Mongolia Growth Group Ltd. Announces the Sale of Mandal General Daatgal LLC
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Ulaanbaatar, MONGOLIA, Nov 25, 2013 (Filing Services Canada via COMTEX) — Mongolia Growth Group Ltd. (YAK – TSX Venture),(“MGG” or “the Company”) is pleased to announce that UMC Capital LLC (“UMC Capital”) has agreed to purchase 100% of Mandal General Daatgal LLC (“Mandal”), subject to the approval of the TSX Venture Exchange, the Financial Regulatory Commission of Mongolia and the satisfaction of certain closing conditions.
Over the course of 2013, the management and board of directors of MGG has determined that, while Mandal has continued to make progress, it is non-core to the Company’s much larger property business that has been created over the past two and a half years. This sale will allow the management of MGG to focus its energy, corporate resources and capital on its core commercial real estate business with the goal of creating the most successful institutional property company in the rapidly growing economy of Mongolia.
The benefits of this divestiture will accrue to both MGG and Mandal.
In the case of MGG, it will lead to;
* The release of capital to re-invest in the property business,
* Substantial annual cash savings in the form of reduced audit, compliance, legal and other expenses along with the retention of rental payments from Mandal at market rates,
* Approximately Cdn$85,000 in stock option expense savings in the year 2014,
* More predictable revenues and expenses by focusing MGG exclusively on the property sector,
* Financial statement simplicity as they will relate entirely to the property business, and
* Streamlining the business from the perspective of potential lenders to property assets.
In the case of Mandal, it will lead to;
* More direct incentivization of management through the direct ownership of Mandal. Employees of Mandal will be involved in the management group that will be buying Mandal from MGG, and
* Ability to access more diversified forms of growth capital.
Under the terms of the agreement, MGG has agreed to sell 100% of its shares in Mandal General Daatgal LLC to UMC Capital LLC for gross proceeds of approximately 5.90 billion Mongolian Togrog (approximately Cdn$3.50 million), representing a surplus of approximately 900 million Mongolian Togrog (approximately Cdn$542,000) from MGG’s original contribution after accounting for a 1.24 billion Mongolian Togrog (approximately Cdn$746,000) release of statutory capital to MGG. In addition, this sale price represents an expected 2.7 billion Mongolian Togrog (approximately Cdn$1,627,000) premium to second quarter, 2013 net tangible book value.
As part of the sale, UMC Capital will make an immediate payment to MGG of 650 million Mongolian Togrog and additional payments of approximately US$3 million, to be paid in installments over the ensuing 18 month period. In addition, MGG expects to accelerate the vesting of the remaining 300,000 MGG options owned by UMC Capital LLC, subject to TSX Venture approval. The amended options are expected to have a strike price of Cdn$1.75 as compared to the current Cdn$1.64 strike price. Finally, MGG will cancel 307,000 stock options that are currently outstanding to employees of Mandal General Daatgal LLC.
“Disposing of Mandal will allow MGG to lower its cost structure and re-focus the business on property assets that are leveraged to the growth of the Mongolian economy,” said Harris Kupperman, Chairman and CEO of MGG.
“We want to thank our friends at Mandal for all of their help in educating us on the Mongolian market. Our early success in the property market would not have been possible without their support. We hope to continue doing business together in the future as MGG intends to keep 100% of its insurance coverage with Mandal on a going forward basis and Mandal has indicated a desire to remain a tenant in the Mandal building-our corporate headquarters.”
“I want to thank our friends at MGG for their support in helping us to launch a company with the vision to create the largest, most innovative and most responsible insurance company in Mongolia. Mandal now enjoys a solid reputation as a major risk management institution in Mongolia and our operations shall continue reflecting the best international standards,” said Ganzorig Ulziibayar, President of Mandal and Chairman of UMC Capital.
