Empresaria Group Regulatory News (EMR)

5 Apr 2007 11:00

Empresaria Group PLC05 April 2007 THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FORPUBLICATION, RELEASE OR DISTRIBUTION IN OR INTO THE UNITED STATES, CANADA,AUSTRALIA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR THE REPUBLIC OF IRELAND. This announcement does not and these materials do not constitute an offer tosell or issue or the solicitation of an offer to buy or subscribe new OrdinaryShares in any jurisdiction in which any such offer or solicitation would beunlawful and the information contained herein is not for publication ordistribution, directly or indirectly, in or into the United States, Canada,Australia, Japan, the Republic of South Africa or the Republic of Ireland or anyjurisdiction in which such publication or distribution is unlawful. 5 April 2007 Empresaria Group plc ("Empresaria" or the "Group") Proposed acquisition of headwayholding gmbh ("Headway") Proposed issue of 9,230,770 New Ordinary Shares of 5p each at 130p per share Notice of an Extraordinary General Meeting Empresaria is pleased to announce that it has entered into a conditionalagreement to acquire 60 per cent. of the issued share capital of Headway (the "Acquisition"), a German recruitment company with a focus on supplying temporarystaff to organisations in the personnel, logistics, engineering and industrialsectors. Acquisition Highlights: • Acquisition of 60% of Headway for €14.6 million (approximately £9.9 million) • Key Headway management to remain with the business and hold the 40% remaining Headway shares • Ability for Empresaria to acquire remaining 40% of Headway shares over a period from 2009, dependent on Headway's performance • Acquisition to be funded by the issue of 9,230,770 New Ordinary Shares at 130p to raise £12 million (before expenses) • The Acquisition is in line with Empresaria's geographic diversification, having expanded into twelve international markets over the last two years • Expected to be earnings enhancing for Empresaria in the first full year About Headway: • Headway was founded in 1997 and has been owner managed since inception • Reported unaudited revenues of €77 million and EBITDA of €3.4 million for the year ended 31 December 2006 • Operates through 47 offices in Germany, Austria and the Czech Republic • Provides temporary/contract and outsourced staffing focused on logistics and HR solutions and the supply of skilled trades into various industry niches Commenting on the Acquisition, Miles Hunt, Empresaria's Chief Executive said: "The German staffing market is experiencing significant growth. The acquisitionof Headway is in line with our strategic objective of positioning Empresaria asan international, high growth, specialist staffing business with revenues andprofits distributed across established and emerging markets." For further information please contact: Empresaria Miles Hunt, Chief Executive 01293 649 900 Nick Hall-Palmer, Finance Director First City 020 7242 2666 Allan Piper Bridgewell James Wellesley Wesley 020 7003 3000 Stephen Cheung Introduction The Board of Empresaria is pleased to announce that it has entered into aconditional agreement to acquire 60 per cent. of the issued share capital ofHeadway, a German recruitment company with a focus on supplying temporary staffto organisations in the personnel, logistics, engineering and industrialsectors. The total consideration for the 60 per cent. shareholding is €14.6million (approximately £9.9 million), which is payable in cash. In addition, inkeeping with the Group's usual approach for acquisitions, Empresaria has enteredinto arrangements relating to the possible acquisition by Empresaria of theremaining 40 per cent. of Headway over a number of years (in this specific case,by means of the Put Options and Call Options). Further details of theAcquisition, Put Options and Call Options are set out in a circular to be sentto shareholders today ("Circular"). All capitalised terms used in this announcement shall, unless the contextotherwise requires, have the same meaning as set out in the Circular. The Acquisition is to be funded through the Placing, which is being underwrittenby Bridgewell, and the Management Subscription, further details of which are setout below. In addition, the Group has secured New Debt Facilities to coverpotential obligations under the Acquisition, the Put Options and Call Optionsarrangements and to provide working capital for the Enlarged Group. The Group is also pleased to announce that Bridgewell has conditionally placed6,500,000 New Ordinary Shares with investors at a price of 130p per share ("Placing Price") to raise £8.45 million (before expenses) for the Company. Inaddition, Anthony Martin and Miles Hunt have agreed to subscribe for 1,730,770and 1,000,000 New Ordinary Shares, respectively, at the Placing Price to raisean aggregate £3.55 million for the Company. The proceeds of the Placing and the Management Subscription, which in aggregateamount to £12 million (before expenses), will be used to fund the cashconsideration for the Acquisition and the costs associated with the Acquisition,and in part to reduce existing indebtedness. Overview of Headway The Headway Group was formed in 1997 as Zeitwerk Personal and has grown to itscurrent size of 47 offices, most of which are based in Germany, but also withoffices in Austria and the Czech Republic. Headway operates through six companies providing temporary personal staffingservices for various sectors. For the year ended 31 December 2006, total unaudited, aggregated revenueamounted to €77 million (2005: €53 million) and gross profit amounted to €21million (2005: €14 million). Management Headway has an experienced management team, with the founders still activelyinvolved in the business. Following the Acquisition, key management will retaina 40 per cent. shareholding in Empresaria Germany, the new holding company ofthe Headway Group, which may be acquired by Empresaria through the Put Optionsand Call Options described in the Circular. Financial Summary Set out below is a summary of the financial information on the Headway Group forthe years ended 31 December 2005 and 2006. Shareholders should read the fullfinancial information set out in the Circular. Aggregated Aggregated Unaudited Unaudited 2005 2006 • 000's • 000's Turnover 52,653 77,193NFI 13,730 20,983NFI margin 26.1% 27.2%EBIT 875 2,929EBIT margin 1.7% 3.8% Rationale for the Acquisition The Board's strategic objective is to position the Group as a trulyinternational, high-growth specialist staffing business with revenues andprofits broadly distributed across established and emerging staffing markets.The Acquisition is in line with this strategy and will provide the Group with anestablished position in the German market. The Directors believe the German staffing market offers significant growthopportunities: • The German staffing market has shown significant growth in recentyears, moving from an estimated €5.9 billion per annum market in 2003 to anestimated €8.6 billion per annum market in 2006. • The market is characterised by recent regulatory liberalisation, agrowing desire for flexibility amongst clients, and an increasing acceptance ofthe concept of temporary and contract staffing which is beginning to extend tobusiness professionals, facilitating further specialisation of the market in thefuture; • A trend to longer term temporary assignments. • Industry analysts expect sustained growth in the German staffing marketover the next three years. • In comparison to the UK market, which had an approximate size in 2005of €36 billion, the German market is relatively small, especially consideringGermany has a population of over 80 million (2005) against the UK's 60 million(2005). This emphasises the latent growth potential within the German market. • The market opportunity is also highlighted by the relatively lowpenetration of temporary workers in the overall German workforce, which stood at1 per cent. in 2005 compared to 5 per cent. in the UK. The measure of thepercentage of temporary workers in the overall workforce is generally used as anindicator of the maturity of a staffing market and therefore of its potential togrow. Empresaria has identified Headway as an attractive acquisition opportunity: • Since its establishment 10 years ago, Headway has achieved strongrevenue and profit growth. Its achievements were recognised by the Bavarianstate in 2006 with an award for being one of its top 50 growth companies. • The directors responsible for operations, sales and marketing areremaining with the Headway business and will continue to hold 40 per cent. ofthe share capital of Headway (via their holdings in Empresaria Germany)following Completion. • The structure and philosophy of the Headway Group, with specialisedautonomous operating companies, offers an excellent fit with that of Empresaria. • Headway provides a business of significant scale in the German market,mainly in the south of Germany, and there are believed to be opportunities forcontinued expansion by opening new branches in other regions of the country. • Headway's operation in Austria further expands Empresaria'sinternational coverage, whilst its Czech business compliments Empresaria'sexisting service offering in that country. Financing of the Acquisition and use of funds Principal terms of the Placing and the Management Subscription Bridgewell has conditionally placed 6,500,000 New Ordinary Shares with investorsat a price of 130p per share to raise £8.45 million (before expenses) for theCompany. The Placing is being underwritten by Bridgewell. In addition, AnthonyMartin and Miles Hunt have conditionally agreed to subscribe for 1,730,770 and1,000,000 New Ordinary Shares, respectively, at the Placing Price to raise £3.55million for the Company. The proceeds of the Placing and the ManagementSubscription, which in aggregate amount to £12 million (before expenses), willbe used to fund the cash consideration for the Acquisition and the costsassociated with the Acquisition, and in part to reduce existing indebtedness. The Placing Price represents a discount of approximately 6.3 per cent. to theclosing mid-market price of 138.75 pence per Ordinary Share as at 4 April 2007,being the latest practicable date prior to the publication of this document. TheNew Ordinary Shares will, when issued, rank pari passu in all respects with theExisting Ordinary Shares, including the right to receive all dividends and otherdistributions made or paid on or after Admission. The New Ordinary Shares may beheld in certificated or uncertificated form. No existing Shareholders areselling any Ordinary Shares pursuant to the Placing and all of the New OrdinaryShares are being issued by the Company. The Placing and the Management Subscription is being made on a non pre-emptivebasis as the time and costs associated with a pre-emptive offer are consideredby the Directors to be excessive. The making of a pre-emptive offer wouldrequire the production of a prospectus which would have to comply with theProspectus Rules of the Financial Services Authority and be pre-vetted andapproved by the Financial Services Authority. Details of the New Debt Facility New Debt Facilities, comprising a total of €18.5 million (approximately £12.5million) and a total of £2.5 million, have been conditionally made available byHSBC Bank plc to the Company to cover potential obligations under theAcquisition, the Put Options and Call Options arrangements and to provideworking capital for the Enlarged Group. Both the Placing Agreement and the New Debt Facilities are conditional, interalia, upon Admission and completion of the Sale and Purchase Agreement. Furtherdetails of the Sale and Purchase Agreement, the Options Agreement, the PlacingAgreement, the Subscription Agreements and the Facilities Agreement are set outin the Circular. Extraordinary General Meeting A notice convening the EGM to be held at 11.00 a.m. on 30 April 2007 will besent to Shareholders today, 5 April 2007. At the EGM, a special resolution willbe proposed to: (a) approve the acquisition of Headway; and (b) authorise the Directors to allot up to 9,230,770 Ordinary Shares inconnection with the Placing and the Management Subscription without having tomake a pre-emptive offer to Shareholders. The authority referred to in paragraph (b) above is in addition to the existingauthorities of the Directors to allot shares both generally and, to a morelimited extent, on a non pre-emptive basis. This information is provided by RNS The company news service from the London Stock Exchange