TIDMAPGN
RNS Number : 2078I
Applegreen PLC
07 August 2019
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
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END
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