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Mortice Limited to acquire Office & General Group Limited for £6.5m

Mortice Limited (LON:MORT), the AIM listed security and facilities management company, has announced that it, and its wholly-owned subsidiary, Tenon Facility Management UK Limited, have entered into a conditional agreement to acquire the entire issued share capital of UK based property service company Office & General Group Limited for a total consideration of up to £6.5m (subject to certain potential adjustments) to be satisfied in cash and shares in Mortice.
 

The acquisition, when completed, is expected to be immediately earnings enhancing (excluding the impact of any losses which may be incurred by Altius Property Services Limited, a subsidiary of O&G Group which is in administration, which may, on consolidation, affect the future earnings of Mortice) and is in line with Mortice’s strategy, as announced on 22 April 2015, of expanding its geographical footprint and growing the business through targeted acquisitions, as well as organically.

 
O&G Group is an independent property service company specializing in cleaning and providing support services such as environmental solutions and built fabric maintenance in the UK. The business was founded in 1987, and is based in London, with additional offices in Manchester and Wolverhampton.

 
Acquisition highlights
· Tenon UK, a wholly-owned subsidiary of Mortice, has entered into a conditional agreement to acquire the entire issued share capital of O&G Group.
· Total consideration of up to £6.5m (subject to certain potential adjustments) to be satisfied by:
* up to £3m payable in cash on completion, subject to certain potential adjustments;
* 3,000,000 new ordinary shares of no par value in the capital of Mortice (“Ordinary Shares”), issued on Completion;
* up to 500,000 new Ordinary Shares, to be issued on the second anniversary of completion of the acquisition (“Completion”), subject to potential adjustments;
· The new Ordinary Shares are subject to certain lock-in provisions.
· Tenon UK will enter into new banking arrangements with Barclays Bank PLC to finance the acquisition and to replace O&G Group’s existing banking facilities.
· Completion of the acquisition is conditional upon, inter alia, shareholders’ approval to allot the Consideration Shares at an extraordinary general meeting of the Company (“EGM”) to be held on 31 August 2015; delivery of O&G Group’s consolidated audited accounts for the financial year ended 31 March 2015 and such accounts not being materially different in any respect from the unaudited consolidated results of O&G Group for the financial year ended 31 March 2015; and the preference shares of £1 each in O&G Group having been cancelled.
· It is anticipated that the new banking facilities to replace O&G Group’s existing banking facilities will be in place on completion of the acquisition.
 

About O&G Group
O&G Group is an independent property service company specializing in cleaning and providing support services such as environmental solutions and built fabric maintenance in the UK. The business was founded in 1987, and is based in London, with additional offices in Manchester and Wolverhampton.  O&G Group provides ‘soft’ services via commercial and office cleaning contracts. O&G Group also provides ‘hard’ services such as repairs and maintenance, refurbishments, redecoration and other mechanical and engineering services. O&G Group also has the capacity to offer in-house pest control services.

In addition to the core cleaning services, O&G Group offers a variety of specialist cleaning services ranging from window cleaning, supply of janitorial and washroom products, stone and marble cleaning and other deep clean and specialist tasks including the provision of waste and recycling services. O&G primarily self delivers all of its services, but has a number of specialist supply chain partners to support its activities. O&G Group has contracts with managing agents, universities and higher education providers, and ‘blue chip’ commercial clients. Clients include Fedex, Steria, CBRE and a number of prominent London universities and the University of Hertfordshire.

O&G Group’s unaudited results for the year ended 31 March 2015 recorded total revenues from continuing operations of £33.46m, continuing operations EBITDA of £1.27m and continuing operations pre-tax profit of approximately £0.4m. The Sellers, Grae Scott and Jonathan Smith, are the founder and managing director respectively of O&G Group and will be retained by O&G Group after Completion as consultants.

Current trading of Mortice
As announced on 18 June 2015, Mortice expects to report for its year ended 31 March 2015 EBITDA growth of c. 21.8% on the previous year to US$4.2m and profit before tax of approximately US$2.2m, up c. 19.2% year-on-year.

Notice of Extraordinary General Meeting (‘EGM’)
An EGM of the Company will be held at 38 Beach Road, #29-11 South Beach Tower, Singapore 189767 on 31 August 2015 at 4.00 p.m. (Singapore time) and the resolutions to be proposed at the EGM will be set out in full in the circular (the “Circular”), which will be published and posted to shareholders today. A copy of the Circular will also be available on the Company’s website: www.morticegroup.com

At the EGM the Company will also seek the consent of Shareholders to make certain amendments to the Company’s Articles of Association, details of which will be set out in the Circular.
 

Commenting, Manjit Rajain, Executive Chairman of Mortice Limited, said: “This acquisition is the first important step in delivering on our strategy of expansion into key new geographies to complement our continued organic growth in areas such as India, Sri Lanka and Saudi Arabia. We remain focused on building a business that can continue to deliver sustainable profitable growth over the long-term and our entrance into the UK market with a well-established and profitable business like O&G Group underlines our commitment to delivering this for shareholders.”