Synstar looks to clear #97m debt
Services Company prepares for more acquisitions as it makes its March debut on the London Stock Exchange.
Synstar Computer Services International is readying itself for morech debut on the London Stock Exchange. purchases after it revealed plans to list itself on the UK Stock Exchange next month.
The flotation will enable the company to use the estimated #135 million it will raise in net proceeds to repay debts arising from a 1997 management buyout (MBO).
Approximately #97 million of the funds raised by the float will be used to repay the MBO debt, with the excess to be divided pro rata among shareholders.
Synstar was formed following the MBO from the Granada Computer Group in September 1997, backed by CVC Capital Partners. In October, it changed its name from Granada Computer Services.
According to Jonathan Feuer, non-executive director of Synstar, the company is chasing a top five position in the pan-European services market and the decision to go public will aid its rise from a current ranking outside the top 10.
'Being a publicly listed company will raise Synstar's profile and make it easier for the company to build up its pan-European customer base,' he said.
'Eliminating the MBO debt will also allow us to use the company's cash flow and acquisition facilities to buy much bigger companies than we were previously able to.'
Feuer added: 'We have also been looking at a few acquisition targets, some of which will want to stay part of the company, so being publicly listed gives us the opportunity to offer a share swap.'
He indicated that Synstar has earmarked more than #100 million to spend on acquisitions. He declined to say which companies the services company has targeted, but said four were worthy of further investigation.
'We are looking for companies that will expand our service products and boost our geographical coverage,' Feuer explained. 'The Control Data acquisition last year gave us better coverage in France and Germany, so now our revenue is split about 50:50 between the UK and the rest of Europe.
'But if you look at the European IT market, the UK only comprises about one-sixth of the total and that's what Synstar is aiming for.'
He pointed out that all negotiations with prospective acquisition targets have been sidelined while Synstar completes its float.
The placing will consist of 87,113,785 ordinary shares at a price expected to be between #1.55 and #1.85. The shares will be available primarily to institutional investors. CVC will retain 30 per cent of the shares issued.
Synstar's formal listing will take place on 5 March.