Marlowe PLC Spin-off Notes

September 20, 2024 Notes

On September 12, 2024, Marlowe PLC (AIM: MRL) announced that it will spin off its occupational health business (Optima Health). Shareholders will receive one share of Optima Health for each share owned.  The spin-off will happen extremely quickly as trading of the spin-off is expected to take place by September 26.

In November 2023, the company initiated a strategy review and was looking to sell its Optima Health division. It sounds like no adequate bids were received for Optima Health, and the company decided to break up instead.

Optima Health is the UK’s leading provider of technology enabled corporate health and wellbeing solutions in the occupational health sector, a specialist branch of medicine. It generates revenue and adjusted EBITDA prior to head office costs in FY24 of £110.6 million and £18.1 million.

The RemainCo will be focused on Fire Safety & Security division and Water & Air Hygiene division. It contributed £292.3 million of revenue and £35.2 million of adjusted EBITDA prior to head office costs of £4.3 million.

As I understand it, Marlowe has a small net cash position currently so we can assume its market cap roughly equates to its enterprise value (£431MM). As such, the stock is trading a little over 8x EBITDA (ignoring head office costs). This doesn’t seem like a screaming bargain to me for a micro-cap AIM listed stock, but let me know if you think I’m missing something. Perhaps the spin-off or the RemainCo will become mispriced after the spin-off is completed.