Petrol forecourt retailer Applegreen is set to increase its stake in the UK market with the acquisition of a majority stake in motorway service operator Welcome Break, in a €361.8 million deal.
The deal will significantly widen Applegreen’s motorway service area network, and is Applegreen’s largest acquisition to date. Welcome Break is one of the three major owners and operators of motorway service areas in the UK. It generated revenues of £723.4 million and adjusted earnings before interest, tax, depreciation and amortisation of £66.4 million in the year to January 2018.
It operates 24 motorway service areas, two trunk road service areas and 29 hotels across 35 locations in the UK, with around 85 million customers per year. It currently employs more than 5,000 people.
Applegreen said it has entered into contracts to acquire a 55 per cent holding in the UK firm from NIBC European Infrastructure Fund. The deal, which constitutes a reverse takeover of the company, will be a transformational one for the firm, and will require approval from Applegreen’s shareholders. Trading in Applegreen’s shares will be suspended on the AIM in London and the ESM Market in Dublin with immediate effect, until the admission document is published, expected in September.
The transaction will be backed by a new €300 million debt facility and a proposed equity fundraising of at least €100 million.
"Welcome Break is a fantastic business, it has led the way in providing the very best food and beverage facilities on the UK motorways," said Applegreen chief executive Bob Etchingham.
“We were attracted to Welcome Break because of the strength of its franchise, the excellent management team and the committed staff at each of its 35 locations.”
Applegreen has also entered into a separate conditional agreement with AIP, which manages the remaining shareholder in Welcome Break, that will see Applegreen sell to AIP an 8.6 per cent stake in Welcome Break for €56.5 million. Under the terms of the AIP agreement, Applegreen will be responsible for Welcome Break’s strategy and operations, and will share general governance rights with AIP.
The agreement also provides that Applegreen will transfer its existing UK motorway service areas and trunk road service area assets to Welcome Break, along with its UK development pipeline assets, in exchange for a further £120 million of equity in Welcome Break. Meanwhile, AIP will invest a further £80 million into Welcome Break, which is intended to repay the junior debt within the company.
If the AIP agreement goes ahead, and is approved by shareholders, Applegreen’s stake in Welcome Break will be approximately 50.01 per cent.
"This is a transformational transaction in the UK MSA sector, and I am sure that the combination of the Applegreen Service Area operations in the UK with those of Welcome Break, and combined management capabilities will help build further upon the consistent and strong earnings growth seen by both businesses over the past decade,¨ said Darren Kyte, managing director of NIBC Infrastructure Partners and chairman of Welcome Break Group.
