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Absolute Capital Man (ACMH)

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Thursday 18 January, 2007

Absolute Capital Man

Acquisition

Absolute Capital Mgmt Holdings Ltd
18 January 2007


                                                                 18 January 2007



                  Absolute Capital Management Holdings Limited
                                    ('ACM')

          Acquisition of Argo Capital Management creating an enlarged
               multi strategy group with assets under management
           increasing from $1.5 billion to in excess of $2.4 billion


Highlights

   • To acquire top quartile debt fund manager Argo Capital Management for
     £50.46 million

   • Assets under management to increase from $1.5 billion to $2.4 billion

   • Immediately earnings enhancing

   • Brings global coverage and extends the pool of investment talent

   • Adds significant product diversification and revenue from debt/finance
     opportunities in emerging markets

   • Underlines the scalability of the group's strategy


ACM (AIM: ACMH), the fund management company focused on delivering investment
returns through the management of absolute return funds, today announces the
conditional acquisition of the award winning hedge fund management businesses of
Argo Capital Management comprising Argo Capital Management Limited, a UK
investment advisory company regulated by the Financial Services Authority,
Argonaftis Capital Management (Overseas) Limited, domiciled in Cyprus and
regulated by the Cyprus Securities and Exchange Commission and Argo Capital
Management (Asia) Pte. Limited, domiciled in Singapore (collectively 'Argo').

Argo's business is focused on generating absolute returns through the management
of 3 funds investing in emerging market fixed income credit products, distressed
debt, special situations and private equity. The acquisition takes ACM,
primarily a developed markets equity manager, into credit markets for the first
time, and opens up substantial new opportunities in both debt investing and in
emerging markets.

The aggregate consideration payable by ACM under the acquisition agreements is
£50.46 million, to be satisfied by the issue of 12.3 million new ordinary
shares, totaling £43.91 million based on the closing price of an ACM ordinary
share on the day prior to this announcement, and a cash payment of £6.55
million. In addition, up to a maximum of 2,344,000 further shares may be issued
to the vendors prior to 1 September 2007 pursuant to certain performance
conditions set out in the purchase agreements. Immediately following completion,
application will be made for the admission to AIM of the 12.3 million new
ordinary shares which rank pari passu in all respects with the existing shares.

Further to ACM's announcement on 11 December 2006 to return up to €20 million to
shareholders post the audit of its 2006 results, ACM's Board confirms that in
light of this transaction, it intends to substantially increase the amount of
such dividend. Under the terms of the purchase agreements, should the increase
to ACM's dividend be less than previously forecast, further cash consideration
of up to £1.23 million will become payable to the vendors.


The acquisition

   •  The enlarged group will have assets under management in excess of
      $2.4 billion:

        -  As at 1 January 2007 Argo had $882 million of assets under management
           and ACM had in excess of $1,550 million of assets under management

   •  Argo has a consistent and award winning long term record. In 2004 the Argo
      Fund was voted by Hedge Fund Review as the Best Performing Single Manager 
      Fund on a Risk Adjusted Basis over three years. The same fund has
      consistently been in the top 10 hedge funds ranked by Sharpe ratio in the 
      last five years in the MARHedge database. In addition to that, the Argo 
      Special Situations Fund has been short-listed by the Eurohedge Awards over
      the last two years in the High yield and Distressed categories.

        -  The Argo Fund has delivered average annualized returns of over 18.0%
           since its launch in October 2000.
        -  The Argo Global Special Situations Fund has averaged annualized
           returns of 16.0% since its launch in August 2004.
        -  Both funds have consistently shown top quartile Sharpe ratios (an
           industry standard measure of risk adjusted returns). The monthly 
           volatility of returns is very low, with each fund incurring just 3 
           down months over their respective lives.
        -  Argo's 19 employees are expected to remain employed with the group
           post completion.

   •  In the 12 months ended 31 December 2006, Argo generated unaudited
      operating profits before bonuses of approximately €25.21 million from 
      revenue of approximately €29.07 million (2006 figures subject to audit). 
      Argo's revenue comes entirely from the management and performance fees 
      generated by its 3 funds.

   •  Andreas Rialas, the founder of Argo, will remain CEO of the Argo business 
      and will be responsible for building up the Debt and Structured Finance
      division of the enlarged group. As part of the transaction Andreas and 
      Kyriakos Rialas have entered into minimum 3 year term service contracts, 
      details of which are provided below. Andreas Rialas will join the Board of
      ACM and serve as ACM's Co-Chief Investment Officer.

   •  A bonus scheme appropriate to the contribution to the group will be
      established for Argo which will be subject to approval by the remuneration
      committee.

   •  The consideration for the acquisition has been determined on the basis 
      that net current assets of Argo at 31 December 2006 are £1. To the extent
      audited net current assets at this date differ, a balancing payment will 
      become due.

   •  Completion of the transaction is conditional upon approval from Cyprus 
      Securities and Exchange Commission to the change in control of Argonaftis
      Capital Management (Overseas) Limited. The Board expects to receive this
      approval within the next two weeks. ACM has received approval from the UK
      Financial Services Authority to the change of control of Argo Capital 
      Management Limited.

   •  The enlarged group will benefit from:

        -  the combination of two award winning and highly successful
           alternative asset management firms which together will provide a 
           broader investment proposition to existing and new investors;
        -  complementary businesses diversifying the product range across the
           enlarged group;
        -  outstanding track records in each division (Equity and Debt) over 5
           years and 6 years respectively;
        -  a broader geographic presence which will now cover the Cayman
           Islands, Switzerland (2 offices), the United Kingdom, Singapore, 
           Spain, Cyprus, Poland and Brazil;
        -  increased size and scope of the business and from this the ability to
           invest in a broader range of financial instruments over a wider 
           geographical area - particularly emerging markets; and
        -  investment returns which are un-correlated to their respective
           investment universe, and in which volatility is low.


Investment track record for the 11 funds now managed by the ACM group

Fund                               AUM $m Annualised
                                          Return *    Down months  Launch date

ACM FUNDS

Absolute Return Europe Fund          478   16.33      2 out of 58  March 2002
European Catalyst Fund               185   20.59      4 out of 39  October 2003
Absolute Germany Fund                218   20.22      2 out of 36  January 2004
Absolute East West Fund              138   24.66      1 out of 18  July 2005
Absolute Octane Fund                 288   46.86      1 out of 18  July 2005
Absolute Large Cap Fund              105   24.85      1 out of 11  February 2006
Absolute India Fund                   19   18.77      0 out of 6   July 2006
Absolute Activist Value Fund         120   41.90      0 out of 6   July 2006


ARGO FUNDS

Argo Fund                            446   18.49      3 out of 74  October 2000
Argo Global Special Situations Fund  380   16.00      3 out of 28  August 2004
Argo Capital Partners Fund            52    N/A       N/A          August 2006

Note: * Average annualized growth rate from inception of each fund to end
December 2006. Assets under Management as at 1 January 2007.


Commenting on the acquisition, ACM's Chairman and Chief Executive Officer Sean
Ewing said: 'This is an exciting new development for ACM, as it both diversifies
and broadens the fund management activities of the group. The debt and
structured finance market is a key leg to our business model and in Argo we have
acquired an outstanding business with an excellent 6 year track record. Argo's
fundamental and detailed style of investment is complementary and near identical
to the approach ACM applies to equity markets.

Andreas, Kyriakos and the team will add significant strength to our overall
strategy. Together we intend to build the ACM Group into a sizable, scaleable,
and diverse absolute return asset management business whilst we continue to
focus on delivering superior risk adjusted returns to our customers.'

Andreas Rialas, CEO of Argo said: 'We are very pleased to be joining the ACM
team and look forward to developing our existing business, and creating new
opportunities for the group. Both teams have developed a successful approach to
investing in different asset classes, based on fundamentally similar investment
analysis and trading disciplines.

There was a meeting of minds during our discussions, and the realization that
putting the two businesses together would create substantial opportunities for
growth both in our existing funds and in the development of new funds. On a
personal level, I am very pleased to be joining the Board of ACM and taking on
the role of ACM's Co-Chief Investment Officer'.



Enquiries:

ACM
Sean Ewing, Chairman and CEO                T: +44 (0)7768 255 472

Solomon Hare Corporate Finance
Nick Reeve                                  T: +44 (0) 117 933 3344

Cardew Group
Tim Robertson                               T: +44 (0)20 7930 0777
Shan Shan Willenbrock
David Roach

A conference call will be held for analysts and investors at 11.00am (UK time)
today. The call can be accessed by dialling:


UK:                                         T: 0800 358 2705
International                               T:+44 (0)20 8609 0205
Pin code: 190702#

A conference call will be held for the media at 12.00pm (UK time) today. The
call can be accessed by dialing:


UK:                                         T: 0800 358 2705
International                               T:+44 (0)20 8609 0205
Pin code: 699842#


About Andreas Rialas

Current directorships and partnerships held by Andreas Rialas, aged 39:

   • Argo Capital Management Limited
   • Argonaftis Capital Management (Overseas) Limited
   • Argo Fund
   • Argo Global Special Situations Fund
   • Argo Capital Partners Fund
   • On-Telecom
   • Mayhem Project LLC
   • PT Polytama Propindo

There is no further information required to be disclosed under schedule 2 (g) of
the AIM rules.

Andreas Rialas has entered into a service agreement with ACM for the position of
CEO of the Argo business and Co-Chief Investment Officer of ACM. The agreement
is terminable on 6 months' notice by either party subject to an initial fixed
term of 3 years. His salary is initially set at €120,000 per annum and is
subject to annual review by ACM's remuneration committee.


About ACM

Absolute Capital Management Holdings Limited is a specialist fund management
company focused on delivering investment returns through the management of
absolute return funds in equities and fixed income products, since inception in
2004. The enlarged company now has offices in the Cayman Islands, Switzerland,
the United Kingdom, Singapore, Spain, Cyprus, Poland and Brazil. Post completion
the group will manage 11 funds and have in excess of $2.4 billion under
management. ACM listed on AIM on 3rd March 2006.

ACM Investment Achievements -

No. 1 Best Hedge Fund Group, 2006 Hedge Fund Reveiw
No. 1 European Event Driven Fund, 2005 Eurohedge
No. 1 Risk Adjusted Long/Short Fund 2005 Barclay Group
No. 1 Germany Fund over 1, 2 and 3 years, 2004 Micropal
No. 1 European Long Short Fund, 2002 HFI


About Argo

Argo was one of the first European emerging markets focused hedge fund groups
with a very diverse group of investors made up of both institutional and High
Net Worth clients. It has always sought to provide clients with a product that
would give them a risk adjusted exposure to emerging markets. The group offers
three different funds as follows:

The Argo Fund invests globally in emerging markets. Argo invests on a
relative-value basis across the whole spectrum of credit products - distressed
debt, bank loans and Eurobonds - in order to maximise the total return in a
diversified sovereign and corporate fixed-income portfolio.  The strategy takes
an active long/short approach to reduce volatility. Argo also invests in
distressed debt/special situations where prices may become depressed due to
market sentiment and is experienced in taking proactive positions in corporate
and sovereign restructurings using a deep value bottom up approach.

The Argo Global Special Situations Fund is strategy specific and not bound by
geography, although the majority of its portfolio is in emerging markets and its
broad strategy is to exploit situations where other market participants are
constrained: corporate credit events including credit rating movements;
sovereign defaults; devaluations; regulatory shifts and resulting balance sheet
pressures; and financial restructurings. The result is valuations which
overstate risks and market inefficiencies that create long only, arbitrage or
relative value opportunities.

The Argo Capital Partners fund aims to capture special situations where a 2 to 3
year investment horizon is required. The fund has a 4 year lock up and it only
charges performance fees on realised gains.

Ends.




                      This information is provided by RNS
            The company news service from the London Stock Exchange
                                                                                                                                   

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