Demerger of Occupational Health division
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as amended by regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310. Upon the publication of this announcement via Regulatory Information Service, this inside information is now considered to be in the public domain.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.
12 September 2024
Marlowe plc
Demerger of the Occupational Health division from Marlowe to form Optima Health
Marlowe plc ("Marlowe", and, together with its subsidiaries, the "Group"), the UK leader in business-critical services which assure regulatory compliance, announces that it intends to demerge its Occupational Health division from Marlowe to form Optima Health plc ("Optima Health") as an independent company and to make an application for the entire issued share capital of Optima Health to be admitted to trading on the AIM market of London Stock Exchange plc by way of an introduction (the "Demerger").
Summary
· Following the strategic review first announced in November 2023, the Group announces the Demerger of its Occupational Health division.
· The Demerger will be implemented by way of a dividend in specie of ordinary shares in the capital of Optima Health ("Optima Health Ordinary Shares") to Marlowe shareholders (the "Demerger Dividend") such that each shareholder of Marlowe shall receive:
1 Optima Health Ordinary Share for every 1 existing Marlowe ordinary share
held on 25 September 2024 (being the Record Date for the Demerger)
· The Demerger will allow Marlowe, as a market-leading Testing, Inspection and Certification ("TIC") business and Optima Health as the UK's leading provider of technology enabled corporate health and wellbeing solutions, as two distinct entities, to fully focus on their respective end markets and future strategic objectives.
· Following the Demerger, the Marlowe Group will continue to drive organic growth across its market-leading TIC division whilst delivering margin expansion and strong cash generation.
· The continuing TIC operations are focussed on ensuring the safety and compliance of customers' business premises in accordance with relevant regulation and legislation and serve approximately 27,000 customers across the UK in markets where Marlowe made its original acquisitions in 2016 and which continue to display the same attractive structural growth drivers underpinned by regulation, legislation and high levels of recurring income.
· Marlowe's continuing TIC operations following the Demerger, comprising Fire Safety & Security and Water & Air Hygiene, generated £292.3 million of revenue and £35.2 million of divisional adjusted EBITDA in the year ended 31 March 2024 ("FY24").
· It is expected that the Optima Health Ordinary Shares will be admitted to the AIM market of London Stock Exchange plc on 26 September 2024 ("Admission").
· Optima Health is the UK's leading provider of technology enabled corporate health and wellbeing solutions in the occupational health sector, a specialist branch of medicine.
· Optima Health offers a comprehensive range of flexible and progressive services from statutory driven workplace health surveillance medicals to proactive and preventive interventions, through to workplace health advice and attendance management assessments, and ultimately rehabilitation programmes and pathways aimed at returning people to work.
Commenting on the intended Demerger, Lord Ashcroft (Interim Non-Executive Chair) said:
"The Demerger will allow the respective Boards of Marlowe and Optima Health to explore strategies tailored to their distinct end markets, providing greater flexibility with which to maximise shareholder value.
"Following the Demerger, Marlowe's business will consist of the market-leading compliance service TIC division which comprise the Fire Safety & Security and Water & Air Hygiene businesses. The Group is well positioned and has a clear strategy to drive organic growth, margin enhancement and strong cash generation."
Background to and rationale for the Demerger
Since its foundation in 2015, Marlowe has built leading UK businesses addressing end markets that are underpinned by regulation and non-discretionary client requirements.
In November 2023, Marlowe announced that the Board had begun a strategic review to evaluate the optimal organisational and capital structure for the Group to maximise shareholder value, with the first action taken being to divest of certain GRC software and service assets for an enterprise value of £430 million (the "GRC Divestment"). The GRC Divestment was announced on 22 February 2024 and subsequently completed at the end of May 2024.
The Group subsequently repaid the Group's debt facilities in full, returned £150 million to Marlowe shareholders by way of a special dividend paid on 5 July 2024 and has made significant progress in returning more than £40 million to Marlowe shareholders under the Group's previously announced share buyback programme. Following the conclusion of the Demerger and conditional on shareholders approving further share buybacks at Marlowe's upcoming Annual General Meeting, the Group intends to continue with this programme at levels which increase value to Marlowe shareholders. These buybacks will be funded by utilising Group cash balances, which will be retained by Marlowe following the Demerger.
The Board has continued its strategic review, recognising that the TIC and Occupational Health divisions operate as distinct businesses in separate end markets, each with their own unique market dynamics and strategic opportunities.
Optima Health will be led by Jonathan Thomas and Heidi Giles as CEO and CFO respectively. The Optima Health executive management team will be subscribing for new ordinary shares in Optima Health following the Demerger and immediately prior to Admission at an Optima Health equity valuation of £225 million. Other than this management subscription, no additional capital will be raised as part of the Demerger. It is intended that Julia Robertson, Adam Councell and Mike Ettling will be appointed as Non-Executive Chair and Non-Executive Directors respectively of Optima Health, all of whom are considered will be independent directors of Optima as a standalone entity following the Demerger. It is intended that Simon Arnold will also be appointed as a non-independent Non-Executive Director of Optima Health.
The Demerger will enable both market-leading businesses to pursue strategies best suited to their respective markets, optimising options for each to generate maximum future value for shareholders.
The Demerger is not conditional on the approval of Marlowe shareholders and Marlowe will not, on completion of the Demerger, retain any residual shareholding in Optima Health.
Demerger timetable
The expected timetable of the Demerger Dividend is as follows:
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Record Date for determining entitlement to the Demerger Dividend |
6.00 p.m. on 25 September 2024 |
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Demerger Dividend paid to Marlowe shareholders on the Record Date |
After 6.00 p.m. on 25 September 2024 |
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Ex-Dividend Date |
26 September 2024 |
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Admission and commencement of dealings in Optima Health Ordinary Shares on the AIM market of the London Stock Exchange |
8.00 a.m. on 26 September 2024 |
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CREST accounts credited in respect of Optima Health Ordinary Shares in uncertificated form |
As soon as practicable after 8.00 a.m. on 26 September 2024 |
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Posting of share certificates for Optima Health Ordinary Shares |
Within 10 business days of Admission |
Unless the counterparties specifically agree otherwise, a buyer of the Company's Ordinary Shares ahead of the Ex-Date will assume the benefit to the Demerged shares, and the seller would need to pass the benefit to the buyer, even if the seller is the recorded owner at the Record Date.
All references to times are to London time unless otherwise stated. The dates given are based on the Company's current expectations and may be subject to change. If any of the dates or times above change, Marlowe will give notice of the change by issuing an announcement through a Regulatory Information Service. Further announcements in respect of the Demerger will be made, as appropriate, in due course.
Tax consequences of the Demerger
Information relating to the tax consequences of the Demerger can be found in the appendix to this announcement. The statements contained within the appendix are intended only as a general guide to certain aspects of current UK tax law and what is understood to be the current practice of HM Revenue and Customs. Shareholders are recommended to consult their own professional adviser immediately on the potential tax consequences of the Demerger. Shareholders should note that no tax clearance has been applied for in relation to the Demerger.
Update regarding Marlowe TIC business and future strategy
Following the Demerger, Marlowe will be a pure play market-leading TIC business which comprises of its Fire Safety & Security division and Water & Air Hygiene division. In FY24, TIC operations contributed £292.3 million of revenue and £35.2 million of adjusted EBITDA prior to head office costs of £4.3 million.
The Occupational Health division subject to the Demerger contributed revenue and adjusted EBITDA prior to head office costs in FY24 of £110.6 million and £18.1 million respectively.
The continuing TIC operations are focussed on ensuring the safety and compliance of customers' business premises in accordance with relevant regulation and legislation and caters to approximately 27,000 customers across the UK.
These markets were where Marlowe made its original acquisitions in 2016 and continue to display the same attractive structural growth drivers underpinned by regulation, legislation and high levels of recurring income.
The Group will continue to be governed by its current Board, senior executives and head office team and the Group's ongoing focus following the Demerger continues to be centred upon driving organic growth, margin expansion and strong cash generation.
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For further information: |
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Marlowe plc |
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Lord Ashcroft, Interim Non-Executive Chair Adam Councell, Chief Financial Officer Benjamin Tucker, Head of Investor Relations & Strategy |
www.marloweplc.com Tel: +44 (0)20 3813 8498
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Cavendish Capital Markets Limited (Nominated Adviser & Joint Broker) |
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Ben Jeynes George Lawson |
Tel: +44 (0)20 7220 0500 |
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Investec Bank (Joint Broker) |
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Henry Reast Oliver Cardigan |
Tel: +44 (0)20 7597 5970 |
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FTI Consulting |
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Nick Hasell Alex Le May |
Tel: +44 (0)20 3727 1340 |
Important Information
This announcement does not constitute, or form part of, any offer or invitation to sell, allot or issue, or any solicitation of any offer to purchase or subscribe for, any securities in the Company in any jurisdiction nor shall it, or any part of it, or the fact of its distribution, form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment therefor.
No reliance may be placed, for any purpose whatsoever, on the information or opinions contained in this announcement or on its accuracy, fairness or completeness. To the fullest extent permitted by applicable law or regulation, no undertaking, representation or warranty, express or implied, is given by or on behalf of the Company, Cavendish Capital Markets Limited ("Cavendish"), Investec Bank plc ("Investec"), or their respective parent or subsidiary undertakings or the subsidiary undertakings of any such parent undertakings or any of their respective directors, officers, partners, employees, agents, affiliates, representatives or advisers or any other person as to the accuracy, sufficiency, completeness or fairness of the information, opinions or beliefs contained in this announcement and no responsibility or liability is accepted by any of them for any errors, omissions or inaccuracies in such information, opinions or beliefs or for any loss, cost or damage suffered or incurred, howsoever arising, from any use, as a result of the reliance on, or otherwise in connection with, this announcement.
Cavendish, which is authorised and regulated by the Financial Conduct Authority is acting only for the Company in connection with the proposed Demerger and is not acting for or advising any other person, or treating any other person as its client, in relation thereto, or giving advice to any other person in relation to the matters contained herein. Such persons should seek their own independent legal, investment and tax advice as they see fit. Cavendish's responsibilities, as the Company's nominated adviser under the AIM Rules for Nominated Advisers and AIM Rules for Companies will be owed solely to the London Stock Exchange and not to the Company, to any of its directors or to any other person.
Investec, which is authorised and regulated by the Financial Conduct Authority, is acting only for the Company in connection with the proposed Demerger and is not acting for or advising any other person, or treating any other person as its client, in relation thereto, or giving advice to any other person in relation to the matters contained herein. Such persons should seek their own independent legal, investment and tax advice as they see fit.
This announcement does not form the basis of or constitute any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any Optima Health Ordinary Shares or any other securities nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract or commitment therefor. No offer or sale of Optima Health Ordinary Shares has been and will not be registered under the applicable securities laws of the United States, Australia, Canada, Japan or South Africa. Subject to certain exceptions, the Optima Health Ordinary Shares may not be offered or sold in the United States, Australia, Canada, Japan or South Africa or to, or for the account or benefit of, any national, resident or citizen of the United States, Australia, Canada, Japan or South Africa. There will be no public offer of the Optima Health Ordinary Shares in the United States, Australia, Canada, Japan or South Africa.
This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These statements reflect beliefs of the Directors (including based on their expectations arising from pursuit of the Company's strategy) as well as assumptions made by the Directors and information currently available to the Company. Although the Directors consider that these beliefs and assumptions are reasonable, by their nature, forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause the Company's actual financial condition, results of operations, cash flows, liquidity or prospects to be materially different from any future such metric expressed or implied by such statements. Past performance cannot be relied upon as a guide to future performance and should not be taken as a representation that trends or activities underlying past performance will continue in the future. Forward-looking statements speak only as of the date they are made. No representation is made or will be made that any forward-looking statements will come to pass or prove to be correct.
Whilst the contents of this announcement are believed to be true and accurate as at the date of its publication, no representation or warranty is made as to such contents continuing to be true and accurate at any point in the future.
For the avoidance of doubt, the contents of the Company's websites and social media accounts are not incorporated by reference into, and do not form part of, this announcement.
Appendix: Tax consequences of the Demerger
The following statements are intended only as a general guide to certain aspects of current UK tax law and what is understood to be the current practice of HM Revenue and Customs. Shareholders are recommended to consult their own professional adviser immediately on the potential tax consequences of the Demerger.
The statements made relate to shareholders who are resident (and in the case of individual shareholders, domiciled) in (and only in) the UK for tax purposes, holding their Marlowe ordinary shares as investments (other than under an individual savings account) and not as securities to be realised in the course of a trade, who are the absolute beneficial owners of both their Marlowe ordinary shares and the dividends paid on them and to whom split-year treatment does not apply.
The tax position of certain categories of shareholders who are subject to special rules, such as (but not limited to) persons who hold (or are deemed to hold) their Marlowe ordinary shares in connection with their (or another person's) office or employment, traders, brokers, dealers in securities, insurance companies, banks, financial institutions, investment companies, tax-exempt organisations, persons connected with Marlowe, persons holding their ordinary shares as part of hedging or conversion transactions, shareholders who are not domiciled or not resident in the UK, collective investment schemes, trusts and those who hold 5 per cent. or more of the Marlowe ordinary shares, is not considered. Nor do the following statements consider the tax position of any person holding investments in any HMRC approved arrangements or schemes, including the enterprise investment scheme, venture capital scheme or business expansion scheme.
Demerger
The Company expects the Demerger Dividend to satisfy the conditions to qualify as an "exempt distribution" within the meaning of section 1075 of the Corporation Tax Act 2010 (CTA 2010) but clearance under section 1091 of the CTA 2010 confirming such treatment has not been sought from HMRC. It is therefore possible that, following the Demerger, HMRC will conclude that one or more of the conditions is not satisfied, in which case exempt distribution treatment may not apply. Shareholders are recommended to seek their own advice as to the consequences of the demerger for their general tax position.
Assuming the distribution of the Ordinary Shares is an "exempt distribution", the income and chargeable gains tax treatment for shareholders is set out in the paragraph entitled "Exempt Distribution" below. If the distribution is considered by HMRC not to be an "exempt distribution", the income and chargeable gains tax treatment for shareholders will follow the analysis set out at paragraph entitled "Non-Exempt Distribution" below. The stamp duty and stamp duty reserve tax ("SDRT") treatment of the distribution does not depend on whether the distribution is an "exempt distribution" and no liability to stamp duty or SDRT should be incurred by shareholders as a result of the issue to them of the Optima Health Ordinary Shares pursuant to the Demerger.
Exempt Distribution
Income
Shareholders that are resident in the UK for UK tax purposes should not incur any liability to tax on income in respect of the receipt of their Optima Health Ordinary Shares.
Chargeable Gains
Shareholders that are resident in the UK for UK tax purposes should not be treated, by virtue of the receipt of Optima Health Ordinary Shares pursuant to the Demerger, as making a disposal or part disposal of their Marlowe ordinary shares for the purposes of the taxation of chargeable gains.
The Optima Health Ordinary Shares distributed to shareholders pursuant to the Demerger should be treated as the same asset, and as having been acquired at the same time, as the Marlowe ordinary shares already held by Shareholders. The aggregate base cost of the Marlowe ordinary shares and Optima Health Ordinary Shares immediately after the Demerger should be the same as the base cost of the Marlowe ordinary shares immediately before the Demerger. Such base cost should be apportioned between the Marlowe ordinary shares and the Optima Health Ordinary Shares by reference to their respective market values on the first day on which the market values or prices are quoted or published for such shares.
Non-Exempt Distribution
If the Demerger Dividend is not treated as an exempt distribution, it will be treated as the receipt of a dividend in an amount equal to the market value of the Optima Health Ordinary Shares received by that shareholder, with the tax consequences set out in the following paragraphs.
UK resident and domiciled or deemed domiciled individual shareholders
UK resident individual shareholders will be subject to UK income tax on the amount of the Demerger Dividend.
Individual shareholders have the benefit of an annual dividend allowance of £500 (the "Nil Rate Amount"). Dividends falling within this allowance are effectively taxed at the rate of 0 per cent.
Dividend income in excess of this allowance (taking account of any other dividend income received by the shareholder in the same tax year) will be taxed at the following rates for 2024/2025: 8.75 per cent. to the extent that it falls below the threshold for higher rate income tax; 33.75 per cent. to the extent that it falls above the threshold for higher rate income tax and below the additional rate band; and 39.35 per cent. to the extent that it falls above the threshold for the additional rate band.
For the purposes of determining which of the taxable bands dividend income falls into, dividend income is treated as the highest part of a shareholder's income. In addition, dividends within the Nil Rate Amount which would (if there was no Nil Rate Amount) have fallen within the basic or higher rate bands will use up those bands respectively for the purposes of determining whether the threshold for higher rate or additional rate income tax is exceeded.
Corporate shareholders within the charge to UK corporation tax
A UK resident corporate shareholder will be liable to UK corporation tax on the receipt of the Demerger Dividend unless the dividend falls within one of the exempt classes set out in Part 9A of the Corporation Tax Act 2009 (subject to anti-avoidance rules and provided all conditions are met).
If the conditions for exemption are not met, or cease to be satisfied, or such a corporate shareholder elects for an otherwise exempt dividend to be taxable, the shareholder will be subject to UK corporation tax on the Demerger Dividend at the rate applicable to that shareholder.
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