Acquisition

RNS Number:7018C
MG Capital PLC
07 September 2004



                           MG CAPITAL PLC (the "Company")

                 Proposed Acquisition, Capital Reorganisation,
            Placing, Open Offer and Rule 9 Waiver (the "Proposals")



Introduction

MG Capital plc announces that it has entered into a conditional agreement (the "
Acquisition Agreement") with Peter Hannen, the sole director of Hannen & Company
Ltd ("Hannen & Co"), and the trustee of The August Settlement (the "Vendors"),
for the acquisition of the entire issued share capital of Hannen & Co (the "
Acquisition"), a provider of asset allocation advice.  The principal asset of
Hannen & Co comprises an investment in Celtic Resources Holdings plc.  Upon
completion of the Acquisition, Peter Hannen, Jonathan Scott-Barrett and Peter
Curtin (the "Proposed Directors") will be appointed as directors of the Company.



The Company further announces that it has entered into a conditional agreement
(the "Offer Agreement") with Keith, Bayley, Rogers & Co. Limited ("KBR") in
respect of a placing of up to 2,500,000 new ordinary shares of 50p each in the
Company ("New Ordinary Shares") (the "Placing") and the making of an open offer
to qualifying shareholders of 380,826 New Ordinary Shares (the "Open Offer"), in
each case at the offer price of 100p per share.



The Company has also entered into a conditional agreement (the "Option
Assignment") with KBR and the Proposed Directors, whereby KBR has agreed to
assign to the Proposed Directors options to purchase all the issued convertible
unsecured loan stock ("CULS") and preference shares of 1p each in the Company ("
Preference Shares") and the Proposed Directors have agreed to the Preference
Shares being converted into and re-designated as New Ordinary Shares and
deferred shares of 1p each in the Company ("Deferred Shares") (the "Preference
Share Conversion") and to accept the redemption of the CULS on the basis of 20p
per #1 nominal amount of CULS (the "CULS Redemption").  The Proposed Directors
have agreed to use the amounts receivable by them under the CULS Redemption to
subscribe for New Ordinary Shares in the Placing.



Completion of these agreements, which will result in the Proposed Directors and
certain others with whom they are deemed to be acting in concert (the "Concert
Party") together becoming interested in between approximately 50.8 and 68.0 per
cent. of the issued ordinary share capital of the Company, is conditional upon,
inter alia, the approval of shareholders of the waiver by the Panel on Takeovers
and Mergers of the requirements of Rule 9 of the City Code on Takeovers and
Mergers (the "City Code") and admission of the enlarged issued ordinary share
capital of the Company to trading on the Alternative Investment Market of the
London Stock Exchange ("Admission").



Application will be made for all of the issued New Ordinary Shares to be
admitted to AIM. It is expected that Admission will take place on 5 October
2004.



The Company has also entered into an agreement with Charles Fowler (the "Fowler
Debt Cancellation Agreement") pursuant to which the sum of approximately
#301,000 due from the Company to Charles Fowler will be cancelled.



A circular to shareholders providing full details of the Proposals, the
procedure for application for shares under the Open Offer and containing a
notice of an extraordinary general meeting to be held on 29 September 2004 (the
"EGM") is being despatched today.



Information on Hannen & Co

Hannen & Co was formed in December 1998 and its main activity is acting as an
asset allocation adviser to Family Investments Limited, a Bahamas-based
open-ended investment company with distributor status in the United Kingdom,
under the terms of a strategic asset allocation agreement as of 1 January 1999.
Family Investments Limited aims to provide a vehicle for long term strategic
management of family and individual wealth on a global basis through investment
in a range of securities and enterprises and, as at 31 July 2004, had net assets
amounting to approximately US$30 million.  Hannen & Co believes that the nature
of its activities did not fall within the definition of investment business for
the purposes of the Financial Services Act 1986 and that Hannen & Co did not
need to be authorised by FSA and has been conducting its activities accordingly.
  Recently, in contemplation of the Acquisition, Hannen & Co has sought
confirmation from the Financial Services Authority ("FSA") that it does not
need, nor has it needed, to be authorised and regulated by FSA to carry on its
business activities.  As at the date of this announcement, no such confirmation
has been received from FSA nor is such confirmation anticipated prior to
completion of the Acquisition.



The principal asset of Hannen & Co is an investment in Celtic Resources Holdings
plc, an AIM company with substantial gold reserves in the Former Soviet Union,
comprising 374,691 ordinary shares of Euro0.25 each, representing approximately
1.02 per cent. of the issued share capital of Celtic Resources Holdings plc, and
warrants to subscribe for 50,000 ordinary shares of Euro0.25 each in Celtic
Resources Holdings plc until 21 September 2004 at an exercise price of 156.3p
per share.  The closing middle market quotation for an ordinary share in Celtic
Resources Holdings plc as derived from the Daily Official List of the London
Stock Exchange on 3 September 2004 (being the last practicable date prior to
publication of this announcement) was 383.5p.



The sole director of Hannen & Co is Peter Hannen who, together with the trustee
of The August Settlement, holds the entire issued share capital of Hannen & Co.



The audited profit and loss account of Hannen & Co for the year ended 31 March
2004 shows profits before tax of US$201,551 and profits after tax of US$154,044.
  The audited balance sheet of Hannen & Co as at 31 March 2004 shows net assets
of US$726,155.



The Acquisition Agreement

Under the terms of the Acquisition Agreement, the Company will acquire from the
Vendors 48,000 ordinary shares of US$15 each, being the entire issued share
capital of Hannen & Co, for a consideration to be satisfied by the issue of
1,800,000 New Ordinary Shares (the "Consideration Shares") to the Vendors on
completion of the Acquisition ("Completion").



The Acquisition Agreement is conditional upon, inter alia, the passing of the
resolutions to be proposed at the EGM, minimum proceeds of #1,574,000 (before
expenses) being raised under the Placing and Admission.  The Acquisition
Agreement contains usual commercial warranties and tax indemnities and also
includes lock-in provisions under which the Vendors have undertaken to the
Company that, save with the consent of the Company or in certain specific
circumstances, they will not dispose of any of the Consideration Shares for a
period of one year from Completion.  Charles Fowler personally has given
warranties to the Vendors under the Acquisition Agreement in respect of, inter
alia, the net liabilities of the Company and its subsidiaries (the "Group") as
at 31 August 2004.



Reasons for the Proposals

Since termination of the management services agreement between N.O.I.T. Services
Limited and New Opportunities Investment Trust plc in December 2003, the Group
has been left without any significant flow of revenue.  Even after substantially
reducing its cost base, the Group requires considerably higher revenues in order
to continue to meet its financial obligations in the future, including premises
costs, interest payments on the CULS and redemption of the issued Preference
Shares on or after 31 December 2005.  The existing directors of the Company (the
"Directors") have been working on plans to launch investment products to replace
the revenue stream from New Opportunities Investment Trust plc but recognise
that the Group will require additional capital in order to pursue these
opportunities.



The Directors consider that, if the Proposals are not successfully completed,
the Group will have insufficient working capital and will be unable to continue
to trade.



The acquisition of Hannen & Co will provide a flow of revenue and a significant
injection of assets to the Group and the Directors believe that the appointment
of the Proposed Directors will add valuable experience to the management team.
In addition, the net cash proceeds from the Placing and Open Offer and the
effects of the Preference Share Conversion, CULS Redemption and Fowler Debt
Cancellation will strengthen the balance sheet of the Group significantly.



The Directors and the Proposed Directors believe that many investors,
particularly high net worth individuals and families, have recently become
disillusioned with the asset management industry, particularly in relation to
the size, performance, vision, flexibility and fee structures of the major
investment houses. They consider, therefore, that an opportunity exists to
develop a specialist investment house which is dedicated to addressing the needs
of those investors by protecting and growing their capital and income.



Hannen & Co, through its relationship with Family Investments Limited, has
access to long-term strategic management experience, particularly in relation to
global growth opportunities not available elsewhere. By combining Hannen & Co
with the Group and capitalising the Group following the Acquisition (the "
Enlarged Group") appropriately, the Directors and the Proposed Directors believe
that the Enlarged Group will be able to offer high net worth individuals and
families the type of service that they are looking for but are unable to find
within the existing asset management industry.



By maintaining the Enlarged Group's quotation on AIM, the Directors and the
Proposed Directors believe that the Enlarged Group will be well placed to pursue
further acquisition opportunities which will enable the Enlarged Group to
continue to develop within the parameters of its core strategy.  As set out in
the section entitled "Current trading and prospects" below, the Company is
currently in negotiations with the shareholders of an independent fund
management company.



Following Completion, the existing employment rights, including pension rights,
of the employees of the Group will be fully safeguarded.



Use of proceeds

The Directors and the Proposed Directors intend to use the net proceeds of the
Placing and the Open Offer to:



*          launch new specialist funds which will be focused principally on the
Asia Pacific and Former Soviet Union economies, in which the Directors and the
Proposed Directors have particular expertise, and to market these funds to
institutions, families and individuals;



*          market the Elite MoneyGuru Income and Growth Trust which, according
to Lipper, was ranked second by performance in its peer group of equity income
trusts over the 12-month and 24-month periods ended 31 July 2004;



*          introduce Family Investments Limited to families and individuals
seeking a suitable vehicle for the long-term management of their wealth and to
develop other appropriate products with similar objectives; and



*          take advantage of any opportunities that may arise to acquire
investment businesses or specialist teams of professionals operating in
complementary areas of activity to the Enlarged Group and other investment
opportunities.



Current trading and prospects

The unaudited interim results of the Group for the six months ended 31 December
2003 were released on 29 March 2004.



Having regard to the performance of Hannen & Co in the current financial year,
the Directors and the Proposed Directors believe that, taking into account the
minimum additional working capital to be provided by the Placing, the Enlarged
Group will be well positioned to take advantage of the opportunities available
to it.



In addition, the Company is presently engaged in negotiations with the
shareholders of an independent fund management company to acquire a majority
interest in that company. The Directors and the Proposed Directors believe that,
if those negotiations are successfully concluded, this will not only provide
additional assets under management but also extend the expertise available to
the Enlarged Group.



Consolidation

The Directors and the Proposed Directors consider that a consolidation of the
ordinary share capital of the Company should lead to a relative reduction in the
bid-offer spread and so help to improve liquidity in the Company's shares.



Accordingly, it is proposed that the ordinary share capital of the Company be
consolidated on the basis of one New Ordinary Share for every 1,000 Existing
Ordinary Shares held.  Holders of fewer than 1,000 Existing Ordinary Shares will
not be entitled to receive a New Ordinary share following the Consolidation.
Shareholders with a holding in excess of 1,000 New Ordinary Shares but which is
not exactly divisible by 1,000 will have their holding of New Ordinary Shares
rounded down to the nearest whole number of New Ordinary Shares following the
Consolidation.  Fractional entitlements, whether arising from holdings of fewer
or more than 1,000 Existing Ordinary Shares, will be sold in the market and the
proceeds will be retained for the benefit of the Company.



Option Agreements and Option Assignment

Pursuant to 13 option agreements (the "Option Agreements"), KBR secured, for a
nominal consideration of #1 per agreement, the assignable right to acquire on or
before 4 October 2004 all of the issued Preference Shares for an aggregate
consideration of #60,000 and all of the CULS in issue for an aggregate
consideration of #173,500, together with a commitment to pay or procure the
payment to the existing holders of the CULS of an amount equal to the interest
accrued but unpaid in respect of the CULS for the period to 31 December 2003.



Under the terms of the Option Assignment, KBR has agreed to assign all of the
Option Agreements to the Proposed Directors in consideration for the sum of #1
and the commitment by the Proposed Directors to pay the aggregate consideration
for the Preference Shares and the CULS under the Option Agreements and to pay or
procure the payment to the existing holders of the issued CULS of the
outstanding interest thereon for the period to 31 December 2003.



Preference Share Conversion

As part of the proposals to be put to shareholders at the EGM and to holders of
the Preference Shares at a separate class meeting to be held shortly after the
EGM, it is proposed to convert and/or redesignate the Preference Shares into New
Ordinary Shares and/or Deferred Shares.



Subject to exercise of all of the Option Agreements, under the terms of the
Option Assignment, the Proposed Directors have conditionally agreed that the
issued Preference Shares will be converted and/or re-designated into 95,520 New
Ordinary Shares and 223,520,300 Deferred Shares. The Deferred Shares will have
no voting rights or entitlement to any dividend and very limited rights on a
return of capital.



CULS Redemption

Subject to exercise of all of the Option Agreements, under the terms of the
Option Assignment, the Proposed Directors have conditionally agreed to accept
redemption of the issued CULS on the basis of 20p per #1 nominal amount of CULS.
The Proposed Directors have also agreed to use the aggregate redemption proceeds
of #173,500 to subscribe for New Ordinary Shares in the Placing.



Fowler Debt Cancellation

As at the date of this announcement, the Group is indebted to Charles Fowler in
the sum of approximately #301,000, comprising a subordinated loan of #85,000 and
cash advances amounting to approximately #216,000. Under the terms of the Fowler
Debt Cancellation Agreement, Charles Fowler has agreed to cancel the debt due to
him from the Company.



Placing and Open Offer

Placing

The Company is proposing to raise up to #2,500,000 before expenses by means of a
reasonable endeavours placing by KBR, as agent of the Company, of up to
2,500,000 New Ordinary Shares (the "Placing Shares") at the offer price of 100p
per share.  The advisers to the Company and the solicitors to KBR and Nabarro
Wells have each agreed to use the fees amounting to approximately #195,000
(exclusive of VAT) to be received by them in connection with the Proposals to
subscribe for Placing Shares.



Open Offer

The Company is also proposing to raise up to #380,826, before expenses, by the
issue of up to 380,826 New Ordinary Shares pursuant to the Open Offer (the "
Offer Shares").



The Directors have arranged for KBR to make the Open Offer, as agent for the
Company, inviting qualifying shareholders to apply for the Offer Shares at the
Offer Price of 100p per share, payable in full on application, on the basis of:



             1 Offer Share for every 1,000 Existing Ordinary Shares



held by such qualifying shareholders and registered in their names at the close
of business on the 3 September 2004, and so in proportion for any other number
of Existing Ordinary Shares then held, rounded down to the nearest whole number
of Offer Shares. Entitlements to fractions of Offer Shares will not be allocated
to qualifying shareholders but, together with Offer Shares attributable to those
overseas shareholders that are not eligible to participate in the Open Offer,
will be aggregated and made available to other qualifying shareholders under the
Offer Agreement and the proceeds will be retained for the benefit of the
Company.  Qualifying shareholders may apply for and shall be entitled to receive
any whole number Offer Shares up to their respective entitlements calculated on
the basis set out above.  In addition, qualifying shareholders may apply for
additional Offer Shares in excess of those entitlements.  To the extent that
applications are received under the Open Offer in respect of more than 380,826
Offer Shares in aggregate, the number of such additional Offer Shares issued to
qualifying shareholders will be reduced in such manner as the Company and KBR
shall, in their absolute discretion, determine.  Any subscription monies paid in
excess of the required amount will be returned to the applicant without
interest.  Holdings of Existing Ordinary Shares in certificated and
uncertificated form will be treated as separate holdings for the purpose of
calculating entitlements under the Open Offer. The latest time and date for the
receipt of completed Application Forms and payment in full in respect of the
Open Offer is 3.00 p.m. on 28 September 2004.



Entitlements under Open Offer may not be assigned, or transferred, except to
satisfy bona fide market claims in relation to purchases or transfers in the
market pursuant to the rules of the London Stock Exchange, prior to the Existing
Ordinary Shares being marked "ex" the Open Offer.



The Directors have elected not to take up their pro rata entitlements to
subscribe for Offer Shares in order to maximise the number of Offer Shares
available for qualifying shareholders under the Open Offer.



The Proposed Directors

Brief biographical details of the Proposed Directors are set out below.



Peter Hannen, Proposed Chairman, aged 51, is the sole director and beneficially
interested in the entire issued share capital of Hannen & Co.  He commenced his
career in 1972 within the commodity division of Merrill Lynch in London before
joining M. Golodetz as a sugar trader, initially in London and subsequently in
New York.  Peter Hannen joined Phibro (now part of Citigroup) in 1978 and, in
1981, moved to Paris to start Richco Sugar for Marc Rich.  In 1990, he
co-founded the predecessor of Hannen & Co.  Peter Hannen is also chairman of
Celtic Resources Holdings plc, an AIM company with substantial gold reserves in
the Former Soviet Union, and a director of a number of private companies.  Peter
Hannen will enter into a service agreement with the Company on Admission for a
period terminable upon 12 months' notice with an initial salary of #70,000 per
annum, based upon him providing his services for two days per week.



Jonathan Scott-Barrett, Proposed Chief Operating Officer, aged 60, joined Hannen
& Co in 2002 to assist Peter Hannen with strategic asset allocation.  His early
career was in the property sector, initially in London and subsequently in
France.  In 1982 he joined a corporate finance boutique assisting in the
financing, construction, delivery and operation of high speed ferries running
between Hong Kong and Macau before leaving, in 1986, to join Centaur
Communications Limited, one of the largest private business publishing companies
in the United Kingdom.  After roles as the publishing director of a number of
titles, including Corporate Money, Money Marketing and The Lawyer, Jonathan
Scott-Barrett moved into group corporate development in 1995 and became chief
executive of Perfect Information Limited, a City of London-based supplier of
public and private company information to the corporate advisory sector, leaving
the group in 2002.  He has also served as a non-executive director of a number
of public and private companies, including Hanson PLC between 1991 and 2000.
Jonathan Scott-Barrett will enter into a service agreement with the Company on
Admission for a period terminable upon 12 months' notice with an initial salary
of #70,000 per annum, on a full time basis.



Peter Curtin, Proposed Non-Executive Director, aged 56, has extensive experience
in the financial services industry and has been acting as an adviser to Hannen &
Co.  He commenced his career in 1964 with deZoete and Gorton, a major London
stockbroker.  In 1980, Peter Curtin joined the investment department of Bankers
Trust where he became a vice-president, specialising in natural resources and
Pacific equities.  He joined Mercury Asset Management Limited in 1990 and was,
at one time, responsible for managing over US$2 billion of investments.  Peter
Curtin retired from Mercury Asset Management in March 2000 after it was acquired
by Merrill Lynch. He is a Member of the Securities Institute and is a
non-executive director of Meringue Productions Limited, an interactive media
company.  On Admission, Peter Curtin will become entitled to directors' fees of
#10,000 per annum.



The information in relation to the Proposed Directors required by paragraph (f)
of Schedule 2 to the AIM Rules is set out in the circular to shareholders
referred to above.



Rule 9 Waiver

Under Rule 9 of the City Code, when any person, or group of persons acting in
concert, acquires shares which, when taken together with shares already held by
him or shares held or acquired by persons acting in concert with him, carry 30
per cent. or more of the voting rights of a company which is subject to the City
Code, that person or persons acting in concert with him are normally obliged to
make a general offer in cash to all shareholders at the highest price paid by
him, or any person acting in concert with him, within the preceding 12 months.



Rule 9 of the City Code also provides, inter alia, that, where any person,
together with persons acting in concert with him, holds shares carrying not less
than 30 per cent. but not more than 50 per cent. of the voting rights of a
company which is subject to the City Code, and such person, or any other person
acting in concert with him, acquires additional shares carrying voting rights in
such company, that person is normally obliged to make a general offer to all
shareholders at the highest price paid by him, or any person acting in concert
with him, within the preceding 12 months.



Where any person, together with persons acting in concert with him, holds shares
carrying more than 50 per cent. of the voting rights of a company which is
subject to the City Code, no obligations to make a general offer under Rule 9 of
the City Code will normally arise from any acquisitions by such person, or any
person acting in concert with him, of any further shares carrying voting rights
in such company. However, the Panel may regard as giving rise to an obligation
to make a general offer to all shareholders the acquisition by one of the
members of the Concert Party of shares sufficient to increase their individual
holding to 30 per cent. or more, or any acquisition if they already hold not
less than 30 per cent. but not more than 50 per cent. of the voting rights of
the Company.



The members of the Concert Party are acting in concert in relation to the
Company for the purposes of the City Code. Upon completion of the Proposals, the
members of the Concert Party will hold 2,619,020 New Ordinary Shares, being the
Consideration Shares, the Preference Share Conversion Shares and 723,500 of the
Placing Shares to be subscribed for by the members of the Concert Party.



Accordingly, in the event that only the minimum number of Placing Shares to be
subscribed under the Placing and none of the Offer Shares are subscribed, on
Admission, the members of the Concert Party could control up to approximately
68.0 per cent. of the voting rights of the Company.



The Panel has agreed, subject to the relevant resolution being passed on a poll
of shareholders independent of the members of the Concert Party at the EGM, to
waive the obligation on the members of the Concert Party to make a general offer
to shareholders under Rule 9 of the City Code which would otherwise arise as a
result of the issue of the Consideration Shares, the Preference Share Conversion
Shares and 723,500 of the Placing Shares to the members of the Concert Party
(the "Rule 9 Waiver").



None of the members of the Concert Party has ever, directly or indirectly, held
or dealt in any Existing Ordinary Shares. The waiver to which the Panel has
agreed will be invalidated if any purchases of Existing Ordinary Shares are made
by any of the members of the Concert Party in the period between the date of
this announcement and the EGM.



EGM

The circular to shareholders contains a notice of the EGM at which, in order to
effect the Proposals, the following resolutions will be proposed to approve:



*          the consolidation of the existing issued and unissued Ordinary Shares
into New Ordinary Shares, conversion and/or re-designation of the Preference
Shares into New Ordinary Shares and/or Deferred Shares and the adoption of new
Articles of Association to reflect such changes;



*    the allotment and issue of New Ordinary Shares in relation to:



     *   the Acquisition;

     *   the Placing; and

     *   the Open Offer; and



*   the Rule 9 Waiver.



In addition, the approval of the holders of Preference Shares to the variation
of the rights attaching to the Preference Shares is required and, for this
purpose, a separate class meeting of the holders of the Preference Shares will
be held shortly after the EGM. Notice of the class meeting of holders of the
Preference Shares is being despatched separately to such holders, together with
a form of proxy for use at such class meeting.



Recommendation

The Directors, who have been so advised by KBR, consider that the terms of the
Acquisition, the Preference Share Conversion, the Placing and the Open Offer are
fair and reasonable so far as the Company and the shareholders are concerned and
the Rule 9 Waiver is in the best interests of the Company and the shareholders
as a whole. The Directors have elected not to take up their entitlements under
the Open Offer in order to maximise the number of Offer Shares available for
qualifying shareholders under the Open Offer.



In providing its advice, KBR has relied upon the commercial assessments of the
Directors.



The Directors also consider that the Consolidation is in the best interests of
the Company and the shareholders as a whole.



Accordingly, the Directors unanimously recommend shareholders to vote in favour
of the resolutions, as they intend to do in respect of their own beneficial
holdings of 80,750,000 Existing Ordinary Shares, representing approximately 21.2
per cent. of the issued ordinary share capital of the Company.



In addition, Newland Resources Limited and Investika Limited have irrevocably
undertaken to vote in favour of the Resolutions in respect of their respective
beneficial holdings of 105,000,000 and 17,500,000 Existing Ordinary Shares, in
aggregate representing approximately 32.2 per cent. of the existing issued
ordinary share capital of the Company.



7 September 2004



Ends


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