TIDMARBB TIDMSTB
RNS Number : 9757H
Arbuthnot Banking Group PLC
04 December 2015
Arbuthnot Banking Group PLC
Proposed disposal of Everyday Loans Group by Secure Trust Bank
PLC
Arbuthnot Banking Group PLC ("ABG", the "Group") today announces
that its Retail Bank, Secure Trust Bank PLC ("STB"), has agreed on
the conditional sale of its branch based non-standard consumer
lending business, Everyday Loans Holdings Limited ("ELG"), to Non
Standard Finance plc ("NSF") (the "Disposal").
ABG is the holding company for Arbuthnot Latham & Co.,
Limited and STB PLC, in which it owns a 51.9% shareholding.
Highlights
-- Consideration comprises GBP107 million in cash and GBP20 million in NSF ordinary shares(1)
-- On completion, NSF will repay c. GBP108 million intercompany debt to STB
-- Expected post tax profit on disposal of not less than GBP115 million
-- On a proforma basis as at 31 October 2015, ABG estimates a 52% enhancement in the Group's CET1 ratio to 16.4% as
a result of the Disposal(2)
-- Since 30 June 2015, STB customer lending balances have continued to grow and now exceed GBP1 billion (30 June
2015: GBP852m)
-- Continued exposure to ELG through STB's shareholding in NSF and GBP30m loan to NSF
-- STB will retain its Moneyway personal lending business which is not part of the Disposal
-- The Disposal is conditional on NSF shareholder approval of its equity fundraising, admission of the new NSF
shares to the main market of the London Stock Exchange, regulatory approval and satisfaction of the conditions to
the NSF financing
-- Completion expected in first quarter of 2016
Commenting on the Disposal, Sir Henry Angest, Chairman and Chief
Executive of Arbuthnot Banking Group, said: "This disposal allows
Secure Trust Bank PLC and Arbuthnot Banking Group PLC to capitalise
future profits and thus strengthen the business and support further
growth."
Paul Lynam, Chief Executive Officer of Secure Trust Bank PLC,
said:
"The unsolicited approach from Non Standard Finance PLC for the
Everyday Loans Group presented an attractive option to accelerate
our strategy of proportionately reducing our exposure to personal
unsecured loan products whilst we invest in our strongly growing
Motor, Retail and SME lending activities. By monetising substantial
levels of future potential profit we are creating material tangible
shareholder value now. This transaction, when completed, broadens
the range of strategic options available to us which we will
consider in more depth and update the market in due course. I
believe today's announcement demonstrates the Board's commitment to
the robust control of the growth of the bank through changes to the
composition of the lending portfolio."
Notes:
(1) Subject to a net asset adjustment mechanism
(2) Proforma basis, as if the Disposal had occurred on 31
October 2015, based on expected capital gain and reduction in Total
Risk Exposure
Note: STB and NSF also today issued separate announcements,
providing further details on the Disposal.
Enquiries:
Arbuthnot Banking Group
PLC
Sir Henry Angest, Chairman Tel: 020 7012 2400
and Chief Executive
Andrew Salmon, Group
Chief Operating Officer
James Cobb, Group Finance
Director
David Marshall, Director
of Communications Tel: 020 7012 2400
Secure Trust Bank PLC
Paul Lynam, Chief Executive
Officer
Neeraj Kapur, Chief
Financial Officer
----------------------------- ---------------------
Canaccord Genuity Limited Tel: 020 7665 4500
(Nominated Adviser and
Broker)
Sunil Duggal
Roger Lambert
----------------------------- ---------------------
Numis Securities Ltd Tel: 020 7260 1000
(Broker)
Chris Wilkinson
Mark Lander
----------------------------- ---------------------
Bell Pottinger Tel: 020 3772 2566
(Financial PR)
Ben Woodford
Zoe Pocock
----------------------------- ---------------------
Introduction
Arbuthnot Banking Group's (ABG) subsidiary, Secure Trust Bank
PLC (STB) has agreed on the conditional sale of its non-standard
consumer lending business, Everyday Loans Group (ELG), to Non
Standard Finance (NSF) for GBP107 million in cash (subject to a net
asset adjustment) and GBP20 million in NSF ordinary shares. On
completion, NSF will repay the current intercompany debt of GBP108
million to STB.
Background on Everyday Loans Group
As at 30 June 2015 ELG provided unsecured loans to more than
37,000 customers, predominantly in lower income groups. It operates
through a national network of 36 branches where loans are
originated, serviced and collected. ELG forms part of STB's
consumer finance division, alongside Moneyway, STB's direct online
and telephone lending business which is being retained.
ELG represents approximately GBP102 million of the GBP189
million receivables of STB's personal lending consumer division as
at 30 June 2015, and generated revenues in FY14 of GBP40.0 million,
compared with GBP49.4 million for the division. ELG generated
pre-exceptional profit before tax of GBP12.9 million in FY14. As at
30 June 2015, ELG had gross assets of GBP107 million and net assets
of GBP7 million.
Further information in relation to ELG, including its
consolidated historic financial statements, is contained in NSF's
announcement today and in the related prospectus to be issued in
due course.
Transaction terms
STB has agreed to sell ELG to NSF for GBP107 million in cash and
GBP20 million in NSF ordinary shares, subject to a net asset
adjustment based on a 30 November 2015 balance sheet. On
completion, NSF will repay current intercompany debt of GBP108
million to STB. The transaction has been structured such that the
economic risk and reward of the ELG business from 30 November 2015
will pass to NSF on completion.
The transaction is being funded by NSF by way of a fully
underwritten placing and open offer and debt facilities of GBP85
million (of which GBP65 million will be drawn down to fund the
Disposal)(the "Facilities"). STB has agreed to provide a proportion
of the funding for the Facilities with a GBP30 million three year
term loan. The loan is secured on ELG's assets.
If the net asset adjustment mechanism referred to above is more
than a material amount, then the Disposal may not proceed. The
determination of the net asset value as at 30 November 2015 is
expected to be completed before the NSF general meeting.
The NSF ordinary shares to be issued to STB will be retained and
subject to a six month lock-up.
STB has also agreed to provide certain services to ELG for a
transitional period post completion.
The Disposal is conditional on NSF shareholder approval of its
equity fundraising, admission of the new NSF shares to the main
market of the London Stock Exchange, regulatory approval and
satisfaction of the conditions to the NSF financing but does not
require shareholder approval by STB or ABG. NSF has agreed to a
break fee of GBP1 million, payable to STB under certain
circumstances, including should the NSF directors change their
recommendation of the acquisition or completion does not occur
(other than as a result of a material breach by STB).
Reasons for and financial effects of the Disposal
Under STB's ownership, ELG has achieved impressive growth,
within the constraints imposed upon it as part of a highly
regulated banking group. An unsolicited approach revealed that NSF,
headed by John Van Kuffeler (former CEO and Chairman of Provident
Financial Group PLC), was prepared to pay an attractive valuation
for ELG.
ELG is expected to target a broader customer base and offer a
wider range of products under NSF's ownership. The greater
opportunity for ELG under NSF's ownership is a reason why STB is
providing funding of GBP30 million to NSF and is accepting NSF
equity as part of the Disposal consideration. The other finance
providers to NSF are Royal Bank of Scotland and Shawbrook Bank.
After repayment of debt, transaction costs and management
incentives, STB expects to book a post-tax profit on the Disposal
of not less than GBP115 million and for the equity base of STB to
almost double to c. GBP250 million.
ABG estimates that the Group's CET1 ratio will grow by 52% to
16.4% as a result of the Disposal.
While in the short term the Disposal is expected to be dilutive
to earnings, given the disposal of ELG's profit streams, the Board
of STB is confident that the proceeds can be reinvested to
accelerate STB's growth prospects and secure new income
streams.
STB is continuing to see strong growth in its Motor, Retail and
SME lending activities. The capital generated by the Disposal will
support the ongoing increase in customer lending balances which now
exceed GBP1 billion for the first time.
STB will provide further commentary in respect of its strategy
when it presents its 2015 final results on 17 March 2016. ABG will
also announce their full year results on 17 March 2016.
STB has reiterated that it anticipates its 2015 full year
results will be in line with market expectations, after taking into
account certain of the deal costs already incurred which are not
dependent on completion of the Disposal.
The Board therefore believes that the Disposal is in the
interests of the Group and represents an excellent opportunity to
realise value for shareholders for reinvestment into STB's existing
profitable consumer and business lending divisions, in line with
STB's stated ambition to shift, over time, the majority of STB's
balance sheet lending into secured lending assets.
Expected timetable
Expected posting of NSF's 7 December 2015
prospectus
---------------------------- --------------------------
NSF general meeting 6 January 2016
---------------------------- --------------------------
FCA approval and completion Decision expected Q1 2016
---------------------------- --------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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