Proposed acquisition of the entire issued share capital of Abacus (Financial Consultants) Limited

Proposed acquisition of the entire issued share capital of Abacus (Financial Consultants) Limited

ClearDebt Group PLC
22 June 2007


ClearDebt Group plc
(‘ClearDebt’ or the ‘Company’)

Proposed acquisition of the entire issued share capital of
Abacus (Financial Consultants) Limited (‘Abacus’) (the ‘Acquisition’)

Placing of 15,750,000 new ordinary shares of 2p each in the Company (‘Ordinary
Shares’) at 2p per share (the ‘Placing’)

he Enlarged Group with the ability to compete in the debt resolution market and the Enlarged Group will be in a strong position to grow going forward.

Terms of Acquisition

ClearDebt has conditionally agreed to acquire the entire issued share capital of Abacus, subject, inter alia, to existing shareholder approval at the EGM. The initial consideration for the Acquisition is £1.2 million to be paid in cash on completion and to be adjusted pursuant to the net working capital of Abacus as at completion. In addition, up to £5 million may be payable to the Vendors, to be satisfied by the issue and allotment of up to 222,222,222 new Ordinary Shares in the capital of the Company (the ‘Earn Out Shares’) which may be issued and allotted to the Vendors in satisfaction of the earn out provisions set out in the acquisition agreement. Payment of the earn out is conditional upon the achievement by Abacus of agreed levels of future net profit before tax.

Proposed new Director

Daniel Morris is the managing director of Abacus and co-founded the company in January 2000. He had a number of sales roles prior to Abacus, including spending over four years at debt management company Gregory Pennington Limited, where he was ultimately responsible for managing a team of sales advisers. Following the Acquisition, Daniel will be ClearDebt’s business development director with responsibility for generating additional sales.

Fund Raising

The Company is proposing to raise £315,000 (before expenses) by the issue of 15,750,000 new Ordinary Shares pursuant to the placing at 2p per Ordinary Share, primarily with UK institutional investors. The Placing Shares will represent approximately 5.17 per cent. of the Enlarged Share Capital.

In order to assist with the payment of the initial consideration, the fees payable by the Company in respect of the Acquisition and to provide the Company with general working capital facilities, an unsecured loan agreement of £1.6 million between David Mond, CEO and a Director of the Company, (as lender) and the Company (as borrower) has been arranged (the ‘Loan’). The Loan will be drawn down in full on Completion and will become due for repayment on 31 January 2009 and will accrue interest at the rate of 2 per cent. per annum above the base rate of Clydesdale Bank plc.

The Loan is classified as a related party transaction under the AIM Rules. With the exception of David Mond, who is involved in the Loan as a related party, the Directors consider, having consulted with WH Ireland, the Company’s nominated adviser, that the terms of the transaction are fair and reasonable insofar as its shareholders are concerned.

Completion of transaction

By reason of the size and relative value of Abacus in relation to ClearDebt, the Acquisition will constitute a reverse takeover under the AIM Rules and will therefore require the approval of existing shareholders of the Company at an EGM. To complete the Acquisition and implement the Placing it will also be necessary to give the Directors of the Company the required powers and authorities to issue and allot the new Ordinary Shares to be issued pursuant to the Acquisition and the Placing.

Due to the potential holdings of Ordinary Shares of the Vendors assuming the Earn Out Shares are issued and allotted, the Company is also proposing to seek a waiver of certain obligations that would otherwise be placed on the Vendors by Rule 9 of the City Code. Accordingly, existing shareholders will be asked at the EGM to consent to the waiver of these obligations.

An admission document setting out details of the transaction and notification of the EGM (the ‘Admission Document’) will be sent today to all shareholders of the Company and, for information purposes only, to holders of warrants in the Company. The EGM will be held at George House, 48 George Street, Manchester M1 4HF at 11 a.m. on 16 July 2007. If all resolutions are passed at the EGM, it is expected that the Existing Ordinary Shares will be readmitted and the New Ordinary Shares will be admitted to trading on AIM and dealings in the Enlarged Share Capital will commence on 17 July 2007.

David Mond, CEO of ClearDebt commented:

‘With the addition of talented new staff, the potential increase of our IVAs per month and the introduction of a new debt management offering to our automated debt advisory service, I believe this transaction will transform ClearDebt from a niche player into a new force in the debt resolution market.

I am confident that our flexible kaizen derived systems will be able to cope with the increased level of IVAs that we predict will result from the Acquisition.

In the light of the potential for increased cash flows, I am very confident about the Group’s future prospects, as can be seen by my personal commitment to the funding for the Acquisition. Given the current level of distress in the consumer debt market, the Board will remain alert for any further deals which will enhance the Group’s value.’

For further information, please contact:

David Mond, ClearDebt Group plc    Tel: 0161 228 7444
David Youngman, WH Ireland Limited
(Nominated adviser)    Tel: 0161 832 2174
Ruari McGirr, St Helen’s Capital Plc
(Broker)    Tel: 020 7628 5582
Paddy Blewer, College Hill Associates
(Financial PR)    Tel: 020 7457 2020

WH Ireland is acting as nominated adviser to ClearDebt in relation to the Placing and Admission.

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