EPE Special Opportunities is reporting an IPO for one of its investments, Luceco plc. The IPO is of 71.6 million shares at a price of 130.0 pence per share. Luceco plc will admit its entire issued share capital of 160.8 million shares to trading on the Main Market of the London Stock Exchange, implying a market capitalisation of GBP209.0 million. The Offer was substantially over-subscribed following an excellent reception by investors.
They led the original buyout of Luceco plc in June 2005. Luceco is a manufacturer and distributor of electrical accessories and LED lighting in the UK and internationally, supplying both the retail and wholesale markets. It has a strong track record of growth: three year sales CAGR of 25% and EBITDA CAGR of 39%. It is differentiated by having a wholly-owned manufacturing facility in China and significant opportunity in LED lighting, with no legacy lighting business facing disruption by the transition away from traditional lighting solutions. The LED lighting market is currently worth $40bn globally and is expected to grow by 15%+ CAGR to $70bn in 2019. Luceco plc has raised GBP26.0 million in new primary capital via the Offer to fund expansion and pay down debt, in addition to which GBP67.1 million has been realised by existing shareholders via a secondary sale of shares to new investors.
EPE Special Opportunities has supported the transformation of Luceco plc from a distributor of imported third party products primarily servicing the UK market, to a Chinese manufacturer supplying a global client base with market-leading product design and service. The construction of Luceco plc’s wholly-owned manufacturing facility in Jiaxing, China, in 2008 has been instrumental in this transformation, enhancing new product development capability, improving margins and creating capacity for growth
The board of EPE Special Opportunities would like to thank John Hornby, CEO of Luceco plc, and his management team for their concerted and continuous hard work, both in day-to-day operations and in successfully leading the company to its initial public offering.
Prior to the Offer, EPE Special Opportunities held 48.6% of the shares of Luceco plc and loans of GBP10 million through ESO Investments 1 LP, in which it is the sole investor. Subsequent to the secondary sale of shares to new investors, they hold 24.3% of the newly quoted entity. The retention by ESO plc of 24.3% of Luceco plc is expected to be accretive to shareholders over the medium to long term. Giles Brand, Managing Partner of EPE, will be Non-executive Chairman of Luceco plc. The Offer implies a return to EPE Special Opportunities of 24.4x Money Multiple and 75.6% IRR, of which 12.3x Money Multiple and 57.9% IRR is realised.
The transaction has a positive impact on EPE Special Opportunities’ NAV, resulting in an increase of 127.91 pence per share. The total NAV at 17 October 2016 incorporating this increase is 304.81 pence per share. This equates to a one year increase in NAV of 118.9% and a five year increase in NAV of 260.7%.
Subsequent to the Offer, overall returns in the current portfolio are running at 6.9x Money Multiple and 37.7% IRR. They say the Offer substantially de-risks and diversifies EPE Special Opportunities , reducing the proportion of gross asset value represented by Luceco plc from 68.4% to 42.2%. EPE Special Opportunities intends to utilise the proceeds of the Offer to enhance value in its existing portfolio companies, make new investments and retire capital at advantageous pricing where possible, with the aim of continuing its market-leading track record of share price growth.
ESO : EPE Special Opportunities benefits from Luceco IPO