The Canadian firm that rescued Archial from administration has revealed that it looked at buying the business last year, but was put off by the size of its debts
Victor Smith, the chief executive of new owner, Toronto-based Ingenium Group, said it had looked at buying Archial 18 months ago as part of a plan to snap up a UK company to form a regional base for its international work. “[We were] dissuaded from progressing this interest at the time due to Archial’s historical debt situation,” he added.
According to the practice’s last report and accounts, debts at Archial then stood at £13.5 million.
"We were dissuaded from progressing due to Archial’s historical debt situation"
Archial went into administration for eight days last month after the banks froze its accounts following the decision by HM Revenue & Customs to issue a winding up notice against the firm, which owed it more than £3 million.
Ingenium bought most of the business from administrator PricewaterhouseCoopers, which is now deciding how much creditors will get back.
Smith said “there were no plans” to replace Chris Littlemore, the Archial chief executive at the time of its administration, and added that he does not expect job losses at the 340-strong business.
“The ability of the new entity to retain jobs was a significant consideration taken into account by PwC,” he added.
Joint administrator David Chubb said a number of firms had registered interest in Archial’s 60-strong Asia business, which is not in administration, but said any sale would not be rushed through.
Up to 20 firms bid to buy stricken firm before knot tied with Canadian company Ingenium
Archial was rescued from the brink of total collapse thanks to a lightning-quick deal, with up to 20 potential buyers being whittled down to one in just three days.
The firm announced on Tuesday that it had been bought for an undisclosed sum by privately owned Canadian business Ingenium, a move which Chris Littlemore, who has been retained as Archial chief executive, claimed would result in a “bright future” for the company.
The remarkable level of interest shown in Archial means that, in less than a week, it has gone from the peril of being in administration over millions of pounds-worth of debt to being part of a larger international and multi-disciplinary firm with all 340 UK staff retained on existing contracts.
But the deal thrashed out by administrator PricewaterhouseCoopers will not be such good news for creditors; and shareholders – who received an upbeat trading update from Archial in May – will not receive a penny.
Partner at PwC and joint administrator, David Chubb, revealed he had been handling “15-20” companies bidding to buy Archial last Thursday with the parties involved working through Sunday night to close the deal with Ingenium, the latest in a string of Canadian firms to buy up British practices.
“We had terrific interest,” he told BD. “It was a really good range of industry players. On Friday evening we had a shortlist of five. We later brought that down to two bidders which we looked at through the weekend.
“Circumstances dictated the speed but I would say this couldn’t have gone much better. We had immense challenges last week keeping the business alive in administration.”
It also emerged this week that the founder of Archial’s predecessor SMC Group sold his shares at the beginning of the year.
Stewart McColl had a 3.5% stake in Archial, but sold all 8,399,689 shares on January 28. At the time, the share price was 7 pence, giving his sale a value of £587,978.23.
At its peak in 2007, Archial shares traded at £1.89 but had fallen to 1.5 pence when they were suspended earlier this month.
Prior to going into administration, Archial was involved in at least four legal claims against debtors over unpaid fees, including one against construction and oil tycoon Ian Suttie.
The one part of Archial not acquired by Ingenium is the Sparch Asia arm, which employs around 60 people.
Current Archial projects include much of Birmingham’s BSF work; London’s 251-room Puddle Dock hotel; living quarters and leisure facilities for construction workers for a new Total E&P UK Limited gas processing plant in the Shetland Islands, the £46.5 million Plymouth Life Centre and Alsop Sparch’s newly completed Michael Faraday nursery and primary school in south London.
Architect involved in at least four legal cases prior to going into administration
Archial was in the process of trying to recoup unpaid fees owed by debtors before it was forced into administration this week.
The London-based practice was involved in at least four legal claims including one against construction and oil tycoon Ian Suttie, the owner of Scottish builder First Construction.
The legal actions were raised in 2009 and Archial administrator PricewaterhouseCoopers will now investigate the claims and decide if further action is necessary.
Archial, formerly known as SMC, went into administration earlier this week after failing to agree repayment terms over more than £3 million of unpaid tax with HM Revenue & Customs.
It also had a reported £15.4 million of bank loans and overdraft facilities, according to its accounts for the year ended December 31, 2009.
PricewaterhouseCoopers is now looking for a rapid sale of the practice, which is working on a number of high-profile jobs, including Alsop Sparch’s Puddle Dock Hotel in central London, originally designed by Will Alsop.
Developer Blackfriars Investments told BD that the £250 million project, which received planning permission from the City of London earlier this year, was continuing.
Chief executive Mallory Clifford said: “At the moment we are starting talks to find an operator for the hotel. Once we find one and we go into detailed design we will see if we get a new architect on board or stay with the firm.”
Archial has been put into administration and is up for sale just days after it suspended trading of its shares.
It emerged today that the listed London-based practice, formerly known as SMC, was unable to agree repayment terms over unpaid tax owed to HM Revenue & Customs and appointed joint administrators David Chubb and Graham Frost of PricewaterhouseCoopers, who are now seeking a rapid sale of the business.
Chubb said: “In response to changes in market conditions, Archial Group PLC had taken a number of steps to improve operations and to develop a sustainable and profitable business going forward.
“However, due to difficulties in meeting the group’s financial obligations, the directors have concluded that various companies in the Group, including Archial Architects Limited and Alsop Sparch Limited, should be placed into administration to protect the business and assets. “
On 26 August, the practice, which employs 400 staff worldwide including around 200 architects, announced its full year results would be “significantly below market expectations” as a result of the unpaid tax.
A previous update in May by the firm - which is led by chief executive Chris Littlemore - said trading for the first four months of the year was in line with management expectations. It had forecast to make a pre-tax profit this year of £3.4 million on turnover of £30.5 million.
Earlier this year, Archial started work on a £27 million mental health facility in Dumfries and in May the practice, one of two listed on the London Stock Exchange’s Alternative Investment Market (AIM), said it had £60 million worth of jobs in the pipeline.