April 15, 2019 / 8:26 AM / in a month

UPDATE 2-Office space provider IWG soars on sale of Japan business

* Sells Japan business for about $420 mln

* Sale comes as IWG looking to close or refurbish locations

* IWG Shares jump 20 pct (Adds analyst comments, details, shares)

By Shashwat Awasthi and Noor Zainab Hussain

April 15 (Reuters) - British office space provider IWG Plc is to sell its Japanese operations to TKP Corp for 320 million pounds ($418.8 million), sending its shares up by almost a fifth.

The company behind the Regus and Spaces brand has been looking to close or refurbish locations in Britain and some other markets to revive its business, which has been hit by a weak property market in London and higher costs related to new sites.

IWG shares rose as much as 19.8 percent in early trade. Including Monday’s gains, IWG’s stock has climbed more than 52 percent this year. The FTSE 250 company’s shares had come under pressure after takeover talks with five separate suitors fell through last year.

Last month, IWG had said it would revamp some locations including in Britain after reporting a dip in its full-year operating profit.

“More sales will follow, which should further validate the new strategy, release substantial value and lead to a complete re-appraisal of the company. Special dividends or cash returns seem likely,” Peel Hunt analyst Andrew Shepherd said.

Shepherd said the Japanese business accounted for 4 percent of IWG’s core earnings.

Credit Suisse upgraded IWG to “outperform” from “underperform” and raised its price target to 328 pence from 200 pence, saying the company was beginning an “evolution towards a franchise model with consequent benefits.”

As part of the TKP deal, the Japanese group will buy 130 flexible co-work centres operated by IWG in Japan and will have exclusive use of IWG’s Regus, Spaces and OpenOffice brands in the country.

IWG said the deal achieved an attractive valuation for IWG’s shareholders and re-affirmed the company’s strategy of capital efficient growth in IWG’s global network with an increased emphasis on partnerships.

Chief Executive Mark Dixon, who is IWG’s biggest investor with a 27.25 percent stake, will join TKP board as a non-executive member. The deal needs antitrust clearance in Japan and is expected to close in May, IWG said.

$1 = 0.7641 pounds Reporting by Shashwat Awasthi in Bengaluru; Editing by Bernard Orr/ Gopakumar Warrier/Jane Merriman

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