ICL to offload UK properties

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The Independent Online

ICL, the computer services group, is hatching a radical £1bn deal to offload its UK property liabilities before its forthcoming flotation, which is planned for the summer.

The company, which was once the great white hope of the British computer industry, is in advanced negotiations to transfer its properties to the consortium Prospero, which includes Australian-owned construction company Bovis Lend Lease, Bank of Tokyo Mitsubishi and surveying firm Chesterton.

The deal is modelled on the Private Finance Initiative (PFI), whereby the consortium will take on ownership of the 120 properties for 15 years and provide all the services.

ICL executives are keen to complete the deal before the summer, when the company hopes to return to the London Stock Exchange, following a 16-year break, with a flotation that will value it at around £5bn.

Taking the estate - which totals 2m square feet of mainly leasehold properties - off the balance sheet will make it much easier for analysts and institutions to value the business.

The deal with Prospero reflects the changing nature of ICL. Formed in 1968, the company made a name for itself as a manufacturer of giant mainframe computers and a mini- rival to the American market-leader IBM.

After being bought by Japanese conglomerate Fujitsu and taken private in 1984, the company has gradually shifted the focus of its activities from manufacturing to computer services.

It now wants to specialise purely in e-business services. To achieve this, it plans to float off its IT training division, KnowledgePool, and its Finnish arm, ICL Data, and close its distribution business.

It will then divide into three units: e-Innovation, e-Applications and e-Infrastructure, and set up an incubation division to nurture start-ups.

But the change of direction will leave ICL saddled with a property estate of 2m square feet that is totally unsuitable for its new needs.

Richard Reed, ICL's director of commercial operations, said: "We are moving out of manufacturing so our existing estate doesn't meet our requirements at all. We need more modern office space."

He said that as part of the deal, the consortium would move ICL into a new estate, totalling 1.2m square feet, within five years.

If the deal is successful, ICL will then consider offloading its worldwide property estate - covering the US, continental Europe, Scandinavia and the Middle East - to Prospero.

ICL has been trying to out-source its properties since last June. It initially entered into discussions with Integrated Workspace Solutions, a consortium that included investment bank Credit Suisse First Boston, construction company Amey and serviced office operator Regus.

However, talks are understood to have collapsed over the pricing and structure of the deal.

ICL is one of a group of companies considering outsourcing its property using the PFI model. Others include JP Morgan and Lloyds TSB.

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