Alpha Returns Group plc : Joint Venture Agreement for the acquisition of MY Securities Limited
Alpha Returns Group PLC
("Alpha Returns" or the "Company")
2 January 2014
Joint Venture Agreement for the acquisition of MY Securities Limited
Further to the Company's announcement on 27 December 2013, the Board of Alpha Returns, the AIM traded investing company focusing on investments in high-growth Asian economies, is pleased to announce that on 26 December 2013 it entered into a Joint-Venture Agreement ("JV Agreement") with Miss Tong Shyn Leng ("Miss Tong"), a Singapore entrepreneur with interests in a number of privately owned companies, to co-fund a BVI incorporated investment vehicle, Riche Bright Group Limited ("Riche Bright"), for the sole purpose of acquiring MY Securities Limited ("MY Securities"), a member firm of The Stock Exchange of Hong Kong Limited. This follows Riche Bright's conditional agreement to acquire the entire issued share capital of MY Securities.
MY Securities is a member of The Stock Exchange of Hong Kong Limited. It provides a wide range of brokerage services including margin trading and IPO subscription services on HKSE traded stocks principally to retail investors in Hong Kong via an internet trading platform. In its year ended 31 March 2013, MY Securities made an audited pre-tax profit of HK$142,000 (c.£11,000) on revenue (being fee income derived from the provision of securities broking services) of HK$3,097,000 (c.£242,000). At 31 March 2013 it had net assets of HK$21,612,000 (c.£1,687,000) and gross assets of HK$37,082,000 (c.£2,894,000).
The JV Agreement
The key terms of the JV Agreement are as follows:
Alpha Returns will invest a capital contribution of HK$9,000,000 on or before 31 January 2014 for a 30 per cent. interest in Riche Bright, part of which is to be satisfied by the issue of 26,668,668 ordinary shares of 0.01 pence each in Alpha Returns at a deemed price of 1p per share, with the balance payable in cash. The consideration amounts to approximately £903,000 with the consideration shares valued at 1.75p per share, the price at which trading in the Company's shares was suspended on 27 December 2013.
Miss Tong will invest a capital contribution of HK$17,500,000 (approximately £1,370,000) in cash for a 70 per cent. interest in Riche Bright.
Alpha Returns has an option to purchase up to an additional 40 per cent. interest in Riche Bright at HK$3,000,000 (currently approximately £234,000) per tranche of 10 per cent., payable in cash or, at the option of Miss Tong, in shares in Alpha Returns to be issued at a 50 per cent. discount to the closing market price on the exercise date of the option. The option is exercisable at any time after completion of the acquisition of MY Securities by Riche Bright up to and including 30 June 2016.
The board of Riche Bright will initially comprise two directors appointed by Miss Tong and one director appointed by Alpha Returns. Alpha Returns shall be entitled to appoint an additional director should its interest increases to 50% or more. The Chairman of Riche Bright is to be appointed by Miss Tong.
The JV Agreement may be terminated by written agreement and stipulates that it shall in any event terminate on the dissolution or liquidation of Riche Bright, which shall be dissolved if it is unable to complete the acquisition of MY Securities on or before 30 June 2014 (or at a postponed completion date).
On dissolution of Riche Bright, any surplus (after discharge of all debts and liabilities and establishment of reserves reasonably deemed necessary to meet contingent or unforeseen obligations) shall be applied to Alpha Returns and Miss Tong in accordance with their respective capital contributions with any profits thereafter in accordance with their respective shareholdings.
The Sale and Purchase Agreement relating to MY Securities (the "SPA")
On 11 December 2013, Riche Bright entered into a sale and purchase agreement for the acquisition of the entire issued share capital of MY Securities. Consideration payable amounted to HK$6 million plus MY Securities' net assets at completion, such net assets not to exceed HK$20 million. The maximum expressed consideration of HK$26 million to be satisfied as follows:
HK$500,000 in cash on execution of the SPA (paid);
HK$2.5 million in cash on or before 15 January 2014;
26,668,668 shares of an AIM traded company at a price of 0.9p per share on or before 15 February 2014; and
the balance in cash on completion, expressed to be as 30 June 2014 or such other date as may be agreed between the parties,
with tranches 1 to 3 understood to equate to the HK$6 million premium over net assets and tranche 4 to the net assets of MY Securities at completion.
There are various conditions precedent to the SPA, the most notable of which are that:
Riche Bright obtain approval from the Securities and Futures Commission of Hong Kong ("HKSFC") for it to be a substantial shareholder of MY Securities;
Riche Bright is to be satisfied with the results of legal and financial due diligence in respect of MY Securities; and
various warranties remain true and accurate and not misleading up to and as at the completion date.
If the conditions precedent are not satisfied or waived by 30 June 2014, the SPA may be terminated by Riche Bright and all monies received by the vendors shall be returned to Riche Bright within 14 days without interest. In the event that HKSFC approval is not obtained for reasons attributable to Riche Bright, the vendors may terminate the SPA, retain HK$2 million of the consideration monies and refund the balance together with any shares transferred to the vendors.
Should the SPA fail to complete other than for non-fulfilment of conditions precedent, then: in the case of default by the vendors, Riche Bright may terminate the SPA and all consideration monies and shares received by the vendors shall be returned plus interest (at the HSBC prime rate, capped at HK$150,000); and, in the case of default by Riche Bright, the vendors may terminate the SPA and they shall be entitled to forfeit all consideration monies and shares received, which latter they shall be entitled to sell at their absolute discretion.
Looking forward, the joint venture's strategy will focus on broadening MY Securities' coverage over time from a Hong Kong-based brokerage firm to cover international financial markets including London and New York.
Commenting on the investment, Christopher Neo, executive director of Alpha Returns, said: "The joint venture acquisition of MY Securities represents an important strategic investment for Alpha Returns as we seek to build our name in the Asia Pacific. We look forward to follow up this investment with more high-quality investments within the Asia-Pacific region."
For further information:
Alpha Returns Group plc
Christopher Neo, Executive Director 020 3286 6388
ZAI Corporate Finance Limited (Nomad) 020 7060 2220
Peter Trevelyan Clark / Ivy Wang
Peterhouse Corporate Finance (Broker) 020 7469 0935
This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Alpha Returns Group plc via Globenewswire