Xchanging plc is pleased to announce that Cambridge Integrated Services Group Inc. has sold its US workers' compensation and TPA operations to Sedgwick Claims Management Services, Inc.
05/31/11
Xchanging plc ("Xchanging"/XCH.L), the global business processing group ("the Group"), is pleased to announce that Cambridge Integrated Services Group Inc ("CISGI"), the US arm of its 76% owned subsidiary Cambridge Solutions Limited, has sold its US workers' compensation and third party administration operations ("the Operations") to Sedgwick Claims Management Services, Inc ("Sedgwick") for $22.7 million (approximately £13.8 million).
This disposal will free the Group of a loss making and cash absorbing operation and improve the underlying profitability and cash flow, whilst enabling Xchanging to focus on its profitable, growing businesses.
Signing and completion are simultaneous and the consideration has been paid in cash. $3 million of the consideration will be held in escrow for 18 months. The consideration is subject to adjustment by reference to post completion confirmation of the working capital and customer funds accounts as at 31 May 2011.
The Operations include the workers' compensation claims, managed care, consumer claims, professional liability claims and structured settlements operations of CISGI. Virtually all of the contracts, assets, employees, current liabilities and future service obligations have been acquired by Sedgwick, although certain liabilities and non-operational assets have been retained by CISGI. CISGI and Sedgwick have also entered into a transition services agreement to facilitate a smooth handover of the Operations.
In the year ended 31 December 2010, the Operations being disposed of recorded revenue of $113.4 million*, an operating loss before interest and tax after IFRS 3 amortisation of acquired intangibles of $(8.2) million* and an operating loss before interest and tax of $(1.4) million* excluding those charges. The gross assets being transferred have a carrying value at 31 December 2010 of $14.9 million*.
The transaction will be reflected as a discontinued operation in the 2011 half year results and the significant cash flow benefits of the sale will help to fund the Group's future growth.
Ken Lever, Acting Chief Executive Officer and Chief Financial Officer of Xchanging, commented: "This transaction is a key element of the Four Point Action Plan we outlined in our preliminary results. Specifically it creates intrinsic value through the exiting of a business with unsatisfactory returns and significant future commitments. Selling the Operations to Sedgwick, a market leader in the workers' compensation arena, will provide our customers and employees with a good home for the future."
StoneRidge Advisors in the US acted as financial adviser to Xchanging plc on this transaction.