24th Dec 2008 09:16
Newcourt Group plc
Ticker: NEW.I
Disposal of Ely Property
Hugh O'Neill appointed Newcourt CEO
Newcourt Group plc ('Newcourt' or the 'Group'), a leading, Irish based, support services group, announces that it has agreed to dispose of its wholly owned subsidiary, Ely Property Group Limited ('Ely') to a consortium of private investors led by Ely CEO, Philip Marley.
Newcourt has agreed to dispose of Ely for an enterprise value of €39.27 million comprising debt of €37.14 million and deferred cash consideration of €2.13m. The deferred consideration will be paid upon the earlier of the closing of certain existing contractual obligations relating to certain student accommodation sites and June 2011.
Transaction Overview
Disposal of wholly owned subsidiary, Ely, to a consortium of private investors led by Ely CEO, Philip Marley. As a result of this transaction, Newcourt will de-leverage, expecting to reduce net debt by €37.14 million resulting in a significantly stronger balance sheet. Newcourt will retain a 50% interest in Aldborough House, Dublin and an interest in a prime student accommodation site in central London. Newcourt will now primarily focus on its core Support Services and Recruitment divisions. Consequent upon Newcourt's revised business focus, Mr Ted O'Neill, Newcourt's CEO, will step down to become non-executive Deputy Chairman. Mr Hugh O'Neill, currently CEO of the Support Services division, appointed Group CEO with effect from 1 January, 2009.Disposal of Ely Property Group
Newcourt has agreed to dispose of its student accommodation business, Ely Property Group, for an enterprise value of €39.27 million to a consortium of private investors led by Ely CEO, Philip Marley. This enterprise value comprises debt of €37.14 million and deferred cash consideration of €2.13 million. The deferred consideration will be paid upon the earlier of the closing of certain existing contractual obligations relating to certain student accommodation sites in the UK and Ireland and June 2011. The consideration, when received, will be retained by Newcourt for general corporate purposes. In the year ended 31 December, 2007, Ely contributed trading profits of €4.11 million and at the year end had net assets of €5.75 million.
Debt Reduction
As a result of this transaction, Newcourt expects to retire €37.14 million of debt from its balance sheet which will be significantly strengthened as a result. €31.14 million of debt will be retired from Newcourt's balance sheet immediately with a further €6 million expected to be retired no later than mid 2009 following the closing of the disposal of a city centre site in Dublin to a joint venture formed between Ely and a third party. Interest and other costs associated with this €6 million debt will be funded by Ely until this disposal is completed.
The disposal of Ely will result in a significant write down of the associated goodwill and certain intercompany loans to Ely from Newcourt's balance sheet, estimated to be in the region of €37 million. This exceptional charge will be reflected in Newcourt's 2008 full year results. This write down will be a non-cash item and is not expected to have any impact on Newcourt's continuing operations in Support Services and Recruitment.
Retained Interests
Newcourt believes that student accommodation remains an attractive asset class. Newcourt will retain a 100 per cent interest in, and intends to complete the development of, a prime student accommodation site in central London. Newcourt is in discussions with equity and debt funding partners that it expects will result in this site being developed, off balance sheet, over the next two years.
Newcourt is also retaining a 50 per cent interest in Aldborough House, Dublin a development site which has planning permission for use as a day-care hospital. The remaining 50 per cent is owned by Ely.
In addition, following the transaction, Newcourt will retain certain contingent liabilities in connection with an interest cover and capital guarantee (€3.17 million of capital) given in relation to the funding of a student accommodation development in Ireland until this is refinanced by Ely, an interest cover guarantee in relation to half the funding cost of a joint venture student accommodation development in the UK and a rental guarantee given in relation to the lease of a UK based student accommodation block. Ely or one of its subsidiaries will retain the primary responsibility in relation to these liabilities.
Management Change
Following the disposal of Ely, Newcourt will focus on its core Support Services and Recruitment divisions. In light of this, Ted O'Neill, Newcourt's current Chief Executive has announced that he will step down and become non-executive Deputy Chairman. Hugh O'Neill, currently Chief Executive of the Support Services Division, will take over as Group Chief Executive with effect from 1 January, 2009.
As part of this transaction, Mr Philip Marley will resign from the Newcourt board.
Related Party Transaction
The disposal constitutes a related party transaction under the IEX Rules and the AIM Rules due to the interests of Philip Marley in Newcourt. Mr. Marley is a director of Ely and is a shareholder in the consortium acquiring Ely. The Directors of Newcourt, other than Philip Marley, having consulted with Davy, consider that the terms of the disposal are fair and reasonable, insofar as shareholders are concerned.
Mr Ted O'Neill, Newcourt's outgoing Group Chief Executive, commented
"Over the past 6 months, with the continuing deterioration in credit markets, our energies have been almost exclusively focused on working to reduce the Group's overall debt level and strengthen its balance sheet. While student accommodation remains an attractive asset class, in the current market environment, it has become increasingly difficult for small, quoted companies, to source equity and debt funding for any class of property development and this situation is unlikely to change in the short to medium term. The absence of the necessary funding constrains the Group's ability to continue to develop our student accommodation business and the imperative for Newcourt has been, and continues to be, to strengthen the balance sheet and focus on cashflow generation."
He added "The Board was approached by Philip Marley, CEO of Ely, on behalf of a consortium of private investors, with a proposal to acquire Ely including much of its related debt. After careful consideration, the Board and its advisers, concluded that, in the current market environment, the interests of all of the Group's shareholders were best served by exiting the student accommodation business, de-leveraging the Group's balance sheet and focusing on the Group's core Support Services and Recruitment businesses."
He concluded "Newcourt now has a sharper business focus and consequently, after six years as Group Chief Executive, and the successful de-leveraging of our balance sheet, I believe now is an appropriate time for me to step down from day to day involvement with the Group. I look forward to continuing to work with Newcourt in my new non-executive role where, among other things, I will focus on completing the attractive student accommodation opportunity we have retained in central London. I also look forward to supporting Hugh O'Neill and his team in taking Newcourt forward."
Mr Hugh O'Neill, incoming Group Chief Executive commented:
"Newcourt will now have a more focused business with well managed and defensive divisions. We remain committed to further strengthening our outsourced services business model and we will continue to support our client base to maximise the cost efficiencies within their operations.
He added "Despite the difficult economic outlook, our Support Services Division retains a strong market position and is a robust, defensive business that continues to develop integrated support service solutions for our valued client base. . Our Recruitment business is not immune to the current economic downturn. However, we have a very strong team and our strategy of building a business with a balance of contract, temporary and permanent placement means that it also has certain defensive qualities that will enable it continue to offer valuable human resource solutions to our extensive customer base."
He concluded "On behalf of the Board and management team, I would like to pay tribute to Ted O'Neill, our outgoing Chief Executive, for his commitment to Newcourt over the past six years. He has never wavered in his loyalty to the company, to his colleagues, to our customers or to our investors and it has been a privilege to work with him as our Chief Executive. I am delighted that he will remain on the Board of Newcourt as Deputy Chairman and look forward to continuing to benefit from his experience and insight."
About Newcourt Group plc
Newcourt is a leading provider of support services, employing over 3,200 staff throughout the island of Ireland. Following the disposal the Group will operate in Support Services and Recruitment.
Contacts
| Hugh O'Neill Newcourt Group Tel: +353 1 8839855 | Mark Kenny/Jonathan Neilan K Capital Source Tel: +353 1 631 5500 Email: | Ivan Murphy/Brian Corr Davy Tel: +353 1 679 6363 |
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