Globiva Divestment

CPPGroup Plc

27 November 2023

 

27 November 2023

CPPGroup Plc

("the Group"; or "the Company")

Globiva Divestment

CPP Group (AIM: CPP), a provider of real-time assistance products and resolution services which reduce disruptions to everyday life for millions of customers across the world, has entered into an agreement (the "Agreement") with the founders of Globiva Services Private Ltd ("Globiva") for the disposal of the Group's majority interest in Globiva for an aggregate consideration of approximately £5.1 million¹ (the "Transaction"). Globiva is non-core to the Group following the announcement of its revised strategy and Change Management Programme ("CMP") in October 2022 to transform the Group to an InsurTech business, led by Blink Parametric ("Blink").

Background

The Group holds a 51% majority interest in Globiva, a Business Processes Management company incorporated in India, with the other 49% of the shares beneficially owned by the three founders of Globiva, Navneet Gupta, Vikram Singh Nathawat, and Ashish Goyal, who continue to manage the business (the "Globiva Founders").

Under amended arrangements entered into on 20 July 2022, the Globiva Founders had the option to buy back 10% of the ordinary shares in Globiva, from the Group, for a pre-agreed price of approximately £0.9 million. This was subject to Globiva meeting certain performance targets, which it is on track to achieve. However, in the normal course of business, it was further agreed that this could not be triggered until 1 January 2026 at the earliest. This Agreement supersedes the previous arrangements.

Transaction Rationale

·      The Transaction is consistent with the Group's stated strategy to transform the Group to an InsurTech business led by Blink and supported by India and Turkey.

·      The Group is currently a "trapped" investor in Globiva with limited options to realise value. In addition, the Group was likely to become a minority shareholder (January 2026) and consequently would have lost majority voting rights on key strategic decisions. The Transaction provides an exit path for the Group at an acceptable return.

·      The Transaction provides cash flow, not previously forecast, over a three-year period to support the Group's CMP.

Transaction Structure

·      The sale and transfer of ownership will be conducted over a three-year period concluding in Q1 2027.

·      The total aggregate consideration of approximately £5.1 million¹ (515 million Indian rupees) represents a blended 7.1x multiple on forecast EBITDA for the 2023, 2024 and 2025 calendar years. Final consideration will be based on audited EBITDA and subject to a maximum adjustment of plus or minus ten percent.

·      The Group's shareholding in Globiva, currently 51%, will reduce to approximately 35% in Q1 2025; 13% in Q1 2026; and zero percent in Q1 2027.

·      Cash, subject to any EBITDA performance adjustment (noted above) will be received by the Group as follows: approximately £1.2 million in 2024; £1.3 million in 2025; £1.2 million in 2026; and £1.4 million in 2027.

For the 2022 financial year, Globiva contributed EBITDA of £2.4 million to the Group's overall EBITDA from continuing operations of £6.9 million, albeit the Group's shareholders only ultimately benefit from 51% of Globiva's results. As at 30 June 2023, Globiva had net assets of £3.6 million.

The Transaction constitutes a related party transaction, pursuant to Rule 13 of the AIM Rules for Companies, as the Globiva Founders are Directors of Globiva. The Group's Directors consider, having consulted with the Company's nominated adviser, Liberum Capital Limited, that the terms of the Transaction are fair and reasonable insofar as the Company's shareholders are concerned.

Simon Pyper, Group CEO, commented:

"The agreement we have reached with Globiva is consistent with our stated strategy and provides a positive outcome for both parties. This is another forward step as we simplify the Group and transform to an InsurTech business."

¹ Approximate, as subject to currency exchange movements.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as amended by The Market Abuse (Amendment) (EU Exit) Regulations 2019. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

Enquiries:

CPP Group plc

Simon Pyper, Chief Executive Officer              Tel: [phone]

David Bowling, Chief Financial Officer

Liberum Capital Limited

(Nominated Adviser and Sole Broker)             Tel: [phone]

Richard Lindley

Lauren Kettle

About CPP Group:

CPP Group is a technology-driven assistance company that creates embedded and ancillary real-time assistance products and resolution services that reduce disruption to everyday life for millions of people across the world, at the time and place they are needed, CPP Group is listed on AIM, operated by the London Stock Exchange.

For more information on CPP visit https://corporate.cppgroup.com/

 

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