Regus Group, the world’s largest provider of serviced offices, has agreed to sell a majority (58 per cent) stake in its UK operations to UK turnaround specialist Alchemy Partners for a maximum of £57m.
This sale of a stake in the group’s profitable UK business will bring much needed funds into the Regus Group and allow the firm to continue the process of reorganisation intended to bring the Group back to profitability.
The company would have defaulted on payments due before the end of the year, including forthcoming quarterly debt repayments of approximately £18.5m, if it hadn’t sold a stake in the business. It recently failed to secure additional financing from its banks. The sale will leave the company with enough cash to last 12 months
Regus has suffered a sharp downturn in performance over the past two years, particularly in the US where the majority of the company’s operations were geared toward dotcom businesses. In a statement to the stock exchange, Regus said the sale of a stake in the UK operations, considered to be the jewel in the crown of the company’s network, was the ‘only option’ for the future of the business.
The Alchemy Investment Plan will pay up to £57m for the stake, of which £16.3m will be satisfied by the acquisition of new shares. Alchemy will also pay £35.6m for existing Regus Holdings (UK) shares. Further payments will be made if Regus meets EBITDA requirements in 2003.
The UK business comprises 92 business centres across Britain, and generated £129.4m in revenue and £13.6m in operating profit during the first nine months of 2002. It employs 556 people and serves approximately 20,000 customers from 4,500 businesses.
The Financial Times reports that the US operations are losing an average of £2m every month. The current occupancy rate in the US is only 62 per cent, against a required level of 100 per cent following sharp price cuts. The required occupancy rate in the UK is 59 per cent and is currently running at 67 per cent.