TV licence collector Capita is being circled by private equity barons, the Mail can reveal.
The troubled FTSE 250 outsourcer – whose share price has fallen more than 80 per cent this year – is in CVC Capital Partners’s cross hairs.
But CVC, one of Europe’s largest private equity businesses which has previously owned Formula One and Legoland operator Merlin Entertainments, could face competition from a rival predator.
Troubled FTSE 250 outsourcer Capita – whose share price has fallen more than 80 per cent this year – is in CVC Capital Partners’s cross hairs
The second suitor is understood to be interested in buying Capita’s education software division, which the group put up for sale this summer.
The interest could spark a bidding war for one of Britain’s biggest employers.
Capita, which collects TV licence for the BBC and operates the charging system for London’s congestion zone, employs around 45,000 staff in the UK alone.
It is one of the largest Government contractors, but has struggled over the past few years with sliding profits.
The company has been hit by a decline in work from local authorities, and a number of botched contracts that have cost it millions of pounds.
Turnaround expert Jon Lewis was brought in as chief executive at the end of 2017, but in March this year he revealed his shake-up was costing more money than initially planned.
Turnaround expert Jon Lewis was brought in as Capita chief executive at the end of 2017
Capita’s shares have tumbled to just 29.3p, from a peak of 815p in 2015, and have slumped 82 per cent this year alone.
The entire company is worth only £500million, and is just managing to hold on to its place in the FTSE 250 index of mid-sized companies.
Capita is hoping that the sale of its education software division will help raise some cash. Analysts think the division alone could fetch up to £700million, already doubling the company’s market value.
Capita confirmed it had received ‘strong expressions of interest’ in the unit earlier this month, but CVC will likely want to take over the whole business and sell off the education division itself to ensure it gets the best price.
Private equity ownership of Capita could spell drastic cuts, and even a break-up of the 36-year-old company.
Private equity firms generally try to make money for their investors – often sovereign wealth funds, pension funds and very wealthy families – by pursuing ruthless cost-cutting at the firms they buy.
They often load them with debt, to help lower the company’s tax bill and inflate returns further, before selling them on or listing them on the stock market after a few years.
Merlin, which was listed on the London Stock Exchange by CVC and co-investor Blackstone in 2013, has since felt the hangover of its period under private equity ownership.
As it was weighed down by the double-whammy of terrorist attacks in 2017 and, later, poor weather and Brexit uncertainty, it struggled under the weight of a £2.2billion debt pile.
Late last year, Blackstone and the founding family behind Lego bought the toy company and took it back into private hands.
Last weekend, the Mail on Sunday revealed that Capita was planning to shutter more than a third of its 250 offices, in a crushing blow to Prime Minister Boris Johnson’s efforts to get staff back into the workplace.
One City investor said yesterday the office cuts ‘looked like a defence plan’ to ward off opportunistic buyers and convince Capita shareholders that the company is making changes.
Capita and CVC declined to comment last night.