Private equity 'a good home for Spice'

Leeds-based Spice last week revealed it rejected an "opportunistic" approach from the European buyout firm, which valued it at just under 200m.

Spice founder Mr Rigby, who left the utilities support services group in February after 15 years, said the spurned cash offer would be "quite compelling" to a lot of shareholders.

However, Mr Rigby, who is now working on a family biodigester business, declined to say what he will do with his nine per cent stake.

"I would have to say that Cinven, not having an investment in this space already and (it) being a small transaction, I would say that they are using it as a platform to build something bigger in this space and to that extent it would be a good home, " said Mr Rigby.

"I want to see Spice in a good home. I spent 15 years on it. I want it in good ownership.

"It's a good company with strong revenues and a good recession-proof business."

Gala bingo owner Cinven last week said it is considering making an offer for Spice, and revealed it approached its board in May with an offer of 56p a share – valuing the group at 197m.

That offer was firmly rejected by Spice, who called it "opportunistic" and said it significantly undervalued the company, whose work ranges from checking power lines to installing water meters.

Cinven argued the offer represented a 51.4 per cent premium to Spice's share price at the time of the approach.

However, analysts said the offer was made before the group offloaded its loss-making gas division, so Cinven was offering a far less generous premium.

Mr Rigby founded Spice in 1996 with a single contract after a management buyout from Yorkshire Electricity. However, after a spell of acquisitions his strategy clashed with investors, who wanted debt cut and organic growth.

At the time of his departure Mr Rigby said he would be a "supportive" shareholder. With 30 million Spice shares, his 8.6 per cent stake would net him around 17m based on the initial offer price. However, he said he has not decided what to do and is acting independently.

"I've never sold a share in the company yet, " he said. "I'm just watching it play out."

Analysts last week suggested Cinven would need to offer in the range of 65p to 75p, valuing Spice at between 229m and 264m, to begin talks with the company.

However, Mr Rigby said the current share price, which closed last night up 2.7 per cent at 57p, suggests the market believes Cinven is "there or thereabouts" with the offer.

"In a market like this a cash offer is quite compelling, " he said.

"In these uncertain times if people are prepared to put money on the table you're going to tempt a lot of people.

"But private equity like to do a lot of due diligence and unless the company engages with them things will not progress further."

Cinven, which declined to comment, has a track record of public to private deals, including the 900m buyout of PizzaExpress owner Gondola Holdings in 2007.

Spice also declined to comment, but last week said it was not in discussions with Cinven or any other party over a potential offer.

"Cinven are a very big and serious organisation and they will have done their homework, " said Mr Rigby. "It represents a very significant premium. They're not a trivial organisation."

Analysts have suggested a trade buyer might emerge, but Mr Rigby said the group appears "much more appealing to the private equity arena".

"Spice has not got a huge amount of debt in private equity terms but a reasonable amount in quoted company terms, " he said. "I would be surprised if a fellow quoted company came along.

"I would not like to see it going to anybody who is very debt laden and not able to invest in the business's future."