Franchise Brands agrees £28m acquisition of Metro Rod
Franchise Brands has agreed to a £28m deal to purchase Metro Rod, a drain clearance and maintenance service provider, in a reverse takeover. The provisional agreement covers the entire share capital of Metro Rod. The acquisition is part of Franchise Brands’ buy and build strategy.
North West Deals Richard Frost

Franchise Brands has agreed a "transformational" £28m deal to buy a drain clearance and maintenance services provider in a reverse takeover.

The Kidderminster-based company has conditionally agreed terms for the acquisition of the entire share capital of Macclesfield-headquartered Metro Rod.

Metro Rod, which was founded in 1983, provides drain clearance and maintenance services on a largely reactive basis through 40 regional franchisees, with geographical coverage across the majority of the UK.

It serves national business customers across multiple sectors including facilities management, retail, water utilities, social housing, hospitality and insurance, as well as local businesses and other customers in the private and public sectors.

Stephen Hemsley, executive chairman of Franchise Brands, said: "We are delighted to announce the proposed acquisition of Metro Rod, which represents a transformational step in respect of implementing the group's stated buy and build strategy.

"Metro Rod is a market-leading, profitable and cash generative business with an experienced management team, a mature and stable franchise network and high customer retention rates.

"We believe that Franchise Brands' significant marketing and franchise management expertise will accelerate the development of Metro Rod's existing business and its newly launched Metro Plumb business, enabling the business and management team to thrive as part of Franchise Brands."

Given the scale of the proposed acquisition when compared to the existing Franchise Brands group, the transaction represents a reverse takeover under AIM rules.

AIM-listed Franchise Brands hopes to raise £20m to partially fund the transaction, which is being conducted through an accelerated book-building process.

Allenby Capital is acting as nominated adviser and joint broker to the company and Dowgate Capital is acting as joint broker in connection with the acquisition, placing and admission.

At the same time, Franchise Brands has published its results for the year ending 31 December 2016 with total revenues climbed by 11 per cent to £4.9m.

Pre-tax profits stood a £784,000 in 2016, down from £1.1m in 2015. But underlying pre-tax profits, after adjusting for non-recurring initial public offering and acquisition costs, increased to £1.2m from £1.1m over the same period.

Franchise Brands has a network of more than 330 franchises in 12 countries under a number of brands, including ChipsAway. It was was founded in 2008 by Stephen Hemsley, a chartered accountant and former chief executive of Domino's Pizza, along with investor and co-owner of Rugby Union side Saracens Nigel Wray.