TIDMMSS
RNS Number : 4146S
Managed Support Services PLC
18 November 2011
Managed Support Services plc
("MSS" or the "Company")
Proposed disposal of the Building Services Division
Proposed New Investing Policy
and
Notice of General Meeting
The Board of MSS today announces that the Company has agreed,
conditionally upon the approval of shareholders in General Meeting,
to dispose of the entire issued share capital of MSS Facilities
Management (comprising the Building Services Division, (the
"Division")) to Initial Facilities Management Limited for a
consideration of up to GBP6.5 million (subject to a net asset
adjustment at completion).
Further details of the Disposal, including details of the
Consideration are set out below under the heading "Principal Terms
of the Disposal".
Following Completion, the Group will have no meaningful trading
activities. As a result, the Disposal will constitute a fundamental
change of business of the Company. Under Rule 15 of the AIM Rules,
this change requires shareholder approval and, in accordance with
the AIM Rules and the Act, the Company is required to send a
circular (the "Circular") to Shareholders setting out the reasons
for, and the principal terms of, the Disposal.
The Circular also provides details of the proposed Investing
Policy which the Company intends to adopt. The Disposal and the
adoption of the Investing Policy are conditional on the approval of
shareholders at a General Meeting to be held on 5 December 2011 at
which the appropriate Resolutions will be proposed.
The Circular containing details of the Disposal is being posted
to Shareholders today and will be available on the Company's
website: www.managedsupportservicesplc.com.
Background to and reasons for the Disposal
Following material trading losses in 2007 and 2008, that led to
the appointment of a new management team, the Group undertook a
significant restructuring and a reduction in operations. The
commercial activities remaining, following these management
actions, were in the building services markets. It was therefore
decided to expand these residual activities by acquisition in order
to create a nationwide supplier of building services, ideally with
sufficient market scale to appeal to larger customers than the
Group enjoyed at the time.
In pursuit of this policy, the Group undertook two principal
acquisitions to increase the Group's building services activities,
being the acquisitions of Status and ECS, for a total net cost of
GBP6.1m.
The businesses acquired by the Group and the small existing
operations were consolidated into two primary trading units based
in Manchester and Wembley during the current year to form the
Division. The Division also enjoyed considerable new business
success gaining larger corporate customers during 2010 and
2011.
However, whilst the Division has been profitable on a
stand-alone basis, before Group costs, the Board believes the
Division has made insufficient progress particularly in current
markets, in creating a building services division of scale. The
Board therefore decided that the prospects for the Division would
be realised more rapidly if the Division became part of a larger
trading group.
Accordingly, following the receipt of unsolicited approaches,
the Board circulated financial information on the Division to a
number of potential offerors and subsequently agreed terms with the
Purchaser as set out below.
Investing Company Status, Proposed Investing Policy
In view of the inevitable delays required to satisfy the Group's
outstanding liabilities after completion and the warranty periods
arising from previous disposals, the Board will not be in a
position to distribute immediately the ultimate net proceeds
remaining within the Company.
The Board therefore believes it is in Shareholders' interests
during this interim period to examine possible investment
opportunities for reinvestment and development, whilst the process
of satisfying residual contractual liabilities continues and the
warranty claim periods elapse. This will also allow the Ordinary
Shares to remain trading on AIM.
Proposed Investing Policy
Following Completion, and the passing of the Resolutions, under
Rule 15 of the AIM Rules, the Company will become an Investing
Company with no material trading activities.
The Board is therefore seeking shareholder permission for the
Investing Policy set out below.
Shareholders should be aware that, under the terms of the
Disposal, the Group will not be able to compete with any of the
activities within the Division being sold under the proposed
Disposal. However, save for this restriction, the Board is seeking
permission from shareholders to examine potential opportunities in
the broadly based Support Services sector, consistent with the
previous experience of the Board.
The Board has experience of operating in a broad range of
Support Services markets including the provision of compliance
services, building services, software and billing management and an
extensive range of business to business services. In considering
investment opportunities, the Board believes it would be helpful to
take advantage of the previous commercial experience of Board
members.
The Board was also able to review a wide range of Support
Services opportunities over the last two years as the Group's
Compliance Division was built up, prior to its sale in August
2011.
In the event that such an opportunity is identified, the Board
believes that the potential acquisition or acquisitions will be
exclusively based in the United Kingdom. It would be the intention
that the initial financing would come from the residual net
proceeds within the Group. If a larger but attractive acquisition
was identified and the transaction received in principle support
from shareholders, third party financing or an equity fundraising
could be considered.
In accordance with AIM Rule 15, the Investing Policy must be
approved by Shareholders in a general meeting and the Company must
implement the Investing Policy or make an acquisition or
acquisitions constituting a reverse takeover under Rule 14 of the
AIM Rules within 12 months of the Company becoming an Investing
Company.
Failure to do so will result in the suspension of the Ordinary
Shares on AIM pursuant to AIM Rule 40. If, following suspension of
the Ordinary Shares, they have not been re-admitted to trading on
AIM within six months, the admission of the Ordinary Shares to
trading on AIM will be cancelled. The Directors will consider
whether they should convene a general meeting of the shareholders
to consider whether to continue seeking investment opportunities or
to wind up the Company and distribute any surplus cash back to
shareholders. To complete this process, any liquidation will need
to allow time for the settlement of all creditors and inter alia,
agreement of the Group's tax computations with HMRC.
The assessment of whether or not the Investing Policy has been
implemented must be made to the satisfaction of AIM.
Proposed Changes to the Board
It is proposed that Jamie Reynolds, the Group's Chief Operating
Officer resign from the Board at Completion. The Group has also
taken steps to reduce central costs in order to minimise
expenditure until either an acquisition is completed or it is
agreed to distribute the cash assets of the Group to
shareholders.
Principal terms of the Disposal
Prior to the Disposal, the trading activities of the Division
were transferred to MSS Facilities Management, a relatively
recently formed trading subsidiary on the terms of the Business
Sale Agreement. MSS Facilities Management now owns all of the
building services activities of the Group.
Pursuant to the Sale Agreement between the Company and the
Purchaser, the Company has conditionally agreed, inter alia,
following shareholder approval, to sell the entire share capital of
MSS Facilities Management to the Purchaser.
The total consideration receivable by MSSBS in respect of the
Disposal of MSS Facilities Management and the Business Sale
Agreement is a maximum amount of GBP6.5 million in cash, payable as
follows:
-- Cash at completion of GBP4 million, being consideration for
the sale of the issued share capital of
MSS Facilities Management Limited for GBP1, together with the
repayment of an amount of GBP3,999,999 owed by MSS Facilities
Management Limited to MSSBS, which represented part of the
consideration receivable by MSSBS under the Business Sale
Agreement. The level of cash at Completion will be reduced pro rata
to the extent that total novations do not exceed GBP8.4 million at
that date. Reductions arising from this adjustment will instead be
paid three months after Completion, as part of the further
consideration, if satisfactory novation is received by that
date.
-- A further consideration payment of up to GBP1.5 million,
which is dependent upon the satisfactory
novation of customer contracts to MSS Facilities Management in
respect of the Building Services contracted customer base. In the
event that contracts with a value of not less than GBP10.5 million
(by way of annualised contract value) are novated satisfactorily,
the full amount of GBP1.5 million will become payable. In the event
that contracts with a value of less than GBP8.4 million (by way of
annualised contract value) are novated satisfactorily, no further
payment will be made. A sliding scale of additional consideration
will operate where the value of contracts novated to MSS Facilities
Management is between GBP8.4 million and GBP10.5 million. The
agreements relating to the Disposal provide that the novations are
required to be satisfactorily established within 3 months following
Completion.
-- The Sale Agreement provides for retentions by the Purchaser
in respect of the consideration totalling GBP1 million, of which up
to GBP0.5 million will be released following satisfactory agreement
of the completion balance sheet (expected to be within three months
of Completion) and GBP0.5 million is to be retained for a maximum
of six months by the Purchaser as a retention in respect of
potential general warranty and indemnity claims.
-- The Sale Agreement includes normal restrictive covenants,
together with customary warranties and indemnities which have been
provided in favour of the Purchaser by the vendor Group, MSSBS and
the Company. The Purchaser is entitled to terminate the Disposal
prior to Completion under certain circumstances
Details relating to the Division
The Division has an approximate current annual turnover of GBP22
million and operates from two principal trading sites, located in
central Manchester and Wembley, North West London.
The Division employs approximately 200 people with the senior
management team being led by Jamie Reynolds, a Director of the
Company, who will be resigning at Completion. He will become a full
time employee of an affiliate of the Purchaser. The Division, now
operating within the legal entity of MSS Facilities Management,
provides a broad range of Mechanical and Electrical engineering
services to occupiers of corporate real estate. The services are
either provided directly to owner occupiers or indirectly via
established managing agents operating on behalf of occupiers.
Typically, the Division provides the full range of management
and maintenance services for the clients' building in order to
maintain the operation of that building, including sub contracting
services not available in-house and services delivered in a
partnership structure such as cleaning, guarding and ancillary non
engineering services.
In addition, the Division has an important in-house capacity to
deliver major, air conditioning related projects works, exclusively
to existing customers. These works are an important addition to the
offering for the Group and the specialist engineering skills
required to deliver major projects are frequently used by existing
customers.
The Division comprises primarily the previous acquisitions of
Status in December 2009 and ECS which was acquired in September
2010. The balance of the Division is made up of the small residual
amounts of turnover retained within the Group following the
restructuring conducted in 2008/09.
In the year ended 31 March 2011, the Division had sales of
GBP21.4 million. Operating profit was GBP1.6 million. Net assets at
completion are estimated to be approximately GBP2.5 million.
Use of Proceeds
The proceeds arising from the Disposal will be used to repay the
remaining liabilities of the Group including third party bank
indebtedness. The Board will also take steps to redeem the
outstanding Loan Notes with a nominal value of GBP500,000. The
Board estimates that the repayment of bank indebtedness, the
redemption of the Loan Notes, transaction fees and payments arising
in relation to Completion will amount to approximately GBP3
million.
General Meeting
Set out at the end of the circular to shareholders is a notice
convening the General Meeting to be held at the offices of Osborne
Clarke, One London Wall, London EC2Y 5EB at 10.00 a.m. on 5
December 2011 for the purposes of considering and, if thought fit,
passing the following Resolutions:
Resolution 1, which will be proposed as an ordinary resolution,
is to approve the Disposal.
Resolution 2, which will also be proposed as an ordinary
resolution, will be for the approval of the new Investing
Policy.
Directors' Recommendation
The Directors consider the Disposal and the adoption of the
proposed Investing Policy to be in the best interests of the
Company and the Shareholders as a whole. Accordingly, the Directors
unanimously recommend Shareholders to vote in favour of the
Resolutions to be proposed at the General Meeting as they intend to
do so in respect of their own beneficial holdings amounting, in
aggregate, to 4,252,536 Ordinary Shares, representing approximately
2 per cent. of the existing issued share capital of the
Company.
Definitions
The following definitions apply throughout the circular to
shareholders, unless the context requires otherwise:
"Act" or "Companies Act" the Companies Act 2006
"AIM" the AIM Market operated by the London
Stock Exchange
"AIM Rules" the AIM rules for companies published
by the London Stock Exchange from time
to time
"Board" or "Directors" the directors of the Company
"Business Sale Agreement" he agreement dated 18 November 2011
between MSSBS, the Company and MSS
Facilities Management Limited relating
to the sale of the business and assets
of MSSBS to MSS Facilities Management
"Cenkos Securities" Cenkos Securities plc
"Completion" Completion of the Disposal
"Company" or "MSS" Managed Support Services plc
"the Disposal" The sale of MSS Facilities Management
Limited comprising the Building Services
Division of the Group on the terms
of the Sale Agreement
"Division" or "the Building The building services activities of
Services Division" the Group, now trading as MSS Facilities
Management
"ECS" Environmental Control Services Limited,
acquired by the Group in September
2010
"Form of Proxy" the Form of Proxy for use at the General
Meeting
"FSA" The Financial Services Authority of
the United Kingdom
"General Meeting" the general meeting of the Company
to be held at
10.00 a.m. on 5 December 2011
"Group" the Company and its subsidiaries
"Loan Notes" the outstanding convertible Loan Notes
with a nominal value of GBP500,000
issued in March 2011 by the Company
"London Stock Exchange" London Stock Exchange plc
"MSSBS" MSS Building Services Limited
"MSS Facilities Management" MSS Facilities Management Limited
"Notice of General Meeting" the notice convening the General Meeting
"Ordinary Shares" the 209,802,191 Ordinary Shares of
the Company in issue as
at the date of this announcement, all
of which are admitted to AIM
"Investing Policy" The Investing Policy to be approved
by Shareholders
"the Purchaser" Initial Facilities Management Limited
"Resolutions" the resolutions set out in the Notice
of General Meeting
"Sale Agreement" The agreement dated 18 November 2011
between MSSBS and the Purchaser relating
to the sale to the Purchaser of the
entire issued share capital of MSS
Facilities Management
"Shareholders" holders of Ordinary Shares in the Company
"Status" Status Building Services and subsidiaries
acquired by the
Group in December 2009.
Expected Timetable of principal events
Date of this announcement 18 November 2011
Latest time for receipt of Forms 10a. m. on 3 December 2011
of Proxy
General Meeting 10 a. m. on 5 December 2011
Expected date of Completion of the 5 December 2011
Disposal
FOR FURTHER INFORMATION, PLEASE CONTACT:
Managed Support Services plc:
Simon Beart, Chief Executive 007710444370
Piers Wilson, Finance Director 001483735703
Cenkos Securities plc:
Nick Wells / Stephen Keys 002073978900
Buchanan:
Richard Darby / Nicola Cronk 002074665000
This information is provided by RNS
The company news service from the London Stock Exchange
END
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