14 June 2024

STM Group Plc

("STM" or "the Company" or "the Group")

Proposed transfer of all members out of Workplace Pensions Master Trust

STM Group Plc (AIM: STM), the cross-border provider of retirement solutions, life assurance products and related administrative services, announces an update on its planned strategy in relation to the UK master trust market. 

As detailed previously within the announcement of Jambo SRC Limited's ("Jambo") firm intention to make an offer for STM in accordance with Rule 2.7 of the Takeover Code (the "Rule 2.7 Announcement") and Scheme of Arrangement Document dated 9 October 2023 and 7 November 2023 respectively, ahead of receiving an approach from Jambo, the STM Board was considering the sale of the Master Trust as part of its strategy review in relation to the UK workplace pension master trust market.   As also detailed in the Rule 2.7 announcement, STM agreed with Jambo to continue to explore its options for the Master Trust.  STM currently carries on its UK workplace pensions business through the Options Master Trust ("OMT"), which is administered by Options Corporate Pensions UK limited ("OCPL").

The workplace pensions sector has undergone a significant amount of consolidation in the past few years and the continued pressure on margins, as well as additional regulatory costs and burdens, means that a smaller innovative master trust is less commercially viable. 

STM, after considering the various potential partners in the market, is pleased to announce that it has signed a commercial agreement with Smart Pension Limited ("SPL" or "Smart"). The agreement will invite the OMT trustees (the "Trustees") to consider and, if they conclude it is appropriate, approve Smart as the default provider, and, subject to regulatory approval by The Pensions Regulator ("tPR"), will allow the Trustees to plan for an orderly transfer of members over time from the OMT to Smart's own Master Trust.

OCPL recorded revenues of £4.5 million and a profit before tax of £0.5 million for the financial year ending 31 December 2023. The Options Master Trust has a membership (including deferred members) in excess of 300,000 individuals, across circa 3,700 participating employers.

Under the commercial agreement, OCPL will be paid by Smart for each member that transfers to Smart, the exact consideration per member being dependent on whether the member remains a contributing member; or whether they are a preserved member. In addition, the consideration per member varies dependent on the member's pension pot, with those members that have a pot below the current Government threshold of £102, and are a preserved member, being transferred at nil value.

Subject to approval by the trustees and tPR and completion of the proposed transfer, it is anticipated under the commercial agreement that the existing OMT membership book will attract an overall consideration of c£4.7 million, with a maximum possible consideration of £4.8 million, which will be paid over the course of the next twenty-four months. The consideration will initially be retained by STM, with further use of proceeds to be decided by the Board of the Company as they are received over the three years following completion of the transaction.

The exact timing of the payments will be dependent on when new contributions are received into Smart's Master Trust for active members and upon the bulk transfer to Smart of historic contributions and assets for active and other Options members. The final thirty per cent. of the expected consideration will be payable twelve months after the date of the bulk transfer, so as to allow for a truing-up for the final numbers of members transferring. Once the bulk transfer has occurred, OCPL, in conjunction with the Trustees, will then wind-down the OMT in an orderly fashion.  

In addition to the above commercial agreement, STM has also entered into an introducer agreement with Smart under which STM will receive an introductory commission for new members to be introduced to SPL by existing and new business relationships. The introducer agreement has the potential to deliver significant additional benefit to STM, with advantageous terms available for twelve months for introductions from existing STM business relationships, and a period of three years on different terms for new business relationships introduced.  The introductory commission is capped, and a reasonable expectation would be that the introducer agreement might generate between £1 million and £5 million of revenue over the three year period.

The agreements with Smart will include companies affiliated with Jambo, once Jambo becomes the shareholder controller of STM. 

Alan Kentish, CEO of STM Group, commented: "We have got to know the Smart team over the last 18 months, and have been impressed with their vision and supporting technology. We believe that Smart would provide a good home for our membership base, and that it will always act in the members' interests. Whilst STM, has grown its master trust business since acquiring it in 2019, and had created an innovative business model as an alternative to the one-size fits all master trust, it is clear that continuing regulatory burdens and consolidation activity mean that it is an opportune time for STM to proceed with its strategy of transferring the UK master trust operation."

Jamie Fiveash, CEO of Smart UK, added: "I'm delighted that the agreement announced today will enable us to further expand the benefits of Smart Pension to be provided to more UK pension savers within the Options Master Trust, bringing value, along with our best in class customer experience and technology, to all its members. As a market-leading consolidator, we look forward both to another successful partnership and implementation, and to further opportunities with the wider STM and Jambo Group."  

This announcement contains inside information in relation to STM for the purposes of Article 7 of the Market Abuse Regulation.  The person responsible for arranging the release of this announcement on behalf of STM is Alan Kentish.

Capitalised terms used in this announcement (the "Announcement") shall, unless otherwise defined, have the same meanings as set out in the Scheme Document. All references to times in this Announcement are to London, United Kingdom time unless stated otherwise.

IMPORTANT NOTICES

Overseas Shareholders

The release, publication or distribution of this Announcement in jurisdictions other than the United Kingdom or the Isle of Man may be restricted by law and/or regulations. Persons who are not resident in the United Kingdom or the Isle of Man or who are subject to the laws and regulations of other jurisdictions should inform themselves of, and observe, any applicable requirements. Unless otherwise determined by Bidco or required by the Takeover Code, and permitted by applicable law and regulation, the Acquisition shall not be made available, in whole or in part, directly or indirectly, in, into or from a Restricted Jurisdiction where to do so would violate the laws or regulations in that jurisdiction and no person may vote in favour of the Acquisition by any such use, means, instrumentality or form within a Restricted Jurisdiction or any other jurisdiction if to do so would constitute a violation of the laws of that jurisdiction. Accordingly, copies of this Announcement and all documents relating to the Acquisition are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction, and persons receiving this Announcement and all documents relating to the Acquisition (including custodians, nominees and trustees) must not mail or otherwise forward, distribute or send them in, into or from such jurisdictions where to do so would violate the laws in those jurisdictions. If the Acquisition is implemented by way of a Takeover Offer (unless otherwise permitted by applicable law and regulation), such Takeover Offer may not be made available directly or indirectly, into or from or by the use of mails or any means or instrumentality (including, but not limited to, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of any Restricted Jurisdiction and the Takeover Offer may not be capable of acceptance by any such use, means, instrumentality or facilities.

The availability of the Acquisition to STM Shareholders who are not resident in the United Kingdom or the Isle of Man (and, in particular, their ability to vote their Scheme Shares with respect to the Scheme at the Court Meeting, or to appoint another person as proxy to vote at the Court Meeting on their behalf) may be affected by the laws of the relevant jurisdictions in which they are resident. Persons who are not resident in the United Kingdom or the Isle of Man should inform themselves of, and observe, any applicable requirements, as any failure to comply with such requirements may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, the companies and persons involved in the Acquisition disclaim any responsibility or liability for the violation of such restrictions by any person. The Acquisition shall be subject to the applicable requirements of the Companies Act, the Court, the Takeover Code, the Panel, the London Stock Exchange, the Financial Conduct Authority and the AIM Rules. Further details in relation to Overseas Shareholders will be contained in the Scheme Document.

Additional Information for US Investors

The Acquisition is being made to acquire the securities of an Isle of Man company by means of a scheme of arrangement provided for under Part X of the Companies Act. A transaction effected by means of a scheme of arrangement is not subject to the proxy solicitation or tender offer rules under the US Exchange Act. Accordingly, the Scheme will be subject to disclosure requirements and practices applicable to schemes of arrangement involving a target company incorporated in the Isle of Man admitted to trading on AIM, which are different from the disclosure requirements of the US under the US proxy solicitation and tender offer rules. The financial information included in this Announcement and the Scheme documentation has been or will have been prepared in accordance with accounting standards applicable in the Isle of Man and the UK and thus may not be comparable to financial information of US companies or companies whose financial statements are prepared in accordance with generally accepted accounting principles in the US.

Neither the US Securities and Exchange Commission nor any US state securities commission has approved or disproved or passed judgment upon the fairness or the merits of the Acquisition or determined if this Announcement is adequate, accurate or complete.

If Bidco were to elect to implement the Acquisition by means of a Takeover Offer, such Takeover Offer would be made in compliance with applicable US laws and regulations, including to the extent applicable Section 14(e) of the US Exchange Act and Regulation 14E thereunder, and in accordance with the Takeover Code. Such a takeover would be made in the United States by Bidco and no one else.

The receipt of cash pursuant to the Acquisition by a US holder as consideration for the transfer of its Scheme Shares pursuant to the Scheme may be a taxable transaction for United States federal income tax purposes and under applicable United States state and local, as well as foreign and other, tax laws. Each STM Shareholder is urged to consult his or her independent professional adviser immediately regarding the tax consequences of the Acquisition applicable to him.

It may be difficult for US holders to enforce their rights and any claims arising out of the US federal securities laws, since STM is located in a country other than the US, and all of its officers and directors are residents of countries other than the US. US holders may not be able to sue a non-US company or its officers or directors in a non-US court for violations of US securities laws. Further, it may be difficult to compel a non-US company and its affiliates to subject themselves to a US court's judgement.

In accordance with normal UK practice and consistent with Rule 14e-5 under the US Exchange Act, Bidco, certain affiliated companies and the nominees or brokers (acting as agents) may from time to time make certain purchases of, or arrangements to purchase, shares in STM outside of the US, other than pursuant to the Acquisition, until the date on which the Acquisition and/or Scheme becomes effective, lapses or is otherwise withdrawn. If such purchases or arrangements to purchase were to be made they would occur either in the open market at prevailing prices or in private transactions at negotiated prices and will comply with applicable law, including to the extent applicable the US Exchange Act. Any information about such purchases or arrangements to purchase will be disclosed as required in the United Kingdom, will be reported to a Regulatory Information Service and will be available on the London Stock Exchange website at www.londonstockexchange.com. This information will also be publicly disclosed in the US to the extent that such information is made public in the UK.

Disclosure Requirements of the Takeover Code

Under Rule 8.3(a) of the Takeover Code, any person who is interested in 1 per cent. or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of: (i) the offeree company; and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 p.m. (London time) on the 10th Business Day following the commencement of the offer period and, if appropriate, by no later than 3.30 p.m. (London time) on the 10th Business Day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes, interested in 1 per cent. or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of: (i) the offeree company; and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 p.m. (London time) on the Business Day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Electronic Communications

Please be aware that addresses, electronic addresses and certain information provided by STM Shareholders and other relevant persons for the receipt of communications from STM may be provided to Bidco during the Offer Period as requested under Section 4 of Appendix 4 of the Takeover Code to comply with Rule 2.11(c) of the Takeover Code.

Publication on Website and Availability of Hard Copies

A copy of this Announcement and the documents required to be published by Rule 26 of the Takeover Code shall be made available subject to certain restrictions relating to persons resident in Restricted Jurisdictions on STM'S website at https://www.stmgroupplc.com/possible-offer-for-stm-group-plc by no later than 12 noon (London time) on the Business Day following this Announcement. For the avoidance of doubt, the contents of this website are not incorporated into and do not form part of this Announcement.

STM Shareholders may request hard copies of this Announcement by contacting Computershare Investor Services (Jersey) Limited at 13 Castle Street, St. Helier, Jersey Channel Islands, JE1 1ES or on +44 (0370) 707 4040 between 9:00 a.m. and 5:00 p.m. (London time) Monday to Friday (public holidays excepted). Calls to this number from persons who are not resident in Jersey are charged at the applicable international rate. Calls from a mobile device may incur network extras.

STM Shareholders may also request that all future documents, announcements and information to be sent to them in relation to the Acquisition should be in hard copy form. If an STM Shareholder has received this Announcement in electronic form, copies of this Announcement and any document or information incorporated by reference into this Announcement will not be provided unless such a request is made.

Rounding

Certain figures included in this Announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

General

If you are in any doubt about the contents of this Announcement or the action you should take, you are recommended to seek your own independent financial advice immediately from your stockbroker, bank manager, solicitor accountant or independent financial adviser duly authorised under the Financial Services and Markets Act 2000 (as amended) if you are a resident in the United Kingdom or, if not, from another appropriately authorised independent financial adviser.

Notes to editors:

STM is a multi-jurisdictional financial services group traded on AIM, a market operated by the London Stock Exchange. The Group specialises in the administration of client assets in relation to retirement, estate and succession planning and wealth structuring.

Today, the Group has operations in the UK, Gibraltar, Malta, Australia and Spain. STM has developed a range of pension products for UK nationals and internationally domiciled clients and has two Gibraltar life assurance companies which provide life insurance bonds - wrappers in which a variety of investments, including investment funds, can be held.

STM's growth strategy is focussed on both organic initiatives and strategic acquisitions.

Further information on STM Group can be found at www.stmgroupplc.com