Brandfort and ICT reach agreement on amended terms and structuring of the proposed transaction

  • Dec. 2, 2013
  • Hans Martens

This is a public announcement by ICT Automatisering N.V. (“ICT”) pursuant to Section 5:25i, paragraph 2 of the Dutch Financial Supervision Act (Wet op het Financieel Toezicht).

Combination of ICT Automatisering and Brandfort creates a leading software and engineering company; solid foundation for further growth.

ICT Automatisering N.V. (“ICT”) today announces that it has reached agreement with the shareholders of Brandfort B.V. (“Brandfort”), on the amendment of certain terms and conditions and the structure of the Contemplated Transaction.

On 24 July 2013, ICT announced that it had reached conditional agreement with the shareholders of Brandfort in respect of a merger of ICT with Brandfort (the "Contemplated Transaction"). Following the conclusion of the first phase of the due diligence investigation it became apparent that the 2012 results of Brandfort and the expected results for 2013 differed from the announcement of 24 July. In addition a number of activities that are not earnings accretive are identified, they will not be part of the transaction. Furthermore a number of shareholders of ICT expressed the wish to limit the dilution related to the transaction. As announced by ICT on 30 October 2013, based on this, discussions have been held in respect of the amendment of certain terms and conditions and the structure of the Contemplated Transaction. These discussions have now resulted in agreement between parties.

Most important amendments to the transaction

The transaction will be structured as a partial exchange of shares in which ICT acquires all of the shares in Brandfort for newly issued ICT shares representing 9% of the outstanding shares post-closing; existing ICT shareholders will own 91% of the outstanding share capital of ICT. In addition ICT will, on behalf of Brandfort, pay off an amount of EUR 5.1 million of shareholders loans in cash to the Brandfort shareholders. The exact redemption (amount) depends on the results of the second phase of the mutual due diligence.

The Combination of ICT and Brandfort (the “Combination”) will have a committed cornerstone shareholder in Jan Brand indirectly owning 9% of the outstanding shares, who is supportive of the strategic ambitions of the Combination. He has therefore agreed to a lock-up period of three years with limited exceptions. Furthermore Mr. Brand will assume an advisory role within the Combination.
ICT will form the holding company of the Combination. The composition of the Supervisory Board will no longer change as a result of the Proposed Transaction.
Given the fact that the shares to be newly issued represent less than 10% of the outstanding capital of ICT there is no obligation to issue a prospectus. Given the amended transaction structure it is no longer necessary to convene an Extraordinary General Meeting of Shareholders (EGM). Closing of the proposed transaction is anticipated in Q1 of 2014 and is subject to customary conditions precedent, such as a mutually satisfactory outcome of due diligence and the absence of a superior offer on ICT.

Financial results Brandfort

In 2012 Brandfort realized sales of EUR 16.7 million with an EBIT margin of around 3%. Based on current trading, Brandfort expects normalized sales of EUR 16.7 million with a normalized EBIT margin of approximately 5% in 2013.

Rationale van de transactie

Brandfort and ICT have an excellent strategic fit and the Combination will form an enlarged platform to accelerate growth. The transaction will provide both ICT and Brandfort access to a significant number of new clients and an even stronger relationship with its existing clients. Through the Combination, both ICT and Brandfort will gain access to additional geographical markets, as well as strengthen their position in key markets.

The Combination will create a company with over 950 technical and highly educated employees and more than EUR 95 million in revenues. Combining the companies will lead to sales and cost synergies. Sales synergies will be achieved by cross-selling, increased utilization and a more distinctive market position and industry visibility, while cost synergies will be realized by increasing efficiency. It is expected that the transaction will result in an increase in earnings per share of around 20% in 2014.

The Combination has the ambition to achieve a leading position in its market and aims to become a platform for further growth, both organically as well as through acquisitions. By offering excellent professional support the Combination can provide engineering companies a platform for their further development and pursue its strategy of becoming a full service technical partner. Through a buy-and-build strategy, the Combination will target acquisitions of multiple engineering companies with mechanical and mechatronic expertise active in niche markets.

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