TIDMSNN
RNS Number : 4497L
Sanne Group PLC
03 October 2016
3 October 2016
SANNE Group plc
("SANNE" or "the Group")
Acquisition of FLSV Fund Administration Services LLC
("Acquisition") and New Banking Facility
SANNE, the specialist provider of outsourced corporate, fund and
private client administration, reporting and fiduciary services, is
pleased to announce that it has entered into an agreement to
acquire FLSV Fund Administration Services LLC ("FAS") for a total
consideration of $65.8 million (GBP50.7 million(1) ).
The consideration for the Acquisition is structured with an
initial amount due at completion of $52.6 million (GBP40.6
million(1) ), to be settled approximately 74% in cash and 26% in
new SANNE shares, as well as deferred consideration of $13.2
million (GBP10.1 million(1) ), to be settled in the same split of
cash and new SANNE shares. The share consideration will be
calculated with reference to SANNE's five day average closing share
price up to 29 September 2016 of 468.6p and will be issued to the
relevant vendor shareholders in four equal annual instalments from
completion.
SANNE has also entered into a new GBP60.0 million, 5 year
committed banking facility with HSBC ("Committed Facility"), with
an additional GBP40.0 million accordion facility ("Accordion"), to
refinance the Group's existing facilities with HSBC, fund the cash
element of the Acquisition consideration and provide the Group with
significant future funding capacity.
Highlights
-- FAS is a New York headquartered business offering fund administration and reporting services to alternative asset
managers, primarily in North America
-- FAS has 115 employees, approximately 75 of whom are based in New York with the balance based in a support office
in Belgrade
-- The Acquisition provides Sanne with a high quality US platform from which to enter the large and fast growing US
alternative assets fund administration market
-- FAS's founders and major shareholders, Jeffrey Hahn (CEO) and Brenda Grayson (COO), will remain with the business
post completion and continue to head what will become SANNE's North American operations
-- The Acquisition will be immediately earnings enhancing
-- The Acquisition is conditional upon certain corporate actions to transfer ownership and control to SANNE. The
deal is expected to complete by the end of November 2016
Dean Godwin, Chief Executive Officer of SANNE Group plc,
commented:
"This is a significant milestone for SANNE, delivering a
platform of quality and scale in the attractive North American
market. FAS is led by a highly experienced and respected team that
has fostered a culture very much aligned with our own, with a focus
on providing the highest quality service to institutional clients.
The US market offers considerable opportunities, particularly in
the fast growing alternatives sector, and we look forward to
working together to deliver the next phase of growth."
Jeffrey Hahn, Partner and CEO of FLSV Fund Administration
Services LLC, commented:
"We are very excited to join SANNE. Being part of the larger
SANNE platform will provide significant leverage to drive growth in
North America and help us meet our clients' ever increasing global
service requirements."
Strategic rationale for the transaction and information on
FAS
The Acquisition represents an important strategic step for SANNE
in establishing a high quality platform in North America. North
America is the world's largest market for alternative asset
management, with private capital AUM of US$2.4 trillion, almost 60%
of the global total. This is forecast to grow at a compound annual
rate of around 13% over the next four to five years. At present,
approximately only 30% of North American private capital AUM is
outsourced to third party administrators. This is estimated to
reach 50% by 2020, driven by regulatory change, evolving reporting
requirements and the need for increased investment in technology
infrastructure, providing a significant opportunity for SANNE.
There are significant similarities between the services that FAS
and SANNE each provide to their respective client bases. However,
there is limited client overlap which should provide potential
revenue synergy opportunities over time.
FAS was founded in 2009 by Jeffrey Hahn, Brenda Grayson, and
Frankel Loughran Starr and Vallone LLP as a fund administration
firm offering end-to-end accounting, operations, reporting and
investor services. FAS has an institutional client base across a
range of alternative asset classes including private equity,
distressed debt, infrastructure and fund-of-funds fund managers.
The business has its head office in Manhattan, New York where
approximately 75 of the business' c115 employees are based. FAS
also has a service delivery office based in Belgrade, Serbia where
the balance of the staff are based.
FAS has enjoyed a strong organic growth track record since 2009
and more recently has delivered compound annual revenue growth of
29% between 31 December 2013 and 31 December 2015. The business has
also enjoyed a high level of cash conversion, with a large
proportion of its contracts billed quarterly in advance. In the
year to 31 December 2015, FAS recorded revenue of $18.0 million
(GBP13.9 million(1) ) and EBITDA of $5.1 million (GBP3.9 million(1)
). At the 31 December 2015 balance sheet date, FAS had gross assets
of $3.1 million (GBP2.4 million(1) ).
FAS was founded to provide certain administration services for a
large and international private equity institution. Revenues from
this client have grown strongly since 2009 at a compound annual
growth rate of 28%. This client remains an important strategic
relationship for the firm, accounting for approximately half of the
business's current work, albeit across a large number of different
funds, structures and services. Whilst this group remains a key
client of FAS, and is also an existing client of SANNE's in Europe,
FAS has also been very successful in building a diversified client
base comprising a large number of funds and structures.
The Acquisition is expected to be immediately earnings
enhancing.
Details of the new bank facilities
SANNE has entered into a new GBP60.0 million, 5 year committed
banking facility with HSBC to replace its existing HSBC facilities.
The Committed Facility is structured as a GBP46.0 million term loan
and GBP14.0 million revolving credit facility. The term loan will
be drawn to refinance the existing GBP18.0 million term loan as
well as part-fund the Acquisition. The revolving credit facility
will replace the Group's existing GBP7.0 million facility providing
committed funding capacity moving forward. In addition to the
committed GBP60.0 million, the Group will also have available a new
GBP40.0 million accordion facility providing significant additional
funding capability for future investment.
Details of the transaction
SANNE will acquire the entire equity interests of FAS for a
total consideration of $65.8 million (GBP50.7 million(1) ). The
initial consideration due at completion is $52.6 million (GBP40.6
million(1) ), of which $38.9 million (GBP30.0 million(1) ) will be
settled in cash and approximately $13.7 million (GBP10.6 million(1)
) will be committed in shares, with the shares issued in equal
tranches over a four year period, commencing on the first
anniversary of the Acquisition completing. Approximately $3.9
million (GBP3.0 million(1) ) of this initial share consideration
will be assigned to members of the senior management team and the
balance will be assigned to Jeffrey Hahn and Brenda Grayson.
There is also a deferred consideration payment of up to $13.2
million (GBP10.1 million(1) ) payable dependent on the satisfaction
of certain targets within FAS over an 18 month period post
completion. This deferred consideration will also be payable in
both cash and shares in the same proportions as the initial
consideration. The number of shares issued to satisfy the shares
element of both the initial and deferred consideration payments
will be calculated with reference to SANNE's average daily
mid-market closing price for the five trading days ended 29
September 2016 of 468.6p. The cash consideration of the Acquisition
will be funded by existing cash resources of the Group as well as
from the new Committed Facility.
Completion of the Acquisition is conditional on certain
corporate actions to transfer ownership and control to SANNE. The
Acquisition is expected to complete by the end of November
2016.
Enquiries:
SANNE Group plc
Dean Godwin, Chief Executive
Officer
Spencer Daley, Chief Financial
Officer +44 (0) 1534 722 787
Investec Bank plc
Garry Levin / James Ireland
Ed Thomas / Matt Lewis +44 (0) 20 7597 5970
Tulchan Communications LLP
Tom Murray
Stephen Malthouse +44 (0) 20 7353 4200
(1) Assumes a GBP:USD exchange rate of GBP1:$1.2968
Notes:
SANNE is a specialist global provider of outsourced corporate,
fund and private client administration, reporting and fiduciary
services.
Established for over 25 years and listed on the Main Market of
the London Stock Exchange, SANNE employs approximately 600 people
worldwide and administers structures and funds that have in excess
of GBP90 billion of assets.
The Group targets alternative asset markets that have high
barriers to entry and require specialist expertise to service. Key
clients include alternative asset managers, financial institutions
and corporates.
The Group has a presence in established, international financial
centres including Jersey, Guernsey, London, Luxembourg, Dublin,
Malta, South Africa, Dubai, Hong Kong, Shanghai and Singapore.
www.sannegroup.com
MSCUUSNRNAARRAA
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