16th Feb 2022 15:21
(Alliance News) - The share price of Filta Group Holdings PLC barely budged on Wednesday, despite the announcement of an agreed takeover offer from fellow AIM listing Franchise Brands PLC.
That is partly to be explained by the offer being all in shares, with no cash element. So the emphasis was on opportunities to create value from a larger combined company.
What's more, in their joint announcement before the market open on Wednesday, the two companies said they already had acceptances for the deal representing 82% of Filta shares, leaving only those holding the other 18% to react.
Rugby, England-based Filta provides cooking oil filtration and fryer management services, supporting the professional kitchens in restaurants and catering operations.
Manchester-based brand owner Franchise Brands is a consumer brand owner - with brands such as ChipsAway, Ovenclean and Barking Mad - but it also has a business-to-business side more closely aligned, but not overlapping, with the work that Filta does.
This division includes Metro Rod, a commercial drainage business; Metro Plumb, which provides specialist plumbing services; and Willow Pumps, a pump design, installation and servicing business.
Franchise Brands said that while Filta has been successful in creating a franchise business in the US, it has fared less well in its home market of the UK. Franchise Brands thinks it can help, and in Europe as well.
Franchise Brands will issue 1.157 shares in exchange for one share in Filta. Based on Franchise Brands' closing price of 147.5 pence on Tuesday, this values each Filta share at around 170.7p, a 7.7% premium to its closing price of 158.5p on Tuesday, and its entire issued share capital at around GBP49.8 million.
Shares in Franchise Brands were down 3.4% at 142.50 pence on Wednesday, reflecting a market cap of GBP136.6 million, while Filta's shares were down 0.4% at 157.89p, representing a market cap of GBP43.2 million.
The acquisition is conditional on Franchise Brands gaining valid acceptances from at least 75% of Filta shareholders, approval from Franchise's own shareholders at an upcoming general meeting, and the admission of new shares on AIM, while Filta's shares cease trading.
So far, Franchise Brands has gained irrevocable undertakings from 23.8 million Filta shares, representing 82% of the company's share capital. This includes the 19.6% stake held by Gresham House Asset Management Ltd. The offer has a long stop date of November 30.
"As we operate in similar markets to Filta, we know the business well, so we are delighted that Filta will be joining Franchise Brands. Bringing the businesses together will enable us to offer a broader range of complementary services to our combined customer base, providing competitive advantages in our ambition to offer a 'Water In, Waste Out' service to commercial customers and significant opportunities for future growth," said Franchise Brands Executive Chair Stephen Hemsley.
"With the benefit of greater scale, we will be able to leverage the combined group's expertise and shared services, including our scaleable technology, to drive future growth in revenue and profits, including by growing and developing Filta's UK and European franchise business. The enlarged group will also be well positioned to expand in North America, given Filta's well-established and successful franchise business in the region."
The senior leadership team of Filta, including Chief Executive Officer Jason Sayers, will join the enlarged group. Sayers will be managing director for Filta, which will be a division of the company.
"Filta delivered a strong performance in 2021 as the restaurant and hospitality market recovered from the impact of Covid-19. Despite some ongoing Covid challenges, new contracts were won, and we bounced back to deliver a record second half," Sayers said.
Last week, Filta said it recorded GBP23.6 million in revenue in 2021, up from GBP16.4 million in 2020.
"Franchise Brands offers an ideal home for our customers, business, talented staff and franchisees," Sayers added. "Our board believes there are greater benefits to be had from the more diversified range of services the larger group will offer, as well as a broader customer base and greater shared resources to support future growth."
By Dayo Laniyan; [email protected]; and Tom Waite; [email protected]
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