Lms Capital Regulatory News (LMS)

LMS CAPITAL PLC ("LMS" or the "Company")

Acquisition by CORETX Holdings PLC ("CORETX") of the Company's investment in

365 ITMS Limited ("365IT")

LMS is pleased to announce the sale of its majority stake in the, leading UK IT services business, 365IT, to CORETX Holdings plc (AIM : COR) the mid-market network, cloud and IT managed services provider.

· Acquisition by a strategic buyer allows 365IT to accelerate its value creation;

· LMS can continue to participate in future growth through its shareholding in Coretx;

· The terms of the transaction represent a premium to the net asset value;

· Gresham House Asset Management Limited ("GHAM"), Investment Manager of LMS was instrumental in facilitating, developing and executing the transaction.

Under the terms of the acquisition the enterprise value of 365IT was agreed at £5.4m, which after adjusting for net debt of £800k results in an equity value of £4.6m, to be settled through a combination of cash and shares.

LMS' share of the equity value is £4.1m. LMS has received gross cash proceeds of £1.1m plus 9,826,400 shares in CORETX having a value of £3m based on a price of 30.5 pence per share being the average closing mid-price for the month of March 2017. This shareholding represents 4.9% of the enlarged undiluted share capital of CORETX. The market value of the shares based on the closing price on 5 April is £3.1m. The shares are subject to a 24-month orderly market agreement.

365IT is an established IT managed services provider, with particular expertise in voice and unified communications, and a services portfolio that includes private cloud, contact centre solutions, connectivity, collaboration and security solutions and training. LMS initially invested in 365IT in 2011. In April 2016, 365IT completed the acquisition of Deverill Group Limited which it has successfully integrated. During the second half of 2016 the company experienced a downturn in its core business reflected in its financial performance which reduced the valuation of its investment to £2.1m at 31 December 2016.

The acquisition by CORETX represents a strategic opportunity for 365IT to accelerate value creation. The acquisition is highly complementary on both a product and service level, and will provide the 365IT business with the benefits of scale and a wider customer base to whom a broader range of technical products and services can be offered. 

Through its equity position in CORETX, LMS has the opportunity to create further value. The CORETX strategy is to consolidate the fragmented IT services market, with the aim to acquire high quality relevant products and services to fulfil the technological needs of its enlarged customer base. This could enable LMS to potentially realise a significant premium to its carrying value and therefore further enhance shareholder returns.

In August 2016, Gresham House Asset Management (''GHAM'') took over the management contract of LMS. GHAM has taken an active, hands on approach with the portfolio to optimise shareholder value. GHAM has also taken positions on the boards of the UK investments, including 365IT. GHAM's involvement was instrumental in facilitating, developing and executing the transaction.

Tony Dalwood, LMS Investment Committee member, commented:

"We are delighted to have achieved this outcome for LMS. It accelerates the longer-term benefits of scale for 365IT and, in addition to providing additional liquidity, offers LMS the opportunity to benefit from the future growth of the enlarged CORETX business."

Enquiries:

Gresham House Asset Management 0203 837 6270

Tony Dalwood