Savills Buys B Member Interes
5 March 2010
Savills plc
Proposed Acquisition of Member Interests in Cordea Savills LLP
Savills plc ("Savills" or the "Company"), the international real estate advisor, today announces that its wholly owned subsidiary, Savills Investments, which holds 60% of the voting rights in Cordea Savills LLP ("Cordea Savills"), the Group's fund management business, has entered into a conditional agreement with the other members who hold voting rights in Cordea Savills to acquire their B Member Interests, which represent 40% of the voting rights in Cordea Savills (the "Proposed Transaction").
Key highlights
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Total consideration of up to £15.4m of which £4.6m will be paid on transaction close with another £4.5m payable in equal instalments on the first and second anniversaries, and up to a further £6.3m on the second anniversary subject to Cordea Savills' earnings performance over the period |
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All consideration payments will be settled in cash out of existing resources, including debt facilities |
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Key employees are incentivised to remain with the business and improve Cordea Savills' profitability |
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Proposed Transaction gives Savills ownership over Cordea Savills, which in turn ensures the stability of the platform for future expansion whilst retaining its operational independence |
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Anticipated to be immediately earnings enhancing |
The Proposed Transaction is a related party transaction (as defined in Chapter 11 of the UKLA Listing Rules) and so is conditional upon shareholder approval, which will be sought at the General Meeting to be held on 24 March 2010. The Proposed Transaction is not subject to any further conditions. A circular in relation to the Proposed Transaction and convening the General Meeting is expected to be published and posted to shareholders today.
Jeremy Helsby, Group Chief Executive of Savills, commented:
"Cordea Savills has been very successful since it was founded nearly six years ago. This transaction demonstrates our long term commitment to the fund management business and is a natural part of the evolution of Cordea Savills. I am delighted that we will have a structure which enables us to deploy our resources to build the business within a governance regime that continues to promote Cordea Savills as an independent organisation within Savills. The ability to service clients' indirect investment requirements is strategically important for Savills, and provides further balance to our transactional, consultancy and property management activities."
John Partridge, Chairman of Cordea Savills, commented:
"This marks the next phase in the development of Cordea Savills. We have a solid platform for growth and Savills' backing will allow us to develop the business and expand our range of investment products. This is a logical and natural step forward for the business given the strength of the relationship with Savills and for our clients, management and staff it provides long term stability. It means that Cordea Savills will be well positioned for the future."
Proposed Transaction rationale
When Cordea Savills was established in 2004, it was agreed that Savills and the Cordea Savills management team would review the ownership options and capital structure after an initial five-year period. This review concluded that the existing joint ownership structure has served the business well to date, however, it is not appropriate to take the business through the next stage of its development. Having considered the options, Savills and Cordea Savills management have agreed that the Proposed Transaction represents the best opportunity for Savills, the Cordea Savills business, its investment clients and its staff for the following reasons:
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the Proposed Transaction ensures that Savills has ownership of the platform upon which it intends to grow its fund management operations in the future, whilst ensuring appropriate governance procedures are in place to allow Cordea Savills to continue to operate as an independent business under its current leadership; |
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simplification of the capital structure under Savills' ownership (such that Savills, through Savills Investments, holds both the A Member Interest and 100% of the B Member Interests in Cordea Savills) will enable Savills to deploy capital more effectively in support of the growth of the business; |
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it rewards the B Members by giving them the opportunity to realise the benefits of their historical success and to be further incentivised to remain with and develop the business in the future; and |
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the Proposed Transaction is anticipated to be immediately earnings enhancing for Savills. |
About Cordea Savills
Cordea Savills is an international property fund management business with offices in London, Milan, Munich, Stockholm, Luxembourg, Paris and Singapore. It provides a range of open and closed ended funds focused on geographical areas (e.g. the European Commercial Fund), sectors (e.g. the Student Halls Fund) or indeed the specific requirements of certain types of investor (e.g. the Charities Property Fund). Cordea Savills currently has 89 staff (including members) and manages total assets of approximately £2.5 billion (as at 31 December 2009) on behalf of pension funds, insurance companies, charities, fund of funds, qualified professional investors and family offices.
In the twelve months ended 31 December 2008, being the last reporting period for which audited financial information has been prepared, Cordea Savills generated a profit before taxation of £3.6 million, which was included within Savills' audited consolidated full year accounts. At 31 December 2008, the Cordea Savills business had gross assets of £12.4 million. Cordea Savills has no external debt.
Summary terms of the Proposed Transaction
The interests which Savills Investments has agreed to acquire are currently held by 16 individuals who comprise the B Members of Cordea Savills and each of whom is actively involved in the Cordea Savills business. Savills Investments is the A Member and holder of the A Member Interest. Three of the B Members, being John Partridge, Justin O'Connor and William Hackney, who jointly hold 17.8% of the voting rights in Cordea Savills, are also members of the Members' Committee of Cordea Savills, which is, in effect, the equivalent of a board of directors of a limited company and are therefore "related parties" of the Company for the purposes of Chapter 11 of the Listing Rules.
The Proposed Transaction will be effected by means of an assignment of B Member Interests to Savills Investments. In consideration for the assignment of their B Member Interests, the B Members as a class will be entitled to the following:
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basic consideration of up to £9.1 million in aggregate, of which 50% will be paid on Completion and 50% will be payable in equal tranches on each of the first and second anniversaries of Completion subject to approval of the audited 2010 and 2011 accounts; |
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further deferred consideration (the "Deferred B Consideration") of up to £2.4 million in aggregate, payable on the second anniversary of Completion subject to approval of the audited 2011 accounts, the exact amount depending upon the growth in aggregate profit before tax of Cordea Savills over the three years to 31 December 2011 compared with the three years to 31 December 2009 ("Aggregate Profit Growth"); and |
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an allocation of C Member Interests in Cordea Savills, which will carry limited rights, and, provided that the Deferred B Consideration is payable in full, will be entitled to a payment from Savills Investments on the second anniversary of Completion subject to approval of the audited 2011 accounts of up to a maximum amount of £3.9 million. The actual payment will be dependent on the amount by which the Aggregate Profit Growth exceeds the amount required to pay the Deferred B Consideration in full. In the event that there is no Deferred B Consideration payable, the C Member Interests may be acquired by Savills Investments for a nominal sum. Allocation of the C Member Interests will be made by the Remuneration Committee of Cordea Savills. All the current B Members including the Related Parties will be allocated C Member Interests. |
For the maximum consideration to become payable, Cordea Savills will have to generate Aggregate Profit Growth of approximately 100% over the three years to 31 December 2011.
In each case, an individual will be entitled to payment provided that he/she has not resigned as a member of Cordea Savills prior to the relevant payment date or been removed as a member for cause.
The Acquisition Agreement, which is conditional only upon Shareholder approval, contains provisions under which certain adjustments may be made to the Deferred B Consideration in respect of, inter alia, the occurrence of undisclosed material adverse events that will reduce the profitability of Cordea Savills.
Savills also expects to consider and introduce appropriate longer term incentivisation arrangements for the management team of Cordea Savills following Completion which will include the Related Parties.
All consideration payments will be settled in cash out of existing resources, including debt facilities.
Further details of the Proposed Transaction will be set out in the circular which is expected to be published and posted to shareholders today. The Proposed Transaction is subject only to shareholder approval, which will be sought at the General Meeting to be held on 24 March 2010.
Ends
For further information, please contact:
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Savills |
+44 (0)20 7353 4200 |
Jeremy Helsby, Group Chief Executive
Simon Shaw, Group Chief Financial Officer
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Cordea Savills |
+44 (0)20 7877 4700 |
John Partridge, Chairman
Justin O'Connor, CEO
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UBS |
+44 (0)20 7567 8000 |
Adrian Haxby
Neil Patel
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Lazard & Co., Limited |
+44 (0)20 7187 2000 |
William Rucker
Nicholas Millar
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Tulchan Communications (for Savills) |
+44 (0)20 7353 4200 |
John Sunnucks
Peter Hewer
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Citigate Dewe Rogerson (for Cordea Savills) |
+44 (0)20 7638 9571 |
Patrick Evans
Steven Sheppard
Notes to Editors
Members' Committee of Cordea Savills
John Partridge, Justin O'Connor and William Hackney, Chairman, CEO and COO respectively are members of the Members' Committee.
John Partridge, Executive Chairman
John is responsible for Cordea Savills' strategic direction and has overall responsibility for the Group's Research and Strategy area. His focus is on the development of new business streams and product lines, and the management of key business relationships.
John's previous roles include Chairman of Morgan Grenfell Property Asset Management (latterly Deutsche Property Asset Management, now RREEF) and Director of Global Property at Henderson Global Investors. John was responsible for the creation of both the Morgan Grenfell and Henderson property businesses. Prior to this he spent thirteen years as an equity fund manager, which included the analysis and investment management of quoted property companies.
Justin O'Connor, Chief Executive Officer and Chief Investment Officer
Justin is Chief Executive Officer and Chief Investment Officer for the Cordea Savills Group. As CEO, he has overall responsibility for the performance of Cordea Savills and is accountable to investors, shareholders and staff. As CIO, he is charged with overseeing portfolio management and analytics, capital transactions, equity and debt financing and asset management.
Justin is a director of Cordea Savills Investment Management Limited, which is authorised and regulated by the UK Financial Services Authority, a Director of Cordea Savills SGR SpA (authorised and regulated by the Bank of Italy) and joint Managing Director of Cordea Savills GmbH. He is also Chairman of the Cordea Savills Investment and Risk Committee.
Prior to joining Cordea Savills, Justin was Director, Property Business Development (Europe) at Henderson Global Investors.
Bill Hackney, Chief Operating Officer
Bill is responsible for business infrastructure and operations, including group finance, compliance, risk management, and human resources. Bill is a member of Cordea Savills' Investment and Risk Committee, and the Managing Director of the Cordea Savills' FSA authorised subsidiaries.
Bill has extensive experience in the structuring and management of pooled property vehicles and was previously a director of Deutsche Property Asset Management (now RREEF).
This information is provided by RNS
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