Pre-paid debit cards marketer Hertford International Group is buying Cheque Exchange Ltd from Provident Financial.
The purchase of the cheque cashing business should be completed in January 2009. It made profits of £258,000 in 2007 and has a network of 750 agents. Hertford wants to expand this network
The shares were suspended at 15p each following the announcement of the reverse takeover. That values the existing business at £6.4m. This business generated less than £90,000 of revenues in the six months to March 2008. Net cash was £282,000.
Hertford is paying a total of £3m for Cheque Exchange. The initial payment of £1.25m is due at the end of January 2009, with a further £1.25m payable six months later. The other £500,000 will be paid in two instalments of £250,000 in January 2010 and January 2011.
Cheque Exchange has been the UK super agency for MoneyGram since 2000. MoneyGram is an international payment services business with more than 157,000 outlets in 180 countries or territories. Cheque Exchange is the largest MoneyGram agent in the UK and accounts for 5% of the third party cheque cashing market. The deal is dependent on this agency being renewed.
Hertford is financing the acquisition by raising £850,000 from a share placing at 13p a share and £2.25m from 10% convertible loan stock 2012. This fund raising has been underwritten by Dexapoint, which is already a shareholder. It will receive warrants exercisable at 15p a share and 20p a share.
The conversion price of the loan stock is initially 13p a share until 2010 when it rises to 15p a share and then 2011 when it will be 17p a share.
Dexapoint could end up with 53.9% of Hertford.
Hertford joined Aim on 24 December 2007. It recently changed its broker Zimmerman Adams to Hythe Securities. Zimmerman Adams is still nominated adviser.
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