BREAKING NEWS AN SBM SCOOP – LONDON CAPITAL GROUP AND THE BID APPROACHES THE CURRENT BOARD ARE NOT DISCLOSING

UPDATE 3:15PM – SPREADEX DECLARE THEIR HAND.

Now an alternate approach is out in the open it is incumbent upon the Board of LCG to engage with Spreadex given the clear alternate cash value that, subject to DD, is on the table. The vote tomorrow should be at least postponed if not halted.

UPDATE 10:30AM – It seems that our piece has prompted an RNS from the NOMAD and the Co as below – 

“The board of LCG has noted comments in the press relating to approaches the Company may have received from third parties. In its circular to shareholders dated 17 June, 2014 (the “Circular”) outlining a proposed financing of up to GBP17.5 million and requisitioning a general meeting for 3 July, 2014 the Company stated “From time to time the Company is in discussions with third parties (including competitors) with regard to possible mergers and acquisitions transactions. The Company, as at the date of this document, has no current intention to pursue any such mergers or acquisitions or similar transactions (other than as disclosed in this document). Should the position change, an appropriate announcement will be made.” The board of LCG confirms that this remains the position. It continues to recommend the financing as described in the Circular.”

This is a rather woolly reference to approaches having been made. We ask why do you not disclose those offers Mr Ashby and allow shareholders to decide for themselves as opposed to you and Mr Vardey making that decision with a nominal holding in LCG? WE CONTINUE TO BELIEVE THE CONVERTIBLE PROPOSAL IS AGAINST EXISTING SHAREHOLDERS BEST INTERESTS AND SHOULD BE VOTED DOWN TOMORROW. ANY INSTITUTION VOTING FOR THIS NEEDS THEIR HEAD EXAMINING AND THEIR MANDATE PULLING. IF THERE ARE APPROACHES WITH MOOTED VALUES OF 30 PER SHARE AND THE MARKET BELIEVES THE CURRENT CONVERTIBLE DEAL TO BE A BAD ONE RE THE PRESENT STOCK PRICE OF 21P AND WHICH IS A MATERIAL DISCOUNT TO CASH, THEN TO EVEN ENTERTAIN THE VOTE IS A DERELICTION OF DUTY.

08:00AM – We can reveal exclusively this morning that London Capital Group the spread betting and CFD company that is presently the subject of a management sanctioned “take under” by a Mr Charles Henri-Sabet via a complicated convertible loan issue that will result in him ultimately having majority control over the company has received not one, but two bid approaches.

At face value both approaches look to be materially more beneficial for current shareholders than the current proposed structure. The present BoD of LCG appear not to be disclosing these offers to shareholders though.

Insiders have revealed that there is an offer on the table from one firm that involves a reverse takeover and a 5p dividend cash payment to existing LCG shareholders and a second offer that is subject to due diligence of 30p per share cash. This is still an utter steal in our opinion with the company’s unencumbered cash balance likely being in the mid to late 20’s now.

Serious questions should be asked of current management – Kevin Ashby and Giles Vardey in particular (the latter being the chap who of course presided over the utter destruction of shareholder wealth at Plus Markets Group with the infamous Mr Cyril Theret) as to just why they are pressing ahead with the convertible vote tomorrow without fully exploring these bids and, more importantly, without giving shareholders (the owners of the business) the opportunity to weigh up alternate routes for the company. Our guess is that management preservation is the reason and is yet another example of how company boards with no skin in the game can and do act at cross purposes to shareholders.

We call upon the company and the takeover panel to reveal exactly what has been laid upon the table for shareholders by two rival firms and that the vote tomorrow regarding the convertible proposal be halted. 

Absent the vote being halted, we would urge all shareholders to vote AGAINST all the resolutions proposed in relation to the convertible financing tomorrow. Our suggestion to large shareholders is that an EGM be called in any event to kick Messrs Vardey and Ashby into the long grass and a real auction for the company be created to maximise shareholder value – something management’s mandate is supposed to have at its heart and indeed be a primary consideration in the running of day to day affairs. It is our understanding that ex management and major shareholders of the company believe the proposed convertible offer to be against existing shareholders interests and they will be voting against the proposal. 

We have spoken with the NOMAD this morning in questioning why they have not been rather more overt in the company’s disclosure to the market of these approaches. Standard comment – “the board has taken appropriate legal advice and believes that they have acted appropriately”. Make up your own mind…

Clear disclosure – Richard Jennings and Titan clients hold positions in LCG.