Boxhill Technologies PLC Group Restructuring, Disposal and Notice of GM (5083U)

TIDMBOX

RNS Number : 5083U

Boxhill Technologies PLC

12 July 2018

Prior to publication, the information contained within this announcement was deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement, this information is now considered to be in the public domain.

12 July 2018

BOXHILL TECHNOLOGIES PLC

("Boxhill", the "Group" or the "Company")

Group Restructuring, Disposal and Notice of General Meeting

On 5 July 2018 the Company announced that it had experienced a substantial decline in certain payment processing revenues during May and June due to a requirement by particular banks to change the nature of transactions they are willing to deal with following regulatory changes. To address this issue the Board today announces a restructuring of the Group and the disposal of certain subsidiaries. The Transaction constitutes a fundamental change of business under the AIM Rules, and this requires the approval of the Resolution by shareholders at the General Meeting. As the Transaction will not result in the Company divesting of all, or substantially all, of its trading business, activities or assets, the Company will not, following the completion of the Disposal, be deemed to become an AIM Rule 15 Cash Shell under the AIM Rules.

The General Meeting is being held at the offices of Allenby Capital Limited, 5 St. Helen's Place, London EC3A 6AB at 11.00 am on 30 July 2018. A copy of the Circular is being posted to Shareholders today and will also be published on the Company's website, https://boxhillplc.com/.

Definitions can be found at the foot of this announcement.

The Transaction and its Background

The Group has been actively engaged in providing payment services for non-mainstream eCommerce businesses, notably those involved in online gambling activities, since first entering the payment services business in 2013. The Group has recently encountered rapidly increasing difficulties in the transacting of payments involving non-mainstream eCommerce merchants in certain jurisdictions ("Non-Conforming Customers"), with a growing list of its partner banks and other financial institutions, following recent regulatory changes, and in turn, this is having a negative impact on its banking and payment relationships relating to other merchants. For the months of May and June, this has resulted in a reduction of circa 75 per cent in revenues relating to payment processing compared with the previously announced (28 March 2018) average for the period October 2017 to January 2018 of GBP120,000 per month. For the year to 31 January 2018, Non-Conforming Customers accounted for circa half the revenue of the payments division of the Group.

As announced on 28 March 2018, the Company established a new subsidiary, Market Access, whose initial focus was on foreign exchange and treasury services. Market Access became authorised as an "EMD Agent" under the rules of the Financial Conduct Authority with effect from 9 May 2018 and is thus authorised to undertake payment processing services.

As a result of the changing market landscape, as described above, the Board has concluded that it is in the best interest of Shareholders to separate the provision of payment services to Non-Conforming Customers from the rest of the Group. As a result, and following negotiation, the Board has agreed to sell Emex to MDC, subject to the approval, by Shareholders, of the Resolution.

The consideration for the purchase of Emex will be GBP2,000,000, satisfied through the issue by MDC of the Loan Note, which has the following key terms:

   --     Amount - GBP2,000,000 
   --     Term - 10 years 
   --     Interest rate - 0 per cent 
   --     Security - A debenture over the issued share capital of: 

o Emex Technologies Limited;

o EmexConsult Ltd.;

o Net World Limited; and

o Emex (UK) Group Limited

   --     Repayment - by way of: 

o The establishment of a sinking fund into which the net revenues of Emex resulting from the customers left in place at the time of the transaction or any new Non-Conforming Customers referred by Market Access shall be transferred on a monthly basis and used for general working capital purposes; and

o Any balance outstanding at the end of 10 years, after the above sinking fund has been extinguished, by MDC.

As part of the Transaction, those merchants other than Non-Conforming Customers of Emex ("Conforming Customers") will be novated to Market Access with effect from the date of completion of the transaction, clear of any liabilities. In consideration for the novation of the Conforming Customers, Boxhill will issue 100,000,000 Shares to MDC.

Under the terms of the Transaction, Market Access will continue to have an ongoing commercial relationship with Emex, with Market Access referring any new Non-Conforming Customers to Emex, and Market Access providing certain ongoing support services to Emex. Once the Loan Note is fully repaid, Market Access will receive a commission of 50 per cent of the net revenues resulting from the Non-Conforming Customers both in place at the time of the Transaction and those subsequently referred to Emex by Market Access.

The Board believes that it may have a legal claim against a former director of the Emex companies. It has been agreed with MDC that any successful claim, after legal costs, will be paid into the sinking fund described above in order to accelerate the repayment of the Loan Note.

The Board believes that this transaction will be financially beneficial to the Group. While profits will be reduced in the short-term until Market Access becomes more established, the structure of the transaction will be neutral in terms of Group cashflow. The separation of the Conforming Clients from the Non-Conforming Clients is anticipated to lead to improved banking relationships for the Group, which in turn should generate financial benefits. For the year to 31 January 2017, the most recently available audited accounts, Emex made a profit for the financial period of GBP8,060, had turnover of GBP561,321 and had gross assets of GBP2,680,723.

The full terms of the Transaction are set out in a sale and purchase agreement, a copy of which can be found on the Company's website, https://boxhillplc.com/.

Related Party Transaction

MDC is owned by John Botros, a director of certain Group subsidiaries and, with persons closely associated (as defined under the Market Abuse Regulation), a substantial shareholder (as defined by the AIM Rules) of Boxill. The Transaction therefore constitutes a related party transaction under the AIM Rules. The Board consider, having consulted with Allenby Capital Limited, the Company's nominated adviser, that the terms of the transaction are fair and reasonable insofar as its shareholders are concerned.

Recommendation

The Board believes that the passing of the Resolution is in the best interests of the Company and its Shareholders as a whole. Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolution. The Directors have given an irrevocable undertaking to vote in favour of the Resolution in relation to the 98,639,988 Shares they own or where they control the voting rights (equivalent to 3.50 per cent of the total voting rights), and certain directors of Group subsidiaries, has have given an irrevocable undertaking to vote in favour of the Resolution in relation to the 426,656,580 Shares they own or where they controls the voting rights (equivalent to 15.15 per cent of the total voting rights). John Botros and persons closely associated with him will not vote on the Transaction.

The Board believes that alternative options to this would either be too slow to deal with the immediate requirement to address the concerns of many of the key banks with which the Group transacts, resulting in a permanent degradation in the business of the Payments division, or would result in a substantial immediate diminution of Shareholder value. In the event that Shareholders vote against the Resolution, then the Board will likely to novate the Conforming Clients as above and then seek to wind down Emex, which it is anticipated would produce an adverse return to Shareholders compared with the Transaction.

The Board believes that alternative options to this would either be too slow to deal with the immediate requirement to address the concerns of many of the key banks with which the Group transacts, resulting in a permanent degradation in the business of the Payments division, or would result in a substantial immediate diminution of Shareholder value.

Annual General Meeting ("AGM")

The AGM of the Company, announced on 5 July 2018 and to be held on 31 July 2018, includes the following resolution:

"To receive the report of the Directors and the statement of accounts and the balance sheet of the Company for the year ended 31 January 2018 with the auditors' report thereon."

As the Company's annual report and accounts has not yet been published, the AGM will be adjourned on the day in relation to this resolution as Shareholders will not have had the required period to review the accounts ahead of the meeting. The AGM is expected to be reconvened at the offices of Allenby Capital Limited, 5 St. Helen's Place, London EC3A 6AB at 11.00 am on 4 September 2018, of which due notice will be given to Shareholders.

For further information, contact:

 
 Boxhill Technologies PLC 
  Lord Razzall, Executive Chairman 
  Website www.boxhillplc.com                 020 7493 9644 
 Allenby Capital Limited (Nomad & Broker) 
  John Depasquale / Nick Harriss             020 3328 5656 
 

Definitions

The following definitions apply throughout this announcement unless the context otherwise requires:

 
 "Act"                    the Companies Act 2006; 
 "AIM"                    AIM, a market operated by the London Stock 
                           Exchange; 
 "AIM Rules"              the AIM Rules for Companies, published 
                           by the London Stock Exchange, as amended 
                           from time to time; 
 "Articles"               the articles of association of the Company 
                           for the time being; 
 "Board" or "Directors"   the board of directors of the Company as 
                           at the date of this document; 
 "Circular"               the document that has been posted today 
                           to Shareholders, including the notice of 
                           General Meeting, and the Form of Proxy, 
                           which can be viewed on the Company's website, 
                           https://boxhillplc.com/; 
 "Company" or "Boxhill"   Boxhill Technologies Plc, a company incorporated 
                           in England and Wales with registered number 
                           04458947 and having its registered office 
                           at 39 St James's Street, London, SW1A 1JD; 
 "Directors"              the directors of the Company as at the 
                           date of this document; 
 "Emex"                   collectively, 1) the following wholly owned 
                           subsidiaries of Boxhill: Emex Technologies 
                           Limited, a company incorporated in England 
                           & Wales with registration number 0926123 
                           and Emex (UK) Group Limited, a company 
                           incorporated in Scotland with registration 
                           number SC518243; and 2) the following wholly 
                           owned subsidiaries of Emex (UK) Group Limited: 
                           EmexConsult Ltd., a company incorporated 
                           in Northern Ireland with registration number 
                           NI614354 and Net World Limited, a company 
                           incorporated in Mauritius; 
 "Group"                  Boxhill together with its subsidiaries 
                           and associates; 
 "General Meeting"        the general meeting of the Company, notice 
                           of which can be viewed on the Company's 
                           website, https://boxhillplc.com/; 
 "Loan Note"              the secured loan note issued by MDC to 
                           Boxhill as consideration for the purchase 
                           of Emex, further details of which can be 
                           found in this document; 
 "Market Access"          Market Access Limited, a company incorporated 
                           in England & Wales with registration number 
                           11119688, a wholly owned subsidiary of 
                           Boxhill; 
 "MDC"                    MDC Nominees Limited, a company incorporated 
                           in England & Wales with registration number 
                           09606912; 
 "Resolution"             the resolution to be proposed at the General 
                           Meeting which is set out in full in the 
                           Notice of General that can be viewed on 
                           the Company's website, https://boxhillplc.com/; 
 "Shareholders"           holders of Shares; 
 "Shares"                 the ordinary shares of 0.1 pence each in 
                           the capital of the Company; 
 "this document"          this announcement; 
 "Transaction"            the sale of Emex by Boxhill to MDC, details 
                           of which can be found in this document. 
 

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July 12, 2018 11:20 ET (15:20 GMT)