U.K.-based pensions actuarial business Xafinity Plc entered into a conditional agreement with Punter Southall Group Ltd. for the acquisition of Punter Southall Holdings Ltd., the holding company of the group's actuarial consulting, pensions administration and investment consulting businesses, for up to approximately £153 million.
Xafinity will satisfy the consideration through the payment of about £92.5 million in cash; the issue to Punter Southall Group of 25,766,871 completion shares at 163 pence apiece, for a total of about £42 million; the transfer by Xafinity Consulting to Punter Southall Group of the entire issued share capital of HR Trustees, Xafinity's noncore independent trustee business, at just under £8.5 million; and the issue of up to 6,134,969 earn out shares at 163 pence apiece, for a total of about £10 million following completion.
The cash component of the consideration will be financed by a combination of a capital increase to raise gross proceeds of about £70 million and of funds drawn under new debt facilities totaling £80 million. The capital raising entails the issuance of 41,176,470 Xafinity shares at an offer price of 170 pence per share through an accelerated book-building, representing a 1.7% discount on the company's Dec. 6 closing stock price of 173.0 pence.
The capital raising consists of a firm placing of 30,645,990 shares, raising gross proceeds of about £52.1 million, and a placing and open offer of 10,530,480, raising about £17.9 million. Qualifying shareholders can subscribe to the open offer on the basis of 1 open offer share for every 13 existing ordinary shares held.
The shares raised from the capital raising will represent 23.1% of Xafinity's enlarged share capital following the shares admission to trading, and 20.2% following the admission to trading of the completion shares issued to Punter Southall Group.
The acquisition is expected to complete Jan. 11, 2018, subject to approval by Xafinity shareholders and the receipt of proceeds from the capital raising efforts, among others. Punter Southall Group will continue to provide overhead services support and services to the Xafinity's targeted businesses for up to two years after completion, for a basic charge of £2.1 million per year.
The targeted businesses reported full-year 2016 revenue of approximately £51 million and adjusted earnings before interest, taxes, depreciation and amortization of £11 million. Xafinity said the acquisition is expected to be earnings-enhancing for the group for the financial year ending March 31, 2019, and materially earnings-enhancing afterward.
Zeus Capital Ltd. acted as joint book runner and sole broker in connection with the capital raising, while Liberum Capital Ltd. acted as joint book runner and sole underwriter.