10th Sep 2024 09:56
(Alliance News) - International Workplace Group PLC should consider a share buyback, US listing or even a sale to unlock its intrinsic value, a leading shareholder on Tuesday stated.
In a letter to IWG management, Buckley Capital Management, LLC, a Miami-based investment firm, called for "immediate action to fully unlock the true value of the company".
"We are concerned that efforts by IWG's management to articulate the investment merits of the company have fallen on deaf ears, and further action needs to be taken to unlock the company's intrinsic value."
Buckley urged IWG, the Zug, Switzerland-based FTSE 250 listing to embark on a "meaningful" share buyback program and to immediately appoint advisors to proceed with a relisting in the US.
Should that fail to drive a re-rating, a sale should be considered.
"The time for action is now - these steps are crucial to ensuring that the company realizes its full potential and delivers the value that shareholders deserve," the letter stated.
While it has been encouraged by discussions with the company thus far, Buckley feels the board and management must take "more immediate action to fully unlock the true value of the company".
Buckley said its analysis suggests IWG could return over GBP2 billion to shareholders through free cash flow and capital structure optimization between now and 2028, which would total more than the market capitalisation today.
On Tuesday, shares in IWG were 1.1% higher at 172.40 pence each in London, giving a market value of GBP1.75 billion.
The investment firm accepted the need for IWG to be at one times net debt to earnings before interest, taxes, depreciation and amortisation in the short-term but it would like to see the longer-term leverage levels higher.
"As the company's capital-light model begins to generate significant fee income in the next 12 to 24 months, the valuation multiple of IWG should rise significantly," Buckley said.
"Therefore, it is imperative for the company to start buying back shares as soon as the 1x net debt/Ebitda target is reached to take advantage of the significantly discounted prices that exist today."
On the US listing, Buckley said it offered a "strategic opportunity to enhance shareholder value".
Buckley remarked that trading on the London Stock Exchange is not rewarding IWG with "the valuation multiple we believe it deserves".
In contrast, Buckely believes a US listing would expose IWG to a "new and more liquid market" with investors who have "greater appreciation of its leverage levels and business model".
Additional positive share price impact can be expected from more passive buying from US indices than passive selling from UK indices, the investment firm suggested.
"The more efficient capital market in the US can help the company realize intrinsic value in a timelier manner, which the UK market has failed to do over the last five years," the letter stated.
Buckley said management's decision to switch its reporting currency and adopt the US Generally Accepted Accounting Principles system, or GAAP, is a "step in the right direction".
"However, we urge management to accelerate its efforts and commit to a US listing immediately."
This would allow IWG to "fully capitalize on its North American business, enhance public-market multiples, and unlock significant shareholder value".
If a US listing and share buybacks fail to re-rate the shares, Buckley thinks management should explore a sale of the business.
Buckley pointed to rumoured interest in 2018 from financial buyers at prices much higher than current levels, between 9 to 10 times Ebitda.
"Given the significant interest in the past, if the public market fails to recognize IWG's value, we strongly recommend that management consider selling the company."
Buckley pledged to work collaboratively and constructively with the board and management to maximize shareholder value and looks forward to continuing a "positive dialogue".
By Jeremy Cutler, Alliance News reporter
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