Braemar breaks into finance with NAVES deal

Braemar

Braemar announced the conditional acquisition of the entire issued share capital of NAVES Corporate Finance GmbH, a corporate finance advisory business focused on the maritime industry to create a new division within Braemar to be known as the Financial Division.

The consideration payable for the Acquisition is €24.00 million (subject to a customary adjustment based on target working capital) rising to a maximum of €35.00 million should earn-out payment terms and conditions be satisfied.

Acquisition Highlights

• Acquisition of NAVES, a corporate finance advisory business focussed on the maritime industry, headquartered in Hamburg, Germany. NAVES advises predominantly German clients on financing, restructuring and sale and purchase transactions.

• Consideration of:

– €19.00 million, to be satisfied 50 per cent. in cash and 50 per cent. in Convertible Loan Notes, of which €14.80 million will be payable on Completion (subject to a customary adjustment based on target working capital) followed by three equal annual instalments of €1.40 million;

– €1.50 million, to be satisfied by the issue of 458,166 Ordinary Shares to Non-management Sellers on Completion (representing a price of 300.2 per Ordinary Share (being the Reference Price));

– €3.50 million to be satisfied by the issue of Convertible Loan Notes to Management Sellers in five equal annual instalments of €0.70 million; and

– up to a further €11.00 million may be payable to Management Sellers over a three year period pursuant to a performance-based earn-out which will be satisfied wholly in Convertible Loan Notes.

• All Deferred Consideration and Earn-out Consideration payable to Management Sellers is subject to the Managing Individuals remaining with the business during the relevant periods (subject to good leaver/bad leaver provisions). A consultancy agreement with a term of up to five years will be entered into at Completion in respect of the services of both Managing Individuals.

• Acquisition terms structured to incentivise long term profit growth in NAVES.

• Cash element of consideration will be financed from funds drawn down under a new credit agreement entered into by the Company and the Company’s own resources and cash flow.

• NAVES is led by Managing Partners Mark Kuchenbecker and Axel Siepmann who have over 40 years of combined professional experience in corporate finance and the maritime industry.

• Creation of a new Financial Division in which Mark Kuchenbecker and Axel Siepmann will take leadership roles.

• NAVES generated revenue and profit after tax for the year ended 31 December 2016 of €7.46 million and €2.13 million respectively.

• NAVES has a track record of performance since establishment of the business in 2009 having advised on over US$6.5 billion of capital and charter hire restructurings.

• Aligns with Braemar strategy to:

– improve market coverage and ability to support clients;

– diversify business operations;

– grow scale through organic and acquisitive development; and

– deliver long-term shareholder value.

Acquisition Benefits

• Entrance to the valuable maritime financial advisory market through an established business.

• Continued growth opportunities from the strong fundamental market drivers of the NAVES niche business, which include continuing high global levels of distressed maritime debt, particularly held by German banks.

• Complementary services and skills that broaden and enhance the Braemar Group’s offering to clients.

• Collaboration between NAVES and the Braemar Group’s operating divisions, particularly with the Braemar Group’s shipbroking division, gives the Enlarged Group the opportunity to increase client services and corresponding revenue.

• Provides an additional source of revenue to Braemar, adding additional resilience and strength to the Group’s earnings profile.

• The Board believes that the Acquisition will be earnings enhancing for Braemar during the current financial year ending February 2018 and in the first full financial year following Completion being the year ending February 2019 and the acquisition terms have been structured to incentivise long term profit growth in NAVES. †

† Earnings for these purposes are underlying basic earnings per Ordinary Share excluding specific items, which include acquisition related items, gains and losses on sale of investments and other one off items. This statement is not intended as a profit forecast and should not be interpreted to mean that underlying basic earnings per Ordinary Share for the current or future financial years would necessarily match or exceed the historical published underlying basic earnings per Ordinary Share.

Comments on the Acquisition from Braemar and NAVES:

James Kidwell, Chief Executive Officer of Braemar said:

“We are delighted to announce this acquisition which is in line with our stated strategy of growing a diverse maritime business. The Board has been looking for high quality acquisitions for some time as a key part of Braemar’s growth strategy. NAVES not only introduces a new service offering for Braemar, enhancing our ‘full service’ offer to our customers, but also widens our geographical footprint. I look forward to welcoming NAVES’ senior management and all staff to Braemar and we look forward to working together.

“We have plans to develop the NAVES business within the Group considerably as this acquisition marks a very good entry level into this growing niche market. It also signifies Braemar’s return to growth and I have no doubt that this will create further value for shareholders. The Board will continue to focus on both organic and acquisitive growth and we look forward to updating shareholders on our progress as we pursue our growth strategy.”

Axel Siepmann and Mark Kuchenbecker, Managing Partners of NAVES said:

“At NAVES, we have long viewed Braemar as a complementary growth business with a culture and ambitions aligned to our own.

There is clearly a strong fit to our business as mainly we offer different services to a similar client base and, together with Braemar, we feel that NAVES can accelerate its growth further.

On behalf of the NAVES board, we look forward to growing our combined businesses and working together to cross-sell our widening range of services to our increasing customer base. We are very pleased to become part of the Braemar Group and look forward to the future with confidence.”

Approvals and timetable

Owing to its size, the Acquisition constitutes a Class 1 transaction for the purposes of the Listing Rules and therefore requires the approval of Shareholders. The notice convening the General Meeting is set out in Part 12 of the Circular and an explanation of the Resolutions to be proposed at the meeting is set out in paragraph 8 of Part 4 of the Circular.

Further details of the Acquisition are set out below, and together with a notice convening a General Meeting on 26 September 2017 to approve the Acquisition, will be contained in the Circular which Braemar is expecting to send to Shareholders later today. The Circular will include a recommendation from the Board that Shareholders vote in favour of the Acquisition. The Company will make a further announcement once the Circular has been published which will include details of where the Circular will be available from.

Completion of the Acquisition is expected on or around 26 September 2017.

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