Creston board agrees to sell to minority shareholder DBAY Advisors amid 'uncertain market conditions'

Creston's board has agreed to sell outright to investment firm DBAY Advisors, a current minority shareholder, for £75.8m, in a move that will end the marcoms group's period as a listed company.

Creston has achieved steady progress despite the challenging economic environment, says CEO Barrie Brien

The price represents a premium of 35.2p on yesterday’s closing share price of 93.5p. Senior independent non-executive director Nigel Lingwood said the decision comes "in light of uncertain market conditions" and "as the business and our clients’ requirements continue to develop".

The firm's CEO said that the deal represented a "very good premium for shareholders" and should complete within two months, subject to shareholder approval, adding that it was "business as usual" as far as servicing clients was concerned.

It comes as Creston this morning reports a four per cent decline in like-for-like revenue to £38.7m in the six months to 30 September. However, pre-tax profit (excluding exceptional factors such as property-related costs, acquisition costs and rebranding) rose 13 per cent to £4.5m, following a £7.6m loss in the last financial year.

DBAY currently owns about 28 per cent of Creston, whose PR assets include Nelson Bostock Unlimited, Fever and Red Door Unlimited. The investment firm has created a new entity, RedWhiteBlue Digital Marketing Services Holdings Ltd, for the acquisition, which is subject to shareholder approval.

Lingwood said: "Creston has achieved steady progress in implementing its five-year strategic plan and the Unlimited Group now successfully brings together a unique blend of experts from different disciplines. As the business and our clients’ requirements continue to develop, and in light of uncertain market conditions, the Creston Board has given careful thought about how best it pursues this strategy to deliver value for shareholders, clients and staff.

"As such, the independent Creston directors consider that recommending this cash offer will provide most shareholders with the opportunity to realise value from their investment in cash at an attractive premium. Furthermore, it offers the business, with the support of DBAY, the ability to continue to grow the Unlimited Group as a private company, which we believe is in the best interests of our clients and staff."

Alex Paiusco, CEO of DBAY, said: "We have been significant investors in Creston for over two years and are excited about this opportunity to help develop the business, alongside its management team and employees, and to fulfil its potential. The acquisition is the culmination of our progressive interest in Creston and we are very pleased to have reached agreement with the independent Creston directors on an attractive cash proposal for Creston shareholders."

Creston indicated that the move is not expected to lead to redundancies, and it will be targeting growth after the acquisition.

The plan is not to make "material changes" to the employment status of Creston staff, it said in a statement. On completion, the new owner plans to undertake a full review of the business, which it said "may lead to the identification of additional strategic opportunities for Creston", which will be "evaluated…with a view to optimising Creston’s performance and accelerating its growth".

Last month, PRWeek reported that the company is to drop "Creston" from its brand to become The Unlimited Group. Creston remains the name of the holding company, while individual agencies will retain their brand name within Unlimited Group.

The company reported broadly flat revenue in the six months to 30 September, at £40m, against £40.3m in the same period last year.

Creston CEO Barrie Brien said: "Despite the challenging economic and trading environment, the group’s headline profits grew 13 per cent in the first half of the year. Creston has achieved steady progress in implementing the group’s five-year strategy of growing the breadth of services to clients under the Unlimited offer and, as a result, our top 20 clients and international revenue have grown by 12 per cent and 11 per cent respectively."

He also told PRWeek: "It's business as usual - there's no change to senior management, the only people who would go would be our non-executive directors who are on our PLC board, aside from Iain Ferguson who represents DBAY."

Brien went on to say that "research and data analytics" would be increasingly important business areas for the group, that it would "look to continue the growth of our footprint in the US", and that its PR units had "been performing well" - although he declined to give specific figures.

News of the acquisition comes amid a resurgence in M&A activity in the PR industry in recent months, despite the uncertainty surrounding Brexit. Click to read PRWeek’s analysis of the current state of sector M&A.

Keith Hunt, managing partner at sector M&A advisor Results International, said the proposed acquisition is "another example of a mid market marcoms group concluding that its future is better under private ownership".

"We had Chime deciding on a similar route in July 2015 when it agreed to a £374m takeover led by US buyout firm Providence Equity Partners. It’s no secret that the mid market companies in the sector are finding it hard to raise money on the quoted markets and as a result are seeing their ambitions somewhat thwarted. Also not insignificant is the sheer time and cost involved in being a quoted company.

"Private ownership is an attractive option as it allows a business to focus on growth and strategy away from the public gaze. The good news is that there is a wall of private equity money available and the PE firms are increasingly interested in the sector – either by taking companies private or investing in groups.

"We expect to see other companies in the sector considering a similar route to Chime and Creston."

This article was altered on Thursday afternoon with comment from Keith Hunt of Results International.

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