Fjordkraft acquires Innlandskraft, strengthens position as leading electricity supplier in Norway

OSLO: Fjordkraft Holding ASA has entered into an agreement for the acquisition of 100% of the shares in Innlandskraft AS, a news release said.

The key terms of the Transaction are as follows:

  • The Transaction will be structured as an acquisition of all shares in the Target by the Company, from Gudbrandsdal Energi Holding AS and Eidsiva Energi AS (the “Sellers”).
  • The purchase price is based on an enterprise value of the Target of NOK 1,410 million on a cash and debt free basis and assuming an agreed normalised level of working capital. The purchase price payable for the shares will follow a typical ´locked box´ mechanism, and will be finally calculated based on a set of audited accounts for the Target to be established as per 30 June 2020. An interest will accrue on the purchase price payable in cash from 30 June 2020 until closing of the Transaction.
  • 50% of the purchase price shall be paid in cash by the Company to Eidsiva Energi AS while the remaining 50% of the purchase price shall be paid in the form of consideration shares in Fjordkraft to Gudbrandsdal Energi Holding AS at an agreed price per consideration share of NOK 74.50. The share price represents the volume-weighted average price of the Company’s share on Oslo Børs the last fifteen trading days prior to signing. The cash portion of the purchase price is expected to be financed by long-term debt and available cash. The completion of the Transaction is not subject to financing.
  • Completion of the Transaction is conditional upon approval by the Norwegian Competition Authority (Konkurransetilsynet), as well as certain other customary closing conditions.
  • Closing of the Transaction is expected to take place during September 2020, subject to satisfaction of the closing conditions.

Strategic rationale:

  • Further strengthening Fjordkraft’s position as the leading electricity retailer in Norway, with an estimated market share of 27% after the Transaction.
  • Increases Fjordkraft’s presence in the Eastern part of Norway, with offices in Hamar, Vinstra and Kongsvinger
  • Innlandskraft has a customer base with strong loyalty and customer satisfaction as well as highly skilled employees, making the acquisition a good strategic fit for Fjordkraft.
  • The acquisition of Gudbrandsdal Energi, with its high customer satisfaction and organic growth potential, will play an important role in Fjordkraft’s brand architecture going forward.
  • Significant potential for both cost synergies and increased sale of value-added services and cross sales, as well as financial synergies related to net working capital and purchase of electricity.

Key financial figures:

  • Innlandskraft comprises two brands, Gudbrandsdal Energi and Eidsiva Marked, with a total number of electricity deliveries of 239 thousand as per 30 June 2020, split ~92/8 between Consumer and Business deliveries. Innlandskraft is the third largest electricity retailer in Norway.
  • The underlying EBIT estimate for 2020 (ex. COVID-19 effects) for Innlandskraft is NOK 105m. Estimated net revenue for 2020 is NOK 290m.
  • Expected synergies:

o             Net working capital is estimated to be reduced by NOK ~100m from the agreed normalised level

o             Cost synergies are estimated to a minimum of NOK 30m with full effect from Q3 2021

o             In addition, Fjordkraft expects a positive effect on the Group’s total cost of goods sold of minimum NOK 10m.

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