2012-05-16 19:23:07 -
Ulaanbaatar, MONGOLIA, May 16, 2012 /FSC/ - Mongolia Growth Group Ltd. (YAK - CNSX),MGG is pleased to announce that it has agreed to and signed a binding term sheet agreeing to sell shares of Mandal General Insurance (MGI) to UMC Capital, the operators of MGI, at a purchase price equivalent to MGG's original funding cost in June of 2011. Following the closing of this transaction, UMC Capital and MGG will respectively own approximately 16% and 84% of Mandal's currently outstanding shares. In addition, UMC Capital will retain the right to purchase an additional 25% of Mandal at the higher of stated book value or funding cost. The transaction is subject to regulatory approvals in Mongolia.
"Insurance is a business predicated
on shifting risks from insureds to insurance companies that are more capable of assuming those risks. Our partner's decision to invest their capital into Mandal displays their commitment to shoulder some of these risks with us," said Jordan Calonego, COO of MGG. "It's one thing to have a carried interest in the future profits of a company; it's a very different experience to actually put your own capital at risk. We welcome UMC Capital's decision to co-invest with us. "
"We are very proud of our achievements to date at Mandal. In less than a year of operations, we have achieved tremendous successes and look forward to a bright future in the insurance business," said Ganzorig Ulziibayar, Chairman of UMC Capital. "We are thankful that MGG has allowed us to increase our ownership interest in Mandal and feel that this will allow us to further motivate our key employees in the future."
"Following this transaction, insurance will represent approximately 7% of MGG's stated book value," noted Harris Kupperman, CEO of MGG. "While we are very confident in the future of Mandal and the insurance industry in Mongolia, given the rapid growth of our property business, we are increasingly recognizing that insurance has become less critical to the overall future of MGG itself. We are exploring various transactions that would allow Mandal management to have increased discretion in managing the business, the ability to direct future strategy and access to additional growth capital; while simultaneously allowing MGG to maintain a sizable ownership interest in the future success of Mandal."
The purchase of Mandal shares by UMC Capital will be completed in stages. 5% of the shares of Mandal will be purchased within 15 days of signing a definitive purchase agreement and the remainder will be purchased over the following 6 months, for total cash consideration of less than one million Canadian dollars. In addition, 200,000 of UMC Capital's 10 year MGG share purchase options will vest immediately. In exchange for accelerating the vesting of these options, the new strike price will be CDN $1.90 compared to the original strike price of CDN$ 1.64 (a 16% increase). MGG applied for an exemption to the stock option policies of the CNSX in order to adjust the vestation and exercise price of the options. The exemption was approved by the CNSX.
For further details on the foregoing document, please refer to the Corporation's filing on SEDAR.
For more information on Mongolia Growth Group Ltd., please see the Company's website:
Forward-looking Information Cautionary Statement
Except for statements of historic fact, this news release contains certain forward-looking information within the meaning of applicable securities law. Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements are based on the opinions and estimates of management relying on their experience at the date the statements are made, and are subject to a variety of risks, uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking statements including, but not limited to delays or uncertainties with regulatory approvals, including that of the CNSX, changes in the business environment that might impact the intended use of proceeds and changes in the intention of the parties to subscribe to the private placement. There are uncertainties inherent in forward-looking information, including factors beyond MGG's control. MGG undertakes no obligation to update forward-looking information if circumstances or management's estimates or opinions should change except as required by law. The reader is cautioned not to place undue reliance on forward-looking statements. Additional information identifying risks and uncertainties that could affect financial results is contained in MGG's filings with Canadian securities regulators, which filings are available at www.sedar.com. The CNSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
To view this press release as a web page, please click on the following link: www.usetdas.com/pr/mongolia05162012.htm
Source: Mongolia Growth Group Ltd. (CNSX - YAK)
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