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FT Blog on the Worthington Group (Rangers related)


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Worthington Group are who effectively "own" Craig Whyte and Aidan Earley's claim on the RIFC assets.

 

Also of note is the fact that the Liquidator appointed to Whyte's BVI based Liberty Capital sold Liberty Capitals holding in Worthington Group at 58p in a delayed notification trade one day before the shares were suspended. Wonder who the Liquidator is actually working on behalf of?

 

 

A Worthington tale

Paul Murphy | Jan 13 13:02 | 7 comments | Share

Ok, go down this alphabetical list of corporate tenants at the front door of a shabby office block in south London. You’re looking for the name “Worthington”. Click to enlarge if needed…

 

 

 

It’s not there, right? And the guy at reception hasn’t heard of “Worthington” either. Which is strange when this address — 30 Great Guildford Street, London, SE1 0HS — is listed on the Worthington Group PLC website as being the company’s “Central London Office.”

 

Our initial thought on this was that perhaps the company had moved already to bigger premises – something more befitting the global conglomerate Worthington is threatening to become. But it subsequently turned out that 30 Great Guildford Street is home to Fresh Business Thinking, an events and digital media business that recently became part of the seemingly fast growing Worthington family.

 

Having had its shares suspended for three months, this company, with a main London listing, revealed on Friday night that the Financial Conduct Authority had decided Worthington would have to issue complete details of the investments it was planning in the form of a full blown prospectus. Much to Worthington’s dismay, the FCA had decided that since these investments would produce a fundamentally different company, these transactions constitute a reverse takeover. Hence the need for a costly and time-consuming prospectus.

 

Despite its current small size in terms of market capitalisation (£12.6m) it’s worth spending a moment considering what Worthington was and what it might become.

 

First, on the plans going forward…

 

The Company has already begun work on the prospectus and will seek to complete it as soon as possible. Once completed, and the application submitted, shares are expected to subsequently resume trading in London and also be traded in Frankfurt, Stuttgart and New York.

 

Following successful completion of the acquisitions, the Company will have substantial interests in litigation funding, media, clean energy, mining, oil and gas and property. Geographically, the Company will have significant investments in the United Kingdom, Australasia, Africa, North America, and India. Consolidated net assets of the group, following conversion of loan notes used to finance investments and before minority interests, are expected to exceed US $2 billion and generate net profits in excess of US $20 million in the first full year following acquisition, with substantial growth expected thereafter. Net assets per share, after financing costs and on a fully diluted basis, are expected to substantially exceed £5 per Worthington ordinary share.

 

Yes, the company has declared, in a regulatory news statement, that once it gets these deals done across five continents and six sectors, net assets per share will be six or more times the pre-suspension market price (87p) and that consolidated assets for the company as a whole will have grown from £5.5m at the last available balance sheet date (March 2014) to circa £1.3bn.

 

So where has Worthington come from?

 

After 58 years on the London stock market, by the summer of 2012 Worthington had shrivelled to become a near-dormant investment company, with a troubled property development on contaminated land at Keighley, near Bradford, and a yawning pension deficit.

 

Enter Doug Ware.

 

Described (by himself) as an incisive and energetic businessman, with extensive experience across various sectors running both publicly listed and private companies, Ware became chief executive, got rid to the old board and brought in two non-executives, Richard Spurway and David Simpson.

 

While Simpson soon resigned, Ware and Spurway moved to try and stabilise the business: the land at Keighley was sold for about £500,000 (against a book value of £4m) and arrangements were made to possibly transfer the pension scheme (which had previously made the mistake of lending £3m to Rangers FC before the club went into administration) to the official pension bailout mechanism, the Pension Protection Fund. These initiatives pushed pre-tax losses to £5.3m in the year to end-September 2013, with losses on the retained earnings line growing to £26m. In November 2013, the shares were suspended as Ware and his team sought additional funding.

 

And then something truly transformational happened.

 

Earlier, in April 2013, Worthington had paid £250,000 in the form of unsecured loan notes for a 25 per cent stake in a company called Law Financial Ltd, which was described as…

 

…a recently incorporated company with a number of subsidiaries, one of which owns ongoing legal claims against the assets of Rangers Football Club Limited.

 

The company also acquired an option to buy the remainder of LFL for £750,000 (again in loan notes) which Worthington then exercised in October that year.

 

With LFL fully consolidated, Worthington then slapped a fair value of £10m on the assets it had just acquired for £1m (with loan notes) and booked a “gain on bargain purchase of £9,034,000 in the period.”

 

Suddenly, for the six months to the end of March, 2014, Worthington was able to declare a profit of £8.7m.

 

Magic.

 

The mysterious vendors of LFL, having apparently sold an asset at 10 per cent of its value, seem to have been motivated by 20m warrants attached to those loan notes. By now warrants over 35m Worthington shares were in circulation, exercisable at 5p apiece.

 

It was now time for Ware to get the shares relisted and enact his master plan, with trading finally resuming on August 29, last year, which is when things really began to motor….

 

September 1 Worthington Group back Rare Earth Mining exploration as world struggles to fill supply gap in potential $8bn global Rare Earth Elements’ marketplace

 

September 10 Worthington Group to expand global legal claims business with acquisition of £43m legal claim.

 

September 22 “Potential major Oil & Gas investment” and “first media investment within the next seven days.”

 

September 26 More rare earth investment in Greenland

 

September 29 Worthington Group to acquire digital media, events and branding portfolio, including The Digital Marketing Show and Essential Cyclist online

 

October 2 Agreement to invest £12.5m in CPS Energy Resources Plc, an oil and gas exploration company focused on Africa

 

October 6 Head of acquisitions appointed, along with a head of the new oil and gas division

 

October 8 Worthington is already in a position to offer an upbeat trading statement, along with news of the acquisition of two further litigation claims, a clean energy company, a private mining company, along with “the acquisition of majority stakes in oil and gas producing assets.”

 

At which point the Worthington juggernaut came to a juddering halt.

 

October 13

 

The Company requested the temporary suspension of its shares on the 10th October 2014 in order to consult with the FCA about whether any of the transactions announced either on 8 October, or previously, or which are currently being contemplated by the Company could be classified as a reverse takeover.

 

The Company will make a further announcement before the end of this week.

 

Three months on, we now know that the FCA very much classes all this apparent activity as constituting a reverse takeover. And how long we might have to wait for the required prospectus is difficult to say. In the meantime, it is worth going back to look at how Worthington sees a couple of these new business lines operating.

 

- – - – - – - – - -

 

Legal claims

 

The £43m litigation claim mentioned above involves two unnamed European companies who are claiming a loss and breach of contract by a Chinese client involving the development of a series of university campuses in China.

 

The idea is that the claimants pay Worthington a fee of £125,000 and the company then hires specialist legal counsel to assess the quality of the claim and offer a percentage probability of successful litigation.

 

If the chances of success top 60 per cent, at a claim value of £43m, Worthington will issue 1m new shares to the claimant companies.

If the claimants can get an English court finding in their favour with this Chinese claim, Worthington will grant a further £1.5m in stock to the claimants.

If the claim brings a successful judgement in China the claimants get another £3m of stock; and

If there’s a successful enforcement of the judgement, and Worthington gets £43m in cash or property, Worthington will then issue a further £5m in stock to the claimants.

The company reckons this approach produces a whole new legal claims division, with stock being used as a claims acquisition currency. Also…

 

Worthington is particularly attracted to the legal claims market because there are essentially only three outcomes: Win, lose or settle – which is in contrast to most business propositions where outcomes can be affected by many more factors which are outside the control of management.

 

- – - – - – - – - -

 

Oil and gas exploration

 

On October 2, Worthington said it wanted to invest £12.5m in CPS Energy Resources, described at the time as an exploration company focused on Africa, working in partnership with Jo’Burg-listed Oando. The new CPS stock was to be priced at “27.5 per cent of the agreed likely stock market value of CPS (i.e. a discount of 72.5 per cent) when, as expected, it lists in 2015.”

 

There was evidently (and understandably) some confusion over this at the time, drawing a clarification from Worthington:

 

This means that, prior to investing, Worthington needs to be satisfied that the expected value of CPS on listing will result in a gain of more than £30m to Worthington. The final decision to invest, in the light of the comparable valuations, will be taken by Worthington in association with the German and Swiss institutional investors who are funding the purchase.

 

What seems to be happening here is that existing holders of convertible Worthington loan notes — those unnamed German and Swiss institutional investors — have agreed to convert, sell the stock, and then lend the proceeds back to Worthington so it can play in the E&P business.

 

- – - – - – - – - – -

 

We could go on, but you’ve probably got the picture by now. Worthington is like no other company we’ve seen on the public markets.

 

If and when Worthington ever comes back from suspension it will not just be in the litigation funding, media, clean energy, mining, oil and gas and property industries. First and foremost it will be in the business of printing shares.

 

 

http://ftalphaville.ft.com/2015/01/13/2085432/a-worthington-tale/?

Edited by forlanssister
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Do you think Park,Letham,Taylor & King would have bought their recent shareholding if this were true?

 

 

not ideally but what choice did they have to force change and try to stop it.

 

in truth worthington have progressed their claim far enough to cripple us at present we cant raise finance in any meaningful way because of their claim. their best bet is no doubt to continue that as long as possible and hope for a settlement.

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not ideally but what choice did they have to force change and try to stop it.

 

in truth worthington have progressed their claim far enough to cripple us at present we cant raise finance in any meaningful way because of their claim. their best bet is no doubt to continue that as long as possible and hope for a settlement.

 

progressed their claim ? to what stage ? have I missed something?

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in truth worthington have progressed their claim far enough to cripple us at present we cant raise finance in any meaningful way because of their claim.

 

I'm not sure that I see the fact that the current directors can't use our stadium as security to raise finance as a bad thing.

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