LINK GROUP TO ACQUIRE CAPITA ASSET SERVICES SUPPORTED BY CAPITAL RAISING

Transcription

1 Link Administratin Hldings Limited ABN NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES 26 June 2017 ASX ANNOUNCEMENT ASX Market Annuncements Office ASX Limited 20 Bridge Street SYDNEY NSW 2000 LINK GROUP TO ACQUIRE CAPITA ASSET SERVICES SUPPORTED BY CAPITAL RAISING Link Administratin Hldings (ASX Cde: LNK) ( Link Grup ) has entered int a binding agreement t acquire Capita Asset Services ( CAS ) frm Capita plc ( Capita ) fr 888 millin (~A$1,493 millin 1 ) ( Acquisitin ) CAS is an established platfrm f scale prviding a brad range f financial and administrative services in the UK & Eurpe The CAS acquisitin is a significant pprtunity fr Link Grup: Strng strategic fit, aligned with Link Grup's grwth strategy Extensin and diversificatin f Link Grup's business prfile and gegraphic expsure Prvides immediate scale in the UK and a grwth platfrm fr Eurpe, with a number f pprtunities already being explred fr further grwth in the regin Significant pprtunity fr Link Grup t drive grwth and further efficiencies pst-acquisitin Defensive financial prfile and attractive acquisitin ecnmics Attractive financial metrics: Strng psitive EPS accretin n a pr frma FY17 basis befre the impact f efficiency benefits 2 Mid teens EPS accretin prir t the adjustment t reflect the bnus factr element f the Entitlement Offer Over 20% EPS accretin pst adjustment t reflect the bnus factr element f the Entitlement Offer Expected efficiency benefits f at least 15 millin per annum t be fully delivered ver the medium term 3 Implied acquisitin multiple f 12.4x EV/EBITDA fr the 12 mnths ending 31 December 2016 multiple reduces t apprximately 10.3x incrprating full run-rate f efficiency benefits The acquisitin will be funded via: A fully underwritten A$883 millin, 4 fr 11 pr rata accelerated renunceable entitlement ffer with retail rights trading Cash and available debt facilities including a new 485 millin acquisitin debt facility FX rate f 1 AUD = GBP used t cnvert all GBP metrics in this Annuncement. Accretin based n the midpint f Link Grup s management Operating NPATA guidance fr 12 mnths ending 30 June 2017 f A$121.5 millin (see slides 38 and 60 f the Investr Presentatin ldged with the ASX n the date f this release) and pr frma CAS Operating NPAT fr 12 mnths ending 31 December 2016 f A$87 millin, including the impact f interest n debt raised t finance the Acquisitin. Efficiencies are included n a run-rate basis and d nt include csts t achieve One-ff csts t achieve efficiencies are estimated t be apprximately 23 millin. Registered Office: Level 12, 680 Gerge Street, Sydney NSW 2000, Australia

2 Acquisitin f Capita Asset Services Link Grup has entered int a binding agreement t acquire CAS fr 888 millin (~A$1,493 millin). The Acquisitin is subject t mandatry regulatry apprvals and is expected t cmplete by 31 December CAS is an established platfrm f scale prviding a brad range f financial and administrative services in the UK & Eurpe, perating acrss fur business segments: Fund Slutins: third-party administratin and transfer agency services t asset managers and a variety f investment funds; Sharehlder Slutins: share registratin, share plans services and treasury slutins t crprate clients; Crprate & Private Client Slutins: trustee, administratin, dmiciliatin and gvernance services t crprates and investrs; and Banking & Debt Slutins: lan prcessing, administratin and wrk-ut services t lenders and investrs. In the 12 mnths t 31 December 2016, CAS generated revenue and Operating EBITDA f 316 millin (~A$532 millin) and 72 millin (~A$121 millin), respectively 4. Transactin funding The Acquisitin will be partially funded via a fully underwritten A$883 millin, 4 fr 11 pr rata accelerated renunceable entitlement ffer with retail rights trading ( Entitlement Offer ). The balance f the Acquisitin will be funded thrugh a cmbinatin f existing cash and available debt facilities, including a new 485 millin acquisitin debt facility. Link Grup remains cmmitted t maintaining a prudent balance sheet, with pr frma net debt t EBITDA rati f apprximately 2.8x fllwing the Acquisitin 5. Given the high cash-flw generatin f the cmbined grup, Link Grup cnsiders this initial leverage target t be the right balance. Acquisitin strategic ratinale The acquisitin is a significant pprtunity fr Link Grup: Strng strategic fit, aligned with cmpany's grwth strategy. CAS prvides prducts and services and perates in end-markets which are well understd by Link Grup. The acquisitin f CAS is aligned with Link Grup s strategy t grw thrugh further penetratin f attractive markets and expand its prduct and reginal capabilities. Extensin and diversificatin f Link Grup s business prfile and gegraphic expsure. The acquisitin significantly enhances Link Grup s cre capabilities in funds administratin, sharehlder services and crprate services in attractive markets, and prvides a new cmplementary capability in debt servicing which Link Grup believes can be leveraged int ther gegraphies (including the Australian market) in the future. In additin, the acquisitin will further diversify Link Grup s revenue and earnings base frm a gegraphic perspective, with revenue frm Australia and New Zealand reducing frm ~ 93% t ~ 55% n a pr frma basis 6. Prvides immediate scale in the UK and a grwth platfrm fr Eurpe. The Acquisitin prvides the Cmpany with established market psitins in multiple sectrs in the UK and an established ftprint in Eurpe fr further grwth. CAS administers and safeguards 4 See slide 60 f the Investr Presentatin ldged with ASX n the date f this release under Glssary. 5 See slide 36 f the Investr Presentatin ldged with ASX n the date f this release under Pr frma balance sheet 6 See slide 60 f the Investr Presentatin ldged with ASX n the date f this release under Glssary. 2

3 apprximately 600 billin f assets 7 and in 2016 managed apprximately 45 billin in annual payments fr its custmers 8. Link Grup will leverage CAS strng market psitins and client relatinships t drive further grwth in existing markets and ultimately further expansin acrss Eurpe. There will als be scpe fr the intrductin f sme f Link Grup s existing cre prducts and services int the Eurpean market ver time, with a number f pprtunities already being explred. Significant pprtunity t drive grwth and further efficiencies in CAS under Link Grup stewardship. Link Grup has identified many pprtunities frm the inclusin f CAS within the Link Grup. CAS is likely t benefit frm greater fcus frm Link Grup management after a perid as part f a brader cnglmerate. Link Grup is targeting efficiency benefits f at least 15 millin per annum t be fully realised ver the medium term, thrugh increased investment in systems t enhance autmatin and streamline prcesses, ratinalisatin and cnslidatin f CAS premises and imprved utilisatin f labur in mre cst-effective markets. Defensive financial prfile and attractive acquisitin ecnmics. The CAS business is highly attractive due t defensive revenues (greater than 50% cntractually recurring in nature, althugh a higher prprtin is captive), strng margins and high cashflw cnversin, making the business highly cmplementary t Link Grup s existing prfile. The acquisitin is als expected t be strngly EPS accretive n a pr frma FY17 basis befre the impact f efficiency benefits 9. Jhn McMurtrie, Link Grup Managing Directr, said: CAS is a business with strng market psitins acrss its perating units, underpinned by lngstanding custmer relatinships and an experienced management team. The business is highly cmplementary t Link Grup and represents an attractive platfrm fr ur cmpany s further expansin int the UK and Eurpean markets. Whilst Link Grup has been a market leader in Australia fr a number f years and has had a presence in Eurpe, with the acquisitin f CAS, we can say that Link Grup is nw a truly internatinal cmpany with expanded pprtunities fr further grwth. We are excited by the pprtunities fr the expanded Link Grup and the emplyees f CAS. Our management team has undertaken a significant amunt f due diligence n CAS, built a strng business case and established a rbust integratin plan. Under Link Grup s stewardship, and alngside the CAS management team, we believe that CAS can g frm strength t strength and further capitalise n its already strng market psitins. Whilst we welcme CAS clients t Link Grup, we remain fully cmmitted t ur existing businesses and client base. Michael Carapiet, Link Grup Chairman, said: We are cnfident that this transactin will have a strng psitive impact n Link Grup. Our management team has spent a significant amunt f time assessing grwth pprtunities fr Link Grup in ffshre markets and this acquisitin materially expands Link Grup s ftprint in the UK and Eurpe in business lines we understand well. On behalf f the Bard, we are very pleased t welcme the CAS team t Link Grup. Trading update Given prximity t Link Grup s financial year end, the Cmpany is als pleased t prvide a trading update and guidance fr the results fr the 2017 financial year. In summary, the Cmpany expects anther strng trading result fr FY2017, with frecast Operating EBITDA f A$ millin and Operating NPATA f A$ millin CAS management infrmatin. CAS management infrmatin. Accretin based n the midpint f Link Grup s management Operating NPATA guidance fr 12 mnths ending 30 June 2017 f A$121.5 millin (see slides 38 and 60 f the Investr Presentatin ldged with the ASX n the date f this release) and pr frma CAS Operating NPAT fr 12 mnths ending 31 December 2016 f A$87 millin, including the impact f interest n debt raised t finance the Acquisitin. Efficiencies are included n a run-rate basis and d nt include csts t achieve 3

4 The Superpartners integratin is prgressing well, with FY17 Grup Operating EBITDA margin frecast t be ~ 28%. Excluding the impact f the acquisitin, Link Grup remains n target t return Grup margins t 34% by The Cmpany has calculated the value f the remaining efficiencies frm the Superpartners integratin t be ~$45 millin. With the substantial change in the business mix fllwing the expected cnsummatin f CAS in FY18, ging frward the cmpany will be assessing the success f the Superpartners integratin against the value f these targeted efficiencies. Fllwing the recent PEXA and Adviser Netwrk transactins, net debt is frecast t be apprximately A$300 millin prir t the impact f the Acquisitin. The FY2017 final dividend is expected t bring the ttal dividend fr the year t the upper end f the 40 60% f NPATA guidance. Dividend franking is expected t recmmence thrugh the curse f FY2018. Further details regarding Link Grup's trading and business update are lcated n page 38 f the Acquisitin f Capita Asset Services and equity raising Investr Presentatin als ldged with ASX n 26 June Entitlement Offer Link Grup intends t raise apprximately A$883 millin in new equity via a fully underwritten 4 fr 11 pr rata accelerated renunceable entitlement ffer with retail rights trading at an ffer price f A$6.75 per New Share (as defined belw). Under the Entitlement Offer, eligible sharehlders are invited t subscribe fr 4 new Link Grup shares ( New Shares ) fr every 11 existing Link Grup shares held as at 7.00pm Thursday, 29 June 2017 ( Recrd Date ). All New Shares in the Entitlement Offer will be issued at a price f A$6.75 per New Share, which represents a discunt f: 13.8% t the last clse f A$7.83 n Friday, 23 June 2017; and 10.5% t the theretical ex-rights price ( TERP ) 10. The Entitlement Offer will cnsist f: an accelerated institutinal cmpnent t be cnducted frm Mnday, 26 June 2017 t Tuesday, 27 June 2017 ( Institutinal Entitlement Offer ), and a retail cmpnent which will pen n Wednesday, 5 July 2017 and clse at 5.00pm (AEST) n Mnday, 17 July 2017 ( Retail Entitlement Offer ). Each New Share will rank equally with existing shares n issue, including eligibility fr the FY2017 final dividend. Link Grup will seek qutatin f the New Shares n ASX. As the Equity Raising is expected t cmplete in July 2017, Link Grup s shares utstanding will initially increase withut a crrespnding increase in earnings until the Acquisitin is cmpleted (expected t be by December 2017). Ntwithstanding that it will result in a temprary increase in Link Grup s dividend payut rati, Link Grup intends t maintain a dividend payut rati tward the upper end f its 40 60% NPATA guidance, which will apply equally t existing shares and New Shares issued pursuant t the Entitlement Offer, subject t the Cmpany s financial psitin and prevailing market cnditins. Institutinal Entitlement Offer Eligible institutinal sharehlders will be invited t participate in the Institutinal Entitlement Offer which pens n Mnday, 26 June 2017 and will clse n Tuesday, 27 June TERP is the theretical price at which Link Grup shares shuld trade after the ex-date fr the Entitlement Offer based n the last traded price and issuance f shares at the ffer price in the Entitlement Offer. TERP is a theretical calculatin nly and the actual price at which Link Grup shares trade immediately fllwing the exdate fr the Entitlement Offer may be different frm TERP. 4

5 Eligible institutinal sharehlders can chse t take up their Entitlement in whle, in part r nt at all. Institutinal entitlements ( Institutinal Entitlements ) cannt be traded r sld n the ASX. As the Entitlement Offer is renunceable, the New Shares that wuld have been issued in respect f Institutinal Entitlements nt taken up by eligible institutinal sharehlders by the clse f the Institutinal Entitlement Offer and the Institutinal Entitlements f ineligible institutinal sharehlders (had such eligible institutinal sharehlders taken up their Institutinal Entitlements and had such ineligible institutinal sharehlders been eligible and taken up their Institutinal Entitlements) ( Institutinal Shrtfall Shares ), tgether with the right t subscribe fr thse Institutinal Shrtfall Shares, will be ffered thrugh an institutinal shrtfall bkbuild expected t be cnducted n Wednesday, 28 June 2017 ( Institutinal Shrtfall Bkbuild ). Any premium ver the A$6.75 per New Share ffer price under the Entitlement Offer which is achieved frm the ffer f the Institutinal Shrtfall Shares (and the right t subscribe fr thse Institutinal Shrtfall Shares) thrugh the Institutinal Shrtfall Bkbuild will be remitted prprtinally t thse institutinal sharehlders There is n guarantee that there will be any such premium remitted t thse institutinal sharehlders as a result f the ffer f the Institutinal Shrtfall Shares (and the right t subscribe fr thse Institutinal Shrtfall Shares) thrugh the Institutinal Shrtfall Bkbuild. Link Grup shares have been placed in a trading halt while the Institutinal Entitlement Offer and Institutinal Shrtfall Bkbuild are undertaken. Retail Entitlement Offer Eligible retail sharehlders with a registered address in Australia r New Zealand n the Recrd Date will be invited t participate in the Retail Entitlement Offer. The Retail Entitlement Offer will pen n Wednesday, 5 July 2017 and clse at 5.00pm (AEST) n Mnday, 17 July Eligible retail sharehlders will have the pprtunity t participate at the same ffer price and ffer rati as the Institutinal Entitlement Offer. Eligible retail sharehlders will be alltted Entitlements ( Retail Entitlements ) which can be traded n the ASX. If eligible retail sharehlders d nt wish t take up all r part f their Retail Entitlements they can seek t sell all r part f their Retail Entitlements n the ASX r realise value fr thse Retail Entitlements by transferring them directly t anther persn ahead f the retail shrtfall bkbuild (referred t belw). Retail Entitlements can be traded n the ASX by certain eligible sharehlders frm Thursday, 29 June 2017 t Mnday, 10 July The New Shares that wuld have been issued in respect f Retail Entitlements nt taken up by eligible retail sharehlders (r purchasers f retail entitlements) by the clse f the Retail Entitlement Offer and the Entitlements f ineligible retail sharehlders (had such eligible retail sharehlders (r purchasers) taken up their Entitlements, and had such ineligible retail sharehlders been eligible and taken up their Entitlements) ( Retail Shrtfall Shares ) tgether with the right t subscribe fr the Retail Shrtfall Shares, will be ffered thrugh a retail shrtfall bkbuild t be cnducted n Thursday, 20 July 2017 ( Retail Shrtfall Bkbuild ). Any premium ver the A$6.75 per New Share ffer price under the Entitlement Offer which is achieved frm the ffer f the Retail Shrtfall Shares (and the right t subscribe fr thse Retail Shrtfall Shares) thrugh the Retail Shrtfall Bkbuild will be remitted prprtinally t thse retail sharehlders There is n guarantee that there will be any such premium remitted t thse retail sharehlders as a result f the ffer f the Retail Shrtfall Shares (and the right t subscribe fr thse Retail Shrtfall Shares) thrugh the Retail Shrtfall Bkbuild. Entitlements may nly be exercised by eligible retail sharehlders r eligible assignees, being persns wh have a registered address in Australia r New Zealand, and certain categries f institutinal investrs in ther jurisdictins. 5

6 Key dates Event Date Trading halt Mnday, 26 June Annuncement f Acquisitin and Institutinal Entitlement Offer pens Institutinal Entitlement Offer clses Tuesday, 27 June Institutinal Shrtfall Bkbuild Wednesday, 28 June Trading halt lifted shares recmmence trading n the ASX n an Thursday, 29 June entitlement basis Retail Entitlements cmmence trading n the ASX n a deferred Thursday, 29 June settlement basis Recrd Date fr determining entitlement t subscribe fr New Shares Thursday, 29 June Retail Entitlement Offer pens Wednesday, 5 July Retail Offer Bklet despatched and Retail Entitlements alltted Wednesday, 5 July Retail Entitlements cmmence trading n the ASX n a nrmal settlement Thursday, 6 July basis Settlement f Institutinal Entitlement Offer Thursday, 6 July Alltment and nrmal trading f New Shares under the Friday, 7 July Institutinal Entitlement Offer Retail Entitlement trading n the ASX ends Mnday, 10 July Retail Entitlement Offer clses Mnday, 17 July Retail Shrtfall Bkbuild Thursday, 20 July Settlement f Retail Entitlement Offer Tuesday, 25 July Alltment f New Shares under the Retail Entitlement Offer Wednesday, 26 July Nrmal trading f New Shares issued under the Retail Entitlement Offer Thursday, 27 July Despatch f hlding statement in respect f New Shares issued under the Friday, 28 July Retail Entitlement Offer Nte: The abve timetable is indicative nly and subject t change withut ntice. All dates are Australian Eastern Standard Time. Further infrmatin Further details f the Acquisitin and the Equity Raising are set ut in the Investr Presentatin als prvided t the ASX tday. The Investr Presentatin cntains imprtant infrmatin including key risks and freign selling restrictins with respect t the Equity Raising. J.P. Mrgan Australia Limited is acting as financial adviser t Link Grup and Sle Glbal C- Ordinatr, jint lead manager, jint bkrunner and jint underwriter t the Equity Raising. Citigrup Glbal Markets Australia Pty Limited is acting as jint lead manager, jint bkrunner and jint underwriter. DLA Piper and Allen & Overy are serving as legal advisers t Link Grup. If yu have any questins in relatin t the Equity Raising, please cntact the Link Grup Offer Infrmatin Line n (within Australia) r (utside f Australia) between 8:30am and 5:30pm (AEST) Mnday t Friday. Fr ther questins, yu shuld cnsult yur brker, slicitr, accuntant, financial adviser, r ther prfessinal adviser. 6

7 NOT FOR RELEASE OR DISTRIBUTION IN THE UNITED STATES This annuncement has been prepared fr publicatin in Australia and may nt be released r distributed in the United States. This annuncement des nt cnstitute an ffer, invitatin r recmmendatin t subscribe fr r purchase any security r financial prduct and neither this annuncement nr anything attached t this annuncement shall frm the basis f any cntract r cmmitment. In particular, this annuncement des nt cnstitute an ffer t sell, r the slicitatin f an ffer t buy, securities in the United States r any ther jurisdictin in which such an ffer wuld be illegal. Any securities described in this annuncement have nt been, and will nt be, registered under the U.S. Securities Act f 1933 (the U.S. Securities Act ), r the securities laws f any state r jurisdictin f the United States. Accrdingly, the securities may nt be ffered r sld directly r indirectly in the United States unless they have been registered under the U.S. Securities Act (which Link Grup has n bligatin t d r prcure) r are ffered and sld in a transactin exempt frm, r nt subject t, the registratin f the U.S. Securities Act and any ther applicable United States state securities laws. Frward lking statements This annuncement cntains frward lking statements, including statements f current intentin, statements f pinin and predictins as t pssible future events. Frward lking statements shuld, r can generally, be identified by the use f frward lking wrds such as believe, expect, estimate, will, may, target and ther similar expressins within the meaning f securities laws f applicable jurisdictins, and include but are nt limited t the expected utcme f the Acquisitin. Indicatins f, and guidance r utlk n, future earnings r financial psitin r perfrmance are als frward lking statements. Such statements are nt statements f fact and there can be n certainty f utcme in relatin t the matters t which the statements relate. These frward lking statements invlve knwn and unknwn risks, uncertainties, assumptins and ther imprtant factrs that culd cause the actual utcmes t be materially different frm the events r results expressed r implied by such statements. Thse risks, uncertainties, assumptins and ther imprtant factrs are nt all within the cntrl f Link Grup and cannt be predicted by Link Grup and include changes in circumstances r events that may cause bjectives t change as well as risks, circumstances and events specific t the industry, cuntries and markets in which Link Grup perates. They als include general ecnmic cnditins, exchange rates, interest rates, cmpetitive pressures, selling price, market demand and cnditins in the financial markets which may cause bjectives t change r may cause utcmes nt t be realised. Nne f Link Grup r any f its subsidiaries, advisrs r affiliates (r any f their respective fficers, emplyees r agents) makes any representatin, assurance r guarantee as t the accuracy r likelihd f fulfilment f any frward lking statement r any utcmes expressed r implied in any frward lking statements. Statements abut past perfrmance are nt necessarily indicative f future perfrmance. ENDS Investr Relatins Cntact Craig Curry, Link Grup Media Cntact Ben Wilsn, GRACsway