Global Ports Investments PLC (“Global Ports” or the “Company”, together with its subsidiaries and joint ventures, the “Group”; LSE ticker: GLPR) announced that it has entered into binding arrangements to acquire 100% of the share capital of NCC Group Limited (together with its subsidiaries the “NCC Group”), for a cash consideration of USD 291.0 million and new shares representing approximately 18% of the enlarged share capital of Global Ports to be issued to Ilibrinio Establishment Limited and Polozio Enterprises Limited (the “Sellers”) in equal proportions (the “Transaction”), the Company said Monday in a media release.
The acquisition of NCC Group, the second largest container terminals operator in Russia , strengthens Global Ports’ leading position in the growing Russian container market and provides potential for greater operational efficiency through improved terminal network management and a reduction in overhead costs as well as the centralisation of support functions. In addition, the enlarged group will have approximately 1.12 million TEU of available capacity enabling it to accommodate throughput growth while reducing the Group’s CAPEX outlays for the next few years. The combination of NCC Group and Global Ports will enable shipping line customers to benefit from network savings through improved call rationalization, improved berth utilisation and enhanced productivity.
NCC Group’s container terminal operations are located on the Baltic Sea, the principal gateway for Russian containerized cargo. Its key assets include 100% ownership of First Container Terminal (“FCT”) in St. Petersburg, 80% ownership of the recently launched Ust-Luga Container Terminal (“ULCT”) in the port of Ust-Luga and 100% ownership of Logistika-Terminal (“LT”), an inland container terminal located close to St. Petersburg which serves primarily as an inland container yard for FCT. As at the end of 2012 NCC Group’s marine terminals’ annual container handling capacity was approximately 1.69 million TEUs which can be significantly expanded in response to market demand. NCC Group’s inland container facility has a capacity of 200,000 TEUs. In 2012 NCC Group generated revenues of USD 253 million and Adjusted EBITDA of USD 164 million .
The Transaction also includes a call option for Global Ports to acquire 50% of the Illichevsk Container Terminal (“CTI”) for the strike price of USD 60 million from NCC Group's current shareholders. The term of the call option is three years following the closing of the Transaction. CTI, which is located on the Black Sea, has a market share of the Ukrainian container handling market of approximately 30%.
As part of the Transaction, at closing, the Sellers will transfer loans provided to their related parties by NCC Group to Global Ports in the amount of USD 568.2 million and the interest accrued for the period from 31 December 2012 until the closing. Further, USD 155 million of loans outstanding from the related parties of the Sellers as of 31 December 2012 together with USD 17 million of further loans advanced during 2013 and all accrued interest thereto are to be set-off against non-cash dividends to be declared by NCC Group.
The Sellers are expected to receive two seats (one each) on the Board of Directors without any special voting or veto rights. The Sellers will be subject to certain non-compete restrictions for as long as they have rights to board representation and will cease to be entitled to board representation if they sell any of the interests in the Company they received as a consideration in the Transaction. The non-compete restrictions will remain in effect for a two year period after the Sellers cease to have board representation. All the Global Ports' shares received by the Sellers as a consideration in the Transaction (representing approximately 18% of Global Ports’ enlarged share capital) will be locked up for 6 months following completion. This lock up will extend for an additional 18 months with respect to a portion of such of shares (representing approximately 10% of Global Ports’ enlarged share capital). Transportation Investments Holding Limited (“TIHL”) and APM Terminals B.V. (“APM Terminals”) have pre-emptive rights over any Sellers’ disposals of these shares.
The Transaction has been approved by the Board of Directors of Global Ports. In connection with such approval, Deutsche Bank provided an opinion addressed to the Board of Directors of Global Ports as to whether the consideration to be paid by Global Ports pursuant to the Transaction is fair, from a financial point of view, to Global Ports. The increase in the authorised share capital of Global Ports is subject to approval at an Extraordinary General Meeting to be held on 27 September 2013.
The cash element of the Transaction will be financed through bank financing. The transaction is expected to complete within three to six months, subject to customary conditions precedent, including regulatory approvals and the issuance of a prospectus for the enlarged Global Ports Group approved by the UK Listing Authority.
The Company is today also releasing the consolidated financial statements of NCC Group for the years ended 31 December 2012, 2011 and 2010 in a separate announcement.
Nikita Mishin, Chairman of the Board of Global Ports, commented: “By acquiring NCC Group and bringing the two companies together, Global Ports confirms its market leadership and creates a company with an enviable position in the high-growth Russian container market. NCC Group is not only considered to be one of the best container terminal operators in Russia and Eastern Europe, it is also highly profitable with a track record of more than 10 years of excellent performance.
Global Ports’ development over the past five years has made it possible for us to seize this unique opportunity. The decision to list the company in London in 2011, the improved access to capital alongside its cash-generative operations and the introduction of APM Terminals, a major international ports operator, into the shareholder base have all played key roles. We believe we have strengths and competencies that few can replicate and therefore have an unparalleled ability to capitalise on the opportunities that we see ahead to create significant value for the Group and all of its stakeholders.”
An investor Andrei Shevchenko said: "We have been present for more than 15 years in the rapidly developing container market of Russia and are pleased that we remain in container business as long-term shareholders of Global Ports. The Russian container market promises a great future, and we are confident that further growth in containerization in Russia and the significant synergies from the merger will help create a new environment for Global Ports business growth. That’s why we prefer to acquire more than 50% of the NCC price through shares of Global Port - the company that is able to effectively convert all of the existing market opportunities into shareholders’ gain".