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Following the announcement of a formal sale process (FSP) in January 2020, subprime lender Amigo Holdings plc (Amigo) has now confirmed that it has received a proposal from a potential buyer who is prepared to announce a firm intention to make an offer at 20.9 pence per ordinary share.
This potential offer is subject to Amigo’s controlling shareholder Richmond Group Ltd, which owns 60.66% of Amigo’s shares, providing an irrevocable undertaking to vote in favour of the transaction. Richmond Group is run by the founder of Amigo, Mr James Benamor. Amigo has stated that it ‘has been unable to engage constructively and ascertain Richmond Group's willingness or not to accept the Potential Offer’, and as such, there is no certainty regarding the potential offer. Minority shareholders have been advised against taking any action until Richmond Group has confirmed its intentions.
This comes after Benamor launched an attack on the company in March 2020 via social media, accusing the company of ‘slow motion suicide’, and stating that he had voted against the FSP, which Amigo have denied. Benamor went on to defend his earlier statements on 28 April 2020 in a further blog post, blaming ‘unfit management’ for the ‘Amigo dumpster fire’. Given the company’s failings and ‘irresponsible lending’, which had prompted investigations by regulators, Benamor stated he had called a vote to make changes to the management, as was his ‘moral obligation’.
Following this, on 20 May 2020, Amigo announced that Richmond Group had requisitioned a general meeting in which it had proposed that the entire board of Amigo be removed and replaced by two new directors. This comes after Benamor re-joined the board on 9 December 2019. However, despite being on the nomination committee and being involved in the director recruitment process, Benamor resigned from the board and nomination committee in March 2020 as he ‘opposed the use of a recruitment consultant to identify suitable replacements for the Board’. Benamor also addressed this in his blog post:
‘A key responsibility of the new board of Amigo will be to investigate, provide evidence to the regulator on, and in all likelihood take litigation action against, the outgoing board members. It is therefore absolutely not acceptable for the outgoing board to be involved in selecting their replacements’.
The board of Amigo have expressed their concerns regarding Benamor’s plans, noting that ‘the removal of the entire Board without any succession plan or suitable replacements in the manner contemplated by RGL will have significant negative consequences for the Company’. This includes concerns regarding the impact of COVID-19 on the company and as regards to compliance with the UK Corporate Governance Code, due to lack of board independence. Alongside this, the board believes the proposals would cause disruption to the FSP, as the nomination of the Shareholder Director Nominees at the general meeting (constituting a change of control under the terms of the Notes), would utilise the ‘one-time exception to the change of control trigger under the Notes’. Therefore the exception to the change of control clause could not be utilised in relation to the FSP, which would make the sale less attractive to potential buyers, as the company would be required to repurchase ‘up to £234.1 million of the Notes, potentially at a significant premium to the current publicly traded value of the Notes’.
The general meeting is scheduled to take place on 17 June 2020. The board have recommended all shareholders vote against the proposed resolutions and have further stated that it is considering legal action against Richmond Group ‘in accordance with its legal duties and in the best interests of the Company’, as this attempt to remove the board is in breach of Richmond Group’s relationship agreement.
Market Tracker will continue to monitor this transaction as it develops.
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