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Potential Bidding War for IWG Fizzles as Starwood, Terra Firma and TDR Capital Walk Away from Regus/Spaces Owner

Takeover Talks Break Down Over Price Disagreements for World’s Largest Serviced Office Group
August 6, 2018
LONDON -- Starwood, Terra Firma and TDR Capital have all abandoned their separate efforts to buy London-based International Workspace Group (IWG), the world’s largest serviced office group and owner of Regus and coworking provider Spaces, with talks having broken down over price.

The latest trio of private equity firms were reportedly seeking to offer IWG shareholders around £2.7 billion [US$3.5 billion].

IWG said in a statement to the London Stock Exchange that its board "unanimously believes that none of the interested parties is currently capable of delivering an executable transaction at a recommendable price."

Shares in IWG opened 22% lower at around 232p, after closing at 300p on Friday.

The decisions add more names to a long list of potential suitors that have considered acquiring IWG and walked away. Canada’s Brookfield Asset Management, Lone Star, Blackstone, Prime Opportunities Investment and boutique private equity group Onex have each attempted to come to terms with the highly-coveted listed workspace provider. Brookfield made two offers for IWG in a bid reportedly valued at £2.5 billion [US$3.2 billion].

"The board remains confident in the long-term value of and opportunities for IWG," said the company’s statement, adding its market was "experiencing its most exciting stage of growth in over 30 years as increasing numbers of companies look to capture the strategic and financial advantages of flexible working."

IWG said it expects to add approximately 22% more square feet of space in 2018 than last year, as the sector continues to benefit from global workplace trends which is driving demand.

Group revenue increased 7.1% to £1.2 billion [US$1.5 billion] in the first half of 2018, compared to the same period last year, although profit before tax slumped 33% to £54.3 million [US$70.3 million]. EBITDA was also down 10% to £170.9 million [US$221.3 million], while post-tax cash return on investment was down 270 basis points to 16.6%.

IWG added 2.8 million square feet of space through 132 new locations in the six months to 30 June 2018.

"We have a strong pipeline for the remainder of the year and in total for 2018 we anticipate adding 6.7 million square feet of new space and 275 locations for approximately £230 million [US$297 million] of net growth investment," said Mark Dixon, IGW founder and CEO, in a statement.

He added: "We remain very confident in the structural, long-term growth of the flexible workspace market and IWG's leading position within it. To fully participate in the market potential, we have made significant investments into our infrastructure, growth related resources and the continued development of our strategic corporate account activities."

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James Wallace is a freelance reporter and consultant who can be reached via LinkedIn or email: jawallace32@gmail.com.
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