Marlowe sells software and service assets in £430m deal

The AIM-traded firm said the agreement with Inflexion Private Equity valued the assets at £430m on a debt-free, cash-free basis.

It said the move followed its announcement in November regarding a comprehensive review of its operations.

The divestment, representing a significant portion of the GRC segment, translated to a multiple of 16.2x pro forma adjusted cash EBITDA for the financial year ended March 2023.

Around 20% of Marlowe's revenues and 40% of its adjusted EBITDA were accounted for by the transaction.

Marlowe noted that the enterprise value of the divestment surpassed Marlowe's market capitalization by 121% as of 20 February, and based on a three-month volume-weighted average share price as of 21 February.

The company said its core operations, termed compliance services, would continue post-divestment, focusing on its testing, inspection, and certification (TIC) and occupational health (OH) businesses.

It said the net cash proceeds from the transaction would be used to retire the current debt facility entirely and allocate over £150m of surplus cash to shareholders.

Following the divestment, Marlowe said it would intensify its efforts on driving organic growth in its leading TIC and OH businesses.

As part of the transaction, chief executive officer Alex Dacre would transition with the divested assets, and resign on completion.

Kevin Quinn would step in as executive chair on an interim basis.

The board said it had initiated a search for a new chief executive, considering both internal and external candidates.

“This divestment represents an excellent outcome for Marlowe and its shareholders and underscores the significant value that has been created through the delivery of our growth strategy,” said chairman Kevin Quinn.

“The valuation achieved demonstrates the substantial potential within our business and will reset our capital structure, giving Marlowe strategic agility whilst delivering meaningful returns to our shareholders.

“Following the sale, Marlowe's business will consist of two market-leading compliance service divisions in Testing, Inspection and Certification and Occupational Health, with a clear and refocused strategy in our core compliance service markets.”

At 1347 GMT, shares in Marlowe were up 23.45% at 524.65p.

Reporting by Josh White for Sharecast.com.