LONDON, UK: Capita plc has agreed to sell Pay360 Limited to Access PaySuite, a division of The Access Group in a deal that values Pay360 at £150 million on a cash-free, debt-free basis, representing a 14.3x multiple on 2021 EBITDA of £10.5 million.

Taking into account cash-like and debt-like items, Capita expects to receive gross proceeds of c.£156m upon completion. The sale will help reduce indebtedness and provide additional liquidity, which together shall further strengthen Capita’s balance sheet, whilst also allowing Capita to enhance its digital offerings for clients.

The sale of Pay360 is a Class 1 transaction and the transaction is conditional on: the approval of Capita’s shareholders with a circular to be posted in due course including a timetable for a General Meeting of Capita shareholders; notification and confirmation from the Secretary of State that no further action will be taken under the UK’s National Security and Investment Act; and change in control clearance from the Financial Conduct Authority (“FCA”). These conditions are currently expected to be satisfied in late Q4 2022.

Pay360 is a UK-based, FCA regulated payments business with c.2,500 customers across the public and private sectors. Pay360 offers its customers gateway and acquiring services, as well as payment solutions across the payments value chain. Pay360 has recently expanded its capabilities into payment facilitation with the launch of its Evolve platform. In 2021, the business processed £8.6bn in transaction value across 142 million transactions.

The gross assets of Pay360 at 30 June 2022 were £63.6m, and for the year to 31 December 2021 it generated revenue of £45.8m, EBITDA of £10.5m and profit before tax of £7.1m. For H1 2022, Pay360 generated revenue of £27.3m, EBITDA of £5.7m and profit before tax of £3.1m. The Pay360 senior management team will be transferring with the business.

The sale of Pay360 follows a strategic review of the business by Capita and represents further progress in our strategy to build a more focused, sustainable business for the long term.

Jon Lewis, Capita’s Chief Executive Officer, said: “We are pleased to have agreed the sale of Pay360 to Access. We announced our intention to sell Pay360 during our half year results, as part of our strategy to simplify and strengthen Capita. The sale is a great opportunity for the new owners to help Pay360 realise its full potential, and our colleagues at Pay360 will also benefit from the focus that this change of ownership will bring. Capita will utilise the cash proceeds of the sale to benefit our digital offerings for clients and further reduce net debt. The Pay360 senior management team and employees will remain with the business as they transfer to new ownership”

Barclays Bank PLC, acting through its Investment Bank (‘Barclays’) is acting as sole financial advisor and sole sponsor to Capita on the transaction.

Moreover, Capita plc has secured an extension to its contract with Barnet Council which will see the business continue to deliver back-office services for the borough’s citizens.

The extension is worth £42.7m and with indexation and potential additional work, it could be worth up to £57m. The extended contract begins at the start of September 2023, which is when Capita’s current 10-year deal with Barnet Council is scheduled to end.

Under the extension, Capita will continue to provide HR and accounts payable services for a further year to the end of August 2024. It will also continue to deliver IT, customer services and revenue and benefits services for the council for an additional two years and seven months until the end of March 2026. Some services not covered by these extensions will be returned to be run by the council from September 2023.

Capita has a strong long-term partnership with Barnet Council, including providing support to the council and helping it establish new services during the Covid-19 pandemic. The extension will provide stable and continuous delivery of key services.

Additionally, Capita will work with the council to modernise its IT infrastructure, following changes to working patterns to support the on-going transformation of services and drive continuous improvement and innovation.

Al Murray, Capita’s CEO for Capita Public Service, said: “The extension of our contract with Barnet Council reflects the strength of our long-term relationship with the council. It also highlights our focus on creating better outcomes through the delivery of essential services for the local community.

 “From next September onward, we will support the council by investing in and enhancing its digital capabilities. We will also be providing stable and continuous delivery of services that residents and businesses interact with every day.

 “This extension follows on from the successful renewal of our PCSE contract with NHS England earlier in the year. It demonstrates the ability of our Public Service division to retain important clients by successfully delivering for them.”