Franchise Brands to buy drains specialist Metro Rod

Franchise Brands has struck a deal to buy drain clearance and maintenance service provider Metro Rod for £28m, which will be partly funded from a £20m discounted equity placing.

The company aims to raise funds with a share placing at 67p each through an accelerated bookbuild on Thursday.

The new shares will represent about 38.4% of Franchise Brand’s share capital on admission to AIM, with the new shares expected to trade on AIM on 11 April.

Certain directors intend to subscribe for 16.67 shares, coming to about £11.2m.

The remaining £8m will be funded from the company’s new bank facilities of up to £17m, which will also be used to pay costs of about £1.8m and for working capital.

The company believes that the acquisition provides an opportunity to leverage Franchise Brands' and Metro Rod's strengths in shared services and will increase the size and scale of its operations.

Metro Rod increased operating profit before exceptional items by about 52% to £3.2m for the year ended 30 April 2016, compared the same period in 2014.

Executive chairman Stephen Hemsley said: "We believe that Franchise Brands' significant marketing and franchise management expertise will accelerate the development of Metro Rod's existing business and its newly launched Metro Plumb business, enabling the business and management team to thrive as part of Franchise Brands."

Shares in Franchise Brands were up 3.53% to 96.80p at 1011 GMT.