Redstone to split in two with services spin-off
Integrator hopes markets will value new Redcentric services business more as a standalone entity
Redstone is to spin off its managed services business into a separate publicly traded entity and hopes its stock price will soar without the lower-margin IT projects business dragging it down.
The integrator announced to the markets this morning that it plans to turn its "network-based managed services business" into a separate company called Redcentric. Its "infrastructure solutions" business will retain the Redstone name and both firms will be quoted on the London AIM market.
The move is subject to approval by shareholders, who will vote on the matter at a meeting on 4 March. Court approval is also needed, with a hearing scheduled for 27 March. If all goes to plan, Redstone expects Redcentric to begin trading on about 16 April.
To help cover the costs of demerging the two businesses and floating the new company, Redstone aims to raise £6m by placing 75 million new shares at a cost of 8p each.
In today's statement, the company claimed that the higher-margin managed services business remains undervalued by the market all the while it is paired with the hardware projects arm. Redstone also outlined that having two discrete companies will allow the management of each to focus more effectively on the business' needs.
Redstone chairman Richard Ramsay said: "Having successfully completed the restructuring of Redstone and integrated the recently acquired Maxima managed services business, it is clear that the group now has a valuable network-based managed services business that has the key attributes of a business that should be valued more highly. Our infrastructure solutions business continues to win mandates from blue-chip organisations and is a well-established and profitable business.
"The proposed demerger offers opportunities for value enhancement for both of the demerged businesses and their stakeholders. We are pleased to have concluded an oversubscribed placing in order to effect the demerger and thank our existing and new shareholders for their support in this process. I am excited about the future for both Redstone and Redcentric."
Redstone has had a mixed recent history, having grown through acquisition to become a £200m market giant. But by 2009 the bloated business operated at a loss of £50m. After downsizing considerably, in FY12 the firm near enough broke even on revenue of £67.2m. But it threw its hat back in the acquisition ring last autumn with a £13.8m buyout of the core business of ailing rival Maxima.