Controversial stock exchange-listed business Quindell today admitted that it had published some 'not appropriate' statements of income as it announced a retreat from the legal services sector.
In a widely trailed deal valued at £637m, it announced a conditional sale of its entire professional services division to Australian firm Slater and Gordon.
The deal, announced on both the Australian and London stock exchanges, involves an 'initial cash consideration’ of £637m and a 50-50 share of profits from future noise-induced hearing loss (NIHL) claims being run by Quindell. Slater and Gordon said it would fund the acquisition by raising A$890m (£462m) in new equity.
The transaction is conditional on a majority vote by Quindell shareholders, which is scheduled for Friday 17 April. Quindell’s board unanimously recommended that Quindell shareholders vote in support of the transaction.
Quindell said it was acting for clients in around 53,000 cases, and the parties will share profits from those until June 2017, after which there will be a final payment based on remaining unresolved cases.
Slater and Gordon said the deal was a ‘transformational opportunity’ that would turn it into the biggest personal injury firm in the UK – just three years after arriving in the country with the acquisition of Russell Jones Walker. The company expects to increase personal injury market share in the UK from 5% to 12% when deal is completed in May.
For Quindell, the company will now lose its professional services division and comprise a range of insurance-related technology businesses – in effect signalling the end of its involvement in the provision of legal service.
Quindell said that if the disposal were not to proceed, the group’s ‘financial and operational flexibility would be limited’ because of the debt it would retain.
Quindell's statement also revealed that an initial report by accountancy firm PwC into accounting practices of Quindell has found they were ‘largely acceptable’ but ’at the aggressive end of acceptable practice’.
PwC found statements of income based on potential hearing loss cases revenue were not appropriate, primarily due to the group’s lack of historical data.
The report is likely to result in a review of policy which will likely result in a reduction of revenue and profit figures for 2014.
The company said it will adjust its reported interim results for the six-month period to June 2014 using more ‘conservative’ policies, as well as the comparative figures for the year ended 31 December 2013.
’This move will accelerate and consolidate our position in the UK market and bring benefits to the clients and staff of both businesses.’
David Currie, interim non-executive chairman of Quindell, said: 'This is an important landmark for Quindell, delivering significant value for investors from part of our business. Should the disposal complete, we are committed to a significant return of capital to our shareholders and to return future cash proceeds over time as NIHL cases settle.’
Andrew Grech, managing director of Slater and Gordon, added: 'In getting to this point we undertook a very extensive due diligence process. The business we are buying is of high quality with robust infrastructure and systems and good people.’