Back to square one
IWG shares dive after it ends talks with three private equity suitors
THE chief executive of serviced office provider IWG has defended the company’s decision to break off takeover talks with three major private equity firms as shares in the company plunged by a fifth.
Mark Dixon said IWG’S board had held a series of telephone conference calls over the weekend and had decided to end talks with Starwood Capital, TDR Capital and Terra Firma ahead of a bid deadline on Wednesday because they were not going to make an offer that valued IWG highly enough.
Shares in IWG, previously known as Regus, slumped 61.5p, or 20.5pc, to 238.5p yesterday, sending the price back to where it was before news of the potential talks emerged in May. Mr Dixon, who personally owns around 25pc of the company, finished the day about £142m worse off as a result.
But he said he was “confident in the long-term value of and opportunities for IWG” as a private company.
“This is just a chapter in the book, it’s not the book,” Mr Dixon said. “This has been going on for almost a year and there comes a time when we have to say ‘come back when you’re ready’.”
Analysts had suggested earlier this year that the company could sell for as much as 350p per share, which would value it at £3.2bn. It has fielded around six expressions of interest this year, resulting in a three-way bidding battle. The company, which operates in 115 countries, has been rapidly expanding in order to stay ahead of newer entrants to the market, including American office business Wework. Four years ago it acquired a new venture, called Spaces, aimed at younger workers.
Mr Dixon added: “We continue to grow our Spaces brand, which by next year will be about half the size of Wework.”
All three of the potential suitors said yesterday that they did not intend to make a formal offer, meaning they now have to wait six months before engaging again under the City’s Takeover Code. Mr Dixon said he had not written off future approaches. “We’re a public company with a board that is very commercial, if it’s the right offer at the right time,” he said.
Alongside the announcement of the end of the talks, the company posted a 33pc drop in pre-tax profits to £54.3m for the six months to the end of June, while revenue rose 2.9pc to £1.2bn.
Mr Dixon, who founded the business in 1989, blamed the fall in profits on expansion and other cost increases.
Andrew Brooke, analyst at RBC Capital Markets, said: “With the company continuing to embark on an aggressive expansion plan, and credibility still low, we believe it will be some time before the market will give the benefit of the doubt.”