Rentokil Initial has sold the entire share capital of City Link to BECAP12 Fund (Better Capital), a private equity investor, for GBP1. There are no outstanding conditions required, so completion is effective immediately.
The current City Link management team, led by David Smith, will continue to run the business. Better Capital will invest GBP40m in the business to provide more than sufficient funding required by City Link to complete its turn-around plan.
City Link reduced adjusted operating losses from GBP31m in 2011 to GBP26m in 2012. First Quarter 2013 performance continued to show an improved trading performance delivering an adjusted operating loss of GBP8.1m, an improvement of GBP4.6m against Q1 2012.
The gross assets of City Link as at 31 December 2012 were GBP77.6m. Rentokil Initial will take an exceptional charge of approximately GBP40m with its Q2 results. This will comprise asset write offs of approximately GBP30m and additional cash costs of approximately GBP10m.
Rentokil Initial has retained certain parent company guarantees, including approximately GBP20m relating to leasehold properties.
Alan Brown, chief executive of Rentokil Initial, says: “I believe City Link has now turned the corner after five years of substantial losses. The business has made strong financial progress over the last two quarters, it now has a strong management team and we have found a very committed investor in Better Capital.
“Rentokil Initial has decided to divest of City Link at this stage of the turnaround so that we can concentrate on our core international businesses in Pest, Hygiene and Workwear. The sale positions Rentokil Initial as a stronger and more focused group.”
