EuroFinance

Sodexo, a global leader in food services and facilities management, announced a plan to spin-off its benefits and rewards business in 2023. The new business is known as Pluxee, and specialises in employee benefits and reward solutions, focusing on offering services such as employee meal vouchers and gift cards. The spin-off of Pluxee from Sodexo was completed on February 1^st, 2024 and required meticulous planning and execution to manage its extensive financing portfolio effectively. This complex transition highlighted the challenges and strategies involved in handling such significant financial responsibilities.

Enabling the Pluxee’ spin-off involved several key steps: determining the optimal capital structure of each entity to ensure capacity for future growth, engaging with three major rating agencies, obtaining formal consent from bondholders, preparing the external financing of the new entity, and managing the ECM and listing process. These efforts culminated in Pluxee’s successful listing on Euronext Paris in early 2024.

A key factor that contributed to this success was the speed at which the Sodexo team moved through the process. This involved setting up new systems and processes for managing bank relationships, financing arrangements, and liquidity requirements. The successful implementation of these new treasury functions was crucial for Pluxee’s financial stability and operational independence.

Sodexo has been highly commended by EuroFinance in the Financing & Liquidity category.  This recognition highlights Sodexo’s outstanding management of its financial strategies and liquidity, showcasing its strong performance and innovative approaches in the field.

Engaging with rating agencies

Maintaining strong investment-grade ratings for both entities was a top priority during the spin-off.  Sodexo carefully planned the proposed capital structure of both entities post spin-off to ensure this objective was achieved. “By initiating discussions with rating agencies before the public announcement, we ensured that both entities would be well-positioned to handle the transition.” Garry Murphy, group VP treasury at Sodexo, explained.

The proactive approach in engaging with rating agencies helped both Sodexo and Pluxee manage their credit ratings effectively. This early engagement was essential in securing the confidence of investors and ensuring that both companies could continue to operate under favourable financial conditions.

Navigating the bond consent process

One of the most critical elements of the spin-off was managing the bond consent process. “Handling the bond consent process during the spin-off was a major challenge,” Murphy said. “Given the scale and complexity of the bonds involved, our objective was to ensure that both Sodexo and Pluxee could continue to operate smoothly and maintain their strong credit ratings.”

The bond consent process required Sodexo to navigate a myriad of legal and regulatory hurdles. Murphy noted that early engagement with rating agencies and clear communication with bondholders were essential to this process. “We had to ensure that bondholders were comfortable with the new arrangements and that the transition would not impact the credit quality of their investments,” he explained.

The consent offers were structured to provide incentives for bondholders to accept the new terms, thereby facilitating a smoother transition. Murphy noted, “Our goal was to make the new arrangements attractive to bondholders while ensuring that the process did not disrupt the overall spin-off.”

Another crucial aspect of the spin-off was the Request for Proposal (RFP) process for selecting financial partners. Sodexo engaged with different banks with expertise in liability management to assist with the transition. “Choosing the right partners was crucial,” Murphy said. “We selected banks based on their diverse strengths and their ability to handle the complexities of the bond consent process effectively.” These banks played a pivotal role in liaising with the bondholders and providing guidance to Sodexo throughout the consent process.  “Their experience and insights were key in navigating the complex landscape of bondholder consent and ensuring a smooth transition,” he added.

Establishing Pluxee’s new financing arrangements

A key requirement of the project was to put in place new external financing for Pluxee in the form of a Revolving Credit Facility with a new Syndicate of banks, and also a Bridge loan facility which would ultimately be repaid by a successful debut Bond issuance after the spin-off completion.  Murphy noted, “Building strong relationships with banks was essential for Pluxee’s success. We had to ensure that they had the financial support needed to thrive as an independent entity.”

The transition also involved negotiating new terms for banking services and financing arrangements. Murphy highlighted the importance of these new banking relationships in providing the necessary support for Pluxee’s ongoing operations and growth.  Murphy added “we have a strong and long-standing group of supportive banks at Sodexo, and so naturally it made sense to develop the new syndicate from this existing group of banks”.

In addition to establishing the new financing arrangements, it was also important that the existing Treasury team of Pluxee were fully prepared to operate on a stand-alone basis. Pluxee had a strong existing treasury function; however, it primarily operated as an internally focused team and needed to develop experience in dealing with external financial markets. The team was unfamiliar with critical processes such as issuing bonds, setting up syndicated bank facilities, and obtaining credit ratings, according to Murphy. “We had to assist in developing their functionality and understanding of these areas. Additionally, new staff were brought on board to strengthen the team’s capabilities.”

The separation of treasury functions from Sodexo involved unwinding existing arrangements and setting up new systems. This also included managing bank guarantees and letters of credit.  Murphy emphasised the importance of carefully planning the transition and also working collaboratively with the Pluxee team to handle these responsibilities to ensure they were fully comfortable with the new requirements of being a listed entity with external financing.

Future outlook

The successful management of the spin-off and bond consent process highlighted several key lessons. Murphy emphasised the importance of effective communication and flexibility in managing complex financial transitions. “The success of this process was a testament to the agility and strategic planning of our teams,” he said. “By focusing on clear communication and strategic planning, we were able to navigate the complexities of the bond consent process and ensure a smooth transition for both Sodexo and Pluxee.”

Looking ahead, the experience gained from this transition will be valuable for future corporate finance activities. Murphy concluded, “The lessons learned from this spin-off will inform our approach to future financial transactions. The ability to manage complex financial processes effectively and maintain strong relationships with stakeholders is crucial for navigating future challenges.”

In summary, the spin-off of Pluxee from Sodexo was a complex financial undertaking that required careful management of bond portfolios, strategic partnerships, and proactive engagement with rating agencies. The success of this transition underscored the importance of effective communication, strategic planning, and flexibility in managing significant corporate finance events. Both Sodexo and Pluxee emerged from this process in strong positions, poised for continued growth and success in their respective markets.