Home repairs group expands US presence with £108m acquisition
Home repairs group HomeServe is expanding its US presence with the acquisition of a complementary business in a deal valued at more than £108m.
The Walsall-based group has acquired certain trade and assets of the home cover business of Dominion Products and Services, a wholly owned subsidiary of Dominion Energy, Inc, based in Richmond, Virginia.
In conjunction with the acquisition, HomeServe has also announced a share placing aimed at raising £125m – which represents approximately 5% of the existing issued share capital of the company.
Dominion Products and Services offers a variety of home protection programmes across 16 states, concentrated in the Mid-Atlantic region.
The transaction brings a growing customer base of 0.5 million customers and 1.1 million policies, and will provide HomeServe with access to 7.1 million additional households.
The total value of the transaction is $143m (£108.33m). This includes $20m of deferred consideration payable on a straight line annual basis over 10 years, with payments expected to start in 2019. The remaining consideration is payable in two tranches that are broadly commensurate with the total number of policies to be transferred in each tranche. Tranche 1 brings c.0.3 million customers, c.0.6 million policies and c.4.3 million households. Tranche 2 brings c.0.2 million customers, c.0.5 million policies and c.2.8 million households.
The acquisition is expected to complete in December subject to US competition clearance.
Tom Rusin, CEO of HomeServe in North America, said: “This agreement with Dominion is another major step forward for HomeServe. It gives us the opportunity to add a significant number of customers, policies and new partner relationships that are complementary to our existing business.”
Richard Harpin, HomeServe founder and group chief executive, said: “We have an ambitious but well-grounded growth plan for our North American business which envisages generating adjusted operating profits of $160m in the medium term. The acquisition of Dominion Products and Services’ business brings forward the achievement of our North American targets by at least 12 months. We are assessing an exciting pipeline of further opportunities, and today’s equity placing retains the balance sheet strength we want to deliver today’s transaction and additional future growth across all of our businesses.”
In a trading update accompanying the acquisition announcement, HomeServe it had had a strong first half and remained on track to deliver further strong growth in 2018.
Group revenue rose 17% to £366m – 12% on a constant currency basis – and group adjusted operating profit was up 13% on the prior year at £35m, a figure benefitting from £2m of favourable exchange movements.
Statutory pre-tax profit was £21m (H1 2016: £22m) – the decline due to an increase in interest and amortisation charges as a result of investments and acquisitions in 2017.
