REG - Manx Financial Group - Conditional Acquisition of 50.1% interest in PAL

Manx FinancialAnnouncement

16/05/2022 07:00

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RNS Number : 5272L  Manx Financial Group PLC  16 May 2022

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET
ABUSE REGULATION (EU No. 596/2014) ("MAR"). UPON THE PUBLICATION OF THIS
ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INSIDE INFORMATION IS
NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

16 May 2022

 

Manx Financial Group PLC

("MFG" or the "Company")

 

Conditional Acquisition of 50.1% interest in Payment Assist Limited

Option to acquire remaining 49.9% interest

Manx Financial Group PLC announces that Manx Ventures Limited ("Manx
Ventures"), a wholly owned subsidiary of the Company, has agreed to acquire a
50.1% interest (the "Acquisition") in UK focused, point of sale lender Payment
Assist Limited ("Payment Assist") for a total initial consideration of £4
million payable in cash. The Company has been working with Payment Assist
since 2015, the Company's wholly owned subsidiary Conister Bank Limited (the
Isle of Man's only independent bank) having provided the primary wholesale
funding agreement to support Payment Assist's growth during this period. The
Acquisition is conditional on the satisfaction of certain conditions precedent
including approval of the change of control by the Financial Conduct Authority
("FCA"). In addition to the Acquisition, Manx Ventures has agreed an option to
acquire the remaining 49.9% of Payment Assist for cash consideration of up to
£5 million (the "Option"). The Option can be exercised by Manx Ventures at
any time for a period of two years after publication by Payment Assist of its
audited accounts for the period to 31 December 2024. MFG will fund the initial
£4 million consideration and deferred consideration of up to £5 million from
its cash resources.

Commenting on the Acquisition, Douglas Grant, CEO of the Company commented:
"The joint venture with Payment Assist continues our strategy of acquiring
interests in high quality specialist lenders. We have witnessed first-hand the
growth of Payment Assist over the last 7 years and the Board believes that
there is potential for significant further growth. The Acquisition, with no
dilution to shareholders or external funding required, will position the
Company to capitalise on what we expect to be a high margin and profitable
business now and in the future. The option positions the Company to acquire
the remaining 49.9% of Payment Assist at an attractive valuation if the
business grows as the Company expects over the next three years. We have
started the process of engaging with the FCA to obtain their approval for the
proposed change of control and will make an announcement to update the market
once this is received."

Neil Jeffery, Chief Executive Officer of Payment Assist commented: "I am
delighted to secure a long-term partnership with the Manx Financial Group, We
have worked well with Conister Bank over the last 7 years and are confident
the partnership with Manx Ventures, and continued support from Conister Bank
as we grow the business, will position Payment Assist to continue to be a
leading point of sale lender in the UK and support our growth into new
products and sectors."

Highlights

Ø   Payment Assist, the UK's leading automotive repair point-of-sale
finance provider, working with premier national chains such as National Tyres,
Halfords and Formula One

Ø   Payment Assist has now diversified lending into insured products and
retail

Ø   Payment Assist loan book of £21.3 million as at 31 December 2021, an
increase of 72% since 2019

Ø   Payment Assist achieved revenue of £6.6 million in the 12 months to 31
December 2021, an increase of 69% since 2019

Ø   Payment Assist EBITDA of £2.5 million for the period to 31 December
2021, an increase of 108% since 2019

Ø   Payment Assist provided finance for over 170,000 customers in the 12
months to 31 December 2021, an increase of 43% since 2019

Ø   Transaction structure means no dilution to Company's shareholders;
acquisition financed from Company's available cash and debt

Ø   Payment Assist management team retain 49.9% interest in business

Ø   Option exercise price of up to £5 million sets an attractive
acquisition price should Payment Assist continue to grow with the support of
the Group

Key Terms of Acquisition

On 13 May 2022 Manx Ventures and the current shareholders of Payment Assist
(the "Vendors") being Neil Jeffrey, Colin Ellard, Spencer Wrench and Simon
Bevan signed a sale and purchase agreement (the "Purchase Agreement") pursuant
to which, subject to satisfaction of certain conditions precedent as further
detailed below, Manx Ventures agreed to acquire 50.1% of the issued ordinary
shares of Payment Assist ("Sale Shares") for total cash consideration of £4
million (the "Consideration"). In particular, £2 million of the Consideration
is payable by the Company within five business days of finalising completion
accounts to the date of completion of the Acquisition (the "Completion Date"),
with the balance of £2 million payable after publication of the Payment
Assist audited accounts for the period to 31 December 2022. The Consideration
is subject to adjustment in accordance with the Purchase Agreement, with
Payment Assist to be acquired on a cash-free/debt-free basis with completion
accounts finalised within 105 days of the Completion Date.

The Acquisition is subject to customary conditions precedent to closing,
including most significantly, approval of the change of control following the
Acquisition by the FCA and other regulators of the Company. The parties have
agreed a long-stop date of 31 December 2022 for satisfaction (of conditions
precedent, failing which, unless agreed otherwise, the rights and obligations
of the parties under the Purchase Agreement shall lapse).

In the period between exchange of the Purchase Agreement on 13 May 2022 and
the Completion Date, the Vendors and Payment Assist have agreed to certain
covenants to ensure the Company continues to be operated in the ordinary
course, and restricting the right of the Vendors to transfer or otherwise
encumber their shares. Manx Ventures has the right to terminate the Purchase
Agreement in the event of a material adverse change to the business of Payment
Assist in the period prior to the Completion Date. The Vendors will provide
Manx Ventures with customary warranties regarding the business and affairs of
Payment Assist, with warranties to be confirmed on 30 June 2022 and each day
thereafter up to and including the Completion Date.

Key Terms of Joint Venture Agreement

From the Completion Date, the parties shall be joint venture partners, with
the Vendors retaining a 49.9% interest in the issued shares of Payment Assist.
On Completion, the parties will execute an agreed form of joint venture
agreement (the "JV Agreement"), setting out the rights of the parties as
shareholders of the Company. In particular, following Completion, Manx
Ventures shall have the right to appoint a majority of directors to the board
of Payment Assist. Neil Jeffery (the current CEO of Payment Assist) and Colin
Ellard (the current COO of Payment Assist) will remain as directors of Payment
Assist and will continue to operate the business on a day-to-day basis
following completion of the Acquisition. The JV Agreement provides certain
customary protections for the Vendors as minority shareholders of the Company,
including in relation to future dilution and the related party transactions.

Key Terms of the Option Agreement

On Completion, Manx Ventures and the Vendors will execute an option agreement
(the "Option Agreement") pursuant to which the Vendors grant to Manx Ventures
the right to acquire the balance of 49.9% of Payment Assist's issued shares
(held by the Vendors) (the "Option Shares") for consideration of up to £5
million. The Option can be exercised by Manx Ventures at any time for a period
of two years after publication by Payment Assist of its audited accounts for
the period to 31 December 2024, with the exercise price for the Option Shares
based on an enterprise value for Payment Assist on exercise of the Option
equal to two times the average net profits of Payment Assist in the three
financial years ending on 31 December 2024 (the "Option Period"), subject to a
cap of £5 million. In the event Mr Jeffery and/or Mr Ellard cease to be
employed by Payment Assist at any time during the Option Period, other than in
circumstances where they are a "good leaver", the Company shall have the right
to bring forward the date on which the Company can exercise the Option in
respect of the shares held by the relevant individual.

 

About Payment Assist

Payment Assist was set up by Neil Jeffery and Colin Ellard in 2013 when they
saw an opportunity in the automotive sector to try and improve garage customer
retention rates by providing a financial solution to customers who could not
immediately afford to pay for all the work that was required to be completed
on their vehicle.

Payment Assist was granted its FCA permission in October 2014.

The opportunity to finance wills and trusts over longer periods was then
discussed with some longstanding contacts. Payment Assist agreed to offer this
facility initially on a trial basis, which has been successful and was
successfully expanded.

The broader retail market is one that Payment Assist are moving into, in
association with a number of key contacts within the industry; building on
their success seen in the automotive sector.

Further details regarding the business and operations of Payment Assist, and
its lending terms and policies, can be found at its website,
https://www.payment-assist.co.uk (https://www.payment-assist.co.uk)

For the year ended December 2021, after all expenses, Payment Assist reported
an unaudited profit on ordinary activities of £1.1 million and had as at that
date net assets of £4.5 million. The results of Payment Assist will be
consolidated with those of the Company from Completion.

Further Information

For further information on the Company please contact:

 Manx Financial Group PLC             Beaumont Cornish Limited     Greentarget Limited
 Denham Eke, Executive Vice Chairman  Roland Cornish/James Biddle  Dafina Grapci-Penney

 Tel +44 (0)1624 694694               Tel +44 (0) 20 7628 3396     Tel +44 (0) 203 963 1887

 

Forward Looking Statements

This announcement contains statements about the Company and Payment Assist
that are or may be deemed to be "forward-looking statements".

All statements, other than statements of historical facts, included in this
announcement may be forward-looking statements. Without limitation, any
statements preceded or followed by, or that include, the words "targets",
"plans", "believes", "expects", "aims", "intends", "will", "may", "should",
"anticipates", "estimates", "projects", "would", "could", "continue" or words
or terms of similar substance or the negative thereof, are forward-looking
statements. Forward-looking statements include, without limitation, statements
relating to the following: (i) future expenditures, expenses, revenues,
earnings, synergies, economic performance, indebtedness, financial condition,
dividend policy, losses and future prospects and (ii) business and management
strategies and the expansion and growth of the operations of the Company
and/or Payment Assist.

These forward-looking statements are not guarantees of future performance.
These forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of any such person, or industry results, to be
materially different from any results, performance or achievements expressed
or implied by such forward-looking statements. These forward-looking
statements are based on numerous assumptions regarding the present and future
business strategies of such persons and the environment in which each will
operate in the future. Investors should not place undue reliance on such
forward-looking statements and, save as is required by law or regulation
(including to meet the requirements of the AIM Rules, MAR and/or the FSMA),
the Company does not undertake any obligation to update publicly or revise any
forward-looking statements (including to reflect any change in expectations
with regard thereto or any change in events, conditions or circumstances on
which any such statement is based). All subsequent oral or written
forward-looking statements attributed to the Company or any persons acting on
their behalf are expressly qualified in their entirety by the cautionary
statement above. All forward-looking statements contained in this announcement
are based on information available to the Directors of the Company at the date
of this announcement, unless some other time is specified in relation to them,
and the posting or receipt of this announcement shall not give rise to any
implication that there has been no change in the facts set forth herein since
such date.

 

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