Tuesday 8 October 2019
For more information about the capital raise referred to below please see ASX website (SLK).
SeaLink Travel Group Limited (ASX:SLK) (“SeaLink”) today announced that it has entered into binding agreements (subject to certain conditions precedent) to acquire 100% of Transit Systems Pty Ltd, Tower Transit Group Ltd and their broader group of entities (including trusts) (together the “Transit Systems Group”), Australia’s largest private operator of metropolitan public bus services and an established international bus operator in London and Singapore, for an enterprise value of A$635 million plus a earn-out component of up to A$63 million (together
To partly fund the Acquisition, SeaLink is undertaking a fully underwritten A$65 million placement to new and existing institutional shareholders and a fully underwritten A$89 million pro-rata, accelerated, non-renounceable entitlement offer to raise a total of A$154 million. The balance of the consideration payable for the Acquisition will be funded by the issue of A$269 million of SeaLink scrip to the vendors of the Transit System Group5, and by drawing down on new multi-tranche debt and revolving credit facilities which will largely replace existing SeaLink and Transit Systems Group debt facilities. As a result of the scrip issuance, certain vendors of Transit Systems Group will become substantial holders of SeaLink, and are expected to hold in aggregate ~33.4% of SeaLink shares on issue post Acquisition (subject to a staggered two year escrow arrangement from the date of issuance6).
Importantly, the SeaLink Board is pleased to announce that, subject to completion of the Acquisition, Clint Feuerherdt, current Group CEO of Transit Systems Group, has agreed to replace Jeff Ellison as SeaLink Group CEO. Clint will own approximately ~2.6% of SeaLink shares on issue post-Acquisition.7 Jeff has agreed to provide support to Clint to ensure a smooth transition of leadership by remaining as an executive director of SeaLink for a short period of time, following which he will remain on the SeaLink Board of Directors as a non-executive director.
In addition, Neil Smith, one of the founding shareholders and current Chairman of Transit Systems Group, will join the SeaLink Board of Directors as a non-executive director upon completion of the Acquisition. Neil will bring over 30 years of commuter transport operations experience in domestic and international markets and is expected to own approximately ~15.3% of SeaLink shares on issue post Acquisition8.
The Acquisition is subject to SeaLink shareholder approval of the scrip consideration and the provision of financial assistance by the Transit Systems Group pursuant to the new multi-tranche debt and revolving credit facilities,
FIRB approval for Transit Systems Group vendors to receive SeaLink scrip consideration, no material adverse change in respect of the Transit Systems Group or the SeaLink Group, change of control consents for bus and other contracts, as well as other customary conditions. An Independent Expert has been appointed to opine on the Acquisition and, subject to ASIC review, has concluded that the Acquisition of Transit Systems Group and the issue of scrip consideration is fair and reasonable for SeaLink shareholders who are not associated with the vendors9. A copy of the Independent Expert’s report will be released today.
The SeaLink Directors unanimously recommend that shareholders vote in favour of the Acquisition and all SeaLink Directors who are shareholders of SeaLink, holding approximately 16% of SeaLink shares on issue at the date of this announcement, intend to vote in favour of the Acquisition at the SeaLink shareholder meeting10. All SeaLink Directors who are shareholders intend to fully or partially take-up their rights under the Entitlement Offer.
Certain break fee and exclusivity arrangements will be in place in respect of both SeaLink and the Transit Systems Group until the Acquisition completes.
Transit Systems Group is Australia’s largest private operator of metropolitan public bus services and is an established international bus operator in London and Singapore. The business was founded in Perth in 1995 after successfully tendering for the Midland bus contract. In 2013, the business expanded into the London market via the acquisition of part of the London operations of FirstGroup Plc and further expanded into Singapore in 2015 by winning the competitive tender for the Bulim bus contract, becoming the first international operator of public bus services in Singapore.
Transit Systems Group currently operates approximately ~3,129 buses across 40 contracts in Australia, London and Singapore on behalf of governments, transport authorities and private bodies. Transit Systems Group carries ~344 million passengers annually on its services. In FY19A, the business generated revenue of A$895 million, pro forma normalised EBITDA of A$78 million and pro forma normalised EBIT of A$61 million<sup11</sup>.
The key strategic and commercial rationale for the Transaction includes:
SeaLink Managing Director and CEO, Mr Jeff Ellison said:
“This is a transformational acquisition for SeaLink. After many months of due diligence, I am delighted to have reached an agreement to acquire Transit Systems Group which has steadily grown over 24 years to become a
leading provider of metropolitan public bus services both in Australia and internationally. This acquisition diversifies SeaLink’s end-markets towards long-term bus contracts with government counterparties who are looking for
reliable public transport solutions to support growing populations. I am excited by the combined capabilities of Transit Systems Group and SeaLink, bringing ‘best-in-class’ capabilities across scheduling, route optimisation, fleet management, ticketing and tendering. The announcement today represents the start of SeaLink’s next phase of growth as an integrated multi-modal passenger services provider. I look forward to continuing to support the combined management team and build on the great momentum that currently exists within both businesses.”
As announced on 22 August 2018, Jeff Ellison indicated his intention to retire from his position as Managing Director and Group CEO of SeaLink. At that time, SeaLink’s Board commissioned an external recruitment firm, Heidrick & Struggles, to conduct a comprehensive search for a replacement. Subject to completion of the Acquisition, current CEO of Transit Systems Group, Clint Feuerherdt, has agreed to lead SeaLink as Group CEO. Commenting on the appointment, SeaLink Chairman, Andrew McEvoy, said:
“The Board of Directors of SeaLink believe that Clint is uniquely positioned to lead the combined SeaLink and Transit Systems Group business. Clint has worked with Transit Systems Group for 10 years and throughout this time has acquired significant experience in managing a large passenger transport business delivering reliable and safe services to large-scale government contracts. Clint also has an extensive background in marine transport operations having built Transit Systems Group’s marine operations into Australia’s largest private operator of passenger and vehicle ferries before divesting the business to SeaLink in 2015.”
To ensure a smooth transition of leadership post completion of the Acquisition, the term of Mr Ellison’s Service Agreement with SeaLink has been extended by mutual agreement until one month after completion of the Acquisition. In consideration for his additional executive services, Mr Ellison will be entitled to a retention payment
of $650,000 which is in addition to his current remuneration package previously advised to the market. Mr Ellison is also proposed to remain on the Board as a non-executive director to provide ongoing support. Neil Smith, one of the founding shareholders and current Chairman of Transit Systems Group, will be appointed as a non-executive director of the SeaLink Board immediately upon the completion of the Acquisition.
Current Transit Systems Group CEO, Clint Feuerherdt commented:
“The combination of SeaLink and Transit Systems Group delivers an exceptional outcome for the respective shareholder groups and for current and future customers. Over a long period of time, both SeaLink and Transit Systems Group have developed market leading positions in their respective sectors and I see significant opportunity for the combined group to target integrated multi-modal passenger transport contracts across the public and private sectors. I particularly look forward to leveraging the skills and expertise of both groups as we look to
deliver a range of synergies from the combined business.”
The enterprise valuation for the Acquisition of A$635 million plus an earn-out component of up to A$63 million is comprised as follows:
The implied transaction multiple based on the Upfront Consideration and Deferred Consideration is approximately 8.2x EV / FY19A pro forma normalised EBITDA pre-synergies16 or 7.8x including net synergies of ~A$4.0 – 4.6 million17 (expected to be realised over two years).
The cash and assumed debt and debt-like items component of Upfront Consideration will be funded by a combination of:
The Deferred Consideration and Earn-out Consideration, to the extent paid, will be funded from operating cash flow and available debt capacity.
The Equity Raising, comprising the Placement and Entitlement Offer, will in total raise approximately A$154 million (before transaction costs). Approximately 44 million new ordinary shares in SeaLink (“New Shares”) will be issued (equivalent to approximately ~43% of existing SeaLink existing shares on issue).
All New Shares offered under the Equity Raising will be issued at a price of A$3.50 per New Share, representing:
Each New Share issued under the Equity Raising will rank equally with existing SeaLink shares on issue. SeaLink will apply for quotation of the New Shares on the ASX.
All shares offered under the Placement will be issued at the same price as New Shares issued under the Institutional Entitlement Offer (A$3.50 per share). New Shares issued under the Placement do not have rights to participate in the Entitlement Offer.
Eligible institutional shareholders will be invited to participate in the Institutional Entitlement Offer. The Institutional Entitlement Offer will open at 10:00am on Tuesday, 8 October 2019 and close on Tuesday, 8 October 2019.
Eligible institutional shareholders can choose to take up their entitlement in whole, in part or not at all. In addition, under the Institutional Entitlement Offer, New Shares equal in number to those attributable to entitlements not taken up by eligible institutional shareholders, together with New Shares attributable to entitlements which would otherwise have been offered to institutional shareholders in ineligible jurisdictions, will be offered to institutional shareholders.
Every SeaLink retail shareholder registered as a shareholder in Australia or New Zealand as at 7.00pm (Sydney time) on Thursday, 10 October 2019 (“Eligible Retail Shareholders”) will be entitled to participate in the Retail Entitlement Offer on the terms and subject to conditions set out in the retail offer booklet to be sent to Eligible Retail Shareholders in relation to the Retail Entitlement Offer (“Retail Offer Booklet”). The Retail Entitlement Offer will open at 9:00am, Tuesday, 15 October 2019 and close at 5:00pm, Tuesday, 29 October 2019.
Under the Retail Entitlement Offer, Eligible Retail Shareholders that take up their full Entitlement may also apply for additional New Shares in excess of their Entitlement, up to a maximum of 50% of their Entitlement at the Offer Price (“Additional Shares”). Eligible retail shareholders are not assured of being allocated any Additional Shares. SeaLink retains absolute discretion regarding allocations of Additional Shares.
All SeaLink Directors who are shareholders intend to participate in the Entitlement Offer. In accordance with the ASX Listing Rules, Directors will not apply for any Additional Shares.
The Entitlement Offer is non-renounceable and entitlements will not be tradeable on ASX or otherwise transferable. Shareholders who do not take up their full entitlements will not receive any payment or value in respect of entitlements they do not take up, and their percentage equity interest in SeaLink will be diluted.
Tuesday, 8 October 2019
Announcement of the Acquisition and Equity Raising, Placement and Institutional Entitlement Offer opens
Tuesday, 8 October 2019
Tuesday, 8 October 2019
Institutional Entitlement Offer closes
Wednesday, 9 October 2019
Trading halt lifted – shares recommence trading on ASX on an “exentitlement” basis
Thursday, 10 October 2019
Record Date for determining entitlement to subscribe for New Shares (7:00pm Sydney time)
Tuesday, 15 October 2019
Retail Entitlement Offer Booklet dispatched and Retail Entitlement Offer opens
Thursday, 17 October 2019
Settlement of Placement and Institutional Entitlement Offer
Friday, 18 October 2019
Allotment and normal trading of New Shares under the Placement and Institutional Entitlement Offer
Tuesday, 29 October 2019
Retail Entitlement Offer closes
Tuesday, 5 November 2019
Settlement of Retail Entitlement Offer
Wednesday, 6 November 2019
Allotment of New Shares under the Retail Entitlement Offer
Wednesday, 6 November 2019
Normal Trading of New Shares under the Retail Entitlement Offer
Thursday, 7 November 2019
Dispatch of holding statements
All dates other than launch date are indicative
Further details of the Acquisition and the Equity Raising are set out in the Investor Presentation also provided to the ASX today. The Investor Presentation contains important information including key risks and foreign selling restrictions with respect to the Entitlement Offer.
SeaLink is being advised by Macquarie Capital (Australia) Limited as exclusive financial adviser in respect of the Acquisition. Macquarie Capital (Australia) Limited, Ord Minnett Limited and Taylor Collison Limited are acting as
joint lead managers, bookrunners and underwriters to the Equity Raising. Kain Lawyers is acting as legal adviser to SeaLink in relation to the Acquisition and the Equity Raising.
If you have any questions in relation to the Entitlement Offer, please contact the SeaLink Offer Line on 1300 737 760 (within Australia) or +61 2 9290 9600 (outside Australia) between 8:30am and 5:00pm (AEST) Monday to Friday. For other questions, you should consult your broker, solicitor, accountant, financial adviser, or other professional adviser.
For further information, please contact:
Jeff Ellison, Chief Executive Officer and Managing Director, +61 407 407 123
Andrew Muir, Chief Financial Officer and Company Secretary, +61 423 027 745