ISG.L Regulatory News (ISG)

ISG plc

Acquisition of 50.1% of the share capital of Spanish fit out companies.

ISG plc ("ISG" or the "Group"), the international construction services group, is pleased to announce that it has acquired a 50.1% interest in Interior ISG Espana SA ("Interior Espana or the Company"), a newly formed company that owns 100% of each of Diseños y Adecuaciones, SL ("Diadec") and Emerald Telecom and Data Center, SA ("Emerald") from its six owner managers led by the Managing Director Mr Javier Cirac. The initial consideration is €2.2m (£1.75m) and the maximum consideration is €4.7m (£3.7m) subject to performance.

Diadec provides office and retail fit out services while Emerald offers data center and engineering services. Both operate in Iberia from a head office in Madrid that employs 35 members of staff. Mr Cirac and the five other founding directors will retain their remaining 49.9% shareholding in the business and will continue to manage the operations going forward. Interior Espana also owns 90% of a fledgling fit out business in Lima, Peru.

Mr Cirac and his colleagues bring with them a wealth of experience in the data center and retail and office fit out markets and their customers include both local companies such as Aguirre Newman, Ocaso, Docout, Vueling and Mapfre, and international companies such as British Telecom, Vodafone, 3M and CBRE.

ISG has an established relationship with Mr Cirac and his management team with the first collaboration between the parties taking place in 2001. A year ago, with signs of an economic recovery in Spain, there has been a marked increase in opportunities.

The combined revenue of Diadec and Emerald for the year ended 31 December 2013, was approximately €7.8m (£6.2m) and they generated a profit before tax of €0.58m (£0.46m). At 31 December the combined net assets of the businesses stood at €0.95m (£0.75m).

At completion, €200,000 (£159,000) will be invested as new capital into the Company and €2m (£1.6m) as vendor consideration, of which €1.5m (£1.2m) will be in cash and the balance of €0.5m (£0.4m) in ISG ordinary shares.

The deferred consideration of €2.5m (£2m) is payable in three potential instalments over three calendar years ending 31 December 2017, based on the achievement of certain Profit Before Tax targets. The first €500,000 of deferred consideration will be settled 75% in cash and the balance in ISG shares and the remaining consideration will be settled 50% in cash and the balance in ISG shares. All shares issued to the vendors are subject to phased lock-in periods over two years from the date of issue and orderly market undertakings.

At completion 66,579 ordinary shares of 1p each in the Group will be issued to the vendors based on a price of £2.98 per share and a further €250,000 of ISG shares will be issued at the end of the warranty retention period in June 2016 (at the then prevailing share price). The new ordinary shares will rank pari passu with the existing shares of the Group. Application will be made to the London Stock Exchange for the new ordinary shares to be admitted to trading on the Alternative Investment Market and it is expected that admission will take place on 21 July 2014. Following the allotment, the total issued share capital of the Group will increase to 39,195,596 ordinary shares.

David Lawther, Chief Executive Officer of ISG, commented:

"ISG has a long association with the management team of Diadec and Emerald and we have collaborated on projects for a range of ISG's repeat customers. The acquisition is part of our strategy to follow clients into key fit out markets and in particular to strengthen our data center and engineering services capabilities internationally."

16 July 2014

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