IWG plummets after abandoning talks with takeover firms

London

AFTER months of protracted courtship by multiple suitors, IWG Plc decided it doesn't want to be sold at a price that private equity firms are willing to pay. The shares plummeted.

The owner of serviced-office provider Regus informed Starwood Capital Group LLC, TDR Capital LLP and Terra Firma Capital Partners that it will not continue discussions regarding their possible offers for the firm.

"The board unanimously believes that none of the interested parties is currently capable of delivering an executable transaction at a recommendable price," IWG said in a statement on Monday. "The board remains confident in the long-term value of and opportunities for IWG."

The news, combined with a decline in operating profit in the first half, sent the shares down 25 per cent at 8.10am in London.

IWG had lured interest from at least six different parties since December after a profit warning hit the company's share price at time when companies are increasingly seeking more flexible leases like those offered by co-working and serviced office providers. The shift towards greater flexibility has powered the growth of WeWork Cos, the flexible office provider backed by SoftBank Group Corp that has become one of the world's most valuable start-ups with a US$20 billion valuation.

IWG has been investing heavily in expansion, particularly for its co-working brand Spaces, as it seeks to update its portfolio and capture the demand for trendier decor and amenities. The company has added the equivalent of more than twice the office space at One World Trade Center to its portfolio this year.

Operating profit fell 29 per cent to £60 million (S$106 million) in the first half on a constant exchange basis, partly because of weakness in the UK, the firm said in an earnings statement on Monday.

The cost of expanding and upgrading, together with a disappointing performance from the company operations in the highly competitive UK market, is hurting its earnings. Indeed, the prospects for organic growth are "grim", Green Street Advisors analyst Hemant Kotak said in a report last month. BLOOMBERG