By Aby Jose Koilparambil
– Office rental company IWG said it would merge its digital assets with flexible workspace platform The Instant Group, as office space providers benefit from the hybrid work trend, sending the London-listed firm’s shares sharply higher.
IWG’s decision comes at a time when office landlords are slowly recovering as tenants reassess their options following the COVID-19 pandemic, including a shift to a permanent hybrid model, in which employees split work between home and office.
“We are merging our digital business with a company, which is serving the rest of the industry, to achieve a high growth rate and give more focus to the digital platform for the broader industry,” IWG Chief Executive Officer Mark Dixon told Reuters in a interview.
Shares of IWG rose as much as 15% to 267.5 pence and the stock was among the top percentage gainers on the FSTE 250 index.
IWG’s digital assets offer services including platforms to book office spaces, while the London-headquartered The Instant Group caters to the flexible workspace market, with presence in 18 countries globally.
IWG will invest about 270 million pounds ($353.65 million) to buy the stakes of selling shareholders, while The Instant Group’s management will invest about 50 million pounds into the combined business, which is expected to be spun out by 2023-end through a listing either in the United States or UK.
The London-listed owner of the Spaces and Regus brands, IWG said it expected the deal to be earnings-accretive in the first full year of ownership.
Dixon said the consensus as of now was for a return to strong profitability in 2022.
The Switzerland-headquartered firm, which operates in more than 3,300 locations across 120 countries, posted a loss before tax from continuing operations of 259.4 million pounds for 2021, compared with a loss of 613.3 million pounds a year earlier.
The CEO said Ukraine and Russia account for only 7 million pounds each of the group’s overall annual revenue of nearly 2.5 billion pounds, adding that its centres in the countries were operational wherever possible.
(This story corrects paragraph 10 to say “7 million pounds each” of revenue from Russia and Ukraine, not “7% each”)
($1 = 0.7635 pounds)
(Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Subhranshu Sahu, Ed Osmond and Louise Heavens)