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Bank buys software firm

RBS acquires FreeAgent in £53m cash deal

Ed Molyneux

Ed Molyneux: launched the business

Royal Bank of Scotland has acquired the Edinburgh-based software accounting company FreeAgent in a cash deal worth £53 million.

About 5% of the consideration will be in shares in RBS BidCo, a subsidiary of RBS.

The deal is one of the first undertaken by RBS since it was rescued by the taxpayer almost 10 years ago.

FreeAgent was launched by former RAF pilot Ed Molyneux. It debuted on the London Stock Exchange’s AIM register in November 2016, valued at £34.1m.

He holds nearly 12% of the shares, entitling him to about £6m gross.

RBS and FreeAgent launched a commercial partnership in January last year offering the product to the bank’s business customers through its online banking service.

Following a rollout in the fourth quarter of 2017, more than 10,000 RBS customers are already signed up to use the FreeAgent product.

RBS intends to operate FreeAgent as an operationally independent member of the RBS Group, retaining FreeAgent’s existing management team and maintaining its current Edinburgh location.

Mr Molyneux said: “Today’s announcement represents the beginning of a new and exciting chapter for FreeAgent.  Our vision is ‘making businesses happier and more successful by putting them in control of their finances’ and this moves us closer to that vision.

“Having developed a strong strategic partnership with RBS and with over 10,000 of their business banking customers having already signed up to use FreeAgent’s accounting solution, we look ahead to the next chapter, where we will accelerate and further extend our technology capabilities as part of a bigger group.

“Our working together represents a really compelling opportunity and hence the Board is intending to recommend the offer which we believe makes both good strategic and financial sense.”

Andy Roberts, chairman of FreeAgent, said: “The combination of FreeAgent and RBS makes sense for our talented people, for our company’s growth prospects, and for the shareholders who have backed our journey so far.

“For those shareholders, today’s offer represents a 5x multiple on our current revenues as well as a very substantial premium to our IPO price.  For the FreeAgent team, it opens up a huge opportunity for them: a chance to target the entire RBS SME client base with a product designed with their needs in mind.  It is for these reasons that I and my Board colleagues fully recommend the offer to shareholders.”

Ross McEwan: ‘we have been impressed by FreeAgent’ (photo by Terry Murden)

Ross McEwan, chief executive of RBS, said: “RBS is pleased to have reached an agreement on a recommended acquisition of FreeAgent. Since the beginning of our partnership, we have been impressed by FreeAgent and its technology and are excited by the enhanced offering we will be able to provide to our customers.

“We believe that a technology-enabled solution for our business banking customers will make it easier for our customers to build their businesses safely and securely.”

The Offer Price represents a premium of approximately:

·             86%. to the closing price per FreeAgent share of 64.5p on 26 March, being the last business day prior to the date of this announcement.

·             42.9%. to the IPO price per FreeAgent share of 84p; and

·             67.3%. to the six month average price per FreeAgent share of 71.7p being the average closing price for the six month period ended on 26 March

·     The FreeAgent directors have been advised by N+1 Singer


Interview with Ed Molyneux

…more follows

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