Unusual deal underpins £150m equity raise for building group
A global investment manager has agreed to invest up to £85m in building materials specialist SIG as part of an £150m equity raise.
The deal with Clayton, Dubilier & Rice (CD&R) is unusual because it is the first private investment in public equity transaction on the London market in more than a decade.
The investment is alongside an equity raise that will be available to investors.
Sheffield-headquartered SIG was already struggling before the impact of coronavirus. It had statutory pre-tax losses of £113m in 2019 after revenues fell £270m, to £2.16bn.
A new management team is being created to turn the business around. Chief executive Steve Francis joined in February and the appointment of Low and Bonar’s group CFO Ian Ashton was announced this morning.
The fundraising will help support the business, which saw revenues fall by £139m in March and April – a drop of more than one-third on last year.
SIG chairman Andrew Allner said: “We recognise the need to raise new equity, of approximately £150m, to provide a solid capital structure for the future.
“We welcome CD&R as a long-term, supportive shareholder and believe they will bring considerable value to SIG through their contribution on strategy, operational performance, culture and value creation, which will benefit all stakeholders.”
The equity offer will be structured in two tranches – a tranche of £60m being placed firm to CD&R, at 25p per share, and a second tranche of £90m, offered to a broader range of investors and incorporating a pre-emptive offer.
CD&R will invest between £12.5m and £25m in the second tranche, although its investment is conditional on funds being raised from other investors.
The investor will then have a stake of around 25% and it will take two seats on the Board of SIG.
New CFO Ashton will also join the board, along with the former chief operating officer of Wickes, Simon King, who will become a non-executive director in July.
SIG has also released its 2019 results, in which it reports a fall in revenues, partly due to the loss of market share following the decision to increase prices in the UK against a tough economic backdrop.
It also attributes the decline to poor execution of transformation initiatives, resulting in a loss of sales focus in both the UK and Germany.
Allner said: “The 2019 results, albeit in line with January guidance, are disappointing. However, the board has taken decisive action to address this performance.
“Under the leadership of Steve Francis, we have developed a new strategy which has been well received by customers, suppliers and colleagues.”
Francis added: “After nearly a decade of contraction, which has included disposals, rationalisation, debt and cost reduction, it is now time to focus on how to grow SIG and rebuild our core USPs of customer proximity, service and expertise.
“I firmly believe that our new strategy for growth will provide the basis, not only for the restoration of profit and cash conversion, but also serve as a foundation to play a leading role in our industry in the years to come.”