Stellanor to acquire Redcentric’s data center biz for up to $167M

Redcentric plc, a leading UK IT managed services provider, is pleased to announce that it has conditionally agreed the sale of its Data Centre business, Redcentric Data Centres Limited, (RDC or DC) to Stellanor Datacenters Group Limited, U.K. data center operator backed by a fund managed by DWS Group, for a cash consideration based on an enterprise valuation of up to $167 million (£127 million). This consideration is subject to adjustment on completion to ensure the DC business is sold on a cash free debt free basis and is also subject to a target level of working capital and a number of adjustments relating to commercial and property contract matters.

The Disposal is comprised of the Group's entire data centre operations, and the consideration will be paid entirely in cash. The maximum potential consideration payable for the Disposal is an enterprise value of $167 million (£127 million), which represents a FY25 EV/Adjusted EBITDA1 (amended to include property lease payments) of c.15.1x. The maximum consideration payable is subject to adjustments to exclude cash and debt within the DC business and further adjustments to reflect certain pre-existing commercial and property related matters. To the extent that these matters are estimated prior to completion, the amount paid on completion will be subject to a usual completion accounts true-up mechanism.

Completion of the Disposal is dependent on several agreed conditions precedent being satisfied, which comprise regulatory requirements, as well as certain conditions relating to outstanding matters from the separation of the business into two segments, which commenced earlier in the year, and are typical in a disposal of a carved-out business. These conditions comprise certification confirmations, commercial contract items including lender consent and the conclusion of certain outstanding property related matters. The long stop date for completion is May 31, 2026.

In the event that any property or commercial matters remain outstanding at completion, part of the enterprise value would be retained by Stellanor, subject to a subsequent true-up and adjustment to be undertaken on the conclusion of such outstanding matters. The long stop date for any outstanding property or commercial matters to be concluded is no later than twelve months after the date of completion.

In addition, Stellanor will also retain $6.6 million (£5 million) from the initial consideration payable at completion, with the portion of this $6.6 million (£5 million) ultimately paid by Stellanor dependent on any further adjustments from the final true-up process.

Based on ongoing discussions regarding outstanding property and commercial matters, the Board estimates the consideration payable will be derived from an adjusted enterprise value ranging from $151 million (£115 million) to $167 million (£127 million). This value will be further adjusted to account for deviations from the agreed target working capital, adding cash and deducting debt.

The transaction is expected to legally complete by the end of May 2026 and the Board believes that any outstanding property and commercial negotiations are expected to conclude by the end of June 2026, at which point the final adjustment amount will be known.  As noted above, the long stop date for the conclusion of any outstanding matters in relation to the Disposal is the date that falls 12 months after the date of completion.

Further market updates with regards the timings and the potential consideration payable will be provided in due course, when available.

Proceeds from the Disposal will be strategically allocated to deliver substantial benefits to shareholders and strengthen the Group's future. Considerations for the Board include but are not limited to:

• Reducing Group debt to enhance financial stability. Included with its borrowings, the Group currently has an available Revolving Credit Facility of up to $79 million (£60 million) of which $54 million (£41 million) has been drawn. The Board expects to materially reduce both the ceiling of this credit facility and the amount drawn following receipt of the sale proceeds;
• Returning capital to shareholders, most likely by way of a Tender Offer, which would be subject to shareholder approval; and
• Retaining sufficient capital to evaluate growth opportunities within the continuing successful Managed Services Provider operations.

In deciding its capital allocation strategy, the Board will take into account the Group's overall capital requirements and its ability to leverage its market-leading position to drive sustained growth and long-term shareholder value.