Capita agrees sale of education unit for around £400m
Outsourcing giant sells Educations Software Solutions to Montagu Private Equity
Capita has agreed to sell its Education Software Solutions (ESS) business to private equity house Montagu in a deal valued at up to £400m.
ESS provides management information system and related software for the education sector. The outsourcing firm revealed last month that it was in talks with Montagu Private Equity to offload the unit.
Montagu has also entered into an agreement to invest in edtech specialist ParentPay and ESS will become part of ParentPay upon the completion of both deals.
The deal for ESS will see Montagu assume liabilities such as working capital and debt worth £57m and it will pay £298m on completion of the deal, which is expected to early next year. Capita could see an additional £45m paid to it once the private equity firm's deal for ParentPay achieves regulatory approval.
The education unit's senior management team will transfer with the business.
ESS' gross assets for the year ending 31 December 2019 were £96.2m and its profit before tax was £52.7m for the same period.
Capita will retain software assets that are "catalysts" for growing its other services but intends to dispose of standalone software products that have little overlap or cross-sell with its core capabilities of consulting, transformation and digital BPO services.
The firm reiterated hat further disposals of its standalone businesses will be announced in due course in order to continue its strategy of simplifying and strengthening its business.
"We are pleased to have agreed the sale of ESS to Montagu Private Equity after a comprehensive auction process," stated Capita's CEO Jon Lewis.
"ESS is a business that Capita originally bought for £10m so we have created significant value over 25 years of ownership.
"We announced our intention to sell ESS earlier this year, as part of our strategy to simplify and strengthen Capita.
"The sale will help us simplify by disposing of a standalone business, while the proceeds will help strengthen Capita's balance sheet, as we build towards a more focused, sustainable business for the long term.
"At the same time, our colleagues at ESS will benefit from a new owner with the focus and means to support further investment and growth, as the business transitions to its next-generation cloud-native software."
Capita has agreed to sell its Education Software Solutions (ESS) business to private equity house Montagu in a deal valued at up to £400m.
ESS provides management information system and related software for the education sector. The outsourcing firm revealed last month that it was in talks with Montagu Private Equity to offload the unit.
Montagu has also entered into an agreement to invest in edtech specialist ParentPay and ESS will become part of ParentPay upon the completion of both deals.
The deal for ESS will see Montagu assume liabilities such as working capital and debt worth £57m and it will pay £298m on completion of the deal, which is expected to early next year. Capita could see an additional £45m paid to it once the private equity firm's deal for ParentPay achieves regulatory approval.
The education unit's senior management team will transfer with the business.
ESS' gross assets for the year ending 31 December 2019 were £96.2m and its profit before tax was £52.7m for the same period.
Capita will retain software assets that are "catalysts" for growing its other services but intends to dispose of standalone software products that have little overlap or cross-sell with its core capabilities of consulting, transformation and digital BPO services.
The firm reiterated that further disposals of its standalone businesses will be announced in due course in order to continue its strategy of simplifying and strengthening its business.
The sale of ESS marks a hat trick of successful divestments from Capita this year; It sold Eclipse Legal Systems to Access UK for £56.5m and Capita Workplace Technology was sold back to its founder Paul Gillett through an MBO.
"We are pleased to have agreed the sale of ESS to Montagu Private Equity after a comprehensive auction process," stated Capita's CEO Jon Lewis.
"ESS is a business that Capita originally bought for £10m so we have created significant value over 25 years of ownership.
"We announced our intention to sell ESS earlier this year, as part of our strategy to simplify and strengthen Capita.
"The sale will help us simplify by disposing of a standalone business, while the proceeds will help strengthen Capita's balance sheet, as we build towards a more focused, sustainable business for the long term.
"At the same time, our colleagues at ESS will benefit from a new owner with the focus and means to support further investment and growth, as the business transitions to its next-generation cloud-native software."
Capita's share price rose as high as five per cent when the news broke yesterday but it has now dropped over nine per cent since then at the time of publication.
Capita's share price is down over 70 per cent this year, primarily as a result of downbeat full-year earnings published in March.