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Monday 21 May 2018

IWG’s shares soar as three private equity firms pursue takeover

The flexible office provider has received approaches from Lone Star Europe, Starwood Capital, and TDR Capital.

Flexible office space is a fast-growing industry (Kirsty O'Connor/PA)
Flexible office space is a fast-growing industry (Kirsty O'Connor/PA)

By Helen Cahill, Press Association City Reporter

Serviced office provider IWG’s shares have soared after it emerged the company has received three takeover offers.

After the close on Friday, IWG said it had received approaches about possible cash offers from Lone Star Europe, Starwood Capital, and TDR Capital.

The board is evaluating the offers, but said there is no certainty that any formal bid would be made for the company, which provides flexible work space in more than 100 countries around the world.

On Monday, IWG’s shares shot up by more than 20%. The group operates brands including Regus, Open Office and Signature.

IWG’s shares surged 30% last December when the group confirmed it had been approached by Brookfield Asset Management and Canadian private equity firm Onex with a possible cash offer.

However, talks over the joint bid collapsed at the beginning of February, with reports suggesting that IWG founder Mark Dixon wanted to sell the company, but was blocked by other directors.

Andrew Shepherd-Barron, analyst at Peel Hunt, said the level of interest from private equity made it likely that IWG would go private this time around.

He said IWG was a global leader, and it had a cost-effective back office. However, risks include growing competition from the likes of WeWork, and the board’s intentions for the business.

IWG also recently lowered its profit guidance, saying it expects to deliver around £165 million in profit before tax in the 2018 financial year. This reflects an increase in short-term marketing costs.

Liberum analysts said: “The flexible work space industry is the fastest-growing segment of the office market.

“We believe rising occupational demand continues to be influenced by technology, enabling growth in start-ups and altering behaviour towards more flexible working patterns, shorter leases and a focus on greater amenities and services.

“Flexible work space is focused on meeting such demands.”

In 2017, a fifth of all space take up was provided by flexible office providers, according to Liberum. However, the market remains relatively small.

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