Southerns, the Leeds-based furniture, fittings and equipment firm, is to join forces with property services firm Styles & Wood Group in a deal that values the latter at £42.5m.
Southerns has grown quickly over the last two years following an investment by Steve Parkin’s venture capital vehicle, Central Square Holdings Limited (CSHL).
The board of CSHL and the independent directors of Styles & Wood have reached agreement on the terms of a recommended cash offer, under which CSHL will acquire Styles & Wood.
The offer is conditional upon the approval Styles & Wood's shareholders. Irrevocable undertakings have already been secured from the holders of 61 per cent of the share capital of Styles & Wood.
Southerns is a fixtures, fittings and equipment specialist that has worked with a range of blue chip clients including Carillion, Bunzl and a number of top end universities including Leeds. Its customers include clients in the healthcare, education and commercial sectors.
The business has achieved rapid organic growth following an investment by CSHL in 2015, supplemented by acquisitions.
Southerns is headed by Andrew Kendall-Jones, who is the largest shareholder in the firm. In the year to June, Southerns reported a pre-tax profit of £4m on revenues of £44m.
Styles & Wood is listed on the AIM market on the London Stock Exchange. The management team, which includes Tony Lenehan (CEO), Phil Lanigan (CFO) and Paul Mitchell (chairman), has re-focused the group over recent years, expanding its service offering, eliminating loss-making business and creating an organisation which is consistently profitable. Styles & Wood's turnover in the year to December 2016 was £104.7m with an underlying pre-tax profit of £4.1m.
It has a diverse customer base spanning the commercial, retail and leisure, and public sectors.
CSHL said the deal will create a group that can capitalise on cross-selling opportunities to a wide range of major corporate and public sector customers.
The executive team of the enlarged group will include Tony Lenehan (CEO), Phil Lanigan (CFO), Paul Mitchell (chairman) and Andrew Kendall-Jones who will become an executive director.
Following the deal, both Southerns and Styles & Wood will be wholly owned subsidiaries of CHSL. Key shareholders in CHSL will include the management team, and Central Square Investments, an investment vehicle controlled by Clipper Logistics boss Steve Parkin.
Mr Kendall-Jones said: “Our business has grown rapidly both organically and by targeted strategic acquisitions.
"We identified the Styles & Wood business as an ideal business to partner with to further develop the range of services offered to customers, and to create an organisation capable of delivering services across the whole spectrum of property and facilities support services”.
Mr Lenehan, CEO of Styles & Wood, added: “This transaction creates an enlarged business committed to the creation of a best in class offer within the property services market with a true end-to-end capability, which will significantly enhance the breadth of services offered to existing and new customers of the group.”
Funding for the deal is being provided by HSBC and Tosca Debt Capital Fund.
CHSL said the deal will create a group that can offer an end-to-end service from concept, design, planning, management and post-development lifetime maintenance, together with specialist services such as M&E design and critical facilities management.
Mr Mitchell said: "In recent years, Styles & Wood has made significant progress with its diversification strategy, driving strong organic growth supplemented by value accretive acquisitions that have broadened the group's service line capabilities.
"We are confident that Central Square, with its commitment to the creation of a best in class offer within the property services market, is the right partner to take Styles & Wood to the next chapter of its growth story."
Robert Hough, speaking on behalf of the independent directors, added: "Having considered in detail the best interests of all shareholders and the company as a whole, the independent directors believe that Central Square's all-cash offer provides an attractive opportunity for Styles & Wood's shareholders to recognise immediate value for their shares, at a 24 per cent premium to the current share price, against a more challenging macro-economic environment and the backdrop of a highly competitive market.
"That is why the independent directors believe that the terms of the offer are fair and reasonable and are recommending that shareholders accept the offer."
Southerns was named best company turning over between £10m and £50m (sponsored by Grant Thornton) at the 2017 Yorkshire Post Excellence in Business Awards.
It has a number of divisions including SpaceInvader Design and Ralph Capper Interiors, which have designed new offices for Zenith and SkyBet in Leeds.