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17 December 2009                                                                                                        For immediate release

OPD Group plc ("OPD" or the "Company")

Sale of a majority interest in Odgers by OPD to management and senior employees of Odgers

OPD Group plc ("OPD" or the "Company") announces that it has entered into an agreement to sell International Resources Group Limited ("Odgers") to a new company to be owned as to 50.5 per cent. by the management of Odgers, certain senior employees and the Odgers Employee Benefit Trust. OPD will hold the remaining 49.5 per cent. shareholding interest in the new company.

Summary

• The transaction will be undertaken by way of a sale of the entire issued share capital of Odgers to Newco, a new company established for the purpose. At completion Newco will be 49.5 per cent owned by OPD and 50.5 per cent. owned principally by the senior management of Odgers (the "Senior Management"), certain senior employees and its Employee Benefit Trust (the "Transaction").

• Newco has agreed to acquire Odgers from OPD for a total consideration of £16.0 million, which will comprise £5.05 million in cash, the issue of a £6.0 million loan note (the "Loan Note") and a 49.5 per cent. shareholding in Newco. OPD's shareholding in Newco has been valued at £4.95 million, based on the price at which the other proposed shareholders of Newco have agreed to subscribe for their shares.

• Before taking account of the interest receivable on the Loan Note, upon full repayment of the Loan Note, OPD will have received net consideration of £11.05 million in cash and at Completion will have a shareholding  of 49.5 per cent. in Newco.

• Immediately prior to Completion, Odgers will distribute £2.0 million in cash to OPD by means of an interim dividend, which does not form part of the consideration under the Transaction, and at Completion Odgers will make a contribution towards the costs of the Transaction incurred by OPD and Newco.

• With the expiry of the earn-out period following OPD's original acquisition of Odgers and given the nature of the Odgers business and its dependence on the knowledge, contacts and expertise of its people, the Board believes that the co-investment model will best align the commercial interests of OPD shareholders and the management and employees of Odgers. The Board has concluded that sharing the risks and rewards of ownership of Odgers between OPD, the Senior Management and certain employees of Odgers will reduce the inherent risk in the continued exclusive ownership of Odgers by OPD, in particular the ability to attract, retain, appropriately remunerate and motivate key employees.

• Although a strengthening of OPD's balance sheet is not the principal reason for the Transaction, an ancillary benefit is that the Company's liquidity position will improve by £5.05 million at Completion and thereafter by subsequent repayment of the Loan Note.

General Meeting

The Transaction is conditional on the approval of OPD shareholders and a notice convening a general meeting for considering the necessary resolutions (the "Resolutions") will be sent to OPD shareholders.  

 

OPD has received an irrevocable undertaking to vote in favour of, or procure a vote in favour of, the Resolutions from Offerco Limited, which holds 16,838,356 Shares, representing approximately 63.09 per cent. of the total issued share capital of the Company. 

Enquiries

OPD Group plc                                                                            Tel. +44 (0) 207 7970 9700

Ian Moss, Group Finance Director

Investec Investment Banking                                                      Tel. +44 (0) 207 7597 5970

Rowena Murray

Cara Griffiths

        

Herax Partners LLP                                                                    Tel. +44 (0) 207 408 0331

Angus MacPherson

Pall Mall Capital Limited (Adviser to Newco)                             Tel. +44 (0) 207 518 7300

 

John Cutts

Alexander Crawford

This announcement has been issued by, and is the sole responsibility of OPD.

Investec Investment Banking, a division of Investec Bank plc, which is authorised and regulated by the Financial Services Authority and is a member of the London Stock Exchange plc, is acting exclusively for OPD in connection with the Transaction and is not acting for any person other than OPD and will not be responsible to any person other than OPD for providing the protections afforded to its customers or for providing advice on the Transaction and arrangements proposed in this announcement.

Herax Partners LLP which is authorised and regulated by the Financial Services Authority, is acting exclusively for OPD in connection with the Transaction and is not acting for any person other than OPD and will not be responsible to any person other than OPD for providing the protections afforded to its customers or for providing advice on the Transaction and arrangements proposed in this announcement.

Pall Mall Capital Limited which is authorised and regulated by the Financial Services Authority, is acting exclusively for Newco in connection with the Transaction and is not acting for any person other than Newco and will not be responsible to any person other than Newco for providing the protections afforded to its customers or for providing advice on the Transaction and arrangements proposed in this announcement.

This announcement is for information only and does not constitute an offer or invitation to acquire or dispose of any securities or investment advice in any jurisdiction.

Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser.

The information contained in this announcement does not constitute an offer to sell or the solicitation of an offer to buy any security. Distribution of the information contained in this announcement, into or within jurisdictions other than the United Kingdom may be restricted by law and, therefore, persons into whose possession this announcement comes should inform themselves about and observe any such restrictions. Any failure to comply with any such restrictions may constitute a violation of the securities laws of the relevant jurisdiction.

This summary should be read in conjunction with the full text of the following announcement.

Terms used in this announcement shall have the same meanings as those in the Circular 

 

1.    Introduction

The most recent interim results and interim management statement for OPD included statements that consideration was being given to the sale of equity stakes in the operating subsidiaries of OPD to the management of those businesses and that discussions were ongoing. As a result of those discussions the Board announces today that OPD has entered into an agreement to sell Odgers to a new company ("Newco"), to be 49.5 per cent owned by OPD and 50.5 per cent owned principally by the senior management (the "Senior Management"), certain senior employees and the Odgers employee benefit trust ("Odgers EBT") (the "Transaction").

The consideration for the whole of Odgers payable by Newco to OPD is £16.0 million, comprising £5.05 million in cash, the issue of a £6.0 million Loan Note and a 49.5 per cent shareholding in Newco, which has been valued at £4.95 million based on the price at which the other proposed shareholders of Newco have agreed to subscribe for shares. Before taking account of the interest receivable on the Loan Note, upon full repayment of the Loan Note, OPD will have received net consideration of £11.05 million in cash and at Completion will have a shareholding interest of 49.5 per cent. in Newco.

2.    Background to and reasons for the Transaction

The Board has been pleased with the performance of Odgers since the acquisition and it remains the most profitable company within the OPD Group, notwithstanding that its financial performance has been impacted by the downturn in the general economic conditions. With the expiry of the earn-out period following the original acquisition of Odgers by OPD in 2005 and given the nature of the business of Odgers, the success of which is primarily dependent on the knowledge, contacts and expertise of its people, the Board has been considering the most appropriate ownership structure for Odgers going forwards in order to protect its continuing investment in the business, to appropriately incentivise Senior Management and senior employees and to retain the highest calibre consultants. The Board believes that the co-investment model whereby the interests of the OPD shareholders and the management and employees of Odgers are directly aligned is a strategically attractive ownership structure. The Board has therefore concluded that sharing the risks and rewards of ownership of Odgers between OPD, Senior Management and certain employees of Odgers, will best align the commercial interests of the parties and reduce the risks inherent in the continued exclusive ownership of Odgers by OPD, in particular the ability to attract, retain, appropriately remunerate and motivate key people. 

Under the Transaction, the Company will receive £11.05 million as cash consideration from Newco (including £6.0 million before interest under the Loan Note) whilst receiving 49.5 per cent. of the shares in Newco at Completion. Although a strengthening of OPD's balance sheet is not the principal reason for the Transaction, an ancillary benefit is that OPD's liquidity position will improve by £5.05 million at Completion and thereafter by subsequent repayment of the Loan Note.

OPD will record a loss of approximately £17.4 million as a result of the Transaction. This is in addition to a goodwill impairment of £7.6 million recognised in the Group's consolidated financial statements for the year ended 31 December 2008. Nevertheless, the Board believes that for the reasons described in the paragraphs above that the Transaction represents the most appropriate course of action to maximise shareholder value.

3.    Information relating to Odgers

Odgers is a leading executive search firm with approximately 370 employees, predominantly active in the UK. It operates from 8 offices in the UK and 5 overseas offices. 

Odgers has a strategy of focusing on senior executive and board level appointments in a number of sector-focused practices, including primarily:

• Board appointments 

• Business and professional services

• Financial services

• Energy, manufacturing and industrial

• Public appointments and charities

• Retail and consumer

• Sports

• Technology

In addition to permanent placements, Odgers has also developed a significant presence in the provision of interim management and is now one of the largest providers of senior interim managers in the UK.

The Board considers each of the members of Senior Management to be key individuals in the context of Odgers' business.

Odgers is a founder member of the Odgers Berndtson international network which is represented in 50 cities in 24 countries and through which it is able to benefit by accessing opportunities from the network and also from making referrals to other network members.

In December 2005, OPD acquired an initial 70 per cent. shareholding in Odgers from certain members of the Senior Management and others, for £19.8 million in cash together with 1.43 million OPD shares. The balance of the issued share capital of Odgers was acquired by OPD in three equal tranches at a valuation based on Odgers' earnings for each of the three financial years ended 31 December 2008. Each payment was equivalent to 60 per cent of the earnings before interest, tax, depreciation and amortisation of Odgers for the relevant financial year and was principally financed by the profits generated by Odgers in that financial year.

The total amount accounted for by OPD in relation to the acquisition of Odgers will, following payment of the final tranche of deferred consideration due to be paid in December 2009, be £36.2 million in cash and the issue of the 1.43 million OPD shares referred to above. £3.8 million was paid to the sellers directly by Odgers and accordingly the net cash outlay of OPD in respect of the original transaction was approximately £32.4 million.

Since the date of the original acquisition and taking into account the Pre-Completion Dividend, OPD will have received dividends of approximately £11.9 million from Odgers and, as set out below, will receive £11.05 million in consideration from Newco.

4.    Information on the purchaser

The purchaser is a newly incorporated company that has been formed for the purposes of implementing the Transaction. Newco will be 49.5 per cent. owned by OPD and 50.5 per cent. owned by the Senior Management, the Odgers A Shareholders (principally senior employees) and the Odgers EBT.

The Senior Management includes Richard Boggis-Rolfe and Virginia Bottomley, who together with certain other employees of Odgers and institutional funds, sold Odgers to OPD in December 2005. Following the acquisition of Odgers by OPD, Richard Boggis-Rolfe and Virginia Bottomley joined the OPD Board as executive directors and were regarded by the OPD Board as being integral to the performance of the Odgers business.

Richard Boggis-Rolfe and Virginia Bottomley are directors of Odgers and were executive directors of OPD until 28 July 2009 and are associates (as defined in the Listing Rules) of Newco. Accordingly, Newco is a related party of the Company for the purposes of the Listing Rules and the Transaction Documents are subject to approval by Shareholders. None of Newco, Richard Boggis- Rolfe or Virginia Bottomley hold OPD shares as at 16 December 2009 (being the latest practicable date prior to the publication of this document), but nonetheless each has undertaken not to vote on the Resolutions and, furthermore, each of them has undertaken to take all reasonable steps to ensure that their associates (as defined in the Listing Rules) will not vote on the Resolutions at the General Meeting. None of the Related Parties are currently members of the Board and therefore have not participated (and will not participate) in the Board's consideration of the Transaction.

5.    Financial effects of the Transaction

The Transaction will increase OPD's cash reserves by £5.05 million and, unless it is repaid early, the Loan Note will give OPD a steady income stream between January 2011 and December 2014. OPD will be entitled to a proportionately lower share of Odgers' future earnings as a result of its reduced indirect shareholding interest in Odgers. However, subject to certain conditions, Newco has committed to distributing 75 per cent. of its annual distributable profits by way of cash dividend and OPD will receive its proportionate share of such dividends.

6.    Principal terms of the sale agreement

Under the terms of the sale agreement, which was signed on 17 December 2009, OPD has agreed to sell Odgers to Newco in return for a cash payment of £5.05 million, the issue of 4.95 million new shares in Newco representing 49.5 per. cent of Newco's issued share capital and the issue of the Loan Note by Newco in the nominal amount of £6.0 million and accruing interest at 8 per cent. over Base Rate. The Loan Note is repayable in equal quarterly instalments over a period of four years from January 2011, but it may be prepaid voluntarily by Newco in whole or in part at any time.

The sale agreement, completion of which will represent a class 1 transaction under the Listing Rules due to the size of Odgers in relation to the OPD Group and the related party nature of the Transaction, is conditional upon the passing of the appropriate resolutions at a general meeting of the Company to be held for that purpose (notice of which will be sent to OPD shareholders) and the payment of the pre-completion dividend of £2 million.

 

7.    Use of proceeds

The proceeds from the sale will in the first instance be retained by the Company to strengthen its financial position. In due course proceeds may be used to fund investment in the ongoing business of OPD or to make acquisitions or may be returned to OPD shareholders. The shares to be issued by Newco to OPD at completion will be retained by OPD and shall have the rights, and be subject to the restrictions, set out in the proposed shareholders' agreement between OPD, Senior Management and Newco and Newco's articles of association.

8.    Current trading, trends and prospects for the continuing group

On 16 October 2009, OPD released an interim management statement for the third quarter of 2009 which stated that:

''Net fee income for the quarter was £16.7 million, 27 per cent. down on that achieved in the equivalent period in 2008. Trading conditions remain challenging in the majority of markets in which the Group operates''.

The Directors believe that this statement remains true as at the date of this document.

 

9.    General Meeting

A circular will be sent to OPD shareholders containing a notice of a general meeting of the Company at which various resolutions will be proposed to approve the Transaction.

The Resolutions will be proposed as ordinary resolutions and will be passed if more than 50 per cent. of the votes are cast in favour. If the Resolutions are not passed, the Transaction will not proceed.

10.    Irrevocable undertaking

OPD has received an irrevocable undertaking to vote in favour, or procure a vote in favour of, the resolutions from Offerco Limited which holds 16,838,356 Shares representing approximately 63.09 per cent. of the existing issued share capital of the Company. This undertaking will lapse if the Transaction does not complete.

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