Slater & Gordon’s UK arm to split from Australian parent
Slater & Gordon, the UK’s first publicly listed legal services business, is to split from its parent company in Australia, it announced yesterday in the latest effort to save the financially struggling operation.
In a statement to the Australian Stock Exchange, the company said that separation “provides the best option to enable both the Australian and UK operations to succeed in their own right and will enable the company to focus its management’s time and resources on the Australian business”.
The deal will involve 95 per cent of the equity in the UK business being handed over to senior lenders, which is understood to be a group of international hedge funds. Existing shareholders will retain approximately 5 per cent of the equity in the hived-off UK company as part of the recapitalisation deal.
That arrangement comes after two years of declining financial fortunes for Slater & Gordon, which bought into the UK market in 2012 when it took over the established London law firm Russell Jones & Walker. Five years earlier, Slater & Gordon had become the first law firm to offer shares to investors when it was listed on the Sydney exchange.
Its troubles in Britain started with its 2015 acquisition of the professional services arm of Quindell, the insurance company. Shortly after that deal, the Serious Fraud Office launched an investigation into Quindell’s accounting practices. Slater & Gordon is now in the midst of litigation over the deal with Watchstone Group, the business that took over Quindell’s identity.
Slater & Gordon has also been hit in the UK by government moves to raise the small claims limit for minor personal injury cases, one of the company’s biggest fields of business. The policy has removed the ability for claimants in lower value personal injury cases to recover legal fees, effectively removing lawyers from the process.
That combination of acquisition woes and public policy reforms has caused Slater & Gordon’s share price to crash. From its peak in 2015 of A$7.85 (£4.80), the shares were trading yesterday at 8 Australian cents.
The company would not comment on the separation of its UK business or the recapitalisation deal beyond its statement to the Australian exchange.