Tourism and transport company SeaLink Travel Group Ltd. will buy Australia's bus operator Transit Systems Group for an enterprise value of A$635 million, according to an Oct. 8 release.
The deal also includes an earnout component of up to A$63 million based on Transit Systems' fiscal 2020 earnings that will be paid in three equal installments over three years.
Australia-based SeaLink will partly fund the transaction through a fully underwritten A$65 million placement to new and existing institutional shareholders and a fully underwritten A$89 million pro rata, accelerated, non-renounceable entitlement offer. The placement and entitlement offer are expected to raise approximately A$154 million.
The remaining balance will be funded by the issue of A$269 million of SeaLink scrip to the vendors of the Transit System Group, and by drawing down on new multi-tranche debt and revolving credit facilities. With the scrip issuance, certain vendors of Transit Systems will become substantial holders of SeaLink and are expected to hold about 33.4% of its shares after the acquisition.
The transaction is subject to shareholder approval, on top of other customary conditions. It is expected to be accretive to SeaLink's fiscal 2019 EPS by 20%.
"This acquisition diversifies SeaLink’s end-markets towards long-term bus contracts with government counterparties who are looking for reliable public transport solutions to support growing populations," SeaLink Managing Director and CEO Jeff Ellison said in a statement. He added that the move represents the start of SeaLink's next phase of growth as an integrated multi-modal passenger services provider.
Following the acquisition, Transit Systems CEO Clint Feuerherdt will replace Ellison as SeaLink Group CEO. Ellison will remain on SeaLink's board as a non-executive director and Feuerherdt will own approximately 2.6% of SeaLink shares after the deal.
In addition, Transit Systems Chairman Neil Smith will become a non-executive director on SeaLink's board and hold approximately 15.3% of SeaLink shares after the transaction.
