TIDMLEO
RNS Number : 8987O
Leo Insurance Services PLC
06 July 2010
6 July 2010
Leo Insurance Services Plc
("Leo" or the "Company")
Disposal and Posting of Circular to Shareholders
The Board of Leo announces that it is today posting to Shareholders a circular
(the "Circular") in relation to the proposed disposal of its 50 per cent.
holding in Grafton Insurance Services Limited ("Grafton"), the adoption of an
Investing Policy, the issue of Convertible Loan Notes, the change of name of the
Company to Palace Capital plc and a Notice of General Meeting.
The Company has today entered into a conditional agreement for the disposal of
its principal asset, a 50 per cent. interest in Grafton, to Safeland (a company
controlled by Larry Lipman and Errol Lipman, both directors of the Company) for
a consideration of GBP90,000. The consideration is to be settled by way of
offset of the outstanding indebtedness owed by the Company to Safeland at
Completion (currently totalling approximately GBP75,000) and the balance in
cash.
The proposed Disposal constitutes a fundamental change of business by the Group
pursuant to Rule 15 of the AIM Rules and is also subject to the provisions of
section 190 of the Act. In accordance with the AIM Rules and the Act, the
Company is required to send a circular to Shareholders setting out the reasons
for, and principal terms of, the Disposal, and also details of the Company's
proposed investing policy following Completion and to seek Shareholders'
approval for the Disposal and the proposed Investing Policy. A notice convening
a GM of the Company for 10.15 a.m. on 30 July 2010 to consider the Resolutions
is set out in the Circular.
In addition, the Company has been notified that immediately following
Completion, Leo Holdings (2008) Corporation will sell 2,157,570 Ordinary Shares
(representing approximately 29.9 per cent. of the issued share capital of the
Company) to Neil Sinclair, Pamela Sinclair, London Active Management Limited (a
company controlled by Neil and Pamela Sinclair), Stanley Davis and Andrew
Perloff.
Upon completion of the Disposal, Neil Sinclair and Stanley Davis will be
appointed as Directors of the Company and all the Existing Directors of the
Company will then resign immediately from the Board.
The full text of the letter to Shareholders from Edward Young, the non-executive
director of the Company, which is included in the Circular, is set out below.
For further information please contact:
+--------------------------------------+------------------------+
| Leo Insurance Services Limited | 020 8815 1600 |
| Paul Davis, Finance Director | |
| | |
+--------------------------------------+------------------------+
| Arbuthnot Securities Limited | 020 7012 2000 |
| Hugh Field / Ed Groome | |
| | |
+--------------------------------------+------------------------+
Definitions used in this announcement have the same meanings as given to them in
the Circular unless the context requires otherwise.
Arbuthnot Securities Limited, which is authorised and regulated in the United
Kingdom by the Financial Services Authority, is acting exclusively for the
Company in connection with the Disposal and will not be responsible to any
person other than the Company for providing the protections afforded to its
customers or for advising any other person on the contents of this document or
any matter, transaction or arrangement referred to herein. The responsibilities
of Arbuthnot Securities Limited as the Company's nominated adviser and broker
under the AIM Rules are owed solely to London Stock Exchange plc and are not
owed to the Company or to any Director, shareholder or any other person.
Arbuthnot Securities Limited is not making any representation or warranty,
express or implied, as to the contents of this document.
Full text of the letter to Shareholders from Edward Young
"1. Introduction
The Company has today entered into a conditional agreement for the disposal of
its principal asset, a 50 per cent. interest in Grafton, to Safeland (a company
controlled by Larry Lipman and Errol Lipman, both directors of the Company) for
a consideration of GBP90,000. The consideration is to be settled by way of
offset of the outstanding indebtedness owed by the Company to Safeland at
Completion (currently totalling approximately GBP75,000) and the balance in
cash.
The proposed Disposal constitutes a fundamental change of business by the Group
pursuant to Rule 15 of the AIM Rules and is also subject to the provisions of
section 190 of the Act. Accordingly, in accordance with the AIM Rules and the
Act, the Company is required to send a circular to Shareholders setting out the
reasons for, and principal terms of, the Disposal, and also details of the
Company's proposed investing policy following Completion and to seek
Shareholders' approval for the Disposal and the proposed Investing Policy. A
notice convening a GM of the Company for 10.15 a.m. on 30 July 2010 to consider
the Resolutions is accordingly set out at the end of this document.
The Company has been notified that, immediately following Completion which is
expected to be on 30 July 2010, Leo Holdings (2008) Corporation (a company
controlled by Larry Lipman and Errol Lipman, both directors of the Company) has
agreed to sell in aggregate 2,157,570 Ordinary Shares (representing
approximately 29.9 per cent. of the issued share capital of the Company) to Neil
Sinclair, London Active Management Ltd (a company controlled by Neil and Pamela
Sinclair), Stanley Davis, Pamela Sinclair (wife of Neil Sinclair) and Andrew
Perloff (the ("Purchasers") at a price of 2.25 pence per Ordinary Share. The
Purchasers have agreed to acquire the Ordinary Shares as follows:
+--------------------------------+----------------+----------------+
| | Ordinary | Percentage of |
| | Shares | Ordinary |
| | | Shares |
| | | in issue |
+--------------------------------+----------------+----------------+
| | | |
+--------------------------------+----------------+----------------+
| Neil Sinclair | 450,000 | 6.24% |
+--------------------------------+----------------+----------------+
| Andrew Perloff | 719,190 | 9.97% |
+--------------------------------+----------------+----------------+
| Stanley Davis | 719,190 | 9.97% |
+--------------------------------+----------------+----------------+
| London Active Management Ltd | 179,190 | 2.48% |
+--------------------------------+----------------+----------------+
| Pamela Sinclair | 90,000 | 1.25% |
+--------------------------------+----------------+----------------+
As a result, the shareholding of Leo Holdings (2008) Corporation will be reduced
to 476,356 Ordinary Shares (representing 6.6 per cent. of the issued share
capital of the Company). For the avoidance of doubt, after this sale, (i)
through the shareholding of Safeland in the Company, Larry Lipman and Errol
Lipman will each continue to have an interest in 511,919 Ordinary Shares
(representing 7.09 per cent. of the issued share capital of the Company); (ii)
Larry Lipman will continue to have a beneficial interest in 65,283 Ordinary
Shares (representing 0.09 per cent. of the issued share capital of the Company);
and (iii) Errol Lipman will continue to have a beneficial interest in 173,110
Ordinary Shares (representing 2.4 per cent. of the issued share capital of the
Company). Paul Davis will continue to have a beneficial interest in 24,346
Ordinary Shares (representing 0.03 per cent. of the issued share capital of the
Company).
In addition, Andrew Perloff and Stanley Davis have entered into an agreement
with Safeland to acquire all the Preference Shares in issue for a total
consideration not exceeding GBP15,000.
As part of these arrangements, on the date of Completion (i) Neil Sinclair and
Stanley Davis (the "Proposed Directors") will be appointed as Directors of the
Company; and (ii) all the Existing Directors of the Company will then resign
immediately from the Board.
Details of the Disposal (which is conditional, inter alia, on Shareholder
approval) and the Proposed Directors' proposals in relation to the Investing
Policy and the short term financing of the Company following Completion are set
out below. It is also proposed that, subject to Completion, the Company's name
be changed to "Palace Capital plc" as the Proposed Directors do not consider
that the current name reflects the proposed Investing Policy.
2. Background to and reasons for the Disposal
Leo was admitted to trading on AIM in March 2005, having been demerged from
Safeland. Leo subsequently acquired an effective 50 per cent. interest in
Grafton in December 2005. The other shares in Grafton are owned by members of
the executive management team of Grafton and a third party investor.
Grafton is a brokerage specialising in property insurance whose main asset is a
long term contract for the provision of property insurance services with
Safeland which expires in December 2013. This long term contract was entered
into in December 2005, when the initial stake was taken by the Company in
Grafton.
It was intended that the Board of Leo would source a number of potential
businesses that would be suitable for acquisition and to inject substantial
third party business into Grafton. As Shareholders know, unfortunately, none
has been completed.
Whilst Grafton itself has been profitable (the Company's share of the results of
its interest in Grafton in the year ended 31 January 2010 was a post-tax profit
of GBP34,061), the costs of running Leo as a public company (GBP79,051 in the
same period) are in excess of the share of profits from Grafton attributable to
Leo. Leo reported a consolidated loss after tax for the year ended 31 January
2010 of GBP50,840. The Group's net liabilities as at 31 January 2010 were
GBP95,968, whilst the Company's interest in Grafton was carried as a non-current
asset of GBP20,237. Source: Leo's Annual Report for the year ended 31 January
2010.
In order to ensure that Leo has been able to continue as a going concern,
Safeland has for a number of years been supporting Leo financially. However,
without the prospect of an improvement in the financial position or trading
performance of Leo in the short term, Safeland is unwilling to continue that
support and therefore the Existing Directors have sought alternative options.
An approach was received by the Existing Directors from the Purchasers to
acquire a 29.9 per cent. stake in the ordinary share capital of the Company from
existing Shareholders, subject to the Company selling its 50 per cent. interest
in Grafton.
The Existing Directors commissioned a "fair market valuation" of the Company's
interest in Grafton (being "the price at which such property would change hands
between a willing buyer and a willing seller, neither being under any compulsion
to buy or sell and both having reasonable knowledge of the relevant fact") from
an independent third party, Fisher Corporate PLC.
The Company has agreed to dispose of its effective 50 per cent. interest in
Grafton (being 100 per cent of the "B" shares in Grafton) to Safeland for
GBP90,000, which is in line with the "fair market valuation" provided to the
Board. The consideration of GBP90,000 is to be settled by way of offset of the
outstanding indebtedness owed by the Company to Safeland at Completion
(currently totalling approximately GBP75,000) and the balance in cash.
Assuming the Disposal is approved by the Company's shareholders, the Proposed
Directors will be appointed to the Board and all the Existing Directors will
step down from the Board. At the time of Completion, Safeland will also
withdraw its financial support for the Company.
In addition and subject to Completion (i) Safeland has also agreed to sell to
Andrew Perloff and Stanley Davis all of the Preference Shares for up to
GBP15,000; and (ii) Messrs. Larry Lipman, Errol Lipman and Paul Davis have each
agreed with the Company to waive, for nil consideration, all of the outstanding
options (being in respect of 911,458 Ordinary Shares each and in aggregate
outstanding unexpired options over 2,734,374 Ordinary Shares) that have been
issued over Ordinary Shares in Leo.
At Completion and prior to the subscription of the Convertible Loan Notes
referred to below, the Company is expected to have approximately GBP85,000 of
net liabilities. Accordingly, following Completion, the Company will be wholly
dependent on the Proposed Directors providing or procuring adequate financial
support to the Group to enable it to meet its liabilities as they fall due.
Shareholders' attention is therefore drawn to paragraphs 5 and 6 below.
The value of the Company's net assets has reached a level that is less than half
of its called-up share capital. In such circumstances, the Directors are
required under section 656 of the Act to convene a general meeting of the
Company for the purpose of considering whether any, and if so what, steps should
be taken to deal with the situation. This matter will be considered at the GM.
The steps which are recommended by the Directors are set out below; if the steps
as further described in this paragraph 2 and in paragraphs 5 and 6 of this
letter are implemented, the Proposed Directors do not consider that any
additional action needs to be taken to deal with this situation.
3. Proposed Directors
Details of the Proposed Directors are as follows:
Ronald Neil Sinclair, aged 67
Neil has nearly 50 years' experience in the property sector. He was a founder of
Sinclair Goldsmith Chartered Surveyors which was admitted to the Official List
in 1987 and subsequently merged with Conrad Ritblat in 1993, when he became
Executive Deputy Chairman. Neil was appointed Non-Executive Chairman of Baker
Lorenz, surveyors in 1999 and which was sold to Hercules Property Services plc
in 2001. He was appointed a Non-Executive Director of Tops Estates plc, a fully
listed company, in 2003 and remained so until it was sold to Land Securities plc
in 2005. He was one of the founders of Mission Capital plc, which was admitted
to AIM in 2005, and was Executive Chairman until February 2008. He was also
featured in "Top 100 Property People in Property Week" in 2003.
He was elected Chief Barker (Chairman) for 1991 for the Variety Club Children's
Charity one of the country's premier charities and is still a Trustee. He
co-founded "the PROPS", one of the industry's leading events which has raised in
excess of GBP6 million for the Variety Club's Easy Riders Wheelchair Programme.
He is also a Director and a Vice President of Variety International, the
Children's Charity based in Los Angeles which raises in excess of GBP30m per
annum for sick, disabled and disadvantaged children.
Stanley Davis, aged 72
Stanley is a successful serial entrepreneur who has been involved in the City of
London since 1977. His founding company was company registration agents Stanley
Davis Company Services Limited which he sold in 1988. In 1990 he became Chief
Executive of a small share registration company which became known as IRG plc
and acquired a number of businesses including Barclays Bank Registrars and was
sold for a substantial sum to The Capita Group plc. He is Chairman of Stanley
Davis Group Limited specialising in company formations, property and company
searches. He is also Chairman of Strategic Global Investments Limited and Tadsec
Advanced Homeland Security Technologies Ltd, Israel.
Service Contracts
The Proposed Directors will not have service contracts and will not receive any
fees or salary until the Company has completed an acquisition.
Board Composition
In addition, the Company has been notified that it is the intention of the
Proposed Directors that in due course following Completion, a new independent
non-executive director will be appointed to the Board.
4. Proposed investing policy
If the Disposal is completed, the Company will be required under AIM Rules to
adopt an investing policy which must also be approved by Shareholders at the GM.
The objective will be to create shareholder value through making property
related investments. The intention is to build the Company by selected
acquisitions using its Ordinary Shares where appropriate to fund acquisitions.
It is intended that the Company will take an active role in managing the
investments by integrating them into the Group.
Initial focus by the Proposed Directors will be investment opportunities
relating to car parks, outdoor advertising and billboarding and care homes. The
Proposed Directors consider that car parking is a recession resistant business
and that shortage of capacity in many towns is a significant issue. Therefore
the Proposed Directors will initially focus on acquiring companies that manage
car parks for third parties or car parks themselves or available vacant
development sites which are unlikely to be built upon for some time. The
Proposed Directors are aware of a number of sites which might provide car
parking opportunities. The Proposed Directors believe that car parks also have
considerable synergy with the billboard and outdoor advertising industries.
The proposed Investing Policy, following Completion, will be for the Company to
seek to make property related acquisitions or investments which may include:
(i) freehold or long leasehold property or asset backed businesses owning
freehold or long leasehold property;
(ii) property-related businesses which manage asset backed businesses;
(iii) distressed properties, in partnership with others, where the Company
would manage the asset(s) for a fee and participate in any potential upside;
(iv) private property companies; and
(v) property services businesses where the majority of the income is
effectively recurring, such as property management, rating and utility
brokerage.
There will be no maximum exposure limit to any single investment nor restriction
on gearing or cross holdings. However, it is currently expected that, at least,
the first acquisition would constitute a Reverse Takeover for the purposes of
the AIM Rules which would be conditional, inter alia, on the consent of
Shareholders in General Meeting and require the publication of a new Admission
Document. The nature of the returns to Shareholders will be dependent on the
assets acquired. After an acquisition has been made, it is expected that
returns to Shareholders would be initially in the form of capital appreciation
but the Proposed Directors will consider the payment of dividends if and when
the Company has sufficient cash resources and retained reserves.
The Proposed Directors consider that this is an appropriate time in the property
and economic cycle to implement this strategy.
As a result of the Disposal and in accordance with AIM Rule 15, the Investing
Policy must be approved by Shareholders in general meeting and the Company must
implement the Investing Policy within 12 months of Completion, otherwise trading
in the Company's Ordinary Shares on AIM will be suspended in accordance with AIM
Rule 40. If following suspension of the Ordinary Shares in accordance with AIM
Rule 40, the Ordinary Shares have not been re-admitted to trading on AIM within
six months, the admission of the Ordinary Shares to trading on AIM will be
cancelled.
5. Financing of Company post Completion
As Shareholders are aware, the Company has been dependent on the financial
support of Safeland for a number of years to enable it and the Group to continue
trading. Upon completion of the Disposal and the withdrawal of Safeland's
financial support for the Company, the Company is expected to have approximately
GBP85,000 of net liabilities (including in respect of the Preference Shares) and
will be wholly dependent on the Proposed Directors providing or procuring
adequate financial support to the Company to enable it to meet its liabilities
as and when they fall due.
Andrew Perloff and Stanley Davis, who have entered into an agreement to purchase
the Preference Shares, have therefore given an irrevocable undertaking to the
Company that the Preference Shares will only be redeemed if the Company has
sufficient distributable reserves to effect the redemption and the Directors of
the Company unanimously decide that there is adequate cash resources within the
Company to enable the Company and the Group to meet their liabilities as they
fall due for at least 12 months from the date of any such redemption.
The Company has also agreed, conditional on the appointment of the Proposed
Directors to the Board, to issue the Convertible Loan Notes which will be
subscribed for by the Purchasers (as described in more detail in paragraph 6
below). The issue of the Convertible Loan Notes will provide a further
injection of GBP60,000 into the Company which will be used to pay for
professional costs incurred in connection with the Disposal and to fund working
capital in the short term.
The Proposed Directors believe that the funds immediately available to the
Group, which the Proposed Directors expect to be approximately GBP75,000 after
Completion and subscription of the Convertible Loan Notes, will only be
sufficient to cover the costs of the Company and the Group for six months and
Shareholders should therefore note that the Company will be dependent on raising
an alternative source of funding within that time period, probably through a
placing, in order to enable the Company to continue as a going concern and to
redeem the Preference Shares.
Implementation of the Investing Policy by the Proposed Directors is therefore
wholly dependent on the Company raising further capital or using its Ordinary
Shares to fund acquisitions.
6. Convertible Loan Notes
The Company has agreed to issue GBP60,000 of Convertible Loan Notes for which
the Purchasers have undertaken to subscribe, conditional upon, inter alia, the
passing of the Resolutions, the completion of the Disposal and the appointment
of the Proposed Directors to the Board.
Unless converted into Ordinary Shares, the Convertible Loan Notes are required
to be repaid in cash on or before 31 July 2012. No coupon will be payable on
the outstanding Convertible Loan Notes.
The Convertible Loan Notes are convertible on or before 31 July 2012 at 2.25
pence per Ordinary Share. Assuming full conversion of the Convertible Loan
Notes, 2,666,667 Ordinary Shares would be issued (equating to 27.0 per cent. of
the current issued Ordinary Shares as enlarged by the Ordinary Shares to be
issued on such conversion).
The following have agreed to subscribe for Convertible Loan Notes, which would
if converted, require the issue to them of the following Ordinary Shares:
+-----------------------------+---------------+---------------+
| | Convertible | Ordinary |
| | Loan Notes | Shares |
| | | required to |
| | | be issued |
| | | upon |
| | | conversion |
+-----------------------------+---------------+---------------+
| | | |
+-----------------------------+---------------+---------------+
| Neil Sinclair | GBP2,000 | 88,889 |
+-----------------------------+---------------+---------------+
| Andrew Perloff | GBP24,500 | 1,088,889 |
+-----------------------------+---------------+---------------+
| Stanley Davis | GBP31,500 | 1,400,000 |
+-----------------------------+---------------+---------------+
| London Active Management | GBP2,000 | 88,889 |
| Ltd | | |
+-----------------------------+---------------+---------------+
No waiver of any obligation to each, or any, of the Purchasers to make a
mandatory offer to Shareholders under Rule 9 of the City Code on conversion of
the Convertible Loan Notes has been sought.
7. General Meeting
Set out at the end of this document is a notice convening the GM of the Company
for 10.15 a.m. on 30 July 2010 to be held at the offices of Hamlins LLP,
Roxburghe House, 273/287 Regent Street, London W1B 2AD.
As set out in paragraph 2 above, Shareholders will be able to consider, in
accordance section 656 of the Act, at the GM whether any, and if so what, steps
should be taken to deal with the reduction in net assets.
The following resolutions will be proposed at the GM:
· Resolution 1 is an ordinary resolution to authorise the Directors to
sell the Company's interest in Grafton. The Disposal constitutes a transaction
by the Company resulting in a fundamental change of business for the purpose of
Rule 15 of the AIM Rules and a substantial property transaction for the purposes
of section 190 of the Act, and accordingly the completion of the Disposal and
the adoption of the proposed Investing Policy require the approval of
Shareholders in a general meeting;
· Resolution 2 is an ordinary resolution to authorise the Directors to
approve and implement the Investing Policy;
· Resolution 3 is an ordinary resolution to authorise the Directors
under section 551 of the Act to issue Ordinary Shares. With respect to the
Convertible Loan Notes, the Act requires that the authority of Directors to
allot relevant securities should be subject to the approval of Shareholders in
general meeting or to an authority set out in the Company's Articles of
Association. Resolution 3 will be proposed at the General Meeting as an
ordinary resolution to authorise the Directors to issue the Convertible Loan
Notes up to a total nominal value of GBP60,000 representing 2,666,667 new
Ordinary Shares on conversion. This authority will expire 15 months after the
passing of the Resolution;
· Resolution 4 is a special resolution conditional upon the completion
of the Disposal to change the name of the Company to "Palace Capital plc"; and
· Resolution 5 is a special resolution to disapply statutory
pre-emption rights under section 571 of the Act in respect of the issue of the
Convertible Loan Notes which are convertible into Ordinary Shares. The Act
requires that any equity securities issued wholly for cash must be offered to
existing Shareholders in proportion to their existing holdings unless otherwise
approved by Shareholders in general meeting or accepted under the Company's
Articles of Association. Accordingly, a special resolution will be proposed at
the GM to vary the Directors' authority to issue Convertible Loan Notes for cash
other than on a pro-rata basis. This authority will expire 15 months after the
passing of the Resolution.
8. Action to be taken
A Form of Proxy is enclosed for use at the GM. Whether or not you intend to be
present at the meeting you are requested to complete, sign and return the Form
of Proxy in accordance with the instructions printed thereon to the Company's
registrars, Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent
BR3 4TU, as soon as possible but in any event so as to arrive not later than
10.15 a.m. on 28 July 2010. The completion and return of the Form of Proxy will
not preclude Shareholders from attending the GM and voting in person should you
subsequently wish to do so.
9. Documents available
Copies of this document will be available to the public, free of charge, at the
Company's registered office and at the offices of Arbuthnot Securities at
Arbuthnot House, 20 Ropemaker Street, London EC2Y 9AR during usual business
hours on any weekday (Saturdays, Sundays and public holidays excepted) for one
month from the date of this document. This document will also be available on
the Company's website, www.leoinsurance.co.uk.
10. Related party transactions
As the Existing Directors are all directors of Safeland and themselves comprise
a majority of the directors of Safeland, (i) the Disposal is deemed a related
party transaction pursuant to Rule 13 of the AIM Rules; and (ii) all of the
Existing Directors are considered to be involved in the Disposal as a related
party for the purposes of Rule 13 of the AIM Rules.
Accordingly Arbuthnot Securities, in its role as nominated adviser to the
Company, has confirmed to the Board of the Company that it considers that the
terms of the Disposal are fair and reasonable insofar as Shareholders are
concerned.
11. Recommendation
The Directors consider that the Disposal and, subject to Completion, the
adoption of the proposed Investing Policy, the issue of the Convertible Loan
Notes and proposed change of name are in the best interests of the Company and
its Shareholders as a whole, and therefore unanimously recommend that
Shareholders vote in favour of all the Resolutions to be proposed at the GM as
they intend to do in respect of their beneficial holdings, which in aggregate
amount to 262,739 Ordinary Shares, representing approximately 3.65 per cent. of
the Company's issued share capital."
=-ENDS--
This information is provided by RNS
The company news service from the London Stock Exchange
END
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