Speedcast International Ltd (ASX:SDA) is pleased to provide the company's Investor Presentation regarding Harris CapRock acquisition and equity raising. Transaction highlights
Summary
Key highlights
- Highly strategic acquisition at an attractive valuation:
-- Creation of a global and diversified industry leader
-- Expansion of the maritime business with global leadership in maritime broadband services
-- A global leader in the energy sector, acquired at a low point in the market cycle and well positioned for future growth
-- Significant operational and economic benefits of scale
- Significant annual cost synergies:
-- Estimated USD 24M delivered progressively over the 24 month period post acquisition, with USD 15M expected to be achieved within the first year post acquisition
- Significant EPS accretion - on a pro-forma full year basis, the acquisition is expected to be:
-- Double digit EPS accretive in 2017 before synergies; and
-- In excess of 40% EPS accretive pro-forma for USD 15M of cost-synergies anticipated to be achieved in year 1
Agreement to acquire Harris CapRock, a subsidiary of Harris Corporation, for USD 425M
Key terms and financial impact
- Acquisition will be funded via a fully-underwritten equity capital raising and a fully-underwritten syndicated debt facility:
-- ~AUD 295M equity raising via a 2-for-3 Accelerated Renounceable Entitlement Offer ("Entitlement Offer")
-- Balance of proceeds under a refinanced USD 385M (~AUD 507M) fully-underwritten syndicated debt facility
--- USD 365M (~AUD 480M) 3-year term loan, fully drawn at completion
--- USD 20M (~AUD 26M) undrawn revolving multi-currency facility
- Anticipated pro-forma LTM net debt / EBITDA of 3.0x for Dec-16(1) (pro-forma for Harris CapRock contribution to EBITDA and anticipated year-1 cost synergies of USD 15M)
-- Strong deleveraging expected to result in actual reported net debt / EBITDA ratio as at Jun-17 of c.3.0x and as at Dec-17 of less than 2.5x, in each case pro-forma for the impact of historical acquisitions and reflective of anticipated realisation of actual Harris CapRock synergies
- The transaction is expected to complete in Q1 2017 subject to customary closing conditions, including anti-trust and regulatory approval
Strategic benefits of the acquisition
1 Creation of a global and diversified industry leader
- Expands global footprint and infrastructure with strong geographic complementarity - gives SpeedCast an immediate geographic presence that it currently lacks in North America, Brazil, Norway and parts of Africa
- Acquisition enhances diversification across end-markets and geographies
2 Expansion of the maritime business with global leadership in maritime broadband services
- Strengthens maritime offering, which is additive to the recent WINS acquisition and a key growth segment
- Leading provider globally to the fast growing and bandwidth hungry cruise segment
- Attractive scale of the combined group enables greater competitiveness
-- SpeedCast's maritime business will more than double in terms of revenue
3 A global leader in the energy sector, well positioned for future growth
- Market leader in Energy, with complementary geographical overlap with SpeedCast
- Strong service and technology offering, creating upsell opportunities to SpeedCast customers
- Acquisition at an attractive stage in the cycle
4 Significant operational and economic benefits of scale
- One of the largest commercial buyers of satellite capacity globally
- Increased operational leverage
- Significant R&D capabilities
- Significant synergies expected, resulting in a high margin combined business
Conclusion and outlook
Group
- SpeedCast's new global footprint, scale, global network and product offering will enable new revenue opportunities and revenue synergies
- Competition for satellite communication services is vibrant and customers have many choices; evolving technologies means increased competition from new and varied sources
- The combination of Harris CapRock capabilities and SpeedCast's customer focused culture will create a strong global and diversified industry leader
- Expands SpeedCast's channels and product offering to a more global customer base with improved quality and choice, increased R&D, and innovative new services
Maritime
- The combination of Harris CapRock and WINS cruise businesses creates a strong global leader in that fast growing segment
- This acquisition of a leading global energy satellite communications provider will strengthen our maritime offering, which is a key growth segment
- SpeedCast reaches a significant scale that will allow it to better compete in the market
- We expect our maritime business to continue to be a key growth engine for the Group in 2017
Energy
- The energy sector has stabilised and is expected to show improvement through 2017, with the Group very well positioned to benefit from this improvement
- SpeedCast will benefit from Harris CapRock capabilities in competing against regional players in the Asia-Pacific region which is expected to support growth in market share
EEM
- EEM will also benefit from Harris CapRock presence in countries that are new for SpeedCast
- The scale of the Group will enhance competitiveness against smaller players
- Government business in developed markets is likely to experience growth momentum in 2017 further supported by SpeedCast having announced several key partnerships
- Cellular backhaul should be a strong growth engine on the back of a good pipeline
- SpeedCast will further develop its media business
To view the presentation, please visit:
http://abnnewswire.net/lnk/FH888442
Media Contact Information: Clara So SpeedCast International Limited T: +852-3919-6800 E: clara.so@speedcast.com Investor Contact Information: Ian Baldwin Chief Financial Officer SpeedCast International Limited T: +61-432-680-746 E: ian.baldwin@speedcast.com
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