Franchise Brands falls 25% on discounted equity raise

Shares of Macclesfield-based Franchise Brands fell about 25% after the firm announced an equity raise at a discount of 27% to help fund the purchase of Hydraulic Authority I Limited, owner of Pirtek, a European provider of on-site hydraulic hose replacement and services.

The £200 million acquisition is conditional upon shareholder approval.

“A total of 51,036,291 placing shares have been conditionally placed in the placing at an issue price of 180 pence per share for £91,865,323.80, alongside the subscription to 2,663,889 subscription shares by senior management and employees of Pirtek and the proposed director for £4,795,000.20,” said Franchise Brands.

“As a result, total equity of approximately £114.3 million at the issue price will be issued by the company pursuant to the acquisition and will comprise (i) 9,772,788 consideration shares; (ii) 2,663,889 subscription shares; and (iii) 51,036,291 placing shares.”

Franchise Brands executive chairman Stephen Hemsley said: “We are pleased to have successfully completed the bookbuild for the fundraise with the support of both new and existing institutional investors.

“This will enable us to proceed with the transformational acquisition of Pirtek Europe, a high quality provider of mission-critical, emergency response on-site hydraulic hose replacement and associated services.

“The acquisition brings an established business of scale with an attractive financial profile and growth prospects and will significantly expand the group’s range of B2B services, customer base and end markets.

Building on the strong performance of the group’s acquisition of Filta in March 2022, which brought an international footprint in North America and Europe, Pirtek Europe will extend the group’s European presence across a number of key countries, providing a platform from which to launch the group’s existing brands.

“By expanding the group’s operations to ten countries, the acquisition will significantly advance the board’s aim to create a market leading international B2B multi-brand franchisor that generates its income equally from the UK, North America and continental Europe.

“We would like to thank our investors for their support and we look forward to driving shareholder value by working with Pirtek Europe’s strong management team to accelerate growth and drive operational leverage across the combined business.”