DFDS (DFDS) M&A announcement summary

Deal rationale and strategic fit

• Acquisition of 98.8% of U.N. Ro-Ro expands the route network into the fast-growing Turkey–EU freight market, diversifying markets and matching an established unaccompanied-freight business model.

• U.N. Ro-Ro was Turkey’s leading freight ferry operator, with 33% of Turkey–Europe export traffic and 61% of the 2017 ferry segment.

• Similar business models and fleets offer scope to apply established capabilities, improve vessel deployment flexibility and broaden customer services.

• Turkey’s historical real GDP growth averaged 5.2% versus 1.5% in Western Europe; 2018–22 forecasts averaged 3.9% versus 1.8%.

Financial terms and conditions

• Acquisition of 98.8% for EUR 950m (DKK 7.1bn) on a debt-free basis, at 9.8x expected 2018 EBITDA; expected to be earnings-accretive in 2018, with ROIC above cost of capital.

• Funding includes committed term loans and a proposed DKK 1.0bn share issue, approximately 5% of current share capital; Lauritzen Foundation planned to participate pro rata.

• Net interest-bearing debt/EBITDA expected at 2.5x after completion, within the 2.0–3.0x target range; the share buyback and planned DKK 7 dividend were suspended.

• 2018 outlook assuming June completion: revenue growth 8% versus 2% previously; EBITDA before special items DKK 3.0–3.2bn versus DKK 2.65–2.85bn.

• 2018 investment outlook increased to DKK 5bn from DKK 1.1bn, including acquisition equity value and target CapEx; transaction costs to be detailed at closing.

Synergies and expected cost savings

• Target of EUR 30m EBITDA improvement by 2021, against U.N. Ro-Ro’s 2017 EBITDA of EUR 94m.

• Intermodal services, wider customer reach, combined sales organisations and additional capacity are expected to support volume growth and lower unit costs.

• Replacing smaller vessels with larger ships over 3–4 years is expected to reduce unit costs; fleet flexibility and potential use of new vessels support capacity growth.