Spark sold to bigger group
McGhee nets £9 million from sale of care homes
CareTech Holdings, a provider of specialist social care services, will make an initial payment of £7.48m in cash for the business with an additional earn-out of up to £1.75m, payable in shares.
McGhee, chairman and sole shareholder, founded Spark in 1999 and in the last financial year reported a pretax profit of £1.2m on revenue of £10.9m. The senior management team will remain under the new management.
The acquisition of Spark, which is expected to be earnings enhancing in its first full financial year, will be financed from CareTech’s existing resources.
Mr McGhee said: “Through our education-based approach we have become a market leader in our sector in Scotland. With CareTech’s support, and with our existing management team, we can continue to develop our business and the services we provide.
“CareTech has greatly impressed us as it shares our values, which are focused on the delivery of high quality services to children and young people with complex needs. Becoming part of CareTech is a very positive step for all our stakeholders. It will support our growth whilst we continue to offer excellent outcomes for the children and young people in our care.”
Farouq Sheikh, executive chairman of CareTech, said: “We are delighted to announce the acquisition of Spark, whose impressive growth in the past few years reflects the quality and innovation of its services and the strength of its local authority relationships. I would like to welcome the team at Spark to CareTech.
“This acquisition, which is expected to be earnings enhancing in its first full financial year, marks our first transaction following the £21 million placing in March this year. We continue to make good progress on a number of other potential bolt-on acquisitions and expect to have fully deployed the proceeds of the placing during the coming months.”
New shares in the company will be quoted on the Alternative Investment Market from 3 August. CareTech has also agreed new banking facilities which include a reduction in the cost of its borrowing and deferring four loan repayments due between now and October 2016 amounting to £21.6m.
Mr Sheikh sadi: “These new banking facilities extend our loan facility by two years and save cost by the reduction in interest rate. These enhanced terms underline the support of our banking syndicate for our growth strategy and the quality of CareTech’s asset base. As stated last month in our interim results, our objective is to deliver double digit growth and these new banking facilities will help us to achieve that objective.”