TIDMCMBN
RNS Number : 8966Q
Cambian Group PLC
05 December 2016
Cambian Group plc
5 December 2016
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
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 OF THAT
JURISDICTION
Cambian Group plc
PROPOSED DISPOSAL OF THE ADULT SERVICES BUSINESS FOR CASH
CONSIDERATION OF GBP377 MILLION
SUMMARY
-- Cambian Group plc ("Cambian" or the "Company"), one of the
UK's leading specialist behavioural health service providers, has
agreed to dispose of its adult services business (the "Adult
Services Business") to Cygnet Health Care Limited (the "Buyer"), a
wholly owned subsidiary of Universal Health Services, Inc. ("UHS")
for cash consideration of GBP377 million (the "Disposal
Consideration") (the "Transaction").
-- The Disposal Consideration represents an attractive
enterprise valuation of approximately 2.9x FY15 revenue of GBP129.5
million for the Adult Services Business. FY15 Adjusted EBITDA for
the Adult Services Business was GBP24.1 million; some costs taken
into account in determining this figure will remain with Cambian
after Completion.
-- The sale of the Adult Services Business will allow the
Company and its subsidiary undertakings (the "Cambian Group") to
focus on being a market leading provider of children's services,
where the board of directors of the Company (the "Board") sees
significant opportunities for growth, development and the creation
of shareholder value.
-- The majority of the Disposal Consideration will be used to
repay the Company's existing indebtedness in full.
-- Cambian also intends, subject to certain conditions, to
announce a return of capital of GBP40 million to Cambian's
shareholders (the "Shareholders") following Completion in H1
2017.
-- Completion of the Transaction ("Completion") is expected by the end of December 2016.
Christopher Kemball, Chairman of Cambian Group, commented:
"We are delighted to have attracted a high level of interest for
the Adult Services Business.
"The consideration from the proposed disposal will enable us to
fully pay down debt and provide adequate working capital for the
development and roll-out of the Children's Services Business at a
time of significant and growing demand for its critical services.
It also offers an opportunity to return capital to
Shareholders."
Saleem Asaria, Chief Executive, said
"We recently took the strategic decision to develop our
Children's Services Business around a differentiated integrated
recovery model incorporating care, education and therapy for
children with the highest needs.
"The proposed disposal will enable us to focus fully on the
development of the business and realise its potential as one of the
UK's leading specialist providers."
Due to its size, the Transaction constitutes a Class 1
transaction for the Company under the Listing Rules and is
therefore subject to the approval of Shareholders. A circular
containing further details of the proposed Transaction and
containing the notice convening a general meeting to consider a
resolution to approve the Transaction, will be sent to Cambian
Group shareholders as soon as practicable.
This summary should be read in conjunction with the full text of
this announcement.
Conference call:
There will be a conference call for analysts and investors today
at 8.30am GMT. To join the call please dial the appropriate number
listed below and provide the operator with the Conference ID. It is
advised to join the call up to 10 minutes in advance.
A presentation to accompany this call will be published on the
Company's website in due course:
http://www.cambiangroup.com/cambiangroup/investor/home
Participant UK Dial-In: 0800 6940 257
Participant International Dial-In: +44 (0)1452 555566
Conference ID: 32225754
For those unable to join the call, a replay function will be
available within four hours of the conclusion of the call. To
access the recording, please dial the appropriate number listed
below and enter the Conference ID.
UK Replay: 08009531533
International Replay: +44 (0)1452550000
Conference ID: 32225754
Enquiries:
Cambian Group plc Tel: +44 (0) 20
8735 6150
Saleem Asaria, Chief Executive
Officer
Martin Hopcroft, Chief
Financial Officer
Rothschild (Financial Adviser) Tel: +44 (0) 20
7280 5000
Hedley Goldberg
Thibault Poirier
Numis (Sponsor and Joint Tel: +44 (0) 20
Corporate Broker) 7920 3150
Michael Meade
James Taylor
James Black
J.P. Morgan Cazenove (Joint Tel: +44 (0) 20
Corporate Broker) 7742 4000
James Mitford
Alex Bruce
Instinctif Partners (PR Tel: +44 (0) 20
Adviser) 7457 2020
Mark Garraway
James Gray
Notes to Editors:
1. About Cambian
Cambian is one of the UK's leading specialist behavioural health
service providers. Founded in 2004, it has grown to become a
significant partner to the UK Government. The Cambian Group's
services have a specific focus on children and adults who present
high severity needs with challenging behaviours and complex care
requirements. The Cambian Group employs over 7,000 people across a
portfolio of over 300 purpose-designed facilities and 9 fostering
offices located in England and Wales.
2. About Cygnet Health Care Limited
The Buyer, a wholly owned subsidiary of UHS, offers a wide range
of services in the UK for individuals suffering from a variety of
mental health problems. The Buyer operates 21 centres with more
than 1,000 beds in the UK.
UHS is one of the largest hospital management companies in the
US. For nearly 40 years, UHS and its affiliates have focused on
meeting patients' healthcare needs across hundreds of local
communities. Today, UHS subsidiaries own and/or operate more than
240 acute care hospitals and behavioural health facilities in 37 US
states, Washington, D.C., Puerto Rico, US Virgin Islands and the
UK.
3. Cautionary statement
Numis Securities Limited ("Numis") which is authorised and
regulated by the Financial Conduct Authority in the United Kingdom,
is acting solely for the Company in relation to the Transaction and
nobody else as a client in relation to the Transaction and will not
be responsible to anyone other than Cambian for providing the
protections afforded to the clients of Numis or for providing
advice in relation to the Transaction.
J.P. Morgan Securities plc (which conducts its UK investment
banking activities under the marketing name, J.P. Morgan Cazenove),
which is authorised in the United Kingdom by the Prudential
Regulation Authority and regulated in the United Kingdom by the
Prudential Regulatory Authority and by the Financial Conduct
Authority, is acting as joint Corporate Broker for Cambian and for
no-one else in connection with the proposed disposal referred to in
this document and is not, and will not be, responsible to anyone
other than Cambian for providing the protections afforded to
clients of J.P. Morgan Securities plc, nor for providing advice in
connection with any of the matters described in this document
N.M. Rothschild & Sons Limited ("Rothschild"), which is
authorised and regulated in the United Kingdom by the Financial
Conduct Authority, is acting as financial adviser exclusively for
Cambian and no one else in connection with the Transaction and will
not regard any other person as a client in relation to the
Transaction and will not be responsible to anyone other than
Cambian for providing the protections afforded to clients of
Rothschild or for providing advice in relation to the
Transaction.
Proposed disposal of the Adult Services Business for cash
consideration of GBP377 million
1. Introduction
The Company today announces that it has agreed to dispose of the
Adult Services Business to the Buyer for cash consideration of
GBP377 million payable upon Completion, subject to certain
customary adjustments.
Due to its size, the Transaction constitutes a Class 1
transaction for the Company under the Listing Rules and is
therefore subject to the approval of Shareholders by ordinary
resolution (the "Resolution"). A circular containing further
details of the Transaction and containing the notice convening a
general meeting to consider the Resolution (the "General Meeting"),
will be sent to Shareholders as soon as practicable.
An irrevocable undertaking to vote in favour of the Resolution
has been received from GI Partners in respect of approximately 43
per cent. of the issued share capital of the Company.
2. Background to and reasons for the Transaction
As indicated in the 2015 Annual Report and Accounts, the Board
has been reviewing its strategic options, in light of the need to
repay Tranche A of its existing borrowings in September 2017 as
well as the wider market environment in which the Cambian Group is
operating, and advisors were appointed to review the options for
the Adult Services Business including a potential sale of this
business. It was further announced in September 2016 that the Board
had commenced market testing to assess potential interest in the
Adult Services Business.
The Board has now completed its strategic review and has
concluded that focusing on its children's services business (the
"Children's Services Business") represents the best way to create
value for Shareholders. The Cambian Group will be one of the
largest specialist children's services providers in the UK;
operating in a fragmented market with high quality ratings, a
differentiated care model and exciting long-term growth
opportunities.
The sale of the Adult Services Business will enable the Cambian
Group to focus all of its resources on becoming a high quality
provider of specialist education and behavioural health services
for children whilst, at the same time, repaying all of the Cambian
Group's existing debt.
The Board believes that the Transaction is highly attractive for
the following reasons:
-- the sale process attracted a significant number of interested
parties; this competitive process has ensured that the Disposal
Consideration of GBP377 million recognises the market position and
future prospects of the Adult Services Business and provides an
attractive valuation;
-- it significantly improves the Cambian Group's overall
financial position by enabling the repayment of all of the
Company's existing indebtedness;
-- it allows a GBP40 million return of capital to Shareholders; and
-- the anticipated growth and development of the Cambian Group
following Completion (the "Retained Group"), focused solely on the
Children's Services Business, is a potential source of future
Shareholder value.
3. Information on the Adult Services Business
The Adult Services Business is a leading provider of care
services to adults in the UK who present high severity needs with
challenging behaviours and complex care requirements. The origin of
these behaviours can be divided into one of three categories:
intellectual disabilities; mental health; and acquired brain
injury. The Cambian Group divides its services into these three
categories:
-- intellectual disabilities: comprising rehabilitation
hospitals, step-down and residential services and day services;
-- mental health: comprising rehabilitation hospitals and
step-down and residential services; and
-- acquired brain injury: comprising rehabilitation hospitals.
For the financial year ending 31 December 2015, the Adult
Services Business generated revenue of GBP129.5 million and
Adjusted EBITDA of 24.1 million.
It should be noted that the Adult Services Business as defined
in this announcement is not the same as the business described as
"Adult Services" in Cambian's published financial reports,
including the 2015 Annual Report and Accounts and the 2016 Interim
Results. This is because the perimeter of the Adult Services
Business differs from the perimeter of the business described as
"Adult Services" in these financial reports, due to sites being
transferred to and from the Adult Business Services Group pursuant
to the corporate reorganisation of the Cambian Group to ensure that
businesses and operations and only the business and operations of
the Adult Services Business are conducted by members of the Adult
Services Business Group. Further, the allocation of central costs
to the Adult Services Business is different from the allocation
made to the business described as "Adult Services" in the segmental
analysis contained in Cambian's published financial reports.
Certain central costs allocated to the Adult Services Business will
be retained by the Cambian Group at Completion.
4. Information on the Retained Group
The Retained Group will be significantly smaller than the
Cambian Group is today and will be focused exclusively on the
Children's Services Business. The Retained Group will keep
Cambian's name and brand.
For the financial year ending 31 December 2015, the Children's
Services Business generated revenue of GBP160.6m and Adjusted
EBITDA of GBP18.4m.
It should be noted that as referred to above in relation to the
Adult Services Business, the Children's Services Business is not
the same as the business described as "Children's Services" in
Cambian's published financial reports, including the 2015 Annual
Report and Accounts and the 2016 Interim Results.
In 2015, the Board took a strategic decision to develop a
differentiated integrated recovery model incorporating care,
education and therapy focused on children and young people with the
highest needs. The Cambian Group is re-focusing its services
accordingly, including fostering, and has invested in upskilling
its staff capabilities.
The Board believes that there is increasing demand for the
Children's Services Business, and significant potential for growth
in what continues to be a highly fragmented market in the UK. The
Retained Group will be one of the UK's largest specialist
children's services providers, with significant opportunity to
develop through a strategy of organic growth and prudent bolt-on
acquisitions, increasing both the range of services and geographic
reach of the business. The Board believes the Retained Group will
be successful due to a combination of its excellent operational
management, high quality regulatory ratings, differentiated model
and the significant demand that exists for the services of the
Retained Group.
The Board intends to adopt a measured approach to expanding its
business, combining both organic growth and acquisitions. In order
to achieve this, the Board intends to negotiate and put in place
appropriate bank facilities to support its future growth and
prospects. The Board's current intention is that, in the medium
term, its total net debt should not exceed 1.5 times Adjusted
EBITDA.
5. Use of proceeds and financial effects of the Transaction
The net cash proceeds arising from the sale of the Adult
Services Business are expected to be approximately GBP359 million
after Transaction costs and expenses of approximately GBP18
million. It is expected that there will be separation and
restructuring costs subsequent to the Transaction in order to fully
separate the Adult Services Business.
It is the Board's intention to use these net cash proceeds to
repay in full the indebtedness of the Cambian Group, which will be
approximately GBP293 million if Completion takes place prior to 1
January 2017 and approximately GBP298 million if Completion takes
place on or after 1 January 2017, and to return capital to
Shareholders (as described more fully below) with the balance
retained for the growth of the Children's Services Business.
6. Return of Capital
Following Completion and repayment of its existing indebtedness
in full, Cambian intends to return GBP40 million of the Disposal
Consideration to Shareholders following Completion (the "Return of
Capital"). The Return of Capital is subject to a number of
conditions including creation of sufficient distributable reserves,
final Board approval and, if required, final shareholder approval.
Further details of the Return of Capital will be provided in due
course. It is the Board's expectation that the Return of Capital
will be announced during the first half of 2017. Shareholders will
not be asked to approve the Return of Capital at the General
Meeting.
7. Future dividend policy
In addition to the Return of Capital, the Board intends to
resume its progressive dividend policy. The Board expects that the
first dividend payment to be made pursuant to such dividend policy
will be the interim dividend for the first six months of 2017
which, subject to, amongst other things, the availability of
sufficient distributable reserves, will be declared on or around
the time of the interim results announcement in 2017.
8. Current Trading
Trading overall, and within each division, is in line with the
Board's expectations, notwithstanding slightly reduced occupancy,
of late, in the lower severity day schools within the Children's
Services Business. Whilst the sale of the Adult Services Business
will involve complex separation issues, the Board looks forward
with confidence to the future as a stand-alone children's services
business.
9. Summary of the principal terms and conditions of the Transaction
Pursuant to a sale and purchase agreement, the Sellers have
agreed to sell the entire issued share capital of Care Aspirations
Developments Limited, Cambian Healthcare Limited and Cambian Care
Services Limited (these companies, together with their subsidiary
undertakings, the "Adult Services Business Group") to the the Buyer
for GBP377 million, subject to customary adjustments, payable in
cash on Completion, subject to a post Completion adjustment.
To facilitate the Transaction, the Company has conducted a
reorganisation to transfer, upon receipt of relevant regulatory
approval, where applicable, those sites which carry out the Adult
Services Business, which are not held by a member of the Adult
Services Business Group, to a member of the Adult Services Business
Group and to transfer those sites which carry out the Children's
Services Business and which are held by a member of the Adult
Services Business Group to a member of the Cambian Group which is
not a member of the Adult Services Business Group. The Board
expects that up to five of such site transfers will take place
after Completion, as the requisite regulatory approval for such
transfers will not have been received by then.
Completion is expected to occur by the end of December 2016 and
is conditional only upon the approval of Shareholders at the
General Meeting by way of an ordinary resolution.
At Completion, Cambian Group Holdings Limited will enter into a
transitional services agreement pursuant to which members of the
Retained Group will provide services, for a charge, relating to IT,
finance, procurement and estates, to members of the Adult Services
Business Group for a period of time following Completion.
Further details of the sale and purchase agreement and
transitional services agreement will be set out in the
Circular.
10. Board Changes
On Completion, Anne Marie Carrie will become the chief operating
officer of the Retained Group and an executive director of the
Company. Anne Marie Carrie has extensive experience in the care
services sector, having been previously chief executive officer of
Barnardo's (the UK's largest children's charity) and a director of
children's services at The Royal Borough of Kensington and Chelsea.
She has managed the Children's Services Business for the last two
years.
Alison Halsey, who is the chair of the audit committee, and
Christopher Brinsmead, senior independent director and chair of the
remuneration committee, have decided to step down from the Board
effective as of the conclusion of the Company's annual general
meeting expected to be held in mid-2017.
Following Completion, the Board will reduce in size in line with
the Retained Group and will comprise Christopher Kemball as
chairman, Saleem Asaria as chief executive officer, Anne Marie
Carrie as chief operating officer, and Alfred Foglio, Dr. Graham
Rich, Mike Butterworth and Donald Muir as non-executive Directors.
Martin Hopcroft is currently the interim chief financial
officer.
11. Expected timetable to Completion
A circular containing further details of the proposed
Transaction and containing the notice convening a general meeting,
will be sent to Cambian Group shareholders as soon as practicable.
Completion of the proposed Transaction is expected to occur by the
end of December 2016.
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
END
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