Viridian sells financial services arm for €180m

Northern Ireland power group Viridian has sold its Open + Direct financial services business to a management buyout team for about £111.4 million sterling (about €180 million). The sale would involve a small book loss for Viridian after costs and the proceeds would be used to reduce existing borrowings, the company said.

The five-member management buyout team led by managing director Mr Paul Elliot has been backed by private equity specialist Alchemy Partners, which has put up equity of about €50 million in its first Irish deal.

Viridian group financial director Mr Patrick Bourke said the sale would enable the company to concentrate its financial resources on other parts of the group, in particular the development of its energy businesses. The proceeds would reduce Viridian debt by about £85 million sterling, he said.

Viridian, which issued a profits warning in March because of difficulties at its Sx3 subsidiary, would report results for the year to end-March 2002 in about two weeks, he said, when asked for the latest Open + Direct financial performance figures. The £111.4 million consideration includes a premium of £1.25 million on end-March 2001 net assets of £24.5 million as well as the repayment of Open + Direct debts of about £85 million.

Under the buyout terms, some £8 million of the price has been deferred - £2.7 million to be paid in equal instalments over five years and £5 million in five years or on the sale or listing of the business if that happens earlier. The balance is payable on completion but may be adjusted when the accounts are finalised.

Open + Direct generated profits before interest and tax of £5.3 million for the year to end-March 2001.

It is a lending and insurance broking operation, offering private-label point-of-sale credit facilities through retailers, personal lending and insurance premium financing and selling insurance under the Open + Direct brand in Northern Ireland and the Footman James brand in Britain.

Viridian chief executive Mr Patrick Haren said the decision to sell was in line with group strategic objectives, would reduce its funding commitments and represented good value for Viridian and for the management team, who could take the business forward.

Alchemy has taken a "substantial majority stake" in Open + Direct, a spokesman said, declining to disclose the shareholding split with the management team. The team of Mr Elliot, Mr Geoffrey Framer, Mr Sam Downey, Mr Garth Brady and Ms Liz Young had invested in shares on favourable terms, he added.

Alchemy said the total consideration, including advisory and banking fees amounted to €200 million - indicating fees of more than €15 million - and said an additional €90 million had been raised to fund the future growth of the operation, which was started in 1999.

Alchemy and the management team aimed to double the size of the business over three to four years, he said. Secured loan facilities have been arranged with Credit Suisse First Boston for the lending operation while a Bank of Scotland term loan was in place for the insurance operation, he said.

In March, Viridian shares fell sharply when the firm said it was cutting 250 jobs at its struggling Sx3 subsidiary and warned that pre-tax profits would fall short of market forecasts by about 10 per cent. Because of difficulties at Sx3, Viridian said then it expected to report pre-tax profits of around £67.5 million for the year to March 31st, off the then consensus forecast of £75 million. Earnings per share were expected to be at the lower end of analysts' expectations, which varied from 46p to 51p.

In London, the March news dragged the group's shares down by more than 12 per cent to 451p. Veridian shares closed up 21p yesterday at 466½p sterling.