Further to the announcement on 24 October, Serco Group has confirmed that it has now signed the definitive Business Purchase Agreement to acquire a portfolio of selected UK health facilities management contracts from Carillion.
Assuming Carillion receives shareholders’ approval and the requisite third party consents over the course of 2018, each individual contract will be acquired on a cash-free, debt-free basis, with the consideration to be paid in instalments and to be satisfied using Serco’s existing debt facilities. Assuming that the contracts are all transferred to Serco, the total consideration payable would be £47.7 million (subject to a limited working capital adjustment and a limited adjustment in the event that the contracts are transferred ahead of or behind an assumed schedule). Full transition of operations is targeted to be achieved by the end of 2018.
The 15 contracts to be acquired by Serco provide FM services to NHS sites across the UK, covering five acute hospital trusts and around 20 other public sector organisations.
The portfolio has current annual revenues of approximately £90 million and a weighted average remaining term of 14 years; approaching £1 billion of core contracted revenue would be added to Serco’s order book if all contracts are transferred.
The contracts will be integrated within Serco’s existing UK Health business unit, which, following recent wins at Barts Health NHS Trust and University Hospital Southampton NHS Foundation Trust, has annual revenues of around £240 million.
Rupert Soames, Serco Group Chief Executive, commented: “The Health sector is one of the fastest-growing areas of government spending worldwide, and our customers face immense challenges catering for the ever-increasing demands of ageing populations. Serco’s existing Health operations already generate revenue of over £350 million, employ over 8,000 people, and provide services to such world-famous institutions as St Barts in the UK, the Cleveland Clinic in Abu Dhabi, the Prince of Wales Hospital in Hong Kong and Fiona Stanley Hospital in Australia. We look forward to taking on these high-quality, long-term contracts which will add significant scale to our Health business, and will enable us to further improve the quality and efficiency of services we provide to the NHS and our other customers.”