Proposed Acquisition of the Business and Assets of GCL Solicitors LLP (GCL)

Gateley (Holdings) Plc (AIM:GTLY), the national commercial law and complementary professional services group, is pleased to announce it has entered into an agreement to acquire the business and assets of GCL Solicitors LLP for a total consideration of £4.15 million. GCL specialises in legal advice for land and property clients. Completion is scheduled for 23 May 2018.

On completion, GCL will trade as Gateley Plc from its existing offices in Guildford, Surrey. This strategic acquisition is the third and largest that Gateley has made since the Group’s admission to AIM in June 2015; the first being the acquisition of Gateley Capitus swiftly followed by Gateley Hamer. GCL will be the first legal business acquired by Gateley since IPO.

Background to GCL

GCL specialises in legal advice on residential developments and works with some of the UK’s top housebuilders as well as promoters and landowners. GCL is also one of the leading law firms who act for overseas private investors buying new build residential properties in the UK, primarily in and around London.

GCL is a profitable and well established business which has been trading since the 1970s and converted to an LLP in 2009. In the year ended 31 March 2018, GCL generated revenues of £6 million and corporatised EBITDA of approximately £0.6 million. The Board expects the acquisition to generate operational synergies and be immediately earnings enhancing.

Terms of the acquisition

Under the terms of the acquisition agreement, Gateley will pay a total consideration on completion of £4.15 million. The total consideration will be split £2,282,500 payable in cash and £1,867,500 through the issuance of 1,164,276 new ordinary shares of 10 pence each in Gateley (‘Ordinary Shares’) at an average price over the past 5 days of £1.604. The cash consideration is being funded by the extension of existing Group bank facilities repayable over the three years from completion. In addition, £1.32 million of liabilities owed to the former members of GCL will be converted into loans of the same amount, repayable by Gateley over the next two years following completion.

Acquisition rationale

The acquisition of GCL is consistent with Gateley’s IPO growth strategy to acquire legal and non-legal businesses that offer complementary professional and other specialist services across Gateley’s five business groups. On completion of this transaction, Gateley will add 79 new members of staff to its Property Group including 6 partners.

The GCL team will integrate into Gateley’s existing Residential Development team which already comprises 119 staff and sits within its Property Group.

The addition of GCL will position Gateley’s offering as one of the UK’s largest specialist Residential Development teams. This national strength in depth will enhance the Group’s existing offering in London, which was established in 2015, as well as continue its expansion in Reading, following the recent appointment of a new partner in March 2018, and support the recent redeployment of specialist teams into Manchester and the East Midlands during 2018.

Gateley currently works with 18 out of the top 20 national housebuilders providing support on planning, land acquisition and sales of plots. When GCL joins Gateley, the Group’s enlarged plot sales team will advise on circa £2.5 billion worth of plot sales annually. In addition, Gateley has been considering investment in technology to enhance further the plot sales service of its business. This acquisition will enhance its technological capabilities through GCL’s existing platform.

The acquisition will also add further strength to Gateley’s wider Real Estate Advisory Services (REAS) offering which provides specialist, legal and complementary services to its property clients, combining expertise from property legal advisors at Gateley Plc, with specialist advice from its capital allowances business, Gateley Capitus and its compulsory purchase and utilities compensation business, Gateley Hamer.

Commenting on the acquisition, Michael Ward, Chief Executive Officer of Gateley, said:

“I am delighted to welcome GCL to the Group. The acquisition will further strengthen our leading position in the Residential Development sector nationally and provide us with a substantial presence in the southern market, which we see as critical in developing a full service offering for our clients.

“There is a structural under supply of new housing in the UK and we see this as a market that will remain strong. The South East in particular will continue to be a significant engine for housing growth for the foreseeable future.

“The acquisition allows us to offer a greater depth of specialism and expertise in all aspects of the residential development market. We can now match our national office network to our Residential Development clients’ networks with 7 Residential Development teams operating across the country. There are also clear opportunities across the Group from this strategic acquisition, not least for Gateley Hamer and Gateley Capitus and we look forward to welcoming everyone from GCL into Gateley.”

Commenting on the acquisition, Tony Inkin, Managing Partner of GCL said:

“We are excited to be joining Gateley who have an outstanding reputation as the market leaders for legal advice in the Residential Development and wider property sector. We have a great opportunity with our combined areas of expertise to build an unrivalled offering for clients in the South of the UK and to strengthen further the private property investment part of our business. We are looking forward to integrating with the team and also benefitting from being part of a wider professional services group that will open up many new opportunities for our existing team and clients.”

As set out above, 1,164,276 Ordinary Shares are to be issued in connection with the acquisition of GCL. Application has been made to the London Stock Exchange for the Ordinary Shares to be admitted to trading on AIM (“Admission”). It is expected that Admission will take place at 8.00 a.m. on 23 May 2018.

The new Ordinary Shares will rank pari passu with the existing Ordinary Shares in issue. Following Admission, Gateley’s total issued share capital will comprise 108,046,229 Ordinary Shares. This number may be used by shareholders in Gateley as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of Gateley under the FCA’s Disclosure Guidance and Transparency Rules.

Enquiries:

Gateley (Holdings) Plc
Neil Smith, Finance Director – +44 121 234 0196
Nick Smith, Acquisitions Director and Head of Investor Relations – +44 20 7653 1665
Cara Zachariou, Head of Communications – +44 121 234 0074 or +44 7703 684 946

Cantor Fitzgerald Europe – Nominated adviser and broker – +44 20 7894 7000
David Foreman, Marc Milmo, Michael Boot (Corporate Finance)
Caspar Shand Kydd, Alex Pollen (Sales)

Arden Partners- Broker
John Llewellyn-Lloyd, Benjamin Cryer (Corporate Finance) – +44 20 7614 5900
James Reed-Daunter (Corporate Broking)

IFC Advisory – Financial PR adviser – +44 20 3053 8671
Tim Metcalfe, Miles Nolan

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon publication of this announcement, this information is now considered to be in the public domain.