
judgment.
In accordance with normal UK practice and pursuant to Rule
14e-5(b) of the US Exchange Act, Bidco or its nominees, or their
brokers (acting as agents), may from time to time make certain
purchases of, or arrangements to purchase, AFH Shares outside of
the US, other than pursuant to the Acquisition, until the date on
which the Scheme and/or the Acquisition becomes Effective, lapses
or is otherwise withdrawn. These purchases may occur either in the
open market at prevailing prices or in private transactions at
negotiated prices. Any information about such purchases will be
disclosed as required in the UK, will be reported to a Regulatory
Information Service and will be available on the London Stock
Exchange website at www.londonstockexchange.com.
Forward-looking statements
This Announcement, oral statements made regarding the
Acquisition, and other information published by Bidco and/or AFH
contain statements which are, or may be deemed to be,
"forward-looking statements". Forward-looking statements are
prospective in nature and are not based on historical facts but
rather on current expectations and projections of the management of
Bidco and/or AFH about future events and are therefore subject to
risks and uncertainties which could cause actual results to differ
materially from the future results expressed or implied by the
forward-looking statements.
The forward-looking statements contained in this Announcement
include statements relating to the expected effects of the
Acquisition on Bidco and AFH, the expected timing and scope of the
Acquisition and other statements other than historical facts.
Often, but not always, forward-looking statements can be identified
by the use of forward-looking words, phrases and statements such as
"plans", "expects" or "does not expect", "is expected", "is subject
to", "budget", "scheduled", "estimates", "forecasts", "intends",
"anticipates" or "does not anticipate", or "believes", or
variations of such words, phrases or statements that certain
actions, events or results "may", "could", "should", "would",
"might" or "will" be taken, occur or be achieved. Although Bidco
and AFH believe that the expectations reflected in such
forward-looking statements are reasonable, Bidco and AFH can give
no assurance that such expectations will prove to be correct. By
their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on
circumstances that will occur in the future. There are a number of
factors that could cause actual results and developments to differ
materially from those expressed or implied by such forward-looking
statements.
These factors include, but are not limited to: the ability to
complete the Acquisition; the ability to obtain requisite
regulatory and shareholder approvals and the satisfaction of other
Conditions on the proposed terms and schedule; the behaviour of
other market participants; the anticipated benefits from the
proposed transaction not being realised as a result of changes in
general economic and market conditions in the countries in which
Bidco and AFH operate; weak, volatile or illiquid capital and/or
credit markets; changes in tax rates, interest rates and currency
value fluctuations; the degree of competition in the geographic and
business areas in which Bidco and AFH operate; and changes in laws
or in supervisory expectations or requirements. Other unknown or
unpredictable factors could cause actual results to differ
materially from those in the forward-looking statements. Such
forward-looking statements should therefore be construed in the
light of such factors. Neither Bidco nor AFH, nor any of their
respective associates or directors, officers or advisers, provides
any representation, assurance or guarantee that the occurrence of
the events expressed or implied in any forward-looking statements
in this Announcement will actually occur. You are cautioned not to
place any reliance on these forward-looking statements. Other than
in accordance with their legal or regulatory obligations, neither
Bidco nor AFH is under any obligation, and Bidco and AFH expressly
disclaim any intention or obligation, to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
No profit forecasts or profit estimates
No statement in this Announcement is intended as a profit
forecast or profit estimate for any period and no statement in this
Announcement should be interpreted to mean that earnings or
earnings per share for Bidco or AFH, as appropriate, for the
current or future financial years would necessarily match or exceed
the historical published earnings or earnings per share for Bidco
or AFH, as appropriate.
Dealing disclosure requirements
Under Rule 8.3(a) of the Code, any person who is interested in
one per cent. or more of any class of relevant securities of an
offeree company or of any securities exchange offeror (being any
offeror other than an offeror in respect of which it has been
announced that its offer is, or is likely to be, solely in cash)
must make an Opening Position Disclosure following the commencement
of the offer period and, if later, following the announcement in
which any securities exchange offeror is first identified.
An Opening Position Disclosure must contain details of the
person's interests and short positions in, and rights to subscribe
for, any relevant securities of each of (i) the offeree company and
(ii) any securities exchange offeror(s). An Opening Position
Disclosure by a person to whom Rule 8.3(a) applies must be made by
no later than 3.30 pm (London time) on the 10th business day
following the commencement of the offer period and, if appropriate,
by no later than 3.30 pm (London time) on the 10th business day
following the announcement in which any securities exchange offeror
is first identified. Relevant persons who deal in the relevant
securities of the offeree company or of a securities exchange
offeror prior to the deadline for making an Opening Position
Disclosure must instead make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes,
interested in one per cent. or more of any class of relevant
securities of the offeree company or of any securities exchange
offeror must make a Dealing Disclosure if the person deals in any
relevant securities of the offeree company or of any securities
exchange offeror. A Dealing Disclosure must contain details of the
dealing concerned and of the person's interests and short positions
in, and rights to subscribe for, any relevant securities of each of
(i) the offeree company and (ii) any securities exchange
offeror(s), save to the extent that these details have previously
been disclosed under Rule 8. A Dealing Disclosure by a person to
whom Rule 8.3(b) applies must be made by no later than 3.30 pm
(London time) on the business day following the date of the
relevant dealing.
If two or more persons act together pursuant to an agreement or
understanding, whether formal or informal, to acquire or control an
interest in relevant securities of an offeree company or a
securities exchange offeror, they will be deemed to be a single
person for the purpose of Rule 8.3. Opening Position Disclosures
must also be made by the offeree company and by any offeror and
Dealing Disclosures must also be made by the offeree company, by
any offeror and by any persons acting in concert with any of them
(see Rules 8.1, 8.2 and 8.4).
Details of the offeree and offeror companies in respect of whose
relevant securities Opening Position Disclosures and Dealing
Disclosures must be made can be found in the Disclosure Table on
the Panel's website at www.thetakeoverpanel.org.uk, including
details of the number of relevant securities in issue, when the
offer period commenced and when any offeror was first identified.
You should contact the Panel's Market Surveillance Unit on +44
(0)20 7638 0129 if you are in any doubt as to whether you are
required to make an Opening Position Disclosure or a Dealing
Disclosure.
In accordance with Rule 2.9 of the Code, AFH confirms that as at
the date of this Announcement, it has in issue and admitted to
trading on AIM 42,983,638 ordinary shares of GBP0.10 each (and
holds no shares in treasury). The International Securities
Identification Number (ISIN) of the ordinary shares is
GB00B4W5WQ08.
Publication on website
In accordance with Rule 26.1 of the Code, a copy of this
Announcement will be made available, subject to certain
restrictions relating to persons resident in Restricted
Jurisdictions, on AFH's website at
https://www.afhwm.co.uk/investor-relations by no later than 12 noon
(London time) on the business day following this Announcement. For
the avoidance of doubt, the contents of this website is not
incorporated by reference into, and does not form part of, this
Announcement.
Requesting hard copy documents
AFH Shareholders may request a hard copy of this Announcement by
contacting the Company Secretary of AFH during business hours on
+44 (0)152 757 7775 or by submitting a request in writing to the
Company Secretary of AFH at AFH House, Buntsford Drive, Stoke
Heath, Bromsgrove, Worcestershire, B60 4JE. For persons who receive
a copy of this Announcement in electronic form or via a website
notification, a hard copy of this Announcement will not be sent
unless so requested. You may also request that all future
documents, announcements and information to be sent to you in
relation to the Acquisition should be in hard copy form.
Electronic communications
Please be aware that addresses, electronic addresses and certain
other information provided by AFH Shareholders, persons with
information rights and other relevant persons for the receipt of
communications from AFH may be provided to Bidco during the offer
period as required under Section 4 of Appendix 4 of the Code to
comply with Rule 2.11(c).
Rounding
Certain figures included in this Announcement have been
subjected to rounding adjustments. Accordingly, figures shown for
the same category presented in different tables may vary slightly
and figures shown as totals in certain tables may not be an
arithmetic aggregation of figures that precede them.
Inside Information
This Announcement contains inside information. Upon the
publication of this Announcement via a Regulatory Information
Service, this inside information is now considered to be in the
public domain.
If you are in any doubt about the contents of this Announcement
or the action you should take, you are recommended to seek your own
independent financial advice immediately from your stockbroker,
bank manager, solicitor, accountant or independent financial
adviser duly authorised under the Financial Services and Markets
Act 2000 (as amended) if you are resident in the United Kingdom or,
if not, from another appropriately authorised independent financial
adviser.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, IN OR INTO ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
For immediate release.
RECOMMED CASH ACQUISITION
of
AFH FINANCIAL GROUP PLC
by
CORTINA BIDCO LIMITED
(a newly incorporated company indirectly controlled by funds
managed by Flexpoint Ford LLC)
intended to be effected by means of a Scheme of Arrangement
under Part 26 of the Companies Act 2006
1 Introduction
The board of Cortina Bidco Limited ("Bidco"), a newly
incorporated company indirectly controlled by funds managed by
Flexpoint Ford LLC ("Flexpoint"), and the Independent Directors of
AFH Financial Group Plc ("AFH") are pleased to announce that they
have reached agreement on the terms and conditions of a recommended
all cash acquisition of the entire issued, and to be issued,
ordinary share capital of AFH. It is intended that the Acquisition
will be implemented by means of a Court-sanctioned scheme of
arrangement under Part 26 of the Companies Act.
2 The Acquisition
Under the terms of the Acquisition, which will be subject to the
Conditions and further terms set out in Schedule 1 to this
Announcement and the full terms and conditions to be set out in the
Scheme Document, each Scheme Shareholder will be entitled to
receive:
for each Scheme Share: 463 pence in cash
In its preliminary results for the year ended 31 October 2020
announced on 18 January 2021, AFH announced that AFH Shareholders
on the register of members at the close of business on 29 January
2021 will receive a first interim dividend of 3 pence per AFH Share
on 16 February 2021 (the "Interim Dividend"). AFH Shareholders on
the register of members as at the close of business on 29 January
2021 will be entitled to receive and retain the Interim Dividend
without any reduction of the consideration payable under the
Acquisition.
The Acquisition Price of 463 pence per Scheme Share (excluding
the Interim Dividend) represents a premium of approximately:
-- 40.3 per cent. to the Closing Price of 330.0 pence per AFH
Share on 1 December 2020 being the date Flexpoint entered into a
confidentiality agreement with AFH;
-- 16.5 per cent. to the Closing Price of 397.5 pence per AFH
Share on the Latest Practicable Date;
-- 34.2 per cent. to the volume-weighted average price of 345.0
pence per AFH Share for the three-month period ended on the Latest
Practicable Date; and
-- 35.9 per cent. to the volume-weighted average price of 340.7
pence per AFH Share for the six-month period ended on the Latest
Practicable Date.
The Acquisition values AFH's entire issued ordinary, and to be
issued, ordinary share capital at approximately GBP224.5
million.
Bidco reserves the right to reduce the consideration payable in
respect of each AFH Share under the terms of the Acquisition to the
extent that the Interim Dividend exceeds 3 pence per AFH Share (as
set out in the AFH results announcement for the 12 months ended 31
October 2020 published on 18 January 2021). If, after the date of
this document, any dividend and/or other return of capital is
announced, declared, made or paid or becomes payable in respect of
the AFH Shares (other than the Interim Dividend), Bidco reserves
the right to reduce the Acquisition Price payable pursuant to the
Acquisition by the amount of such dividend and/or distribution
and/or return of capital so announced, declared, made, paid or
payable.
3 Background to and reasons for the Acquisition
Flexpoint has previously identified the UK wealth management
sector as a potentially attractive area for investment and believes
AFH to be one of the UK's leading wealth management platforms
having reviewed a number of investment opportunities.
Flexpoint believes that the management team of AFH has built an
attractive financial planning-led business with a strong, scaled
platform delivering attractive propositions for clients. Flexpoint
aims to support AFH's management in building on this solid
foundation to enhance the growth in the business both organically
and by acquisition, by providing capital backing, investment,
strategic support and its global expertise, as needed.
Flexpoint also believes that, in order to maximise its future
potential, AFH would be better suited to a private company
environment where initiatives to improve the performance of the
business can be implemented effectively with appropriate support,
capital and assistance from Flexpoint, free from the requirement to
meet the public equity market's shorter-term reporting requirements
and expectations and the costs, constraints and distractions
associated with being a publicly quoted company.
4 Recommendation
As the AFH Executive Directors will have a personal interest in
the Rollover Arrangements (and consequently the Acquisition more
generally), the board of AFH has constituted a committee composed
of the Independent Directors for the purposes of evaluating and
recommending the Acquisition to AFH Shareholders. None of the AFH
Executive Directors have participated in the appraisal of the
Acquisition by the Independent Directors or the decision of the
Independent Directors to recommend the Acquisition to AFH
Shareholders.
The Independent Directors, who have been so advised by KBW as to
the financial terms of the Acquisition, consider the terms of the
Acquisition to be fair and reasonable. In providing its advice, KBW
has taken into account the commercial assessments of the
Independent Directors. KBW is providing independent financial
advice to the Independent Directors of AFH for the purposes of Rule
3 of the Code.
Accordingly, the Independent Directors confirm that they intend
unanimously to recommend that AFH Shareholders vote, or procure the
vote, in favour of the Scheme at the Court Meeting and the
Resolutions at the General Meeting, as the Independent Directors
who are interested in AFH Shares have irrevocably undertaken to do,
or procure to be done, in respect of their own beneficial holdings
of AFH Shares which are under their control, amounting, in
aggregate, to 311,254 AFH Shares representing approximately 0.7 per
cent. of the issued ordinary share capital of AFH and approximately
0.8 per cent. of the AFH Shares eligible to vote at the Court
Meeting, in each case, on the Latest Practicable Date. Further
details of these undertakings, including the circumstances in which
they cease to be binding, are set out in Schedule 3.
In view of their personal interest in the Rollover Arrangements
(as described at paragraph 9 below), the AFH Executive Directors
will not be permitted to vote, or procure the vote, on the Scheme
at the Court Meeting or the Rollover Resolution at the General
Meeting in respect of their beneficial holdings of 6,005,700 AFH
Shares, in aggregate, representing approximately 14.0 per cent. of
the issued ordinary share capital of AFH on the Latest Practicable
Date. However, they are entitled to vote their AFH Shares, or
procure that their AFH Shares are voted, on the special resolution
to amend the Articles (and any further Resolutions on which they
are not conflicted) to be proposed at the General Meeting.
5 Background to and reasons for the recommendation
The AFH Group's strategy
The AFH Group is a leading UK financial planning-led wealth
management firm based in the Midlands. Founded in 1990 by Alan
Hudson (Chief Executive Officer). The AFH Group provides wealth
management and financial advisory services to over 20,000 clients
in the UK. These services are delivered by over 450 professional
advisers and 400 support staff.
Since its IPO in 2014, the AFH Group's strategy has focused on
increasing shareholder value through a combination of organic
growth through greater productivity of advisers and by value
accretive acquisitions financed on an earn-out model (having made
over 50 acquisitions since IPO). In September 2019, following
feedback from shareholders, the AFH Group announced a focus on
organic growth. This reflected the fact that access to funding on a
regular basis to support M&A-led growth can be challenging for
publicly quoted companies.
Accordingly, the AFH Group's revised strategy set out a focus on
completing the integration of previous acquisitions, driving
adviser productivity and generating cash to pay down deferred
earn-outs and finance additional acquisitions without recourse to
the equity market. The AFH Group's strategy would also be
complemented by digital marketing to support the generation of new
clients, technology to improve operational efficiencies, digital
interaction with existing clients to enhance user experience and
selective value-enhancing acquisitions.
The Independent Directors remain confident that the ongoing,
successful execution of the AFH Group's strategy would provide
long-term growth and create significant value for AFH
Shareholders.
Market environment
The Independent Directors expect the requirement for
professional financial planning to accelerate in the future and for
the consolidation within the sector to continue, driven by
commercial factors and regulatory requirements.
Nonetheless, the Independent Directors note that the recent
market backdrop has resulted in a challenging trading environment,
with macro-economic uncertainties due to a combination of COVID-19
and the UK's exit from the European Union, which came into effect
on 31 December 2020. Despite this market backdrop, the AFH Group
has continued to trade profitably whilst focusing on cash
management and the strengthening of the balance sheet by paying
down both deferred earn-outs and loan notes as they matured.
Future funding
It is the view of the Independent Directors that the public
markets no longer afford AFH the financial flexibility to enable it
to pursue its strategy and unlock the full potential of the AFH
Group. As a public company AFH has, at times, struggled to raise
equity capital for growth in a timely manner and on reasonable
terms, and has also been hampered from accessing cost-effective
funding from debt capital markets, which many of its
privately-backed competitors have enjoyed.
The Independent Directors believe that the UK's IFA market
remains attractive, providing opportunities for both organic growth
and opportunities for value enhancing consolidation, however, AFH
lacks the financial resources to pursue these opportunities in a
meaningful way today. The Independent Directors believe that the
delivery of the AFH Group's growth strategy would be both slower
and more uncertain without considerable further capital funding,
which is not currently available without material changes to the
capital structure and dividend policy of the group. Potential
organic growth initiatives, which require capital funding, could
include accelerating the recruitment of advisers, investing in
additional sales and marketing resource, increasing investment in
technology and continuing to develop the AFH Group's investment
proposition.
The Independent Directors recognise that, in order for the AFH
Group to continue making acquisitions, it will require additional
funding on a regular basis. The availability of further funding on
a timely basis, on reasonable financial terms, to support
M&A-led growth can be challenging in the public market given
the current market environment; however, as a private company and
with the support of Bidco it is expected that AFH will have better
and more flexible access to debt and equity capital to accelerate
its strategy.
Bidco offer
The Independent Directors remain confident that the ongoing,
successful execution of the AFH Group's strategy would provide
long-term growth and create significant value for AFH Shareholders.
However, the Independent Directors believe the Acquisition reflects
an attractive valuation for AFH. An Acquisition Price per Scheme
Share of 463 pence represents a premium of 34.2 per cent. to the
volume-weighted average price of 345.0 pence per AFH Share for the
three-month period ended on the Latest Practicable Date. It also
represents a total return to investors since its IPO of 239.5 per
cent. (as at the Latest Practicable Date) including dividend
reinvestment. At this level, the Independent Directors believe that
the Acquisition will provide the AFH Shareholders with the
opportunity to obtain liquidity for their investment and to
crystallise the value of their holdings now against an uncertain
market backdrop.
Bidco has received support from major AFH Shareholders, together
with the support of all Independent Directors, who hold, or are
interested in, AFH Shares, with aggregate irrevocable undertakings
with respect to 8,176,977 AFH Shares representing approximately
19.0 per cent. of the issued share capital (as at the Latest
Practicable Date) of AFH and approximately 22.1 per cent. of the
AFH Shares eligible to vote at the Court Meeting, in each case on
the Latest Practicable Date.
In addition, the Independent Directors are pleased with Bidco's
stated intentions concerning AFH's management and employees,
locations of business and strategic plans (further details of which
are set out in paragraph 12 below). In particular, the Independent
Directors are pleased that Bidco (i) does not intend to initiate
any material headcount reductions; (ii) does not intend to initiate
any material restructurings; and (iii) does not have any current
plans to change the locations where people presently work for AFH
and intends to maintain AFH's existing corporate headquarters in
Bromsgrove. In addition, the Independent Directors are pleased that
Bidco intends to develop the business through organic initiatives
and by acquisitions. The Independent Directors also welcome Bidco's
confirmation that, following completion of the Acquisition, the
existing contractual and statutory employment rights of all AFH's
management and employees will be fully safeguarded in accordance
with applicable law.
Having taken into account all relevant factors, the Independent
Directors believe that the terms of the Acquisition are compelling,
acknowledge the quality and strong prospects of AFH's business and
deliver attractive value to AFH Shareholders in cash allowing them
to crystallise the value of their holdings. As such, the
Independent Directors unanimously intend to recommend the
Acquisition to AFH Shareholders.
None of the AFH Executive Directors have participated in the
appraisal of the Acquisition by the Independent Directors or the
decision of the Independent Directors to recommend the Acquisition
to AFH Shareholders as a result of the conflicts of interest
arising from their participation in the Rollover Arrangements,
which are described more fully in paragraph 9 below.
The same conflicts of interest preclude the AFH Executive
Directors from voting on the resolution to approve the Scheme at
the Court Meeting and the resolution to approve their Rollover
Arrangements at the General Meeting, although they will be entitled
to vote on the special resolution to approve the adoption of the
Amended AFH Articles (and any further resolutions on which they are
not conflicted) to be proposed at the General Meeting.
6 Irrevocable Undertakings
Bidco has, in total, received irrevocable undertakings from AFH
Shareholders in respect of a total of 14,182,677 AFH Shares
representing, in aggregate, approximately 33.0 per cent. of the
issued ordinary share capital of AFH (representing approximately
22.1 per cent. of the AFH Shares eligible to vote at the Court
Meeting) on the Latest Practicable Date. These irrevocable
undertakings are described in further detail below.
Bidco has received irrevocable undertakings from the Independent
Directors who hold AFH Shares to vote, or procure the vote, in
favour of the Scheme at the Court Meeting and the Resolutions (or,
if the Acquisition is to be implemented by way of an Offer, to
accept, or procure the acceptance of, the Offer) in respect of a
total of 311,254 AFH Shares, representing approximately 0.7 per
cent. of the issued ordinary share capital of AFH and approximately
0.8 per cent. of the AFH Shares eligible to vote at the Court
Meeting, in each case, on the Latest Practicable Date. These
irrevocable undertakings remain binding in the event of a competing
offer.
Alan Hudson, AFH's largest shareholder, has irrevocably
undertaken in favour of Bidco to be bound by the terms of the
Scheme (or, if the Acquisition is to be implemented by way of an
Offer, to accept, or procure the acceptance of, the Offer) in
respect of 6,105,700 AFH Shares beneficially owned by him (or in
respect of which he is interested pursuant to options held over AFH
Shares) (being all of the AFH Shares (on a fully diluted basis)
beneficially owned by him or in respect of which he is interested),
representing approximately 12.6 per cent. of AFH's issued, and to
be issued, ordinary share capital as at the Latest Practicable
Date. Alan Hudson has also irrevocably undertaken in respect of
5,955,700 AFH Shares (being his entire beneficial holding of AFH
Shares and representing approximately 13.9 per cent. of AFH's
issued ordinary share capital as at the Latest Practicable Date) to
vote, or procure the vote, in favour of the special resolution
proposed at the General Meeting to approve the adoption of the
Amended AFH Articles. Alan Hudson is not entitled to vote in
respect of the Scheme at the Court meeting or at the General
Meeting in respect of the Rollover Resolution. This irrevocable
undertaking remains binding in the event of a competing offer.
Paul Wright, Austin Broad and Alex Larvin have irrevocably
undertaken in favour of Bidco to be bound by the terms of the
Scheme (or, if the Acquisition is to be implemented by way of an
Offer, to accept, or procure the acceptance of, the Offer) in
respect of 487,840 AFH Shares owned by them (or in respect of which
they are interested pursuant to options held over AFH Shares)
(being all of the AFH Shares (on a fully diluted basis) owned by
them or in respect of which they are interested ), representing, in
aggregate, approximately 1.0 per cent. of AFH's issued, and to be
issued, ordinary share capital as at the Latest Practicable Date.
Paul Wright and Austin Broad have also irrevocably undertaken in
respect of an aggregate of 50,000 AFH Shares (being their entire
beneficial holdings of AFH Shares and representing approximately
0.1 per cent. of AFH's issued ordinary share capital as at the
Latest Practicable Date) to vote, or procure the vote, in favour of
the special resolution proposed at the General Meeting to amend the
Articles. Paul Wright and Austin Broad are not entitled to vote in
respect of the Scheme at the Court Meeting or at the General
Meeting in respect of the Rollover Resolution. Alex Larvin's
interests are currently held by way of options over AFH Shares
only, which will not have been exercised at the date of the General
Meeting. These irrevocable undertakings remain binding in the event
of a competing offer.
Bidco has also received irrevocable undertakings to vote, or
procure the vote, in favour of the Scheme at the Court Meeting and
the Resolutions (or, if the Acquisition is to be implemented by way
of an Offer, to accept, or procure the acceptance of, the Offer)
from each of BMO Asset Management Limited, Paul Connor and Philip
Mobberley in respect of a total of 7,865,723 AFH Shares
representing, in aggregate, approximately 18.3 per cent. of the
issued ordinary share capital of AFH and approximately 21.3 per
cent. of the AFH Shares eligible to vote at the Court Meeting, in
each case, on the Latest Practicable Date.
Further details of the irrevocable undertakings described above,
including the circumstances in which they may lapse, are set out in
Schedule 3 to this Announcement.
7 Information relating to Flexpoint and Bidco
Flexpoint is a US-based investment firm which has raised over
$4.3 billion in capital and made over 30 investments since 2005.
Flexpoint specialises in investments in the financial services and
healthcare sectors and has expertise in both minority and control
structures across private and public companies. Flexpoint employs
over 50 people across two offices in Chicago and New York in the
United States.
Bidco is a newly incorporated company registered in the Cayman
Islands, which was formed for the purposes of the Acquisition.
Bidco is indirectly controlled by Flexpoint Fund IV-A, L.P. and
will, prior to the Effective Date be indirectly controlled jointly
by Flexpoint Fund IV-A, L.P., Flexpoint Fund IV-B, L.P., Flexpoint
Overage Fund IV-A, L.P. and Flexpoint Overage Fund IV-B, L.P. (the
"Flexpoint Funds"), each of which is managed by Flexpoint Ultimate
Management IV, LLC. These funds, together with their affiliates, do
business as Flexpoint.
8 Information relating to AFH AND CURRENT TRADING
AFH ( AIM: AFHP) is a leading UK financial planning-led wealth
management firm based in the Midlands with offices across the UK.
Founded in 1990 by Alan Hudson (Chief Executive Officer), the AFH
Group provides wealth management and financial advisory services to
over 20,000 clients in the UK. These services are delivered by over
450 professional advisers and 400 support staff.
Since its IPO in 2014, the AFH Group's strategy has focused on
increasing shareholder value through a combination of organic
growth through greater productivity of advisers and by value
accretive acquisitions financed on an earn-out model (having made
over 50 acquisitions since IPO). In September 2019, following
feedback from shareholders, the AFH Group announced a focus on
organic growth.
On 18 January 2021, AFH announced its results for the twelve
months ended 31 October 2020, a copy of which can be found at
www.afhwm.co.uk/investor-relations/announcements/.
9 MANAGEMENT Arrangements
The following summarises the proposed Management Arrangements in
relation to the AFH Executive Directors:
Cash Sale SPA
Bidco and Alan Hudson have entered into an agreement, dated the
same date as this Announcement, to sell for cash at a price equal
to the Acquisition Price 4,294,065 AFH Shares beneficially owned by
him (representing approximately 9.99 per cent. of AFH's issued
ordinary share capital as at the Latest Practicable Date) to Bidco.
Completion of the acquisition is not subject to any conditions but
will occur: (i) immediately following the issue of the Scheme Court
Order; or (ii) the Long Stop Date, whichever is the earlier. If the
Scheme Court Order has not been issued on or before the Long Stop
Date, Bidco will have the right, but is not obliged, to rescind the
agreement.
Share Exchange Agreement
A Share Exchange Agreement provides for the exchange by the AFH
Executive Directors of 1,680,931 AFH Shares beneficially owned by
them (or in respect of which they are interested pursuant to
options held over AFH Shares) (on a fully diluted basis) and 984
Growth Shares, which have an aggregate value of GBP9,651,462 at the
Acquisition Price, for loan notes to be issued by Bidco (the "Bidco
Rollover Notes"). The Share Exchange Agreement also provides for
the rollover of certain Growth Shares held by the AFH Executive
Directors, whereby such Growth Shares will first be exchanged,
following the Scheme becoming Effective, for loan notes to be
issued by AFH, and then such AFH loan notes will be exchanged by
the AFH Executive Directors for Bidco Rollover Notes.
Put and Call Option Deed
A Put and Call Option Deed provides for the transfer by the AFH
Executive Directors, by means of a series of put and call options,
of the Bidco Rollover Notes issued to them pursuant to the Share
Exchange Agreement in consideration for loan notes issued by Midco
and, subsequently, shares issued by Topco.
Investment Agreement
An Investment Agreement sets out the terms on which the AFH
Executive Directors will hold their investment in shares in Topco,
an indirect parent of Bidco.
The Independent Shareholders will be asked at the General
Meeting to approve the Rollover Arrangements described in this
paragraph 9 by voting on the Rollover Resolution. Voting on the
Rollover Resolution will be by way of a poll.
The Independent Directors intend unanimously to recommend that
the Independent Shareholders vote, or procure the vote, in favour
of the Rollover Resolution to approve the Rollover Arrangements
described in this paragraph 9.
As a result of their respective interests in the Rollover
Arrangements, the AFH Executive Directors are not considered to be
independent for the purposes of the Code. Neither they, nor any of
their respective connected persons nor any person holding AFH
Shares on behalf of any AFH Executive Directors and/or any of their
respective connected persons, will be entitled to vote on the
resolution to approve the Scheme at the Court Meeting or the
Rollover Resolution at the General Meeting. Each of the AFH
Executive Directors has irrevocably undertaken to vote, or procure
the vote, in favour of the other Resolution(s) in respect of their
entire holding of AFH Shares.
For the purposes of Rule 16 of the Code, KBW has confirmed that,
in its opinion, the terms of the Rollover Arrangements are fair and
reasonable so far as the Independent Shareholders are concerned. In
providing its opinion, KBW has taken into account the commercial
assessments of the Independent Directors. The Acquisition is
conditional, amongst other things, upon the passing of the Rollover
Resolution by the requisite majority of the Independent
Shareholders.
Other than the Management Arrangements, currently there are no
arrangements or understandings between Flexpoint or Bidco and/or
any person acting in concert with Flexpoint and/or Bidco and the
management or directors of AFH having any connection with or
dependence upon the Acquisition.
Further details of the terms of the Management Arrangements will
be set out in the Scheme Document.
10 Financing
The cash consideration payable by Bidco in respect of the
Acquisition will be funded by a combination of equity financing
drawn down from the Flexpoint Funds pursuant to an Equity
Commitment Letter entered into by the Flexpoint Funds and debt
financing drawn down under an interim facilities agreement arranged
by Ares Management Limited.
Raymond James is satisfied that sufficient resources are
available to Bidco to satisfy in full the cash consideration
payable to the Scheme Shareholders under the terms of the
Scheme.
11 Further terms
Bidco reserves the right to reduce the consideration payable in
respect of each AFH Share under the terms of the Acquisition to the
extent that the Interim Dividend exceeds 3 pence per AFH Share. If,
after the date of this document, any dividend and/or other
distribution and/or other return of capital is announced, declared,
made or paid or becomes payable in respect of the AFH Shares (other
than the Interim Dividend), Bidco reserves the right to reduce the
Acquisition Price payable pursuant to the Acquisition by an amount
up to the amount of such dividend and/or distribution and/or return
of capital so announced, declared, made, paid or payable.
12 DIRECTORS, Management, employees, research and development and locations
Prior to the date of this Announcement, consistent with market
practice, Bidco was granted access to AFH's senior management team
for the purpose of undertaking confirmatory due diligence, which
has allowed Bidco to evaluate the strategic and operational plans
of the AFH Group. From the diligence undertaken, Bidco is
supportive of the organic and M&A-led growth strategy of the
AFH Group and believes it can support the management team and AFH
Group in accelerating the delivery of its stated strategy.
It is anticipated that more detailed long-term strategic and
operational planning will take place in the six months following
the Effective Date (the "post-Effective Date review") and that this
will include plans to support the management team and the AFH Group
in accelerating the delivery of its stated strategy including
through further investment in AFH's underlying technology and
systems, and the re-engagement with potential target firms
previously in the Company's M&A pipeline.
Post-completion, Alan Hudson and Paul Wright will join the board
of directors of Bidco and remain in their roles as Chief Executive
Officer and Chief Financial Officer of AFH, respectively.
Bidco's strategic plans for AFH
The Bidco Directors believe that the UK wealth management market
is currently undergoing an important transition, as regulatory and
demographic trends are driving increasing demand for high quality
financial advice that can be met by financial planning-led firms
with a long-term view and the ability to invest in critical
infrastructure and technology. In addition, the market is highly
fragmented, which provides an opportunity to service customers
better and to create value through consolidation.
Based on its due diligence, the Bidco Directors believe AFH's
management, competitive position and track record make AFH
well-positioned to capitalise on the market opportunity. Bidco
looks forward to working with AFH's management team to continue
building a leading financial planning-led wealth management firm of
scale, with the ability to offer its clients access to the highest
quality investment solutions at an attractive cost.
In addition to AFH's overall performance, Bidco has been
particularly impressed by the AFH management team's ability to
create value, both organically and inorganically, across both its
two divisions, wealth management and protection broking. Bidco
intends to support the existing management team of AFH to maximise
the value of each division. Bidco intends to undertake a further
detailed review and this next stage of planning may result in the
development of separate, focused strategies for each division. This
will be further explored as part of the post-Effective Date review,
which will include for each division an in-depth review of
competitive market standing, and the identification of
opportunities for additional investment with the objective of
driving growth and reviewing broader strategic options.
The current Bidco Directors believe that there is the potential
to accelerate some areas of the AFH management team's current
organic growth strategy, which can be more easily achieved when
operating with a focus on the longer-term, with a unified and
aligned investor base. Potential initiatives could include
accelerating the recruitment of advisers, investing in additional
sales and marketing resource, increasing investment in technology
and continuing to develop the firm's investment proposition.
AFH has a long track record of acquiring and integrating
advisory businesses, although the cadence of its acquisitions
slowed during 2019 and 2020 due to the complexity of continuously
raising capital in a public setting. Bidco intends to work with
AFH's management team to restart, and potentially accelerate, its
prior acquisition activity by deploying its resources (both capital
and expertise) to support AFH.
Employees and management
Bidco attaches great importance to the skills, experience and
continued commitment of AFH's management and employees and believes
that they will benefit from greater opportunities as a result of
the Acquisition. The Bidco Directors intend to support the
development of the business through organic initiatives and by
acquisitions and, as such, does not expect any material change to
the operations of the business as a result of the Acquisition.
Bidco will continue to support AFH's management in the continuous
review of the AFH Group's operations to ensure efficiency in the
ordinary course of business, including any operational adjustments
necessary as it transitions from being a public company to a
private company.
Bidco has not entered into, and has not had any discussions with
respect to proposals to enter into, any form of incentivisation or
any other arrangements with members of AFH's management (other than
in respect of the Rollover Arrangements, which are described at
paragraph 9 above and will be described further in the Scheme
Document). It is the intention to put in place appropriate
arrangements for management and staff of AFH following completion
of the Acquisition.
Each of John Wheatley (Non-Executive Chairman), Sue Lewis
(Non-Executive Director) and Mark Chambers (Non-Executive Director)
has confirmed that they intend to resign, following a contractual
notice period, from the board of AFH conditional upon, and with
effect from, the Scheme becoming Effective.
Save as described above, Bidco does not intend to make any
material reduction to the headcount, or any material change to the
conditions of employment or to the balance of skills and functions,
of the AFH Group's employees or management.
Existing rights and pension schemes
AFH and certain of its subsidiaries make contributions to
various defined contribution pension schemes on behalf of a number
of qualifying employees and Bidco intends that these arrangements
would remain in place.
No member of the AFH Group participates in a defined benefit
pension scheme.
Following completion of the Acquisition, the existing employment
rights, including pension rights, of the management and employees
of the AFH Group will be fully safeguarded.
Locations and headquarters
Bidco has no current plans to change the locations where people
presently work for AFH. Bidco also intends to maintain AFH's
existing corporate headquarters in Bromsgrove and will follow
current strategy with respect to the AFH Group's other locations
and regional offices.
There are no plans to redeploy the fixed assets of AFH. AFH does
not currently have a research and development function and Bidco
has no plans in this regard.
Trading Facilities
AFH is currently admitted to trading on AIM and, as set out in
paragraph 16 below, prior to the Scheme becoming Effective, a
request will be made to the London Stock Exchange to cancel trading
in AFH Shares on AIM, following which it is intended that AFH would
be re-registered as a private limited company.
No statements in this paragraph 12 are "post-offer undertakings"
for the purposes of Rule 19.5 of the Takeover Code.
13 AFH SHARE PLANS AND AFH CULS
AFH Share Plan Participants will be contacted regarding the
effect of the Acquisition on their rights under the AFH Share Plans
and appropriate proposals will be made to such AFH Share Plan
Participants in due course. Details of these proposals will be set
out in separate letters to be sent to the AFH Share Plan
Participants.
All outstanding "in the money" options and/or awards under the
AFH Share Plans will be treated in accordance with the rules of the
applicable AFH Share Plans.
The holders of the Growth Shares will be contacted regarding the
effect of the Acquisition on their Growth Shares and an appropriate
proposal will be made to such holders in due course.
In addition, the holders of the AFH CULS will be contacted
regarding the effect of the Acquisition on their loan notes under
the AFH CULS and an appropriate proposal will be made to such
holders in due course.
Further details on the terms of such proposals will be contained
in the Scheme Document.
14 Offer-related Arrangements
Confidentiality Agreement
On 1 December 2020, Flexpoint and AFH entered into the
Confidentiality Agreement in relation to the Acquisition, pursuant
to which, amongst other things, Flexpoint has undertaken to: (i)
subject to certain exceptions, keep information relating to AFH and
the Acquisition confidential and not to disclose it to third
parties; and (ii) use such confidential information only in
connection with the Acquisition. These confidentiality obligations
will remain in force until 1 December 2022, provided that if the
Acquisition becomes Effective then the obligations contained in the
Confidentiality Agreement will lapse to the extent the Confidential
Information relates solely to AFH or a member of the AFH Group.
Co-operation Agreement
On 25 January 2021, Bidco and AFH entered into a Co-operation
Agreement, pursuant to which the parties have, amongst other
things, each agreed to: (i) co-operate in relation to obtaining any
consents, clearances, permissions, waivers and/or approvals as may
be necessary, and the making of all filings as may be necessary, in
order to satisfy the Condition set out in paragraph 2 of Part A of
Schedule 1 in connection with the Acquisition; and (ii) cooperate
in preparing and implementing appropriate proposals in relation to
the AFH Share Plans. In addition, Bidco has given certain
undertakings in the event that the Scheme should switch to an
Offer. The Co-operation Agreement will terminate in certain
circumstances, including if the Acquisition is withdrawn or lapses,
if prior to the Long Stop Date any Condition becomes incapable of
satisfaction, if the Independent Directors withdraw their
recommendation of the Acquisition or if the Scheme does not become
Effective in accordance with its terms by the Long Stop Date or
otherwise as agreed between Bidco and AFH.
Cash Sale SPA
On 25 January 2021, Bidco and Alan Hudson entered into an
agreement to sell for cash at a price equal to the Acquisition
Price 4,294,065 AFH Shares beneficially owned by him (representing
approximately 9.99 per cent. of AFH's issued ordinary share capital
as at the Latest Practicable Date) to Bidco. Completion of the
acquisition is not subject to any conditions but will occur: (i)
immediately following the issue of the Scheme Court Order; or (ii)
the Long Stop Date, whichever is the earlier. If the Scheme Court
Order has not been issued on or before the Long Stop Date, Bidco
will have the right, but is not obliged, to rescind the
agreement.
Investment Agreement
An Investment Agreement sets out the terms on which the AFH
Executive Directors will hold their investment in shares in Topco,
an indirect parent of Bidco.
15 Structure of the Acquisition
It is intended that the Acquisition will be implemented by way
of a Court-sanctioned scheme of arrangement between AFH and the
Scheme Shareholders under Part 26 of the Companies Act. The purpose
of the Scheme is to provide for Bidco to become the owner of the
entire issued, and to be issued, share capital of AFH. Under the
Scheme, the Acquisition will be achieved by the transfer of the
Scheme Shares by the Scheme Shareholders to Bidco in consideration
for which the Scheme Shareholders will receive cash on the basis
described in paragraph 2 above. The procedure involves, among other
things, an application by AFH to the Court to sanction the
Scheme.
The Acquisition is subject to the Conditions and certain further
terms referred to in Schedule 1 to this Announcement and to the
full terms and conditions to be set out in the Scheme Document and
will only become Effective if, among other things, the following
events occur on or before the Long Stop Date:
-- the FCA having notified Bidco and/or AFH of its approval of
the change of control of any UK authorised persons within the AFH
Group as a result of the Acquisition (or the requisite assessment
period for such approval to be provided having elapsed without the
FCA having objected to the Acquisition);
-- a resolution to approve the Scheme is passed by a majority in
number of the Voting Scheme Shareholders present and voting (and
entitled to vote), either in person or by proxy, representing 75
per cent. or more in value of each class of the Scheme Shares held
by those Voting Scheme Shareholders at the Court Meeting (or at any
adjournment thereof) on or before the 22(nd) day after the expected
date of the Court Meeting to be set out in the Scheme Document in
due course (or such later date as may be agreed between AFH and
Bidco and the Court may allow);
-- the resolution(s) necessary to implement the Scheme is/are
passed at the General Meeting to be held on or before the 22(nd)
day after the expected date of the General Meeting to be set out in
the Scheme Document in due course, expected to be immediately after
the Court Meeting (or such later date as may be agreed between AFH
and Bidco and the Court may allow), which will require the approval
of AFH Shareholders representing at least 75 per cent. of the votes
cast at the General Meeting, either in person or by proxy;
-- the Rollover Resolution is passed on a poll at the General
Meeting to be held on or before the 22(nd) day after the expected
date of the General Meeting to be set out in the Scheme Document in
due course (or such later date as may be agreed between Bidco and
AFH and the Court may allow), which will require the approval of
Independent Shareholders representing more than 50 per cent. of the
votes cast by Independent Shareholders on the Rollover Resolution.
The requirement for the Rollover Resolution to be passed is not
capable of being waived by Bidco;
-- following the Meetings, the Scheme is sanctioned by the Court
(without modification, or with modification on terms agreed by
Bidco and AFH) on or before the 22(nd) day after the expected date
of the Scheme Court Hearing to be set out in the Scheme Document in
due course (or such later date as may be agreed between Bidco and
AFH and the Court may allow); and
-- following such sanction, a copy of the Scheme Court Order is
delivered to the Registrar of Companies, whereupon the Scheme will
become Effective.
Upon the Scheme becoming Effective: (i) it will be binding on
all Scheme Shareholders, irrespective of whether or not they
attended or voted at the Court Meeting or the General Meeting (and
if they attended and voted, whether or not they voted in favour);
and (ii) share certificates in respect of AFH Shares will cease to
be valid and entitlements to AFH Shares held within the CREST
system will be cancelled.
Any AFH Shares issued before the Scheme Record Time will be
subject to the terms of the Scheme. The special resolution to be
proposed at the General Meeting will, amongst other matters,
provide that the Articles be amended to incorporate provisions
requiring any AFH Shares issued after the Scheme Record Time (other
than to Bidco and/or its nominees) to be automatically transferred
to Bidco on the same terms as the Acquisition (other than terms as
to timings and formalities). The provisions of the Articles (as
amended) will avoid any person (other than Bidco and/or its
nominees) holding shares in the capital of AFH after the Effective
Date. If the Scheme does not become Effective on or before the Long
Stop Date, it will lapse and the Acquisition will not proceed
(unless the Panel otherwise consents).
The Scheme Document will include full details of the Scheme,
together with notices of the Meetings. The Scheme Document will
also contain the expected timetable for the Acquisition and will
specify the necessary actions to be taken by AFH Shareholders. It
is expected that the Scheme Document, together with the Forms of
Proxy, will be published as soon as practicable and in any event,
within 28 days of this Announcement (unless the Panel agrees
otherwise).
16 CANCELLATION OF admission to trading on AIm
At least 20 business days prior to the Scheme becoming
Effective, AFH intends to make an application to the London Stock
Exchange for the cancellation of the admission to trading of the
AFH Shares on AIM, requesting that such cancellation takes effect
on, or shortly after, the Effective Date. The Scheme Document will
set out details of the expected last day of dealings in AFH Shares
on AIM and the latest time for registration of transfers prior to
the Effective Date.
On the Effective Date, AFH will become a wholly-owned subsidiary
of Bidco. As soon as possible after the Effective Date, it is
intended that AFH will be re-registered as a private limited
company under the relevant provisions of the Companies Act.
17 Disclosure of interests in AFH relevant securities
Except for the irrevocable undertakings referred to at paragraph
6 above, as at the close of business on the Latest Practicable
Date, neither Bidco, nor any Bidco Directors or any member of the
Bidco Group, nor, as far as Bidco is aware, any person acting in
concert (within the meaning of the Code) with Bidco:
-- had any interest in, or right to subscribe for, any relevant securities of AFH; nor
-- had any short position in relevant securities of AFH,
including any short position under a derivative, any agreement to
sell, any delivery obligation or right to require another person to
purchase or take delivery of relevant securities of AFH; nor
-- had borrowed or lent any relevant securities of AFH or
entered into any financial collateral arrangements relating to
relevant securities of AFH; nor
-- was party to any dealing arrangement of the kind referred to
in Note 11 on the definition of acting in concert in the Code in
relation to relevant securities of AFH.
In the interests of secrecy prior to this Announcement, Bidco
has not made any enquiries in respect of the matters referred to in
this paragraph of certain parties who may be deemed by the Panel to
be acting in concert with Bidco for the purposes of the Scheme.
Enquiries of such parties will be made as soon as practicable
following the date of this Announcement and any disclosure in
respect of such parties will be included in the Scheme
Document.
'Interests in securities' for these purposes arise, in summary,
when a person has long economic exposure, whether absolute or
conditional, to changes in the price of securities (and a person
who only has a short position in securities is not treated as
interested in those securities). In particular, a person will be
treated as having an 'interest' by virtue of the ownership, voting
rights or control of securities, or by virtue of any agreement to
purchase, option in respect of, or derivative referenced to,
securities.
18 Dividends
Bidco reserves the right to reduce the consideration payable in
respect of each AFH Share under the terms of the Acquisition to the
extent that the Interim Dividend exceeds 3 pence per AFH Share. If,
after the date of this document, any dividend and/or other
distribution and/or other return of capital is announced, declared,
made or paid or becomes payable in respect of the AFH Shares (other
than the Interim Dividend), Bidco reserves the right to reduce the
Acquisition Price payable pursuant to the Acquisition by an amount
up to the amount of such dividend and/or distribution and/or return
of capital so announced, declared, made, paid or payable.
19 Overseas shareholders
The availability of the Acquisition or the distribution of this
Announcement to AFH Shareholders who are not resident in the United
Kingdom may be affected by the laws of their relevant jurisdiction.
Such persons should inform themselves of, and observe, any
applicable legal or regulatory requirements of their jurisdiction.
AFH Shareholders who are in any doubt regarding such matters should
consult an appropriate independent professional adviser in the
relevant jurisdiction without delay.
This Announcement does not constitute an offer for sale of any
securities or an offer or an invitation to purchase any securities.
AFH Shareholders are advised to read carefully the Scheme Document
and related Forms of Proxy once these have been published.
20 Documents published on a website
Copies of the following documents will, by no later than 12 noon
(London time) on the business day following this Announcement, be
published on AFH's website at www.afhwm.co.uk/investor-relations
until the Effective Date:
-- this Announcement;
-- the irrevocable undertakings referred to in paragraph 6;
-- the Confidentiality Agreement referred to in paragraph 14;
-- the Cooperation Agreement referred to in paragraph 14;
-- the Cash Sale SPA referred to in paragraph 14;
-- the Investment Agreement referred to in paragraph 14; and
-- documents relating to the financing of the Scheme referred to in paragraph 10 above.
The contents of AFH's website are not incorporated into and do
not form part of this Announcement.
21 General
Bidco reserves the right to elect (with the consent of the
Panel) to implement the acquisition of the AFH Shares by way of a
Takeover Offer as an alternative to the Scheme. In such event, the
Offer will be implemented on substantially the same terms, so far
as applicable, as those which would apply to the Scheme and, among
other things, the change in structure by which the Acquisition is
to be implemented and compliance with all applicable laws,
including US securities laws.
The Acquisition will be made on the terms and subject to the
Conditions and further terms set out in Schedule 1 to this
Announcement and to the full terms and conditions to be set out in
the Scheme Document. The sources of information and bases of
calculations contained in this Announcement are set out in Schedule
2 to this Announcement. A summary of the irrevocable undertakings
is contained in Schedule 3 to this Announcement. Certain terms used
in this Announcement are defined in Schedule 4 to this
Announcement.
Raymond James (as financial adviser to Bidco) and KBW (as
financial adviser to AFH) have each given and not withdrawn their
consent to the publication of this Announcement with the inclusion
herein of the references to their names in the form and context in
which they appear.
Enquiries
Cortina Bidco Limited via Raymond James
Steven Begleiter
Daniel Edelman
Stephane Essama
Raymond James Financial International
Limited (Sole Financial Adviser
to Bidco) +44 (0) 203 798 5700
Dominic Emery
Edward Griffin
Junya Iwamoto
AFH Financial Group Plc +44 (0) 152 757 7775
John Wheatley (Chairman)
Alan Hudson (Chief Executive Officer)
Keefe, Bruyette & Woods (acting
through Stifel Nicolaus Europe Limited)
(Sole Financial Adviser to AFH) +44 (0) 207 710 7600
Alistair McKay
Alex Price
Dennis Towers
Tiber Karadag
Shore Capital (Nominated Adviser) +44 (0) 207 408 4090
Hugh Morgan
Daniel Bush
Sarah Mather
Henry Wilcocks
Further information
Raymond James Financial International Limited ("Raymond James"),
which is authorised and regulated in the United Kingdom by the FCA,
is acting as financial adviser to Bidco and no-one else in
connection with the matters described in this Announcement and will
not be responsible to anyone other than Bidco for providing the
protections afforded to clients of Raymond James nor for providing
advice in connection with the matters referred to herein. Neither
Raymond James nor any of its affiliates owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect,
whether in contract, in tort, under statute or otherwise) to any
person who is not a client of Raymond James in connection with this
Announcement, any statement contained herein, the Acquisition or
otherwise.
Stifel Nicolaus Europe Limited, which also trades under the name
Keefe, Bruyette & Woods ("KBW"), and which is authorised and
regulated in the United Kingdom by the FCA, is acting as financial
adviser to AFH and no-one else in connection with the matters
described in this Announcement and will not be responsible to
anyone other than AFH for providing the protections afforded to
clients of KBW nor for providing advice in connection with the
matters referred to herein. Neither KBW nor any of its affiliates
owes or accepts any duty, liability or responsibility whatsoever
(whether direct or indirect, whether in contract, in tort, under
statute or otherwise) to any person who is not a client of KBW in
connection with this Announcement, any statement contained herein,
the Acquisition or otherwise.
Shore Capital and Corporate Limited and Shore Capital
Stockbrokers Limited ("Shore Capital") are authorised and regulated
in the United Kingdom by the FCA. Shore Capital is acting
exclusively for AFH and no one else in connection with the matters
referred to in this announcement and will not be responsible to
anyone other than AFH for providing the protections afforded to
clients of Shore Capital or for providing advice in connection with
the matters referred to in this announcement. Neither Shore Capital
nor any of its subsidiaries or affiliates owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect,
whether in contract, in tort, under statute or otherwise) to any
person who is not a client of Shore Capital in connection with this
announcement or any matter referred to herein.
Kirkland & Ellis International LLP is retained as legal
adviser to Flexpoint and Bidco.
Eversheds Sutherland (International) LLP is retained as legal
adviser to AFH.
The person responsible for arranging for the release of this
Announcement on behalf of AFH is Paul Wright, Chief Financial
Officer .
This Announcement is for information purposes only and is not
intended to and does not constitute, or form part of, an offer,
invitation or the solicitation of an offer to purchase, otherwise
acquire, subscribe for, sell or otherwise dispose of any
securities, or the solicitation of any vote or approval, in any
jurisdiction, pursuant to the Acquisition or otherwise, nor shall
there be any sale, issuance or transfer of securities of AFH in any
jurisdiction in contravention of applicable law. The Acquisition
will be implemented solely by means of the Scheme Document (or, if
applicable, the offer document containing any Offer), which will
contain the full terms and conditions of the Acquisition including
details of how to vote in respect of the Scheme (or, if applicable,
how to accept the Offer). Any vote in respect of the Scheme or
other response in relation to the Acquisition should be made only
on the basis of the information contained in the Scheme Document
(or, if applicable, the offer document containing any Offer).
Overseas jurisdictions
The availability of the Acquisition to AFH Shareholders who are
not resident in, and citizens of, the UK may be affected by the
laws of the relevant jurisdictions in which they are located or of
which they are citizens. Persons who are not resident in the UK
should inform themselves of, and observe, any applicable legal or
regulatory requirements of their jurisdictions.
The release, publication or distribution of this Announcement in
or into jurisdictions other than the UK may be restricted by law
and therefore any persons who are subject to the law of any
jurisdiction other than the UK should inform themselves of, and
observe, any applicable legal or regulatory requirements. In
particular, the ability of persons who are not resident in the UK
to vote their AFH Shares with respect to the Scheme at the Court
Meeting, or to appoint another person as proxy to vote at the Court
Meeting on their behalf, may be affected by the laws of the
relevant jurisdictions in which they are located. Any failure to
comply with the applicable restrictions may constitute a violation
of the securities laws of any such jurisdiction. To the fullest
extent permitted by applicable law, the companies and persons
involved in the Acquisition disclaim any responsibility or
liability for the violation of such restrictions by any person.
This Announcement has been prepared for the purposes of complying
with English Law, the AIM Rules, UK MAR, the rules of the London
Stock Exchange and the Code and the information disclosed may not
be the same as that which would have been disclosed if this
Announcement had been prepared in accordance with the laws of
jurisdictions outside of England.
Copies of this Announcement and the formal documentation
relating to the Scheme and the Acquisition will not be, and must
not be, mailed or otherwise forwarded, distributed or sent in, into
or from any Restricted Jurisdiction or any jurisdiction where to do
so would violate the laws of that jurisdiction and persons
receiving such documents (including custodians, nominees and
trustees) must not mail or otherwise forward, distribute or send
them in or into or from any Restricted Jurisdiction. Doing so may
render invalid any related purported vote in respect of the
Acquisition. If the Acquisition is implemented by way of an Offer
(unless otherwise permitted by applicable law or regulation), the
Offer may not be made, directly or indirectly, in or into or by use
of the mails or any other means or instrumentality (including,
without limitation, facsimile, e-mail or other electronic
transmission, telex or telephone) of interstate or foreign commerce
of, or any facility of a national, state or other securities
exchange of any Restricted Jurisdiction and the Offer will not be
capable of acceptance by any such use, means, instrumentality or
facilities or from within any Restricted Jurisdiction.
Further details in relation to overseas shareholders will be
contained in the Scheme Document.
Additional information for US Holders
US Holders should note that the Acquisition relates to the
securities of an English company and is proposed to be implemented
under a scheme of arrangement under English company law. A
transaction effected by means of a scheme of arrangement is not
subject to the tender offer rules under the US Exchange Act and the
proxy solicitation rules under the US Exchange Act will not apply
to the Acquisition. The Scheme will be subject to UK disclosure
requirements and practices which are different from the disclosure
requirements of the US tender offer and proxy solicitation rules.
The financial information included in this Announcement and the
Scheme Document has been, or will have been, prepared in accordance
with IFRS and thus may not be comparable to financial information
of companies whose financial statements are prepared in accordance
with generally accepted accounting principles in the US. However,
if Bidco were to exercise its right to implement the Acquisition of
the AFH Shares by way of an Offer, such Offer will be made in
compliance with applicable US tender offer and securities laws and
regulations. Such an Offer would be made by Bidco.
The receipt of cash pursuant to the Acquisition by a US Holder
as consideration for the transfer of its Scheme Shares pursuant to
the Scheme may be a taxable transaction for US federal income tax
purposes and under applicable US state and local, as well as
foreign and other, tax laws. Each AFH Shareholder is urged to
consult his, her or its independent professional adviser
immediately regarding the tax consequences of the Acquisition
applicable to him, her or it.
It may be difficult for US Holders to enforce their rights and
claims arising out of the US federal securities laws since Bidco
and AFH are located in countries other than the US and some or all
of their officers and directors may be residents of countries other
than the US. US Holders may not be able to sue a non-US company or
its officers or directors in a non-US court for violations of US
securities laws. Further, it may be difficult to compel a non-US
company and its affiliates to subject themselves to a US court's
judgment.
In accordance with normal UK practice and pursuant to Rule
14e-5(b) of the US Exchange Act, Bidco or its nominees, or their
brokers (acting as agents), may from time to time make certain
purchases of, or arrangements to purchase, AFH Shares outside of
the US, other than pursuant to the Acquisition, until the date on
which the Scheme and/or the Acquisition becomes Effective, lapses
or is otherwise withdrawn. These purchases may occur either in the
open market at prevailing prices or in private transactions at
negotiated prices. Any information about such purchases will be
disclosed as required in the UK, will be reported to a Regulatory
Information Service and will be available on the London Stock
Exchange website at www.londonstockexchange.com.
Forward-looking statements
This Announcement, oral statements made regarding the
Acquisition, and other information published by Bidco and/or AFH
contain statements which are, or may be deemed to be,
"forward-looking statements". Forward-looking statements are
prospective in nature and are not based on historical facts but
rather on current expectations and projections of the management of
Bidco and/or AFH about future events and are therefore subject to
risks and uncertainties which could cause actual results to differ
materially from the future results expressed or implied by the
forward-looking statements.
The forward-looking statements contained in this Announcement
include statements relating to the expected effects of the
Acquisition on Bidco and AFH, the expected timing and scope of the
Acquisition and other statements other than historical facts.
Often, but not always, forward-looking statements can be identified
by the use of forward-looking words, phrases and statements such as
"plans", "expects" or "does not expect", "is expected", "is subject
to", "budget", "scheduled", "estimates", "forecasts", "intends",
"anticipates" or "does not anticipate", or "believes", or
variations of such words, phrases or statements that certain
actions, events or results "may", "could", "should", "would",
"might" or "will" be taken, occur or be achieved. Although Bidco
and AFH believe that the expectations reflected in such
forward-looking statements are reasonable, Bidco and AFH can give
no assurance that such expectations will prove to be correct. By
their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on
circumstances that will occur in the future. There are a number of
factors that could cause actual results and developments to differ
materially from those expressed or implied by such forward-looking
statements.
These factors include, but are not limited to: the ability to
complete the Acquisition; the ability to obtain requisite
regulatory and shareholder approvals and the satisfaction of other
Conditions on the proposed terms and schedule; the behaviour of
other market participants; the anticipated benefits from the
proposed transaction not being realised as a result of changes in
general economic and market conditions in the countries in which
Bidco and AFH operate; weak, volatile or illiquid capital and/or
credit markets; changes in tax rates, interest rates and currency
value fluctuations; the degree of competition in the geographic and
business areas in which Bidco and AFH operate; and changes in laws
or in supervisory expectations or requirements. Other unknown or
unpredictable factors could cause actual results to differ
materially from those in the forward-looking statements. Such
forward-looking statements should therefore be construed in the
light of such factors. Neither Bidco nor AFH, nor any of their
respective associates or directors, officers or advisers, provides
any representation, assurance or guarantee that the occurrence of
the events expressed or implied in any forward-looking statements
in this Announcement will actually occur.
You are cautioned not to place any reliance on these
forward-looking statements. Other than in accordance with their
legal or regulatory obligations, neither Bidco nor AFH is under any
obligation, and Bidco and AFH expressly disclaim any intention or
obligation, to update or revise any forward-looking statements,
whether as a result of new information, future events or
otherwise.
No profit forecasts or profit estimates
No statement in this Announcement is intended as a profit
forecast or profit estimate for any period and no statement in this
Announcement should be interpreted to mean that earnings or
earnings per share for Bidco or AFH, as appropriate, for the
current or future financial years would necessarily match or exceed
the historical published earnings or earnings per share for Bidco
or AFH, as appropriate.
Dealing disclosure requirements
Under Rule 8.3(a) of the Code, any person who is interested in
one per cent. or more of any class of relevant securities of an
offeree company or of any securities exchange offeror (being any
offeror other than an offeror in respect of which it has been
announced that its offer is, or is likely to be, solely in cash)
must make an Opening Position Disclosure following the commencement
of the offer period and, if later, following the announcement in
which any securities exchange offeror is first identified.
An Opening Position Disclosure must contain details of the
person's interests and short positions in, and rights to subscribe
for, any relevant securities of each of (i) the offeree company and
(ii) any securities exchange offeror(s). An Opening Position
Disclosure by a person to whom Rule 8.3(a) applies must be made by
no later than 3.30 pm (London time) on the 10th business day
following the commencement of the offer period and, if appropriate,
by no later than 3.30 pm (London time) on the 10th business day
following the announcement in which any securities exchange offeror
is first identified. Relevant persons who deal in the relevant
securities of the offeree company or of a securities exchange
offeror prior to the deadline for making an Opening Position
Disclosure must instead make a Dealing Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes,
interested in one per cent. or more of any class of relevant
securities of the offeree company or of any securities exchange
offeror must make a Dealing Disclosure if the person deals in any
relevant securities of the offeree company or of any securities
exchange offeror. A Dealing Disclosure must contain details of the
dealing concerned and of the person's interests and short positions
in, and rights to subscribe for, any relevant securities of each of
(i) the offeree company and (ii) any securities exchange
offeror(s), save to the extent that these details have previously
been disclosed under Rule 8. A Dealing Disclosure by a person to
whom Rule 8.3(b) applies must be made by no later than 3.30 pm
(London time) on the business day following the date of the
relevant dealing.
If two or more persons act together pursuant to an agreement or
understanding, whether formal or informal, to acquire or control an
interest in relevant securities of an offeree company or a
securities exchange offeror, they will be deemed to be a single
person for the purpose of Rule 8.3. Opening Position Disclosures
must also be made by the offeree company and by any offeror and
Dealing Disclosures must also be made by the offeree company, by
any offeror and by any persons acting in concert with any of them
(see Rules 8.1, 8.2 and 8.4).
Details of the offeree and offeror companies in respect of whose
relevant securities Opening Position Disclosures and Dealing
Disclosures must be made can be found in the Disclosure Table on
the Panel's website at www.thetakeoverpanel.org.uk, including
details of the number of relevant securities in issue, when the
offer period commenced and when any offeror was first identified.
You should contact the Panel's Market Surveillance Unit on +44
(0)20 7638 0129 if you are in any doubt as to whether you are
required to make an Opening Position Disclosure or a Dealing
Disclosure.
In accordance with Rule 2.9 of the Code, AFH confirms that as at
the date of this Announcement, it has in issue and admitted to
trading on AIM 42,983,638 ordinary shares of GBP0.10 each (and
holds no shares in treasury). The International Securities
Identification Number (ISIN) of the ordinary shares is
GB00B4W5WQ08.
Publication on website
In accordance with Rule 26.1 of the Code, a copy of this
Announcement will be made available, subject to certain
restrictions relating to persons resident in Restricted
Jurisdictions, on AFH's website at
https://www.afhwm.co.uk/investor-relations by no later than 12 noon
(London time) on the business day following this Announcement. For
the avoidance of doubt, the contents of this website is not
incorporated by reference into, and does not form part of, this
Announcement.
Requesting hard copy documents
AFH Shareholders may request a hard copy of this Announcement by
contacting the Company Secretary of AFH during business hours on
+44 (0)152 757 7775 or by submitting a request in writing to the
Company Secretary of AFH at AFH House, Buntsford Drive, Stoke
Heath, Bromsgrove, Worcestershire, B60 4JE. For persons who receive
a copy of this Announcement in electronic form or via a website
notification, a hard copy of this Announcement will not be sent
unless so requested. You may also request that all future
documents, announcements and information to be sent to you in
relation to the Acquisition should be in hard copy form.
Electronic communications
Please be aware that addresses, electronic addresses and certain
other information provided by AFH Shareholders, persons with
information rights and other relevant persons for the receipt of
communications from AFH may be provided to Bidco during the offer
period as required under Section 4 of Appendix 4 of the Code to
comply with Rule 2.11(c).
Rounding
Certain figures included in this Announcement have been
subjected to rounding adjustments. Accordingly, figures shown for
the same category presented in different tables may vary slightly
and figures shown as totals in certain tables may not be an
arithmetic aggregation of figures that precede them.
Inside Information
This Announcement contains inside information. Upon the
publication of this Announcement via a Regulatory Information
Service, this inside information is now considered to be in the
public domain.
If you are in any doubt about the contents of this Announcement
or the action you should take, you are recommended to seek your own
independent financial advice immediately from your stockbroker,
bank manager, solicitor, accountant or independent financial
adviser duly authorised under the Financial Services and Markets
Act 2000 (as amended) if you are resident in the United Kingdom or,
if not, from another appropriately authorised independent financial
adviser.
Schedule 1
Conditions and Certain Further Terms of the Scheme and the
Acquisition
Part A
Conditions to the Scheme and Acquisition
The Acquisition will be conditional upon the Scheme becoming
unconditional and becoming Effective, subject to the provisions of
the Code, on or before the Long Stop Date.
Scheme approval
1. The Scheme will be conditional upon:
1.1 approval of the Scheme by a majority in number of the Voting
Scheme Shareholders representing not less than 75 per cent. of the
voting rights held by the Voting Scheme Shareholders (or the
relevant class or classes thereof, if applicable) in each case
present and voting, either in person or by proxy, at the Court
Meeting and at any separate class meeting which may be required by
the Court (or at any adjournment of any such meetings), provided
that the Court Meeting may not be adjourned beyond the 22nd day
after the expected date of the Court Meeting to be set out in the
Scheme Document in due course (or such later date (if any) as Bidco
and AFH may agree and the Court may allow);
1.2 all resolutions necessary to approve and implement the
Scheme as set out in the notice of the General Meeting being duly
passed by the requisite majorities at the General Meeting or at any
adjournment thereof, provided that the General Meeting may not be
adjourned beyond the 22nd day after the expected date of the
General Meeting to be set out in the Scheme Document in due course
(or such later date (if any) as Bidco and AFH may agree and the
Court may allow);
1.3 the Rollover Resolution (as set out in the notice of the
General Meeting) being duly passed by the requisite majority of
Independent Shareholders at the General Meeting or at any
adjournment thereof, provided that the General Meeting may not be
adjourned beyond the 22nd day after the expected date of the
General Meeting to be set out in the Scheme Document in due course
(or such later date (if any) as Bidco and AFH may agree and the
Court may allow); and
1.4 the sanction of the Scheme by the Court (without
modification, or with modification on terms acceptable to Bidco and
AFH), provided that the Scheme Court Hearing may not be adjourned
beyond the 22nd day after the expected date of the Scheme Court
Hearing to be set out in the Scheme Document in due course (or such
later date (if any) as Bidco and AFH may agree and the Court may
allow) and the delivery of a copy of the Scheme Court Order to the
Registrar of Companies.
In addition, Bidco and AFH have agreed that, subject as stated
in Part B below and to the requirements of the Panel, the
Acquisition will be conditional upon the following matters and,
accordingly, the necessary actions to make the Scheme Effective
will not be taken unless such conditions (as amended, if
appropriate) have been satisfied or, where relevant, waived:
Regulatory clearance
2. In respect of each notice under section 178 of FSMA which
Bidco or any other person who has decided to acquire or increase
control over any member of the Wider AFH Group which is a UK
authorised person (as such term is defined in section 191G of FSMA)
is under a duty to give in connection with the proposed
implementation of the Acquisition:
2.1 the FCA having given notice in writing pursuant to section
189(4)(a) of FSMA that it has determined unconditionally (save only
as to the timing of such acquisition or increase) to approve each
such acquisition or increase in control pursuant to section 185 of
FSMA;
2.2 in relation to such acquisition or increase in control, the
FCA having given notice in writing pursuant to section 189(7) of
FSMA subject to condition(s) specified in the decision notice and
such condition(s) not being unreasonably onerous in the reasonable
opinion of Bidco and any other proposed controllers; or
2.3 the FCA being treated, under section 189(6) of FSMA, as
having approved each such acquisition or increase in control.
General third party clearances
3. Excluding filings, applications, obligations, notifications,
waiting and other time periods and clearances relating to the
Regulatory Clearance (in respect of which only paragraph 2 above
shall apply), all necessary filings or applications having been
made, all necessary waiting and other time periods (including any
extensions of such waiting and other time periods) under any
applicable legislation or regulation of any relevant jurisdiction
having expired, lapsed or been terminated (as appropriate) and all
statutory or regulatory obligations in any relevant jurisdiction
having been complied with, in each case in connection with the
Acquisition or the acquisition by any member of the Wider Bidco
Group of any shares or other securities in, or control of, any
member of the Wider AFH Group, where the direct consequence of a
failure to make such a notification or filing or to wait for the
expiry, lapse, or termination of any such waiting or time period
would be unlawful in any relevant jurisdiction.
4. No Third Party having intervened (other than any Third Party
having intervened in respect of the Regulatory Clearance (in
respect of which only paragraph 2 above shall apply)) and there not
continuing to be outstanding any statute, regulation or order of
any Third Party (other than any statute, regulation or order of any
Third Party relating to the Regulatory Clearance (in respect of
which only paragraph 2 above shall apply)), in each case which
would reasonably be expected to:
4.1 make the Scheme or the Acquisition or, in each case, its
implementation or the acquisition or proposed acquisition by Bidco
or any member of the Wider Bidco Group of any shares or other
securities in, or control or management of, AFH or any member of
the Wider AFH Group void, illegal or unenforceable in any
jurisdiction, or otherwise directly or indirectly materially
restrain, prevent, prohibit, restrict or materially delay, the same
or impose material additional conditions or obligations with
respect to the Scheme or the Acquisition or such acquisition, or
otherwise materially impede, challenge or interfere with the Scheme
or Acquisition or such acquisition, or require material amendment
to the terms of the Scheme or Acquisition or the acquisition or
proposed acquisition of any AFH Shares or the acquisition of
control or management of AFH or the Wider AFH Group by Bidco or any
member of the Wider Bidco Group;
4.2 materially limit or delay, or impose any material
limitations on, the ability of any member of the Wider Bidco Group
or any member of the Wider AFH Group to acquire or to hold or to
exercise effectively, directly or indirectly, all or any rights of
ownership in respect of shares or other securities in, or to
exercise voting or management control over, any member of the Wider
AFH Group or any member of the Wider Bidco Group;
4.3 require, prevent or materially delay the divestiture or
materially alter the terms envisaged for any proposed divestiture
by any member of the Wider Bidco Group of any shares or other
securities in AFH or of all or any material portion of their
respective businesses, assets or properties or materially limit the
ability of any of them to conduct any of their respective
businesses or to own or control any of their respective assets or
properties or any part thereof;
4.4 except pursuant to sections 974 to 991 of the Companies Act,
require any member of the Wider Bidco Group or of the Wider AFH
Group to acquire, or to offer to acquire, any shares or other
securities (or the equivalent) in any member of either group owned
by any third party;
4.5 materially limit the ability of any member of the Wider
Bidco Group or of the Wider AFH Group to conduct or integrate or
co-ordinate its business, or any part of it, with the businesses or
any part of the businesses of any other member of the Wider Bidco
Group or of the Wider AFH Group; or
4.6 otherwise materially adversely affect, any or all of the
business, assets, profits, financial or trading position of any
member of the Wider AFH Group or of the Wider Bidco Group.
Certain matters arising as a result of any arrangement,
agreement, etc.
5. Except as Disclosed, there being no provision of any
arrangement, agreement, licence, permit, franchise or other
instrument to which any member of the Wider AFH Group is a party,
or by or to which any such member or any of its assets is or are or
may be bound, entitled or subject, which, in each case as a
consequence of the Scheme or Acquisition or the acquisition or
proposed acquisition of any shares or other securities in, or
control of, AFH or any other member of the Wider AFH Group by any
member of the Wider Bidco Group or otherwise, would be expected to
result in (in any case, to an extent which would reasonably be
expected to be material and adverse in the context of the AFH Group
taken as a whole):
5.1 save in respect of the AFH CULS and the HSBC Facility, any
monies borrowed by or any other indebtedness or liabilities (actual
or contingent) of, or any grant available to, any member of the
Wider AFH Group being or becoming repayable or capable of being
declared repayable immediately or prior to its stated maturity date
or repayment date or the ability of any member of the Wider AFH
Group to borrow monies or incur any indebtedness being withdrawn or
inhibited or becoming capable of being withdrawn or inhibited;
5.2 the creation or enforcement of any mortgage, charge or other
security interest over the whole or any part of the business,
property, assets or interests of any member of the Wider AFH
Group;
5.3 any such arrangement, agreement, licence, permit, franchise
or instrument, or the rights, liabilities, obligations or interests
of any member of the Wider AFH Group thereunder, being, or becoming
capable of being, terminated or modified or affected or any action
being taken or any obligation or liability arising thereunder;
5.4 any asset or interest of any member of the Wider AFH Group
being or falling to be disposed of or charged or ceasing to be
available to any member of the Wider AFH Group or any right arising
under which any such asset or interest could be required to be
disposed of or could cease to be available to any member of the
Wider AFH Group otherwise than in the ordinary course of
business;
5.5 the creation of any liabilities (actual or contingent) by
any member of the Wider AFH Group other than trade creditors or
other liabilities incurred in the ordinary course of business;
5.6 the rights, liabilities, obligations or interests of any
member of the Wider AFH Group under any such arrangement,
agreement, licence, permit, franchise or other instrument or the
interests or business of any such member in or with any other
person, firm, company or body (or any arrangement or arrangements
relating to any such interests or business) being terminated or
adversely modified or affected; or
5.7 the financial or trading position or the value of any member
of the Wider AFH Group being prejudiced or adversely affected,
and no event having occurred which, under any provision of any
such arrangement, agreement, licence, permit or other instrument,
would or would reasonably be expected to result in any of the
events or circumstances which are referred to in paragraphs 5.1 to
5.7 of this paragraph 5 in any case to an extent which would
reasonably be expected to be material and adverse in the context of
the AFH Group taken as a whole.
Certain events occurring since 31 October 2020
6. Except as Disclosed, no member of the Wider AFH Group having, since 31 October 2020:
6.1 issued or agreed to issue, or authorised the issue of,
additional shares of any class, or securities convertible into or
exercisable or exchangeable for, or rights, warrants or options to
subscribe for or acquire, any such shares or convertible securities
or transferred or sold any shares out of treasury, in each case
other than as between AFH and wholly-owned subsidiaries of AFH and
other than any shares issued or shares transferred from treasury
upon the exercise of options granted under any of the AFH Share
Plans or in consideration for the disposal of any Growth
Shares;
6.2 purchased or redeemed or repaid any of its own shares or
other securities or reduced or made any other change to any part of
its share capital in each case to an extent which is material and
adverse in the context of the Wider AFH Group taken as a whole;
6.3 recommended, declared, paid or made any dividend or other
distribution whether payable in cash or otherwise or made any bonus
issue (other than to AFH or a wholly-owned subsidiary of AFH and
other than the Interim Dividend);
6.4 other than pursuant to the Acquisition (and except for
transactions between AFH and its wholly-owned subsidiaries or
between the wholly-owned subsidiaries of AFH and transactions in
the ordinary course of business) implemented, effected, authorised
or announced its intention to implement, effect, authorise or
propose any merger, demerger, reconstruction, amalgamation, scheme,
or acquisition or disposal of assets or shares or loan capital (or
the equivalent thereof) in any undertaking or undertakings in any
such case to an extent which is material and adverse in the context
of the Wider AFH Group taken as a whole or in the context of the
Acquisition;
6.5 save for intra-AFH Group transactions, made or authorised
any change in its loan capital other than in connection with
ordinary course financing arrangements in any case to an extent
which is material and adverse in the context of the AFH Group taken
as a whole;
6.6 save for intra-AFH Group transactions, entered into,
implemented or authorised the entry into of, any joint venture,
asset or profit sharing arrangement, partnership or merged with,
demerged or acquired any body corporate, partnership or business or
acquired or disposed of or transferred, mortgaged, charged or
created any security interest over any assets or any right, title
or interest in any assets (including shares in any undertaking and
trade investments) or authorised the same (in each case, to an
extent which is material and adverse in the context of the Wider
AFH Group taken as a whole);
6.7 save in the ordinary course of business, issued or
authorised the issue of, or made any change in or to, any
debentures or (save for intra-AFH Group transactions) incurred or
increased any indebtedness or liability (actual or contingent)
which in any case is material and adverse in the context of the
Wider AFH Group taken as a whole;
6.8 entered into, varied or authorised any material agreement,
transaction, arrangement or commitment (whether in respect of
capital expenditure or otherwise) which:
6.8.1 is of a long term, onerous or unusual nature or magnitude
or which is reasonably likely to involve an obligation of such
nature or magnitude (save in the ordinary course of business);
or
6.8.2 is likely to materially restrict the business of any
member of the Wider AFH Group other than to a nature and extent
which is normal in the context of the business concerned,
and, in either case, which is or would reasonably be expected to
be material and adverse in the context of the Wider AFH Group taken
as a whole;
6.9 (other than in respect of a member which is dormant or which
is solvent at the relevant time) taken any corporate action or had
any legal proceedings instituted or threatened against it or
petition presented or order made for its winding-up (voluntarily or
otherwise), dissolution or reorganisation or for the appointment of
a receiver, administrator, administrative receiver, trustee or
similar officer of all or any material part of its assets and
revenues or any analogous proceedings in any jurisdiction or
appointed any analogous person in any jurisdiction which in any
case is material in the context of the Wider AFH Group taken as a
whole;
6.10 been unable, or admitted in writing that it is unable, to
pay its debts or having stopped or suspended (or threatened to stop
or suspend) payment of its debts generally or ceased or threatened
to cease carrying on all or a substantial part of its business to
an extent which is material in the context of the Wider AFH Group
taken as a whole;
6.11 other than in respect of claims between AFH and wholly
owned subsidiaries of AFH, waived or compromised any claim
otherwise than in the ordinary course of business which is material
in the context of the Wider AFH Group taken as a whole;
6.12 made any alteration to its memorandum or articles of
association (in each case, other than in connection with the
Scheme) which is material in the context of the Acquisition;
6.13 (except in relation to changes made or agreed as a result
of, or arising from, legislation or changes to legislation) made or
agreed or consented to:
6.13.1 any material change to:
(a) the terms of the trust deeds constituting the pension
scheme(s) established for its directors, employees or their
dependents; or
(b) the contributions payable to any such scheme(s) or to the
benefits which accrue or to the pensions which are payable
thereunder; or
(c) the basis on which qualification for, or accrual or
entitlement to such benefits or pensions are calculated or
determined; or
(d) the basis upon which the liabilities (including pensions) or
such pension schemes are funded, valued or made,
in each case, which is material in the context of the Wider AFH
Group taken as a whole; or
6.13.2 any change to the trustees including the appointment of a
trust corporation;
6.14 entered into or materially varied the terms of or made any
offer (which remains open for acceptance) to enter into or vary the
terms of, any contract, agreement, commitment, transaction or
arrangement with any director or senior executive which is material
and adverse in the context of the Acquisition or which would
reasonably be expected to have a material adverse effect on the
financial position of the Wider AFH Group;
6.15 proposed, agreed to provide or materially modified the
terms of any share option scheme, incentive scheme or other benefit
relating to the employment or termination of employment of any
person employed by the Wider AFH Group in each case which is
material and adverse in the context of the Wider AFH Group taken as
a whole; and
6.16 on or after the date of this Announcement, and other than
with the consent of Bidco, no action having been taken or proposed
by any member of the Wider AFH Group which requires or would
require the approval of AFH Shareholders in general meeting in
accordance with, or as contemplated by, Rule 21.1 of the Code.
No adverse change, litigation or regulatory enquiry
7. Except as Disclosed, since 31 October 2020:
7.1 there having been no adverse change or deterioration in the
business, assets, financial or trading positions or profit or
prospects of any member of the Wider AFH Group which in any case is
material and adverse in the context of the Wider AFH Group taken as
a whole;
7.2 no contingent or other liability of any member of the Wider
AFH Group having arisen or become apparent or increased which in
any case is or would reasonably be expected to be material and
adverse in the context of the Wider AFH Group taken as a whole;
7.3 (other than as a result of or in connection with the
Acquisition), no litigation, arbitration proceedings, prosecution
or other legal or regulatory proceedings to which any member of the
Wider AFH Group is or may become a party (whether as plaintiff,
defendant or otherwise) and no investigation by any Third Party
against or in respect of any member of the Wider AFH Group having
been threatened in writing, announced, implemented or instituted by
or against or remaining outstanding against or in respect of any
member of the Wider AFH Group which in any such case is or would
reasonably be expected to be material and adverse in the context of
the Wider AFH Group taken as a whole;
7.4 no steps having been taken which are likely to result in the
withdrawal, cancellation, termination or modification of any
licence held by any member of the Wider AFH Group which is
necessary for the proper carrying on of its business and the
withdrawal, cancellation, termination or modification of which
would reasonably be expected to have a material adverse effect on
the Wider AFH Group taken as a whole; and
7.5 no member of the Wider AFH Group having conducted its
business in breach of any applicable laws and regulations which in
any case is material in the context of the Wider AFH Group taken as
a whole.
No discovery of certain matters
8. Except as Disclosed, Bidco not having discovered:
8.1 that any financial or business or other information
concerning the Wider AFH Group disclosed at any time by or on
behalf of any member of the Wider AFH Group, whether publicly, to
any member of the Wider Bidco Group or to any of their advisers or
otherwise, is misleading or contains any misrepresentation of
material fact or omits to state a material fact necessary to make
any information contained therein not misleading, in each case to
an extent which is material in the context of the Wider AFH Group
taken as a whole; or
8.2 that any member of the Wider AFH Group is subject to any
liability (actual or contingent) which is material in the context
of the Wider AFH Group taken as a whole.
Anti-corruption, sanctions and criminal property
9. Except as Disclosed, Bidco not having discovered that:
9.1 any:
9.1.1 past or present member, director, officer or employee of the Wider AFH Group; or
9.1.2 person that performs or has performed services on behalf of the Wider AFH Group,
has at any time engaged in an activity, practice or conduct
which would constitute an offence under the UK Bribery Act 2010,
the US Foreign Practices Act of 1977 or any other applicable anti-
corruption legislation;
9.2 any material asset of any member of the Wider AFH Group
constitutes criminal property as defined by section 340(3) of the
Proceeds of Crime Act 2002 (but disregarding paragraph (b) of that
definition);
9.3 any past or present member, director, officer or employee of
the Wider AFH Group, or any other person for whom any such person
may be liable or responsible, has engaged in any business with,
made any investments in, or made any payments or assets available
to or received any funds or assets from:
9.3.1 any government, entity, or individual with which US or
European Union persons (or persons operating in those territories)
are prohibited from engaging in activities, doing business or from
receiving or making available funds or economic resources, by US or
European Union laws or regulations, including the economic
sanctions administered by the United States Office of Foreign
Assets Control or HM Treasury & Customs; or
9.3.2 any government, entity or individual targeted by any of
the economic sanctions of the United Nations, United States or the
European Union or any of its member states; or
9.4 a member of the AFH Group has engaged in a transaction which
would cause the Bidco Group to be in breach of any law or
regulation on completion of the Acquisition, including the economic
sanctions administered by the United States Office of Foreign
Assets Control or HM Treasury & Customs or any government,
entity or individual targeted by any of the economic sanctions of
the United Nations, United States or the European Union or any of
its member states.
10. For the purpose of these Conditions:
10.1 "Third Party" means any central bank, government, government department or governmental, quasi-governmental, supranational, statutory, regulatory, environmental or investigative body, authority, court, trade agency, association, institution or professional or environmental body in any relevant jurisdiction, including, for the avoidance of doubt, the Panel; and
10.2 a Third Party shall be regarded as having "intervened" if
it has given written notice to take, institute, implement or
threaten any action, proceeding, suit, investigation, enquiry or
reference or made, proposed or enacted any statute, regulation,
decision or order or taken any measures or other steps or required
any action to be taken or information to be provided or otherwise
having done anything and "intervene" shall be construed
accordingly.
Part B
Certain further terms of the Scheme and the Acquisition
1. Conditions 2 to 9 (inclusive) must be fulfilled, be
determined by Bidco to be or remain satisfied or (if capable of
waiver) be waived prior to the commencement of the Scheme Court
Hearing, failing which the Scheme will lapse.
2. Notwithstanding the paragraph above, subject to paragraph 4
below and subject to the requirements of the Panel, Bidco reserves
the right in its sole discretion to waive all or any of paragraphs
3 to 9 (inclusive), in whole or in part and to proceed with the
Scheme Court Hearing prior to the fulfilment, satisfaction or
waiver of any of the paragraphs 2 to 9 (inclusive).
3. Bidco shall be under no obligation under the terms and
Conditions of the Acquisition to waive (if capable of waiver), to
determine to be or remain satisfied or to treat as fulfilled any of
paragraphs 2 to 9 (inclusive) by a date earlier than the latest
date specified in paragraph 1 of Part A above, notwithstanding that
the other Conditions may at such earlier date have been waived or
fulfilled and that there are, at such earlier date, no
circumstances indicating that any Condition may not be capable of
fulfilment.
4. Bidco reserves the right to elect to implement the
Acquisition by way of a takeover offer (as defined in Part 28 of
the Companies Act), subject to the Panel's consent and (while the
Co-operation Agreement is continuing) to the terms of the
Co-operation Agreement. In such event, such Offer will be
implemented on the same terms and conditions (subject to
appropriate amendments, including (without limitation and for so
long as the Co-operation Agreement is continuing) an acceptance
condition set at 75 per cent. of the shares to which the
Acquisition relates (or such lesser percentage, as Bidco may decide
with the consent of the Panel) so far as applicable, as those which
would apply to the Scheme.
5. Under Rule 13.5(a) of the Code, Bidco may not invoke a
Condition so as to cause the Acquisition not to proceed, to lapse
or to be withdrawn unless the circumstances which give rise to the
right to invoke the Condition are of material significance to Bidco
in the context of the Acquisition. The Conditions contained in
paragraph 1 of Part A above and, if applicable, any acceptance
condition if the Acquisition is implemented by means of an Offer,
are not subject to this provision of the Code.
6. If the Panel requires Bidco to make an offer for AFH Shares
under the provisions of Rule 9 of the Code, Bidco may make such
alterations to the Conditions as are necessary to comply with the
provisions of that Rule.
7. The Acquisition will be subject, inter alia, to the
Conditions and certain further terms which are set out in this
Schedule 1 and those terms which will be set out in the Scheme
Document and such further terms as may be required to comply with
the provisions of the AIM Rules and the provisions of the Code.
8. The Scheme Shares will be acquired by Bidco fully paid and
free from all liens, equitable interests, charges, encumbrances and
other third party rights of any nature whatsoever and together with
all rights attaching to them, including the right to receive and
retain all dividends and distributions (if any) declared, made or
paid after the date of this Announcement (other than the Interim
Dividend).
9. If, on or after the date of this Announcement, any dividend
(save for the Interim Dividend) and/or other distribution and/or
other return of capital is declared, made or paid or becomes
payable in respect of the AFH Shares, Bidco reserves the right
(without prejudice to any right of Bidco to invoke Condition 6.3 of
Part A of this Schedule 1 ), to reduce the Acquisition Price
payable under the terms of the Acquisition for the AFH Shares by an
amount up to the amount of such dividend and/or distribution and/or
return of capital, in which case any reference in this Announcement
or in the Scheme Document to the Acquisition Price payable under
the terms of the Acquisition will be deemed to be a reference to
the Acquisition Price as so reduced. If Bidco exercises its right
to reduce the Acquisition Price payable under the terms of the
Acquisition for the AFH Shares by an amount up to the amount of a
dividend and/or distribution and/or return of capital that has not
been paid, AFH Shareholders will be entitled to receive and retain
any such dividend and/or other distribution and/or other return of
capital. To the extent that any such dividend and/or distribution
and/or other return of capital is declared, made or paid or is
payable and it is: (i) transferred pursuant to the Acquisition on a
basis which entitles Bidco to receive the dividend or distribution
and to retain it; or (ii) cancelled, the consideration payable
under the terms of the Acquisition will not be subject to change in
accordance with this paragraph. Any exercise by Bidco of its rights
referred to in this paragraph shall be the subject of an
announcement and, for the avoidance of doubt, shall not be regarded
as constituting any revision or variation of the Acquisition.
10. This Announcement and any rights or liabilities arising
hereunder, the Acquisition, the Scheme, and any proxies will be
governed by English law and be subject to the jurisdiction of the
Courts. The Scheme will be subject to the applicable requirements
of the Code, the Panel, the London Stock Exchange, the AIM Rules,
the FCA and the Registrar of Companies.
Each of the Conditions shall be regarded as a separate Condition
and shall not be limited by reference to any other Condition.
Schedule 2
Bases and Sources
Unless otherwise stated in this Announcement:
1. all references to AFH Shares are to ordinary shares of 10
pence each in the capital of AFH;
2. the value attributed to the fully diluted issued ordinary
share capital of AFH is based on:
a) 42,983,638 AFH Shares in issue as at the Latest Practicable Date; and
b) 1,914,024 AFH Shares which may be issued on or after the date
of this Announcement to satisfy the exercise of options and vesting
of awards outstanding under the AFH Share Plans as at the Latest
Practicable Date (assuming an Effective Date of 31 March 2021 and
that optionholders have saved the maximum amount possible under the
AFH SAYE Option Plan); and
c) 3,597,588 AFH Shares which may be issued on or after the date
of this Announcement to satisfy the conversion of AFH CULS into AFH
Shares (assuming 31 March 2021 as the "change of control" date
under the trust deed relating to the AFH CULs);
3. historical AFH Share prices are sourced from the AIM Appendix
to the Daily Official List and represent Closing Prices on the
relevant dates; and
4. the volume-weighted average prices of AFH Shares and trading
volume data have been derived from Capital IQ and, in the case of
volume-weighted average prices, have been rounded to the nearest
single decimal place.
Schedule 3
Details of Irrevocable Undertakings
AFH Executive Director undertakings
Alan Hudson Undertaking
Alan Hudson has given an irrevocable undertaking in respect of
6,105,700 AFH Shares beneficially owned by him (or in respect of
which he is interested pursuant to options held over AFH Shares)
(being all of the AFH Shares (on a fully diluted basis)
beneficially owned by him or in respect of which he is interested),
and representing approximately 12.6 per cent of AFH's issued, and
to be issued, share capital as at the Latest Practicable Date) to
be bound by the terms of the Scheme (or, if the Acquisition is to
be implemented by way of an Offer, to accept, or procure the
acceptance of, the Offer) and, in respect of 5,955,700 AFH Shares
beneficially owned by him (being all of the AFH Shares beneficially
owned by him) and representing approximately 13.9 per cent. of
AFH's issued share capital as at the Latest Practicable Date), to
vote, or procure the vote, in favour of the special resolution to
be proposed at the General Meeting to approve the adoption of the
amended Articles. Alan Hudson is not entitled to vote at the Court
Meeting, and is not entitled to vote at the General Meeting in
respect of the Rollover Resolution.
The terms of Alan Hudson 's irrevocable undertaking do not
permit him to accept a higher competing offer made prior to the
Scheme becoming Effective, if any person other than Bidco, or a
person acting in concert with Bidco, announces a firm intention to
make an offer to acquire the entire issued, and to be issued,
ordinary share capital of AFH.
Alan Hudson's irrevocable undertaking will cease to be binding
only if: (i) the Panel consents to Bidco not proceeding with the
Acquisition; (ii) the Scheme Document is not dispatched to AFH
Shareholders within 28 days (or such longer period as may be agreed
between AFH and the Panel) of this Announcement; or (iii) the
Scheme lapses or is withdrawn in accordance with its terms or the
Scheme does not become Effective by the Long Stop Date. As stated
above, the irrevocable undertaking will remain binding in the event
that a higher competing offer for AFH is made.
Other AFH Executive Directors' Undertakings
Paul Wright has given an irrevocable undertaking in respect of
285,000 AFH Shares owned by him (or in respect of which he is
interested pursuant to options held over AFH Shares) (being all of
the AFH Shares (on a fully diluted basis) owned by him or in
respect of which he is interested ), and representing approximately
0.6 per cent. of AFH's issued, and to be issued, share capital as
at the Latest Practicable Date) to be bound by the terms of the
Scheme (or, if the Acquisition is to be implemented by way of an
Offer, to accept, or procure the acceptance of, the Offer) and, in
respect of 35,000 AFH Shares owned by him (being all of the AFH
Shares owned by him) and representing approximately 0.1 per cent.
of AFH's issued share capital as at the Latest Practicable Date),
to vote, or procure the vote, in favour of the special resolution
to be proposed at the General Meeting to approve the adoption of
the amended Articles. Paul Wright is not entitled to vote at the
Court Meeting, and is not entitled to vote at the General Meeting
in respect of the Rollover Resolution.
Austin Broad has given an irrevocable undertaking in respect of
101,420 AFH Shares owned by him (or in respect of which he is
interested pursuant to options held over AFH Shares) (being all of
the AFH Shares (on a fully diluted basis) owned by him or in
respect of which he is interested ), and representing approximately
0.2 per cent. of AFH's issued, and to be issued, share capital as
at the Latest Practicable Date) to be bound by the terms of the
Scheme (or, if the Acquisition is to be implemented by way of an
Offer, to accept, or procure the acceptance of, the Offer) and, in
respect of 15,000 AFH Shares owned by him (being all of the AFH
Shares owned by him) and representing approximately 0.03 per cent.
of AFH's issued share capital as at the Latest Practicable Date),
to vote, or procure the vote, in favour of the special resolution
to be proposed at the General Meeting to approve the adoption of
the amended Articles. Austin Broad is not entitled to vote at the
Court Meeting, and is not entitled to vote at the General Meeting
in respect of the Rollover Resolution.
Alex Larvin has given an irrevocable undertaking in respect of
101,420 AFH Shares in which she is interested pursuant to options
held over such AFH Shares (being all of the AFH Shares in which she
is interested and representing approximately 0.2 per cent. of AFH's
issued, and to be issued, share capital as at the Latest
Practicable Date), to be bound by the terms of the Scheme (or, if
the Acquisition is to be implemented by way of an Offer, to accept,
or procure the acceptance of, the Offer). As Alex Larvin's
interests are currently held by way of options over AFH Shares
only, which will not have been exercised at the date of the General
Meeting, she will not have the right to vote on the special
resolution to be proposed at the General Meeting to approve the
adoption of the amended Articles, nor at the Court Meeting nor
General Meeting in respect of the Rollover Resolution.
The terms of these irrevocable undertakings are otherwise the
same as those of the Alan Hudson's irrevocable undertaking referred
to above.
AFH Independent Director undertakings
The following Independent Directors who are interested in AFH
Shares have given irrevocable undertakings to vote, or procure the
vote, in favour of the Scheme at the Court Meeting and the
Resolutions (or, if the Acquisition is to be implemented by way of
an Offer, to accept, or procure the acceptance of, the Offer) in
relation to the following AFH Shares:
Name Number of AFH Shares Percentage of AFH Shares as at the Latest Practicable Date
John Wheatley 233,121 0.5
Mark Chambers 78,133 0.2
These irrevocable undertakings do not permit acceptance of a
higher competing offer made prior to the Scheme becoming Effective,
if any person other than Bidco, or a person acting in concert with
Bidco, announces a firm intention to make an offer to acquire the
entire issued, and to be issued, ordinary share capital of AFH.
These irrevocable undertakings lapse in the same circumstances
described in relation to Alan Hudson's irrevocable undertaking
above.
Sue Lewis does not currently hold any AFH Shares.
AFH Shareholder undertakings
In addition to the AFH Executive Directors and the AFH
Independent Directors, the following AFH Shareholders have given
irrevocable undertakings to vote, or procure the vote, in favour of
the Scheme at the Court Meeting and the Resolutions (or, if the
Acquisition is to be implemented by way of an Offer, to accept, or
procure the acceptance of, the Offer) in relation to the following
AFH Shares:
Name Number of AFH Shares Percentage of AFH Shares as at the Latest Practicable Date
Paul Connor 3,500,000 8.1
Philip Mobberley 2,548,776 5.9
BMO Asset Management Limited 1,816,947 4.2
The undertakings from the AFH Shareholders named above will
cease to be binding only if:
1.1 a press announcement substantially in the form of this
Announcement has not been released by 11.59 p.m. (London time) on
25 January 2021 (or such later date as AFH and Bidco may
agree);
1.2 the Scheme Document is not sent to AFH Shareholders within
28 days (or such longer period as the Panel may agree) after the
date of this Announcement;
1.3 if the Acquisition is to be implemented by way of an Offer,
the Offer lapses or is withdrawn in accordance with its terms and
Bidco publicly confirms that it does not intend to proceed with the
Offer or to implement the Offer by way of a Takeover Offer or
otherwise;
1.4 the Scheme has not become effective by 6.00 p.m. on the Long
Stop Date (or such later time or date as agreed between Bidco and
AFH, with the approval of the Court and/or the Panel if required);
or
1.5 in respect of BMO Asset Management Limited only, (i) a
competing offer third party announces a firm intention pursuant to
Rule 2.7 of the Code to acquire the entire issued and to be issued
ordinary share capital of the Company and the consideration payable
to each AFH Share under such proposal is 513 pence or greater; and
(ii) Bidco does not confirm an increase in the consideration to be
paid for the AFH Shares pursuant to the Offer to at least an
equivalent amount per share within seven days of such competing
offer.
Schedule 1
Schedule 4
Definitions
The following definitions apply throughout this Announcement
unless the context requires otherwise:
"Acquisition" means the direct or indirect acquisition of the
entire issued and to be issued ordinary share capital of AFH by
Bidco to be implemented by way of the Scheme or (should Bidco so
elect, subject to the consent of the Panel) by way of an Offer;
"Acquisition Price" means 463 pence for each Scheme Share;
"AFH" means AFH Financial Group Plc, a company registered in
England and Wales with registered number 07638831;
"AFH CULS" means outstanding loan stock issued under the trust
deed dated 29 July 2019 constituting GBP15,000,000 4 per cent.
Convertible Unsecured Loan Stock 2024 issued by AFH;
"AFH Directors" means the directors of AFH;
"AFH Executive Directors" means Alan Hudson, Paul Wright, Austin
Broad and Alex Larvin;
"AFH Group" means AFH and its subsidiary undertakings;
"AFH Shareholders" means the registered holders of AFH Shares
from time to time;
"AFH Shares" means the ordinary shares of 10 pence each in the
capital of AFH;
"AFH Share Plan Participants" means participants in the AFH
Share Plans;
"AFH Share Plans" means, each of:
(a) the AFH Company Share Option Plan;
(a) the AFH SAYE Option Plan;
(b) the AFH 2012 EMI Share Option Plan;
(c) the Unapproved Share Option Contract; and
(d) the Growth Share Scheme;
"AIM Rules" means the AIM Rules for Companies published by the
London Stock Exchange, as amended from time to time;
"Announcement" means this announcement made pursuant to Rule 2.7
of the Code;
"Articles" means the articles of association of AFH from time to
time;
"Bidco Directors" means the directors of Bidco;
"Bidco Group" means Bidco, its subsidiaries and its subsidiary
undertakings from time to time;
"business day" means any day (excluding any Saturday or Sunday
or any public holiday) on which banks in the City of London are
generally open for business;
"Cash Sale SPA" means the sale and purchase agreement entered
into between Bidco and Alan Hudson dated 25 January 2021, a summary
of which is set out in paragraph 14 of this Announcement;
"Closing Price" means the closing middle market quotation of a
share on a particular trading day as derived from the Daily
Official List published for that day;
"Code" means the City Code on Takeovers and Mergers;
"Companies Act" means the Companies Act 2006, as amended from
time to time;
"Conditions" means the conditions to the implementation of the
Acquisition (including the Scheme) as set out in Schedule 1 to this
Announcement and to be set out in the Scheme Document;
"Confidentiality Agreement" means the confidentiality agreement
entered into between Flexpoint and AFH dated 1 December 2020, a
summary of which is set out in paragraph 14 of this
Announcement;
"Co-operation Agreement" means the co-operation agreement
entered into between Bidco and AFH dated 25 January 2021, a summary
of which is set out in paragraph 14 of this Announcement;
"Court" means the High Court of Justice of England and
Wales;
"Court Meeting" means the meeting or meetings of Voting Scheme
Shareholders or of any class or classes thereof to be convened by
order of the Court pursuant to section 896 of the Companies Act,
notice(s) of which will be set out in the Scheme Document, to
consider and, if thought fit, approve the Scheme (with or without
amendment) and any adjournment(s) thereof;
"CREST" means the relevant system (as defined in the
Uncertificated Securities Regulations 2001 (SI 2001/3755)
(including as it forms part of domestic law of the United Kingdom
by virtue of the European Union (Withdrawal) Act 2018), in respect
of which Euroclear UK & Ireland Limited is the Operator (as
defined in such Regulations) in accordance with which securities
may be held and transferred in uncertificated form;
"Daily Official List" means the AIM Appendix to the Daily
Official List published by the London Stock Exchange;
"Dealing Disclosure" means an announcement pursuant to Rule 8 of
the Code containing details of dealings in interests in relevant
securities of a party to an offer;
"Disclosed" means:
(e) information disclosed by, or on behalf of, AFH in this Announcement;
(f) fairly disclosed prior to the date of this Announcement by
or on behalf of AFH to Bidco (or its respective officers,
employees, agents or advisers in their capacity as such); or
(g) as otherwise publicly announced by AFH prior to the date of
this Announcement (by the delivery of an announcement to a
Regulatory Information Service);
"Effective" means, in the context of the Acquisition:
(h) if the Acquisition is implemented by way of the Scheme, the
Scheme having become effective pursuant to its terms, upon the
delivery of a copy of the Scheme Court Order to the Registrar of
Companies; or
(i) if the Acquisition is implemented by way of an Offer, the
Offer having been declared or become unconditional in all respects
in accordance with the requirements of the Code;
"Effective Date" means the date upon which the Acquisition
(including the Scheme) becomes Effective in accordance with its
terms;
"Excluded Shares" means (i) any AFH Shares legally or
beneficially held by Bidco and/or any other member of the Wider
Bidco Group; or (ii) any AFH Shares held in treasury ;
"FCA" or "Financial Conduct Authority" means the Financial
Conduct Authority acting in its capacity as the competent authority
for the purposes of Part VI of the UK Financial Services and
Markets Act 2000;
"Flexpoint" means Flexpoint Ford LLC;
"Forms of Proxy" means the forms of proxy for use by AFH
Shareholders in connection with each of the Court Meeting and the
General Meeting, which shall accompany the Scheme Document;
"General Meeting" means the general meeting of AFH to be
convened to consider and, if thought fit, to approve the
Resolutions (with or without amendment) and any adjournment
thereof;
"Growth Shares" means A Shares of GBP0.001 each in the share
capital of AFH Group Limited (registered in England & Wales
with company number 02557859);
"HSBC Facility" means the facility agreement dated 7 November
2019 between AFH and certain of its subsidiaries and HSBC Bank
plc;
"IFRS" means International Financial Reporting Standards;
"Independent Directors" means John Wheatley, Sue Lewis and Mark
Chambers, being the independent directors of AFH who do not have an
interest in the Management Arrangements;
"Independent Shareholders" means the AFH Shareholders other than
the AFH Executive Directors, any of their respective connected
persons, any person holding AFH Shares on behalf of any AFH
Executive Directors and/or any of their respective connected
persons;
"Interim Dividend" means the interim dividend for the year ended
31 October 2020 of 3 pence per AFH Share (as set out in the
announcement of AFH's preliminary results for the year ended 31
October 2020 published on 18 January 2021);
"Investment Agreement" means the agreement entered into between
Bidco and the AFH Executive Directors dated 25 January 2021, a
summary of which is set out in paragraph 14 of this
Announcement;
"KBW" means Stifel Nicolaus Europe Limited, which also trades
under the name Keefe, Bruyette & Woods, which is a firm
authorised in the United Kingdom by the Financial Conduct Authority
under number 190412, with principal place of business at 150
Cheapside, London EC2V 6ET;
"Latest Practicable Date" means 22 January 2021 (being the last
business day before the date of this Announcement);
"London Stock Exchange" means London Stock Exchange plc,
together with any successor thereto;
"Long Stop Date" means 30 June 2021 or such later date (if any)
as Bidco and AFH may, with the consent of the Panel, agree and (if
required) the Court may approve;
"Management Arrangements" means the Cash Sale SPA and the
Rollover Arrangements;
"Management Arrangements Shares" means the Manager Sale Shares
and the Rollover Shares;
"Manager Sale Shares" means 4,294,065 of the AFH Shares
registered in the name of or beneficially owned by Alan Hudson
which are subject to the Cash Sale SPA;
"MAR" means the Market Abuse Regulation (2014/596/EU);
"Meetings" means the Court Meeting and the General Meeting;
"Midco" means Cortina Midco Limited, a newly incorporated
company registered in the Cayman Islands which was formed for the
purposes of the Acquisition;
"Offer" means if (subject to the consent of the Panel) Bidco
elects to effect the Acquisition by way of a takeover offer (as
defined in Chapter 3 of Part 28 of the Companies Act), the offer to
be made by or on behalf of Bidco to acquire the issued, and to be
issued, ordinary share capital of AFH on the terms and subject to
the conditions set out in the related offer document;
"offer period" means the offer period (as defined by the Code)
relating to AFH, which commenced on the date of this Announcement
and ending on the date on which the Acquisition becomes Effective,
lapses or is withdrawn (or such other date as the Panel may
decide);
"Opening Position Disclosure" has the same meaning as in Rule 8
of the Code;
"Panel" means the Panel on Takeovers and Mergers;
"Put and Call Option Deed" means the put and call option deed in
the agreed form, to be entered into between Topco, Midco, Bidco and
each of the AFH Executive Directors;
"Registrar of Companies" means the Registrar of Companies in
England and Wales;
"Regulatory Authority" means any central bank, ministry,
governmental, quasigovernmental, supranational, statutory,
regulatory or investigative body or authority, national, state,
municipal or local government (including any subdivision, court,
administrative agency or commission or other authority thereof),
any entity owned or controlled by them, any private body exercising
any regulatory, taxing, importing or other authority, trade agency,
association, institution or professional or environmental body in
any jurisdiction;
"Regulatory Condition" means the Condition set out in paragraph
2 of Part A of Schedule 1 ;
"Regulatory Information Service" means any information service
authorised from time to time by the FCA for the purpose of
disseminating regulatory announcements;
"Resolutions" means the Rollover Resolution and the
resolution(s) to be proposed at the General Meeting necessary to
implement the Scheme, including, amongst other things, a resolution
to amend the Articles by the adoption and inclusion of a new
article under which any AFH Shares issued or transferred after the
General Meeting shall either be subject to the Scheme or (after the
Effective Date) shall be immediately transferred to Bidco (or as it
may direct) in exchange for the same consideration as is due under
the Scheme;
"Restricted Jurisdictions" means any jurisdiction where local
laws or regulations may result in a significant risk of civil,
regulatory or criminal exposure if information concerning the
Acquisition is sent or made available to AFH Shareholders in that
jurisdiction;
"Rollover Arrangements" means the arrangements described in
paragraph 9 (other than the Cash Sale SPA);
"Rollover Documents" means the Investment Agreement and the
Share Exchange Agreement and Put and Call Option Deed to be entered
into in accordance with the terms of the Investment Agreement;
"Rollover Resolution" means the ordinary resolution to be
proposed at the General Meeting in connection with the approval of
the Rollover Arrangements pursuant to Rule 16 of the Code;
"Rollover Shares" means such number of AFH Shares registered in
the name of, or beneficially owned by, each of the AFH Executive
Directors (including following the exercise of options under the
AFH Share Plans in connection with the Acquisition) as equates,
together with any Growth Shares registered in the name of, or
beneficially owned by, each of the AFH Executive Directors to be
exchanged for Bidco Rollover Notes pursuant to the Share Exchange
Agreement, to 30 per cent. of the aggregate gross proceeds to be
received by the AFH Executive Directors pursuant to the Acquisition
(net of any exercise price payable on the exercise of options under
the AFH Share Plans) at the Acquisition Price and ultimately to be
exchanged for shares in Topco pursuant to the terms of the Rollover
Documents;
"Scheme" means the scheme of arrangement proposed to be made
under Part 26 of the Companies Act between AFH and the Scheme
Shareholders, the terms of which are to be set out in the Scheme
Document, with or subject to any modification, addition or
condition approved or imposed by the Court and agreed to by AFH and
Bidco;
"Scheme Court Hearing" means the hearing of the Court to
sanction the Scheme under Part 26 of the Companies Act;
"Scheme Court Order" means the order of the Court sanctioning
the Scheme under Part 26 of the Companies Act;
"Scheme Document" means the document to be sent to (among
others) AFH Shareholders containing and setting out, among other
things, the full terms and conditions of the Scheme, the
explanatory statement required by Section 897 of the Companies Act
and containing the notices convening the Meetings;
"Scheme Record Time" means the time and date specified in the
Scheme Document, expected to be 6.00 p.m. on the business day
immediately prior to the Effective Date;
"Scheme Shareholders" means holder(s) of Scheme Shares;
"Scheme Shares" means the AFH Shares:
(a) in issue as at the date of the Scheme Document;
(b) (if any) issued after the date of the Scheme Document and
prior to the Scheme Voting Record Time; and
(c) any AFH Shares issued on or after the Scheme Voting Record
Time but before the Scheme Record Time, either on terms that the
original or any subsequent holders thereof shall be bound by the
Scheme or in respect of which the holders thereof shall have agreed
in writing to be bound by the Scheme,
but, in each case, excluding any Excluded Shares and any AFH
Shares which are Management Arrangements Shares;
"Scheme Voting Record Time" means the time and date specified as
such in the Scheme Document by reference to which entitlement to
vote on the Scheme at the Court Meeting will be determined, which
is expected to be 6.00 pm on the day which is two days before the
date of the Court Meeting (or any adjournment thereof);
"Share Exchange Agreement" means the share exchange agreement in
the agreed form, to be entered into between Bidco and each of the
AFH Executive Directors;
"Substantial Interest" means a direct or indirect interest in 20
per cent. or more of the voting equity share capital of an
undertaking;
"Topco" means Cortina Topco Limited, a newly incorporated
company registered in the Cayman Islands which was formed for the
purposes of the Acquisition;
"UK MAR" means MAR, as adopted in the United Kingdom and amended
by the European Union (Withdrawal) Act 2018 and Market Abuse
(Amendment) (EU Exit) Regulations 2019;
"United States of America", "United States" or "US" means the
United States of America, its territories and possessions, any
state of the United States and the District of Columbia;
"US Exchange Act" means the United States Securities Exchange
Act of 1934 and the rules and regulations promulgated thereunder
(as amended);
"US Holders" means holders of AFH Shares ordinarily resident in
the US or with a registered address in the US, and any custodian,
nominee or trustee holding AFH Shares for persons in the US or with
a registered address in the US;
"Voting Scheme Shareholders" means holder(s) of Voting Scheme
Shares;
"Voting Scheme Shares" means all Scheme Shares, other than any
AFH Shares registered in the name of or beneficially owned by any
AFH Executive Directors;
"Wider AFH Group" means AFH and its subsidiaries, subsidiary
undertakings and associated undertakings and any other undertaking
(including any joint venture, partnership, firm or company) in
which AFH and/or such undertakings (aggregating their interests)
have a Substantial Interest; and
"Wider Bidco Group" means Bidco, funds advised by Flexpoint and
their respective associated undertakings and any other body
corporate, partnership, joint venture or person in which Bidco and
all such undertakings (aggregating their interests) have a
Substantial Interest and member of the Wider Bidco Group shall be
construed accordingly.
For the purposes of this Announcement, "subsidiary", "subsidiary
undertaking", "undertaking", "associated undertaking" and "equity
share capital" have the meanings given by the UK Companies Act
2006.
References to an enactment include references to that enactment
as amended, replaced, consolidated or re-enacted by or under any
other enactment before or after the date of this Announcement. All
references to time in this Announcement are to London time unless
otherwise stated.
A reference to "includes" shall mean "includes without
limitation", and references to "including" and any other similar
term shall be construed accordingly.
References to " pounds ", "pounds sterling", "Sterling", "GBP",
"GBP", "pence", "penny" and "p" are references to the lawful
currency of the United Kingdom.
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