TIDMDPEU
RNS Number : 3010X
DP Eurasia N.V
19 December 2023
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, DIRECTLY OR INDIRECTLY IN, INTO OR FROM ANY JURISDICTION
WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR
REGULATIONS OF SUCH JURISDICTION
FOR IMMEDIATE RELEASE
19 December 2023
DP Eurasia N.V.
("DP Eurasia" or the "Company", and together with its
subsidiaries, the " Group ")
Response to Revised Offer from Jubilant Foodworks
Introduction
DP Eurasia, the master franchisee of the Domino's Pizza brand in
Turkey, Azerbaijan and Georgia, notes the announcement earlier
today by Jubilant Foodworks Netherlands B.V. ("Jubilant
Foodworks"), a wholly owned subsidiary of Jubilant Foodworks
Limited ("Jubilant"), of its revised cash offer of 95 pence per
share (a "DP Eurasia Share") for the entire issued and outstanding
share capital of the Company not already owned by Jubilant
Foodworks (the "Revised Offer").
While the Revised Offer supersedes Jubilant Foodworks' initial
offer of 28 November 2023 at a price of 85 pence per DP Eurasia
Share (the "Initial Offer"), the non-conflicted members of the
board of the Company (the " Board ") have determined that it is
significantly below what they consider to be the fair value of the
DP Eurasia business and its prospects, particularly considering its
continued strong performance as detailed below.
As a result, the Board, having taken advice from its financial
advisors, Liberum, has concluded that it is not recommending the
Revised Offer and continues to urge minority shareholders to take
no action.
Current Trading and EBITDA Forecast
-- Further to its trading update of 28 November 2023 for the
period ended 31 October 2023, the Company has continued to trade
well and, as a result, confirms it now expects to marginally exceed
the EBITDA guidance for FY 2023 of TRY 696 million provided at that
time.
-- The Board reviewed the FY 2023 outturn and FY 2024 draft
budget during a Board meeting (including the directors appointed as
representatives of Jubilant) held on 23 November 2023 and the
profit forecasts presented below are as of that date (the "Profit
Forecasts").
-- The Profit Forecasts have not been subject to audit or
third-party review but are presented after due enquiry by the Board
as follows:
o FY 2023 EBITDA of approximately TRY 713 million (approximately
GBP 24.1 million)
o FY 2024 EBITDA of approximately TRY 1,245 million
(approximately GBP 30.7 million)
o FY 2023 year-end net debt of approximately TRY 653 million
(approximately GBP 17.8 million)
Turkish Lira ("TRY") with Pounds Sterling ("GBP") equivalents
being converted using average TRY:GBP exchange rates of 29.6 and
40.5, respectively for FY 2023 and FY 2024 EBITDA and spot rate of
36.7 for FY 2023 net debt.
Valuation References
The Board acknowledges that the valuation of the Company is
complicated by the hyper-inflationary environment in Turkey.
Multiple valuation methodologies have been considered and
triangulated with Liberum, the Company's financial advisers, in
reaching the conclusions on value.
The table below illustrates the trading EV/EBITDA valuation
multiples for the listed Domino's franchises (the "DP Peer Group")
based on consensus estimates.
Company Master Franchise Jurisdictions CY* 23 EV/EBITDA CY 24 EV/EBITDA
DP Poland
PLC Poland and Croatia 21.8x 16.6x
-------------------------------- ----------------- ----------------
Domino's Pizza
Group plc UK and Ireland 14.3x 13.2x
-------------------------------- ----------------- ----------------
Australia, New Zealand,
Belgium,
France, the Netherlands,
Japan, Germany, Luxembourg,
Domino's Pizza Denmark, Cambodia,
Enterprises Taiwan, Malaysia and
Limited Singapore 18.7x 15.6x
-------------------------------- ----------------- ----------------
Average 18.3x 15.1x
----------------- ----------------
Source: Bloomberg
* CY = calendar year
Illustratively, this compares with the implied trading EV/EBITDA
multiples indicated below for the Company at the Revised Offer and
based upon the Profit Forecasts.
CY 23 EV/EBITDA CY 24 EV/EBITDA
DP Eurasia 6.5x 5.1x
---------------- ----------------
Further to the DP Peer Group trading EV/EBITDA multiples, the
Board wishes to draw minority shareholders attention to Jubilant's
current trading EV/EBITDA multiples shown below.
CY 23 EV/EBITDA CY 24 EV/EBITDA
Jubilant 3 3.7 x 26.8x
---------------- ----------------
Source: Bloomberg
Notwithstanding the Company's growth prospects, the Board
acknowledges that DP Eurasia may not be valued at quite the same
trading EV/EBITDA multiples as the DP Peer Group, particularly due
to the macro-economic environment in Turkey. Despite this, the
relative valuations illustrate why the Revised Offer is an
excellent transaction for Jubilant and a very poor one for the
minority shareholders.
Risks to, and protections for, Minority Shareholders regarding
the Revised Offer
-- Governing jurisdiction: the Revised Offer is subject to the
mandatory offer provisions set out in the Company's articles of
association and the terms set out in the Revised Offer. These
provisions are more limited than those set out in the United
Kingdom's Takeover Code or in the equivalent takeover legislation
of the Netherlands. As a result, shareholders have significantly
less protections and rights than they might otherwise have.
-- Revised Offer acceptance period : in its announcement today,
Jubilant Foodworks has indicated that the deadline for acceptance
and settlement is 1.00 p.m. (London time) on 18 January 2024.
Accordingly, the Revised Offer will remain available to
shareholders until such time (or any amended deadline announced by
Jubilant Foodworks, provided always that the Revised Offer is
required under the articles of association of the Company to be
open for acceptance for a period of at least 21 days after the
Revised Offer is made).
-- Lack of withdrawal rights: the terms of the Revised Offer
summarised in Jubilant Foodworks' announcement today do not include
any right for a shareholder that accepts (and is thereby bound by)
the Revised Offer to withdraw its acceptance, even if Jubilant
Foodworks subsequently makes a higher offer to other shareholders
during the Revised Offer period.
-- Subsequent higher offer: once the Revised Offer has closed in
accordance with its terms, Jubilant Foodworks is not prohibited
from subsequently making a higher offer either to an individual
shareholder or the remaining shareholders who did not accept the
Revised Offer and making such a subsequent higher offer to one or
more shareholders will not trigger another mandatory tender offer
to all of the remaining shareholders.
-- Delisting, cancellation of trading, conversion and
post-closing restructuring: Jubilant Foodworks' stated intention is
that the Company's listing on the London Stock Exchange will be
cancelled after it acquires or agrees to acquire shares carrying
75% of the voting rights of the Company (which would also represent
the acquisition or agreed acquisition of a majority of the voting
rights held by the independent shareholders on 28 November 2023,
the date its firm intention to make the Offer was announced).
Consequently, if that 75% threshold is reached, the Company's
listing on the London Stock Exchange would be cancelled and
remaining shareholders would then hold their shares in an unlisted
company.
If the DP Eurasia Shares are delisted, Jubilant Foodworks has
stated that it intends to procure that DP Eurasia be converted into
a Dutch private company with limited liability (besloten
vennootschap met beperkte aansprakelijkheid).
The delisting of the DP Eurasia Shares and the conversion of DP
Eurasia into a Dutch private company with limited liability will
significantly reduce the liquidity and marketability of the DP
Eurasia Shares in respect of which the Revised Offer has not been
accepted at that time and their value may be affected as a
consequence. Any remaining DP Eurasia shareholders will, in this
case, become minority shareholders in a majority controlled private
company with limited liability and may therefore be unable to sell
their DP Eurasia Shares.
In the event that the delisting of the DP Eurasia Shares and the
conversion of DP Eurasia into a Dutch private company with limited
liability, Jubilant Foodworks may seek to effect or a cause to
effect a restructuring of DP Eurasia. Some of the restructuring
options may have the effect of diluting the shareholding of
minority DP Eurasia shareholders, including a post-Revised Offer
asset sale, the dissolution and liquidation of DP Eurasia, a
statutory squeeze-out in accordance with Dutch law, a subsequent
public offer and a statutory cross-border, bilateral or triangular
merger.
-- Minority shareholder protections: the Jubilant group's
relationship agreement with the Company remains in effect whilst
the Company is listed and admitted to trading on the London Stock
Exchange. Under the relationship agreement, the Jubilant group is
required to adhere to governance obligations which prohibit
Jubilant group members from taking actions that would affect the
ability of the Company to carry on its business independently of
the wider Jubilant group. It is also bound under that agreement to
exercise its voting rights to ensure continued independence of the
Board and that the Company is managed in accordance with principles
of good governance set out in the UK Corporate Governance Code
(including as to independence). Consequently, for so long as the
Jubilant group does not acquire or agree to acquire shares carrying
75% of the voting rights of the Company (and thereby is not able to
effect the de-listing of the Company), the Company and its minority
shareholders will continue to benefit from these protections. Under
these circumstances the Board can continue to defend the Company
and is determined to do so. If Jubilant Foodworks is successful in
delisting the Company, the relationship agreement will no longer
apply.
Analysis of and Recommendation by the Board
The Board has carefully considered the Revised Offer and
concluded that it remains significantly below what the Board
believes to be the fair value of the DP Eurasia business and does
not reflect its prospects, particularly in light of its continued
strong performance.
Furthermore, the Revised Offer of 95 pence is at the same level
to which Jubilant Foodworks attempted, in September 2021, to
increase its stake in the Company to 49.99% through a reverse
bookbuild but only succeeded in increasing its stake to 39.79% as
shareholders were not supportive of an acquisition at that price.
Since then, between the years ending December 2021 and December
2023, notwithstanding the extraction of the Company from its
involvement in the Russian market following the Ukraine war, the
Company has:
-- on an IAS 29 basis, increased revenue and EBITDA by
approximately 40.9% and 40.1%, respectively;
-- organically established a coffee brand in Turkey, COFFY,
which has diversified the Company's revenue, de-risked revenue
generation and provided a second key driver for future growth in
addition to the Domino's brand. At the end of 2023, the Company
expects to have 25 corporate and 69 franchise COFFY stores and is
planning on continuing the fast growth of this successful new
chain;
-- increased Domino's store count by 85 from 621 to 706; and
-- de -leveraged the balance sheet from 3.0 x to approximately 0.9 x Net Debt/EBITDA.
The Board has engaged collaboratively with Jubilant since 28
November 2023 to both better understand Jubilant's intentions and
to relay the Board's and minority shareholders' concerns.
The Company suffers from extremely limited minority protection
rights in takeover situations due to the fact that it is neither
subject to the United Kingdom's Takeover Code nor to any EU
takeover provisions despite its listing in the United Kingdom and
being incorporated in the Netherlands. In addition, despite being a
good commercial partner, Jubilant has sought to exploit this to its
advantage by seeking to take full control and de-list the Company
without offering fair value, to the detriment of minority
shareholders. Furthermore, by virtue of its representation on the
board of the Company, the Boardbelieves that Jubilant is well aware
of just how much growth potential exists.
As such, the Board is disappointed that the Revised Offer does
not provide an adequately attractive increase in price for the
Board to be able to change their position in so far as the Revised
Offer still:
-- significantly undervalues DP Eurasia;
-- continues to have minimal support based upon feedback
received from minority shareholders; and
-- does not recognise the fundamental growth potential of DP
Eurasia, including its COFFY business.
Accordingly, the Board, having been advised by Liberum, confirms
its unanimous and unequivocal recommendation that shareholders do
not accept Jubilant Foodworks' Revised Offer.
The Board intends to continue to engage with Jubilant with the
aim of achieving an offer price that fairly values DP Eurasia and
which the Board would be prepared to recommend.
The Board strongly advises DP Eurasia shareholders to take no
action at this time and remind them their unified stance is vital
in preserving the best outcome for all shareholders.
Enquiries
DP Eurasia N.V.
İlknur Kocaer, CFA - Investor Relations
Director +90 212 280 9636
Buchanan (Financial Communications)
Richard Oldworth / Toto Berger / Verity +44 20 7466 5000
Parker dp@buchanan.uk.com
Liberum (Financial Adviser, Corporate
Broker)
Corporate Broking: Andrew Godber / Edward
Thomas / Will King
M&A: Tim Medak / Mark Harrison / Matt Hogg +44 20 3100 2000
Important Notices
For the purposes of the matters referred to in this
announcement, the Board comprises the directors of the Company
excluding those directors recused by reason of conflict of
interest. Those directors so recused are Shyam S. Bhartia and Hari
S. Bhartia (both of whom are appointees connected with Jubilant)
and Aslan Saranga, the Company's Chief Executive Officer, who is
recused by reason of the conflict of interest in light of his
discussions with Jubilant Foodworks on his shareholding in the
Company and his likely continuation as CEO. References in this
announcement to the "Board" are to be construed accordingly.
Liberum Capital Limited ("Liberum"), which is authorised and
regulated in the United Kingdom by the FCA, is acting as financial
adviser exclusively for the Company and no one else in connection
with the matters set out in this announcement and will not regard
any other person as its client in relation to the matters set out
in this announcement and will not be responsible to anyone other
than the Company for providing the protections afforded to clients
of Liberum, nor for providing advice in relation to the contents of
this announcement or any other matter referred to herein. Neither
Liberum nor any of its subsidiaries, branches or affiliates owes or
accepts any duty, liability or responsibility whatsoever (whether
direct or indirect, whether in contract, in tort, under statute or
otherwise) to any person who is not a client of Liberum in
connection with this announcement, any statement contained herein
or otherwise. Neither Liberum nor any of its affiliates nor any of
their respective directors, officers, employees, advisers or agents
accepts any responsibility or liability whatsoever for, or makes
any representation or warranty, express or implied, as to, the
truth, accuracy or completeness of the information in this
announcement (or whether any information has been omitted from the
announcement) or any other information relating to the Company.
This announcement is not intended to, and does not, constitute
or form part of any offer, invitation or the solicitation of an
offer to purchase, otherwise acquire, subscribe for, sell or
otherwise dispose of, any securities, or the solicitation of any
vote or approval in any jurisdiction, pursuant to this announcement
or otherwise. The distribution of this announcement in
jurisdictions other than the United Kingdom and the availability of
any offer to shareholders of the Company who are not resident in
the United Kingdom may be affected by the laws of relevant
jurisdictions. Therefore, any persons who are subject to the laws
of any jurisdiction other than the United Kingdom or shareholders
of the Company who are not resident in the United Kingdom will need
to inform themselves about, and observe any applicable
requirements.
Forward-looking statements
This document, including information included or incorporated by
reference in this document, may include statements that are, or may
be deemed to be, "forward-looking statements". These
forward-looking statements may be identified by the use of
forward-looking terminology, including the terms "targets",
"believes", "estimates", "plans", "projects", "anticipates",
"expects", "intends", "may", "will" or "should" or, in each case,
their negative or other variations or comparable terminology, or by
discussions of strategy, plans, objectives, goals, future events or
intentions. These forward-looking statements include all matters
that are not historical facts and involve predictions.
Forward-looking statements may and often do differ materially from
actual results. Any forward-looking statements reflect the
Company's current view with respect to future events and are
subject to risks relating to future events and other risks,
uncertainties and assumptions relating to the Company's business,
results of operations, financial position, liquidity, prospects,
growth or strategies and the industry in which it operates.
Forward-looking statements speak only as of the date they are made
and cannot be relied upon as a guide to future performance. There
are many factors that could cause actual results to differ
materially from those expressed or implied in forward-looking
statements. Among such factors are changes in the global,
political, social, economic, business, competitive, market and
regulatory forces, future exchange and interest rates, changes in
tax rates, future business combinations or disposals, and any
epidemic, pandemic or disease outbreak.
These forward-looking statements are based on numerous
assumptions regarding the present and future business strategies of
such persons and the environment in which each will operate in the
future. By their nature, these forward-looking statements involve
known and unknown risks and uncertainties because they relate to
events and depend on circumstances that will occur in the future.
The factors described in the context of such forward-looking
statements in this document may cause the actual results,
performance or achievements of any such person, or industry results
and developments, to be materially different from any results,
performance or achievements expressed or implied by such
forward-looking statements. No assurance can be given that such
expectations will prove to have been correct and persons reading
this document are therefore cautioned not to place undue reliance
on these forward-looking statements that speak only as at the date
of this document. All subsequent oral or written forward-looking
statements attributable to the Company or its affiliates or any
persons acting on its behalf are expressly qualified in their
entirety by the cautionary statement above. The Company does not
intend, nor undertakes any obligation, to update publicly or revise
forward-looking statements, whether as a result of new information,
future events or otherwise, except to the extent legally
required.
UK Market Abuse Regulation
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014 of the European
Parliament and the Council of 16 April 2014 as it forms part of
domestic law in the United Kingdom by virtue of the European Union
(Withdrawal) Act 2018.
Appendix I
Sources and Bases of Information
1. Any reference to issued share capital is based on the number
of DPEU Shares currently in issue, which is 146,590,620 shares.
2. All figures exclude Russian business which is now a
discontinued operation, except the stated FY21 Net Debt/EBITDA
figure of 3.0x.
3. Inflation rates used in the calculation of the Profit
Forecasts for 2023 and 2024 are 54.0% and 60.0%, respectively,
derived from the IMF World Economic Outlook database and management
expectations.
4. GBP:TRY forecast exchange rates for 2023 and 2024 of 29.6 and
40.5 are derived from FactSet and Bloomberg.
5. GBP:TRY spot exchange rate of 36.7 rate is derived from Bloomberg as at 18 December 2023.
6. DP Peer Group and Jubilant EV/EBITDA multiples are derived
from Bloomberg and presented on a calendar year ("CY") basis.
7. The presented EBITDA figures are adjusted EBITDA. Adjusted EBITDA doesn't include the one-off income/expenses and share base payments. These items are determined by the principles defined by Group management and comprise income/expenses which are assumed by Group management to not be part of the normal course of business and are non-trading items.
8. The presented net debt is adjusted net debt which is not
defined by IFRS. Adjusted net debt includes cash deposits used as a
guarantee of lease liabilities related to franchisee rent
agreements and cash paid, but not collected during the non-working
day at the year end. Management uses these numbers to focus on net
debt including deposits not otherwise considered cash and cash
equivalents under IFRS.
9. DP Eurasia Profit Forecasts for the period ending 31 December
2024 are derived from a bottom-up budget developed internally. The
primary driver of growth in the period will be Domino's and COFFY
store expansion, of which the target new store numbers are outlined
below and compared to the current 2023 period end estimates.
New Franchise and Corporate 31 December 2023E 31 December 2024E
Stores
Domino's 35 60
COFFY 65 70
10. Unless stated, all figures are presented on a pre-IAS 29
basis.
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END
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(END) Dow Jones Newswires
December 19, 2023 05:06 ET (10:06 GMT)
Dp Eurasia N.v (LSE:DPEU)
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