REG - Marlowe PLC - Demerger of Occupational Health division

MarloweAnnouncement

12/09/2024 07:00

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RNS Number : 8553D  Marlowe PLC  12 September 2024

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as amended by regulation 11 of the Market Abuse (Amendment)
(EU Exit) Regulations 2019/310. Upon the publication of this announcement
via Regulatory Information Service, this inside information is now considered
to be in the public domain.

 

 

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INDIRECTLY IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE
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12 September 2024

 

Marlowe plc

 

Demerger of the Occupational Health division from Marlowe to form Optima
Health

 

Marlowe plc ("Marlowe", and, together with its subsidiaries, the "Group"), the
UK leader in business-critical services which assure regulatory compliance,
announces that it intends to demerge its Occupational Health division from
Marlowe to form Optima Health plc ("Optima Health") as an independent company
and to make an application for the entire issued share capital of Optima
Health to be admitted to trading on the AIM market of London Stock Exchange
plc by way of an introduction (the "Demerger").

 

Summary

 

·      Following the strategic review first announced in November 2023,
the Group announces the Demerger of its Occupational Health division.

 

·      The Demerger will be implemented by way of a dividend in specie
of ordinary shares in the capital of Optima Health ("Optima Health Ordinary
Shares") to Marlowe shareholders (the "Demerger Dividend") such that each
shareholder of Marlowe shall receive:

 

1 Optima Health Ordinary Share for every 1 existing Marlowe ordinary share

 

held on 25 September 2024 (being the Record Date for the Demerger)

 

·      The Demerger will allow Marlowe, as a market-leading Testing,
Inspection and Certification ("TIC") business and Optima Health as the UK's
leading provider of technology enabled corporate health and wellbeing
solutions, as two distinct entities, to fully focus on their respective end
markets and future strategic objectives.

 

·      Following the Demerger, the Marlowe Group will continue to drive
organic growth across its market-leading TIC division whilst delivering margin
expansion and strong cash generation.

 

·      The continuing TIC operations are focussed on ensuring the safety
and compliance of customers' business premises in accordance with relevant
regulation and legislation and serve approximately 27,000 customers across the
UK in markets where Marlowe made its original acquisitions in 2016 and which
continue to display the same attractive structural growth drivers underpinned
by regulation, legislation and high levels of recurring income.

 

·      Marlowe's continuing TIC operations following the Demerger,
comprising Fire Safety & Security and Water & Air Hygiene, generated
£292.3 million of revenue and £35.2 million of divisional adjusted EBITDA in
the year ended 31 March 2024 ("FY24").

 

·      It is expected that the Optima Health Ordinary Shares will be
admitted to the AIM market of London Stock Exchange plc on 26 September 2024
("Admission").

 

·      Optima Health is the UK's leading provider of technology enabled
corporate health and wellbeing solutions in the occupational health sector, a
specialist branch of medicine.

 

·      Optima Health offers a comprehensive range of flexible and
progressive services from statutory driven workplace health surveillance
medicals to proactive and preventive interventions, through to workplace
health advice and attendance management assessments, and ultimately
rehabilitation programmes and pathways aimed at returning people to work.

 

 

Commenting on the intended Demerger, Lord Ashcroft (Interim Non-Executive
Chair) said:

 

"The Demerger will allow the respective Boards of Marlowe and Optima Health to
explore strategies tailored to their distinct end markets, providing greater
flexibility with which to maximise shareholder value.

 

"Following the Demerger, Marlowe's business will consist of the market-leading
compliance service TIC division which comprise the Fire Safety & Security
and Water & Air Hygiene businesses. The Group is well positioned and has a
clear strategy to drive organic growth, margin enhancement and strong cash
generation."

 

Background to and rationale for the Demerger

 

Since its foundation in 2015, Marlowe has built leading UK businesses
addressing end markets that are underpinned by regulation and
non-discretionary client requirements.

 

In November 2023, Marlowe announced that the Board had begun a strategic
review to evaluate the optimal organisational and capital structure for the
Group to maximise shareholder value, with the first action taken being to
divest of certain GRC software and service assets for an enterprise value of
£430 million (the "GRC Divestment"). The GRC Divestment was announced on 22
February 2024 and subsequently completed at the end of May 2024.

 

The Group subsequently repaid the Group's debt facilities in full, returned
£150 million to Marlowe shareholders by way of a special dividend paid on 5
July 2024 and has made significant progress in returning more than £40
million to Marlowe shareholders under the Group's previously announced share
buyback programme. Following the conclusion of the Demerger and conditional on
shareholders approving further share buybacks at Marlowe's upcoming Annual
General Meeting, the Group intends to continue with this programme at levels
which increase value to Marlowe shareholders. These buybacks will be funded by
utilising Group cash balances, which will be retained by Marlowe following the
Demerger.

 

The Board has continued its strategic review, recognising that the TIC and
Occupational Health divisions operate as distinct businesses in separate end
markets, each with their own unique market dynamics and strategic
opportunities.

 

Optima Health will be led by Jonathan Thomas and Heidi Giles as CEO and CFO
respectively. The Optima Health executive management team will be subscribing
for new ordinary shares in Optima Health following the Demerger and
immediately prior to Admission at an Optima Health equity valuation of £225
million. Other than this management subscription, no additional capital will
be raised as part of the Demerger. It is intended that Julia Robertson, Adam
Councell and Mike Ettling will be appointed as Non-Executive Chair and
Non-Executive Directors respectively of Optima Health, all of whom are
considered will be independent directors of Optima as a standalone entity
following the Demerger. It is intended that Simon Arnold will also be
appointed as a non-independent Non-Executive Director of Optima Health.

 

The Demerger will enable both market-leading businesses to pursue strategies
best suited to their respective markets, optimising options for each to
generate maximum future value for shareholders.

 

The Demerger is not conditional on the approval of Marlowe shareholders and
Marlowe will not, on completion of the Demerger, retain any residual
shareholding in Optima Health.

 

Demerger timetable

 

The expected timetable of the Demerger Dividend is as follows:

 

 Record Date for determining entitlement to the Demerger Dividend                6.00 p.m. on 25 September 2024
 Demerger Dividend paid to Marlowe shareholders on the Record Date               After 6.00 p.m. on 25 September 2024
 Ex-Dividend Date                                                                26 September 2024
 Admission and commencement of dealings in Optima Health Ordinary Shares on the  8.00 a.m. on 26 September 2024
 AIM market of the London Stock Exchange
 CREST accounts credited in respect of Optima Health Ordinary Shares in          As soon as practicable after 8.00 a.m. on 26 September 2024
 uncertificated form
 Posting of share certificates for Optima Health Ordinary Shares                 Within 10 business days of Admission

 

Unless the counterparties specifically agree otherwise, a buyer of the
Company's Ordinary Shares ahead of the Ex-Date will assume the benefit to the
Demerged shares, and the seller would need to pass the benefit to the buyer,
even if the seller is the recorded owner at the Record Date.

 

All references to times are to London time unless otherwise stated. The dates
given are based on the Company's current expectations and may be subject to
change. If any of the dates or times above change, Marlowe will give notice of
the change by issuing an announcement through a Regulatory Information
Service. Further announcements in respect of the Demerger will be made, as
appropriate, in due course.

 

Tax consequences of the Demerger

 

Information relating to the tax consequences of the Demerger can be found in
the appendix to this announcement. The statements contained within the
appendix are intended only as a general guide to certain aspects of current UK
tax law and what is understood to be the current practice of HM Revenue and
Customs. Shareholders are recommended to consult their own professional
adviser immediately on the potential tax consequences of the Demerger.
Shareholders should note that no tax clearance has been applied for in
relation to the Demerger.

 

Update regarding Marlowe TIC business and future strategy

 

Following the Demerger, Marlowe will be a pure play market-leading TIC
business which comprises of its Fire Safety & Security division and Water
& Air Hygiene division. In FY24, TIC operations contributed £292.3
million of revenue and £35.2 million of adjusted EBITDA prior to head office
costs of £4.3 million.

 

The Occupational Health division subject to the Demerger contributed revenue
and adjusted EBITDA prior to head office costs in FY24 of £110.6 million and
£18.1 million respectively.

 

The continuing TIC operations are focussed on ensuring the safety and
compliance of customers' business premises in accordance with relevant
regulation and legislation and caters to approximately 27,000 customers across
the UK.

 

These markets were where Marlowe made its original acquisitions in 2016 and
continue to display the same attractive structural growth drivers underpinned
by regulation, legislation and high levels of recurring income.

 

The Group will continue to be governed by its current Board, senior executives
and head office team and the Group's ongoing focus following the Demerger
continues to be centred upon driving organic growth, margin expansion and
strong cash generation.

 

 

 For further information:

 Marlowe plc
 Lord Ashcroft, Interim Non-Executive Chair                   www.marloweplc.com

 Adam Councell, Chief Financial Officer                       Tel: +44 (0)20 3813 8498

 Benjamin Tucker, Head of Investor Relations & Strategy       IR@marloweplc.com (mailto:IR@marloweplc.com)

 Cavendish Capital Markets Limited (Nominated Adviser & Joint Broker)
 Ben Jeynes                                                   Tel: +44 (0)20 7220 0500

 George Lawson

 Investec Bank (Joint Broker)
 Henry Reast                                                  Tel: +44 (0)20 7597 5970

 Oliver Cardigan
 FTI Consulting
 Nick Hasell                                                  Tel: +44 (0)20 3727 1340

 Alex Le May

 

Important Information

This announcement does not constitute, or form part of, any offer or
invitation to sell, allot or issue, or any solicitation of any offer to
purchase or subscribe for, any securities in the Company in any jurisdiction
nor shall it, or any part of it, or the fact of its distribution, form the
basis of, or be relied on in connection with or act as an inducement to enter
into, any contract or commitment therefor.

 

No reliance may be placed, for any purpose whatsoever, on the information or
opinions contained in this announcement or on its accuracy, fairness or
completeness. To the fullest extent permitted by applicable law or regulation,
no undertaking, representation or warranty, express or implied, is given by or
on behalf of the Company, Cavendish Capital Markets Limited ("Cavendish"),
Investec Bank plc ("Investec"), or their respective parent or subsidiary
undertakings or the subsidiary undertakings of any such parent undertakings or
any of their respective directors, officers, partners, employees, agents,
affiliates, representatives or advisers or any other person as to the
accuracy, sufficiency, completeness or fairness of the information, opinions
or beliefs contained in this announcement and no responsibility or liability
is accepted by any of them for any errors, omissions or inaccuracies in such
information, opinions or beliefs or for any loss, cost or damage suffered or
incurred, howsoever arising, from any use, as a result of the reliance on, or
otherwise in connection with, this announcement.

 

Cavendish, which is authorised and regulated by the Financial Conduct
Authority is acting only for the Company in connection with the proposed
Demerger and is not acting for or advising any other person, or treating any
other person as its client, in relation thereto, or giving advice to any other
person in relation to the matters contained herein. Such persons should seek
their own independent legal, investment and tax advice as they see fit.
Cavendish's responsibilities, as the Company's nominated adviser under the AIM
Rules for Nominated Advisers and AIM Rules for Companies will be owed solely
to the London Stock Exchange and not to the Company, to any of its directors
or to any other person.

 

Investec, which is authorised and regulated by the Financial Conduct
Authority, is acting only for the Company in connection with the proposed
Demerger and is not acting for or advising any other person, or treating any
other person as its client, in relation thereto, or giving advice to any other
person in relation to the matters contained herein. Such persons should seek
their own independent legal, investment and tax advice as they see fit.

 

This announcement does not form the basis of or constitute any offer or
invitation to sell or issue, or any solicitation of any offer to purchase or
subscribe for any Optima Health Ordinary Shares or any other securities nor
shall it (or any part of it) or the fact of its distribution, form the basis
of, or be relied on in connection with, any contract or commitment therefor.
No offer or sale of Optima Health Ordinary Shares has been and will not be
registered under the applicable securities laws of the United States,
Australia, Canada, Japan or South Africa. Subject to certain exceptions, the
Optima Health Ordinary Shares may not be offered or sold in the United States,
Australia, Canada, Japan or South Africa or to, or for the account or benefit
of, any national, resident or citizen of the United States, Australia, Canada,
Japan or South Africa. There will be no public offer of the Optima Health
Ordinary Shares in the United States, Australia, Canada, Japan or South
Africa.

 

This announcement may include statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements may be
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "plans", "projects", "anticipates", "expects",
"intends", "may", "will" or "should" or, in each case, their negative or other
variations or comparable terminology, or by discussions of strategy, plans,
objectives, goals, future events or intentions. These statements reflect
beliefs of the Directors (including based on their expectations arising from
pursuit of the Company's strategy) as well as assumptions made by the
Directors and information currently available to the Company.  Although the
Directors consider that these beliefs and assumptions are reasonable, by their
nature, forward-looking statements involve known and unknown risks,
uncertainties, assumptions and other factors that may cause the Company's
actual financial condition, results of operations, cash flows, liquidity or
prospects to be materially different from any future such metric expressed or
implied by such statements. Past performance cannot be relied upon as a guide
to future performance and should not be taken as a representation that trends
or activities underlying past performance will continue in the future.
Forward-looking statements speak only as of the date they are made. No
representation is made or will be made that any forward-looking statements
will come to pass or prove to be correct.

 

Whilst the contents of this announcement are believed to be true and accurate
as at the date of its publication, no representation or warranty is made as to
such contents continuing to be true and accurate at any point in the future.

 

For the avoidance of doubt, the contents of the Company's websites and social
media accounts are not incorporated by reference into, and do not form part
of, this announcement.

 

Appendix: Tax consequences of the Demerger

 

The following statements are intended only as a general guide to certain
aspects of current UK tax law and what is understood to be the current
practice of HM Revenue and Customs. Shareholders are recommended to consult
their own professional adviser immediately on the potential tax consequences
of the Demerger.

 

The statements made relate to shareholders who are resident (and in the case
of individual shareholders, domiciled) in (and only in) the UK for tax
purposes, holding their Marlowe ordinary shares as investments (other than
under an individual savings account) and not as securities to be realised in
the course of a trade, who are the absolute beneficial owners of both their
Marlowe ordinary shares and the dividends paid on them and to whom split-year
treatment does not apply.

 

The tax position of certain categories of shareholders who are subject to
special rules, such as (but not limited to) persons who hold (or are deemed to
hold) their Marlowe ordinary shares in connection with their (or another
person's) office or employment, traders, brokers, dealers in securities,
insurance companies, banks, financial institutions, investment companies,
tax-exempt organisations, persons connected with Marlowe, persons holding
their ordinary shares as part of hedging or conversion transactions,
shareholders who are not domiciled or not resident in the UK, collective
investment schemes, trusts and those who hold 5 per cent. or more of the
Marlowe ordinary shares, is not considered. Nor do the following statements
consider the tax position of any person holding investments in any HMRC
approved arrangements or schemes, including the enterprise investment scheme,
venture capital scheme or business expansion scheme.

 

Demerger

 

The Company expects the Demerger Dividend to satisfy the conditions to qualify
as an "exempt distribution" within the meaning of section 1075 of the
Corporation Tax Act 2010 (CTA 2010) but clearance under section 1091 of the
CTA 2010 confirming such treatment has not been sought from HMRC.  It is
therefore possible that, following the Demerger, HMRC will conclude that one
or more of the conditions is not satisfied, in which case exempt distribution
treatment may not apply.  Shareholders are recommended to seek their own
advice as to the consequences of the demerger for their general tax position.

 

Assuming the distribution of the Ordinary Shares is an "exempt distribution",
the income and chargeable gains tax treatment for shareholders is set out in
the paragraph entitled "Exempt Distribution" below. If the distribution is
considered by HMRC not to be an "exempt distribution", the income and
chargeable gains tax treatment for shareholders will follow the analysis set
out at paragraph entitled "Non-Exempt Distribution" below. The stamp duty and
stamp duty reserve tax ("SDRT") treatment of the distribution does not depend
on whether the distribution is an "exempt distribution" and no liability to
stamp duty or SDRT should be incurred by shareholders as a result of the issue
to them of the Optima Health Ordinary Shares pursuant to the Demerger.

 

Exempt Distribution

 

Income

 

Shareholders that are resident in the UK for UK tax purposes should not incur
any liability to tax on income in respect of the receipt of their Optima
Health Ordinary Shares.

 

Chargeable Gains

 

Shareholders that are resident in the UK for UK tax purposes should not be
treated, by virtue of the receipt of Optima Health Ordinary Shares pursuant to
the Demerger, as making a disposal or part disposal of their Marlowe ordinary
shares for the purposes of the taxation of chargeable gains.

 

The Optima Health Ordinary Shares distributed to shareholders pursuant to the
Demerger should be treated as the same asset, and as having been acquired at
the same time, as the Marlowe ordinary shares already held by Shareholders.
The aggregate base cost of the Marlowe ordinary shares and Optima Health
Ordinary Shares immediately after the Demerger should be the same as the base
cost of the Marlowe ordinary shares immediately before the Demerger. Such base
cost should be apportioned between the Marlowe ordinary shares and the Optima
Health Ordinary Shares by reference to their respective market values on the
first day on which the market values or prices are quoted or published for
such shares.

 

Non-Exempt Distribution

 

If the Demerger Dividend is not treated as an exempt distribution, it will be
treated as the receipt of a dividend in an amount equal to the market value of
the Optima Health Ordinary Shares received by that shareholder, with the tax
consequences set out in the following paragraphs.

 

UK resident and domiciled or deemed domiciled individual shareholders

 

UK resident individual shareholders will be subject to UK income tax on the
amount of the Demerger Dividend.

 

Individual shareholders have the benefit of an annual dividend allowance of
£500 (the "Nil Rate Amount"). Dividends falling within this allowance are
effectively taxed at the rate of 0 per cent.

 

Dividend income in excess of this allowance (taking account of any other
dividend income received by the shareholder in the same tax year) will be
taxed at the following rates for 2024/2025: 8.75 per cent. to the extent that
it falls below the threshold for higher rate income tax; 33.75 per cent. to
the extent that it falls above the threshold for higher rate income tax and
below the additional rate band; and 39.35 per cent. to the extent that it
falls above the threshold for the additional rate band.

 

For the purposes of determining which of the taxable bands dividend income
falls into, dividend income is treated as the highest part of a shareholder's
income. In addition, dividends within the Nil Rate Amount which would (if
there was no Nil Rate Amount) have fallen within the basic or higher rate
bands will use up those bands respectively for the purposes of determining
whether the threshold for higher rate or additional rate income tax is
exceeded.

 

Corporate shareholders within the charge to UK corporation tax

A UK resident corporate shareholder will be liable to UK corporation tax on
the receipt of the Demerger Dividend unless the dividend falls within one of
the exempt classes set out in Part 9A of the Corporation Tax Act 2009 (subject
to anti-avoidance rules and provided all conditions are met).

 

If the conditions for exemption are not met, or cease to be satisfied, or such
a corporate shareholder elects for an otherwise exempt dividend to be taxable,
the shareholder will be subject to UK corporation tax on the Demerger Dividend
at the rate applicable to that shareholder.

 

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