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AqualisBraemar to Acquire LOC Group

Source: 11/23/2020, Location: Europe

- Creates a leading global independent offshore energy and marine consultancy - Increases AqualisBraemar’s renewables footprint and ramps up the companies’ commitment to the global energy transition - LOC Group has highly complementary market positions to AqualisBraemar - Clients will benefit from broader service offering and increased scale globally - Estimated USD 3.5 million in annual cost synergies - Joint group target of 50 percent of revenues from the renewables sector and other sustainability and CO2-reducing activities in 2025 - Transaction fully funded through combination of cash, bank loan and new equity

AqualisBraemar ASA has entered into an agreement to acquire 100 percent of the shares in LOC Group, thereby creating a leading global independent offshore energy and marine consultancy.

“Our strategy is clear; we want to grow through continued expansion in the rapidly growing offshore renewables industry, and leverage on our position within shipping and oil and gas markets, to support this energy transition. LOC Group, with its strong and highly complementary footprint within the same industries, is a perfect fit for this strategy and will support our ambition of consistently returning capital to our shareholders,”

The Combined Group
Following completion of the acquisition, the combined group will be a leading global independent offshore energy and marine consultancy firm. It will have a total of 880 employees in 85 offices in 39 countries all over the world. Today, AqualisBraemar has 465 employees, including subcontractors on a 100 percent utilisation basis.

“Our complementary geographical footprint reiterates how this acquisition will allow us to provide clients with even better local expertise and swifter response times regardless of where in the world they are,” adds David Wells.

On preliminary pro-forma basis, the combined group has delivered revenues of USD 139 million in the past twelve months (AqualisBraemar stand-alone: USD 76 million) up until 30 September 2020, with an adjusted EBITDA of USD 12.5 million (USD 5.7 million). The joint group’s order backlog was USD 83 million (USD 28 million) at the end of the third quarter. Together, the companies have identified an estimated USD 3.5 million in annual cost synergies. This includes facility redundancy, utilisation improvement, capital efficiency and SG&A optimisation.

“We are combining two well-run businesses to create an even more complete service provider. You would have to look very, very hard to find a better strategic fit than AqualisBraemar and LOC Group. This is a big reason why key managers have decided to continue with the combined group,”

David Wells
Facilitating the Energy Transition
LOC Group’s CEO, Dr R. V. Ahilan, will continue in the joint company in a newly created role as chief energy transition officer, supporting the group’s ambition of 50 percent of revenues coming from renewables and other sustainability and CO2-reducing activities by 2025. He will also join the combined group’s executive management team.

By joining the fast-growing specialist renewable entities of AqualisBraemar’s offshore wind consultancy firm OWC and LOC Group’s Innosea and other renewable focused units, the combined group will double its size within renewables.

“The exponential growth we are witnessing within offshore renewables requires all the specialist competence it can get. However, this is not a numbers game, it is about working smarter. Combining OWC’s leading position within renewables consulting and engineering with Innosea’s specialist competence within fixed and floating substructure concept development and turbine engineering and analysis is one way to address this requirement. In addition, we have LOC’s leading position within marine warranty services for the offshore renewables sector,” says Dr Ahilan.

“Our objective is that 50 percent of our revenues should come from the renewables sector and other sustainability and CO2-reducing activities in 2025. However, reducing the carbon intensity of the offshore oil and gas and shipping industries are also key to achieving the energy transition the world so desperately needs. We will continue to support all these industries to help make this energy transition happen,” adds Dr Ahilan.

The Transaction
AqualisBraemar has entered into an agreement to acquire 100 percent of the shares in Neptune Midco 1 Limited from the ultimate parent company of the LOC Group, LOC Group Holdings Limited, the shareholders of which include pan-European investment group Bridgepoint and key employees of LOC.

The purchase price consideration consists of a combination of cash consideration and conditional warrants in AqualisBraemar as follows:

- USD 20.2 million net cash consideration, subject to customary adjustments prior to closing
- 1 million warrants, conditional on the AqualisBraemar share price 18 months after completion being above NOK 7.5
- 1 million warrants, conditional on the AqualisBraemar share price 36 months after completion being above NOK 10.0
- The warrants will be issued on completion of the transaction and will be exercisable in a short period following the expiry of the 18- and 36-month periods. The warrant condition thresholds are measured against the 60-day value weighted average price prior to the expiry of these periods. The exercise price will be NOK 0.10 per warrant, being the nominal value per AqualisBraemar ordinary share.

AqualisBraemar will finance the acquisition through a combination of USD 5 million in existing cash, a new USD 15 million bank facility with Nordea, and a fully subscribed equity issue of USD 15 million. Part of the funds will be used to refinance LOC’s current debt at USD 12 million and cover other costs and contingencies of USD 3 million. LOC had a net cash position of USD 2 million as of 30 September 2020.

As part of AqualisBraemar’s long term incentive program, the group intends to issue an additional 9.5 million options to existing employees of LOC Group and 1.5 million options to existing employees of AqualisBraemar. The options are issued at-the-money with a 3-year vesting period subject to inter alia continued employment and additional restrictions after vesting.

Closing of the acquisition is expected on or around 21 December 2020. The transaction is subject to approval of the equity issue by an extraordinary general meeting (EGM) in AqualisBraemar. The EGM will be held on or about 14 December 2020. Shareholders representing approximately 75% of the shares in AqualisBraemar have undertaken to vote in favour of the equity issue at the EGM.

AqualisBraemar and LOC Group will be trading separately for up to six months following completion of the transaction. A proposal to change the parent group name from AqualisBraemar ASA to AqualisBraemar LOC ASA will also be made to the extraordinary general meeting in AqualisBraemar.

In connection with the Transaction, AqualisBraemar is advised by Clarksons Platou Securities AS as sole financial advisor, Advokatfirmaet Haavind AS and Eversheds Sutherland as legal advisors, and Corporate Communications AS as communication advisor.

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