Exclusive: LCG goes private in £5 million Loan Notes deal, to Charles-Henri Sabet

LCG trading floor

LeapRate Exclusive… LeapRate has learned that FCA regulated Retail FX, CFDs and spreadbetting broker London Capital Group is going to be taken private by CEO Charles-Henri Sabet.

Charles Henri Sabet LCG

Charles-Henri Sabet, LCG

Mr. Sabet and his investor group GLIO Holdings already control the publicly traded parent company London Capital Group Holdings PLC (which we’ll call ‘Holdings’), with a 78.1% holding. However the proposed transaction will see Mr. Sabet’s private holding company SLCG International buy from Holdings its ownership of the FCA regulated operating company London Capital Group Limited (which we’ll simply call ‘LCG’), as well as the other subsidiaries of Holdings.

We expect the company to make a formal announcement shortly.

The transaction will remove LCG from operating as a public company. Despite improving results, LCG has continued to generate operating losses since Mr. Sabet took over Holdings more than three years ago. By removing LCG from operating under the scrutiny and limitations of being owned by a publicly traded entity, it will be easier to inject capital (by Mr. Sabet and his co-investors) into LCG, and pursue a strategy that would lead the company back to growth and profitability.

The proposed transaction will see LCG issue Loan Notes to Holdings in the amount of £4.6 million, carrying a fixed interest coupon of 8%, in return for 91.5% of LCG’s capital. The Loan Notes are perpetual, and the capital is not expected to be repaid, such that the ‘consideration’ that Holdings will receive is a steady interest stream of approximately £370,000 per annum.

Sabet’s SLCG International will have an option to acquire the remaining 8.5% of LCG for £430,676, to be satisfied by the issue of further Loan Notes.

We now understand that one of the reasons that Holdings moved its share listing from the London Stock Exchange’s AIM to the NEX Exchange last month was to be able to more easily effect the proposed transaction. Since the going-private transaction is (obviously) a related-party transaction, the NEX Exchange’s rules are much more amenable to what is being proposed.

Holdings will hold a shareholder vote on the matter on March 21. However, given that Sabet-controlled GLIO already holds 78.1% of Holdings’ shares, as noted above, the transaction is basically guaranteed to be approved in the vote.

The transaction also needs to be approved by the FCA, given the formal change-of-control of the licensed operating company LCG. However, since it will be the same effective controlling shareholder and management team, that should be just a formality as well.

As far as the future of Holdings goes after the transaction, it will become a publicly traded cash holding company and, according to filings, will look for an appropriate reverse takeover candidate in the financial services or technology field, in the UK or EU.

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