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Robert.Jervis_43227 Mar 31

Agility makes recommended cash offer for John Menzies

agility menzies
£763m EV
The boards of Agility and National Aviation Services (NAS), one of Agility’s wholly owned subsidiaries, and the board of John Menzies PLC (Menzies) have announced that they have reached agreement on the terms of a recommended cash offer to acquire 100.0% of the ordinary shares in Menzies at a price of 608 pence a share.

Menzies delivers time-critical logistics services at more than 200 locations in more than 37 countries, across six continents, through a global team of more than 25,000. Menzies Aviation is firmly established as a global player in cargo, fuelling and ground handling with strong competitive positioning within each of its core focus areas and an excellent reputation in the market.

The deal values Menzies at approximately £571m on a fully diluted basis and at approximately £763m on an enterprise value basis.

The board of Menzies intends unanimously to recommend the cash offer to their shareholders.

Agility stated that if approved by Menzies’ shareholders and regulatory authorities, the deal will create an industry powerhouse in aviation services.

The Combined Group is expected to be the largest airport services company in the world by the number of countries it operates in, second largest in terms of airports served, and third largest in terms of revenue.

The combined revenues of Menzies and NAS were more than $1.5bn in 2021. The Combined Group is expected to have approximately 35,000 employees with a presence at more than 250 airports in 57 countries, handling more than 600,000 aircraft turns per year.

The Combined Group will be wholly owned by Agility.

Vice-Chairman of Agility Tarek Sultan said:

“Agility’s focus is on growth and shareholder value creation. We are a long-term, multi-business operator and investor aiming to create value with a disciplined investment strategy that focuses on companies in high-growth sectors with strong fundamentals, reinforced by management teams with established records, best-practices governance, and alignment with Agility’s vision and values. Menzies is a good fit. The aviation sector has strong growth potential, and Menzies is one of the most-established providers in the industry, with a sustainability focus we share. A NAS-Menzies combination will create a strong and resilient industry player, well positioned to grow, and drive future earnings. We expect this acquisition to further diversify Agility’s revenue base and strengthen cash flow generation.”

Agility reported that the combination of NAS and Menzies represents opportunities to:
  • Create a global aviation services leader with greater scale and resources to deploy on growth opportunities: The Combined Group hopes to equip itself with the scale and resources necessary to serve a broader customer base globally and capitalise on growth opportunities as the aviation industry continues to recover from the effects of the COVID-19 pandemic. The Combined Group looks to have the capital to be able to invest in the talent development, technology, infrastructure, sustainability, and innovation required to accelerate growth
  • Leverage complementary footprints and product portfolios to create a truly global aviation services and air cargo platform: The Combined Group is expected to unite NAS’ leadership in emerging markets across the Middle East and Africa, alongside Menzies’ presence in large global markets in Europe, North America, and Oceania. Customers will hopefully benefit from a more diversified product portfolio and will be able to access Menzies’ operational excellence and greater scale in more airports around the world
  • Establish a stronger and more resilient entity that is better positioned to support the needs of the market: The Combined Group will expand the breadth and depth of service offerings to customers, as well as meet growing customer expectations to invest in areas including technology, new equipment, warehousing infrastructure, and training. Together, the companies hope to be able to respond more effectively in an increasingly competitive market

It is intended that the Combined Group will use the globally-recognized “Menzies” and “Menzies Aviation” brands following completion of the acquisition.

Following completion of the Acquisition, it is intended that Menzies and NAS will be combined and managed by a team with representatives drawn from both Menzies and NAS with the current Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer of Menzies in these roles in the Combined Group. The current NAS CEO is expected to assume the role of Chairperson of the Combined Group. The Combined Group will be governed by a professional board of directors through an appropriate governance structure.

NAS/Agility intend to support Menzies’ heritage and presence in the UK, including retaining a corporate hub and significant head office functions in Edinburgh. In addition, the intention is to open a new head office for the Combined Group in London, where certain senior management and some head office functions will be located. These arrangements will reflect the global footprint of the Combined Group’s operations and enable the Combined Group to have a new centre in London, where many of its clients have a presence.

Now that a recommended offer has been announced, Agility stated that the next steps are to seek approval from Menzies shareholders as well as the relevant regulatory authorities. Both companies will work alongside counsel to ensure that the requisite competition and regulatory filings are made in the appropriate jurisdictions. It is currently expected that the transaction will complete in the third quarter of 2022.

Separately, Agility has reported a revenue increase of 22.1% year-on-year

In FY2021, Agility reported revenues of KD486.2m*, up 22.1% y-o-y, and an EBITDA of KD109m, up 13.2% y-o-y. Most significantly, net profit rose by 2,250.7% y-o-y, reaching KD997.4m.

In 2021, Agility sold its core commercial logistics business, Global Integrated Logistics (GIL), to DSV, in exchange for 19.3m shares in DSV. As a result, Agility reported a one-time gain of almost KD1bn and is now the second-largest shareholder in DSV with an 8.0% stake.

Agility stated it enjoys a healthy balance sheet with KD2.9bn in assets including KD1.4bn of DSV shares. Net Debt stood at KD324.4m as of December 31, 2021

Agility Vice Chairman Tarek Sultan said:

“Agility’s 2021 performance was exceptional. In addition to a significant one-time gain from the GIL sale, our portfolio of businesses performed well, returning to pre-COVID profitability levels. We will be looking to accelerate growth in these businesses as they contribute to our core operations and EBITDA.”

Sultan continued:

“The DSV transaction and the sale of GIL fundamentally changed the structure of the company and reset the baseline for the continuing operations. Like most companies, Agility was adversely affected by the COVID pandemic in 2020 and 2021.Looking ahead, despite the challenging market conditions and geopolitical risks, we expect performance of our continuing operations to be strong and expect our operating results for 2022 to show a minimum of 20.0% growth compared to this year.  The board and the executive management team of the company continue to be focused on growing and enhancing shareholder value over time, and we are confident that with current M&A initiatives, as well as the organic and inorganic growth initiatives that we are working on across the controlled segment entities, we will continue to create value for shareholders in the medium and long term.”

Commenting on the company’s investments, Sultan said:

“Today, we own roughly 8.0% of DSV. This investment represents a large portion of our balance sheet.”

Sultan also noted that Agility’s debt-levels were expected to increase in line with business growth needs, but that the company intends to keep borrowing within limits.

Agility Logistics Parks (ALP) revenue in 2021 was roughly in line with 2020 results, which benefitted from increased demand for warehousing facilities as companies and government entities continued to store more goods in the face of ongoing supply chain disruption. Demand for warehousing space continues to grow in the MEA and South Asia regions where ALP operates. Agility reported that ALP is optimising its existing land bank and adding to its supply of available land to meet customer demand. In 2021, ALP added roughly 150,000 sq m of built-up storage area. Operations in Kuwait, Saudi Arabia and Africa have performed well, and ALP is looking at new markets for additional growth.

Tristar, a fully integrated liquid logistics company, posted a 16.5% increase in revenue for the full-year 2021 vs. 2020. Profitability more than doubled and was in line with forecasts. This performance is driven by strong recovery in international oil prices, good performance in the Road and Transport segments, and favourable dry bulk charter rates in the Maritime segment. Tristar expects another year of growth in 2022.

National Aviation Services (NAS) reported 65.4% revenue growth year-over-year for 2021. The increase reflects the broad recovery in commercial aviation as flights, passengers and cargo volumes grew. In addition, NAS undertook cost-cutting measures that had a positive impact on overall performance and added new operations in the Democratic Republic of Congo, South Africa, Iraq (Baghdad) and Kenya. NAS’s performance also benefitted from its launch of technology solutions and applications intended to support governments and passengers by enhancing travel health and safety. In 2022, NAS and Agility publicly reported that both are in discussions for the potential acquisition of John Menzies, one of the world’s largest providers of aviation services.

United Projects for Aviation Services Company (UPAC) reported a 14.0% increase in revenue for 2021. The increase was driven by a rebound in airport-related services and parking, following the phased reopening of Kuwait International Airport in Q3. UPAC expects a gradual increase in airport traffic in 2022 and beyond, and a favourable outlook for its business.

UPAC is a co-developer of Abu Dhabi’s Reem Mall, on Reem Island. Construction is more than 95.0% complete. The retail, entertainment and leisure attraction is expected to open in 2022. Carrefour, the anchor tenant, recently opened its doors at Reem Mall.

At Global Clearinghouse Systems (GCS), Agility’s customs-modernization company, FY2021 revenue grew 32.1%. The increase was driven by higher trade volumes and company growth initiatives. GCS is pursuing opportunities to sustain future growth and diversify its sources of income.

*1KD = €3.0/$3.3

Source: Transport Intelligence
Source: Transport Intelligence