Regus snaps up US-based HQ Global in $302m deal

Shares in Regus Group, the serviced offices provider, fell by 3.5p to 65.5p yesterday after the company ended months of speculation with the news that it is to take over HQ Global Holdings of Dallas for $302m (£163m) cash.

Shares in Regus Group, the serviced offices provider, fell by 3.5p to 65.5p yesterday after the company ended months of speculation with the news that it is to take over HQ Global Holdings of Dallas for $302m (£163m) cash.

HQ is in a similar business, and the combined group will dominate the world market for serviced offices with more than 650 centres in 52 countries. Serviced offices offer companies full facilities - from internet to conference rooms - for as little as an hour's rent.

Mark Dixon, the Regus chief executive, said: "This means we can now serve our customers across the world in a way that is tailored to them and their business needs. The deal is excellent news for investors and customers alike, and is expected to be both earnings per share and cash flow per share enhancing."

About £119m of the cash will be raised through a placing and open offer of new shares at 62.25p. Nearly 46 per cent of these shares are being placed on a firm conditional basis with institutional investors. The rest will be placed on a conditional basis, subject to clawback to satisfy valid applications by qualifying shareholders. They will be able to buy one new share for every four they hold. Mr Dixon will buy a million, increasing his stake to 37.2 per cent. The placing and open offer have been fully underwritten by Dresdner Bank and KBC Peel Hunt.

Bear Stearns is to provide new debt facilities made up of a $110m term loan, a $25m revolving facility to finance the deal and inject working capital into the business.

HQ and the US operations of Regus were driven into Chapter 11 bankruptcy protection by the collapse of the dot.com bubble, but both have come out of that. HQ had to close 96 centres, renegotiate 180 leases and swap debt for equity. The group is in the process of agreeing with the US Internal Revenue Service the availability of $200m of net operating losses, to offset against future profits in the US.

"We are picking up a very mature business that has been going 40 years," Mr Dixon said, "and has a very mature client basis. It will add 100 new markets to our existing platform, and we expect to generate synergies of £11m a year, at a one-off cost of £8m."

Mr Dixon said he hoped the combination of Regus and HQ would throw up opportunities to obtain better prices from major suppliers of equipment and telecommunication services, as well as operational efficiencies and cost control programmes. He said Regus did not expect to pay dividends in the immediate future, but hoped it would do so in due course.

Regus operates at the premium end of the market, while HQ is mid-range.