Disposal

RNS Number:3229S
Blue Star Mobile Group plc
15 April 2008


           Blue Star Mobile Group Plc ("Blue Star" or the "Company")

                        Disposal of trading subsidiaries

Blue Star is pleased to announce today that it has entered into a conditional
agreement in relation to the sale of all the issued shares of two of the Group's
four trading subsidiaries, Blue Star Mobile Limited and Blue Star Sport Limited
for a cash consideration of �225,000 (the "Agreement") (�175,000 to be paid at
the signing of the Agreement and �50,000 to be paid six months later) to Blue
Star International Limited (the "Buyer"), a company controlled by the members of
the Executive Board, following their offer for the shares of the Target
Companies to the Company (the "Offer"). With regard to the other two
subsidiaries which are non-UK incorporated, the Agreement provides that the
Buyer and/or the Company, shall complete all the formalities necessary to
transfer ownership in these companies from the Seller to the Buyer under the
laws of their respective jurisdictions within six months of completion of this
Transaction at the Buyer's cost. If the Offer is accepted, the Executive Board
have agreed to vote for the redesignation of their 6,470,040 ordinary shares in
the Company to 6,470,040 deferred shares with no rights at all, save for the
repayment of nominal capital after (and only after) the weighted rights to
repayment of all other shareholders of their capital have been satisfied in
full.

The Disposal is deemed to be a disposal resulting in a fundamental change of
business for the purpose of AIM Rule 15 and therefore is conditional on consent
from Shareholders. Because the subsidiaries are being sold to a company
controlled by members of the Company's Executive Directors, the Disposal is also
deemed to be a related party transaction under the AIM rules.

A circular has been posted to shareholders today, detailing the particulars of
the Disposal and the reasons why the Independent Directors believe that the
terms of the Disposal are fair and reasonable as far as Shareholders are
concerned, and the investment strategy of the Company going forward and why they
believe that the resolutions should be approved by Shareholders.

Background

Since the Company floated in April 2005, the Executive Board and senior
management have become increasingly frustrated with the public arena and believe
that the Company may be better suited as a private entity. The Company has
failed to attract institutional investors and whilst the Board believe they
have, until this year, achieved respectable results, this has not been reflected
in the Company's share price. There has been little liquidity in the Company's
shares and such trading as has occurred has seemingly been outside the market in
matched buyers and sellers. The performance of the share price has frustrated
the Company's ability to issue and raise equity as capital for the purposes of
making acquisitions. In addition to this, the time and costs associated with
being a public company are not justified and the Executive Board feel that their
time may be better spent on the commercial development of the business in the
private arena. The Executive Board considered making an offer for and de-listing
the Company, but after considering the costs and time involved believe it is in
the best interests of Shareholders to acquire the assets of the Company, thereby
obviating the need to make an offer under the City Code for Takeovers and
Mergers to the shareholders of the Company.

As announced on 1 February 2008, a dispute with one of our major customers is
ongoing and will have a significant effect on the Company's results. No further
information is available regarding this matter. The Company also made the
following announcement on 7 April 2008:

"Further to the announcement of 1 February 2008, the trading performance of the
group has deteriorated further as the group has not closed the new business that
it anticipated. It will therefore post a substantial loss of not less than �500k
for the year ended 31 March 2007."

The Independent Directors, having taken into account the terms of the Offer, the
lack of any other bidders and the potential consequences to the Company if any
of the Executive Board resign, believe that the Offer is fair and reasonable
insofar as Shareholders as a whole are concerned and also that it is in the best
interests of Shareholders. The Independent Directors believe that the Company
may fail to maintain the current market capitalisation if the current executive
management were no longer running the Company, leading to further erosion of the
share price.

The Proposed Transaction

The proposed transaction will take the form of the sale of the entire issued
share capital of each of the Target Companies from the Company to the Buyer.

On completion, the Buyer will immediately pay �175,000 to the Company. A further
and final instalment of �50,000 will be paid by the Buyer to the Company on
expiry of six months after completion.

The payment of this instalment is unconditional.

The Agreement contains basic warranties as to capacity and authority and title
from the Company and no other warranties.

The Company's liability for a claim cannot exceed the level of the consideration
and all claims must be brought within six months from the date of completion.

The Buyer agrees to indemnify the Company against any loss it might suffer in
respect of a number of matters. These include any litigation, any claims in
respect of properties occupied by the Company and any claims brought in respect
of the operation of the Companies while the Executive Board was running them and
any claim in respect of the acts or omissions of individual members of the
Executive Board.

This Agreement also requires the members of the Executive Board to attend the
meeting of shareholders to be convened to approve the Disposal and vote in
favour of the Resolutions to be proposed there, one of which is the
redesignation of their 6,470,040 Ordinary Shares into 6,470,040 deferred shares.

This Agreement contains provisions requiring the Buyer to produce documentation
effecting the valid transfer of the Company's wholly owned non UK registered
subsidiaries Blue Star Mobile Inc and Blue Star Beijing (Tech) Ltd in accordance
with the laws of their incorporation procuring that all necessary procedures
under those laws have taken place in order to transfer ownership of them from
the Seller to the Buyer. If the Buyer fails to discharge its responsibilities
under these provisions after three months following the signing of the Agreement
have passed, the Company may, under certain conditions, elect to take over these
responsibilities at the Buyer's cost. If the Company does not so elect, the
Buyer remains responsible and if it has not fulfilled its responsibilities after
the expiry of six months following the signing of the Agreement, the Company may
elect to take these over, at the Buyer's cost, unconditionally. The Company and
the Buyer have entered into a separate anti-embarrassment agreement whereby the
Company will receive 25 per cent. of any sale proceeds in excess of �225,000, if
the Buyer or Blue Star
Mobile Limited is sold within six months of the signing of the Agreement.

Financial Statements

The financial information on the Group derived from the final results for the
year ended 31 March 2007, released on 8 June 2007 is as follows:

Turnover of �4,434,000, Operating Profit of 92,000, and Gross Assets of
2,178,000.

Business going forward

Following the Disposal, the Company will have no trading business and therefore
under the AIM rules it must seek the consent of Shareholders for the investment
strategy.

It is the view of the Independent Directors that going forward the only strategy
for the Company is to return the sale proceeds (less the costs of sale, ongoing
professional advisers' fees and the ongoing maintenance of the Company as an AIM
listed plc) of the Target Companies to the shareholders.

The main factors in reaching this conclusion are that there are limited
financial resources and consequently time to search for or develop a new venture 
and that to do so may unnecessarily erode what funds remain.

If the Company does not make a reverse takeover within six months of the sale of
the operating companies, the Independent Directors will seek to return residual 
cash to shareholders through a
Members' Voluntary Liquidation to be approved at an EGM. At the same time that
the Company seeks shareholder approval for the Members' Voluntary Liquidation,
the Company shall also seek shareholder approval for the Company's listing on
AIM to be cancelled. Cancellation would be effective from the business day
following the date of the EGM. If the Members' Voluntary Liquidation and
cancellation of the Company's listing on AIM are not approved by Shareholders,
the Company will be required to implement an investing strategy under the AIM
Rules, for which the Company must seek the consent of Shareholders at an EGM to
be held shortly after the previous EGM. If the Members' Voluntary Liquidation is
approved by Shareholders, but cancellation of the Company's listing on AIM is
not approved, the Company's listing on AIM will be suspended from the business
day following the date of the EGM. The Company would remain suspended for six
months, after which its listing on AIM would be cancelled. The Independent
Directors of the Company do not have any experience in sourcing companies to
acquire cash shells (as the Company will be classified after the Resolutions are
passed) nor in looking for reverse takeover targets. They will, however, work
with their advisers in trying to source potential targets.

Use of Proceeds

The proceeds will be used to fund the ongoing costs of maintaining the Company
as an AIM listed plc until such time as it makes a reverse takeover within the
next six months or cash is returned to shareholders through a Members' Voluntary
Liquidation.

If, for whatever reason, the Company is unable to return cash to shareholders
through a Members' Voluntary Liquidation, under the AIM Rules for Companies if
the Company does not make a reverse takeover within 12 months from the date of
the EGM its listing on AIM will be suspended. If the Company subsequently fails
to make a reverse takeover within a further six months from its date of
suspension, its listing on AIM will be cancelled.

Notice Of Extraordinary General Meeting

The notice of an Extraordinary General Meeting of the Company to be held at
10.00 am on 8 May 2008 at the offices of Halliwells LLP, 1 Threadneedle Street,
London EC2R 8AY, sets out the Resolutions to be approved at the EGM.

The ordinary resolution is to approve the Disposal for the purposes of s.190 of
the Act and Rule 15 of the AIM rules for companies ("Resolution 1"). The Special
Resolutions are needed to redesignate the 6,470,040 Ordinary Shares held by the
members of the Executive Board into 6,470,040 deferred shares (Resolution 2),
and to effect a change of name (Resolution 3).

Recommendation

Because the Disposal is deemed to be a related party transaction pursuant to the
AIM Rules, the Independent Directors consider, having consulted with the 
Company's nominated adviser, Seymour Pierce Limited, that the terms of the 
transaction are fair and reasonable insofar as Shareholders are concerned.

Accordingly, the Independent Directors unanimously recommend that you vote in
favour of Resolutions 1 to 3, to be proposed at the EGM, as they intend to do in 
respect of their own beneficial holdings amounting in aggregate to 6,207,373 
Ordinary Shares, representing approximately 21 per cent. of the existing issued 
ordinary share capital of the Company.


Enquiries:

Blue Star:
David Cromwell                 Tel: 020 7199 0129

Seymour Pierce:
John Depasqual/Matt Thomas     Tel: 020 7107 8000



                      This information is provided by RNS
            The company news service from the London Stock Exchange

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