Mitie Group PLC on Thursday said it is suspending its share buyback programme after agreeing a £366 million takeover of Marlowe PLC.
The Glasgow-based engineering, security, cleaning and hygiene services provider said the cash and shares offer values each share in Marlowe at 466 pence each.
Shares in Marlowe, the London-based provider of software and services for safety and regulatory compliance, rose 8.4% to 440.00p each in London on Thursday.
In sharp contrast, shares in Mitie fell 11% to 141.95p. It has a market value of £1.78 billion.
Under the agreement, shareholders in Marlowe will receive 1.1 new Mitie shares and 290p in cash for each Marlowe share held.
On Wednesday, both companies confirmed talks regarding a deal were taking place.
Mitie Chief Executive Phil Bentley said the deal will ‘generate significant revenue growth opportunities as well as immediate cost efficiencies.’
Marlowe Interim Non-Executive Chair Lord Ashcroft said the terms represent ‘excellent value’ for shareholders.
Mitie believes the enlarged group can deliver £30 million of pre-tax recurring operating cost synergies which will be achieved in the second full financial year following completion.
Achieving the synergies will result in one-off costs of around £27 million.
The ‘compelling’ opportunity is expected to be margin and earnings accretive in Mitie’s first full year of ownership whilst leverage is expected to reduce to within the firm’s target leverage range of 0.75 times to 1.5x.
‘The acquisition will make a meaningful contribution to the strategic progress of Mitie and the delivery of the ambitious Mitie three-year plan targets,’ the company added.
The enlarged group’s return on invested capital is expected to remain ‘comfortably ahead’ of the 20% target included in the Mitie three-year plan, Mitie said.
The deal is expected to complete in the third quarter of 2025.
Reflecting the deal, Mitie said it is suspending its £125 million share buyback with immediate effect.
Mitie pointed out its capital deployment policy prioritises strategic M&A at returns ‘materially above our weighted average cost of capital’.
The company expects to resume share buybacks following the acquisition as ‘leverage reduces quickly through cash generation and increasing profitability.’
The news came alongside results for the financial year to March 31.
Mitie said pretax profit fell 7.0% to £145.4 million from £156.3 million a year prior.
Excluding other items, pretax profit rose 8.5% to £217.9 million from £200.8 million a year ago.
Other items, which include non-cash amortisation, acquisition earn-outs and costs of margin enhancement initiatives, rose to £72.5 million from £44.5 million.
Revenue increased 13% to £5.09 billion from £4.51 billion including 9% organic growth primarily driven by new contract wins and scope increases, pricing and projects upsell, alongside a 4% contribution from acquisitions.
Mitie highlighted record contract awards up 21% to £7.5 billion and a record total order book up 35% to £15.4 billion.
The firm declared a final dividend of 3.0p per share, taking the total payout to 4.3p per share, up 7.5% from 4.0p a year ago.
Looking ahead, Mitie said it has entered financial 2026 with ‘good momentum’ and ‘growing confidence in delivering our ambitious three-year plan targets to create further value for shareholders.’
Copyright 2025 Alliance News Ltd. All Rights Reserved.