Issue of Equity

RNS Number : 9030B

Capita PLC

24 April 2012

 



NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA OR JAPAN

Capita plc

("Capita" or "the Company")

Proposed Placing

Capita plc proposed placing of approximately 40 million new ordinary shares

Capita plc the UK's leading business process outsourcing ("BPO") and professional services company today announces that it is placing approximately 40 million new ordinary shares (the "Placing Shares") representing approximately 6.5 per cent of the Company's existing issued share capital (the "Placing").

In addition, Capita is today issuing its interim management statement covering the three months to 31 March 2011 and progress to date.

Background to and rationale for the Placing

Against an encouraging operating backdrop Capita sees significant growth prospects, specifically:

·           Organic growth through continued contract wins within both central and local government as well as the private sector.  We remain highly confident of the contract growth opportunities with £900 million of major sales opportunities secured in the first 16 weeks of the year; and

·           Growth driven by regularly acquiring small to medium sized complementary businesses to enhance capabilities and expand our market reach.  We have spent a total of £1.3 billion on buying businesses since 2005, including £642 million in the 2 years to 31 December 2011 and £91m to date in 2012, all of which have been funded without recourse to shareholders. We estimate that acquisitions made in the last four years have delivered a post tax return on capital of approximately 14%.

·           The Board had expected acquisition activity to reduce during 2012.  However, in assessing the pipeline of potential opportunities since the preliminary results, the Board has concluded that the current acquisition environment continues to offer a rare opportunity to broaden the business, consolidating Capita's position as the industry leader.  Having spent £91 million so far this year, Capita believes that it could spend at least as much again during 2012 on attractive bolt-on acquisitions.  The Board remains very confident that the Company can continue to deliver the superior returns from these acquisitions that it has achieved in recent years.

Such strong growth, both organically and through bolt-on acquisitions requires capital.  As explained at the time of the preliminary results, some new contracts can initially be cash consuming before delivering the significant cash returns and profits across the life of the contract.

Capita has £1,176 million of private placement debt of which £123 million matures between now and August 2015, with the remainder gradually maturing until 2021.  In February 2012, the Company raised a further £285 million of bank debt under a two year term loan facility to further increase liquidity headroom.

It has always been a target of the Company to maintain a capital structure, with relatively low gearing and the Board is also conscious that its clients value Capita partly because of its financial strength.  Capita's aim continues to be to keep the ratio of net debt to EBITDA in the range of 2-2.5 over the long term.  In its preliminary results statement in February 2012, Capita reported that its net debt to EBITDA ratio had increased to 2.5 as a result of the high level of acquisition opportunities in 2011 and higher working capital requirements.

In order to pursue the increased pipeline of value enhancing bolt-on acquisitions and allow the Company to maintain a prudent yet efficient balance sheet, the Board considers it appropriate to raise fresh equity.

To put the issue of equity in context, since 2003, Capita has bought back 113 million shares for a cash cost of around £560 million at an average price of 499p per share.  Over this period, Capita has delivered £1.4 billion to shareholders through dividends, share buybacks and a special dividend.  The company has also grown the ordinary dividend by a compound growth of 22% since 2003 and remains committed to a progressive dividend.  Furthermore the Company currently expects that, from time to time, surplus capital will continue to be returned to shareholders, as it has been in the past.

Paul Pindar, Chief Executive commented:

"We are well placed to achieve renewed organic growth in line with expectations in 2012 and anticipate further strong progress in 2013.  Alongside this renewed organic growth, the Board believes that it is sensible to issue this fresh equity to enable us to pursue the attractive opportunities in our increased pipeline of acquisitions, whilst maintaining our efficient balance sheet.  We have a strong track record of generating returns from our acquisitions and can clearly demonstrate how they play a key role in opening up new markets and help us to secure major new contracts."

Proposed Placing

The Placing will be conducted in accordance with the terms and conditions set out in the Appendix.  The Placing will be effected by way of an accelerated bookbuilding to be managed by Citi and Deutsche Bank AG, London Branch ("Deutsche Bank" and together with Citi the "Joint Bookrunners").  The book will open with immediate effect.  The timing of the closing of the book, pricing and allocations is at the absolute discretion of the Joint Bookrunners.  The price at which the Placing Shares are to be placed (the "Placing Price") and the number of Placing Shares will be agreed by the Company with the Joint Bookrunners at the close of the accelerated bookbuilding period.  Details of the Placing Price and the number of Placing Shares will be announced as soon as practicable after the close of the bookbuilding process.  The Placing Shares will, when issued, be credited as fully paid and will rank equally in all respects with the existing ordinary shares of the Company ("Ordinary Shares"), including the right to receive all dividends and other distributions declared, made or paid in respect of such shares after the date of issue of the Placing Shares.

The Placing is conditional upon, amongst other things, admission of the Placing Shares to the Official List maintained by the UK Listing Authority and to trading by the London Stock Exchange on its main market for listed securities, becoming effective ("Admission") and the placing agreement between the Company and the Joint Bookrunners not being terminated prior to Admission.

Settlement for the Placing Shares as well as Admission is expected to take place on 27 April 2012.

Paul Pindar, Chief Executive of the Company is selling 400,000 Ordinary Shares alongside the Placing to satisfy a personal settlement.  He will have a residual holding of around 1.3m shares following the sale and has no intention to sell any further shares in the near term.

Persons who are invited to and who choose to participate in the Placing, by making an oral or written offer to acquire Placing Shares, will be deemed to have read and understood this announcement (including the Appendix) in its entirety and to be making such offer on the terms and conditions, and to be providing the representations, warranties, acknowledgements and undertakings contained in the Appendix.

Enquiries

Capita plc	020 7799 1525
Paul Pindar
Shona Nichols	020 7654 2219
Citi	0207 986 4000
Charlie Lytle
Patrick Evans
Ronan Veale
Deutsche Bank AG, London Branch	020 7545 8000
Charles Bryant
Martin Pengelley
Jonathan Berger
FTI Consulting	020 7269 7191
Nick Hasell

About Capita

Capita plc is the UK's leading provider of BPO and integrated professional support service solutions.  With 46,500 people at more than 350 sites, including 68 specialist business centres across the UK, Europe and India, the Group uses its expertise, infrastructure and scale benefits to transform its clients' services, driving down costs and adding value.  Capita is quoted on the London Stock Exchange (CPI.L), and is a constituent of the FTSE 100 with 2011 turnover of £2.9 billion and profit before tax of £385 million.  Further information on Capita plc can be found at: www.capita.co.uk.

This announcement is for information only and, save as expressly set out herein, does not constitute an offer or invitation to underwrite, subscribe for or otherwise acquire or dispose of any securities or investment advice in any jurisdiction in which such an offer or solicitation is unlawful, including without limitation the United Kingdom, Canada, South Africa or Japan.  Persons needing advice should consult an independent financial adviser.

This announcement has been issued by and is the sole responsibility of Capita.  No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by the Joint Bookrunners or by any of its affiliates or agents as to or in relation to, the accuracy or completeness of this announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed.

Citi is authorised and regulated in the United Kingdom by the Financial Services Authority ("FSA").  Deutsche Bank is authorised under German Banking Law (competent authority: BaFin - Federal Financial Supervising Authority) and regulated by the FSA for the conduct of UK business.  The Joint Bookrunners are acting for the Company and for no-one else in relation to the Placing, and will not be responsible to any other person for providing the protections afforded to each of its respective clients nor for providing advice in connection with the Placing.

The distribution of this announcement and the placing of the Placing Shares as set out in this announcement in certain jurisdictions may be restricted by law.  No action has been taken by the Company or the Joint Bookrunners that would permit an offering of the Placing Shares or possession or distribution of this announcement in any jurisdiction where action for that purpose is required.  Persons into whose possession this announcement comes are required by the Company and the Joint Bookrunners to inform themselves about, and to observe, such restrictions.  Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

This announcement is directed only at persons (i) having professional experience in matters relating to investments who fall within the definition of "investment professionals" in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (ii) who are high net worth entities falling within Article 49(2)(a) to (d) of the Order, and other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as "relevant persons"). Any investment activity to which this announcement relates is available only to, and will be engaged in only with, relevant persons. This announcement must not be acted or relied on in the United Kingdom by persons who are not relevant persons.

In member states of the European Economic Area ("EEA"), this announcement is only addressed to and directed at persons who are 'qualified investors' within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC, as amended, to the extent implemented in the relevant member state) (the "Prospectus Directive") ("Qualified Investors").

This announcement is not an offer of securities for sale in the United States.  The Placing Shares may not be offered, sold or transferred, directly or indirectly, within the United States absent registration under the US Securities Act of 1933 (the "Securities Act") or an exemption therefrom.  The Company has not registered and does not intend to register any of the Placing Shares under the US Securities Act.  The Placing Shares will not be sold to the public in the United States.

Subject to certain exceptions, this announcement does not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire securities of the Company in Canada, South Africa or Japan or any jurisdiction in which such an offer or solicitation is unlawful.  No money, securities or other consideration is being solicited and, if sent in response to the information herein, will not be accepted.  There will be no public offer of any securities of the Company.

Neither the content of the Company's website (or any other website) nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

Forward-looking Statements

This announcement contains (or may contain) certain forward-looking statements with respect to certain of the Company's current expectations and projections about future events.  These statements, which sometimes use words such as "aim", "anticipate", "believe", "intend", "plan", "estimate", "expect" and words of similar meaning, reflect beliefs and expectations and involve a number of risks, uncertainties and assumptions that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement.  By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances.  Statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future.  The information contained in this announcement is subject to change without notice and, except as required by applicable law, the Company does not assume any responsibility or obligation to update publicly or review any of the forward-looking statements contained herein.  You should not place undue reliance on forward-looking statements, which speak only as of the date of this announcement.  No statement in this announcement is or is intended to be a profit forecast or to imply that the earnings of the Company for the current or future financial years will necessarily match or exceed the historical or published earnings of the Company.

APPENDIX

Details of the Placing Agreement and of the Placing Shares

Citi, Deutsche Bank AG, London Branch ("Deutsche Bank") (together with Citi the "Joint Bookrunners") and Capita plc ("Capita" or the "Company") have today entered into a Placing Agreement (the "Placing Agreement") under which, on the terms and subject to the conditions set out therein, the Joint Bookrunners have agreed to use reasonable endeavours to procure subscribers ("Placees") for approximately 40 million new Ordinary Shares in the capital of Capita of nominal value 2 ¹/₁₅ pence at a price determined following completion of an accelerated bookbuild process (the "Placing Shares") ("the Bookbuild") (the "Placing").  In accordance with the terms of the Placing Agreement and a subscription and transfer agreement between the Company, Citi and a Jersey incorporated subsidiary of the Company (the "Subscription and Transfer Agreement"), the Joint Bookrunners have agreed, subject to agreement with the Company as to the number and price of the Placing Shares to be placed with Placees, to underwrite the settlement risk in the event that any Placees fail to take up their allocation of the Placing Shares.

The allotment and issue of the Placing Shares will be made by the Company to Placees in consideration for the transfer to the Company of certain shares in a Jersey incorporated subsidiary of the Company by Citi.

Paul Pindar, the Chief Executive of the Company is selling 400,000 Ordinary Shares (the "Sale Shares") which will be sold alongside the placing of the Placing Shares.

Participation in, and principal terms of, the Placing

1.         Participation in the Placing will only be available to persons who may lawfully be, and are, invited to participate by the Joint Bookrunners.  The Joint Bookrunners and their affiliates are entitled to enter bids in the Bookbuild as principals.

2.         The Bookbuild will establish a single price payable to the Joint Bookrunners by all Placees whose bids are successful (the "Placing Price").  The Placing Price and the number of Placing Shares will be agreed between the Joint Bookrunners and the Company following completion of the Bookbuild.  The Sale Shares will be sold for the same value as the Placing Price.  The Placing Price and the number of Placing Shares will be announced on a Regulatory Information Service ("RIS") following the completion of the Bookbuild (the "Pricing Announcement").

3.         To bid in the Bookbuild, prospective Placees should communicate their bid by telephone to their usual sales contact at the relevant Joint Bookrunner.  Each bid should state the number of Placing Shares which the prospective Placee wishes to acquire at either the Placing Price which is ultimately established by the Company and the Joint Bookrunners or at prices up to a price limit specified in its bid.  Bids may be scaled down by the Joint Bookrunners on the basis referred to in paragraph 7 below.  A bid in the Bookbuild will be made on the terms and subject to the conditions in this announcement and will be legally binding on the prospective Placee on behalf of which it is made and except with the Joint Bookrunners' consent will not be capable of variation or revocation after the time at which it is submitted.  Each Placee will have an immediate, separate, irrevocable and binding obligation, owed to the relevant Joint Bookrunners, to pay it (or as it may direct) in cleared funds an amount equal to the product of the Placing Price and the number of Placing Shares such Placee has agreed to acquire and the Company has agreed to allot.  Each Placee's obligations will be owed to the relevant Joint Bookrunner.

4.         The Bookbuild is expected to close no later than 5:00p.m. (GMT) on 24 April 2012 but may be closed earlier or later at the sole discretion of the Joint Bookrunners.  The Company and the Joint Bookrunners reserve the right to reduce or seek to increase the amount to be raised pursuant to the Placing, in their absolute discretion.

5.         Each prospective Placee's allocation will be confirmed to such Placee orally by one of the Joint Bookrunners following the close of the Placing, and a trade confirmation will be dispatched thereafter.  All obligations under the Bookbuild and Placing will be subject to fulfilment of the conditions referred to below under "Conditions of the Placing" and to the Placing not being terminated on the basis referred to below under "Right to terminate under the Placing Agreement".

6.         Subject to paragraphs 4 and 5 above, the Joint Bookrunners may choose to accept bids, either in whole or in part, on the basis of allocations determined at their discretion and may scale down any bids for this purpose on such basis as they may determine.  The Joint Bookrunners may also, notwithstanding paragraphs 4 and 5 above (i) allocate Placing Shares after the time of any initial allocation to any person submitting a bid after that time and (ii) allocate Placing Shares after the Bookbuild has closed to any person submitting a bid after that time.

7.         Irrespective of the time at which a Placee's allocation is confirmed, settlement for all Placing Shares to be acquired pursuant to the Placing will be required to be made at the same time, on the basis explained below under "Registration and Settlement".

8.         To the fullest extent permissible by law, neither of the Joint Bookrunners nor any of their respective affiliates shall have any liability to Placees or purchasers of Sale Shares (or to any other person whether acting on behalf of a Placee or otherwise).  In particular, neither of the Joint Bookrunners nor any of their respective affiliates shall have any liability (including to the extent permissible by law, any fiduciary duties) in respect of the Joint Bookrunners' conduct of the Bookbuild or of such alternative method of effecting the Placing as the Joint Bookrunners and the Company may determine.

Conditions of the Placing

The obligations of the Joint Bookrunners under the Placing Agreement in respect of the Placing Shares are conditional on, inter alia: the publication of certain announcements; the terms of subscription (detailing the number of Placing Shares and the Placing Price) having been executed; the warranties of the Company in the Placing Agreement being true and accurate; Admission and allotment of the Placing Shares.  If any of the conditions are not fulfilled or waived by the Joint Bookrunners the Placing Agreement shall cease and determine.

Lock up

Subject to customary exceptions the Company has agreed to a six month lock-up arrangement beginning on the date of this announcement.

Right to terminate under the Placing Agreement

The Joint Bookrunners are entitled, at any time before Admission, to terminate the Placing Agreement in accordance with the terms of the Placing Agreement in certain circumstances, including a breach of the warranties given to the Joint Bookrunners in the Placing Agreement or the occurrence of a force majeure event.  By participating in the Placing, Placees agree that the exercise by the Joint Bookrunners of any right of termination or other right or discretion under the Placing Agreement shall be within the absolute discretion of the Joint Bookrunners and that they need not make any reference to Placees and that they shall have no liability to Placees whatsoever in connection with any such exercise.

No Prospectus

No offering document or prospectus has been or will be submitted to be approved by the FSA in relation to the Placing.

Representations and Warranties

By participating in the Placing each Placee (and any person acting on such Placee's behalf):

1.         represents and warrants that it has read and understood this announcement in its entirety and that its acquisition of Placing Shares is subject to and based upon all the terms, conditions, representations, warranties, acknowledgements, agreements and undertakings and other information contained herein;

2.         acknowledges that no offering document or prospectus has been prepared in connection with the Placing;

3.         acknowledges that the content of this announcement is exclusively the responsibility of the Company and that neither the Joint Bookrunners nor any person acting on their behalf has or shall have any liability for any information, representation or statement contained in this announcement or any information previously or subsequently published by or on behalf of the Company, including, without limitation, any information required to be published by the Company pursuant to applicable laws (the "Exchange Information").  Each Placee further acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of the Company in deciding to participate in the Placing.  None of Citi, Deutsche Bank, the Company or any of their respective affiliates has made any representations to it, express or implied, with respect to the Company, the Placing and the Placing Shares or the accuracy, completeness or adequacy of the Exchange Information.  Nothing in this paragraph or otherwise in this announcement excludes the liability of any person for fraudulent misrepresentation made by that person;

4.         represents that (i) it is a qualified investor, as that term is defined in the European Prospectus Directive, (ii) is not subscribing to the shares on a non-discretionary basis on behalf of a person in the EEA that is not also a Qualified Investor, and (iii) is not subscribing to the shares with a view to reselling the shares to persons in the EEA that are not qualified investors.

5.         if a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, represents and warrants that the Placing Shares acquired by it in the Placing will not be acquired on a non-discretionary basis on behalf of, nor will they be acquired with a view to their offer or resale to, persons in a Member State of the European Economic Area other than Qualified Investors, or in circumstances in which the prior consent of a Joint Bookrunner has been given to the offer or resale;

6.         represents and warrants that it has not offered or sold and will not offer or sell any Placing Shares to the public in any member state of the European Economic Area except in circumstances falling within Article 3(2) of the Prospectus Directive which do not result in any requirement for the publication of a prospectus pursuant to Article 3 of that Directive;

7.         if in a Member State of the European Economic Area, unless otherwise specifically agreed with a Joint Bookrunner in writing, represents and warrants that it is a "qualified investor";

8.         if in the UK, represents and warrants that it is a person (i) who has professional experience in matters relating to investments falling with Article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"); (ii) falling within Article 49(2)(A) to (D) ("High Net Worth Companies, Unincorporated Associations, etc") of the Order; or (iii) to whom this announcement may otherwise be lawfully communicated;

9.         represents and warrants that it and any person acting on its behalf is entitled to acquire the Placing Shares under the laws of all relevant jurisdictions which apply to it and that it has fully observed such laws and obtained all such governmental and other guarantees, permits, authorisations, approvals and consents which may be required thereafter and complied with all necessary formalities and that it has not taken any action or omitted to take any action which will or may result in a Joint Bookrunner, the Company or any of their respective directors, officers, agents, employees or advisers acting in breach of the legal or regulatory requirements of any jurisdiction in connection with the Placing;

10.       acknowledges that these terms and conditions and any agreements entered into by it pursuant to these terms and conditions shall be governed by and construed in accordance with English law and it submits (on behalf of itself and on behalf of any person on whose behalf it is acting) to the exclusive jurisdiction of the English courts as regards any claim, dispute or matter arising out of any such contract, except that enforcement proceedings in respect of the obligation to make payment for the Placing Shares (together with any interest chargeable thereon) may be taken by the Company or the Joint Bookrunners in any jurisdiction in which the relevant Placee is incorporated or in which any of its securities have a quotation on a recognised stock exchange; and

11.       agrees that the Company, Citi, Deutsche Bank and their respective affiliates and others will rely upon the truth and accuracy of the foregoing representations, warranties, acknowledgements and undertakings which are given to Citi and Deutsche Bank on their own behalf and on behalf of the Company and are irrevocable.

The foregoing representations, warranties and confirmations are given for the benefit of the Company as well as the Joint Bookrunners.

All times and dates in this announcement are subject to amendment by the Joint Bookrunners (in their absolute discretion).

 

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