Franchise group agrees ‘transformational’ £28m deal

Drain clearance business Metro Rod has been bought for £28m by a franchise business that listed on the stock market last year.

Franchise Brands, which already operates four franchise businesses, intends to raise £20m in a share placing to fund the deal.

Macclesfield-based Metro Rod is a £21m-turnover group with 40 regional franchisees providing drain clearance and maintenance services.

Franchise Brands’ directors “believe the acquisition represents a transformational step” for the business. It operated three brands – ChipsAway, Ovenclean and MyHome – when it floated last year, and bought dog business Barking Mad last autumn.

Metro Rod’s size, which makes the deal a reverse takeover, is expected to provide benefits to both businesses.

Franchise Brands has significant expertise in marketing, which it hopes will accelerate the development of Metro Rod’s existing business and the newly launched Metro Plumb business. At the same time, Metro Rod has a substantial call centre capability, whereas Franchise Brands currently outsources this function.

Franchise Brands floated on the Alternative Investment Market last August. It share price had increased by more than 50% up to Tuesday night’s close to 69p, but rose to 93p yesterday as deal speculation was confirmed.

The West Midlands group has also released its full-year figures for 2016. Pre-tax profits were down 30% to £784,000, although revenues grew 11% to £4.87m.
Stephen Hemsley, executive chairman of Franchise Brands, said: “2016 has been a successful and eventful year with the group’s IPO putting the company in a position to make selective, complementary acquisitions of franchise businesses that could benefit from our central services, including marketing expertise and franchising experience.

“Our first acquisition of Barking Mad, the leading franchise provider of professionally-organised dog sitting services in the UK, is already starting to benefit from our shared support services and our Ovenclean and ChipsAway businesses have performed well.”

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