Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of
Report (Date of earliest event reported): July 29, 2020
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FREEDOM HOLDING CORP.
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(Exact
name of registrant as specified in its charter)
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Nevada
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001-33034
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30-0233726
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(State
or other jurisdiction of incorporation)
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Commission
File
Number)
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(IRS
Employer
Identification
No.)
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77/7 Al
Farabi Ave., “Esentai Tower” BC, Floor 7, Almaty,
Kazakhstan 050040
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(Address
of principal executive offices) (Zip Code)
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+7 727
311 10 64
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(Registrant’s
telephone number, including area code)
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N/A
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(Former
name or former address, if changed since last report.)
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Check
the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2
below):
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□
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
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□
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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□
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
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□
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
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Securities
registered under Section 12(b) of the Act:
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Title
of each class
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Trading
Symbol(s)
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Name of
each exchange on which registered
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Common
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FRHC
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The Nasdaq Capital Market
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Indicate
by check mark whether the registrant is an emerging growth company
as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of
1934 (§240.12b-2 of this chapter).
Emerging
growth company □
If an
emerging growth company, indicated by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. □
Item 1.01 Entry into a Material Definitive Agreement
General
Freedom
Finance, JSC, (“Buyer”) a wholly owned subsidiary of
Freedom Holding Corp, the registrant, (“FRHC”) has
entered into the Bank Kassa Nova JSC Ordinary Share Purchase and
Sale Agreement (the “Ordinary Shares SPA”), dated July
29, 2020, with ForteBank JSC, a joint stock company incorporated in
the Republic of Kazakhstan (“Seller”), pursuant to
which Buyer has agreed to purchase all of the issued and
outstanding ordinary shares (the “ Ordinary Shares”) of
Bank Kassa Nova JSC, a joint stock company incorporated in the
Republic of Kazakhstan (the “Bank”) from Seller (the
“Ordinary Shares Acquisition”). Shareholder approvals
of the Ordinary Shares SPA in accordance with Kazakh Law were
received on August 3, 2020. The Ordinary Shares SPA is written in
Russian and Kazakh, an English translation of the Ordinary Shares
SPA is filed as Exhibit 2.01 to this Current Report on Form 8-K
(the “Current Report”) and incorporated by reference
herein.
In
connection with the Ordinary Shares SPA, Buyer also expects to
enter into a Preferred Shares Sale and Purchase Agreement of Bank
Kassa Nova JSC (the “Proposed Preferred Shares SPA”)
with Mr. Bulat Zhamitovich Utemuratov (“Utemuratov”),
pursuant to which Buyer will purchase all of the issued and
outstanding Preferred Shares of the Bank (the “Preferred
Shares”) from Utemuratov (the “Proposed Preferred
Shares Acquisition”). As a condition to closing the Proposed
Preferred Shares SPA, it is anticipated that in connection with the
Proposed Transactions, Buyer, or a person designated by Buyer and
agreed with Utemuratov, will acquire the subordinated debt of the
Bank (the “Subordinated Debt”) from its holders. The
form of Proposed Preferred Shares SPA expected to be executed by
the parties is written in Russian and Kazakh, an English
translation of the form of Proposed Preferred Shares SPA is filed
as Exhibit 2.02 to this Current Report and incorporated by
reference herein. The transactions contemplated by the Ordinary
Shares SPA and the Preferred Shares SPA are referred to herein as
the “Proposed Transactions.”
The
descriptions of the Ordinary Shares SPA, Proposed Preferred Shares
SPA and the Proposed Transactions described in this Current Report
do not purport to be complete and are qualified in their entirety
by reference to the Ordinary Shares SPA and the Proposed Preferred
Shares SPA. The Ordinary Shares SPA and the Proposed Preferred
Shares SPA have been included to provide information regarding
their terms. They are not intended to provide any other factual
information about Buyer, Seller, the Bank, Utemuratov or FRHC. The
Ordinary Shares SPA and Proposed Preferred Shares SPA contain
representations, warranties and covenants the parties thereto made
to and solely for the benefit of the respective parties. The
assertions embodied in those representations, warranties and
covenants are subject to important qualifications and limitations
agreed to by the parties in connection with negotiating the
Ordinary Shares SPA and the Proposed Preferred Shares SPA,
including confidential disclosure schedules that the parties have
exchanged in connection with the Proposed Transactions.
Accordingly, investors and security holders should not rely on the
representations, warranties and covenants as characterizations of
the actual or complete state of facts, since they were only made as
of the date of the Ordinary Shares SPA or in the case of the
Proposed Preferred Shares SPA will be made as of the date that
agreement is executed. The representations, warranties and
covenants made in the Ordinary Shares SPA and or the Proposed
Preferred Shares SPA may be modified in important part by agreement
of the parties and by the underlying disclosure schedules.
Moreover, information concerning the subject matter of the
representations, warranties and covenants may change or be subject
to subsequent waiver after the date of the Ordinary Shares SPA and
the Proposed Preferred Shares SPA, which subsequent information may
or may not be fully reflected in the Company’s public
disclosures.
Capitalized
terms used in this Current Report, but not otherwise defined herein
have the meanings given to them in the Ordinary Shares SPA or the
Proposed Preferred Shares SPA.
The
parties to the Ordinary Shares SPA and Proposed Preferred Shares
SPA are Kazakhstani entities or, in the case of Utemuratov, a
Kazakhstani citizen. The Ordinary Shares SPA and the Proposed
Preferred Shares SPA are denominated in Kazakhstani tenge
(“KZT”). For informational purposes only, U.S. dollar
(“$”) equivalent amounts have been included in this
Current Report. Such U.S. dollar equivalent amounts were calculated
based on the KZT to U.S. dollar conversion rate on July 29, 2020,
of 417.2900 KZT to $1, as reported on www.bloomberg.com. The actual
U.S. dollar equivalent amounts at closing may vary significantly
from what is disclosed herein based on fluctuations between the KZT
and the U.S. dollar between July 29, 2020 and the closing of the
Ordinary Shares SPA, the Proposed Preferred Shares SPA and other
agreements executed in connection with the Proposed Transactions.
Both the KZT and U.S. dollar equivalent amounts at closing may vary
significantly from what is disclosed herein based on among other
things, Bank operations and accrual of unpaid interest on the
Subordinated Debt, between July 29, 2020 and the closing of the
Ordinary Shares SPA, the Proposed Preferred Shares SPA and other
agreements executed in connection with the Proposed Transactions.
The U.S. dollar equivalent amounts at closing may also vary as a
result of fluctuation in the currency exchange rate between the KZT
and U.S. dollar over the period described in the previous
sentence.
Consideration
Ordinary Shares Purchase Price
Pursuant
to the Ordinary Shares SPA, Buyer will purchase 9,356,140 Ordinary
Shares, which constitutes all of the issued and outstanding
Ordinary Shares, of the Bank. The purchase price for the Ordinary
Shares will be equal to the sum of:
(i)
the
Bank’s Equity as of June 30, 2020, which was approximately
17,308,218,000 KZT ($41,477,673);
(ii)
minus
1,708,416,000 KZT ($4,094,074);
(iii)
multiplied
by 1.1;
(iv)
adjusted
for the Pool of Loans Adjustment (as defined below);
and
(v)
adjusted
for the Non-core and Real Property Assets Adjustment (as defined
below).
The
total of (i), (ii) and (iii) will be adjusted based on the
difference between the Net Book Value of the Pool of Loans and the
actual selling price of the Pool of Loans (the “Pool of Loans
Adjustment”). If such difference is a positive amount, that
amount shall be deducted from the total of (i), (ii) and (iii). If
the difference is a negative amount, the positive equivalent of
such negative amount will be added to the total of (i), (ii) and
(iii).
The
total of (i), (ii), (iii) and (iv) will be adjusted based on the
difference between the Net Book Value of the Non-core and Real
Property assets and the actual selling price of the Net Book Value
of the Non-Core and Real Property assets (the “Non-core and
Real Property Assets Adjustment”). If such difference is a
positive amount, that amount shall be deducted from the total of
(i), (ii), (iii) and (iv). If the difference is a negative amount,
the positive equivalent of such negative amount will be added to
the total of (i), (ii), (iii) and (iv).
Preferred Shares Purchase Price
Pursuant
to the Proposed Preferred Shares SPA, Buyer will purchase 1,000,000
Preferred Shares, which constitutes all of the issued and
outstanding Preferred Shares, of the Bank from Utemuratov for
1,040,000,000 KZT ($2,492,272).
Subordinated Debt Purchase Price
As
a condition to closing the Proposed Preferred Shares SPA, Buyer or
a person designated by Buyer and agreed by Utemuratov, will acquire
the Subordinated Debt from its holders. The agreed upon
consideration for acquisition of the Subordinated Debt will be
equal to the sum of the nominal value of the Subordinated Debt and
any accrued but unpaid interest associated with such Subordinated
Debt as of December 23, 2020. For informational purposes only, the
aggregate outstanding balance of the Subordinated Debt, including
accrued but unpaid interest, of the Bank as of June 30, 2020, was
4,016,558,000 KZT ($9,625,340).
Representations, Warranties and Covenants
The
parties to the Ordinary Shares SPA and the Proposed Preferred
Shares SPA have made such customary representation and warranties
in the Ordinary Shares SPA and the Proposed Preferred Shares SPA as
they deemed enforceable under Kazakh Law. The representations and
warranties in the agreements will terminate at Closing. The parties
have also made such customary covenants in the Ordinary Shares SPA
as they deemed enforceable under Kazakh Law, including, among other
things, (i) affirmative covenants relating to operation of the Bank
from the date of such agreements until closing, (ii) obtaining all
requisite Governmental Approvals, (iii) appointment by Buyer of two
individuals to serve as internal Bank Consultants from the date of
the Ordinary Shares SPA until closing of the Ordinary Shares SPA,
(iv) purchase of the Pool of Loans with certain limited exceptions,
by Seller, (v) purchase of designated Non-core and Real Estate
assets of the Bank by Seller, (vi) satisfaction in full or transfer
of certain other Bank obligations to Seller, (vii) exchange of
legal opinions, and (vii) continued operation of the Bank for a
period of one year following closing.
Conditions to Closing
Consummation
and closing of the transactions contemplated by the Ordinary Shares
SPA is subject to certain closing conditions, including, among
others, that:
(i)
the
Bank’s banking licenses remain valid and are not
revoked;
(ii)
that
Buyer has (a) obtained requisite Governmental Approvals, including
consent of the Committee on Regulation of Natural Monopolies,
Protection of Competition and Consumers of the Ministry of National
Economy of the Republic of Kazakhstan, or official confirmation
that such consent is not required, and consent of the Agency for
Regulation and Development of the Financial Market of the Republic
of Kazakhstan to grant bank holding company status to Buyer, (b)
obtained all required corporate consents and approvals, (c) lodged
the Pledge, (d) deposited the funds to purchase the Ordinary Shares
as provided in the Ordinary Shares SPA within three calendar days
of receipt of requisite Governmental Approvals, and (e) provided to
Seller the required legal opinion; and
(iii)
that
Seller has (a) obtained all required corporate consents and
approvals, (b) provided to Buyer the required legal opinion, and
(c) completed its obligations to purchase the Pool of Loans and the
Non-core and Real Property assets.
Consummation
and closing of the transactions contemplated by the Proposed
Preferred Shares SPA is subject to certain closing conditions,
including, among others, that:
(i)
the
Bank’s banking licenses remain valid and are not
revoked;
(ii)
that
Buyer has (a) obtained the requisite Governmental Approvals to
acquire the Ordinary Shares and the Preferred Shares, and (b)
obtained all required corporate consents and approvals;
and
(iii)
that
Buyer or a person designated Buyer and agreed by Utemuratov has
acquired the Subordinated Debt after receipt of all requisite
Governmental Approval and by no later than December 23,
2020.
Closing
As
noted above, as a condition to closing the Ordinary Shares SPA and
the Proposed Preferred Shares SPA, Buyer must obtain the requisite
Governmental Approvals, unless such conditions are waived by the
parties. Receipt of the requisite Governmental Approvals by Buyer
cannot be assured. The parties anticipate consummating the Proposed
Transactions and closing the Ordinary Shares SPA, the Preferred
Shares SPA and any other agreements between the parties required to
effect the Proposed Transaction as promptly as practicable
following receipt of all requisite Governmental Approvals, which
the parties expect to complete by December 23, 2020. The Ordinary
Stock SPA provides that its closing will occur by no later than
December 28, 2020. Notwithstanding the foregoing, in the event the
requisite Governmental Approvals to effect the Ordinary Shares SPA
have not been received, the parties will undertake to agree on
conditions of a two-month extension.
Pledge
Pursuant to the Ordinary Shares SPA, Buyer is
required to deliver 1,800,000,000 KZT ($4,313,547) to secure
fulfillment of its obligations under the Ordinary Shares SPA and
the Proposed Preferred Shares SPA (defined below) within five
Business Days of the effective date of the Ordinary Shares SPA (the
“Pledge”). In the event the Ordinary Shares SPA closes,
the Pledge will be applied to reduce the amount of the Purchase
Price by the amount of the Pledge. For additional information
regarding the Pledge, see “Termination”
below.
Termination
The
Ordinary Shares SPA may be terminated prior to closing (i) by
written consent of the parties, (ii) by Buyer if Seller has not
completed its conditions to closing by December 23, 2020, (iii) by
Seller if Buyer has not completed its conditions to closing by
December 23, 2020, or (iv) by either party if any Government
Authority shall have issued an order restraining or enjoining the
transactions contemplated by the Ordinary Shares SPA.
The
Proposed Preferred Shares SPA may be terminated prior to closing
(i) by written consent of the parties, (ii) by Buyer if Utemuratov
has not received the requisite consent of his spouse to effect
transfer of the Preferred Shares, (iii) by Seller if Buyer has not
completed its conditions to closing under the Proposed Preferred
Shares SPA, or (iv) by either party if any Government Authority
shall have issued an order restraining or enjoining the
transactions contemplated by the Ordinary Shares SPA.
In
the event of the declaration of emergency rule or quarantine over
the Republic of Kazakhstan, Almaty or Nur-Sultan, the deadline for
fulfillment of the closing conditions of the Ordinary Shares SPA
and the Proposed Preferred Shares SPA shall be suspended for the
duration of such emergency rule or quarantine.
In
the event the Ordinary Shares SPA is terminated by Buyer in
accordance with its terms, Seller shall pay Buyer 1,800,000,000 KZT
($4,313,547) and return to Buyer the Pledge. In the event the
Ordinary Shares SPA is terminated by Seller in accordance with its
terms, Seller shall retain the Pledge.
Governing Law and Jurisdiction
The
Ordinary Shares SPA and the Proposed Preferred Shares SPA are each
governed by Kazakh law and all disputes arising out of or in
connection with such agreements are subject to the exclusive
jurisdiction of the courts of the Republic of
Kazakhstan
Item 7.01 Regulation FD Disclosure
On
August 3, 2020, FRHC issued a press release announcing it had
entered into the Ordinary Shares SPA and discussing the Proposed
Preferred Shares SPA and the Proposed Transactions, a copy of which
is attached hereto as Exhibit 99.01 and incorporated by reference
herein.
Special Note About Forward-Looking Statements
This
Current Report contains “forward-looking” statements
regarding the proposed acquisition of by Buyer of Ordinary Shares,
Preferred Shares and Subordinated Debt of the Bank, entry into
agreements to acquire the Preferred Shares and/or Subordinated Debt
and the material terms and conditions of such agreements, the
anticipated purchase prices of the Ordinary Shares, Preferred
Shares and Subordinated Debt, the consummation and closing of the
Proposed Transactions and the timing thereof. All such
forward-looking statements are subject to uncertainty and changes
in circumstances, and there is no assurance the Proposed
Transactions will be consummated and closed. Moreover, all
forward-looking statements are not guarantees of future results or
performance and involve risks, assumptions and uncertainties that
could cause actual events or results to differ materially from the
events or results described in, or anticipated by, the
forward-looking statements. Factors that could materially affect
such forward-looking statements include the failure of any one or
more of the closing conditions to the Proposed Transactions,
termination of the Ordinary Shares SPA or the inability of the
parties to agree upon the Proposed Preferred Shares SPA or
agreements for the acquisition or assignment of the Subordinated
Debt, and other economic, business and regulatory risks and factors
identified in the Company’s periodic reports filed with the
SEC. All forward-looking statements are made only as of the date of
this Current Report and the Company assumes no obligation to update
forward-looking statements to reflect subsequent events or
circumstances. Actual results may differ materially from
anticipated results or outcomes discussed in any forward-looking
statement. Readers should not place undue reliance on these
forward-looking statements.
Item 9.01 Financial Statements and Exhibits.
Exhibits
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Exhibit No.
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Exhibit Description
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Bank
Kassa Nova JSC (Subsidiary Bank of ForteBank JSC) Ordinary Share
Purchase and Sale Agreement, dated July 29, 2020, by and between
ForteBank JSC and Freedom Finance JSC(1)(2)
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Form of
Preferred Shares Sale and Purchase Agreement of Bank Kassa Nova
Joint-Stock Company (Subsidiary Bank of ForteBank Joint-Stock
Company) by and between Mr. Bulat Zhamitovich Utemuratov and
Freedom Finance JSC(1)(2)(3)
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Press
Release dated August 3, 2020
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(1) This exhibit is an
English translation of a foreign language document. FRHC hereby
agrees to furnish supplementally to the SEC, upon request, a copy
of the foreign language document.
(2)
The schedules to
this Exhibit have been omitted in accordance with Regulation S-K
Item 601(b)(2). FRHC agrees to furnish supplementally a copy of any
omitted schedule to the SEC upon request.
(3)
Certain portions of
this exhibit (indicated by “[***]”) have been omitted
in accordance with Regulation S-K Item 601(a)(6).
SIGNATURES
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
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FREEDOM HOLDING
CORP.
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Date:
August 3, 2020
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By:
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/s/
Timur
Turlov
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Timur
Turlov
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Chief
Executive Officer
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