Issue of Equity

 

TIDMIBB 
 
RNS Number : 9565P 
Islamic Bank of Britain Plc 
27 July 2010 
 

Not for release, distribution or publication in the United States of America, 
Canada, Australia, the Republic of South Africa or Japan 
 
27 July 2010 
 
ISLAMIC BANK OF BRITAIN PLC 
 
Proposed Placing, Code Waiver, Trading Update and Notice of General Meeting 
 
Highlights 
 
-       Islamic Bank of Britain to raise GBP20 million through a proposed 
placing of new ordinary shares at a price of 1 pence per share. 
 
-       Shares to be subscribed by Qatar International Islamic Bank, an existing 
shareholder in Islamic Bank of Britain. 
 
-       Current trading continues to be challenging. 
 
Gerry Deegan, Managing Director at Islamic Bank of Britain,commented "Qatar 
International Islamic Bank was instrumental in establishing Islamic Bank of 
Britain as one of the first Islamic banks in the West and this capital injection 
demonstrates its continuing commitment. This is very good news for Islamic Bank 
of Britain's shareholders, staff and customers as well as for the Islamic 
banking sector in the UK." 
 
Overview of the Placing 
 
Islamic Bank of Britain PLC  ("IBB", the "Company" or the "Bank") today 
announces that it proposes to raise GBP20 million before expenses by way of a 
placing of 2,000,000,000 new ordinary shares ("New Ordinary Shares" or "the 
Placing Shares"), at 1 pence ("the Issue Price") per Placing Share (the 
"Placing"). The net proceeds of the Placing will be used to provide the Company 
with sufficient regulatory capital to manage and grow its business. 
 
The 2,000,000,000 Placing Shares are being placed with Qatar International 
Islamic Bank ("QIIB"), an existing shareholder. QIIB is considered by the Panel 
on Takeovers and Mergers ("the Panel") to be acting in concert with Qatar 
Islamic Insurance Company (Q.S.C) ('QIIC'), HE Sheikh Thani Bin Abdulla Bin 
Thani Jasim Al Thani ("Sheikh Thani") and Mohsen Moustafa  (together, the 
"Concert Party"). 
 
Following the Placing, the Concert Party will own 88.20 per cent. of the 
enlarged share capital of the Company of which QIIB will own 80.95 per cent. The 
Placing is therefore conditional upon, inter alia, the approval by the 
shareholders who are independent of the Concert Party ("Independent 
Shareholders") of a waiver from the obligations of Rule 9 of the Takeover Code 
to make a general offer for the issued share capital of the Company that the 
Concert Party does not already own ("the Rule 9 Waiver", together with the 
Placing "the Proposals"). 
 
The Company is also seeking appropriate authorities to allot shares and disapply 
pre-emption rights in order to facilitate the Placing and to provide future 
headroom. 
 
Further details can be found in the circular being posted to shareholders today. 
 
Current Trading 
 
On 24 March 2010 Islamic Bank of Britain announced a pre and post-tax loss for 
the year ended 31 December 2009 of GBP9.5m (2008: loss of GBP5.9m).  The loss 
resulted from a difficult and challenging market in which the impact of the UK 
recession on the housing market, unemployment, disposable incomes and market 
yields adversely affected the Company's revenues. 
 
The board of directors of the Company ("the Board" or "the Directors") have been 
pleased with the levels of new business applications for the year ended 31 
December 2009, in particular the Home Purchase Plan.  However, this has not been 
reflected by a corresponding growth in the asset base due to the lack of capital 
and available funding. In addition, those customer deposits that have not been 
used to fund asset growth produced lower returns due to declining yields in the 
Islamic inter-bank markets affecting the Company's margin. 
 
The Company continues to face challenging trading conditions and continues to 
review its operating cost base in light of future plans and potential efficiency 
improvements. 
 
The Company expects to publish its interim results for the six months ended 30 
June 2010 in September 2010. 
 
Prospects for the Bank 
 
As announced on 24 March 2010 and noted in the 2009 Annual Report and Financial 
Statements, the Bank has been seeking to raise capital to support the future 
growth of the Company and ensure that regulatory capital requirements are met. 
The strategy of the Company is to enhance profitability by growing its secured 
financing, through its Home Purchase Plan book, funded by longer term deposits 
and capital whilst increasing fee and commission income as a proportion of 
revenue. 
 
Despite the continued market and trading conditions which make it difficult to 
forecast future revenues with any certainty, the Directors believe that 
following the Placing Islamic Bank of Britain will be well placed to take 
advantage of its position as the sole full-service wholly Sharia'a-compliant 
retail bank operating in the UK with the strategic support of QIIB, an 
established Islamic bank and committed shareholder in the Company. 
 
Reasons for the Placing 
 
The Board is conscious of its responsibilities to ensure that Islamic Bank of 
Britain has sufficient regulatory capital to manage and grow the business. The 
Board closely monitors the Company's capital position to ensure compliance with 
the FSA's capital requirements through the Internal Capital Adequacy Assessment 
Process (ICAAP). New capital is required to support the future growth in 
customer assets, and ensure that an appropriate buffer is maintained over the 
minimum regulatory requirement. 
 
The new funding raised from the Placing will significantly alleviate the current 
constraints on the Islamic Bank of Britain's capital and, in the Directors' 
opinion, will allow renewed growth in the Company's asset base and assist the 
Company in moving towards profitability over the medium term. 
 
The Company has explored its options for raising new finance and concluded that 
its shareholders are best served by the Company securing funds from an existing 
shareholder, QIIB. 
 
The Directors believe that the Proposals are fundamental to the future of the 
Company and if the Placing were not to proceed, the Company would be unable to 
continue operating as a going concern. In this event the Directors believe that 
the value attributable to the ordinary shares would be severely reduced (or 
possibly nil). 
 
Accordingly, the Board believes that it is essential for shareholders' interests 
to strengthen the Company's capital base with the proposed Placing. 
 
Details of the Placing 
 
The Company is proposing to raise GBP20 million (before expenses) by way of a 
Placing of 2,000,000,000 New Ordinary Shares at 1 pence each (which represents 
approximately 366 per cent.of Islamic Bank of Britain's existing issued capital) 
resulting in net proceeds of GBP18.2 million (after expenses). The New Ordinary 
Shares will represent approximately 78.5 per cent.of the enlarged issued 
ordinary share capital immediately following completion of the Placing. 
 
The Issue Price represents a discount of 69.2 per cent. to the closing price of 
3.25 pence per ordinary share on  26 July 2010 (being the last practicable date 
prior to this announcement) and of 67.5 per cent. to the net book value per 
ordinary share as at 31 December 2009. 
 
The Placing is conditional upon certain conditions, details of which are in a 
circular being posted today to shareholders. 
 
Application has been made for the New Ordinary Shares to be admitted to trading 
on AIM and it is expected that admission of the New Ordinary Shares 
("Admission") will become effective and dealings in the New Ordinary Shares will 
commence at 8.00 a.m. on 18 August2010, being the first business day following 
the General Meeting. 
 
The New Ordinary Shares will, when issued and fully paid, rank pari passu in all 
respects with the existing ordinary shares, including the right to receive all 
dividends and other distributions (if any) declared, made or paid by Islamic 
Bank of Britain after the date of issue of the New Ordinary Shares. 
 
QIIB has transferred the full amount of the subscription monies for the Placing 
Shares (GBP20 million) to an account with Qatar National Bank in the name of 
QIIB, to be held by Qatar National Bank pending payment of such monies to the 
Company in accordance with the terms and conditions of the Placing letter, 
details of which are provided in the circular being posted to shareholders 
today. 
 
Also within the circular are details of a conditional investment and shareholder 
agreement ("the Investment Agreement") entered into between the Company and QIIB 
as part of the arrangements in relation to the Placing which provide certain 
undertakings by the Company relating to the conduct of business during the 
period of strategic review described below and certain undertakings given by 
QIIB relating to the independence of the Company and the resolution of any 
conflicts arising between the Concert Party and the Company following the 
completion of the Placing. 
 
Intentions of the Concert Party 
 
To assist the Company in moving towards profitability over the medium term, QIIB 
has confirmed that it will carry out a strategic review of Islamic Bank of 
Britain's business and operations after Admission. 
 
The strategic review will examine and consider the implementation of measures to 
enhance efficiencies, reduce costs and refocus the business of the Company in a 
manner consistent with UK market demands together with the needs and 
expectations of the Bank's target customers. 
While the Concert Party does not have any current intentions regarding Islamic 
Bank of Britain's business that would (a) affect the strategic plans of the 
Company; (b) affect the employment of Islamic Bank of Britain's 
personnel, including the continued employment of, or the conditions of 
employment of, any of the Company's management;(c) affect the locations of 
Islamic Bank of Britain's business or operating subsidiaries; or (d) result in 
the disposal of or otherwise change the use of any of the fixed assets of 
Islamic Bank of Britain, any or all of these may be affected by the outcome of 
the strategic review. 
No changes are currently intended to the Board of Islamic Bank of Britain. 
 
Related Party Transactions 
 
As at the date of this announcement QIIB holds more than 10 per cent. of the 
ordinary shares, meaning the Placing will be a related party transaction for the 
purposes of Rule 13 of the AIM Rules. Rule 13 of the AIM Rules requires the 
directors of the Company to confirm that they consider, having consulted with 
the Company's nominated adviser, Grant Thornton Corporate Finance, that the 
terms of the Placing are fair and reasonable insofar as its Shareholders are 
concerned. The directors with the exception of Mohsen Moustafa (the "Independent 
Directors"), having consulted with Grant Thornton Corporate Finance, consider 
that the terms of the Placing are fair and reasonable insofar as the Company's 
Shareholders are concerned. 
 
Further, the Company entering into the Investment Agreement with QIIB will be a 
related party transaction for the purposes of Rule 13 of the AIM Rules.  As 
noted above, Rule 13 of the AIM Rules requires the directors of the Company to 
confirm that they consider, having consulted with the Company's nominated 
adviser, Grant Thornton Corporate Finance, that the terms of the Investment 
Agreement are fair and reasonable insofar as Shareholders are concerned.  The 
Independent Directors, having consulted with Grant Thornton Corporate Finance, 
consider that the terms of the Investment Agreement are fair and reasonable 
insofar as the Company's Shareholders are concerned. 
 
 
Notice of General Meeting 
 
Included in the circular being posted today is a notice convening the General 
Meeting of the Company to be held at the offices of the Company at Edgbaston 
House, 3 Duchess Place, Hagley Road, Birmingham, B16 8NH, on  17 August 2010 at 
10.00 a.m. At the General Meeting, resolutions will be proposed to authorise the 
Directors to allot and issue shares, to approve the Panel's waiver of the 
requirement for the Concert Party to make a Rule 9 Offer, to amend the Articles 
of Association of the Company and disapply pre-emption rights (together, "the 
Resolutions"). 
 
Recommendation 
The Independent Directors,who have been so advised by Ernst & Young LLP ("Ernst 
& Young"), consider the terms of the Placing, including the Rule 9 Waiver, to be 
fair and reasonable and in the best interests of the Company and its Independent 
Shareholders as a whole. In providing advice to the Independent Directors, Ernst 
& Young has taken into account the Independent Directors' commercial 
assessments. 
 
The Independent Directors unanimously recommend that Shareholders vote in favour 
of the Resolutions to be proposed at the General Meeting.  The Independent 
Directors who are also shareholders have given irrevocable undertakings to vote 
in favour of the Resolutions in respect of their own beneficial holdings of 
ordinary shares which amount, in aggregate, to 54,000 ordinary shares, 
representing approximately 0.01 per cent. of the existing ordinary shares in 
issue as at the date of this announcement. 
 
Mohsen Moustafa has not taken part in the Board's consideration of the Proposals 
due to a potential conflict of interest arising by virtue of his position as the 
Deputy-CEO of QIIB and therefore him being considered to be a member of the 
Concert Party.  Accordingly, he is not entitled to vote on the Rule 9 Waiver in 
respect of the 100,000 Ordinary Shares which he holds and has undertaken to take 
all reasonable steps to ensure that his connected persons abstain from voting on 
the Rule 9 Waiver. 
 
All the members of the Concert Party have provided irrevocable undertakings to 
vote in favour of the Resolutions (other than the Rule 9 Waiver) in respect of 
their entire beneficial holdings of Ordinary Shares which amount, in aggregate, 
to 245,926,746 ordinary shares, representing approximately 45.00 per cent. of 
the existing ordinary shares in issue as at the date of this announcement. 
 
All defined terms used in this announcement are consistent with the defined 
terms set out in the circular. 
 
 
For further information contact: 
 
Islamic Bank of Britain Plc 
Gerry Deegan, Managing Director 
           0121 452 7300 
Sultan Choudbury, Commercial Director 
 
Ernst & Young LLP (Financial Advisor) 
Tim Medak, Mark Harrison, Ian Cosgrove, Jo Royden-Turner        020 7951 2000 
Grant Thornton Corporate Finance (Nominated Adviser) 
Gerald Beaney, Salmaan Khawaja, David Hignell                               020 
7383 5100 
 
 
Ernst & Young LLP, which is authorised and regulated in the United Kingdom by 
the FSA, is acting exclusively for Islamic Bank of Britain for the purposes of 
providing independent advice to the Independent Directors on the Proposals under 
Rule 3 of the Takeover Code and no one else in connection with the Proposals and 
will not be responsible to anyone other than Islamic Bank of Britain for 
providing the protections afforded to clients of Ernst & Young nor for providing 
advice in relation to the Proposals or any other matters referred to in this 
announcement. 
 
Grant Thornton Corporate Finance, a division of Grant Thornton UK LLP, which is 
authorised and regulated in the United Kingdom by the FSA, is acting as the 
nominated adviser to Islamic Bank of Britain for the purpose of the AIM Rules. 
Grant Thornton Corporate Finance is not acting for and will not be responsible 
to any person other than Islamic Bank of Britain and will not be responsible to 
any person other than Islamic Bank of Britain for providing the protections 
afforded to its clients or for providing advice to any other person in 
connection with this announcement or any transaction or arrangement referred to 
in this announcement. Grant Thornton Corporate Finance's responsibility as the 
nominated adviser to Islamic Bank of Britain is owed solely to the London Stock 
Exchange. No liability whatsoever is accepted by Grant Thornton Corporate 
Finance for the accuracy of any information or opinions expressed in this 
announcement and no representation or warranty, express or implied, is made by 
Grant Thornton Corporate Finance as to the contents of this announcement, or for 
the omission of any material information from this announcement. 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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