SEC Newgate – which owns the eponymous PR agency – has made an agreement for Three Hills Capital Partners to provide capital and resources for potential acquisitions via a newly formed private entity.
Fiorenzo Tagliabue, chief executive of SEC Newgate, told PRWeek that the US, Central and South America, and Asia Pacific region are the main targets. "We are very close to completing our deals, as soon as we get the financial resources, in US and in Central and in South America. At the same time we are working on a target in APAC," he said.
Funding would be conditional on SEC Newgate, which formed in September 2019 from the merger of Porta and Italian group SEC, de-listing from London's AIM stock market.
SEC Newgate said it has support for the move among shareholders owning 76.57 per cent of its shares. The business is offering shareholders the chance to sell back their shares at 111.32p each, which is a 29 per cent premium on its closing share price of 86.5p on Tuesday, prior to the announcement.
Shareholders will vote on the plans at a general meeting, to be convened shortly. The aim is to delist in late February or the beginning of March.
Three Hills Capital Partners specialises in taking minority investments in businesses and would hold a maximum stake of 28 per cent in the new company. The remainder would be held by existing shareholders transferring their ownership.
Tagliabue said a small part of Three Hills' €49m investment would go to buying back shares from those who want to sell. The majority of the money – about €38m – would be used for acquisitions, with a further €20m possibly being made available at a later date.
The chief executive cited two main reasons for the plan.
"Our stock value was and is absolutely undervalued on the market. This was the first reason to push me, at the beginning of 2021, to think how to tackle the situation and how to find a solution."
The second reason is the need for international expansion, particularly in the US, which he described as "the first market in our industry". SEC Newgate launched a start-up in the US in 2020.
The company stated: "SEC Newgate believes that its presence in the US should be more significant in order to become a recognised international player – and also in other strategic markets, for example, Latin America."
Tagliabue said he was "sure" that enough shareholders will approve the plan. Approval from 75 per cent of shareholders present at the general assembly will be required.
Tagliabue described the new proposal as a "transformational milestone in the history of our group".
He said: "In September 2019 we embarked on a three-year strategic plan. It began with the merger that created SEC Newgate. Since then, we have achieved so much across our footprint of 38 offices across five continents. This next step will provide the investment needed to realise our ambitions and provide the flexibility to make more entrepreneurial decisions, and to access to the capital we need to invest in our business and people."
SEC Newgate said it expects to report a "strong performance" for 2021, with trading "significantly ahead of budget forecasts" and over €1m of EBITDA (underlying earnings) delivered in November alone.
Revenue in the 11 months to November 2021 was up 35 per cent to €78.6m, with EBITDA up 41 per cent to €10.6m. Pre-tax profit was €5.8m, up 114 per cent. "All major business segments have continued to deliver strong performances over the last two quarters," the firm stated.
It said new business included a three-year project funded by the EU aimed at promoting Italian food abroad. The project covers 11 countries and is worth about €5m over its term. "The company believes this project creates a solid track record ahead of future EU-funded tenders, and highlights the increasing trend in cross-selling and intercompany business, which accounted for over €300k of profit in the last quarter, with further significant prospects in the pipeline."
SEC Newgate, which has about 600 employees in 15 countries, earlier reported that trading in the first half of 2021 was "significantly ahead of pre-pandemic levels".
Last August, SEC Newgate announced it had acquired a 70 per cent stake in the Middle East branch of Italian agency Twister Communications, which has since been rebranded SEC Newgate ME.