Shareholders voted down the Interserve board’s deleveraging plan on Friday to by 59% to 41%. They were not prepared to see their ownership diluted to just 5%. So now they have nothing.
The business is now owned by a group that includes banks RBS and HSBC, and investors Emerald Asset Management and Davidson Kempner Capital.
While uncertainty remains for the 68,000 employees around the world, there is no reason to suppose that lenders should by any less responsible or capable owners than the speculators and hedge funds that controlled Interserve previously. Being no longer listed on the London Stock Exchange will bring certain rational benefits to Interserve, although already rival outsourcing firms are said to be making a play for the facilities management division.
Interserve chief executive Debbie White has argued all along that the only problem Interserve had was an out-of-control debt burden. With that now tackled, there is no new logic behind further restructuring. If breaking up the group made sense to the board, it would presumably have sought to do it before collapsing the company.
And yet, despite all the planning for any eventuality, uncertainty and speculation is bound to continue, since in due course, probably within five years, the new owners will want an exit strategy.
For now, though, the business seems safe. Within hours of shareholders voting down the board’s Plan A, Plan B was in place.
The administrators sold Interserve’s business and assets to a new company called Montana 1 Limited, controlled by Interserve’s lenders. Montana 1 is in the process of being renamed Interserve Group Limited.
The alternative transaction involves the equitisation of approximately £485m of existing debt and the injection of £110m of new money into the group.
“This alternative deleveraging transaction will restore the group’s balance sheet and provide additional liquidity,” the board said. “All companies in the group other than the parent company will remain solvent, providing continuity of service for customers and suppliers.
The message being stressed by the board this week, led by chief executive Debbie White, is that it is “business as usual for employees, customers, suppliers, and other stakeholders” –keep calm and carry on.
“Under new ownership, the group will have a strong balance sheet, competitive financial structure and a fundamentally solid foundation from which to deliver on its long term strategy,” it said.
Stressing the positives, the board said that its Support Services business in the UK and Middle East had “excellent positions in growing markets and strong cash flow and significant margin improvement potential”; the Construction business was described as “robust, with a clear strategy to use Interserve's market position to focus on the most attractive and lower risk opportunities in construction, building fit-out and infrastructure services”.
And then there is RMD Kwikform, and “a leading Equipment Services business, which solves complex engineering problems for its customers, through the application of world-class design and logistics capabilities, backed up by an extensive fleet of specialist equipment”.
The board has tried to find a buyer for the profitable RMD Kwikform business before but failed to strike a deal that made sense. Now the goalposts have change, a sale of RMDK seems an easier move for Interserve than withdrawing from the support services market.
For chief executive Debbie White the fight is not over; she lost the battle against the shareholders for her preferred deal [feel the Brexit parallels vibrating here…] but the nuclear no-deal option of putting the company into administration and starting again means the start of a new battle to reassure employees, reassure suppliers and restore industry confidence in the business.
After the sale of the business to the lenders, she said: “With a stronger financial platform in place, Interserve will be able to concentrate on delivering value for our customers. The group's transformation programme will continue, focused on improving our value propositions for customers, standardising our operational delivery, making Interserve simpler and more efficient through our Fit for Growth initiatives, and embedding a culture of ownership and openness throughout the group. Interserve is fundamentally a strong business and with a competitive financial platform in place we see significant opportunities ahead as a best-in-class partner to the public and private sector."