The statement made by Michael Gove, the Chancellor of the Duchy of Lancaster, in the House of Commons on 22 June 2021.
I am pleased to announce that the Cabinet Office has conditionally agreed to sell its 49% stake in Axelos Limited to PeopleCert International Ltd, a member of the PeopleCert group. This is part of a joint sale with Capita of the whole of Axelos. Subject to the timely satisfaction of conditions the sale is expected to complete in July.
Sale of the Cabinet Office stake will generate cash proceeds of approximately £175 million. The Cabinet Office has also received cash dividends of approximately £10.7 million this year making total cash receipts of some £185.7 million.
As part of the sale, the Cabinet Office will also receive accelerated settlement of outstanding deferred consideration (currently worth some £24 million) owed to it by Axelos dating from the formation of the joint venture.
The sale values the business at £380 million on a cash free, debt free basis.
Axelos staff and senior management will be transferring with the business.
Rationale and timing
The Axelos joint venture was established with Capita in 2013 to commercialise certain best practice methodologies (principally ITIL and Prince2) previously developed by HM Government. The Cabinet Office chose to retain a 49% stake on the formation of the business with a view to delivering better value for money through a future sale.
The sale followed a strategic review triggered by Capita’s desire to sell its majority stake. The Cabinet Office concluded that a joint sale was likely to attract greater interest and generate a higher price per share than a separate sale of the Cabinet Office’s 49% stake; it also offered the opportunity to share in the premium typically available on the sale of a controlling stake.
The sale was conducted through a public auction process and the sale proceeds exceed the Cabinet Office’s retention value.
The sale terms include standard sale indemnities and an indemnity by the Cabinet Office for 49% of Axelos’ share of the deficit in the Capita Group’s defined benefit scheme, calculated on the basis set out in section 75 Pensions Act 1995, to the extent that it exceeds the allowance already made for it. Any liability under the indemnity is not expected to exceed £300,000 and is expected to be settled during this financial year.
On this occasion, due to the sensitivities surrounding the commercial negotiation of this sale, it was not possible to notify Parliament of the particulars of the contingent liability in advance of the sale announcement. Instead, the Cabinet Office notified the chairs of the Public Accounts Committee and the Public Administration and Constitutional Affairs Committee.
More information on this contingent liability has been set out in a departmental minute that has been laid before the House alongside this statement.
The impact on the fiscal aggregates, in line with fiscal forecasting convention, are not discounted to present value. The net impact of the sale on a selection of fiscal metrics are summarised as follows:
The price achieved is above retention value.
Public sector net borrowing
The sale reduces public sector debt. All else being equal, the sale will reduce future debt interest costs for Government. The reduction in Government’s shareholding means it will not receive future dividend income that it would otherwise have been entitled to through these shares.
Public sector net debt
Improved by £213.9 million
Public sector net liabilities
Improved by £50.5 million
Public sector net financial liabilities
Improved by £50.5 million