GBP 500 M DEAL - Innovation Group PLC TIG Recommended Cash Offer by Axios Bidco Limited
RECOMMENDED CASH OFFER
for
The Innovation Group plc ("Innovation")
by
Axios Bidco Limited ("Bidco")
Summary
· The boards of Bidco and Innovation are pleased to announce that they have reached agreement on the terms of a recommended cash offer pursuant to which Bidco shall acquire the entire issued and to be issued ordinary share capital of Innovation. The Offer is to be effected by means of a scheme of arrangement under Part 26 of the Companies Act.
· Under the terms of the Offer, Innovation Shareholders shall be entitled to receive 40 pence in cash for each Ordinary Share held, representing a premium of approximately:
· 13.5 per cent. to the Closing Price per Ordinary Share of 35.25 pence on 27 August 2015 (being the latest practicable date prior to the announcement by Innovation that it was in discussions with Carlyle);
· 26.3 per cent. to the volume weighted average Closing Price per Ordinary Share of 31.67 pence for the 3 months ended 27 August 2015 (being the latest practicable date prior to the announcement by Innovation that it was in discussions with Carlyle);
· 42.1 per cent. to the volume weighted average Closing Price per Ordinary Share of 28.14 pence for the 6 months ended 27 August 2015 (being the latest practicable date prior to the announcement by Innovation that it was in discussions with Carlyle); and
· a P/E multiple of 22.9x to Innovation's earnings per share for the twelve months ended 31 March 2015.
· The Offer values the entire issued and to be issued ordinary share capital of Innovation at approximately £499 million.
· The Offer is conditional on, amongst other things, the approval of Innovation Shareholders.
· Bidco has, in total, received irrevocable undertakings and letters of intent to vote in favour of the Scheme in respect of 346,817,571 issued Ordinary Shares representing, in aggregate, approximately 28.3 per cent. of the issued ordinary share capital of Innovation on 27 August 2015 (being the last practicable date prior to the date of this Announcement). These are described in further detail below.
· The Innovation Directors, who have been so advised by Investec, consider the terms of the Offer to be fair and reasonable. In providing advice to the Innovation Directors, Investec has taken into account the commercial assessments of the Innovation Directors.
· Bidco is indirectly wholly owned by the Carlyle Europe Partners IV Funds. The Carlyle Europe Partners IV Funds, together with their affiliates, do business as 'The Carlyle Group' ("Carlyle"). Carlyle is a global alternative asset manager with $193 billion of assets under management in 128 funds and 159 fund of funds vehicles as of 30 June 2015. Carlyle invests across four segments - Corporate Private Equity, Global Market Strategies, Real Assets and Investment Solutions - in Africa, Asia, Australia, Europe, the Middle East, North America and South America. Carlyle has expertise in various industries, including: financial services, aerospace, defence & government services, consumer and retail, energy and power, healthcare, industrial, infrastructure, real estate, technology and business services, telecommunications and media and transportation. Carlyle employs more than 1,700 people in 35 offices across six continents.
· The Board and management team of Innovation have built a strong business since 2009, growing the market capitalisation of Innovation from £50 million on 13 May 2009, the day before announcing the Group's proposed placing to raise approximately £5.1 million at 8 pence per Ordinary Share, to £433 million as at 27 August 2015 (being the last practicable date prior to the date of this Announcement). This has been achieved through a combined organic and inorganic growth strategy, offering a range of insurance-focused business process services and software to clients.
· Whilst the Innovation Directors believe that there is potential for future growth in equity value for Innovation Shareholders they recognise the benefits to Innovation in having a partner like Carlyle with global presence, relevant industry network and commitment to the ongoing investment requirements of (i) supporting the international growth of the Business Services division; (ii) accelerating its growth through acquisitions; and (iii) scaling the Software division. The Offer will provide Innovation with enhanced financial and operational flexibility as it seeks to execute its strategy in the longer-term. As such, the Innovation Directors believe that the Offer represents a compelling opportunity for Innovation Shareholders to immediately and fully realise the value from their investment in cash and at a premium.
· Accordingly, the Innovation Directors intend to recommend unanimously that Innovation Shareholders vote in favour of the Scheme at the Court Meeting and the resolution to be proposed at the General Meeting as the Innovation Directors have irrevocably undertaken to do in respect of their own beneficial holdings amounting in aggregate to 8,215,394 Ordinary Shares representing approximately 0.7 per cent. of the issued ordinary share capital of Innovation as at 27 August 2015 (being the latest practicable date prior to the publication of this Announcement).
· The Offer Price assumes that Innovation Shareholders will not receive a final dividend for Innovation's financial year ending 30 September 2015. If any dividend or other distribution is authorised, declared, proposed, made or paid by Innovation on or after the date of this Announcement and prior to the Effective Date, Bidco reserves the right to adjust the Offer Price downwards on an equivalent basis.
· The Offer shall be put to Innovation Shareholders at the Court Meeting and at the General Meeting. In order to become effective, the Scheme must be approved by a majority in number of the Innovation Shareholders voting at the Court Meeting, either in person or by proxy, representing at least 75 per cent. in value of the Ordinary Shares voted. In addition, a special resolution implementing the Scheme must be passed by Innovation Shareholders representing at least 75 per cent. of votes cast at the General Meeting.
· The Scheme Document, containing further information about the Offer and notices of the Court Meeting and the General Meeting, shall be published as soon as practicable and, in any event, within 28 days of this Announcement.
Commenting on the Offer, Eric Kump, Managing Director, Carlyle Europe Partners, said:
"Innovation is a high-quality business with great potential for growth, both organically and through acquisitions. Carlyle shares the management team's vision for growth and international expansion, and we believe our partnership will strengthen the business."
Commenting on the Offer, Zeina Bain, Managing Director, Carlyle Europe Partners, said:
"We are excited about working with management to realise the group's growth potential and continuing its success internationally through leveraging Carlyle's experience and global 'OneCarlyle' network."
Commenting on the Offer, David Thorpe, Non-Executive Chairman of Innovation, said:
"The group has achieved much and created significant value since the management team, led by Andy Roberts, took over the leadership of the business in 2009. Carlyle's offer represents a compelling opportunity for Innovation's shareholders to immediately and fully realise the value from their investment, in cash and at a premium. We also believe that Carlyle brings a commitment and vision to the ongoing investment requirements of the business, providing Innovation with enhanced financial and operational flexibility as the group seeks to execute its strategy in the longer-term. We believe this also makes the transaction compelling for our non-investor stakeholders as well. As a consequence, the Board believes that this transaction is in the best interests of all our stakeholders and unanimously recommends that shareholders vote in favour of the resolutions relating to this Offer."
This summary should be read in conjunction with the full text of this Announcement. The Offer shall be subject to the Conditions and further terms set out in Appendix I to this Announcement and to the full terms and conditions which shall be set out in the Scheme Document. Appendix II to this Announcement contains the sources of information and bases of calculations of certain information contained in this Announcement, Appendix III contains a summary of the irrevocable undertakings and letters of intent received in relation to this Offer and Appendix IV contains definitions of certain expressions used in this summary and in this Announcement.