Diagnosis ‘reasonable’ for HCL after likely share buyout

Healthcare recruiter Healthcare Locums (HCL) has received an indicative offer from its two main shareholders to purchase the remaining shares from current shareholders.
Wed, 6 Feb 2013
Healthcare recruiter Healthcare Locums (HCL) has received an indicative offer from its two main shareholders to purchase the remaining shares from current shareholders.

Should the offer be accepted the two main shareholders, Tosca Asset Management and Ares Capital Europe (ACE), who currently own 72.5% of HCL’s shares, have indicated their intention to inject “significant capital” into the business.

In January HCL warned that it might not meet its banking covenants in March and June and that it had identified a requirement for “additional capital funding in the next 12 months”. It also said at the time that it was in discussion with Tosca Fund and Ares Capital about the possibility that they would inject capital into the business.

In a statement to the London Stock Exchange, HCL says: “Although there can be no certainty that an offer will ultimately be made for HCL, nor as to the terms on which any offer may ultimately be made. Toscafund and ACE reserve the right to announce an offer at a lower price [than the 54p a share announced in the indicative proposal] with the agreement of the board.”

Kevin Lapwood, head of support services equity research at investment bank and stockbroker Seymour Pierce, tells Recruiter there is “absolutely no chance of the offer not going through as Tosca and Ares are the main shareholders”.

He says he suspects from reading the statement that the company will be split into two businesses, one focused on the UK and the other in Australia.

Lapwood says there is “a reasonable chance” of the strategy being successful. “They need new capital restructuring  because there is a possibility that they may not meet their banking covenants and they have to keep the banks on side, but assuming they can do that there is no reason why they cannot run profitably,” he says.

He says he suspects from reading the statement that the company will be split into two businesses, one focused on the UK and the other in Australia.

Adrian Kearsey, an analyst at Hardman & Co, says that assuming the existing shareholders are bought out, he would be surprised if HCL didn’t go private. This is something that would make it easier for HCL to make the changes it needs to make.

“Going through restructuring is much easier when it’s a private company rather than a public company that is operating in the public eye,” he says.

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