TIDMCLLN
RNS Number : 1898Z
Carillion PLC
13 December 2017
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN, INTO OR FROM
ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR IMMEDIATE
RELEASE
13(th) December 2017
Carillion plc ("Carillion" or the "Group")
Update on proposed disposal of UK healthcare facilities
management business
On 24(th) October 2017, Carillion announced that it had signed
heads of terms with Serco Group plc ("Serco") for the disposal of a
large part of its UK healthcare facilities management business (the
"Disposal"). Further to this, the Board of Carillion today
announces that it has entered into a definitive Business Purchase
Agreement (the "BPA") with Serco.
Highlights
-- A portfolio of UK healthcare facilities management contracts
and associated ancillary contracts and assets (the "FM
Arrangements") which relate to fifteen sites will be transferred to
Serco on a phased basis pursuant to the Disposal
-- As the Disposal is a Class 1 transaction for Carillion under
the UK Listing Rules, the Disposal is conditional upon the approval
of Carillion's shareholders. The transfers of the FM Arrangements
are also conditional on, among other things, receipt of all
required third party consents
-- An agreed proportion of the total consideration of
approximately GBP47.7 million (subject to a limited working capital
adjustment, and a limited adjustment in the event that the FM
Arrangements are transferred ahead of or behind an assumed
schedule) will be payable in instalments on the transfer of each FM
arrangement to Serco, with the aim of receiving the bulk of the
proceeds in the second and third quarters of 2018
-- After taking account of fees, costs and taxes, the net
Disposal proceeds are expected to be GBP41.4 million and, when
received, will be applied in prepayment and cancellation of an
equivalent amount of the Group's GBP140 million committed credit
facilities (the "New Money Facilities") announced on 24(th) October
2017
-- The Disposal forms part of the Group's GBP300 million
non-core disposals target announced as part of its strategic review
in order to reduce net debt and refocus the Group on its core
strengths and markets
Keith Cochrane, Carillion's Interim Chief Executive, said:
"I am pleased we have been able to successfully conclude this
transaction which will contribute to our efforts to reduce net
debt."
Lazard & Co., Limited is acting as lead financial adviser
and sponsor to Carillion in relation to the Disposal.
Enquiries:
Investors/ Analysts:
Carillion plc
Kellie McAvoy, Head of Investor Relations +44 (0) 1902
906333
John Denning, Director Group Corporate Affairs
Media:
Teneo Blue Rubicon +44 (0) 207 420 3197
Charles Armitstead / Haya Herbert-Burns
This and other Carillion news releases can be found at
www.Carillionplc.com
Cautionary statement
This announcement may contain indications of likely future
developments and other forward-looking statements that are subject
to risk factors associated with, amongst other things, the economic
and business circumstances occurring from time to time in the
countries, sectors and business segments in which the Group
operates. These and other factors could adversely affect the
Group's results, strategy and prospects. Forward-looking statements
involve risks, uncertainties and assumptions. They relate to events
and/or depend on circumstances in the future which could cause
actual results and outcomes to differ materially from those
currently anticipated. No obligation is assumed to update any
forward-looking statements, whether as a result of new information,
future events or otherwise.
1. Introduction
The Board of Carillion today announces that it has entered into
a definitive Business Purchase Agreement for the disposal of a
large part of the Group's UK healthcare facilities management
business to Serco for a total cash consideration of approximately
GBP47.7 million, subject to the limited adjustments referred to
below. The consideration will be payable in instalments in agreed
proportions upon the transfer of each FM Arrangement to Serco.
The Disposal is a Class 1 transaction for Carillion under the UK
Listing Rules and is therefore conditional, amongst other things,
upon the approval of Carillion's shareholders.
A circular containing further details of the Disposal and the
notice convening a general meeting will be posted to shareholders
of Carillion in due course (the "Circular"). It is currently
intended for the Circular to be posted in the first quarter of
2018.
2. Background to and reasons for the Disposal
On 10(th) July 2017 Carillion announced that it was undertaking
a comprehensive review of its business and capital structure in
order to evaluate a range of options to optimise value for its
shareholders. Alongside this, Carillion announced further actions
to reduce net borrowing, including an intention to raise up to
GBP125 million from non-core disposals in the twelve months to July
2018.
On 29(th) September 2017 Carillion provided an update on its
strategic and operational review, outlining the further actions
being taken to strengthen the business and reduce net debt. As part
of this update, the Group raised its target for non-core disposals
to over GBP300 million by the end of 2018 and the Board announced
that it was in discussions regarding the sale of the UK healthcare
business.
On 24(th) October 2017 Carillion updated the market on the
signing of heads of terms with Serco for the disposal of a large
part of its UK healthcare facilities management business for
GBP50.1 million, subject to a limited working capital adjustment.
The consideration has been revised to approximately GBP47.7 million
(subject to the limited adjustments referred to below) as a result
of further discussions and an agreement between Carillion and Serco
to exclude the contracts and assets relating to one of the sites at
which Carillion provides healthcare facilities management services
from the Disposal.
Carillion entered the public healthcare market two decades ago
in response to the Public Private Partnership ("PPP") acute
hospital redevelopment programme. Since entering this market,
Carillion has offered an integrated proposition that encompasses
equity investment, construction and the provision of both hard and
soft facilities management services. The Group's strategy in the
healthcare segment has not typically included pursuing
traditionally outsourced facilities management contracts.
As a consequence of the reduced volume of primary PPP
transactions in the sector and the scope of facilities management
services becoming more limited to hard facilities management
services, the Board determined that the facilities management
proposition of Carillion's hospitals contracts no longer forms part
of the Group's core strategy. Accordingly, and consistent with the
Group's commitment to reducing net debt from non-core disposals,
the Board decided that Carillion should seek to sell the majority
of its portfolio of UK healthcare facilities management
contracts.
Subject to identifying an appropriate purchaser prepared to
offer a satisfactory purchase price, Carillion intends to seek to
dispose of the remaining contracts in its UK healthcare facilities
management portfolio during 2018.
3. Principal terms and conditions of the Disposal
Carillion is proposing to sell, through certain of its
wholly-owned subsidiaries, a portfolio of FM Arrangements to a
wholly-owned subsidiary of Serco (the "Purchaser"), pursuant to the
terms of the BPA and associated ancillary agreements. The FM
Arrangements, which relate to fifteen sites, will be novated to the
Purchaser on an FM Arrangement-by-FM Arrangement basis.
As the Disposal is a Class 1 transaction for Carillion under the
UK Listing Rules, the Disposal is conditional upon the approval of
Carillion's shareholders. In respect of each FM Arrangement,
completion is also conditional on, among other things, receipt or
waiver of all third party consents required to transfer that
particular FM Arrangement.
The total consideration for the Disposal is approximately
GBP47.7 million (subject to a limited working capital adjustment
and a limited adjustment in the event that the FM Arrangements are
transferred ahead of or behind an assumed schedule). The
consideration attributable to each FM Arrangement will be paid to
Carillion upon the successful transfer of the relevant FM
Arrangement.
The Purchaser has rights to terminate the BPA if Carillion has
not posted the Circular to the shareholders of Carillion, such
right to terminate being exercisable within a period of 2 business
days of each of 28(th) February 2018, 30(th) March 2018 or 27(th)
April 2018 only. If the Circular is posted to the shareholders of
Carillion, and the shareholders do not approve the terms of the
Disposal, the BPA will terminate automatically. If the Purchaser
terminates the BPA or the BPA is terminated automatically in the
circumstances described above, a termination fee of GBP752,945,
which is equal to 1% of the market capitalisation of Carillion as
at close of business on the date immediately before the date of the
BPA (inclusive of VAT), will become payable by the Sellers to the
Purchaser.
In addition, the Purchaser has certain rights to terminate the
BPA in respect of a particular FM Arrangement in the event that a
material breach (as described in the BPA) in relation to that FM
Arrangement has occurred.
The first FM Arrangement is expected to transfer to Serco in Q2
2018. Unless otherwise agreed between Carillion and Serco, any FM
Arrangements that have not been transferred to Serco by 13(th)
December 2018, will not transfer to Serco and Carillion will not
receive the consideration allocated to those FM Arrangements,
unless otherwise agreed.
4. Information on the UK healthcare facilities management business being disposed
Carillion is a leading provider of healthcare facilities
management services to the National Health Service, having
developed a significant presence in the UK healthcare market over
the previous fifteen years. Carillion provides a wide range of
services essential to creating and managing healthcare facilities
and infrastructure, including lifetime maintenance, integrated
facilities management, and energy efficiency.
The FM Arrangements comprise facilities management contracts and
their associated ancillary agreements, which relate to fifteen
sites. Typically, each site is covered by a principal FM agreement,
pursuant to which a wholly-owned subsidiary of Carillion provides
facilities management services to the site, as well as certain
ancillary agreements such as supply agreements or secondary
services agreements. The FM Arrangements include both the FM
agreement and any associated ancillary agreements required for the
provision of healthcare facilities management services to each
site. In some instances, one FM Arrangement covers multiple
sites.
5. Use of Proceeds and financial effects of the Disposal
The net cash proceeds arising from the Disposal are expected to
be GBP41.4 million after taking account of fees, costs and taxes of
approximately GBP6.3 million. The Disposal proceeds will also be
subject to a limited working capital adjustment and a limited
adjustment in the event that the FM Arrangements are transferred
ahead of or behind an assumed schedule. The net cash proceeds will
be applied in prepayment and cancellation of an equivalent amount
of the New Money Facilities announced on 24(th) October 2017.
In the financial year ended 31(st) December 2016, the FM
Arrangements contributed operating profit of GBP11.6 million to the
Group. As at 30(th) June 2017, the FM Arrangements had total assets
of GBP16.4 million and total liabilities of GBP17.1 million.
Lazard & Co., Limited (" Lazard "), which is authorised and
regulated by the Financial Conduct Authority, is acting for
Carillion and for no one else in connection with the Disposal and
will not be responsible to anyone other than Carillion for
providing the protections afforded to clients of Lazard or for
providing advice in relation to the Disposal, the contents of this
announcement or any matter referred to in this announcement.
Neither Lazard nor any of its affiliates owes or accepts any duty,
liability or responsibility whatsoever (whether direct or indirect,
whether in contract, in tort, under statute or otherwise) to any
person who is not a client of Lazard in connection with this
announcement, any statement contained herein, the Disposal or
otherwise.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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