Kingswood Group today (12 March) said that it is in advanced discussions with HSQ Investments a wholly owned indirect subsidiary of funds managed and/or advised by Pollen Street Capital Limited, regarding a sale by KPI and purchase by HSQ of KPI’s entire shareholding in the company.
HSQ, a wholly owned indirect subsidiary of funds managed and/or advised by Pollen Street Capital, initially invested in Kingswood in September 2019, providing up to £80m of growth equity capital to the business.
HSQ currently holds 68.4% of Kingswood’s voting rights and it further confirmed that it "continues to be supportive of the business but believe that the purchase is most appropriate from a position as sole institutional shareholder alongside the company moving to an unlisted, private company setting".
The debt is not the reason for the delisting, the statement said, but reflects the sale of KPI’s shares and will follow a similar delisting process undertaken by Pollen Street with Mattioli Woods.
The update also said that the company’s performance had been impacted by the headwinds seen across the sector over the last couple of years.
"This has resulted in the Company’s growth not being as strong over the period as management had expected. In conjunction with this, the acquisition strategy has seen the Company’s debt position increase significantly over the last two years, rising from a net cash position of £39.7m to a net debt position of £48.1m as at 31 December 2023.
"Since the start of 2024, in order to satisfy the working capital obligations of the Company (including to meet deferred payment obligations and debt interest payments on its senior debt facility) HSQ, or affiliates of HSQ, have provided the Company with additional loans, amounting to in aggregate £21 million.
"As at 31 December 2024, the unaudited gross debt in the Company from its senior debt facility and the loans provided by HSQ and/or affiliates of HSQ since February 2024 amounted to, in aggregate, £90.7m.
"Set against this, the Company has imminent obligations which significantly exceed the cash balance available at the end of March 2025. In the absence of new external financial support, the Company would not be able to satisfy these obligations."
The Kingswood independent directors were also "strongly of the view that there is no other near term credible alternative to the Company other than the continued financial support from HSQ".
A possible offer by HSQ is subject to formalising an in-principle agreement between HSQ and KPI regarding a sale by KPI and purchase by HSQ of KPI’s entire shareholding in the company at a price of 7 pence per share.
The update also added that the independent Kingswood directors have informed HSQ that they would be minded to recommend the possible offer, if made, to Kingswood Shareholders at this price of 7 pence per share.
There can be no certainty that an offer will be made. Further announcements will be made as and when appropriate.
In accordance with Rule 2.4(c) of the Takeover Code, HSQ will be required, pursuant to Rule 2.6(a) of the Code, by no later than 5.00 pm on 9 April 2025, to either announce a firm intention to make an offer for the group, under Rule 2.7 of the Code, or announce that it does not intend to make an offer for the Group.
HSQ have provided their consent to this announcement, the statement concluded.
