Disposal of Rowan Dartington and Investing Policy (0074B)

TIDMASTR

RNS Number : 0074B

Astaire Group Plc

10 February 2011

Astaire Group PLC

Recommended sale of Rowan Dartington

and

proposed investing policy

For immediate release

10 February 2011

The Board of Astaire Group PLC ("Astaire") announces that a conditional contract has been signed for the sale of Rowan Dartington & Co. Limited to a new company formed by a consortium of private investors led by Graham Coxell.

1. Introduction

On 15 July 2010 the Astaire Group Board announced that discussions were in progress which may lead to the sale of the Group's main operating businesses. Since that time Astaire Securities, a stockbroking and corporate finance advisory business has been sold and a conditional contract for the sale of Dowgate Capital Stockbrokers Limited has been signed.

Under the AIM Rules, the disposal of a business which represents over 75% of an AIM quoted company's gross assets, pre tax profit, turnover, capitalisation or gross capital is treated as a fundamental change in that company's business and must be conditional on its shareholders' approval. The proposed sale of Rowan Dartington represents such a fundamental change in the business of both the Astaire Group and of its 53% holding company, Evolve Capital PLC. Accordingly general meetings of the Astaire Group and Evolve will be convened to approve it.

The Board have concluded that it would be premature for the Company to seek to delist its Shares from trading on AIM at this stage but rather that Shareholders should have the opportunity to see the completion of the sale of Dowgate Capital Stockbrokers and the sale of Rowan Dartington and seek a liquidity event for themselves at that stage if they so wish. The Board will keep any future potential delisting of the Astaire Group under review going forward.

Following completion of the proposed Sale, Astaire Group will become an "investing company" as defined in the AIM Rules as a result of the disposal of substantially all of its trading businesses. A resolution will be proposed at the General Meeting to approve the Astaire Group Investing Policy.

This announcement describes the recent sales of Astaire Securities and Dowgate Capital Stockbrokers and sets out the background to the Sale and the reasons why the Directors unanimously recommend that Shareholders vote in favour of the Sale and the Investing Policy at the General Meeting.

2. Background

The Astaire Group Board announced on 15 July 2010 that it had completed a strategic review of its businesses and concluded the following:

(i) that the operating businesses have good potential given the right corporate environment; and

(ii) that there is a considerable momentum to make a clean break from the current corporate structure.

The Sale follows a period of considerable activity exploring alternative proposals for the Astaire Group as a whole and for its constituent parts. Negotiations which were intended to result in the Astaire Group as a whole having a new direction and a new controlling shareholder failed to reach a mutually satisfactory conclusion for several reasons, including difficulties in ring-fencing Astaire Securities from a contingent litigation liability to Izodia PLC at that time. As these difficulties emerged, the Board resolved to follow up approaches from potential purchasers of the constituent parts of the Group and established a process for the submission of offers, the selection of preferred bidders and, eventually, reaching agreement for the sale of both Astaire Securities and Rowan Dartington, as well as agreeing a transaction for DCS.

3. Sale of Astaire Securities

The strategy adopted by Evolve following its acquisition of Astaire Group (then called Blue Oar PLC) during the winter of 2008-9 did not prove successful against the background of continuing difficult market conditions. Litigation by Izodia PLC against CS Holdings, an intermediate holding company within the Group which held 99.9% of the issued share capital of Astaire Securities created an atmosphere of uncertainty at Astaire Securities, causing damage in terms of staff morale and client relationships. As this business is dependent on its staff and clients, a decision was made to sell it so that it could enjoy better prospects as part of a purchaser's more stable group and to enable the Astaire Group to realise some value for it. After considering several proposals, contracts were exchanged for the sale of Astaire Securities to Sandfire Capital Inc. on 15 October 2010 and the sale was completed on 22 October 2010.

When the sale was announced on 15 October 2010, Astaire Securities acted as Nominated Adviser and / or broker to over 40 companies, most of which were quoted on AIM. Its turnover, losses and assets as at the dates shown were:-

 
                           Year ended     Year ended   6 months ended 
                          31 Dec 2008    31 Dec 2009     30 June 2010 
                            (audited)      (audited)      (unaudited) 
                              GBP'000        GBP'000          GBP'000 
----------------------  -------------  -------------  --------------- 
 Turnover                       6,318          5,259            2,897 
----------------------  -------------  -------------  --------------- 
 Pre tax loss                   2,914          1,934              635 
----------------------  -------------  -------------  --------------- 
 Net assets at period 
  end                           4,565          2,938            2,446 
----------------------  -------------  -------------  --------------- 
 

The pre-tax loss for the first half of 2010 is shown after accounting for exceptional costs of GBP250,000 for restructuring and redundancies.

The consideration due from the Sandfire Capital Inc. was GBP2.45 million comprising GBP2 million cash which was received on completion and GBP450 000 to be placed in an escrow account in relation to Astaire Securities' continuing eligibility for Nominated Adviser status and against any warranty claims or shortfall in the proceeds of the sale of certain assets below their book value. In addition to containing warranties in favour of the purchaser, as is normal for this type of contract, the sale and purchase agreement, which was signed on 15 October 2010, contains a tax indemnity. CS Holdings' exposure under the tax indemnity is intended to be mitigated by the transfer of tax losses within the Astaire Group. It was announced today that Astaire Securities, which has changed its name to Northland Capital Partners Limited, has been approved by London Stock Exchange as a continuing Nominated Adviser following its change of ownership, thereby satisfying conditions for the release of the GBP350,000 out of the escrow escrow account to Astaire.

The effect of the sale of Astaire Securities was to reduce the Astaire Group's trading losses. While the receipt of the cash proceeds strengthened the Astaire Group consolidated balance sheet, the net cash proceeds will be retained by CS Holdings as explained below. Astaire will record a loss on disposal in the range GBP0.8 million to GBP1.4 million, the exact amount of which will depend on the amounts released to Astaire from the escrow accounts.

The sale proceeds (net of transaction related costs) are held by CS Holdings pending the outcome of the litigation, which is being vigorously defended. Transaction related costs include a liability in respect of a staff retention plan amounting to between GBP182,172 and GBP269,987 (depending on the amounts eventually released to CSH from escrow), legal and financial advisor fees.

Astaire Securities was named as a defendant in the claim by Izodia PLC, but in order to effect the sale Astaire Securities agreed, on a without prejudice basis, to a payment of GBP37,000 in full and final settlement of any claim against Astaire Securities and with no admission of fault or liability on the its part and without discharging Izodia's claim against CS Holdings.

4. Sale of Dowgate Capital

Dowgate Capital Stockbrokers Limited was acquired as part of the Dowgate Capital PLC group in July 2009. Its business activity is the provision of private client stockbroking services.

The conditional sale of Dowgate Capital Stockbrokers Limited ("Dowgate") to 3B Capital Limited ("3B Capital") was agreed and announced on 24 December 2010.

The contract provides for the sale of the whole of the issued share capital of Dowgate to 3B Capital for GBP900,000 of which GBP675,000 is payable in cash at completion and the balance of GBP225,000 is due no later than 30 June 2012 subject to any claims against the warranties and indemnities provided by Astaire. 3B Capital is a new company formed by Beavis Morgan LLP and employees of Dowgate, including two directors, Neil Badger and Clive Mattock, who have together subscribed GBP82,502 (which will represent 25 per cent. of 3B's issued share capital following completion). Neil Badger and Clive Mattock will join the board of 3B Capital. In view of these directors' participation in 3B Capital, the sale of Dowgate is categorised as a transaction with a related party in accordance with the AIM Rules. The Directors of Astaire, none of whom has any interest in the sale of Dowgate, consulted Fairfax I.S. PLC (Nominated Adviser to Astaire Group PLC) and announced when the sale of Dowgate was announced that they consider the terms of the transaction to be fair and reasonable insofar as Astaire Shareholders are concerned.