DMGT announces today that, following a number of enquiries from third parties, it is in discussions in relation to the sale of its Insurance Risk division (“RMS“). While discussions are ongoing and there can be no certainty that a transaction will result, the Board of DMGT believes the terms of the proposed sale, if completed, would realise a premium valuation for DMGT’s shareholders. Should terms be agreed, completion is expected to take place in Q3 2021 (calendar year).
The disposal of RMS would mark a further significant milestone in the transformation of DMGT, following the disposals in recent years of Hobsons, Genscape and Zoopla, which collectively realised c.£1.2 billion of value for DMGT, as well as the distribution of DMGT’s c.50% stake in Euromoney. On top of the substantial cash proceeds that would arise from the sale of RMS, DMGT will have a further major asset upon completion of the business combination of Cazoo Holdings Limited (in which DMGT currently has a c.20% stake) with AJAX I, as referred to in the announcement made by DMGT on 29 March 2021 (“Cazoo Completion“). It is expected that, upon Cazoo Completion, the Group will hold c.16% of the common stock of the listed Cazoo on a fully diluted basis (the “Cazoo Shares“).
The Board has considered whether, assuming both the completion of the sale of RMS (“RMS Completion“) and Cazoo Completion, it would be in shareholders’ interests to retain the cash proceeds and the Cazoo Shares or to distribute the resulting value directly to all shareholders, including RCL. The Board has concluded that it would be in the best interests of shareholders to distribute the value expected to be created upon RMS Completion and Cazoo Completion through a special distribution and has discussed this conclusion with its controlling shareholder, RCL.
The Possible Offer for DMGT
RCL has indicated to the Board that, if RMS Completion and Cazoo Completion both happen, it would be prepared to make a possible cash offer to acquire the entire issued and to be issued share capital of DMGT not already owned by RCL (the “DMGT Shares“) (the “Possible Offer“).
Under the terms of the Possible Offer, and subject to the reservations set out below, holders of DMGT Shares would receive 251 pence in cash for each DMGT Share (the “Offer Consideration“).
The Special Dividend
Conditional upon the Possible Offer becoming or being declared unconditional, DMGT intends to declare a single distribution comprising (i) cash; and (ii) non-cash assets (being Cazoo Shares) (the “Special Dividend“), payable to all DMGT shareholders (including RCL) on the register of members on the record date, which will be the date on which the Possible Offer (if made) becomes or is declared unconditional.
The cash component of the Special Dividend would comprise the net proceeds received on RMS Completion and other DMGT Group cash immediately prior to declaration of the Special Dividend, subject to certain deductions to be agreed between DMGT and RCL including in respect of (i) tax liabilities arising in connection with the sale of RMS; (ii) liabilities to or in respect of DMGT’s pension schemes; and (iii) liabilities under various employee incentives arrangements. Given the uncertainty of some of these amounts at this time, the Board is only able to provide a broad estimate at this stage of the likely cash component of the Special Dividend, which is expected to be approximately 610 pence per DMGT share.
The Cazoo Share component of the Special Dividend will be subject to (i) an adjustment to accommodate an estimate of any tax liabilities of DMGT arising in connection with the distribution of the Cazoo Share component (if any); and (ii) a constitutional lock-up of up to six months after Cazoo Completion. Settlement of the Cazoo Share component of the Special Dividend will not be able to occur until that lock-up period has expired.
The Possible Offer implies an enterprise value of £810 million (with DMGT assuming debt with a fair value of approximately £230 million) for all of the trading and investment businesses of DMGT, excluding RMS, the Cazoo Shares and the cash subject to the Special Dividend. The aggregate value of the Offer Consideration and the Special Dividend will be determined following RMS Completion and agreement on any associated deductions from the resulting cash held by DMGT; and in the case of the Cazoo Share component of the Special Dividend, upon distribution of the relevant Cazoo Shares. Further details will be provided in any announcement by RCL of a firm intention to make the Possible Offer.
The independent DMGT directors have indicated to RCL that, based on the above, the Offer Consideration and the anticipated value of the Special Dividend will represent attractive value for DMGT’s shareholders and that in the absence of material unforeseen circumstances they would be minded to recommend the Possible Offer to DMGT’s shareholders, should a firm intention to make an offer be announced on such terms pursuant to Rule 2.7 of the Code, subject to (i) reaching agreement on the other terms and conditions of the Possible Offer; (ii) completion of limited confirmatory due diligence by RCL; (iii) discussion with J.P. Morgan Cazenove, DMGT’s independent financial adviser appointed pursuant to Rule 3 of the Code; (iv) RMS Completion; and (v) Cazoo Completion.
If the Possible Offer is made and becomes or is declared unconditional, it is expected that DMGT would cease to be listed in due course and re-registered as a private company.
It is anticipated that any offer arising from the Possible Offer would be effected by means of a takeover offer as defined in Chapter 3 of Part 28 of the Companies Act 2006.
This announcement has been released with the consent of RCL..
For the full press release see here