OREANDA-NEWS. Dufry to acquire World Duty Free.

Strategic rationale

  • The combination with WDF will further enhance Dufry's global position in the travel retail industry and the combined entity will be present in 67 countries and reach a market share of approx. 24% in airport retail globally
  • The transaction will enhance Dufry's portfolio with attractive long-term concessions across several major European airports, including the recently extended London Heathrow airport with a large number of emerging market consumers and the Spanish airports which ideally complement Dufry’s strong Mediterranean footprint; in addition, the transaction will also strengthen Dufry's operations in North and Latin America, Asia and the Middle East
  • Dufry believes that the transaction will create a series of new growth opportunities thanks to the broader breadth of the combined platform

Financial highlights

  • Dufry agreed to acquire Edizione's 50.1% stake in WDF for € 10.25 per share in cash, valuing the entire fully diluted share capital of WDF at € 2.6 billion (CHF 2.7 billion) and implying an enterprise value of € 3.6 billion (CHF 3.8 billion); following completion of Edizione's stake in WDF, Dufry will launch a mandatory tender offer for the remaining 49.9% of WDF’s outstanding shares for € 10.25 per share in cash
  • Dufry expects that the transaction will result in cost reductions and gross profit improvements with an annual run-rate of approximately € 100 million1 which are expected to be fully realised by full-year 2017
  • The transaction is expected to be value accretive to Dufry shareholders, resulting in a double-digit cash EPS accretion from the second year post-acquisition
  • The financing of the transaction has been secured via a fully committed debt bridge facility of € 3.6 billion (CHF 3.8 billion), of which at least € 2.1 billion (CHF 2.2 billion) will be refinanced through equity and up to € 1.5 billion (CHF 1.6 billion) through debt instruments
  • Dufry will hold a General Meeting (GM) to approve the equity financing, in form of an at market rights issue, targeting at least CHF 2.2 billion from an ordinary capital increase
  • The rights issue is fully secured by a combination of the underwriting by a bank consortium as well as commitments by the investors GIC (Singapore's Sovereign Wealth Fund), the Qatar Investment Authority ("QIA") and Temasek, which have all committed to invest up to CHF 450 million each in equity in the combined entity
  • By way of the capital increase, Dufry expects to maintain its solid financial profile with a net debt / LTM EBITDA not exceeding 4.3x (pre-synergies)

Transaction overview

Dufry announces that it has entered into a binding agreement with Edizione to acquire its 50.1% stake in WDF for € 10.25 per WDF share in cash, equivalent to a total consideration of € 1,307 million. Following completion of the transaction with Edizione, Dufry will launch a mandatory tender offer for the remaining 49.9% outstanding WDF shares at a price of € 10.25 per WDF share. The consideration to Edizione and in the mandatory tender offer will be fully payable in cash. The transaction with Edizione remains subject to approval of the ordinary capital increase by Dufry's shareholders as well as regulatory approvals.

Dufry intends to initially finance the acquisition of WDF and the refinancing of WDF's debt through a fully committed debt bridge facility of € 3.6 billion (CHF 3.8 billion), provided by BBVA, Goldman Sachs, ING, Santander, UBS and UniCredit, which is expected to be refinanced by the rights issue of at least € 2.1 billion (CHF 2.2 billion) and long-term debt instruments for a total amount of up to € 1.5 billion (CHF 1.6 billion).

The equity financing is expected to be implemented in the form of a rights issue of at least CHF 2.2 billion from an ordinary capital increase, which is subject to approval by the GM. The rights issue has been fully secured by a combination of a firm underwriting by a banking consortium as well as commitments by the investors GIC, QIA and Temasek. The definite terms of the rights issue are expected to be determined and communicated immediately prior to the GM, which will take place no later than 15 May 2015.

Dufry has secured equity investment commitments from GIC, QIA and Temasek for up to CHF 450 million each in the form of a commitment to purchase shares for which existing shareholders have not exercised their pre-emptive rights in the rights issue.

Shareholders representing approximately 30% of Dufry's voting share capital have irrevocably committed to vote in favour of the ordinary capital increase at the GM.

Following completion of the share purchase from Edizione which is expected to occur in the 3rd quarter 2015, Dufry will launch a mandatory tender offer for all remaining shares of WDF in accordance with Italian law at the same price per WDF share of € 10.25 as will be paid by Dufry to Edizione, in accordance with the terms of the share purchase agreement. The consideration of the mandatory tender offer will be fully payable in cash. Dufry will, in due course following completion of the share purchase agreement, publish an offer prospectus with further details related to the mandatory tender offer.

About Dufry

Dufry AG (SIX: DUFN; BM&FBOVESPA: DAGB33) is a leading global travel retailer operating over 1,650 duty-free and duty-paid shops in airports, cruise lines, seaports, railway stations and downtown tourist areas. Dufry employs around 20,000 people. The Company, headquartered in Basel, Switzerland, operates in more than 60 countries around the world.

About WDF

WDF, the holding company of World Duty Free Group, is one of the world’s leading travel retailers, operating mainly in airports and with a broad geographical reach. It has operations in 20 countries through 105 locations with over 500 stores, from its heartland in Western Europe, to the Americas, the Middle East and Asia. In 2014, WDF reported turnover of € 2,440 million and EBITDA of € 261 million. WDF operates some of the most exciting and engaging airport shops in the world, with a focus on the customer and innovative marketing programmes, including multi-channel digital and live in-store interactive promotions.