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RNS Number : 9245K
Marlowe PLC
13 July 2017
13 July 2017
Marlowe plc
Acquisition of Ductclean (UK) Limited
Placing of new Ordinary Shares to raise approximately GBP10
million
Notice of General Meeting
Marlowe plc ("Marlowe", the "Company" or the "Group"), the
support services group focused on acquiring and developing
companies that provide critical asset maintenance services,
announces that it has agreed to acquire Ductclean (UK) Limited
("DCUK") for a total enterprise value of up to GBP10.0 million (the
"Acquisition").
DCUK is a UK market leader in ventilation maintenance, ductwork
cleaning and management, kitchen extract cleaning and contamination
remediation services, including asbestos remediation. Established
in 1998 and operating nationally from headquarters in Welwyn Garden
City, Hertfordshire, the business employs around 185 people. DCUK's
key customers include national hotel and leisure providers,
airports, NHS trusts, universities, local authorities, and FTSE
companies.
The acquisition of DCUK represents Marlowe's first step into the
air hygiene market, where it will form the basis of a new division
to sit alongside the Group's existing activities in fire &
security and water treatment. The Board believes that the air
hygiene market shares attractive key characteristics with the fire
& security and water treatment markets, including a significant
element of non-discretionary spend, strong regulatory and
legislative drivers, a degree of operational and technical
complexity which favours outsourcing, and the same channel to
market, which provides opportunities for cross-selling. In addition
to providing the Group with a presence in a new complementary
service sector, the market in which DCUK operates is currently
highly fragmented and offers significant scope for
consolidation.
For the year ended 30 September 2016, DCUK reported revenues of
GBP16.7 million, underlying EBITDA of GBP1.8 million (adjusted for
non-recurring items) and gross assets of GBP6.0 million, including
freehold property which has been independently valued at GBP1.5
million. The Directors believe that the Acquisition will
immediately enhance Group earnings.
The Acquisition of DCUK includes cash consideration of GBP4.0
million which will be used in part to repay debt of approximately
GBP2 million. In addition Marlowe will issue of 878,031 new
ordinary shares of 50 pence each (the "Consideration Shares") at
393.88 pence per share, representing an aggregate value of
approximately GBP3.5 million, to the DCUK management team who will
lead Marlowe's new Air Hygiene division. The Consideration Shares
are subject to a lock-up period of up to 60 months with orderly
market conditions attached after this period. An additional
earn-out is payable of up to GBP2.5 million, which can be settled
in cash or ordinary shares at the Company's option. The earn-out
shares would be issued at the market price at the time of issue and
subject to the same lock-in period.
In addition, the Company today announces a Placing that was
oversubscribed, with new and existing institutional shareholders,
to raise approximately GBP10 million. The proceeds of the Placing,
along with the Company's existing GBP18 million debt facilities,
will be used to fund the cash consideration for DCUK and to support
the Company's plans for further acquisition-led growth. The Company
has approximately GBP17 million of net headroom under its current
debt facilities.
The Placing Proceeds, as well as the issue of the Consideration
Shares, will be subject to approval by the Company's shareholders
at the General Meeting (the "GM") to be held on 28 July 2017. The
Company will apply for admission of 2,597,402 Placing Shares and
878,031 Consideration Shares to trading on AIM that are subject to
shareholder approval at the GM and it is expected that admission
will occur on 31 July 2017.
The Circular which sets out the details of the Placing and
Consideration Shares, and of the Resolutions to be proposed at the
GM, is expected to be posted to shareholders today. The Circular
will also be available on the Company's website at:
www.marloweplc.com. Capitalised terms used, but not defined in this
announcement shall have the same meaning as set out in the
Circular.
Following admission of the Placing and Consideration Shares, the
Company's issued ordinary share capital will consist of 34,392,428
ordinary shares; no shares are held in treasury. The above figure
of 34,392,428 may be used by shareholders as the denominator for
the calculations by which they will determine if they are required
to notify their interest in, or a change to their interest in the
Company under the FCA's Disclosure Guidance and Transparency
Rules.
Alex Dacre, Chief Executive of Marlowe plc, commented:
"The acquisition of DCUK significantly extends the scope of the
Group's activities into a new complementary service sector with
strong recurring revenues and where growth is driven by stringent
health and safety regulation. The air hygiene market is currently
highly fragmented and this will provide Marlowe with increased
acquisition-led growth opportunities alongside our existing Fire
& Security and Water Treatment businesses. We look forward to
DCUK joining the Group and to the substantial contribution that it
will make to the continued development of Marlowe into the UK's
leading provider of critical asset maintenance services."
For further information:
Marlowe plc www.marloweplc.com
Alex Dacre, Chief Executive Tel: +44 (0) 203 813
8498
IR@marloweplc.com
Cenkos Securities plc (Nominated Adviser and Broker)
Nicholas Wells Tel: +44 (0)20 7397 8900
Elizabeth Bowman
FTI Consulting
Nick Hasell Tel: +44 (0)20 3727 1340
Alex Le May
About Marlowe plc
Marlowe is an AIM-listed company formed to create sustainable
shareholder value through the acquisition and development of
businesses that provide critical asset maintenance services in the
UK. It is focused on fire protection, security systems, water
treatment and air hygiene services - which are essential to its
customers' operations and invariably governed by regulation, and
where customers require a single specialist outsourced provider
with nationwide coverage. Our customers can be found on most high
streets, in office complexes and industrial estates, and include
SMEs, local authorities, facilities management providers,
multi-site NHS trusts and FTSE 100 companies.
The information contained within the announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014. Upon the
publication of this announcement via Regulatory Information
Service, this inside information is now considered to be in the
public domain.
About DCUK
DCUK was founded in 1998 and is headquartered in Welwyn Garden
City. It provides ventilation maintenance and contamination
remediation services including:
-- Ventilation hygiene including general ventilation and ductwork, kitchen extract ducts, bathroom extracts
and fire damper inspection;
-- Contaminated ductwork work including asbestos remediation in ductwork; and
-- Training courses in ventilation hygiene and asbestos awareness.
In addition to its headquarters in Welwyn Garden City, it
operates from four other branches in the UK and employs around 185
people of which 60 are duct cleaning operatives and 70 are asbestos
remediation operatives. Its key customers include national hotel
and leisure providers, airports, NHS trusts, universities, local
authorities, and FTSE companies.
In line with businesses in Marlowe's other sectors of fire and
security and water treatment, DCUK operates in a regulated
environment. The Directors believe that this regulation should
drive DCUK's growth. In April 2006 it became a serious offence if
injury results from unmaintained duct systems. In addition, there
are various statutory requirements and other regulations placed on
building owners and tenants regarding maintenance of ductwork.
Asbestos management and remediation is a highly regulated
industry. Key legislation includes the Control of Asbestos
Regulations 2012 and Hazardous Waste Regulations. To undertake
asbestos remediation a company requires Health & Safety
Executive licenses.
The following financial information has been extracted from the
audited accounts of DCUK. For the 12 months to 30 September 2016,
DCUK recorded underlying EBITDA (adjusted for non-recurring items)
of GBP1.8 million (2015: GBP1.2 million) on audited revenues of
GBP16.7 million (2015: GBP12.6 million) and profit before tax of
GBP1.0 million (2015: GBP0.3 million). The audited fixed assets of
DCUK at 30 September 2016 were GBP2.2 million and the net assets
were GBP1.7 million. Net assets being acquired include a property
in Welwyn Garden City independently valued at GBP1.5 million and
working capital of GBP0.9 million.
Background to and reasons for the Acquisition
DCUK is a well-established ductwork cleaning and asbestos
remediation company.
In line with Marlowe's strategy of acquiring businesses in the
outsourced business service sector that provide critical asset
maintenance services in the UK, the Acquisition will broaden the
capabilities of the Group and create a third complementary division
in air hygiene.
The Board believes the Acquisition will:
-- provide a strong platform for growth through consolidation of
the fragmented air hygiene market;
-- increase the breadth of Marlowe's critical asset maintenance
service offering;
-- increase Marlowe's scale and customer base; and
-- provide extensive cross selling opportunities across the Fire
& Security and Water Treatment customer bases of Marlowe.
The Acquisition is expected to be immediately earnings
enhancing.
A summary of the principal terms of the Acquisition Agreement is
set out below.
The Acquisition Agreement
Pursuant to the Acquisition Agreement, the Company has agreed to
purchase the entire issued share capital of DCUK. The aggregate
consideration payable to acquire the entire issued share capital of
the Company and to repay outstanding debts is GBP7.5 million
payable on Completion and up to a further GBP2.5 million
conditional on DCUK's EBITDA in the periods to 30 September
2019.
The Company has a right to choose the form in which any deferred
consideration is settled. Resolutions 1 and 2 therefore include a
proposed authority to allot up to 2,500,000 Ordinary Shares in
settlement of any deferred consideration payable.
Completion of the Acquisition Agreement is conditional on the
passing of the Resolutions.
Details of the Consideration Shares
Application will be made to the London Stock Exchange for the
Consideration Shares to be admitted to trading on AIM. Subject to,
inter alia, the passing of the Resolutions, it is expected that
Admission will take place and that trading will commence on AIM at
8am on or around 31 July 2017. Following the issue of the
Consideration and Placing Shares, the Company will have 34,392,428
Ordinary Shares in issue and there are no shares held in
treasury.
The Issue Price of 393.88 pence per new Ordinary Share
represents the average closing mid-market price at which the
Ordinary Shares were quoted on AIM for the 20 Business Days ending
11 July 2017.
The allotment of the Consideration Shares is conditional on,
amongst other things, the Acquisition Agreement becoming
unconditional save in respect of conditions relating to
Admission.
The Consideration Shares will, when issued and fully paid, rank
pari passu in all respects with the Existing Ordinary Shares,
including the right to receive all dividends and other
distributions declared, made or paid after the date of
Admission.
Background to and reasons for the Placing, and use of
proceeds
Since its admission to AIM in spring 2016, Marlowe has
successfully developed its platform within the fire and security
and water treatment segments of the critical asset management
services sector. DCUK offers Marlowe the opportunity to move into a
new sector. Marlowe has historically financed its acquisitions
through equity fundraisings as well as with debt facilities. It
intends to use approximately GBP4.0 million of the proceeds of the
Placing to pay the initial cash consideration and to repay
outstanding debt. The remaining net proceeds of the Placing of
approximately GBP5.68 million will provide resources for future
acquisitions alongside Marlowe's existing debt facility.
The Placing
The Company proposes to raise approximately GBP10 million gross
(approximately GBP9.68 million net of expenses) through the issue
of the Placing Shares through Cenkos, the Placing not being
underwritten, at the Issue Price.
The Company's existing share authorities, which allow it to
issue shares on a non pre-emptive basis, are insufficient to allow
the Placing to proceed. Therefore the Placing is conditional, inter
alia, on the passing of the Placing Resolutions.
If the Placing Resolutions are not passed at the General
Meeting, the Placing Shares will not be issued and the proceeds of
the Placing will not be available to the Company.
The issue price of 385 pence per Placing Share represents a
premium of 1.99 per cent. against the mid-market price of 377.5
pence per share at which the Ordinary Shares were quoted on AIM as
at close of trading on 12 July 2017, the last trading day prior to
announcement of the Placing. Following their admission, the Placing
Shares will represent approximately 7.55 per cent of the Company's
then enlarged issued ordinary share capital.
The Placing is conditional, amongst other matters, on the
passing of the Placing Resolutions at the General Meeting, and is
expected to complete at 8.00 a.m. on 31 July 2017, being the
expected date of Admission. The notice of General Meeting is set
out at the end of the Circular.
The Placing Shares will, when issued and fully paid, rank pari
passu in all respects with the Existing Ordinary Shares, including
the right to receive all dividends and other distributions
declared, made or paid after the date of Admission.
Application will be made to the London Stock Exchange for the
Placing Shares to be admitted to trading on AIM. Subject to, inter
alia, the passing of the Placing Resolutions, it is expected that
Admission will take place and that trading will commence on AIM at
8.00 a.m. on or around 31 July 2017. Following the issue of the
Placing and Consideration Shares, the Company will have 34,392,428
Ordinary Shares in issue and there are no shares held in
treasury.
Details of the Placing Agreement
The Placing Agreement contains customary warranties and an
indemnity from the Company in favour of Cenkos together with
provisions which enable Cenkos to terminate the Placing in certain
circumstances prior to Admission, including where any warranties
are found to be untrue, inaccurate or misleading in any material
respect or in the event of a material adverse change in the
financial position or prospects of the Company's group in the
context of the Placing or Admission.
The Placing Agreement is conditional, inter alia, upon:
(a) Shareholder approval of the Placing Resolutions at the General Meeting;
(b) the Placing Agreement having become unconditional in all
respects (save for the condition relating to Admission) and not
having been terminated in accordance with its terms prior to
Admission; and
(c) Admission becoming effective not later than 8.00 a.m. on 31
July 2017 or such later time and/or date as the Company and Cenkos
may agree, being not later than 31 August 2017.
General Meeting
You will find set out at the end of the Circular a notice
convening the General Meeting to be held at 20 Grosvenor Place,
London, SW1X 7HN at 11.00 a.m. on 28 July 2017 at which the
Resolutions will be proposed as ordinary or special
resolutions.
Action to be taken in respect of the General Meeting
Shareholders will find accompanying to the Circular a Form of
Proxy for use in connection with the General Meeting. The Form of
Proxy should be completed and returned in accordance with the
instructions thereon so as to be received by Capita, The Registry,
34 Beckenham Road, Kent BR3 4TU as soon as possible and in any
event not later than two Business Days before the time of the
General Meeting. Completion and return of the Form of Proxy will
not prevent a Shareholder from attending and voting at the General
Meeting should he/she/it so wish.
Recommendation
The Directors believe the Acquisition and the Placing to be in
the best interests of the Company and its Shareholders as a whole.
Accordingly, the Directors unanimously recommend Shareholders to
vote in favour of the Resolutions as they intend so to do in
respect of their beneficial shareholdings amounting to 8,899,847
Existing Ordinary Shares.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
2017
Announcement of the Acquisition and 13 July
Placing
Posting of the Circular 13 July
Latest time and date for receipt 11.00 a.m. on 26 July
of Forms of Proxy
General Meeting 11.00 a.m. on 28 July
Admission and commencement of dealings 8.00 a.m. on 31 July
if the Resolutions are passed of
the Consideration Shares and the
Placing Shares
If the Resolutions are passed, the 31 July
Consideration Shares and Placing
Shares credited to CREST stock accounts
Despatch of definitive share certificates, week commencing 7 August
if the Resolutions are passed, in
respect of the Consideration Shares
and Placing Shares
Notes:
(i) References to times in the Circular are to London time (unless otherwise stated).
(ii) If any of the above times or dates should change, the
revised times and/or dates will be notified by an announcement to
an RIS.
(iii) The timing of the events in the above timetable and in the
rest of the Circular is indicative only.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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