Slater and Gordon (SGH) is expected to announce a long mooted London deal that will cost the company upwards of $1.4 billion and change its nature completely, dramatically expanding its business in the UK where it has been growing rapidly in recent years.
Slater & Gordon will finance the purchase with an $890 million equity raising, to be announced this morning, according to reports in London overnight. That will represent a 50% plus expansion of the company’s capital base.
For months now the company has been negotiating the purchase of the professional services arm of a London-based insurance claims processor called Quindell.
The price, weekend reports claimed, around by around 700 million pounds – which if true will require a massive expansion of the company’s debt and share on issue because Slater and Gordon only had a market value of $A1.59 billion at Friday’s closing price of $7.55.
The weekend reports say it is likely the deal will be confirmed to the ASX this morning, before trading starts for the day.
SGH 1Y – Slater & Gordon close in on significant London deal
Under the terms of the deal, the Australian law firm is poised to pay 637 million pounds in cash for Quindell’s core road traffic incident unit. It will also include a share of receipts from the settlement of hearing loss cases, which could be worth a further 100 million.
Quindell’s professional services division mainly handles the legal and other aspects of UK car insurance claims.
The Financial Times said at the weekend that Slater & Gordon’s acquisition values the unit at about 7 times its earnings before interest, depreciation, taxation and amortisation.
Quindell is selling because it needs to raise the cash to settle shareholder fears about its liquidity, its governance and fears that it might go out of business. It has been under attack from short sellers and other investors after claims about the company’s operations by a US research outfit were found to be accurate.
For Slater and Gordon, the deal will add to its existing “no win, no fee” personal injury claims business which is one of its major breadwinners in Australia.
The UK accounted for nearly half the company’s $418m revenues last year, so the purchase will see a considerable expansion in that market.
