The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
Proposed disposal of the Ingenie Business ("the Disposal") and Notice of General Meeting
The Disposal will be effected through the sale of the entire issued share capital of Romeo Newco (which has acquired certain of the assets and liabilities of IL) and the transfer of the general insurance broking business operated by ISL under the name "Ingenie".
In view of the size of the Ingenie Business relative to the Company, the Disposal will result in a fundamental change in the business of the Company for the purpose of Rule 15 of the AIM Rules and it is therefore conditional upon the approval of Shareholders, amongst other matters. That approval will be sought at a general meeting of the Company to be held at Aldwych House, 71-91 Aldwych,
The Circular, along with a notice of general meeting, to be held at Aldwych House, 71-91 Aldwych,
The release of this announcement has been authorised by
For further information:
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Extracts from the Circular
The following has been extracted from, and should be read in conjunction with, the Circular, which will be posted to Shareholders shortly and made available on the Company's website www.watchstonegroup.com.
1. The Disposal
The stated strategy of the Group has been to resolve its legacy issues and prepare its operating businesses for disposal. Following the sale of Healthcare Services earlier this year, the Ingenie Business is the remaining operating business in the Group.
The Ingenie Business is a technology provider and an insurance broker focused on helping young drivers use the road safely and affordably. Using telematics technology, the Ingenie Business gives its community discounts, feedback and bespoke advice via its Driver Behaviour Unit to help them improve their driving skills whilst staying safe. It also provides its telematics technology and analytics capability to certain third parties as a technology solutions provider.
As announced on
The Ingenie Business has been developing and recovering from a difficult period of trading and has inevitably been impacted by the COVID-19 restrictions. Accordingly, the Board feels that now is the right time for a new owner to further leverage its market leading proposition.
1.2 Reasons for the Disposal
The Directors believe that the Ingenie Business is a high-quality business with a robust operating model, strong systems and dedicated people. However, without the scale of a more established insurance business in the UK and/or without investing a substantial amount in marketing and building further market presence, the Directors believe that growth opportunities are limited as a standalone entity. The COVID-19 restrictions further complicate the development of its proposition and its growth in the short to medium term.
Accordingly, the Directors have decided to dispose of the Ingenie Business whilst retaining an interest in its performance in 2021 through deferred consideration. In addition, the Company will retain the benefit of historic tax claims in ISL which the Directors are advised have substantial value (albeit this remains subject to challenge by HMRC).
The sale of the Ingenie Business represents an opportunity for the Company to realise cash proceeds and for Shareholders to participate in that cash realisation. The Disposal is in line with the Board's broader objective of generating value for Shareholders and returning cash to Shareholders.
If the Resolution is not passed, the Disposal will not proceed, and the Board would continue to operate the Ingenie Business in the best interests of Shareholders in line with the Board's strategy.
1.3 Summary terms of the Disposal
Through the Transaction Documents, the Buyer has conditionally agreed to acquire the Ingenie Business. The Disposal will be effected through the sale of the entire issued share capital of Romeo Newco (which has acquired certain of the assets and liabilities of IL) to
The Disposal is subject to fulfilment of conditions including, inter alia, the approval of the Shareholders at the General Meeting and the agreement by certain counterparties of the novation of contracts with IL and ISL. On completion, which is expected to occur on or around
The Group has agreed that, for a period of three years following Completion, it will refrain from competing with Ingenie Business and it has agreed to be subject to customary restrictive covenants in this regard. The Group has given customary warranties to the Buyer in respect of the Ingenie Business and the Group's liability under those warranties is subject to certain customary limitations. The Transaction Documents are governed by English law. The English courts shall have exclusive jurisdiction to settle any disputes arising out of or in connection with the Transaction Documents.
1.4 The Buyer
1.5 Use of Proceeds
The net cash proceeds of the Disposal will be kept on deposit and managed prudently until the Company's next distribution is effected. The precise amount of any distribution to shareholders has not yet been determined.
1.6 Strategy in respect of the remaining Company in the event of the Disposal
In the event that the Disposal completes, Watchstone will comprise only of non-operating assets and will, under the AIM Rules, be considered an AIM Rule 15 cash shell. At this stage, the Board has not concluded whether it intends to undertake a reverse takeover in accordance with the AIM Rules.
2. AIM Rule 15
In accordance with AIM Rule 15, the Disposal constitutes a fundamental change of business of the Company. On Completion, the Company would cease to own, control or conduct all or substantially all, of its existing trading business, activities or assets. Following completion of the Disposal therefore, the Company will become an AIM Rule 15 cash shell and as such will be required to make an acquisition or acquisitions which constitutes a reverse takeover under AIM Rule 14 (including seeking re-admission as an investing company (as defined under the AIM Rules)) on or before the date falling six months from completion of the Disposal or be re-admitted to trading on AIM as an investing company under the AIM Rules (which requires the raising of at least
3. General Meeting
The Disposal is conditional upon, amongst other things, Shareholder approval being obtained at the General Meeting to be held at Aldwych House, 71-91 Aldwych, London WC2B 4HN, at
The evolving COVID-19 situation and the related Government restrictions will clearly impact the ability of Shareholders to attend the General Meeting in person. In normal circumstances, the Board greatly values the opportunity to meet Shareholders in person. However, it fully supports the Public Gathering Restrictions, and takes seriously the Company's responsibility to slow the spread of COVID-19. In response to the current COVID-19 pandemic, the UK government introduced laws and associated guidance restricting the movement of people.
The health and wellbeing of our Shareholders, employees, advisers and of the general public is of paramount importance to the Board, and the Company is committed to minimising the unnecessary movement of people at this time and observing all measures mandated and recommended by the UK government. As a result, and in order that Shareholders and the Company are able to comply with the Public Gathering Restrictions, the General Meeting will be held as a closed meeting. Shareholders will not be permitted to attend.
The Directors consider the Disposal to be in the best interests of the Company and the Shareholders as a whole. The Directors have received advice from
The following definitions and technical terms apply throughout this announcement, unless the context otherwise requires:
"AIM" the AIM market, being a market of that name and operated by the
"AIM Rules" the AIM Rules for Companies (as amended from time to time);
"Board" or "Directors" the board of directors of the Company;
"Completion" completion of the Disposal expected to occur on or about
"Disposal" the proposed sale of the Ingenie Business;
"General Meeting" the general meeting of the Company to be held at Aldwych House, 71-91 Aldwych, London WC2B 4HN, at
"Group" the Company and its subsidiaries and subsidiary undertakings;
"HMRC" Her Majesty's Revenue and Customs;
"Ingenie Business" the business that is the subject of the Disposal being the entire issued share capital of Romeo Newco and ISL's general insurance broking business;
"Ordinary Shares" ordinary shares of
"Resolution" the resolution to approve the Disposal to be proposed at the General Meeting;
"Shareholders" holders of Ordinary Shares;
"Transaction Documents" the conditional sale and purchase agreement relating to the sale of Romeo Newco and the conditional business transfer agreement related to the ISL's general insurance broking business; and
"Watchstone" or "Company"
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