The price is right? Capita confirms Education Software back in talks with new bidder
(2020/11/27)
- Reference: 1606482911
- News link: https://www.theregister.co.uk/2020/11/27/capita_confirms_education_software_back/
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Capita has opened talks with a new suitor for its Education Software Solutions business, the one it tried to offload earlier in the year at a price reported to be higher than the entire group's market capitalisation on the London Stock Exchange.
In a [1]brief statement to the City this morning , the company said: "Capita confirms it has entered into exclusive talks with Montagu [Private Equity] over the potential sales of ESS.
"There can be no certainty that a sale will be concluded nor any certainty over the terms of such a sale."
A for-sale sign sign was hung over ESS in [2]August when Capita outlined results at the halfway point of calendar 2020. The unit sells its own information system, SIMS, and support for 21,000 schools worldwide with financial management and process organisation wares.
The unit turned over £95m in revenue in [3]2019 and had an EBITDA of £49m.
At the time releasing its H1 financials, Capita said the pandemic has sped up its "strategic decisions" to get shot of areas of the organisation that CEO Jon Lewis deemed to be not part of his future vision for the integrator-cum-outsourcing organisation.
According to [4]Bloomberg , Capita was locked in negotiations with bidders including private equity investor Bain Capital and TPG. The asking price was understood to be the stumbling block: ESS was expected to be sold for between £500m to £700m.
When those negotiations ended in no sale on 15 October, Capita's share price slumped 7.45 per cent, reducing its market cap to £431m.
It is unclear at this stage if Capita has lowered its estimates to entice more interested parties, and the company is making no further statements on the talks.
Lewis [5]took over at Capita in 2017 following a string of [6]profit warnings , and once he had reviewed operations decided a [7]"significant change was required" , saying the business was "too complex" and "driven by a short-term focus."
The field of vision for Capita was narrowed to IT services software, HR, customer management and government services. The company has since sold its Parking Eye business, supplier assessment unit Constructionline, law practice software Eclipse, and Irish insurance and pensions arm CLPSI.
Megabuyte analyst Rob Warensjo said: "The deal confirms reports of Montagu’s interest and highlights that Capita is back on track in offloading the ESS business after some underwhelming interest in the last few months.
"However, we suspect that price negotiations will still be below its original £500m target given its already lower than-hoped-for offers and the fact that ESS has been slowly losing market share and is in need of significant investment to turn it around – the latest version of ESS's management information system was originally released over a decade ago, with the launch date of its Cloud-based SIMS 8 pushed back multiple times." ®
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[1] https://www.londonstockexchange.com/news-article/CPI/response-to-media-speculation-ess/14771375
[2] https://www.theregister.com/2020/08/18/capita_h1_2020/
[3] https://www.investegate.co.uk/capita-plc/cpi/h1-2020-market-update/20200625070000P490B/
[4] https://www.bloomberg.com/news/articles/2020-10-15/capita-said-to-get-lower-than-expected-bids-for-school-tech-unit-kgard0fy
[5] https://www.theregister.com/2017/10/10/capita_goes_to_jon_lewis_for_ceo
[6] https://www.theregister.com/2016/09/29/capita_share_price_dives_after_1st_ever_profit_warning/
[7] https://www.theregister.com/2018/01/31/capita_shares_plunge_40_per_cent_amid_profit_warning/
[8] https://whitepapers.theregister.com/
In a [1]brief statement to the City this morning , the company said: "Capita confirms it has entered into exclusive talks with Montagu [Private Equity] over the potential sales of ESS.
"There can be no certainty that a sale will be concluded nor any certainty over the terms of such a sale."
A for-sale sign sign was hung over ESS in [2]August when Capita outlined results at the halfway point of calendar 2020. The unit sells its own information system, SIMS, and support for 21,000 schools worldwide with financial management and process organisation wares.
The unit turned over £95m in revenue in [3]2019 and had an EBITDA of £49m.
At the time releasing its H1 financials, Capita said the pandemic has sped up its "strategic decisions" to get shot of areas of the organisation that CEO Jon Lewis deemed to be not part of his future vision for the integrator-cum-outsourcing organisation.
According to [4]Bloomberg , Capita was locked in negotiations with bidders including private equity investor Bain Capital and TPG. The asking price was understood to be the stumbling block: ESS was expected to be sold for between £500m to £700m.
When those negotiations ended in no sale on 15 October, Capita's share price slumped 7.45 per cent, reducing its market cap to £431m.
It is unclear at this stage if Capita has lowered its estimates to entice more interested parties, and the company is making no further statements on the talks.
Lewis [5]took over at Capita in 2017 following a string of [6]profit warnings , and once he had reviewed operations decided a [7]"significant change was required" , saying the business was "too complex" and "driven by a short-term focus."
The field of vision for Capita was narrowed to IT services software, HR, customer management and government services. The company has since sold its Parking Eye business, supplier assessment unit Constructionline, law practice software Eclipse, and Irish insurance and pensions arm CLPSI.
Megabuyte analyst Rob Warensjo said: "The deal confirms reports of Montagu’s interest and highlights that Capita is back on track in offloading the ESS business after some underwhelming interest in the last few months.
"However, we suspect that price negotiations will still be below its original £500m target given its already lower than-hoped-for offers and the fact that ESS has been slowly losing market share and is in need of significant investment to turn it around – the latest version of ESS's management information system was originally released over a decade ago, with the launch date of its Cloud-based SIMS 8 pushed back multiple times." ®
Get our [8]Tech Resources
[1] https://www.londonstockexchange.com/news-article/CPI/response-to-media-speculation-ess/14771375
[2] https://www.theregister.com/2020/08/18/capita_h1_2020/
[3] https://www.investegate.co.uk/capita-plc/cpi/h1-2020-market-update/20200625070000P490B/
[4] https://www.bloomberg.com/news/articles/2020-10-15/capita-said-to-get-lower-than-expected-bids-for-school-tech-unit-kgard0fy
[5] https://www.theregister.com/2017/10/10/capita_goes_to_jon_lewis_for_ceo
[6] https://www.theregister.com/2016/09/29/capita_share_price_dives_after_1st_ever_profit_warning/
[7] https://www.theregister.com/2018/01/31/capita_shares_plunge_40_per_cent_amid_profit_warning/
[8] https://whitepapers.theregister.com/
Re: Even if the price is right
Anonymous Coward
Doesn't matter a lot of schools will buy any old shit as long as it comes in comic sans.
the market is pretty small for this sort of stuff so there isn't a lot of competition.
I am surprised
macjules
I would have thought that by now Capita would have had several companies set up to supply dodgy facemasks and fake PPE. Couple of bids for half a billion pounds and their liquidity would have been back on track.
Market cap doesn't mean what you think it does
Anonymous Coward
The market cap is the cost to buy all the outstanding shares, not the value of a company. It can be the same for a company with £100 million in the bank or for one with £100 million of debt. Given a choice I'd rather buy the former. 'Enterprise Value' is a better metric to use.
Even if the price is right
Are the Education Software Solutions any good?