Regus staves off bankruptcy with £57m UK disposal

The cash-strapped provider of serviced offices Regus sold a controlling stake in its UK business yesterday in a last-ditch effort to raise money to ensure it stays afloat.

The company is selling 58 per cent of its UK business for a maximum of £57m to Rex 2002, a new company set up by the venture capital firm Alchemy.

Regus said it believed the deal was the only option left on the table and warned that unless it was completed by the end of the year, as expected, "parts of the Regus Group will be unable to trade, which is likely to result in the appointment of the administrators".

"This was a deal we had to do," said Mark Dixon, the chief executive. "We are selling the crown jewels here, we can't deny that. The UK business is our most established business, it's our most profitable business, it's the best cash-flow producer."

The company's UK operation, which has a workforce of 556, made an operating profit of £13.6m in the first nine months of the year, on sales of £129.4m.

Regus warned yesterday that it would have faced a £6m shortfall later this year were it not for the disposal of the 58 per cent stake in that business to Alchemy. Shares in the company closed down 6 per cent at 14.5p.

The company does not have any overdraft or debt facilities to bridge that shortfall and admitted yesterday that none of the banks or potential lenders it approached were prepared to help.

It said that providing it made revenues of more than £270m in 2003 and provided the disposal to Alchemy went through, it thought it had sufficient working capital for the next 12 months.

It is now also working on plans to sell non-core assets as well as to restructure its loss-making businesses, particularly in the United States, to improve its finances.

But the company warned that it expected pricing to remain under pressure "at least for the foreseeable future" and said it expected turnover to be "down fractionally" in the first quarter of next year.

Regus' advisor, NM Rothschild, said Regus was in "severe" financial difficulty and warned that it would not be able to meet its obligations unless the sale went through in time.