OPD Opd Group

 

TIDMOPD 
 
RNS Number : 3066E 
OPD Group PLC 
17 December 2009 
 

17 December 2009 
                                       For immediate release 
 
 
OPD Group plc ("OPD" or the "Company") 
 
 
Sale of a majority interest in Odgers by OPD to management and senior employees 
of Odgers 
 
 
OPD Group plc ("OPD" or the "Company") announces that it has entered into an 
agreement to sell International Resources Group Limited ("Odgers") to a new 
company to be owned as to 50.5 per cent. by the management of 
Odgers, certain senior employees and the Odgers Employee Benefit Trust. OPD will 
hold the remaining 49.5 per cent. shareholding interest in the new company. 
 
 
Summary 
 
 
  *  The transaction will be undertaken by way of a sale of the entire issued share 
  capital of Odgers to Newco, a new company established for the purpose. At 
  completion Newco will be 49.5 per cent owned by OPD and 50.5 per cent. owned 
  principally by the senior management of Odgers (the "Senior Management"), 
  certain senior employees and its Employee Benefit Trust (the "Transaction"). 
 
 
 
  *  Newco has agreed to acquire Odgers from OPD for a total consideration of GBP16.0 
  million, which will comprise GBP5.05 million in cash, the issue of a GBP6.0 
  million loan note (the "Loan Note") and a 49.5 per cent. shareholding in Newco. 
  OPD's shareholding in Newco has been valued at GBP4.95 million, based on the 
  price at which the other proposed shareholders of Newco have agreed to subscribe 
  for their shares. 
 
 
 
  *  Before taking account of the interest receivable on the Loan Note, upon full 
  repayment of the Loan Note, OPD will have received net consideration of GBP11.05 
  million in cash and at Completion will have a shareholding  of 49.5 per cent. in 
  Newco. 
 
 
 
  *  Immediately prior to Completion, Odgers will distribute GBP2.0 million in cash 
  to OPD by means of an interim dividend, which does not form part of the 
  consideration under the Transaction, and at Completion Odgers will make a 
  contribution towards the costs of the Transaction incurred by OPD and Newco. 
 
 
 
  *  With the expiry of the earn-out period following OPD's original acquisition of 
  Odgers and given the nature of the Odgers business and its dependence on the 
  knowledge, contacts and expertise of its people, the Board believes that the 
  co-investment model will best align the commercial interests of OPD shareholders 
  and the management and employees of Odgers. The Board has concluded that sharing 
  the risks and rewards of ownership of Odgers between OPD, the Senior Management 
  and certain employees of Odgers will reduce the inherent risk in the continued 
  exclusive ownership of Odgers by OPD, in particular the ability to attract, 
  retain, appropriately remunerate and motivate key employees. 
 
 
 
  *  Although a strengthening of OPD's balance sheet is not the principal reason for 
  the Transaction, an ancillary benefit is that the Company's liquidity position 
  will improve by GBP5.05 million at Completion and thereafter by subsequent 
  repayment of the Loan Note. 
 
 
 
 
 
General Meeting 
 
 
The Transaction is conditional on the approval of OPD shareholders and a notice 
convening a general meeting for considering the necessary resolutions (the 
"Resolutions") will be sent to OPD shareholders. 
 
OPD has received an irrevocable undertaking to vote in favour of, or procure a 
vote in favour of, the Resolutions from Offerco Limited, which holds 16,838,356 
Shares, representing approximately 63.09 per cent. of the total issued share 
capital of the Company. 
 
 
Enquiries 
 
 
OPD Group plc 
        Tel. +44 (0) 207 7970 9700 
Ian Moss, Group Finance Director 
 
 
Investec Investment Banking 
Tel. +44 (0) 207 7597 5970 
Rowena Murray 
Cara Griffiths 
 
 
Herax Partners LLPTel. +44 (0) 207 408 0331 
Angus MacPherson 
 
 
Pall Mall Capital Limited (Adviser to Newco)Tel. +44 (0) 207 518 7300 
 
John Cutts 
Alexander Crawford 
 
 
This announcement has been issued by, and is the sole responsibility of OPD. 
 
 
Investec Investment Banking, a division of Investec Bank plc, which is 
authorised and regulated by the Financial Services Authority and is a member of 
the London Stock Exchange plc, is acting exclusively for OPD in connection with 
the Transaction and is not acting for any person other than OPD and will not be 
responsible to any person other than OPD for providing the protections afforded 
to its customers or for providing advice on the Transaction and arrangements 
proposed in this announcement. 
 
 
Herax Partners LLP which is authorised and regulated by the Financial Services 
Authority, is acting exclusively for OPD in connection with the Transaction and 
is not acting for any person other than OPD and will not be responsible to any 
person other than OPD for providing the protections afforded to its customers or 
for providing advice on the Transaction and arrangements proposed in this 
announcement. 
 
 
Pall Mall Capital Limited which is authorised and regulated by the Financial 
Services Authority, is acting exclusively for Newco in connection with the 
Transaction and is not acting for any person other than Newco and will not be 
responsible to any person other than Newco for providing the protections 
afforded to its customers or for providing advice on the Transaction and 
arrangements proposed in this announcement. 
 
 
This announcement is for information only and does not constitute an offer or 
invitation to acquire or dispose of any securities or investment advice in any 
jurisdiction. 
 
 
Past performance is no guide to future performance and persons needing advice 
should consult an independent financial adviser. 
 
 
The information contained in this announcement does not constitute an offer to 
sell or the solicitation of an offer to buy any security. Distribution of the 
information contained in this announcement, into or within jurisdictions other 
than the United Kingdom may be restricted by law and, therefore, persons into 
whose possession this announcement comes should inform themselves about and 
observe any such restrictions. Any failure to comply with any such restrictions 
may constitute a violation of the securities laws of the relevant jurisdiction. 
 
 
This summary should be read in conjunction with the full text of the following 
announcement. 
 
 
Terms used in this announcement shall have the same meanings as those in the 
Circular 
 
1.    Introduction 
 
 
The most recent interim results and interim management statement for OPD 
included statements that consideration was being given to the sale of equity 
stakes in the operating subsidiaries of OPD to the management of those 
businesses and that discussions were ongoing. As a result of those 
discussions the Board announces today that OPD has entered into an agreement to 
sell Odgers to a new company ("Newco"), to be 49.5 per cent owned by OPD and 
50.5 per cent owned principally by the senior management (the "Senior 
Management"), certain senior employees and the Odgers employee benefit 
trust ("Odgers EBT") (the "Transaction"). 
 
 
The consideration for the whole of Odgers payable by Newco to OPD is GBP16.0 
million, comprising GBP5.05 million in cash, the issue of a GBP6.0 million Loan 
Note and a 49.5 per cent shareholding in Newco, which has been valued at GBP4.95 
million based on the price at which the other proposed shareholders of Newco 
have agreed to subscribe for shares. Before taking account of the 
interest receivable on the Loan Note, upon full repayment of the Loan Note, OPD 
will have received net consideration of GBP11.05 million in cash and at 
Completion will have a shareholding interest of 49.5 per cent. in Newco. 
 
2. 
   Background to and reasons for the Transaction 
 
 
The Board has been pleased with the performance of Odgers since the acquisition 
and it remains the most profitable company within the OPD Group, notwithstanding 
that its financial performance has been impacted by the downturn in the general 
economic conditions. With the expiry of the earn-out period following the 
original acquisition of Odgers by OPD in 2005 and given the nature of the 
business of Odgers, the success of which is primarily dependent on the 
knowledge, contacts and expertise of its people, the Board has been considering 
the most appropriate ownership structure for Odgers going forwards in order to 
protect its continuing investment in the business, to appropriately incentivise 
Senior Management and senior employees and to retain the highest calibre 
consultants. The Board believes that the co-investment model whereby 
the interests of the OPD shareholders and the management and employees of Odgers 
are directly aligned is a strategically attractive ownership structure. The 
Board has therefore concluded that sharing the risks and rewards of ownership of 
Odgers between OPD, Senior Management and certain employees of Odgers, will best 
align the commercial interests of the parties and reduce the risks inherent in 
the continued exclusive ownership of Odgers by OPD, in particular the ability 
to attract, retain, appropriately remunerate and motivate key people. 
 
 
Under the Transaction, the Company will receive GBP11.05 million as cash 
consideration from Newco (including GBP6.0 million before interest under the 
Loan Note) whilst receiving 49.5 per cent. of the shares in Newco at Completion. 
Although a strengthening of OPD's balance sheet is not the principal reason for 
the Transaction, an ancillary benefit is that OPD's liquidity position will 
improve by GBP5.05 million at Completion and thereafter by subsequent repayment 
of the Loan Note. 
 
 
OPD will record a loss of approximately GBP17.4 million as a result of the 
Transaction. This is in addition to a goodwill impairment of GBP7.6 million 
recognised in the Group's consolidated financial statements for the year 
ended 31 December 2008. Nevertheless, the Board believes that for the reasons 
described in the paragraphs above that the Transaction represents the most 
appropriate course of action to maximise shareholder value. 
 
3. 
Information relating to Odgers 
 
 
Odgers is a leading executive search firm with approximately 370 employees, 
predominantly active in the UK. It operates from 8 offices in the UK and 5 
overseas offices. 
 
 
Odgers has a strategy of focusing on senior executive and board level 
appointments in a number of sector-focused practices, including primarily: 
  *  Board appointments 
  *  Business and professional services 
  *  Financial services 
  *  Energy, manufacturing and industrial 
  *  Public appointments and charities 
  *  Retail and consumer 
  *  Sports 
  *  Technology 
 
 
 
In addition to permanent placements, Odgers has also developed a significant 
presence in the provision of interim management and is now one of the largest 
providers of senior interim managers in the UK. 
 
 
The Board considers each of the members of Senior Management to be key 
individuals in the context of Odgers' business. 
 
 
Odgers is a founder member of the Odgers Berndtson international network which 
is represented in 50 cities in 24 countries and through which it is able to 
benefit by accessing opportunities from the network and also from making 
referrals to other network members. 
 
 
In December 2005, OPD acquired an initial 70 per cent. shareholding in 
Odgers from certain members of the Senior Management and others, for GBP19.8 
million in cash together with 1.43 million OPD shares. The balance of the issued 
share capital of Odgers was acquired by OPD in three equal tranches at a 
valuation based on Odgers' earnings for each of the three financial years 
ended 31 December 2008. Each payment was equivalent to 60 per cent of the 
earnings before interest, tax, depreciation and amortisation of Odgers for the 
relevant financial year and was principally financed by the profits generated by 
Odgers in that financial year. 
 
 
The total amount accounted for by OPD in relation to the acquisition of Odgers 
will, following payment of the final tranche of deferred consideration due to be 
paid in December 2009, be GBP36.2 million in cash and the issue of the 1.43 
million OPD shares referred to above. GBP3.8 million was paid to the sellers 
directly by Odgers and accordingly the net cash outlay of OPD in respect of 
the original transaction was approximately GBP32.4 million. 
 
 
Since the date of the original acquisition and taking into account the 
Pre-Completion Dividend, OPD will have received dividends of approximately 
GBP11.9 million from Odgers and, as set out below, will receive GBP11.05 million 
in consideration from Newco. 
 
4.    Information on the purchaser 
 
 
The purchaser is a newly incorporated company that has been formed for the 
purposes of implementing the Transaction. Newco will be 49.5 per cent. owned by 
OPD and 50.5 per cent. owned by the Senior Management, the Odgers A Shareholders 
(principally senior employees) and the Odgers EBT. 
 
 
The Senior Management includes Richard Boggis-Rolfe and Virginia Bottomley, who 
together with certain other employees of Odgers and institutional funds, sold 
Odgers to OPD in December 2005. Following the acquisition of Odgers by OPD, 
Richard Boggis-Rolfe and Virginia Bottomley joined the OPD Board as executive 
directors and were regarded by the OPD Board as being integral to the 
performance of the Odgers business. 
 
 
Richard Boggis-Rolfe and Virginia Bottomley are directors of Odgers and were 
executive directors of OPD until 28 July 2009 and are associates (as defined in 
the Listing Rules) of Newco. Accordingly, Newco is a related party of the 
Company for the purposes of the Listing Rules and the Transaction Documents are 
subject to approval by Shareholders. None of Newco, Richard Boggis- Rolfe or 
Virginia Bottomley hold OPD shares as at 16 December 2009 (being the latest 
practicable date prior to the publication of this document), but nonetheless 
each has undertaken not to vote on the Resolutions and, furthermore, each of 
them has undertaken to take all reasonable steps to ensure that their associates 
(as defined in the Listing Rules) will not vote on the Resolutions at the 
General Meeting. None of the Related Parties are currently members of the Board 
and therefore have not participated (and will not participate) in the Board's 
consideration of the Transaction. 
 
5.    Financial effects of the 
Transaction 
 
 
The Transaction will increase OPD's cash reserves by GBP5.05 million and, unless 
it is repaid early, the Loan Note will give OPD a steady income stream between 
January 2011 and December 2014. OPD will be entitled to a proportionately lower 
share of Odgers' future earnings as a result of its reduced indirect 
shareholding interest in Odgers. However, subject to certain conditions, Newco 
has committed to distributing 75 per cent. of its annual distributable profits 
by way of cash dividend and OPD will receive its proportionate share of such 
dividends. 
 
6.    Principal terms of the sale agreement 
 
 
Under the terms of the sale agreement, which was signed on 17 December 2009, OPD 
has agreed to sell Odgers to Newco in return for a cash payment of GBP5.05 
million, the issue of 4.95 million new shares in Newco representing 49.5 per. 
cent of Newco's issued share capital and the issue of the Loan Note by Newco in 
the nominal amount of GBP6.0 million and accruing interest at 8 per cent. over 
Base Rate. The Loan Note is repayable in equal quarterly instalments over a 
period of four years from January 2011, but it may be prepaid voluntarily by 
Newco in whole or in part at any time. 
 
 
The sale agreement, completion of which will represent a class 1 transaction 
under the Listing Rules due to the size of Odgers in relation to the OPD Group 
and the related party nature of the Transaction, is conditional upon the passing 
of the appropriate resolutions at a general meeting of the Company to be held 
for that purpose (notice of which will be sent to OPD shareholders) and the 
payment of the pre-completion dividend of GBP2 million. 
 
7.    Use of proceeds 
 
 
The proceeds from the sale will in the first instance be retained by the Company 
to strengthen its financial position. In due course proceeds may be used to fund 
investment in the ongoing business of OPD or to make acquisitions or may be 
returned to OPD shareholders. The shares to be issued by Newco to OPD at 
completion will be retained by OPD and shall have the rights, and be subject to 
the restrictions, set out in the proposed shareholders' agreement between OPD, 
Senior Management and Newco and Newco's articles of association. 
 
8. 
Current trading, trends and prospects for the continuing group 
 
 
On 16 October 2009, OPD released an interim management statement for the third 
quarter of 2009 which stated that: 
 
 
"Net fee income for the quarter was GBP16.7 million, 27 per cent. down on that 
achieved in the equivalent period in 2008. Trading conditions remain challenging 
in the majority of markets in which the Group operates". 
 
 
The Directors believe that this statement remains true as at the date of this 
document. 
 
9.    General Meeting 
 
 
A circular will be sent to OPD shareholders containing a notice of a general 
meeting of the Company at which various resolutions will be proposed to approve 
the Transaction. 
 
 
The Resolutions will be proposed as ordinary resolutions and will be passed if 
more than 50 per cent. of the votes are cast in favour. If the Resolutions are 
not passed, the Transaction will not proceed. 
 
10.    Irrevocable 
undertaking 
 
 
OPD has received an irrevocable undertaking to vote in favour, or procure a vote 
in favour of, the resolutions from Offerco Limited which holds 16,838,356 Shares 
representing approximately 63.09 per cent. of the existing issued share capital 
of the Company. This undertaking will lapse if the Transaction does not 
complete. 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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