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IWG: Takeover desk-ussions terminated

Shares in flexible workspace provider IWG are down an understandable 21% this morning after it called off takeover discussions with a trio of rival private equity suitors (Starwood, Terra Firma, TDR), saying none can offer a deal recommendable to the board. Understandable because it’s almost the mirror image of the 22.8% jump on 14 May when talks were revealed.

IWG’s move might have been considered a means of getting the trio to engage more and spice up some rivalry, however, they have already replied separately, saying they don’t intend to make formal offers. This puts them out of the frame for at least six months, removing the supportive element that had kept the shares around 300p.

First-half revenues did grow by 2.9% (7.1% excluding FX moves), however, EBITDA fell 10% and pre-tax profits dropped 33% as higher costs (marketing, overheads) and investment (infrastructure, talent) compounded UK market weakness. The company is still anticipates a short-term impact on revenue generation while several key UK centres are refurbished, however, it is also still reiterating full year guidance.

An 11% hike in the dividend suggests confidence, even after cash flow fell 13% and the net-debt to EBITDA ratio climbed from 0.8x to 1.1x. The shares are already 6-7%  off their 222p lows (revisit of Mar/Apr/May base), however, without hopes of a takeover investors will likely need to hear good news about the business itself and/or the global economy (it’s nicely geographically diverse) if that 250-300p gap is to be refilled.

Mike van Dulken, Head of Research, 6 Aug 2018

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This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.


Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance.

Prepared by Michael van Dulken, Head of Research

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