IWG has completed its first franchise sale to send shares soaring today, as it netted £320m from the sale of its Japanese division.
The firm’s share price soared 23 per cent to hit 339.30p after reaching the strategic franchise arrangement with TKP Corporation.
The deal will see TKP pay IWG £320m for Regus Japan Holdings, which houses IWG’s local operations, comprising 130 flexible co-working spaces.
TKP, advised by Mizuho on the deal, has exclusive rights to use the Regus, Spaces and Open Office brands once the transaction completes next month.
IWG, advised by Rothschild, will also offer support to TKP in the form of its sales and marketing platform, operational infrastructure and technology in return for an undisclosed share of system-wide Japanese revenues.
It must now get past Japanese anti-trust regulators.
Mark Dixon, chief executive of IWG, said: “Partnering and franchising are increasingly important elements of our growth strategy and TKP is an outstanding partner for IWG in Japan, with strong local expertise and leadership in adjacent markets and a complementary network of operations.
“The transaction realises an attractive valuation for IWG’s shareholders and re-affirms our strategy of capital efficient growth in IWG's global network with an increased emphasis on partnerships. We look forward to working with TKP for many years to continue our network development in Japan.”
Regus was valued at £98.3m at the end of 2018, IWG said, and the firm’s Japan country manager, Shingo Nishioka, will join TKP as part of the transaction.
Dixon will join TKP’s board as a non-executive director.
“Japan only contributed 4% of group earnings before interest, tax, depreciation and amortisation (Ebitda) yet has been sold for £320m cash,” Peel Hunt said in a note.
“More sales will follow, which should further validate the new strategy, release substantial value and lead to a complete re-appraisal of the company.”
Investors can expect special dividends and cash returns as a result of the transaction, Peel Hunt added, saying shares could go as high as 400p, having previously set the ceiling at 351p.
Meanwhile Credit Suisse also raised its outlook on IWG from underperform to outperform, hiking its price target to 328p, from 200p.