Source - RNS
RNS Number : 6584M
EPE Special Opportunities PLC
17 October 2016

EPE Special Opportunities plc

Pricing of Initial Public Offering of Luceco plc and NAV Update


EPE Special Opportunities plc ("ESO plc" or the "Company") announces that Luceco plc has successfully priced its initial public offering (the "Offer") of 71.6 million shares at a price of 130.0 pence per share. Luceco plc will admit its entire issued share capital of 160.8 million shares to trading on the Main Market of the London Stock Exchange, implying a market capitalisation of £209.0 million.

ESO plc is an AIM quoted private equity investment company, focussed on long-term value creation in primarily UK-based small and medium sized enterprises ("SMEs"). EPIC Private Equity LLP ("EPE"), an independent investment manager, is the Investment Advisor to ESO plc.

As at 13 October 2016 and prior to the Offer, ESO plc was the second best performing investment trust over five years, with a share price increase of 396%.1


·      The Offer was substantially over-subscribed following an excellent reception by investors.


·      The board of ESO plc and EPE would like to thank John Hornby, CEO of Luceco plc, and his management team for their concerted and continuous hard work, both in day-to-day operations and in successfully leading the company to its initial public offering.


·      Prior to the Offer, ESO plc held 48.6% of the shares of Luceco plc and loans of £10 million through ESO Investments 1 LP ("ESO 1 LP"), in which it is the sole investor. Subsequent to the secondary sale of shares to new investors, ESO 1 LP now holds 24.3% of the newly quoted entity.


·      The retention by ESO plc of 24.3% of Luceco plc is expected to be accretive to ESO plc shareholders over the medium to long term. Giles Brand, Managing Partner of EPE, will be Non-executive Chairman of Luceco plc.


·      The Offer implies a return to ESO plc of 24.4x Money Multiple and 75.6% IRR, of which 12.3x Money Multiple and 57.9% IRR is realised.


·      Giles Brand, Alex Leslie and Dan Murray led the transaction on behalf of EPE and ESO plc.


·      The transaction has a positive impact on ESO plc's NAV, resulting in an increase of 127.91 pence per share. The total NAV at 17 October 2016 incorporating this increase is 304.81 pence per share. This equates to a one year increase in NAV of 118.9% and a five year increase in NAV of 260.7%.2


·      Subsequent to the Offer, overall returns in the current ESO plc portfolio are running at 6.9x Money Multiple and 37.7% IRR.


·      The Offer substantially de-risks and diversifies ESO plc, reducing the proportion of ESO plc's gross asset value represented by Luceco plc from 68.4% to 42.2%.


·      ESO plc intends to utilise the proceeds of the Offer to enhance value in its existing portfolio companies, make new investments and retire capital at advantageous pricing where possible, with the aim of continuing its market-leading track record of share price growth.


·      ESO plc has retired 43.7% of its capital base (equity and debt) over the last five years3.


·      EPE team members have been consistent buyers of shares in ESO plc and currently own 26% of the Company. Giles Brand is the single largest holder with 22%.  

About ESO plc and EPIC Private Equity LLP ("EPE")

ESO plc is an AIM-quoted private equity investment company. The Company's objective is to provide long-term return on equity for its shareholders by investing primarily in UK-based SMEs.

Founded in June 2001, EPE is an independent investment manager wholly owned by its partners. In addition to the investment activities of the Capital division, EPE provides corporate finance and fund placement and fund administration services. Since 2001, the Capital division of EPE has made 37 platform investments.

EPE believes in developing certain investments over the very long term in order to maximise value. The quoted structure of the Company facilitates prolonged holding periods. Luceco plc, which funds advised by EPE have held since 2005, demonstrates the benefit of returns compounding over periods in excess of standard private equity hold periods (typically three to five years). EPE intends to continue to develop ESO plc as a private equity investment company focussed on long-term capital gain. EPE targets growth, buyout, special opportunities and distressed transactions at attractive in-prices. EPE uses proprietary deal sourcing approaches to identify opportunities, as well as actively engaging with the wider advisory community to communicate ESO plc's investment strategy. The Company will continue to target the following types of investments:

·      Growth, Buyout and Pre-IPO: leveraging EPE's investment experience, contacts and ability. The Company is particularly focused on making investments in sectors where the opportunity exists to create a unique asset via the consolidation of a number of smaller companies, taking advantage of the lack of liquidity in the SME market and the attraction to secondary buyers of larger operations.


·      Special Situations: investment opportunities where EPE believes that assets are undervalued due to specific, event-driven circumstances and where asset-backing may be available creating the opportunity for recovery and significant upside. Target companies may or may not be distressed as a result of the situation. EPE will aim to use its restructuring and refinancing expertise to resolve the situation and achieve a controlling position in the target company. ESO plc seeks to acquire distressed debt, undervalued equity or the assets of target businesses in solvent or insolvent situations.


·      Private Investment in Public Equities ("PIPE"): ESO plc may consider making investments in smaller quoted companies, primarily those listed on AIM. The Company will either seek to acquire and de-list the target company or take a large minority interest in the target company whilst retaining the listing. ESO plc may offer shares in the Company as all or part of the consideration for such investments.


·      Special Purpose Acquisition Companies ("SPAC"): ESO plc may consider making investments in listed companies which have been established to acquire other companies. EPE intends to work with management teams to develop acquisition strategies in advance of the listing of a SPAC, at which point the Company would invest. The subsequent acquisition or acquisitions may be funded through further equity raises directly into the SPAC. The strategy seeks to take advantage of EPE's combination of experience in both the establishment and management of listed companies and private equity investing.


·      Secondary portfolios / LP positions (secondary or primary) / EPE Funds: ESO plc has access, via EPE's Placement division, to opportunities to invest as a limited partner in various private funds on preferential terms. On occasion, the Company may seek to take advantage of these opportunities. EPE's experience is well suited to the requirements of co-investing in funds.

ESO plc will consider most industry sectors, including consumer, retail, manufacturing, financial services, healthcare services and media. ESO plc targets companies with strong fundamentals, including defensible competitive positioning and high levels of cash generation, and seeks to partner with outstanding management teams to combine operational and financial expertise in each investment.

The Company aims to invest between £2 million and £20 million in each portfolio asset. Investments are structured as both debt and equity instruments to generate returns through yield (targeting 5% to 15% per annum) as well as capital gain. Whilst in general ESO plc aims to take controlling equity positions, it may also decide to develop companies as a minority investor. Occasionally ESO plc may consider investments of less than £2 million. For investments larger than £10 million, the Company may source co-investment from third parties or may raise additional capital via public market fundraisings.

As demonstrated in the past, the portfolio may be concentrated, numbering between two and 10 assets at any one time.

For more information about EPE or ESO plc please go to

About Luceco plc

ESO plc is the largest shareholder in Luceco plc through ESO 1 LP, in which it is the sole investor.

EPE led the original buyout of Luceco plc in June 2005. Luceco plc is a manufacturer and distributor of electrical accessories and LED lighting in the UK and internationally, supplying both the retail and wholesale markets.

·      Strong track record of growth: three year sales CAGR of 25% and EBITDA CAGR of 39%.


·      Differentiated by wholly-owned manufacturing facility in China and significant opportunity in LED lighting, with no legacy lighting business facing disruption by the transition away from traditional lighting solutions.


·      LED lighting market currently worth $40bn globally and expected to grow by 15%+ CAGR to $70bn in 2019.


·      Luceco plc has raised £26.0 million in new primary capital via the Offer to fund expansion and pay down debt, in addition to which £67.1 million has been realised by existing shareholders via a secondary sale of shares to new investors.

EPE has supported the transformation of Luceco plc from a distributor of imported third party products primarily servicing the UK market, to a Chinese manufacturer supplying a global client base with market-leading product design and service. The construction of Luceco plc's wholly-owned manufacturing facility in Jiaxing, China, in 2008 has been instrumental in this transformation, enhancing new product development capability, improving margins and creating capacity for growth.

ESO plc has retained 24.3% of Luceco plc, which is expected to be accretive to ESO plc shareholders over the medium to long term. Giles Brand will be Non-executive Chairman of Luceco plc.


EPIC Private Equity LLP

+44 (0) 207 269 8865

Giles Brand / Alex Leslie

FIM Capital Limited

+44 (0) 1624 681 250

Philip Scales

Cardew Group Limited

+44 (0) 207 930 0777

Richard Spiegelberg

Numis Securities Limited

+44 (0) 207 260 1000

Nominated Advisor:

Stuart Skinner / Hugh Jonathan

Corporate Broker:

Charles Farquhar


Note 1: FE Trustnet data, 14 October 2016, all European investment trusts excluding those purely focussed on property (325 investment trusts in total).

Note 2: NAV per share is based upon total issued share capital, including shares held in the employee benefit trust but excluding shares held in treasury.

Note 3: in the five year period since September 2011, ESO plc has repurchased shares and convertible loan notes in the Company and has acquired a minority interest in ESO 1 LP from a third party. The stated percentage of capital retired is calculated by comparing the current NAV per share with the pro forma NAV per share had these transactions not taken place (being 212.05 pence per share). The pro forma NAV per share takes into account the number of shares repurchased, the principal value and remaining financing costs (at the time of the repurchase) of the repurchased loan notes, the current value of the minority interest in ESO 1 LP, and the cash used to effect the transactions.

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