Fit-out contractor opted for debt-for-equity swap and financial transfusion after calling off sale talks

Retail fit-out specialist Styles & Wood dismissed the option of a private equity takeover because bids were too low, according to a deal insider.

The company, which announced the details of its refinancing package last Thursday, had pursued a sale to a private equity buyer alongside the option of asking existing investors for cash, combined with a debt-for-equity swap with lender RBS.

Ivan McKeever
Ivan McKeever

The source said: “Private equity groups had their money on the table first, but first wasn’t best and after all the options were fully tested, the company realised that a deal with the bank and the institutional investors was best for shareholders.”

It is understood at least two private equity groups put in bids after wide-ranging talks with funds such as Rutland Partners, HIG Capital and Alchemy.

Under the deal, RBS is to take a stake of just under 20% in the company and investors have agreed to put in £12.25m. Following the agreement, the company’s debt-pile of £17m will be wiped out and it will return to a positive cash position.

It is understood that going to the market for cash became the most attractive option about three weeks into the six-week restructuring process. The

Private equity groups had their money on the table first, but first wasn’t best

Source close to situation

source said: “That’s when the balance started to swing away from private equity. It was as though the institutional investors woke up and recognised the opportunity that was there.”

The company, which delayed its 2008 results statement for two months as a result of the financial uncertainty, announced a pre-tax loss of £900,000 in the year to 31 December 2008.

Turnover was slightly ahead of market expectations at £243.1m. In 2007 it made a pre-tax profit of £11.8m on turnover of £316m.

The company has suffered in the recession owing to its exposure to the retail market. Last year it issued two profit warnings.

The company said it would look to enter new markets. A statement said: “The core business of construction services (StoreFit) will continue to service major retailers and banks but will also target new sectors including the public, office and leisure markets.”

Chief executive Ivan McKeever on the deal

“This refinancing will provide us with the funds we need to secure our position as one of the leading players in the property services market. It provides a huge boost to our balance sheet, relieves concerns about our short and medium-term debt and should allow us to work closely with our customers to take advantage of the expected upturn in our business as we emerge from recession.”