The Royal Bank of Scotland's corporate and structured finance team in Birmingham has backed construction company Willmott Dixon's £148 million acquisition of property maintenance firm Inspace by providing £80 million of senior debt, bridging and working capital facilities.
Willmott Dixon, which has a regional base in Coleshill, is a leading provider of construction services in the public and private sector across England and Wales. Its acquisition of AIM-listed Inspace is part of its strategy to develop a broader construction services business.
Inspace, originally floated on the LSE twoand-a-half years ago, provides specialist services to both the social housing market and corporate arena. Prior to flotation the company was owned by Willmott Dixon and the construction firm was a ten per cent shareholder in the business.
As part of its integration strategy, Hertfordshire-based Willmott Dixon will be carrying out a complete restructure of the combined business.
The new company aims to be a focused provider of construction, maintenance and interior fit out services to the commercial and public sectors. Inspace's role will be to continue providing social and affordable housing to the UK market together with regeneration work and local housing maintenance.
It is thought that Willmott Dixon's decision to acquire Inspace was triggered by the latter's fall in share value.
On flotation in 2005, Inspace's shares were priced at 100p. They later peaked at 194p before falling back to 110p.
Although the acquisition priced the shares at 183p, Willmott Dixon chief executive Rick Willmott denied that the company had been over-valued. He said brokers had targeted a price around 200p.
There is also a suggestion that Willmott Dixon decided to snap up the company before a move by any rival business, although no offer is thought to have been made prior to Will-mott's approach.
Mr Willmott said that there was a strong correlation between the two businesses and therefore the acquisition made good sense.
Willmott's turnover is expected to grow to around £850 million in 2008 as a result of the acquisition, with pre-tax profits expected around £20 million. The business has predicted it could top £1 billion within three years.
Inspace has generated annual revenues of between £320 million and £340 million and since flotation the company grew at 15 to 20 per cent a year.
Once the company restructure has been concluded it is thought that part of Inspace will be rebranded under a division of Willmott Dixon with the remainder of the firm continuing to operate under its own banner.
The transition is expected to be a smooth one with Inspace executive chairman Colin Enticknap, who had headed up Inspace since flotation, staying on as chairman of the Willmott Dixon group.
Jamie Callaghan, director of corporate and structured finance at RBS in Birmingham, helped conclude the deal.
He said: "We are delighted to support the shareholders of Willmott Dixon with the next stage in their strategic development.
"Both Willmott Dixon and Inspace have impressive track records of acquiring new projects and the newly formed group will benefit from an enhanced balance sheet to continue to compete successfully for new project mandates."
Grant Thornton and the Birmingham office of DLA provided financial diligence and legal advice to RBS.