TIDMKIE
RNS Number : 7941V
Kier Group PLC
16 April 2021
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART
IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT
JURISDICTION.
THE COMPANY EXPECTS TO PUBLISH SHORTLY A CIRCULAR IN CONNECTION
WITH THE TRANSACTION. ANY VOTING DECISIONS BY SHAREHOLDERS IN
CONNECTION WITH THE TRANSACTION SHOULD BE MADE ON THE BASIS OF THE
INFORMATION CONTAINED IN THE CIRCULAR.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
FOR IMMEDIATE RELEASE
16 April 2021
Kier Group plc
Sale of Kier Living
Kier Group plc ("Kier" or the "Company") today announces that it
has entered into an agreement for the cash sale of Kier Living
Limited ("Kier Living") to Foster BidCo Limited (the "Buyer"), a
newly formed company, ultimately owned by Guy Hands, the Founder,
Chairman and Chief Investment Officer of Terra Firma (the
"Transaction").
The Transaction is conditional on Kier shareholders'
("Shareholders") approval at a General Meeting expected to occur in
early May.
The consideration payable by the Buyer for Kier Living is GBP110
million, payable in cash on completion of the Transaction
("Completion"), which is expected before mid-June. There will be
additional payments made on completion to cover, among other
things, Kier and its subsidiary and associated undertakings (the
"Group") providing working capital funding to Kier Living in the
period from 1 July 2020 until Completion.
The Buyer has paid a non-refundable (other than in limited
circumstances) deposit of GBP40 million to the Company, held in
escrow and to be released on Completion. The balance of the
consideration and the working capital funding will also be paid at
Completion.
Kier Living is a housebuilding business with established
operations across four of the most affordable regions in England.
Kier Living's principal focus is providing well-priced, low-rise,
mixed- tenure suburban family homes through open-market sales.
Benefits of the Transaction
The Kier Board unanimously believes that the Transaction
recognises the strategic value of Kier Living and is in the best
interests of Shareholders and other stakeholders as a whole because
it will:
-- facilitate a material reduction in the Group's net debt;
-- reduce the volatility of the Group's working capital;
-- remove the capital requirement to support land acquisition
within Kier Living to maintain its current level of sales
completions;
-- remove the off-balance sheet debt associated with certain of
Kier Living's joint ventures; and
-- simplify the Group and allow it to focus on its core,
high-quality, market-leading businesses in Infrastructure Services,
Construction and Property.
The sale of Kier Living is another step in the management's
strategy to simplify the Group and to create a strong, resilient
and flexible balance sheet, providing the Group's clients,
customers, suppliers and other stakeholders with greater confidence
in Kier as a counterparty. In addition, Kier is continuing to
consider a potential equity raise.
Kier publishes its interim financial results for the six months
ended 31 December 2020 on 21 April 2021.
A circular containing further information on the Transaction,
together with a notice convening a Shareholders' meeting of Kier,
is expected to be sent to Shareholders shortly.
Andrew Davies, Kier Group Chief Executive Officer said:
"The actions we have taken over the last two years have created
a strong operational platform for sustainable profitable growth and
free cash flow.
The disposal of Kier Living delivers another key milestone in
the Group's strategy to simplify the business and strengthen its
balance sheet."
Enquires:
Kier Group plc
07933 388
Andrew Collins, Head of Investor Relations 746
01767 355
Kier Press Office 096
Rothschild & Co (Financial Adviser and Sponsor
to Kier)
Neil Thwaites
Peter Everest
Phil Hare 020 7280 5000
FTI Consulting LLP
Richard Mountain
Nick Hasell 020 3727 1340
Important Notice
This announcement is for information purposes only and does not
constitute a prospectus or prospectus equivalent document. Nothing
in this announcement shall constitute an offer or invitation to
underwrite, buy, subscribe, sell or issue of the solicitation of an
offer to buy, sell, acquire, dispose or subscribe for shares of any
other securities. Nothing in this announcement should be
interpreted as a term or condition of the Transaction.
A circular is expected to be published shortly in connection
with the Transaction (the "Circular"). Copies of the Circular will,
following publication, be available through the website of Kier at
www.kier.co.uk. Neither the content of Kier's website nor any
website accessible by hyperlinks on the Company's website is
incorporated in, or forms part of, this announcement.
Kier urges Shareholders to read the Circular once published
carefully as it contains important information in relation to the
Transaction. Any vote in respect of resolutions to be proposed at
the Shareholder meeting to approve the Transaction and related
matters should be made only on the basis of the information
contained in the Circular.
The information contained in this announcement is for background
purposes only and does not purport to be full or complete. No
reliance may be placed for any purpose on the information contained
in this announcement or its accuracy or completeness. The
information in this announcement is subject to change.
The availability of this announcement and/or the Circular to
Shareholders who are not resident in the United Kingdom may be
affected by the laws of the relevant jurisdictions in which they
are resident (including affecting the ability of such Shareholders
to vote their shares with respect to the Scheme and the
Transaction). Persons who are not resident in the United Kingdom or
who are subject to the laws and/or regulations of another
jurisdiction should inform themselves of, and should observe, any
applicable requirements. Any failure to comply with any such
restrictions may constitute a violation of the securities laws of
such jurisdiction.
N.M. Rothschild & Sons Limited ("Rothschild & Co") is
authorised and regulated in the United Kingdom by the Financial
Conduct Authority (the "FCA") and is acting exclusively for the
Company and no one else in connection with the contents of this
document and any other matters referred to in this document and
will not regard any other person (whether or not a recipient of
this document) as a client in relation to any other matters
referred to in this document and will not be responsible to anyone
other than the Company for providing the protections afforded to
its clients, or for providing advice, in relation to the contents
of this document or any other matter or arrangement referred to in
this document.
Rothschild & Co does not accept any responsibility
whatsoever for the contents of this document, including its
accuracy, completeness or verification, or for any other statement
made or purported to be made by it, or on its behalf, in connection
with the Company and/or any other transaction or arrangement
referred to herein. Rothschild & Co accordingly disclaims, to
the fullest extent permitted by applicable law, all and any duty,
liability, or responsibility whatsoever whether arising in tort,
contract or otherwise, which it might otherwise have in respect of
this document or any such statement. No representation or warranty,
express or implied, is made by Rothschild & Co or any of its
affiliates as to the accuracy, completeness, verification or
sufficiency of the information set out in this document, and
nothing in this document will be relied upon as a promise or
representation in this respect, whether or not to the past or
future, provided that nothing in this paragraph shall seek to
exclude or limit any responsibilities or liabilities which may
arise under the FSMA or the regulatory regime established
thereunder.
Forward-Looking Statements
This document and the information incorporated by reference into
this document include statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements can
be identified by the use of forward-looking terminology, including
the terms "believes", "estimates", "anticipates", "expects",
"intends", "plans", "goal", "target", "aim", "may", "will",
"would", "could" or "should" or, in each case, their negative or
other variations or comparable terminology. These forward-looking
statements include all matters that are not historical facts. They
appear in a number of places throughout this document and the
information incorporated by reference into this document and
include statements regarding the intentions, beliefs or current
expectations of the Directors, the Company or the Group concerning,
amongst other things, the operating results, financial condition,
prospects, growth, strategies and dividend policy of the Group and
the sectors and markets in which it operates.
By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future and may be
beyond the Directors' or the Company's ability to control or
predict. Forward-looking statements are not guarantees of future
performance. The Group's actual operating results, financial
condition, dividend policy and the development of the sectors and
markets in which it operates may differ materially from the
impression created by the forward-looking statements contained in
this document and/or the information incorporated by reference into
this document. In addition, even if the operating results,
financial condition and dividend policy of the Group, and the
development of the sectors and markets in which it operates, are
consistent with the forward-looking statements contained in this
document and/or the information incorporated by reference into this
document, those results or developments may not be indicative of
results or the development of such sectors and markets in
subsequent periods. Important factors that could cause these
differences include, but are not limited to, general political,
economic and business conditions, including resulting from the
impact of the COVID-19 pandemic and responses by governments to it,
sector and market trends, changes in government, changes in law or
regulation, stakeholder perception of the Group and/or the sectors
or markets in which it operates and those risks described in the
section of this document headed "Risk Factors".
Other than in accordance with their legal or regulatory
obligations (including under the listing rules of the FCA, the
Disclosure Guidance and Transparency Rules of the FCA, the
Prospectus Regulation Rules made by the FCA including, where
appropriate, relevant provisions of the Regulation (EU) 2017/1129
and amendments thereto (as it forms part of retained EU law as
defined in the EU (Withdrawal) Act 2018) as referred to or
incorporated within the Prospectus Regulation Rules and the Market
Abuse Regulation (EU) No 596/2014 (as it forms part of retained EU
law as defined in the EU (Withdrawal) Act 2018)), neither the
Company nor Rothschild & Co undertake any obligation to update
or revise publicly any forward-looking statement, whether as a
result of new information, future events or otherwise.
Kier Group plc
Sale of Kier Living
1 Introduction
Kier Group plc ("Kier" or the "Company") today announces that it
has entered into an agreement for the cash sale of Kier Living
Limited ("Kier Living") to Foster BidCo Limited (the "Buyer"), a
newly formed company, ultimately owned by Guy Hands, the Founder,
Chairman and Chief Investment Officer of Terra Firma (the
"Transaction").
The consideration payable by the Buyer for Kier Living is GBP110
million, payable in cash on Completion of the Transaction
("Completion"). There will be additional payments made on
Completion to cover, among other things, Kier and its subsidiary
and associated undertakings (the "Group") providing working capital
funding to Kier Living in the period from 1 July 2020 until
Completion.
After adjustment for estimated Transaction costs and debt and
debt-like items, the net cash proceeds from the Transaction are
expected to be approximately GBP100 million (the "Net Cash
Proceeds"). The Board intends to use the Net Cash Proceeds to
reduce the Group's net debt and to make a contribution to its
Pension Schemes, both of which will help improve the financial
position of the Group.
The Transaction constitutes a Class 1 transaction for the
Company under the listing rules of the Financial Conduct Authority
and is, therefore, conditional upon the approval of Shareholders.
There are no other conditions to Completion. Completion, and
receipt of the consideration by Kier, is expected to occur before
mid-June. Kier will publish a circular to Shareholders shortly
setting out further details of the Transaction and convening the
General Meeting, at which Shareholder approval will be sought for
the Transaction.
2 Background to, and Reasons for, the Transaction
On 17 June 2019, Kier announced the conclusions of its strategic
review. In that announcement, the Company set out a new strategy
for the Group, which has been implemented by the refreshed senior
executive management team led by Andrew Davies, Chief Executive
Officer, and Simon Kesterton, Chief Financial Officer,
incorporating the simplification of the Group's portfolio of
businesses by selling or exiting non-core activities, including
Kier Living, focusing on cash generation and reducing the Group's
net debt. In addition, the Group is continuing to consider a
potential equity raise.
Kier Living is a well-established business but has limited
operational synergies with other parts of the Group and would
require significant ongoing funding from the Group to deliver
future growth. Accordingly, the Board initiated a competitive
process for the sale of Kier Living, which culminated in the
signing of the Sale and Purchase Agreement with the Buyer. The
Board unanimously believes that the Transaction recognises the
strategic value of Kier Living and is in the best interests of
Shareholders and other stakeholders as a whole because it will:
-- facilitate an immediate material reduction in the Group's net debt;
-- reduce the volatility of the Group's working capital;
-- remove the capital requirement to support land acquisition
within Kier Living to maintain its current level of sales
completions;
-- remove the off-balance sheet debt associated with certain of
Kier Living's joint ventures; and
-- simplify the Group and allow it to focus on its core,
high-quality, market-leading businesses in Infrastructure Services,
Construction and Property.
3 Trading update
As announced in Kier's trading update on 19 January 2021, the
Group performed well in the first half of financial year ending 30
June 2021 and second half trading started well with first half
trends continuing. Since the 19 January 2021 trading update, Kier
has continued to perform well and in line with the Board's
expectations.
Kier publishes its interim financial results for the six months
ended 31 December 2020 on 21 April 2021.
4 Information on Kier Living
Kier Living is a housebuilding business with established
operations across four of the most affordable regions in England.
Kier Living's principal focus is providing well-priced, low-rise,
mixed-tenure suburban family homes through open-market sales. In
the financial year ended 30 June 2020, Kier Living completed 1,183
sales completions and, as at 30 June 2020, Kier Living had a land
bank of 4,677 plots. The current owned and controlled landbank of
4,677 plots represent c.3 years of land supply based on Kier Living
delivering c.1,600 sales completions per annum. To maintain this
volume of sales completions on an ongoing basis, additional
investment in Kier Living will be required to support its land
acquisition strategy and increase its owned and controlled
landbank, providing greater visibility over its future delivery of
sales completions across each of its regions.
Kier Living's market position is supported by a structural
undersupply of affordable housing across the UK, a well-priced
product in affordable regions and strong relationships with
housing-focused public-sector bodies. Kier Living uses joint
ventures to provide alternative sources of capital to invest in
land acquisitions and provide greater access to increased land
opportunities that may not be possible without the joint venture
partner. Kier Living has announced a number of joint ventures in
recent years, including a joint venture partnership established in
2018 with Homes England and Cross Keys to develop 5,400 homes over
the next 10 years; a joint venture with Cross Keys announced in
2017 in the east of England; and a joint venture with Together
Housing announced in 2016. The Kier Living Group's interest in
these joint ventures (and the share of third-party debt) will
indirectly transfer to the Buyer on Completion. The remaining joint
ventures are not material to the business of the Kier Living
Group.
As at 30 June 2020, Kier Living was classified as an asset held
for sale with a fair value of GBP110.0 million, and an asset value
of GBP190.9 million, and in the year ended 30 June 2020 had an
operating loss of GBP42.4m.
5 Information on the Buyer
The Buyer is a newly formed private limited company incorporated
in Guernsey, ultimately owned by Guy Hands, the Chairman, Founder
and Chief Investment Officer of Terra Firma.
Since 1994, Terra Firma has sought to create value for investors
using a strategic, operationally focused and creative approach to
building better businesses. Terra Firma has invested over EUR17
billion of equity in 35 businesses with an aggregate enterprise
value of more than EUR48 billion. The investment strategy is sector
agnostic. Terra Firma searches for asset-backed businesses with
robust underlying demand which are open to transformation and these
have been found in a wide range of industries.
6 Principal Terms of the Transaction
On 16 April 2021, the Company and the Buyer entered into the
Sale and Purchase Agreement, pursuant to which the Company has
agreed, on the terms and subject to the conditions of the Sale and
Purchase Agreement, to sell all its shares in Kier Living to the
Buyer. The enterprise value of the Transaction is GBP110 million
(this excludes Kier Living's share of third party debt in certain
key joint ventures in the Kier Living Group). The consideration
payable by the Buyer for Kier Living is GBP110 million, payable in
cash on Completion. There will be additional payments on Completion
to cover among other things, the Group providing working capital
funding to Kier Living in the period from 1 July 2020 until
Completion.
The Transaction is conditional upon the approval of the
Resolution by Shareholders at the General Meeting.
Under the Sale and Purchase Agreement, the Company has given
customary warranties, indemnities and covenants to the Buyer.
As part of the Transaction, the Company has agreed to provide
certain transitional services to the Kier Living Group for a
limited time following Completion, including shared finance
services, shared HR services, procurement services and IT
services.
The Buyer has paid a non-refundable (other than in limited
circumstances) deposit of GBP40 million to the Company, held in
escrow and to be released on Completion. The balance of the
consideration and the working capital funding will also be paid at
Completion.
The Board expects that, subject to the approval by Shareholders
at the General Meeting, Completion will occur before mid-June
2021.
7 Use of Proceeds and Financial Effects of the Transaction
Use of proceeds
The Net Cash Proceeds arising from the Transaction are expected
to be approximately GBP100.0 million, after payment of Transaction
costs and expenses. The Board has agreed that the Net Cash Proceeds
will be used by Kier (excluding Kier Living) (the "Retained Group")
as follows:
-- GBP10.0 million will be used to reduce the Retained Group's
current funding deficit under its Pension Schemes;
-- GBP75.0 million will be used to reduce the Retained Group's current indebtedness; and
-- GBP15.0 million will be retained within the Retained Group's cash reserves.
Financial effects of the Transaction on the Retained Group
In addition to the use of proceeds described above, the
Transaction will also have the following beneficial financial
effects on the Retained Group:
-- simplify the Group's portfolio to enable Kier to focus on its
core markets in Infrastructure and Construction;
-- remove off-balance sheet debt associated with certain of Kier Living's joint ventures;
-- it is expected to result in a reduction to the overall
liability of the Group under its supply chain financing
arrangements; and
-- the Group will no longer need to provide working capital funding for Kier Living.
8 General Meeting
Completion is conditional upon Shareholders' approval being
obtained at the General Meeting. A circular setting out further
details of the Transaction, together with the notice to convene the
General Meeting and the form of proxy for use at the General
Meeting, will be published shortly.
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