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DFDS acquires U.N. Ro-Ro for USD950m; expands into Mediterranean.

NORDIC BUSINESS REPORT-April 13, 2018-DFDS acquires U.N. Ro-Ro for USD950m; expands into Mediterranean


Shipping and logistics company DFDS A/S (CPH:DFDS) announced on Thursday the entering into an agreement to acquire 98.8% of U.N. Ro-Ro, a large Turkish operator of freight shipping routes connecting Europe and Turkey, from Turkish private equity firms Actera Group and Esas Holdings.

Under the deal, DFDS will acquire U.N. Ro-Ro for EUR950m on a debt free basis, which will be mainly funded through committed debt financing.

This acquisition is expected to be earnings accretive already in 2018. U.N. Ro-Ro's ROIC post acquisition exceeds DFDS' cost of capital.

U.N. Ro-Ro operates five freight shipping routes in the Mediterranean between Turkey and EU, of which four routes connect to Italy and one to France. These routes carried 202,000 freight units in 2017, corresponding to a 34% share of the total market including land transport. By the end of 2017, U.N. Ro-Ro deployed 12 freight ferries with an average age of 11 years.

Also, U.N. Ro-Ro operates two port terminals and provides intermodal solutions. For 2018, revenues of EUR240m and EBITDA of EUR 97m are expected.

According to DFDS, with this acquisition it is expanding its route network to include the fast growing transport market between Turkey and EU. U.N. Ro-Ro's business model of carrying un-accompanied freight units, mainly trailers, on ro-ro ships between Turkey and EU is identical to DFDS' North Sea business model which will allow it to leverage its strong track record in this market. In addition, the integration of U.N. Ro-Ro into DFDS' business model and systems is expected to offer a number of synergies and development opportunities.

This transaction is subject to approval by the Turkish, Austrian and German competition authorities, as well as Italian authorities in relation to the transfer of the Trieste terminal as a strategic asset. Closing of this transaction is expected to take place in June 2018.

Deutsche Bank acted as financial adviser to DFDS on the transaction.

Further, DFDS' board of directors has decided to terminate the current share buyback programme and suspend the planned dividend of DKK 7.00 in August 2017 to maintain financial flexibility.

DFDS' board of directors has recommended a share issue of approximately 5% of the current share capital, or DKK1.0bn, as a part of the financing structure that otherwise consists of committed term loan financing, considering the planned fleet renewal, in both DFDS and U.N. Ro-Ro and potential investment opportunities during the next 12 to 18 months.

An extraordinary general meeting will be held prior to closing of the transaction and the Lauritzen Foundation that holds 42% of DFDS' share capital has confirmed its intention to participate pro rata in a share issue, the company added.

DFDS' board expects to review the capital structure and hence capital distribution for 2019 in connection with the release of the Q4 and year-end report in February 2019. The ratio between DFDS' NIBD and EBITDA is expected to increase to around 2.5 upon completion of the acquisition, including the share issue, in line with DFDS' targeted leverage ratio of between 2.0 and 3.0.

Furthermore, the company updated its outlook and now expects revenues in 2018 to increase around 8%, as compared with the prior outlook of a 2% increase. The outlook range for EBITDA before special items is now expected to be DKK3,000m to DKK3,200m, as compared with the prior DKK2,650m to DKK2,850m. Investments are expected to amount to around DKK5bn,as compared with the prior DKK1.1bn.


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Publication:Nordic Business Report
Date:Apr 13, 2018
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