Connect Group divests Tuffnells

Following an internal company review, Connect Group PLC has announced it is to sell its parcel delivery company Tuffnells to maximise shareholder value and for the best interests of Connect Group and its stakeholders.

The company statement said: “After conducting a thorough and competitive sale process, the Group’s wholly-owned subsidiary, Smiths News Holdings Limited (the Seller) has entered into a conditional share purchase agreement with Palm Bidco Limited (the Purchaser) to dispose of The Big Green Parcel Holding Company Limited and each of its subsidiaries, including Tuffnells Parcels Express Limited which trades as ‘Tuffnells’, on a debt free, cash free basis at completion of the proposed transaction (Completion), for aggregate deferred consideration of £15 million. This consideration is payable in three tranches between 18 months following Completion and the third anniversary of Completion, but is not subject to the satisfaction of any conditions.

“In order to facilitate the proposed turnaround of Tuffnells and, in light of the difficulties in obtaining external debt financing at this time due to current market conditions caused by the consequences of the COVID-19 pandemic, the Group has agreed, as a term of the sale, to make available to Tuffnells from Completion a term loan facility of up to £10.5 million secured against the 7 English properties in which Tuffnells has a freehold interest (including one long leasehold interest). Loans drawn under the facility will be repayable in two instalments, with £5 million repayable within 18 months from Completion and all other outstanding amounts repayable on the second anniversary of Completion. Each loan drawn under that facility will carry interest at the rate of 10% per annum, payable quarterly in arrears.

“Completion of the proposed transaction is conditional upon the approval of the Company’s shareholders at a General Meeting or the Company obtaining sufficient written voting undertakings from shareholders, to the effect that they approve the proposed transaction and would vote in favour of the resolution that will be proposed (the Resolution) so as to ensure that the Resolution would be passed at the General Meeting, were it to be held. The share purchase agreement does not contain any other conditions or contractual rights for either party to terminate it.”

The Connect Group statement concluded, “In the event that the proposed transaction is not approved by the Company’s shareholders, or the general meeting is not held or voting undertakings (as set out above) not obtained, the Seller has agreed to pay a break fee to the Purchaser of £100,000. Further, in the event of a future sale of Tuffnells by the Purchaser within 24 months of Completion, 50% of the net proceeds of any sale shall be paid to the Seller, and if a future sale occurs within 36 months of Completion, all outstanding deferred consideration shall be paid in full at that time.”