Bglobal sell Utiligroup NorthEdge Capital: plans to return money to shareholders and de-list from AIM

bglobalBglobal has announced that it is to sell its Utiligroup subsidiary for £16.1 million in cash to private equity company NorthEdge Capital. The company plans to return money to shareholders and de-list from AIM once the deal completes.

Utiligroup is a provider of energy management software and process solutions. For the year ended 31 March 2013, Utiligroup’s revenue was £7.1 million and profit before taxation was £0.5 million.  Gross assets at 31 March 2013 were £5.7 million.  For the six months ended 30 September 2013, Utiligroup’s revenue was £3.0 million and profit before taxation was £0.4 million.

The announcement follows:

Bglobal plc (AIM:BGBL), announces it has conditionally agreed to sell its  wholly owned subsidiary Utiligroup Limited to a new company backed by NorthEdge Capital LLP and supported by Utiligroup’s management team, for a cash consideration of £16.1 million, payable on completion.

The Disposal constitutes a fundamental change of business under Rule 15 of the AIM Rules. Accordingly, the Disposal is conditional upon approval of Shareholders at a general meeting to be held on 18 June 2014.

Highlights

  • Disposal of Utiligroup for a cash consideration of £16.1 million
  • Following completion of the Disposal Bglobal will have estimated cash balances of £16.8 million
  • The Board’s strategy is to return this capital to Shareholders, and it is currently in discussion with its advisers to explore ways in which this can be achieved most effectively
  • It is anticipated that capital equal to up to 11 pence per Ordinary Share will be returned to Shareholders in 2014, with the balance of £5.1 million being retained to cover working capital and any liabilities arising from the disposal of Utiligroup and the disposal of B Global Metering Limited (which was announced on 22 April 2014)

 A circular, explaining the background to and reasons for the Disposal and providing notice of a general meeting (the “Circular”), is expected to be posted to Shareholders later today. Copies of the Circular will also be available on the Company’s website (www.bglobalplc.com).

 John Grant,  Executive Chairman of Bglobal plc, commented:

 “When I became Chairman in August last year, it was apparent that there was significant value within the Group that was in danger of being depleted rather than realised. Since then, I am pleased that the Board has been able to deliver improved underlying performance for Bglobal Metering and Utiligroup. This transaction, and the sale of Bglobal Metering in April, demonstrate that value which the Board has been able to unlock for our shareholders.”

Tim Jackson Smith, Chief Executive of Bglobal plc, commented:

 “I am delighted that we have agreed, subject to shareholder approval, to sell Utiligroup to a new company backed by NorthEdge Capital LLP. This deal is part of our ongoing programme to return value to our shareholders and the price we have achieved, which represents a significant premium to the current share price, fairly reflects the value of Utiligroup.”

 Background to and reasons for the Disposal

At the general meeting of the Company on 15 August 2013, Shareholders approved a resolution mandating the Board to carry out of a strategic review of the Group the purpose of which was to improve the performance of the business and enhance value for Shareholders. The Board appointed KPMG to carry out this review, whilst at the same time it actioned its own plan to significantly reduce Bglobal’s head office costs, re-focus the business on its customers, implement strict cash management procedures and remove approximately £1.0 million of annualised costs from Bglobal Metering. As announced on 11 November 2013, following detailed consultation and receipt of a report from KPMG, the Board commenced exploring a potential sale of its metering business.

On 22 April 2014, Bglobal announced it had reached an agreement with Energy Assets Group plc to dispose of the entire issued ordinary share capital of its metering business, Bglobal Metering, for a cash consideration of £2.3 million, which included a payment of £0.2 million for the cash balance on completion. 

Following the announcement of the strategic review, the Board received a number of enquiries from various parties who expressed an interest in acquiring Utiligroup. Whilst the Board’s main focus was in securing a buyer for Bglobal Metering and removing excess costs from the Group, it was decided in early 2014 to pursue a formal process to gauge the level of interest in Utiligroup and the likely value that a disposal of that business could generate for Shareholders. As part of this process, in February 2014, NorthEdge, supported by Utiligroup’s management team, approached the Board with an offer for the entire issued share capital of Utiligroup.

The Board is focused on enhancing value for Shareholders and considers that the sale of Utiligroup represents the best way to increase value for a number of reasons, namely:

  • in connection with the formal sales process of the business over 25 parties were approached to explore whether they were interested in acquiring Utiligroup. As part of that process several offers were received from both trade and private equity backed buyers and it was clear from the terms being offered that the offer from NorthEdge was the most attractive, not only with regard to the price being offered but also with regard to the deliverability of the offer. The sensible approach being adopted in respect of the scope and length of warranty and indemnity protection required and the caps on liability under those warranties and indemnities, will also allow the Board to return cash to Shareholders much quicker than under the alternative offers;
  • it has been clear to the Board for a while now that in order to thrive as a business, capitalise on future opportunities and fulfil its potential Utiligroup requires significant investment in its resources and systems which the Directors believe NorthEdge can deliver. The Board’s view is that the Group is unable to provide this investment without raising further funds the return on which would be uncertain;
  • without the necessary investment, the Group would remain a small AIM quoted company and Utiligroup would need to support the head office and other costs that are associated with an AIM quotation, which will further restrict its potential to grow; and
  • when Utiligroup was acquired by the Company in June 2010, the total consideration paid was £10.79 million (of which £6.8 million was satisfied in cash). In February 2013, Utilisoft Pty was sold for £2.2 million cash and accordingly, if this present transaction is completed, the Company will have received £18.3 million in cash in less than four years for the whole of the Utiligroup group, representing a significant return on that investment. Throughout the period of ownership Utiligroup has been profitable and cash generative all of which has helped to support the Group as other parts of its business failed to perform in line with expectations.

Accordingly, the Board considers that the offer for Utiligroup represents good value for the business and is in the best interests of Shareholders as a whole.

Following the completion of the Disposal, which is subject, inter alia, to Shareholder approval, Bglobal will have estimated cash balances (net of the expenses incurred in carrying out the strategic review and in the sale of Bglobal Metering and Utiligroup) of £16.8 million. The Board’s strategy is to return this capital to Shareholders and it is currently in discussions with its advisers to explore ways by which this can be achieved most effectively. The Board anticipates that a return of capital of equal to up to 11 pence per Ordinary Share will be undertaken in 2014, with the balance of approximately £5.1 million being retained to cover working capital and any liabilities arising from the disposal of Utiligroup and Bglobal Metering under the warranties and indemnities given to each buyer in respect of those transactions.  The Board expects that surplus monies will be returned to Shareholders once the extent of these liabilities, if any, has been determined.

Additionally, it is the Board’s intention, in due course, to cancel the admission of the Company’s Ordinary Shares to trading on AIM.

The Board will update Shareholders in relation to these matters when further information is available.

Information on Utiligroup

Utiligroup is a leading provider of energy management software and process solutions to UK energy participants. Utiligroup has many years’ experience in managing market participants’ dataflow requirements and breaking down barriers to entry through the Supplier in a Box” offering to new entrants.

The business operates through two subsidiaries, Utilisoft Limited (“Utilisoft”) and Utiliserve Limited (“Utiliserve”).

Utilisoft is a software company specialising in the development of software solutions that manage industry processes concerned with the movement of dataflows and the automation of core processes, such as retail customer registration and energy trading.

Utiliserve offers outsourced managed services providing back office support to a number of energy suppliers who use Utilisoft software solutions. Typical support would include managing the data processes of customers switching between suppliers and dataflows associated with meter readings or meter works.

Utiligroup is a market leading provider of software and services to the energy retail sector, providing solutions to 29 of the active UK energy suppliers, from the ‘Big 6’ suppliers to new entrants. Its range of solutions is easily scalable for all sizes of business, from small new entrants with ambitious plans to grow, to large multi-national corporations with millions of customers.

To read the full announcement, including the terms of the agreement click here.

UK, Darwen, Lancashire

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