Silver Chef board recommends shareholders accept takeover bid by private equity group Next Capital

A private equity group is poised to gobble up an embattled Brisbane firm launched 33 years ago to lease kitchen and catering equipment to hospitality operators.

GOBBLED UP

A private equity group is poised to gobble up Silver Chef, the embattled Brisbane firm launched 33 years ago by entrepreneur Allan English to lease kitchen and catering equipment to hospitality operators.

The company’s board has unanimously recommended that shareholders accept the $28 million takeover bid from a consortium of investors led by Sydney-based Next Capital following more than a year of drama with financiers.

It offered $1 per share back in April but, following a bit more due diligence, is now putting just 70 cents on the table.

They are also throwing in a “contingent value note’’ per share to allow investors to reap the benefits of a selldown of one arm of the Silver Chef business.

Emerging from a trading halt, shares in the company more than doubled in price yesterday to close at 71 cents.

Stakeholders are set to vote on the privatisation scheme in late August and, if approved, it would take affect the following month.

TURBULENT TIME

The tentative deal comes after a turbulent two-year period which saw Silver Chef suffer a record $48 million net loss in the 2018 financial year and another $11.7 million of red-ink in the six months to last December.

Much of the trouble spun out of unforeseen problems that arose following the company’s decision in February last year to jettison its GoGetta business division, which flogged sedans, wagons and SUVs.

Within months it had acknowledged breaching debt covenants, with a waiver provided by financial backers conditional on the company raising at least $45 million to repay borrowings.

Paradoxically, a condition of the waiver required Silver Chef to limit growth by tapping in to only its operating cashflows and cash reserves. That contributed to the recent half-year loss and is tipped to undercut the results for both the 2019 and 2020 financial years.

Silver Chef founder Allan English.

Further conditions imposed in November last year and this February have “progressively and significantly reduced the near-term financial outlook for the company,’’ Silver Chef said.

Ultimately, a combination of the funding squeeze and the urgency of neutralising the covenant breaches forced its hand.

Company director Sophie Mitchell said the Next Capital offer “provides certainty of value’’ to shareholders and avoids the minefield of trying to raise debt or equity to snuff out the debt burden.

SAD CODA

The likely sale of the business is a sad coda for English, who floated the company in 2005 and served as non-executive chairman.

It wasn’t so long ago that Silver Chef enjoyed a golden age, when every year’s profit exceeded the last and the share price hit a high of more than $11 in late 2016.

“Obviously it’s a disappointment for a number of our shareholders,’’ English told City Beat yesterday.

“It’s been a journey, a big part of my life. The most important point now is that the company thrive in the future for employees and customers and, without capital, we weren’t going anywhere.’’

A passionate advocate of corporate social responsibility, English transferred more than half his stake in the business to his family’s philanthropic foundation in 2014.

The 4.4 million shares, once valued at $49 million but worth just $3.1 million at yesterday’s close, helped fund a variety of innovative programs, including microfinancing loans, to worthy recipients across both Australia and overseas, particularly south east Asia.

Despite the board’s endorsement of the Next Capital offer, English has not yet committed to selling down his substantial share portfolio.

“At this stage, the Foundation and the family have no agreement with Next Capital with regards to our shareholdings,’’ he said.

“We await the scheme booklet to determine whether we participate and accept the offer.’’

Next Capital was launched in 2005 by three former principals of Macquarie Bank’s private equity division and it has more than $600 million in funds under management.

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Silver Chef boss Allan English is focused on enriching his charitable foundation and fostering a “purpose driven culture’’ in his ranks