Capita plc has entered into a definitive agreement to divest its standalone software division, Capita One, to Orchard Information Systems Limited, a subsidiary of MRI Software, LLC. The transaction, valued at £200 million on a cash-free, debt-free basis, is expected to significantly reshape Capita’s operational focus and enhance shareholder returns.

Financial Highlights and Strategic Implications:

– Sale Price: £200 million, approximately 10 times the 2023 EBITDA of Capita One.

– Expected Proceeds: Gross cash proceeds of about £207 million are anticipated upon the completion of the sale, along with a pre-completion cash dividend of £4.8 million from Capita One.

– Use of Proceeds: The proceeds from this disposal will bolster Capita’s financial position, allowing for debt reduction and funding ongoing transformations.

Capita One, known for its software solutions catering to local governments, education authorities, and housing associations, has been a robust component of Capita’s portfolio, enhancing local public services’ efficiency and revenue collection. However, as part of a strategic realignment announced during Capita’s Capital Markets Event on June 13, 2024, this sale aligns with the company’s focus on streamlining operations and concentrating on core business areas.

– Financial Metrics of Capita One: For the fiscal year ending December 31, 2023, Capita One reported revenues of £55 million and a profit before tax of £19 million. The business achieved an EBITDA of approximately £21 million, with an impressive operating cash conversion rate of 92%.

Adolfo Hernandez, CEO of Capita, remarked on the divestiture, stating, “Capita One is a high-quality business that has performed exceptionally well. Under its new owner, it is well positioned to benefit from investment in its strategic growth. We remain committed to the local public service market but want to see Capita One be set up for continued success with an owner that can deliver the investment it needs.”

The transaction is classified as a Class 1 transaction under current Listing Rules and hinges on several conditions, including approvals from Capita’s shareholders and the Secretary of State under the UK’s National Security and Investment Act. The anticipated completion is slated for late August, subject to the satisfaction of these conditions.

MRI Software, through its subsidiary Orchard Information Systems, plans to support and expand Capita One’s product offerings and customer base, reinforcing its position in the real estate software market. This acquisition is expected to enable MRI Software to leverage Capita One’s technologies and market presence to enhance its own suite of solutions.

Barclays Bank PLC serves as the sole financial advisor and sponsor to Capita for this transaction, underscoring the strategic importance and expected smooth execution of the disposal.

  Capita One, Capita One disposal, Capita plc sale, Capita Sale, MRI Software, MRI Software growth strategy, Orchard Information Systems, Orchard Information Systems acquisition, Software Business Disposal, software business transaction