TheChek News Flow

--> FYI Last year on the same period (30/03 --> 30/07 2014) 62,4mil shares traded

Bridgepoint, the European buyout firm and owner of Pret A Manger in the UK, has raised €4bn for its latest fund in another sign of the wave of cash rushing into private equity.

The fundraising, Bridgepoint’s first since a €4.8bn vehicle in 2008, has taken less than a year to reach a “hard cap” beyond its original €3.5bn target.

Institutional investors have been putting more money into private equity as they look to reinvest record levels of cash being returned by their existing fund investments.

Low interest rates and high valuations in public markets have made it easier for firms to sell or list companies, and to mark up the value of holdings.

Bridgepoint made more than two and a half times its original investment when it sold Swiss sports rights company Infront to Dalian Wanda of China for more than €1bn this year.

Low interest rates have also made pension funds, sovereign wealth funds and endowments wary of keeping cash on their books for too long.

Bridgepoint said its new fund “has benefited from significant recommitment of existing investors” who increased their contributions by more than 25 per cent on average.

The new fund, which will continue Bridgepoint’s strategy of investing in mid-market European companies valued at more than €200m, has already made its first investment by buying the ASK and Zizzi Italian restaurants in the UK.

Bridgepoint is also investing to expand Pret abroad, including in the US and China. It acquired the sandwich chain in 2008.

Traditional buyout funds are pools of money invested by private equity firms on behalf of “limited partners”, who lock up capital for years in the hope of high double-digit returns.

Firms are looking to raise more than €80bn for European buyout funds at present, according to Bloomberg data. More than half of the fundraising was announced in the past year, with €28bn of it in the past six months.

The French firm PAI Partners recently exceeded its target when raising €3.3bn for its latest fund, in a comeback from an internal management “coup” which clouded its last fundraising in 2008.

Despite the cash flowing into private equity, relatively few deals are being done amid fears of high prices driving down future returns.

As of the middle of March there have only been €20bn in private equity takeovers so far this year, according to Palico, a data provider. That is the lowest level since 2002 — when the industry was a third of its current size.

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*MARKS & SPENCER RAISED TO TOP PICK AT RBC CAPITAL

*MARKS & SPENCER RAISED TO TOP PICK AT RBC CAPITAL

U.S.-based Elliot Management holds a 7.5% stake in the Sweden-based surveillance video camera company Axis AB, the target company of Canon Inc. [TYO: 7751] planning to acquire the full control, according to a newswire report.

Canon, the Japan-based camera maker, plans to acquire all the outstanding shares of Axis, and Elliot Management's shareholding in the company could be a hurdle to complete the acquisition, Reuters reported on 28 March.

Elliot Management's shareholding was disclosed on 26 March in a filing to Swedish Financial Supervisory Authority, according to the Reuters report.

On 10 February, Canon announced it will launch a tender offer at SEK 340 USD 40) per share to acquire 100% of the shares in Axis. The three leading shareholders of Axis, including founding members, holders of an aggregate 39.5% stake, have agreed to support the tender offer.

Dufry announces that it has entered into a binding agreement with Edizione S.r.l. ("Edizione") to acquire its 50.1% stake in World Duty Free S.p.A ("WDF"). Following completion of the transaction with Edizione, Dufry will launch a mandatory tender offer for the remaining 49.9% outstanding WDF shares. The combination with WDF will enhance Dufry's global position in the travel retail industry. Dufry expects to generate synergies of up to EUR 100m (1). On a pro forma combined basis, once fully integrated and including planned synergies, Dufry would have generated a turnover of CHF 7.8bn in 2014 and an EBITDA of more than CHF 1bn (2). The transaction is expected to be value accretive to Dufry shareholders, resulting in a double-digit cash EPS accretion from the second year post-acquisition.

Strategic rationale

The combination with WDF will further enhance Dufry's global position in the travel retail industry and the combined entity will be present in 67 countries and reach a market share of approx. 24% in airport retail globally

The transaction will enhance Dufry's portfolio with attractive long-term concessions across several major European airports, including the recently extended London Heathrow airport with a large number of emerging market consumers and the Spanish airports which ideally complement Dufry’s strong Mediterranean footprint; in addition, the transaction will also strengthen Dufry's operations in North and Latin America, Asia and the Middle East

Dufry believes that the transaction will create a series of new growth opportunities thanks to the broader breadth of the combined platform

Financial highlights

Dufry agreed to acquire Edizione's 50.1% stake in WDF for EUR 10.25 per share in cash, valuing the entire fully diluted share capital of WDF at EUR 2.6bn (CHF 2.7bn) and implying an enterprise value of EUR 3.6bn (CHF 3.8bn); following completion of Edizione's stake in WDF, Dufry will launch a mandatory tender offer for the remaining 49.9% of WDF’s outstanding shares for EUR 10.25 per share in cash

Dufry expects that the transaction will result in cost reductions and gross profit improvements with an annual run-rate of approximately EUR 100m (1) which are expected to be fully realised by full-year 2017

The transaction is expected to be value accretive to Dufry shareholders, resulting in a double-digit cash EPS accretion from the second year post-acquisition

The financing of the transaction has been secured via a fully committed debt bridge facility of EUR 3.6bn (CHF 3.8bn), of which at least EUR 2.1bn (CHF 2.2bn) will be refinanced through equity and up to EUR 1.5bn (CHF 1.6bn) through debt instruments

Dufry will hold a General Meeting (GM) to approve the equity financing, in form of an at market rights issue, targeting at least CHF 2.2bn from an ordinary capital increase

The rights issue is fully secured by a combination of the underwriting by a bank consortium as well as commitments by the investors GIC (Singapore's Sovereign Wealth Fund), the Qatar Investment Authority ("QIA") and Temasek, which have all committed to invest up to CHF 450m each in equity in the combined entity

By way of the capital increase, Dufry expects to maintain its solid financial profile with a net debt / LTM EBITDA not exceeding 4.3x (pre-synergies)

Transaction overview

Dufry announces that it has entered into a binding agreement with Edizione to acquire its 50.1% stake in WDF for EUR 10.25 per WDF share in cash, equivalent to a total consideration of EUR 1.307bn. Following completion of the transaction with Edizione, Dufry will launch a mandatory tender offer for the remaining 49.9% outstanding WDF shares at a price of EUR 10.25 per WDF share. The consideration to Edizione and in the mandatory tender offer will be fully payable in cash. The transaction with Edizione remains subject to approval of the ordinary capital increase by Dufry's shareholders as well as regulatory approvals.

Dufry intends to initially finance the acquisition of WDF and the refinancing of WDF's debt through a fully committed debt bridge facility of EUR 3.6bn (CHF 3.8bn), provided by BBVA, Goldman Sachs, ING, Santander, UBS and UniCredit, which is expected to be refinanced by the rights issue of at least EUR 2.1bn (CHF 2.2bn) and long-term debt instruments for a total amount of up to EUR 1.5bn (CHF 1.6bn).

The equity financing is expected to be implemented in the form of a rights issue of at least CHF 2.2bn from an ordinary capital increase, which is subject to approval by the GM. The rights issue has been fully secured by a combination of a firm underwriting by a banking consortium as well as commitments by the investors GIC, QIA and Temasek. The definite terms of the rights issue are expected to be determined and communicated immediately prior to the GM, which will take place no later than 15 May 2015.

Dufry has secured equity investment commitments from GIC, QIA and Temasek for up to CHF 450m each in the form of a commitment to purchase shares for which existing shareholders have not exercised their pre-emptive rights in the rights issue.

Shareholders representing approximately 30% of Dufry's voting share capital have irrevocably committed to vote in favour of the ordinary capital increase at the GM.

Following completion of the share purchase from Edizione which is expected to occur in the 3rd quarter 2015, Dufry will launch a mandatory tender offer for all remaining shares of WDF in accordance with Italian law at the same price per WDF share of EUR 10.25 as will be paid by Dufry to Edizione, in accordance with the terms of the share purchase agreement. The consideration of the mandatory tender offer will be fully payable in cash. Dufry will, in due course following completion of the share purchase agreement, publish an offer prospectus with further details related to the mandatory tender offer.

Excellent strategic fit with significant value creation potential

Enhancing global industry position in travel retail: The acquisition of WDF will enhance Dufry's global position in the global duty-free and travel retail market. On a pro forma combined basis and based on 2014 turnover, Dufry including WDF would have a pro forma market share of c.24%. Pro forma combined 2014 turnover of the combined entity would have been CHF 7.8bn with a pro forma combined 2014 EBITDA of more than CHF 1bn (1).

Enhancing key strategic areas and emerging market exposure: The combined entity will comprise a geographically diversified concession portfolio with operations in 67 countries and close to 400 locations, providing a balanced exposure to developed and emerging markets and spanning across all five continents. WDF’s operations at London Heathrow have one of the most diverse customer mix, and combining Dufry’s and WDF’s expertise with different passenger nationalities will provide for an unrivalled proposition in the travel retail industry. The WDF businesses in Spain and Italy are highly complementary to Dufry's existing footprint in the Mediterranean region, one of Dufry’s key strategic focus areas. The acquisition of WDF will also reinforce Dufry's position in the Americas, another key strategic area, by adding operations in the US, Canada, Mexico, Brazil, Peru and Chile. Last but not least, the transaction will substantially enhance Dufry's third key growth area in Asia and the Middle East with attractive locations that will support the future growth in these regions.

Attractive potential synergies at Group level with a run-rate of approx. EUR 100m p.a.(2): Dufry intends to integrate WDF into its organisation and expects to generate annual cost synergies with a run-rate of approx. EUR 100m (1) (pre-tax), comprising both cost reductions and gross profit improvements. First, Dufry expects to realise cost reductions with a run-rate of approximately EUR 50-60m per annum (pre-tax) by integrating the global operations of the enlarged company, including combining and streamlining regional and global headquarters, accelerating the functional optimization plans in the UK and Spain and streamlining the new operating model. Secondly, Dufry expects to realise gross profit improvements with a run-rate of approximately EUR 40-50m through improved purchasing power, optimised pricing and promotion strategies. Dufry expects to fully realize these synergies by full-year 2017 with associated, non-recurring restructuring costs of approx. EUR 50m in total during the first two years post completion of the transaction.

Value enhancing transaction for shareholders: The transaction is expected to create significant value to shareholders as a result of the substantial synergies. Dufry expects that this will translate into a double digit cash EPS accretion from the second year post acquisition.

Creating additional avenues for growth: Dufry believes the acquisition of WDF also presents additional growth opportunities and revenue synergies. The combined entity is expected to be better positioned to secure new contracts and renew existing agreements. Together, Dufry and WDF expect to benefit from leveraging their mutual core competencies such as scale of procurement operations, assortment expertise and consumer insights and build on long-term relationships with airport operators. The combined group’s airport retail capabilities and logistics network is expected to offer a differentiated proposition when competing for concessions and provide a solid foothold to successfully realise renewals and win new contracts in key strategic areas.

Starting a new era in travel retail

Julian Diaz, CEO of Dufry, commented: "The acquisition of WDF is a truly unique and highly transformational transaction for Dufry and is equally a milestone for the travel retail industry overall. The transaction further enhances our global position and with a market share of 24% in airport retail, we plan to drive our business to new levels in term of capturing global passenger flows, execution capabilities and efficiencies. WDF's business is highly complementary to our existing footprint and will reinforce our leading position in the Mediterranean, the Americas as well as the Middle East and Asia. At the same time, having access to one of the most diverse passenger flows in Heathrow, combining attractive emerging and developed market customer profiles, will allow us to leverage our existing expertise on all the customer groups and to further develop our global offering.

As such, the transaction will transform Dufry into an even more distinct global business with a balanced exposure to developed and emerging markets. This acquisition is a continuation of the global geographic diversification strategy which we have communicated and executed for many years, lastly with the acquisition of Nuance last year. We are preparing a detailed integration plan, focused on implementing the operational initiatives previously communicated by WDF and creating additional value through the integration of WDF and Dufry’s existing platforms. We have a successful integration track record and will work closely with the local teams. Dufry has great respect for the achievements of WDF and we look forward to working with our more than 9,500 new colleagues in 20 countries and across more than 100 locations. Ultimately what we want to achieve is to develop a better company for our employees, customers, suppliers and landlords and a more valuable asset for our shareholders.”

Financial Advisors

Credit Suisse, Goldman Sachs and UBS acted as financial advisors to Dufry on this transaction.

1 On the basis of FY2014 financials, including cost savings of EUR 26m announced by WDF in January 2015

2 Dufry 2014 pro forma for acquisitions of Nuance and WDF, including expected synergies

Macro :

- Greece’s Talks With Creditors Happening in a Positive Climate

- U.K. Govt in Talks to Privatize Network Rail: Sunday Times

- Roubini Sees Room for Compromise to Avoid ‘Grexit’: Investir

- Most Germans Say Country’s Dominance in EU Has Grown: Spiegel

Keep an eye on :

- DBK GY : Deutsche Bank Considers Legally Combining European Units: FAS

- GIL GY : DMG Mori Seiki expects to gain over 50% stake in DMG Mori Seiki AG 

- GKP LN : Gulf Keystone Investors Want Change of Chairman, Sky Reports

- HSBA LN : HSBC Turkey Seeks 20% Loan Rise Amid Bid to Avoid Sale: Hurriyet

- MDLZ US : Mondelez Mulls Sale of $3b Philadelphia Brand in Europe: Times

- UG FP : Peugeot May Reach Auto Unit Operating Margin Goal Before 2018

- PHNX LN : Fosun International Group in talks to buy Phoenix Holdings majority stake, considers buying five insurance firms overseas 

- PC IM : ChemChina Chairman Doesn’t Rule Out Higher Pirelli Offer: WSJ

- PC IM : ChemChina Chairman Says Pirelli ‘Needs an Asian Partner’: FT

- PC IM : ChemChina Hopes to Re-List Pirelli After Takeover: Reuters Link

- QPP LN : Slater & Gordon Close to GBP700m Quindell Takeover: FT

- RSA LN : Cevian Capital Lifts Stake in RSA to More Than 13%: Sunday Times

- STAN LN : Standard Chartered management changes could open door to merger with ANZ

- TEVA IT : Teva close to major acquisition - Globes

- UBSN VX : UBS Says It Will Fight EUR40m French Tax Investigation

- VED LN : Vedanta’s Albanese Sees ‘Huge’ Restructuring Task at Zambia Unit

- YOOX IM : Italy’s Yoox in Talks to Buy Richemont’s Net-A-Porter: Times

- WDF IM : Dufry Agrees to Buy 50.1% of World Duty Free for EU1.3b