Redde has agreed to acquire the FMG group of companies, comprising FMG Group Holdings Limited (“FMG”) and its subsidiary companies and partnership interests (the “FMG Group”), for approximately £43.2 million in aggregate. The acquisition is subject to the requisite regulatory approvals being received from The Financial Conduct Authority and the Solicitors Regulation Authority. Completion is expected to occur within 3 months.
Redde’s existing businesses currently focus on accident management, legal services and the supply and administration of general insurance products. The purchase of the FMG Group will broaden Redde’s accident and fleet management capabilities and allow it to enter additional industry sectors. Redde will also be able to widen its appeal to the owners and managers of large vehicle fleets requiring accident management and legal services as part of a long-term customer development plan.
The FMG Group undertakes outsourced fleet management, specialist rapid response and recovery management, fleet risk management and legal services. The FMG Group’s customers comprise leasing companies, fleet insurers and brokers, daily vehicle rental companies, direct fleets, blue light organisations, local councils and the Highways Agency.
Unaudited management accounts for the 9 months ended 30 June 2015 indicate that in aggregate the FMG Group achieved an EBITDA (before exceptional costs) of £3.8 million on sales of £69.2 million in that period and that as at that date the FMG Group had net assets of £21.6 million on a debt free basis. Management projections indicate an EBITDA outturn of £5.4 million for the 12 months to 30 September 2015. Based upon audited accounts for year to 30 September 2014, the reported EBITDA (before exceptional costs) was £2.5 million and a loss before tax of £0.5 million was recorded on sales £93.6 million with net assets on a debt-free basis being £9.9 million.
The FMG Group is being acquired from its management and a number of funds managed by Endless LLP for approximately £43.2 million in aggregate on a debt-free basis and assuming a normalised level of working capital. The consideration for the acquisition of all the shares and other vendor interests in the FMG Group will comprise a number of elements, the effect of which is the payment at completion of approximately £38.2 million in cash and the issue of new ordinary Redde shares (“Redde Shares”) with a total value of £5.0 million. Redde will also make a cash payment of £2.5 million in respect of additional working capital balances on completion.
The Redde Shares will be valued at their volume-weighted daily average price for the 20 business days prior to completion and the cash consideration will be adjusted downwards (or upwards) by £10,931 per day if completion occurs before (or after) 30 September 2015.
The new Redde Shares will be issued on completion but the holders have unconditionally and irrevocably waived their entitlement for any dividends with a record date during the 12 months following completion. The Redde Shares will be subject to a 24 month lock in (subject to the customary exemptions) followed by an orderly market arrangement.
In addition to supporting the Group’s strategy of widening its range of services the acquisition is expected to be immediately earnings enhancing and cash generative, and will support the Group’s dividend policy of distributing as much of the Group’s profits by way of dividend as it can, taking account of prevailing circumstances and other requirements and commitments.
Commenting on the Transaction Martin Ward, Chief Executive of Redde said: “The addition of FMG to the Redde group supports our strategic objective of growing earnings on a sustainable basis and broadening the scope of services we offer which are related to our core businesses. FMG is a quality business and has a strong reputation in its fields of business for serving its customers well. We have worked together in the legal services arena for a number of years and this acquisition is a further step in strengthening Redde’s proposition to its customers as we build on our recent successes”.
Andrew Cope, Executive Chairman of FMG said: “This is a truly exciting day in the long history of FMG. We strongly believe that marrying FMG’s people, knowledge and innovative capacity to Redde’s long term investment and commitment to the vehicle claims industry will result in an outstanding service and technical proposition for our customers today, tomorrow and well into the future”.
