This values the existing issued share capital of Marlborough Stirling at approximately £95.3 million and equates to an enterprise value of approximately £72.2 million after accounting for Marlborough Stirling’s cash balances as at 31 December 2004 and exercisable options.
The Marlborough Stirling Board unanimously recommends the Proposal and shareholders holding approximately 58.5 per cent of the issued share capital have given undertakings to vote in favour of the Proposal.
Marlborough Stirling has three divisions, the largest of which is its life and pensions business, which is mainly a provider of outsourcing services to life assurers in the UK. Its second largest business is its mortgage division, which provides software, outsourcing and technology implementation services to customers in the UK and Canada. The third element of the Group is the Exchange business, which is a leading supplier of portal services to independent financial intermediaries in the UK.
Tom Drury, Managing Director of Vertex, said: ‘The rationale for this acquisition is that it will provide Vertex with an entry point into the business process outsourcing segment of the financial services market, which we believe offers significant growth opportunities. This is consistent with our approach to date of making bolt-on acquisitions, where appropriate, to unlock significant growth potential in new markets. Once we have achieved such footholds, we then look to grow by securing further contracts.
‘All three divisions of Marlborough Stirling are of interest to us and we intend to create additional value across all three sectors based on our complementary skills and expertise.
‘The financial services sector exhibits many similar characteristics and growth opportunities to markets in which we already have a strong presence and expertise. Marlborough Stirling has significant knowledge and experience in this sector, but we believe it has been too small to take full advantage of the large deals typical in the life and pensions outsourcing businesses.
‘We also believe that Marlborough Stirling’s expertise in IT software and systems development is an excellent fit with Vertex’s transformational and customer management skills, particularly when looking to secure large scale BPO contracts.
‘Through the acquisition of Marlborough Stirling, Vertex intends to create a leading financial services outsourcing player in the UK market. Combined with United Utilities’ financial strength and stability, this player should have the ability to secure larger, higher value and longer-term contract opportunities than Marlborough Stirling has been able to benefit from to date.
‘We believe that we will be able to secure significant synergy savings through the removal of duplication in corporate overheads. Marlborough Stirling’s North American business fits comfortably with our own business in North America, and our offshore presence in India will further enhance Marlborough Stirling’s offering to clients.’
For the year to 31 December 2004, Marlborough Stirling had turnover of £98.8 million on which it reported a loss before tax, amortisation of goodwill and exceptional items of £0.6 million.
To become effective the proposal needs to be approved by Marlborough Stirling Shareholders at an EGM. The acquisition is expected to become effective during May 2005.
Mike O’Leary, Chief Executive of Marlborough Stirling, comments: “Marlborough Stirling and Vertex share a strong common ambition to create a major financial services utility. I believe that the combination with Vertex is good news for all our customers and shareholders, as well as presenting exciting opportunities for our employees. The strength and stability afforded by being owned by Vertex and part of the United Utilities group will help realise the full potential of our products and services and the benefits they can deliver to intermediaries, mortgage lenders and product providers.”
