Share Buy-Back & Share Purchase
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For Immediate Release
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23 October 2020 |
The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
Victoria PLC
('Victoria', 'Company', or the 'Group')
£29.91 million Share Buy-Back by Victoria
and
£43.75 million Ordinary Share purchase by Koch Equity Development ("KED")
Company share buy-back
Victoria's mission statement is "To create wealth for shareholders". To that end, and due to the Directors' firmly-held view that the Company's Ordinary Shares are materially under-valued and a buyback at these levels represents very good value for the Shareholders, the Board of Victoria refers to its announcement yesterday and confirms that, in conjunction with the proposed Preferred Equity investment by KED, the Company has now entered into a conditional agreement to purchase off-market 8,546,095 of its ordinary shares, representing 6.82% of the Company's issued share capital of the Company, at £3.50 per share (the "Company Buyback").
In arriving at their decision to pursue the buy-back, the Directors have carefully considered the following:
· The Company's existing strong cash position will be further enhanced following the Preferred Equity investment by KED, announced yesterday. The Directors are confident that Victoria has more than adequate liquidity to meet its operational needs in all reasonable scenarios. It is useful to remember that, even during the lockdowns of Q1, Victoria's operational cash flow was close to neutral due to the business's low operational gearing and decisive management actions. In addition, as outlined in our recent trading update, the Group has very substantial undrawn credit facilities and is now cash flow positive, positive like-for-like sales, and there is visibility into continued strong order backlog through year-end.
· The Directors believe that the Group has excellent long-term prospects. Flooring will always be needed and continually upgraded and refreshed and the Directors believe Victoria is better placed than many of its competitors to efficiently meet this demand.
· Following the material investments made in fiscal years 2019 and 2020 set out earlier to shareholders, it is the Directors view that the Company will continue to be significantly cash generative in the short-medium term future.
· Finally, capital allocation is, over time, the single largest determinant of value creation at a company. Therefore, the Directors have thoughtfully reviewed alternative uses for the Group's cash resources and, following that review, are firmly of the view that the Buyback as proposed is a good use of capital at this time and will be value-enhancing for the Shareholders
The Company Buyback will be financed from the Company's existing cash resources and those shares will be transferred into treasury.
KED Ordinary Share purchase
The Company further announces that a separate conditional agreement has been entered into between KED and Invesco for KED to purchase off-market 12,500,000 ordinary shares in the Company from Invesco, representing 9.97 % of the Company's the issued ordinary share capital, also at a price of £3.50 per ordinary share (the "KED Purchase").
This KED Purchase of £43.75 million in ordinary shares is in addition to the up to £175 million preferred share investment described in the announcement released yesterday.
Spruce House Partnership LLC Ordinary Shares purchase
The Company further announces that a separate conditional agreement has been entered into between Spruce House Partnership LLC, an existing 14.8% shareholder of Victoria, and Invesco to purchase off-market 3,600,000 ordinary shares (being 2.87% of the issued share capital of the Company) from Invesco at £3.50 per share (the "Spruce House Purchase").
The total shares proposed to be acquired pursuant to Company Buyback, the KED Purchase, and the Spruce House Purchase being 19.65% of the issued share capital of the Company, represent all of ordinary shares in the Company held by funds managed by Invesco.
Shareholder Approval
The Company Buyback, KED Purchase, Spruce House Purchase, and issue of preferred shares referred to in the announcement released yesterday are conditional, inter alia, upon resolutions necessary to complete the transactions described above being passed at a general meeting of the Company's ordinary shareholders (the "General Meeting").
The Directors all intend to vote their own ordinary shares in favour.
The Company intends to post a circular (including notice of meeting) to ordinary shareholders in respect of the transaction outlined above shortly and a further announcement will be made at such time.
Assuming that all of the resolutions are passed at the General Meeting and that all of the other conditions to the Company Buyback are satisfied at such time, it is expected that completion of the Company Buyback will take place on two business days following the day on which the General Meeting takes place.
Related Party Transaction
As Invesco holds 19.65 per cent of the issued ordinary shares they are considered substantial shareholders (and are therefore a related party of the Company) for the purposes of the AIM Rules. Consequently, the proposed purchase of shares pursuant to the Company Buyback constitutes a related party transaction under Rule 13 of the AIM Rules for Companies. The Directors consider, having consulted with its nominated adviser, N+1 Singer, that the terms of the Company Buyback are fair and reasonable so far as the Company's ordinary shareholders are considered.
Victoria Executive Chairman, Geoff Wilding, said:
"Victoria's business model has proven resilient this year during the most difficult trading conditions in living memory. So, the time has now come to again focus on growth and the capital provided by Koch will enable us to deliver significant value creation while maintaining stable and secure debt leverage ratios. I am delighted to bring the capital, resources, and deep industrial expertise of the largest privately held company in the United States to Victoria's next phase of growth as we execute on the exceptional organic growth and acquisition opportunity ahead."
Koch Equity Development Managing Director, Blake Ressel, commented:
"We are delighted to be partnering with Victoria. We have conducted due diligence over the last few months, and we are confident in Victoria's strategy, its management team, and the size of the market opportunity. We expect our investment to help Victoria accelerate execution of its growth plans."
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For more information contact:
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About Koch Equity Development and Koch Industries
With offices in Wichita and London, KED focuses its efforts on strategic acquisitions and industry agnostic principal investments. Significant recent non-controlling principal investments completed include Getty Images, MI Windows and Doors, Global Medical Response, and Meredith/Time Inc. Since 2012, KED has invested approximately US$30 billion of equity capital.
Koch Industries is one of the largest privately held companies in the United States, with estimated annual revenues as high as US$115 billion (according to Forbes) and has a presence in over 70 countries with about 130,000 employees worldwide across the Koch companies. Founded in 1940, Koch Industries owns a diverse group of companies. With their long-term investment horizon and existing interest in segments of the flooring industry in which Victoria does not operate, the Board believes that Koch Equity Development and Koch Industries are the ideal long-term partners for Victoria bringing the possibility of opportunities for international growth as well as the additional capital to be provided through the Preferred Equity Investment. Further information about Koch Equity Development and Koch Industries can be found on their websites, www.kochequity.com; www.kochind.com.
About Victoria
Established in 1895 and listed since 1963 and on AIM since 2013 (VCP.L), Victoria PLC, is an international manufacturer and distributor of innovative flooring products. The Group, which is headquartered in Kidderminster, UK, designs, manufactures and distributes a range of carpet, flooring underlay, ceramic tiles, LVT (luxury vinyl tile), artificial grass and flooring accessories.
Victoria has operations in the UK, Spain, Italy, Belgium, the Netherlands and Australia and employs approximately 3,400 people across more than 20 sites. Victoria is the UK's largest carpet manufacturer and the second largest in Australia, as well as the largest manufacturer of underlay in both regions.
The Group's strategy is designed to create value for its shareholders and is focused on consistently increasing earnings and cash flow per share via acquisitions and sustainable organic growth. (Further information about Victoria can be found on its website, www.victoriaplc.com.)
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