REG - Dewhurst Group PLC - Acquisition of Minority Interest in P&R Liftcars

DewhurstAnnouncement

21/02/2024 07:00

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RNS Number : 8386D  Dewhurst Group PLC  21 February 2024

21 February 2024

Dewhurst Group plc

("Dewhurst", the "Group" or the "Company")

Acquisition of minority interest in P&R Liftcars Pty Ltd

1.00 AUD : 0.51 GBP

Dewhurst Group plc (AIM: DWHT), the global manufacturer and supplier of
quality components to the lift, transport and keypad industries, announces
that it will acquire the remaining shares of P&R Liftcars Pty Ltd
("P&R Liftcars") that are not already owned by the Company (representing a
25 per cent. stake in P&R Liftcars). P&R Liftcars, based in Australia,
is a lift car interior manufacturer whose core business is the design,
manufacture and installation of new interior lift finishes and full-depth door
frame cladding.

Background

On 1 February 2017, Dewhurst announced that it had signed an agreement to
acquire 75 per cent. of the business and assets of P&R Liftcars from Roy
Peat and Peter Hosey for a cash consideration of A$1.54 million plus a cash
adjustment on completion for 75% of the inventory less employee liabilities of
c. A$190k (the "Initial Acquisition"). Roy Peat (the "Seller") retained a 25
per cent. shareholding in P&R Liftcars and remained a statutory director
of the legal entity.

From the date of the Initial Acquisition to the year ended 30 September 2023,
P&R Liftcars has delivered value to Dewhurst shareholders with an initial
payback period of 3.5 years and IRR of 41 per cent.

For the year ended 30 September 2023, P&R Liftcars reported profit after
tax of A$163k (£84k) as well as net assets of A$5.7 million (£3.0 million),
a figure materially lower than in recent years. This is due to fewer capital
projects being released during the pandemic which impacted P&R in its 2023
financial year. As at 31 January 2024, P&R Liftcars' contracted and
forward orders comprised A$4.0 million.

Put Option

A clause within the original shareholders' deed between Dewhurst, P&R
Liftcars and the Seller, signed on 1 February 2017, granted the Seller a put
option which, when exercised, would cause Dewhurst to acquire his remaining
interest in P&R Liftcars ("Put Option") at a pre-determined multiple 1 
(#_ftn1) of P&R Liftcars' EBIT.

On 6 March 2020, the Company agreed to amend the terms of the Put Option in
the Seller's favour, such that the Put Option was to be based on 2.5x the
average of P&R Liftcars' best three financial years EBIT, following the
Initial Acquisition ("Amended Put Option").  The Put Option was amended to
provide for the retention of the the Seller in a managerial role within the
P&R Liftcars business and further  to motivate him to deliver performance
in the years ahead. Dewhurst deemed the Amended Put Option to be in the
interest of Dewhurst shareholders as it kept a vital staff member running a
subsidiary during a time of immense disruption caused by Covid.

6 March 2020 Related Party Transaction

As the Seller was a director of P&R Liftcars on 6 March 2020 (which itself
was a subsidiary of the Dewhurst), he was a related party of the Company (by
definition of the AIM Rules for Companies ("AIM Rules")). The Amended Put
Option therefore constituted a Related Party Transaction under AIM Rule 13, as
the revised consideration due to the Seller upon the eventual exercise of the
Put Option could have exceeded the relevant thresholds in the AIM Rules class
tests.

Singer Capital Markets was appointed as the Company's Nominated Adviser on 30
July 2020 and is therefore unable to retrospectively consult with the
directors of Dewhurst in forming the statement that was required at the time
under the AIM Rules that the terms of the transaction were fair and reasonable
insofar as Dewhurst's shareholders are concerned.

Related Party Transaction

The Seller has now provided written notice to Dewhurst exercising the Put
Option. Dewhurst will therefore acquire the remaining 25 per cent. of P&R
Liftcars from the Seller for consideration of A$2.9 million (£1.5 million)
(the "Transaction"), payable in cash. The Seller will remain with the business
in a full time capacity until at least September 2024 to enable an orderly
handover. The Transaction will be immediately earnings enhancing to
shareholders of Dewhurst.

As the Seller is a director of P&R Liftcars (which remains a subsidiary of
Dewhurst) and the Amended Put Option was not assessed under AIM Rule 13 at the
time, the Transaction is classified as a related party transaction under the
AIM Rules. The directors of Dewhurst consider, having consulted with Singer
Capital Markets its Nominated Adviser, that the terms of the Transaction are
fair and reasonable insofar as its shareholders are concerned.

Contacts:

 

 Dewhurst Group Plc                                           Tel: +44 (0)208 744 8200
 Richard Dewhurst, Chairman

 Jared Sinclair, Chief Financial Officer

 www.dewhurst-group.com (http://www.dewhurst-group.com)

 Singer Capital Markets (Nominated Adviser and Sole Broker)   Tel: +44 (0)207 496 3000
 Rick Thompson / Alex Bond

 

 1  (#_ftnref1) 2.5x the average of the P&R Liftcars' last three
financials years EBIT

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