3 October 2016
SANNE Group plc
("SANNE" or "the Group")
Acquisition of FLSV Fund Administration Services LLC
("Acquisition") and New Banking Facility
SANNE, the specialist provider of outsourced corporate, fund and private client administration, reporting and fiduciary services, is pleased to announce that it has entered into an agreement to acquire FLSV Fund Administration Services LLC ("FAS") for a total consideration of $65.8 million (£50.7 million1).
The consideration for the Acquisition is structured with an initial amount due at completion of $52.6 million (£40.6 million1), to be settled approximately 74% in cash and 26% in new SANNE shares, as well as deferred consideration of $13.2 million (£10.1 million1), to be settled in the same split of cash and new SANNE shares. The share consideration will be calculated with reference to SANNE's five day average closing share price up to 29 September 2016 of 468.6p and will be issued to the relevant vendor shareholders in four equal annual instalments from completion.
SANNE has also entered into a new £60.0 million, 5 year committed banking facility with HSBC ("Committed Facility"), with an additional £40.0 million accordion facility ("Accordion"), to refinance the Group's existing facilities with HSBC, fund the cash element of the Acquisition consideration and provide the Group with significant future funding capacity.
- FAS is a New York headquartered business offering fund administration and reporting services to alternative asset managers, primarily in North America
- FAS has 115 employees, approximately 75 of whom are based in New York with the balance based in a support office in Belgrade
- The Acquisition provides Sanne with a high quality US platform from which to enter the large and fast growing US alternative assets fund administration market
- FAS's founders and major shareholders, Jeffrey Hahn (CEO) and Brenda Grayson (COO), will remain with the business post completion and continue to head what will become SANNE's North American operations
- The Acquisition will be immediately earnings enhancing
- The Acquisition is conditional upon certain corporate actions to transfer ownership and control to SANNE. The deal is expected to complete by the end of November 2016
Dean Godwin, Chief Executive Officer of SANNE Group plc, commented:
"This is a significant milestone for SANNE, delivering a platform of quality and scale in the attractive North American market. FAS is led by a highly experienced and respected team that has fostered a culture very much aligned with our own, with a focus on providing the highest quality service to institutional clients. The US market offers considerable opportunities, particularly in the fast growing alternatives sector, and we look forward to working together to deliver the next phase of growth."
Jeffrey Hahn, Partner and CEO of FLSV Fund Administration Services LLC, commented:
"We are very excited to join SANNE. Being part of the larger SANNE platform will provide significant leverage to drive growth in North America and help us meet our clients' ever increasing global service requirements."
Strategic rationale for the transaction and information on FAS
The Acquisition represents an important strategic step for SANNE in establishing a high quality platform in North America. North America is the world's largest market for alternative asset management, with private capital AUM of US$2.4 trillion, almost 60% of the global total. This is forecast to grow at a compound annual rate of around 13% over the next four to five years. At present, approximately only 30% of North American private capital AUM is outsourced to third party administrators. This is estimated to reach 50% by 2020, driven by regulatory change, evolving reporting requirements and the need for increased investment in technology infrastructure, providing a significant opportunity for SANNE. There are significant similarities between the services that FAS and SANNE each provide to their respective client bases. However, there is limited client overlap which should provide potential revenue synergy opportunities over time.
FAS was founded in 2009 by Jeffrey Hahn, Brenda Grayson, and Frankel Loughran Starr and Vallone LLP as a fund administration firm offering end-to-end accounting, operations, reporting and investor services. FAS has an institutional client base across a range of alternative asset classes including private equity, distressed debt, infrastructure and fund-of-funds fund managers. The business has its head office in Manhattan, New York where approximately 75 of the business' c115 employees are based. FAS also has a service delivery office based in Belgrade, Serbia where the balance of the staff are based.
FAS has enjoyed a strong organic growth track record since 2009 and more recently has delivered compound annual revenue growth of 29% between 31 December 2013 and 31 December 2015. The business has also enjoyed a high level of cash conversion, with a large proportion of its contracts billed quarterly in advance. In the year to 31 December 2015, FAS recorded revenue of $18.0 million (£13.9 million1) and EBITDA of $5.1 million (£3.9 million1). At the 31 December 2015 balance sheet date, FAS had gross assets of $3.1 million (£2.4 million1).
FAS was founded to provide certain administration services for a large and international private equity institution. Revenues from this client have grown strongly since 2009 at a compound annual growth rate of 28%. This client remains an important strategic relationship for the firm, accounting for approximately half of the business's current work, albeit across a large number of different funds, structures and services. Whilst this group remains a key client of FAS, and is also an existing client of SANNE's in Europe, FAS has also been very successful in building a diversified client base comprising a large number of funds and structures.
The Acquisition is expected to be immediately earnings enhancing.
Details of the new bank facilities
SANNE has entered into a new £60.0 million, 5 year committed banking facility with HSBC to replace its existing HSBC facilities. The Committed Facility is structured as a £46.0 million term loan and £14.0 million revolving credit facility. The term loan will be drawn to refinance the existing £18.0 million term loan as well as part-fund the Acquisition. The revolving credit facility will replace the Group's existing £7.0 million facility providing committed funding capacity moving forward. In addition to the committed £60.0 million, the Group will also have available a new £40.0 million accordion facility providing significant additional funding capability for future investment.
Details of the transaction
SANNE will acquire the entire equity interests of FAS for a total consideration of $65.8 million (£50.7 million1). The initial consideration due at completion is $52.6 million (£40.6 million1), of which $38.9 million (£30.0 million1) will be settled in cash and approximately $13.7 million (£10.6 million1) will be committed in shares, with the shares issued in equal tranches over a four year period, commencing on the first anniversary of the Acquisition completing. Approximately $3.9 million (£3.0 million1) of this initial share consideration will be assigned to members of the senior management team and the balance will be assigned to Jeffrey Hahn and Brenda Grayson.
There is also a deferred consideration payment of up to $13.2 million (£10.1 million1) payable dependent on the satisfaction of certain targets within FAS over an 18 month period post completion. This deferred consideration will also be payable in both cash and shares in the same proportions as the initial consideration. The number of shares issued to satisfy the shares element of both the initial and deferred consideration payments will be calculated with reference to SANNE's average daily mid-market closing price for the five trading days ended 29 September 2016 of 468.6p. The cash consideration of the Acquisition will be funded by existing cash resources of the Group as well as from the new Committed Facility.
Completion of the Acquisition is conditional on certain corporate actions to transfer ownership and control to SANNE. The Acquisition is expected to complete by the end of November 2016.
SANNE Group plc
Dean Godwin, Chief Executive Officer
Spencer Daley, Chief Financial Officer
+44 (0) 1534 722 787
Investec Bank plc
Garry Levin / James Ireland
Ed Thomas / Matt Lewis
+44 (0) 20 7597 5970
Tulchan Communications LLP
+44 (0) 20 7353 4200
1 Assumes a GBP:USD exchange rate of £1:$1.2968
SANNE is a specialist global provider of outsourced corporate, fund and private client administration, reporting and fiduciary services.
Established for over 25 years and listed on the Main Market of the London Stock Exchange, SANNE employs approximately 600 people worldwide and administers structures and funds that have in excess of £90 billion of assets.
The Group targets alternative asset markets that have high barriers to entry and require specialist expertise to service. Key clients include alternative asset managers, financial institutions and corporates.
The Group has a presence in established, international financial centres including Jersey, Guernsey, London, Luxembourg, Dublin, Malta, South Africa, Dubai, Hong Kong, Shanghai and Singapore.
This information is provided by RNS