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Marlowe bidding for Restore makes perfect sense
The attempted takeover of Restore (RST:AIM) by Marlowe (MRL:AIM) represents an interesting development as the two businesses go back a long way. Strategically there is merit in combining the two entities.
Marlowe has effectively emulated the success of Restore as a buy and build support service group. Both companies were backed by Lord Ashcroft and Marlowe’s chief executive Alex Dacre ran the M&A team at Restore.
Marlowe’s incoming chief financial officer Adam Councell held the same role at Restore between 2012 and 2019, and the bidder’s non-executive director Charles Skinner was CEO of Restore from 2009 to 2019 – so it is fair to say the suitor is well versed with how the target’s business is run.
Restore used to be called Mavinwood and was involved in activities such as survey and repair work for insurers. Having struggled for some time, it sold off a chunk of its operations, brought in new leadership and shifted the focus to document storage, office removals and IT services. The share price has risen 1,510% since changing its name in September 2010.
Marlowe started out as a cash shell (or SPAC as they are known today) called Shellshock. In 2015, a strategy was put in place to focus on essential testing markets, and more recently it has branched out into human resources and compliance technology services. Since the name change six years ago, the share price is up 808%.
For years, Restore was the bigger of the two companies, but Marlowe has seen a surge in its market value in the past year, now valued at £666 million versus £574 million for its peer. Both have recently been chasing technology-related deals, but the market appears to have been more excited about Marlowe’s prospects given the stronger share price reaction.
Parking the two companies together makes sense as they both deal with facilities managers, so there will be natural cross-selling opportunities. It would also make the enlarged group a more credible player for companies who want to deal with multi-skilled suppliers.
Restore’s board has rejected two bid proposals to date, the highest being 530p per share in a mixture of cash and shares.
Marlowe has gone public with the takeover interest clearly to put pressure on Restore to engage in conversation and to see if the target’s shareholders like the idea of a business combination. It’s a well-trodden path to follow and the next step would be to raise the offer price again.
Should a deal fail to happen, one might expect Restore’s shareholders to put pressure on the company to accelerate its growth, perhaps through entering new business areas. It seems unlikely they would let it continue as per before.