RECOMMENDED CASH OFFER
for
HomeServe plc (“HomeServe”)
by
Hestia Bidco Limited (“Bidco”)
an indirect subsidiary of Brookfield Infrastructure funds
to be effected by means of a scheme of arrangement
under Part 26 of the UK Companies Act 2006
Summary
· The boards of Bidco and HomeServe are pleased to announce that they have reached agreement on the terms of a recommended cash offer to be made by Bidco to acquire the entire issued and to be issued share capital of HomeServe. The Acquisition is to be effected by means of a court-sanctioned scheme of arrangement under Part 26 of the Companies Act.
· Under the terms of the Acquisition, HomeServe Shareholders shall be entitled to receive
for each HomeServe Share 1,200 pence in cash
· The Acquisition values the entire issued and to be issued share capital of HomeServe at approximately £4,077 million and represents a premium of approximately:
· 71 per cent. to the Closing Price per HomeServe Share of 704 pence on 23 March 2022 (being the last Business Day prior to the start of the Offer Period);
· 65 per cent. to the volume-weighted average price per HomeServe Share of 728 pence over the three-month period ended 23 March 2022 (being the last Business Day prior to the start of the Offer Period); and
· 52 per cent. to the volume-weighted average price per HomeServe Share of 791 pence over the six-month period ended 23 March 2022 (being the last Business Day prior to the start of the Offer Period).
· The Acquisition Price assumes that HomeServe Shareholders shall not receive any dividend, distribution, or other return of value. If, on or after the date of this announcement and on or prior to the Effective Date, any dividend, distribution, or other return of value is declared, made, or paid or becomes payable by HomeServe, Bidco reserves the right to reduce the Acquisition Price by an amount up to the amount of such dividend, distribution or other return of value in which case any references to the Acquisition Price will be deemed to be a reference to the Acquisition Price as so reduced. In such circumstances, HomeServe Shareholders shall be entitled to retain any such dividend, distribution, or other return of value declared, made, or paid.
· The cash consideration payable to HomeServe Shareholders under the terms of the Acquisition will be financed by a combination of equity to be drawn from funds managed by Brookfield Infrastructure or affiliates of Brookfield Infrastructure and debt to be provided under the Interim Facilities Agreement.
HomeServe Recommendation
· The HomeServe Directors, who have been so advised by J.P. Morgan Cazenove, UBS and Goldman Sachs International as to the financial terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable. In providing their advice to the HomeServe Directors, J.P. Morgan Cazenove, UBS and Goldman Sachs International have taken into account the commercial assessments of the HomeServe Directors. UBS is providing independent financial advice to the HomeServe Directors for the purposes of Rule 3 of the Code.
· Accordingly, the HomeServe Directors intend to recommend unanimously that HomeServe Shareholders vote in favour of the Scheme at the Court Meeting and the resolution to be proposed at the General Meeting as the HomeServe Directors have irrevocably undertaken to do in respect of their own beneficial holdings of 26,941,260 HomeServe Shares representing, in aggregate, approximately 8.01 per cent. of the share capital of HomeServe in issue on 18 May 2022 (being the latest practicable date prior to this announcement).
· It is the HomeServe Directors' intention, as soon as reasonably practicable following the end of the closed period to which HomeServe is subject under Article 19(11) of the Market Abuse Regulation, such closed period being expected to end on 24 May 2022 following the publication of HomeServe's preliminary results announcement for the financial year ended 31 March 2022, to give irrevocable undertakings (in case the Acquisition is implemented by way of a Takeover Offer in accordance with the terms of the Co-operation Agreement) to accept or procure the acceptance of a Takeover Offer in respect of their own holdings of HomeServe Shares.
Irrevocable undertakings
· In addition to the irrevocable undertakings from the HomeServe Directors described above, Bidco has received an irrevocable undertaking to vote in favour of the Scheme at the Court Meeting and the resolutions to be proposed at the General Meeting from Katherine Harpin in respect of a total of 16,023,620 HomeServe Shares representing, in aggregate, approximately 4.76 per cent. of HomeServe's issued share capital.
· Bidco has therefore received irrevocable undertakings in respect of a total of 42,964,880 HomeServe Shares representing, in aggregate, approximately 12.77 per cent. of HomeServe's share capital in issue on 18 May 2022 (being the latest practicable date prior to this announcement).
· Further details of these irrevocable undertakings are set out in Appendix III to this announcement.
Information on Bidco and Brookfield
· Bidco is an indirect subsidiary of funds advised or managed by affiliates of Brookfield Infrastructure Partners L.P. (“Brookfield Infrastructure”). Brookfield Infrastructure is a leading global infrastructure company that owns and operates high quality, long-life assets in the utilities, transport, midstream and data sectors across North and South America, Asia Pacific and Europe. Brookfield Infrastructure is focused on assets that generate stable cash flows. Investors can access its portfolio either through Brookfield Infrastructure Partners L.P. (NYSE: BIP; TSX: BIP.UN), or Brookfield Infrastructure Corporation (NYSE, TSX: BIPC), a Canadian corporation.
· Brookfield Infrastructure is the flagship listed infrastructure company of Brookfield Asset Management Inc. (“Brookfield”), a leading global alternative asset manager with approximately $725 billion of assets under management across real estate, infrastructure, renewable power, private equity and credit.
· Brookfield owns and operates long-life assets and businesses, many of which form the backbone of the global economy. Utilising its global reach, access to large-scale capital and operational expertise, Brookfield offers a range of alternative investment products to investors around the world – including public and private pension plans, endowments and foundations, sovereign wealth funds, financial institutions, insurance companies and private wealth investors. Brookfield is listed on the New York and Toronto stock exchanges under the symbol BAM and BAM.A respectively.
Background to and reasons for the recommendation
· HomeServe has a clear vision: to be the world's largest, most trusted provider of home repairs and improvements. HomeServe has made significant progress in achieving this vision, with large, well established and growing Membership and HVAC businesses in North America and EMEA, together with the innovative Home Experts business which includes Checkatrade, Habitissimo and eLocal. HomeServe has businesses that operate in 10 countries.
· The HomeServe Group has delivered strong revenue and profit growth, and high levels of cash generation, over many years. In addition, the HomeServe Group has paid out more than £800 million in dividends to HomeServe Shareholders since its demerger and listing in 2004. HomeServe has emerged from the COVID pandemic with all three business divisions performing strongly and well positioned for continued growth.
· Management has a clear strategy for the HomeServe Group, and each of the businesses within it. The HomeServe Board is confident this strategy would allow HomeServe to have a strong future as an independent listed company and would deliver significant value over time for HomeServe Shareholders and other stakeholders.
· Brookfield has a track record of owning high quality businesses in utility and residential infrastructure sectors, and can bring operational expertise and new relationships across HomeServe's three businesses. The HomeServe Board believes both that Brookfield would be a good owner for HomeServe, and that Brookfield's experience in the energy transition space will support HomeServe's ambitions in this area.
· Whilst the HomeServe Board did not solicit an offer from Brookfield, they believe that the Acquisition, at 1,200 pence per HomeServe Share, reflects the strength of the HomeServe business and its future prospects. The Acquisition provides the opportunity for shareholders to fully crystallise the value of their holdings, delivering a compelling valuation that realises in cash today the potential for future value creation, while providing certainty when weighed against the inherent uncertainty of the delivery of future value.
· The HomeServe Directors have taken several factors into account in considering the terms of the Acquisition, including:
o the opportunity for HomeServe Shareholders to realise their investment for cash at a fair and reasonable value;
o a premium of approximately 71 per cent. to the Closing Price per HomeServe Share of 704 pence on 23 March 2022 (being the last Business Day prior to the commencement of the Offer Period);
o a premium of approximately 65 per cent. to the three-month volume weighted average price per HomeServe Share of 728 pence on 23 March 2022 (being the last Business Day prior to the commencement of the Offer Period);
o a premium of approximately 52 per cent. to the six-month volume weighted average price per HomeServe Share of 791 pence on 23 March 2022 (being the last Business Day prior to the commencement of the Offer Period);
o a value of £4,077 million for the entire issued and to be issued ordinary share capital of HomeServe; and
o Brookfield's intention to continue to invest in each of HomeServe's businesses to improve the long-term strategic value of HomeServe's businesses for the benefit of customers, affinity partners, suppliers, and employees.
· The HomeServe Directors also note Brookfield's long history of investing in infrastructure and utility businesses, and the expertise they will bring to allow them to develop the customer offer and continue to strengthen the HomeServe business over the longer term.
· The HomeServe Directors have taken into account Brookfield's other stated intentions for the business, management, employees, pension schemes and other stakeholders of HomeServe.
· Accordingly, following careful consideration of the above factors, the HomeServe Directors intend to unanimously recommend the Acquisition to HomeServe Shareholders.
Timetable and conditions
· It is intended that the Acquisition will be implemented by way of a court-sanctioned scheme of arrangement under Part 26 of the Companies Act (although Bidco reserves the right to effect the Acquisition by way of a Takeover Offer, subject to the consent of the Panel and the terms of the Co-operation Agreement).
· The Acquisition is conditional on the approval of HomeServe Shareholders and subject to the further Conditions and terms set out in Appendix I to this announcement (which will be set out in full in the Scheme Document), including the satisfaction of merger control conditions in respect of the UK, the European Union and the United States, the receipt of foreign investment clearances in Spain and Italy and the receipt of change of control approval from the FCA in the UK.
· The Acquisition shall be put to HomeServe Shareholders at the Court Meeting and at the General Meeting. In order to become effective, the Scheme must be approved by a majority in number of the HomeServe Shareholders voting at the Court Meeting, either in person or by proxy, representing at least 75 per cent. in value of the HomeServe Shares voted. In addition, a special resolution implementing the Scheme must be passed by HomeServe Shareholders representing at least 75 per cent. of votes cast at the General Meeting.
· It is expected that the Scheme Document, containing further information about the Acquisition and notices of the Court Meeting and the General Meeting shall be published as soon as practicable and, in any event, within 28 days of this announcement. It is expected that the Court Meeting and the General Meeting will take place in July 2022. The Acquisition is currently expected to complete during the fourth quarter of 2022, subject to the satisfaction of the relevant merger control conditions and receipt of foreign investment clearances and regulatory approvals. An expected timetable of key events relating to the Acquisition will be provided in the Scheme Document.
Commenting on the Acquisition, Tommy Breen, Chairman of HomeServe, said:
“HomeServe is a very high-quality business with a clear strategy and strong management team, which has been led entrepreneurially by its founder, Richard Harpin, for almost 30 years. The offer from Bidco recognises the quality of our business, our people and our future growth potential, and allows shareholders to realise their investment at an attractive valuation. The HomeServe Board also believes that Brookfield's experience with residential infrastructure businesses should generate enhanced opportunities for our employees and a continued high-quality service to our customers.”
Commenting on the Acquisition, Richard Harpin, Founder and Chief Executive of HomeServe, said:
“Since HomeServe was founded in 1993 with just £500,000 of capital from South Staffordshire Group, the company has gone from strength to strength and now operates in 10 countries with a workforce of around 9,000 employees. HomeServe has become a world class business with an important purpose – to make home repairs and improvements easy for homeowners and trades. I am proud of the company we have built and am delighted that Brookfield is committed to providing long-term capital and global expertise, which I am confident will accelerate progress towards our vision to be the world's largest, most trusted provider of home repairs and improvements.”
Sam Pollock, Managing Partner & CEO of Brookfield Infrastructure, said:
“At Brookfield, we are building the world's leading residential infrastructure investment platform, and our acquisition of HomeServe allows us to partner with one of the highest quality companies in the sector. Richard and team share Brookfield's vision for the future of residential infrastructure, making Brookfield the ideal partner to scale the business internationally and across new product offerings. HomeServe and Brookfield together can play an instrumental role in supporting our communities with their net zero objectives and improved customer value proposition.”
Sikander Rashid, Managing Partner at Brookfield Infrastructure, said:
“Brookfield has a proven track record of accelerating companies' growth in the long-term with our deep sector expertise and access to capital. We have a long track record of owning essential residential infrastructure and other in-home services businesses in North America and Europe. We look forward to supporting HomeServe's continued growth globally as critical residential infrastructure is upgraded in the coming years to drive decarbonisation and improve energy efficiency.”