Possible Offer by Marlowe plc for Restore plc

RNS Number : 0575G

Marlowe PLC

22 July 2021

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

THIS IS AN ANNOUNCEMENT OF A POSSIBLE OFFER FALLING UNDER RULE 2.4 OF THE CITY CODE ON TAKEOVERS AND MERGERS (THE "CODE"). IT DOES NOT CONSTITUTE AN ANNOUNCEMENT OF A FIRM INTENTION TO MAKE AN OFFER UNDER RULE 2.7 OF THE CODE. ACCORDINGLY, THERE CAN BE NO CERTAINTY THAT AN OFFER WILL BE MADE.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

FOR IMMEDIATE RELEASE.

22 July 2021

Marlowe plc

Possible Offer by Marlowe plc for Restore plc

Marlowe plc ("Marlowe" or, the "Company") announces that it made an approach to the Board of Restore plc ("Restore") regarding a possible offer to acquire all of the issued and to be issued share capital of Restore for 530p per Restore ordinary share (the "Possible Offer"). The combination would create a business of scale delivering a broad spectrum of business-critical services and software to UK organisations, addressing their compliance and information management requirements.

This was the second proposal made by Marlowe to the Restore Board. Both proposals were made over the last few weeks and were rejected.

The terms of the Possible Offer of 530p, if made, would consist of 71p in cash for each Restore share and the remainder in new Marlowe shares. The exchange ratio will be set at the time of the announcement of a firm intention to make an offer, if made.

The terms of the Possible Offer of 530p represent:

· a premium of approximately 45% to the placing price of 365 pence per Restore share on 30 April 2021;

· a premium of approximately 42% to the six-month volume-weighted average closing price of 373p per Restore share; and

· a premium of approximately 26% to yesterday's closing share price of 420p per Restore share.

The Possible Offer values the entire issued and to be issued share capital of Restore at £743m on a fully diluted basis. Restore shareholders would own approximately 49% of the combined group and would be major participants in the potential future value creation within the combined group.

Alex Dacre, Chief Executive of Marlowe, commented:

"We believe the combination of Marlowe and Restore is strategically compelling and will deliver value for all shareholders.

Marlowe and Restore share the same corporate DNA and channels to market, and we believe that bringing our businesses together will create a leading business-critical services group delivering a comprehensive range of services and software, spanning the compliance and information management sectors, with an addressable market of c.£9bn.

Combining Marlowe and Restore represents a transformational opportunity for our customers and shareholders, reinvigorating the Restore strategy and shareholder returns, deepening and broadening our service offering, and creating a business of scale that will deliver significant further growth".

Strategic Overview

The Marlowe Board believes the combination will deliver value for both Marlowe and Restore shareholders by:

· Creating a business of scale in attractive sectors delivering complementary business-critical services to a highly compatible UK client base with similar channels to market in an addressable market of c.£9bn;

· Creating a platform for significant future growth with an enhanced financial profile which is well-positioned to accelerate organic growth, target cross-sell opportunities and deploy capital into acquisition-led growth;

· Benefiting from applying the Marlowe digital model to deliver a digital strategy for Restore , evolving Restore's proposition from a primarily physical records management business into the faster growing market of Intelligent Information Management and document management software;

·   Benefiting from cost synergies from combining corporate and support functions, optimising the enlarged group's sales, marketing and CRM activities, aligning third party procurement and maximising property footprint efficiencies;

· Benefiting from shared operating characteristics such as non-discretionary spend, recurring revenues and the provision of mission-critical services which can be increasingly tech and software enabled;

· Benefiting from shared corporate heritage and DNA, with both companies having executed successful 'buy and build' strategies on AIM, sharing a history of common leadership with senior members of Marlowe's team having held leadership positions at Restore during its formative years, as well as overlap within their shareholder registers; and

·  Benefiting from Marlowe's leadership under Alex Dacre, CEO, during whose tenure the business has delivered significant share price appreciation having grown from a market capitalisation of approximately £12m at the time of Alex's appointment in 2015 to £674m as at 21 July 2021.

It is the intention of the Marlowe Board that Marlowe's Chairman, Chief Executive and Group Finance Director would retain these positions within the combined business.

Marlowe has a strong track record of value creation for its shareholders. In particular, Marlowe has a proven track record of M&A in fragmented markets and experience in digital transformation and software which the Marlowe Board believes will allow the combined group to deliver on the synergies from the combination to drive value creation and shareholder returns.

The financial strength provided by the combination will provide the resources to accelerate the M&A programme of Restore, evolving its offering into digital information management markets and allowing Marlowe to further develop its compliance offering.

The Marlowe Board believes that the combined business would deliver significantly greater benefits to the shareholders of Restore than Restore could otherwise achieve on its own.

This announcement does not constitute an announcement of a firm intention to make an offer. There can be no certainty that an offer will be made.

A further announcement will be made as and when appropriate.

Pursuant to Rule 2.5 of the Code, Marlowe reserves the right to:

a.  vary the form and/or mix of the consideration described in this announcement and vary the transaction structure;

b.  make the offer on less favourable terms or at a lower value than the Possible Offer of 530p:

i.  with the agreement or consent of the Board of Restore;

ii.  if a third party announces a firm intention to make an offer for Restore at a lower value or on less favourable terms than contemplated under the terms of the Possible Offer;

iii.  if Restore announces, declares, makes or pays any dividend or any other distribution or return of capital to its shareholders after this announcement (in which case Marlowe reserves the right to reduce the offer price by an amount up to the amount of such dividend, distribution or return of capital); or

iv.  if Restore announces a whitewash transaction pursuant to the Code.

In accordance with Rule 2.6(a) of the Code, Marlowe is required, by no later than 5.00pm on 19 August 2021, to announce either a firm intention to make an offer for Restore in accordance with Rule 2.7 of the Code or that it does not intend to make an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. This deadline can be extended with the consent of the Panel on Takeovers and Mergers ("Takeover Panel") in accordance with Rule 2.6(c) of the Code.

For further information contact:
Marlowe plc	[phone] / [e-mail]
Alex Dacre, Chief Executive
Mark Adams, Group Finance Director
Goldman Sachs International (Financial Adviser to Marlowe)	[phone]
Owain Evans
Khamran Ali
Pernille Thuesen
Bertie Whitehead (Corporate Broking)
Tom Hartley (Corporate Broking)
FTI Consulting (PR Adviser to Marlowe)	[phone]
Nick Hasell
Alex Le May
Cenkos Securities plc (Nominated Adviser and Joint Broker)	[phone]
Nicholas Wells
Ben Jeynes
George Lawson
Berenberg (Joint Broker)	[phone]
Ben Wright
Mark Whitmore

About Marlowe plc

Marlowe is a UK leader in business-critical services and software which assure safety and regulatory compliance. Marlowe is listed on the AIM segment of the London Stock Exchange with a market capitalisation of £674m as at 21 July 2021 on a fully diluted basis.

Marlowe delivers services across health & safety, compliance and EHS software, employment law & HR compliance, fire safety & security, water & air hygiene and occupational health - all of which are vital to the wellbeing of its customers' operations and are invariably governed by regulation. Marlowe currently provides services to around 25% of Britain's commercial premises and is increasingly attractive to customers who require a single outsourced nationwide provider of a comprehensive range of business-critical solutions.

Marlowe has current run-rate revenues of £280m, over 80% of which are recurring with organic growth in the high single digits. Revenues have grown at a compound 42% and adjusted EBITDA has grown at a compound 64% over the period from April 2016 to March 2021.

Marlowe has a strong M&A track record, having executed 58 acquisitions through its model of fast-paced M&A and effective integration to form leading positions in its five business-lines across defensive sectors underpinned by regulation and non-discretionary requirements, which are experiencing attractive secular growth. Additionally, Marlowe has delivered accelerating organic growth and significant adjusted EBITDA margin expansion.

Strategic rationale 

Creating a business of scale in attractive sectors with an expanded addressable market of c.£9bn

Together Marlowe and Restore provide business critical services to approximately 50,000 workplaces across the UK. The enlarged group would cover a broad spectrum of business-critical services & software delivered to commercial organisations and benefit from a similar channel to market.

Marlowe and Restore operate in large fragmented markets with an addressable market of £8.7bn (Marlowe: £6.8bn, Restore: £1.9bn) in the UK. The enlarged group would be able to go to market as a holistic solution to organisations which need to manage their business-critical requirements to ensure compliance and the effective management of information and data across their organisations. The Marlowe Board believes that the scale and breadth of the enlarged group would result in it becoming the preferred choice for decision-makers across these sectors.

Creating a platform for significant future growth with an enhanced financial profile

On a simple aggregation of current figures, Marlowe and Restore would have combined run-rate revenues of approximately £500m and combined operating cash flow of approximately £80m based on the latest financial year for each business.

The Marlowe Board believes that the enlarged group's increased scale and scope would offer the opportunity to accelerate growth within a larger addressable core market and to cross-sell to an enlarged customer base whilst benefitting from revenue and cost synergies that would result from this scale.

Additionally, the Marlowe Board believes the transaction would create opportunities to accelerate inorganic growth through broadening the capabilities of the enlarged group and provide increased scope for growth. This expansion would be further underpinned by the enlarged cash flow and balance sheet of the enlarged group which would provide significant resources for self-funded acquisition-led growth.

Driving a digital strategy

Over the last three years, Marlowe has rapidly developed its compliance offering into the digital sphere, underpinning its belief that a combined solution of services and software enhances the customer value proposition and leads to greater compliance and service levels, increased customer stickiness and an enhanced financial profile in fast-growth markets.

Through a combination with Restore, Marlowe would apply that digital model to spearhead a similarly transformational digital strategy, evolving its proposition from its primarily physical storage into the faster growing market of Intelligent Information Management ("IIM") delivering vertical market document management software and workflow tools to help organisations manage their data, processes and information in a way that is appropriate for their organisation.

The Marlowe Board believes that IIM would complement Restore's existing customer base, especially within the Healthcare, Legal, Financial services and Public sectors where Restore benefits from significant market share in document management services.

The Marlowe Board therefore believes the enlarged group would be positioned in fast-growing, high-margin compliance software and IIM markets benefiting from increased organic revenue growth with the aim of generating sustainable and long-term shareholder returns.

Shared investment Attributes

Marlowe and Restore are highly compatible B2B service businesses which have implemented successful 'buy and build' strategies.

The transaction would offer the opportunity to pursue cross-sell activities through targeting shared customers. The enlarged group would drive organic growth through cross-sell via access to commercial and public sector organisations in the UK who are existing clients of each business.

Beyond the significant revenue and cross-sell synergies, Marlowe believes the enlarged group would benefit from cost synergies to be generated from combining corporate and support functions, optimising the enlarged group's sales, marketing and CRM activities, aligning third party procurement and maximising property footprint efficiencies.

A shared corporate DNA

Key to the combination of Marlowe and Restore is their shared corporate heritage and DNA. Not only have both businesses executed successful 'buy and build' strategies on AIM, but they also share history of common leadership as well as overlap within shareholder registers.

Like Restore, Marlowe's organisational structure consists of a number of business units which share a similar channel to market and operate as part of a clear strategic framework which drives revenue and cost synergies.

The Marlowe Board believes that a combination of a deep knowledge of highly regulated, business-critical markets, a proven track record of M&A in fragmented markets and experience in digital transformation and software would allow the enlarged group to deliver on the significant synergies that a combination creates whilst delivering its fast-paced M&A and digital strategy to maximise value creation and shareholder returns.

Benefiting from Marlowe's leadership under Alex Dacre, CEO

Marlowe's CEO and founder, Alex Dacre, was Head of M&A at Restore from 2010 to 2013, Marlowe's incoming CFO, Adam Councell, was Group Finance Director at Restore between 2012 and 2019 and Marlowe's Non-Executive Director, Charles Skinner, was CEO of Restore from 2009 to 2019. The trio were instrumental in developing Restore's strategy of consolidating the document storage market and broadening Restore's activities into digital scanning, secure shredding, IT & technology asset destruction and commercial relocations. The Marlowe Board believes this strategy is highly compatible with the Marlowe strategy of becoming a one-stop shop for business-critical services and software.

Sources and bases of information

Unless otherwise stated in this announcement:

1.  six month volume-weighted average closing price of 373p per Restore share derived from Bloomberg for the period from 22 January 2021 to 21 July 2021;

2.  the value attributed to the entire issued and to be issued share capital of Restore is based on a value of 530 pence per Restore share; and:

a)  136,674,067 Restore shares in issue on 30 April 2021; and

b)  3,543,950 Restore shares which may be issued on or after the date of this announcement to satisfy the exercise of options and vesting of awards;

3.  Restore shareholders' ownership in the combined business is based on 74,490,822 new Marlowe shares issued to Restore shareholders (based on the Possible Offer of 530 pence per Restore share and the assumption that new Marlowe shares are issued at Marlowe's share price of 864 pence as at 21 July 2021); and:

a)  77,123,772 Marlowe shares in issue as at the date of this announcement; and

b)  911,416 Marlowe shares which may be issued on or after the date of this announcement to satisfy the exercise of options and vesting of awards;

4.  combined group financials based on a simple aggregation of latest reported run-rate revenue for both businesses and operating cash flow as reported by Marlowe for the year ended 31 March 2021 and by Restore for the year ended 31 December 2020;

5.  combined group potential addressable market calculated as Marlowe core total addressable market of in the UK of c.£6.8bn as set out in the Marlowe Proposed Placing announcement on 18 March 2021, and the Restore addressable market of £1.9bn as set out in the Restore Capital Market Presentation 2020; and

6.  unless otherwise stated, the financial information relating to Marlowe is extracted (without material adjustment) from the 2020/21 Marlowe Annual Report and the financial information relating to Restore is extracted (without material adjustment) from the 2020 Restore Annual Report.

Rule 2.9

In accordance with Rule 2.9 of the Takeover Code, as at the date of this announcement, Marlowe's issued share capital consisted of 77,123,772 ordinary shares of 50 pence each and admitted to trading on the Alternative Investment Market of the London Stock Exchange. There are no shares held in treasury. The International Securities Identification Number for the ordinary shares is GB00BD8SLV43.

Important notices

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or solicitation of any offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities or the solicitation of any vote or approval in any jurisdiction, whether pursuant to this announcement or otherwise.

The release, distribution or publication of this announcement in jurisdictions outside the United Kingdom may be restricted by laws of the relevant jurisdictions and therefore persons into whose possession this announcement comes should inform themselves about, and observe, any such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities law of any such jurisdiction.

Disclaimer

Goldman Sachs International, which is authorised by the Prudential Regulation Authority ("PRA") and regulated by the PRA and the Financial Conduct Authority ("FCA") in the United Kingdom, is acting exclusively for Marlowe plc and for no one else in connection with the possible offer and will not be responsible to anyone other than Marlowe plc for providing the protections afforded to its clients or for providing advice in relation to the possible offer, the contents of this announcement or any other matters referred to in this announcement.

Joh. Berenberg, Gossler & Co. KG, London Branch ("Berenberg"), which is authorised by the German Federal Financial Supervisory Authority and subject to limited regulation by the FCA in the United Kingdom, is acting exclusively for Marlowe and no one else in connection with the possible offer and will not be responsible to anyone other than Marlowe for providing the protections afforded to clients of Berenberg nor for providing advice in relation to the possible offer or any other matters referred to in this Announcement. Neither Berenberg nor any of its affiliates owes or accepts any duty, liability or responsibility to any person who is not a client of Berenberg in connection with this Announcement, any statement contained herein or otherwise.

Disclosure requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4)

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on [phone] if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Publication on a website

In accordance with Rule 26.1 of the Code, a copy of this announcement will be made available on the Company's website (www.Marloweplc.com) no later than 12 noon (London time) on the business day immediately following the date of this announcement. The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.

The person responsible for arranging the release of this announcement on behalf of Marlowe is Alex Dacre, Chief Executive Officer.

 

END

 

 

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