22 Jul 2016 07:00
For Immediate Release | 22 July 2016 |
Bond International Software plc
("Bond" or "the Company" or "the Group")
Proposed sale of Bond HR and Payroll Software Limited, Bond Payroll Services Ltd and Eurowage Ltd
The Board of Directors of the Company (the "Board") announces that it has entered into a conditional agreement with FMP Global Bidco Limited (the "Purchaser") for the sale of the entire issued share capital of its payroll subsidiaries, comprising Bond HR and Payroll Software, Bond Payroll Services and Eurowage Limited ("the Payroll Subsidiaries"), for a net cash consideration of £27.4 million and the assumption of £2.0 million of net debt (the "Acquisition"). The sale is conditional on shareholder approval in a general meeting; the Purchaser's debt financing for the Acquisition being completed, and finalisation of documentation with Barclays Bank Plc for the continuation of existing facilities for the Payroll Subsidiaries. Further details of the Acquisition, and the reasons why the Board considers that the sale is in the best interests of the Company and its shareholders, as well as the Board's view of the offer for the entire share capital of the Company by Constellation Software Inc. ("the Constellation Offer") are set out below.
Proposed sale
The proposed sale of Bond's Payroll Subsidiaries to the Purchaser is conditional on Shareholder Approval and completion of the Purchaser's debt finance for the Acquisition. The debt finance is being provided by HSBC and has been approved by HSBC's credit committee with the contractual documentation between the Purchaser and HSBC being finalised. The net cash consideration in respect of the Acquisition is £27.4 million. In addition the purchaser has assumed £2 million of net debt owed by Eurowage Limited. The net cash consideration is payable in full on completion without adjustment. The Purchaser has been formed for the purpose of the Acquisition. The Purchaser is a private limited company in which Tenzing Private Equity is a majority shareholder. Justin Cottrell and other senior management of the Payroll Subsidiaries are minority shareholders in the Purchaser.
As part of the sale, the Company has entered into a settlement agreement with the original sellers of Eurowage Limited ("Eurowage"), who include Justin Cottrell and Nick Cottrell, whereby the Company will transfer to Eurowage the liability to make certain deferred payments owed to the sellers of Eurowage in a total net amount of £2.0 million and the remaining B shares in Eurowage Limited held by the Eurowage sellers will be transferred at nominal value.
The Company's total liability under all warranties and indemnities in the sale and purchase agreement ("SPA") is limited to £3 million and all claims under the SPA must be made within 12 months of Completion.
The Acquisition is in line with the Company's divestment strategy, announced in February 2016 following an in-depth strategic review, and the Board believes that it will create maximum value for all shareholders. All strategic options were considered in the review including a strategic partnership, acquisitions to increase the scale of the Group, corporate divestments, a sale of the Company or a new or extended bank facility to support investment into the Group.
The Acquisition follows the sale announced on 3 May 2016 of the entire issued share capital of the Group's wholly owned subsidiary, Strictly Education Limited to Education Services Solutions Limited, for a total consideration of £11.3 million, of which £4.3 million was deferred by the issue of a Loan Note by Education Services Solutions Limited to the Company (the "Loan Note").
General Meeting
Due to its size, the proposed sale of the Payroll Subsidiaries is deemed to be a disposal resulting in a fundamental change in the business of the Company pursuant to Rule 15 of the AIM Rules and therefore requires Shareholder Approval. In addition, as a result of the Constellation Offer, the Company is required by Rule 21.1 of the City Code on Takeovers and Mergers (the "Takeover Code") to obtain Shareholder Approval before it completes the Acquisition. A general meeting will be convened as soon as practicable following the satisfaction of the conditions in the Sale Agreement relating to the Purchaser's debt financing and the arrangements with Barclays Bank, so that at the time of convening a general meeting the only condition to the Acquisition will be shareholder approval. It is expected that a circular will be posted to shareholders no later than 28 July 2016.
Shareholders should be aware that, due to the conditions specified in Constellation Software Inc.'s ("Constellation") announcement of their firm intention to make an offer on 3 June 2016, if they vote in favour of the Acquisition of the Payroll Subsidiaries and the Acquisition completes, the Constellation Offer may lapse and may not proceed.
Financial effects of the sale
For the year ended 31 December 2015 Bond Payroll Services and Bond HR & Payroll Software had a combined revenue of £7,050,000 and a profit before tax of £2,006,000. For the year ended 31 December 2015 Eurowage, trading as FMP Europe, had revenues of £4,851,000 and made a profit before tax of £1,696,000.
It is expected that the cash proceeds receivable by the Company on Completion from the sale will be £27.4 million, following the assumption by the Purchaser of a net liability of £2.0 million to the original Eurowage Sellers. The application of the net sale proceeds will be in line with the strategy following completion stated below.
Strategy following completion
Following completion of the Acquisition, the remaining assets of the Group will consist of the Recruitment Software Subsidiaries, certain real estate assets and the Loan Note.
Subject to the Constellation Offer lapsing, as set out in more detail below, the Company intends to continue to pursue its stated strategy to sell the Recruitment Software Subsidiaries and is in advanced negotiations for their sale. The Company also intends to sell the Group's real estate assets.
Once the Group has completed the sale of the Recruitment Software Subsidiaries it intends to propose a members' voluntary winding up of the Company, with the intention of distributing its net assets to shareholders. If the Company enters into a members' voluntary liquidation, it is likely that there would be an immediate cash distribution to shareholders, with subsequent distributions to be made once the Group's real estate assets had been sold, the Loan Note repaid and the creditors of the Company discharged.
Constellation offer update
On 30 June 2016 Constellation announced its intention to make an all cash offer for the entire issued and to be issued share capital of Bond not owned by Constellation or parties acting in concert with it, at a price of 105 pence per ordinary. The Board has given careful consideration to the merits of the Constellation Offer and has concluded, having consulted with its financial advisers, Houlihan Lokey, that it is not in the interests of shareholders to accept the Constellation Offer as it fails fully to reflect the fair value of the Company.
The Board believes that the aggregate return to shareholders from a liquidation of the Company, after it has completed the Acquisition, received repayment of the Loan Note, sold the Group's real estate assets, sold the Recruitment Software Subsidiaries and paid all relevant transaction costs and taxes, will result in a meaningful premium to the 105 pence per Bond Share which the Constellation Offer represents.
The Board therefore considers the Constellation Offer would represent significantly less value than the alternative strategy being proposed by the Board.
Martin Baldwin, the Chairman of Bond, said:
"The Board is pleased to announce the sale of its Payroll Subsidiaries as we believe this will generate maximum value for shareholders. The proposal by the Purchaser, which was received as part of a competitive process in which multiple offers were submitted, represents an attractive valuation for the businesses and recognises its market position and future prospects."
A copy of this announcement can be viewed at www.bondinternationalsoftware.com.
This announcement includes inside information.
For further information, please contact:
Bond International Software plc: Tel: 01903 707070
www.bondinternationalsoftware.com
Steve Russell: Group Chief Executive
Bruce Morrison: Group Finance Director
Buchanan: Tel: 020 7466 5000
Richard Darby
Steph Watson
Houlihan Lokey Capital, Inc. (Financial adviser)
Thomas Bailey Tel: 001 404 495 7056
Cenkos Securities plc (Nomad) Tel: 020 7397 8900
Stephen Keys
Camilla Hume