Agreement to sell Education Software Solutions

LEI no. CMIGEWPLHL4M7ZV0IZ88

This contains inside information

14 December 2020

Capita plc

Agreement to sell Education Software Solutions 

Capita plc (‘Capita’) today announces that it has agreed to sell its Education Software Solutions (‘ESS’) business to Tiger UK Bidco Limited, a newly formed company established by funds advised by Montagu Private Equity (‘Montagu’), in a deal that values ESS at up to £400m.

ESS is a standalone provider of management information system (MIS) and related software for the education sector.

Part of the consideration agreed is for Montagu to assume liabilities such as working capital and debt worth £57m. Montagu will pay £298m on completion, expected early in 2021.

Montagu has also agreed to invest in ParentPay (Holdings) Ltd (‘ParentPay’), a provider of education technology. Following successful completion of both investments, ESS will become part of the ParentPay Group.

An additional sum of £45m will subsequently be payable to Capita once Montagu’s agreed investment in ParentPay has achieved regulatory approvals.

The total enterprise value of the ESS disposal is up to £400m.

Proceeds from the transaction will be used to strengthen Capita’s balance sheet and £50m will be used to replace the remaining value of an asset-backed financing agreement, relating to intellectual property developed by ESS, which was entered into in 2012 with the Capita pension scheme.

The sale of ESS is a Class 1 transaction and is conditional on the approval of Capita’s shareholders, with a circular to be posted in due course, including a timetable for a General Meeting, expected to be held in January.

The gross assets of ESS and the reported profit before tax for the year to 31 December 2019 were £96.2m and £52.7m respectively. 

The ESS senior management team will be transferring with the business.

As previously announced, the process to sell ESS followed a strategic review of the Software division, after which we decided to focus on a portfolio of core capabilities better aligned with and which support our consulting, transformation and digital BPO services, and the vertical markets of the rest of Capita.

We will retain software assets that are catalysts for growing our other services, but plan to dispose of standalone software products that have little overlap or cross-sell with the rest of Capita, such as ESS.

Further disposals of other standalone businesses across Capita will be announced in due course as we continue to simplify and strengthen the business.

Jon Lewis, Capita’s Chief Executive Officer, said: “We are pleased to have agreed the sale of ESS to Montagu Private Equity after a comprehensive auction process.

“ESS is a business that Capita originally bought for £10m so we have created significant value over 25 years of ownership.

“We announced our intention to sell ESS earlier this year, as part of our strategy to simplify and strengthen Capita.

“The sale will help us simplify by disposing of a standalone business, while the proceeds will help strengthen Capita’s balance sheet, as we build towards a more focused, sustainable business for the long term.

“At the same time, our colleagues at ESS will benefit from a new owner with the focus and means to support further investment and growth, as the business transitions to its next-generation cloud-native software.”

Capita is being advised on the transaction by Goldman Sachs International, and Barclays Bank PLC, acting through its Investment Bank, is acting as sponsor.
 

For more information please contact:

Capita investor enquiries
Stuart Morgan
Director of Investor Relations
Tel: [phone]
Email: [e-mail]

Capita media enquiries
Capita external communications
Tel: [phone]
Email: [e-mail] 

Montagu
Rob White, Mikaela Murekian, Catriona Crellin 
Greenbrook Communications
[e-mail]
[phone]

Capita is a consulting, transformation and digital services business. Every day our 61,000 colleagues help millions of people, by delivering innovative solutions to transform and simplify the connections between businesses and customers, governments and citizens. We partner with clients and provide the insight and cutting-edge technologies that give time back, allowing them to focus on what they do best and making people’s lives easier and simpler. We operate in the UK, Europe, India and South Africa – and across six divisions: Customer Management; Government Services; People Solutions; Software; Specialist Services; and Technology Solutions. Capita is quoted on the London Stock Exchange (CPI.L). Further information can be found at: http://www.capita.com

Montagu is one of Europe’s leading private equity firms and has been investing in businesses for over fifty years. Montagu’s investment strategy is focused on partnership with management in buyouts of high-quality companies operating in stable and growing sectors, providing products and services that their customers would badly miss. It develops a shared strategic vision with management and then provides the necessary financial, strategic and operational resources to help realise that vision and support growth. Montagu partners with companies with enterprise values between €200m and €1bn and has €8bn assets under management. For additional information on Montagu, visit www.montagu.com

Additional information on ESS

ESS is a standalone UK-based provider of market-leading management information systems for educational institutions. The business aims to improve educational outcomes by providing software technology, apps and data and analytics solutions to support teachers, administrators, students and parents in their day-to-day administrative activities and communications, allowing them to dedicate more time and resources to focus on learning and improved educational outcomes.

ESS’s primary information management system, ‘SIMS’, supports over 19,000 schools in the UK and internationally with, amongst other things, completion of statutory and school critical processes. Further and higher education institutions in the UK rely on ESS’s ‘UNIT-e’ software technology to manage their student and staff records and to optimise the management of their institutions’ data. ESS also offers, amongst other services, cost-effective solutions for cataloguing school and public libraries, finance management, payments and access to an ecosystem of over 150 application programming interface partners.

The ESS senior management team comprises: Andy Bennett, Managing Director; Rajul Modi, Finance Director; Simon Walters, Director of Services; Robin Lipscomb, Director of Development; Bob Yorke, Sales Director; and Susi Mackeown, Product Director. They are key individuals to ESS and will be transferring with the business.

Important Notices

Barclays Bank PLC, acting through its investment bank ("Barclays"), which is authorised by the Prudential Regulation Authority (“PRA”) and regulated in the United Kingdom by the Financial Conduct Authority and the PRA, is acting exclusively for Capita and no one else in connection with the matters set out in this announcement and will not be responsible to anyone other than Capita for providing the protections afforded to clients of Barclays nor for providing advice in relation to the matters referred to in this announcement. 

Goldman Sachs International, which is authorised by the PRA and regulated by the FCA and the PRA in the United Kingdom, is acting exclusively for Capita and no one else in connection with the matters referred to in this announcement and will not be responsible to anyone other than Capita for providing the protections afforded to clients of Goldman Sachs International, or for providing advice in relation to the matters referred to in this announcement.

ENDS