Morningstar DBRS Comments on Mitie Group plc's Pending Acquisition of Marlowe PLC

Morningstar DBRS notes that on 5 June 2025, Mitie Group plc (Mitie), the parent company of Mitie Treasury Management Ltd. (rated BBB with a Stable trend by Morningstar DBRS) announced that it had reached an agreement on the terms of a recommended cash and share offer to acquire the entire issued and to-be-issued ordinary share capital of Marlowe PLC (Marlowe). The consideration consists of GBP 228 million in cash and 86.6 million new Mitie shares (with an approximate value of GBP 124 million as of 18 June 2025), for an implied total of approximately GBP 352 million. Mitie has arranged a GBP 240 million bridge facility to finance the cash portion of the transaction. Subject to regulatory and shareholder approvals and other transaction conditions, the acquisition is expected to complete in the summer of 2025.

Based on Morningstar DBRS' review of the Rule 2.7 Firm Offer Announcement and publicly available information for Marlowe, Morningstar DBRS believes that Mitie's strong financial position allows adequate headroom to execute the proposed acquisition without affecting Mitie Treasury Management Ltd.'s credit rating, all else being equal. Marlowe's business lines are complementary to Mitie's existing operations and Morningstar DBRS views the integration risk as manageable for Mitie as an experienced integrator of acquisitions. Morningstar DBRS based this assessment on information available at the time of publication, and the assessment remains subject to ongoing monitoring of the credit rating, including an upcoming review of the credit rating to be completed in July 2025.

Marlowe is a leading testing, inspection, and certification service provider in the United Kingdom. Marlowe services approximately 27,000 customers, which include local authorities, facilities management providers, multi-site NHS trusts, FTSE 100 companies, and small and medium-size enterprises. Marlowe's business operates through two divisions: (1) Fire, Safety and Security, which provides design, installation, maintenance, monitoring, and technical support services to ensure fire safety, security, and compliance with associated regulations, and (2) Water Treatment and Air Hygiene, which provides services to maintain safe water and air systems and to comply with water and air safety and environmental regulations. As per Marlowe's trading update for the for the year ended 31 March 2025 (F2025), it expects to report F2025 revenue of approximately GBP 305 million and adjusted EBITDA of approximately GBP 32.5 million. As at F2025, Marlowe's GBP 50 million debt facility was undrawn, while as at September 2024 it reported lease liabilities of GBP 21.6 million, resulting in limited debt to be acquired by Mitie as part of the transaction aside from transaction-specific financing.

Mitie reported continued strong financial results in F2025, consistent with Morningstar DBRS' expectations. Mitie's group revenue (excluding share of revenue of joint ventures and associates) grew to GBP 5.1 billion from GBP 4.4 billion in F2024, while its F2025 Morningstar DBRS-adjusted EBITDA rose to GBP 305 million from GBP 260 million in F2024. Mitie's standalone financial metrics remain strong for the credit rating category including debt-to-EBITDA of about 1.2 times and cash flow-to-debt comfortably above 60%, as adjusted by Morningstar DBRS. Morningstar DBRS' most recent credit rating action on Mitie Treasury Management Ltd. (July 2024) can be found here: https://dbrs.morningstar.com/issuers/27185.

All figures are in GBP unless otherwise noted.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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