7 Aug 2019 07:00
This announcement contains inside information within the meaning of the EU Market Abuse Regulation 596/2014.
Applegreen plc
("Applegreen" or the "Company" or, together with its subsidiaries, the "Group")
Strategic Acquisition of a Minority Stake in Connecticut Services Area Operator
Dublin, London, 7 August 2019: Applegreen, is pleased to announce that it has conditionally acquired a 40% holding in 23 on-highway services plazas in Connecticut, US.
The Company has entered into a consortium shareholder agreement with IST3 Investment Foundation, acting on behalf of and for the account of its investment vehicle IST3 Infrastruktur Global ("IST3") and TD Greystone Asset Management ("TD Greystone") on behalf of and as manager of the Greystone Infrastructure Fund, (together the "Consortium"). The consortium has entered into a securities purchase agreement to acquire JLIF Holdings (Project Service) US, Inc and it's 100% subsidiary Project Services LLC (together the "Transaction") which operates the Connecticut Service Plazas ("CT Service Plazas").
Transaction Highlights
·; Acquisition of a significant equity stake in a well-established and fully re-developed service plaza business in the US, located on three heavily trafficked routes which are the main Interstate routes between New York City and Boston Massachusetts.
·; The 23 service plazas benefit from exclusive rights along the I-95, I-395 and Route 15 highways in the State of Connecticut granted under a long-term concession agreement with the Connecticut Department of Transportation.
·; The Transaction supports Applegreen's strategic objective of growth in North America and continues to develop its stated ambition of reducing fuel dependency through the addition of significant food and beverage operations.
·; Consideration for Applegreen of approximately $37.6 million (excluding transaction fees), to acquire a 40% Consortium interest.
·; Applegreen has entered into a call option agreement with TD Greystone, exercisable at five years after completion of the Transaction that will enable Applegreen to increase its interest in CT Service Plazas to 60% and take majority control, if exercised.
·; The acquisition is subject to approval from Connecticut Department of Transportation.
About CT Service Plazas
CT Service Plazas consists of 23 on-highway service plazas located in Connecticut across interstate 95, interstate 395 and route 15, three heavily trafficked routes between New York and Boston. Project Services LLC has the exclusive rights along the routes in the State under a concession agreement with the Connecticut Department of Transport which currently has 25 years remaining, with the potential to extend for a further 10 years. The plazas offer essential services including fuel, quick-service food and beverage, retail, restroom and other facilities, operating 24 hours a day and 7 days a week. Approximately 91% of revenue generated by CT Service Plazas is from long-term anchor tenants including McDonalds, Dunkin' Donuts, Subway and Alliance Energy.
Chief Executive Bob Etchingham said: "This transaction represents a rare opportunity to acquire a high profile service plaza concession project in one of our core regions in the United States, significantly increasing our market presence in the North East and positioning the company for further growth in this key strategic market."
Rationale for the Transaction
·; Important opportunity to access Motorway Service Areas in the US, operating from strategic locations with high barriers to entry for competitors.
·; CT Service Plazas is a well-established operator with a track record of generating robust and consistent cashflows with high traffic volumes and strong margins.
·; CT Service Plazas provides the opportunity to generate very stable long-term earnings with revenue generated mainly from long-term contracted, well-established, multinational branded anchor tenants, which have a long and successful track record.
·; The Transaction opens up new and strategically valuable relationships with a variety of high-profile large-scale quick service restaurant brands.
·; The Transaction further deepens the Group's exposure to non-traditional fuel earnings with growth opportunities identified across retail, advertising, food and beverage and electric vehicle charging solutions.
·; Applegreen has identified a number of potential opportunities to drive additional growth across the plazas including adding new tenants, additional catering facilities and operating electric vehicle charging bays.
·; The acquisition will be funded from existing group debt facilities and the Company still expects to remain broadly on track with its deleveraging objective for the next two years.
Transaction Structure
·; Applegreen has entered into a consortium shareholder agreement with IST3 and TD Greystone as manager for and on behalf of the Greystone Infrastructure Fund.
·; The Consortium and JLIF Holdings (Project Service) UK Limited have entered into an agreement for the Consortium to acquire a 100% shareholding in CT Service Plazas for an enterprise value of $229 million including a total Consortium equity consideration of $129.6 million (excluding leakage to completion).
·; The consideration is being funded through contributions from each of the Consortium members, existing Project Services LLC cash reserves and an amendment and restatement to an existing non-recourse debt facility within the acquired entity, which equates to approximately $30 million coming from additional debt in the acquired entity.
·; Applegreen's consideration contribution of approximately $37.6 million (excluding transaction fees) will be funded from existing resources available to the Group.
·; Following completion of the Transaction, Applegreen will hold 40% of the Consortium's shareholding in CT Service Plazas, with IST3 and TD Greystone holding 40% and 20% respectively.
·; Completion of the Transaction is subject to Connecticut Department of Transportation approval and, pending satisfaction of this condition, is expected to complete in Q3 2019.
Financial Effects of the Transaction for Applegreen
Applegreen will support the existing management team of CT Service Plazas from its existing North East US regional office and assist management to drive the implementation of a number of operational improvements and revenue growth initiatives post completion of the Transaction. CT Service Plazas reported Earnings Before Interest Tax Depreciation and Amortisation, Profit Before Tax, and Gross Assets under US Generally Accepted Accounting Standards of approximately $14.5 million, $4.2 million and $213.5 million, respectively for the year ended 30 June 2018.
As Applegreen's shareholding will represent a minority investment under International Financial Reporting Standards the Group will utilise equity accounting treatment for the inclusion of the acquired entities financial results. Equity accounting treatment takes Applegreen's share of the Profit After Tax ("PAT") for the acquired operations for inclusion in our EBITDA.
The Transaction is currently expected to be slightly dilutive to earnings in the Company's year ended 31 December 2019 due to the additional debt service costs incurred. However, management expects it to be accretive from the first full financial year onwards (FY20) as CT Service Plazas is able to increase the pace of operational improvements with the potential for significant future earnings growth.
For further enquiries, please contact:
Applegreen
Bob Etchingham (CEO) +353 (0) 1 512 4800
Niall Dolan (CFO)
Drury Porter Novelli
Paddy Hughes +353 (0) 1 260 5000
Shore Capital
Stephane Auton +44 (0) 20 7408 4090
Patrick Castle
Daniel Bush
Goodbody
Joe Gill +353 (0) 1 667 0420
Siobhan Wall
Richard Tunney