Emperia Holding SA, one of the largest trading groups in Poland, has concluded a conditional investment agreement with Eurocash SA providing for the transfer of shares in the Tradis Wholesale Group companies to Eurocash SA. Upon conclusion of the transaction, Emperia Holding SA will become a major shareholder of Eurocash SA. The base value of the transaction has been set at PLN 926 million, to be effected by transfer to Emperia SA of newly issued Eurocash shares and cash. The principal condition to the transaction is the approval of the Polish Office for Competition and Customer Protection (UOKiK). The parties intend to finalise the investment agreement by the end of June 2011.
The base value of the transaction has been calculated at the projected Tradis Group EBITDA for 2010 of PLN 109 million. The final value of the transaction will depend on the final outcome of the due diligence to be carried out by an auditor jointly appointed by the parties, Eurocash and Emperia, to be announced by the end of the first quarter of 2011.
The total of up to 21,262,820 new Eurocash shares may be issued as part of the transaction. The issue price will be PLN 22.21 per share, based on the three-month average market price as at 13 September (the date Eurocash announced its proposal to take over Emperia). The remaining liabilities of PLN 453.7 million (base scenario) will be paid by Eurocash in cash. In certain cases specified under the investment agreement Eurocash may also pay the entire price in cash. An additional benefit to Emperia, besides the very price conditions, is provided by the fact that should Eurocash decide not to go ahead with the transaction as provided for under the agreement concluded it will be required to pay to Emperia PLN 200 million as compensation for loss of contract.
Upon completion of the transaction, Emperia Holding SA will become a major shareholder of Eurocash SA, holding an interest of up to 14 percent. As such it will continue to have a lot of impact upon the decisions affecting the Tradis Group companies. At the same time, Emperia Trading Group will focus upon strengthening its leadership in the retail segment of supermarkets in Poland.
“We are glad that we have succeeded in reaching an agreement and managed to defend Emperia against the hostile takeover. We are convinced that the agreed terms of the deal are most beneficial to our shareholders both in terms of the pricing and the structure of the transaction. We have never challenged the business rationale for such a transaction if undertaken on satisfactory conditions. Given the adopted course of action, we will not pursue the originally intended spin off and flotation of our wholesale business, scheduled to take place in March 2011. The incorporation of the Tradis Group into Eurocash SA is beneficial to all parties to the deal, including without doubt Emperia and Tradis itself, its staff and clients,” says Artur Kawa, Chairman of Management Board, Emperia Holding SA.
Until the closing of the transaction contemplated under the preliminary investment agreement, the Tradis Trading Group will be controlled by Emperia Holding SA.
Given the agreement concluded, Eurocash SA will not go ahead with the public offering for K and L series shares. The Tradis Group acquisition will be effected under a new issue prospectus.
The purpose of the parties to the transaction is for the Eurocash shares offered to Emperia to pay dividend to Eurocash shareholders in 2010. If no dividend is paid on the new shares, the price for the shares being transferred paid by Eurocash will be increased as appropriate. Further, if the Eurocash group achieves the operational and financial objectives in 2011 and 2012 as agreed by the parties and listed in the agreement, Emperia will receive additional 1,000,000 shares for each year.
The transaction will see the following companies making up the Tradis Wholesale Group incorporated into Eurocash SA: Tradis Sp. z o.o., DEF sp. z o.o., Ambra Sp. z o.o., Detal Koncept Sp. z o.o., Euro Sklep SA, Partnerski Serwis Detaliczny SA, Lewiatan Holding SA, and the other PSH Lewiatan companies in which Emperia holds interests. This means that Emperia Holding will not go ahead with its proposed spin-off and flotation of the Tradis Wholesale Group.
“Emperią enters a period of intensive development of the supermarket segment. The proceeds from the sale of the Tradis Group will be applied towards financing further mergers and acquisitions, we will also seek to expand our operations by organic growth. We will be presenting a detailed roadmap for the process in the coming weeks. We see the supermarket sector as one that offers strong development prospects. In the time ahead we intend to draw strongly on our competencies to grow our retail chains. We aspire to become the leader of the supermarket segment in Poland,” adds Artur Kawa.
Upon completion of the transaction, the Emperia Trading Group will be made up of the following companies: Emperia Holding SA, Emperia Info Sp. z o.o., Stokrotka Sp. z o.o., Elpro Sp. z o.o., Maro Markety Sp. z o.o., Społem Tychy Sp. z o.o., Infinite Sp. z o.o.