Hong Kong-based investors counter Regus’ MWB bid
Pyrrho Investments, a Hong Kong-based investment agency owned by billionaire Anson Chan, have tabled a £65m counter bid to rival Regus’ proposed takeover of flexible office providers MWB BE.
The offer represents a 62.4% increase on the £40m sum proposed by global flexible office providers Regus in December 2012, which would have cemented the latter’s position as the largest office solution provider in the world.
The move by Pyrrho – already a major MWB BE and MWB Group Holdings shareholder – came just moments before Thursday’s midnight deadline for any rival bids to be confirmed.
The development is likely to spark a bidding war between the two companies as they look to secure control of MWB’s 70 business centres in London’s City and West End, with Regus now having three days to lodge an improved offer. Although Regus are not obligated to match the offer, MWB PL would be obliged to accept it should it meet a certain set of criteria, including the successful settlement of all outstanding debts.
Only 24 hours before, Pyrrho were in the process of lodging a legal petition in opposition of MWB BE’s parent company, MWB PL, that required them to buy Pyrrho’s 16.7% stake in MWB BE, resulting in Regus having to request a series of clarifications from MWB.
The petition has since caused Pyrrho to request that the OFT refer the merger to the UK’s Competition Commission, with proceedings set to commence on 13 May 2013.
A spokesperson for Pyrrho said the deal could: “result in a substantial lessening of competition in relation to the provision of serviced offices in London, and a complaint has been lodged with the Office of Fair Trading requesting it to investigate the proposed merger of Business Exchange and Regus to determine whether the proposed merger should be referred to the Competition Commission.”
Pyrrho’s offer was made in cash by subsidiary Gallant Victor, representing an attempt to raise the former’s stake from 16.7% to a controlling stake of 75.22%. Terms of the offer dictate that MWB BE shareholders would be allocated 100p per ordinary share of 0.1p each in capital generated.
The Pyrrho statement continued by that stating that the company felt Regus’ initial bid ignored the inherent value in MWB, with the quality of both staff and property assets combined contributing enough to make the business profitable again with some procedural changes.
On the offer, Anson Chan, director of GVHL, said: "We are pleased to be able to announce a fair and properly-priced offer for Business Exchange which we view as a high quality operator in the serviced offices business with a prominent market presence in a world class city, London.
“The substantial financial resources available to Pyrrho, its low cost of capital and international business expertise have enabled us to make this offer to Business Exchange shareholders, which is at a strategic premium of 62.4% over the Regus proposal.
“If Regus decides to counter our bid, the much higher cost of acquisition which Regus will have to pay may be a significant surprise to Regus shareholders and market commentators alike.
“If our offer is successful, Pyrrho intends to deploy its funding resources and international network to develop Business Exchange into a truly international enterprise, working with its existing management team.
“We plan to become a leading provider of quality serviced offices in world class cities in Asia, such as Hong Kong, Shanghai and Singapore, and to improve on the business model currently espoused by Regus."
Meanwhile, Regus are of the opinion that Pyrrho’s cash offer would affect the price of their own offer significantly, as any successful bid would require MWB BE to pay out for Pyrrho’s current share package. MWB stated on Thursday that: “The directors of the company do not currently believe that these proceedings will have a material adverse effect on the company's financial condition.”
The initial bid from Regus was enabled after administrators Deloitte were bought in following MWB’s failure to repay an £8m inter-company loan from MWB Business Exchange, alongside a further £4.8m in contractual expenditure: “which was due to be made in monthly instalments from this September, stretching to February 2013".
A previous offer from Regus for MWB BE was withdrawn in June 2012 after the latter’s directors - John Spencer, Rick Aspland-Robinson, Keval Pankhania and Malcolm Murray – backed parent MWB’s bid of 49.82p per share over Regus’ 92.36p offer.
Last year, MWB recorded revenues of £121.1m, down approximately 10% on the previous 18 month’s takings of £165.2m. Total losses accrued totalled £14.8m and £12.9m respectively.