To sell a loss-making company for more than seven times its market price requires either a mug on the other side of the trade or a true Midas touch – which Michael Ashcroft seems to have once again proven he has. In spades.
The price of £48.10 a share for facilities services operator OneSource, against its close last week of £6.65, represents a massive 623 per cent premium, valuing the business at $365m, or nearly 46 times its trailing ebitda.
For Lord Ashcroft, who owns about 74 per cent of OneSource, the cash could hardly have arrived at a better time. Although Gordon Brown has just wavered in the face of the polls, ruling out an early election, as deputy chairman of the Conservative Party Lord Ashcroft is charged, through the Target Seat campaign, with pouring funds into handpicked, marginal seats. The sale of the business to a US buyer, ABM Industries, will generate as much as $266.5m for the longstanding Tory supporter to fuel the party’s grassroots before the next general election.
Aim-listed OneSource, which is incorporated in Belize and operates primarily in the US, provides janitorial, landscaping, general repair and maintenance and was demerged from Lord Ashcroft’s BB Holdings vehicle in February 2006. It lost $1.9m last year on revenues of $824.6m, bringing in $8m in ebitda in the 12 months to June.
But how do you persuade a buyer to stump up such a vast premium? ABM, founded in 1909 as a one-man window washing business, now operates across similar markets to OneSource in the US and Canada. In a statement, the president and CEO said it had seen “an opportunity to accelerate our growth strategy and we seized it.”
The US company will take on tax benefits of about $195m accrued by OneSource from its previous losses. These could save the company $14m from its annual tax bill. It also said it expected to save annual costs of between $45m and $50m within a year of the deal closing, through consolidating facilities and combining the companies’ back offices. The company also expects to be able to drag OneSource into profit, raising margins to the level of their janitorial division.
The deal will serve as a reminder of the Lord’s business nous and canny dealmaking, which in the 1980s and 1990s made him one of the most colourful characters in British business. His brash manner antagonised old fashioned City types, and his decision to move his affairs to Bermuda in 1984 cemented his reputation as a ‘wrong ‘un’ among the establishment.
In 1997, he agreed to sell his Bermuda-based home security company, ADT, to Tyco International, fending off a hostile offer from a US utility and leaving the businessman with a personal stake in Tyco worth $200m. He stepped down from the scandal-hit company’s board in 2002, after helping to clear out those associated with the era of Dennis Kozlowski, the former chief executive who, with his finance director, was convicted of looting the company.
Lord Ashcroft has the option, under the sale to ABM, to maintain an interest in OneSource. Part of the consideration can be taken as a pre-close dividend of up to $50m, which would go into a new Aim-listed subsidiary of OneSource, with shares distributed to current investors in proportion to their holdings.
Good news for Lord Ashcroft, for the Conservative party and for other shareholders – OneSource shares were up a mere 570 per cent on Monday. Lord Ashcroft, we note from his website, is also keen on saving the whale and on collecting Victoria Cross medals – so his new found wealth is a result for aficionados of large sea mammals and military medals, as well as for David Cameron.