TIDMMMC
RNS Number : 5314K
Management Consulting Group PLC
22 September 2016
22 September 2016
This announcement contains inside information
Management Consulting Group PLC
Disposal of the remaining Kurt Salmon business
Management Consulting Group PLC ("MCG" or the "Company") today
announces that it has entered into an agreement with Accenture for
the sale of Kurt Salmon (the "Target Business"), comprising the
Kurt Salmon retail and consumer goods consulting businesses in the
United States, Canada, the United Kingdom, Germany, China, Hong
Kong and Japan, for a total gross cash consideration of
approximately $165 million (equivalent to approximately GBP127
million) payable on completion of the sale (the "Disposal").
Highlights
-- The Disposal is expected to realise gross cash proceeds of
approximately GBP127 million, allowing MCG to seek to use part of
the net proceeds of the Disposal to fund a proposed payment of
capital to shareholders (the "Return of Capital")
-- The Disposal represents an attractive value for shareholders
with the proposed gross consideration representing approximately
148% of the MCG Group's (the "Group") current market
capitalisation
-- The net proceeds of the Disposal will strengthen the
financial position of the Group by increasing the level of cash
resources available to the remaining business and eliminating the
requirement for the existing working capital facility
The Disposal, because of its size relative to the Group, is a
Class 1 transaction for MCG under the Listing Rules and is
therefore conditional, inter alia, on the approval of MCG
shareholders. MCG shareholders representing approximately 52% of
the Company's issued Ordinary Share Capital, excluding shares held
in treasury, have given irrevocable undertakings to vote in favour
of the resolution to be proposed at the general meeting to approve
the Disposal.
A circular containing further information on the Disposal and
the Return of Capital along with a notice convening a general
meeting will be sent to MCG shareholders in due course.
Alan Barber, Chairman of MCG, commented:
"The proposed disposal of the Kurt Salmon retail and consumer
goods consulting business follows the recent disposals of the
healthcare and French and related operations of Kurt Salmon. We
believe the business will be in excellent hands as part of
Accenture. In aggregate these disposals are expected to realise
total net proceeds (after transaction expenses) for the Kurt Salmon
businesses of approximately GBP180 million. We expect to return
part of the proceeds from the Disposal to shareholders in due
course and are highly focused on driving a recovery to profitable
growth in the Alexander Proudfoot business."
Enquiries
For further information please contact:
MCG Tel: +44 20 7710 5000
Nick Stagg, Chief Executive
Chris Povey, Group Finance
Director
FTI Consulting Tel: +44 20 3727 1000
Ben Atwell
Management Consulting Group PLC
Disposal of the remaining Kurt Salmon business
1. Introduction
Management Consulting Group PLC ("MCG" or the "Company") today
announces that it has entered into an agreement with Accenture for
the sale of Kurt Salmon (the "Target Business"), comprising the
Kurt Salmon retail and consumer goods consulting businesses in the
United States, Canada, the United Kingdom, Germany, China, Hong
Kong and Japan, (the "Disposal") for a total gross cash
consideration of approximately $165 million (equivalent to
approximately GBP127(1) million) payable on completion of the sale
("Completion").
The Disposal is of sufficient size relative to the MCG group
(the "Group") to constitute a Class 1 transaction for MCG under the
Listing Rules and is therefore conditional upon, inter alia, the
passing of a resolution approving the Disposal by shareholders of
MCG (the "Shareholders") at a general meeting (the "General
Meeting").
The Disposal is also conditional upon:
(i) there having been no material adverse change in staff
retention rates in the Target Business since the signing of the
Disposal agreement to the Completion date; and
(ii) the competition authorities in the United States, Austria
and Germany approving the Disposal.
MCG is expected to receive from the Disposal net cash proceeds
of approximately $157 million (equivalent to approximately GBP121
million) after the deduction of estimated transaction costs of $8
million (equivalent to GBP6 million). The Company intends to use
part of the net proceeds of the Disposal to fund a proposed payment
of capital to Shareholders (the "Return of Capital"). The board of
directors of MCG (the "Board") will seek flexibility to consider
further returns of value where it determines this to be in the best
interests of the Company and Shareholders as a whole.
A circular containing further information on the Disposal, and
including further details on the Return of Capital, along with a
notice convening the General Meeting will be sent to Shareholders
in due course.
Irrevocable undertakings to vote in favour of the resolution to
approve the Disposal at the General Meeting have been received from
Shareholders representing approximately 52% of the Company's issued
Ordinary Share capital (as defined below(2) ) as at 21 September
2016 (the latest practicable date prior to the publication of this
announcement).
2. Description of the Target Business and background to and reasons for the Disposal
MCG currently comprises two independently managed practices:
Alexander Proudfoot and Kurt Salmon. Alexander Proudfoot develops
and implements operational improvements to its clients to increase
productivity and is not affected by the Disposal.
As previously announced in January 2016, MCG completed the sale
of the French and related operations of Kurt Salmon and in July
2016 it completed the sale of the US healthcare business of Kurt
Salmon. Following these disposals, the Kurt Salmon business
retained by the Group comprises the Target Business which is now
subject to the Disposal. Kurt Salmon is an established
international brand and a leading management consulting firm
addressing clients in the retail and consumer goods sector.
The Target Business generated profit before tax of GBP5.3
million (Group: GBP3.7 million loss from continuing operations) and
revenues of GBP71.4 million (Group: GBP138.9 million from
continuing operations), in each case for the year ended 31 December
2015. The Target Business had total assets of GBP118.4 million
including goodwill attributable to the Target Business (Group:
GBP303.0 million) as at 31 December 2015.
The Board has concluded that the terms of the Disposal provide
an opportunity to exit from the Kurt Salmon business at an
attractive price for Shareholders. The Target Business is a
successful consulting business, but as part of the Group its
potential for investment and growth is limited.
Following the Disposal, the trading operations of the Group will
solely comprise Alexander Proudfoot. Alexander Proudfoot is a long
established business which has been successful over many decades.
It operates globally and is organised on the basis of two regional
centres, one focused on the Americas and one on Europe, Africa and
Asia. The recent performance of Alexander Proudfoot has been
adversely affected by weakness in the natural resources market
which has typically provided a substantial proportion of its
revenues. The Board remains committed to improving the performance
of Alexander Proudfoot and restoring the business to profitable
growth.
3. Key benefits of the Disposal
-- Achieves an attractive value for Shareholders
The agreed gross cash proceeds of approximately $165 million
(equivalent to approximately GBP127 million) (which is subject to
post-closing adjustments relating to amounts of debt, debt like
items, cash and working capital in the Target Business at
Completion) represents approximately 148% of the Group's market
capitalisation as at 21 September 2016(3) .
-- Strengthens the Group's balance sheet
The net proceeds from the Disposal will strengthen the financial
position of the Group by increasing the level of cash resources
available to the remaining business and eliminating the requirement
for a working capital facility.
-- Provides an opportunity to return cash to Shareholders
The Disposal will allow the Group to seek to return part of the
net cash proceeds from the Disposal to Shareholders.
4. Principal terms and conditions of the Disposal
The Disposal will be effected by way of a sale of the entire
issued share capital of the legal entities which comprise the
Target Business. The gross cash proceeds payable by Accenture are
expected to be approximately $165 million (equivalent to
approximately GBP127 million) (subject to post-closing adjustments
relating to amounts of debt, debt like items, cash and working
capital in the Target Business at Completion).
The Disposal is expected to complete in October or November
2016. The Disposal is conditional upon:
(i) the approval by Shareholders of the Disposal resolution at the General Meeting;
(ii) there having been no material adverse change in staff
retention rates in the Target Business since the signing of the
Disposal agreement to the Completion date; and
(iii) the competition authorities in the United States, Germany
and Austria approving the Disposal.
In the event that the conditions referred to above have not been
satisfied by 20 December 2016, the Disposal agreement will
terminate, unless this date is extended by Accenture. If the Board
changes its recommendation that Shareholders vote in favour of the
Disposal prior to the General Meeting, then Accenture can terminate
the Disposal agreement and the Company shall pay a fee of
GBP860,000.
5. Financial effects of the Disposal and the use of proceeds
MCG is expected to receive net cash proceeds of approximately
$157 million (equivalent to approximately GBP121 million) after the
deduction of estimated transaction costs of approximately $8
million (equivalent to GBP6 million). There will also be
non-recurring expenses and cash outflows associated with the
Disposal, principally relating to share awards and employee
remuneration and tax expenses arising on the Disposal. After
deduction of non-recurring costs and tax expenses the net cash
proceeds are expected to be approximately GBP116 million.
The Board intends to seek to return part of the net cash
proceeds to Shareholders and the forthcoming circular will contain
further information on the proposed Return of Capital. It is
intended that MCG will use the balance of net cash proceeds of the
Disposal after non-recurring costs and tax expenses, and after the
Return of Capital, for general corporate purposes, including the
matters referred to below, and will in due course consider
returning cash not required for these purposes to Shareholders by
way of a dividend or other means.
Following Completion, the Group will retain certain assets,
obligations and liabilities of the existing Kurt Salmon business,
relating principally to back office functions in the United States.
Some of these are required to support the transitional services
agreements in place with Wavestone (formerly Solucom) and ECG
Management Consultants, the acquirers of the French and related
operations and the healthcare operations of Kurt Salmon
respectively, and the transitional services agreement with
Accenture. Following the Disposal, and as these transitional
services arrangements with acquirers fall away over time, the Group
will need to make changes to the existing back office functions to
reduce costs, in the United States in particular. The Group is also
likely to make other changes to its cost base to reflect the
reduced scale of the continuing operations of the Group following
the Disposal. The Group intends to retain sufficient cash resources
to support the ongoing costs of these obligations and liabilities
and any related restructuring requirements following the
Disposal.
Following the Disposal, Alexander Proudfoot will comprise the
sole trading operations of the Group. The Board will continue to
take action to restore Alexander Proudfoot to profitable growth.
The Group will retain sufficient cash resources to support the
working capital requirements and obligations of this business as
necessary.
The Group will continue to monitor its balance sheet, including
the appropriate level of capital, liquidity and cash, taking into
account opportunities to further invest in and grow the Group's
remaining business, or to seek value for Shareholders through
further disposals should appropriate opportunities arise.
The Disposal is expected to generate a one-off IFRS profit on
sale of approximately GBP30 million, taking into account goodwill
held in the consolidated balance sheet of the Group which is
allocated to the Target Business (but excluding the impact of the
recycling of currency translation reserves). The Group profit and
loss account will also reflect the non-recurring expenses relating
to the Disposal.
6. Board, Management and Employees
There will be no changes to the Board as a result of the
Disposal.
7. Directors' recommendation
The Board considers the Disposal to be in the best interests of
MCG and the Shareholders as a whole. Accordingly, the Board
unanimously recommends that Shareholders vote in favour of the
resolution relating to the Disposal to be proposed at the General
Meeting, as the Directors intend to in respect of their own
beneficial holdings of Ordinary Shares representing approximately
0.8% of the Company's issued Ordinary Share capital as at 21
September 2016 (the latest practicable date prior to the
publication of this announcement).
References
1. All US Dollar amounts in this announcement are translated to
Sterling at an exchange rate of 1.30
2. Based on 506,085,179 Ordinary Shares in issue, excluding treasury shares
3. The Group's market capitalisation is calculated at GBP86.0
million, being 506,085,179 shares in issue, excluding treasury
shares, at GBP0.17 per share.
Notes to editors
MCG (MMC.L) provides professional services across a wide range
of industries and sectors. For further information, visit
www.mcgplc.com.
Accenture is a leading global professional services company,
providing a broad range of services and solutions in strategy,
consulting, digital, technology and operations. Combining unmatched
experience and specialized skills across more than 40 industries
and all business functions-underpinned by the world's largest
delivery network- Accenture works at the intersection of business
and technology to help clients improve their performance and create
sustainable value for their stakeholders. With more than 375,000
people serving clients in more than 120 countries, Accenture drives
innovation to improve the way the world works and lives. For
further information, visit www.accenture.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
DISZLLBLQKFZBBK
(END) Dow Jones Newswires
September 22, 2016 02:01 ET (06:01 GMT)
Management Consulting (LSE:MMC)
Historical Stock Chart
From Jun 2024 to Jul 2024
Management Consulting (LSE:MMC)
Historical Stock Chart
From Jul 2023 to Jul 2024