Applegreen duo say private ownership best for massive spend plans

Founding directors have joined forces with unit of US investor Blackstone in €718m bid

Applegreen's two founding directors and main shareholders, who have joined forces with a part of US investment giant Blackstone to bid €718 million for the fuel forecourt retailer, say the business is now better off in private hands as it prepares for large investments in electric car charging facilities and US highway service areas.

The company's independent directors, led by chairman Danny Kitchen, have also decided to unanimously recommend the €5.75-per-share takeover bid, highlighting the constraints on Applegreen borrowing heavily as a listed company, particularly amid Covid-19, to take advantage of "significant" growth opportunities, they said in a statement on Tuesday.

The independent directors said they have been told by their advisers in Goodbody Stockbrokers that the offer is “fair and reasonable”, priced at a 48 per cent premium to Applegreen’s closing share price on December 9th, the evening before the bid approach was announced.

Applegreen’s founders, chief executive Robert Etchingham and chief operations officer Joseph Barrett, own 41.3 per cent of the company through a vehicle called B&J Holdings, and plan to roll over all of their shares into the bid vehicle with Blackstone Infrastructure Partners. Mr Barrett declined to comment on the stake the duo will ultimately end up with in the business after the Blackstone unit commits equity.

The move to take Applegreen private comes as the business grapples with Covid-19, Brexit and an accelerating shift by motorists towards electric vehicles. It is understood that the initial bid approach was made in August.

“Applegreen will transition its business through capital-intensive highway projects and electric vehicle charging infrastructure to meet the needs of an evolving consumer,” said the two founders. “We believe private ownership is the appropriate structure for this transition and that in Blackstone Infrastructure Partners, with its long-term focus and its significant ability to accelerate our growth, we have found the right partner for the next stage of the Applegreen journey.”

Bank debt

The bidders’ adviser, Goldman Sachs, is providing a standby €335 million facility to refinance Applegreen’s bank debt, which would fall due at the point of a change of control. However, it is possible that the banks will agree to roll over their loans.

Mr Etchingham (67) founded the business in 1992 with one station in Ballyfermot in west Dublin, having spent the previous decade working for Esso. Mr Barrett (54) joined him the following year.

Applegreen raised €92 million through an initial public offering (IPO) of new stock in June 2015 at €3.80 each. The deal also saw Mr Etchingham and Mr Barrett raising €21.7 million by placing some of their shares on the market.

The duo’s stake declined over the following years as they sold an additional €27 million of their shares and Applegreen raised a further €222 million through two stock placings to fund expansion.

The group’s number of sites has trebled since the flotation to total 559 at the end of June, including 204 locations in Ireland, 164 in the UK and 191 in the US, a market it entered in 2014.

The bulk of investment in recent years has been in the US, where it has focused on joint ventures using some complex structures.

If the takeover deal fails, Applegreen has agreed to reimburse up to €4.3 million of third-party costs and expenses incurred by the bidders.

“The independent directors believe the acquisition will bring strategic benefits to Applegreen as Blackstone will be able to provide access to a significant pool of available capital to fund both organic investment and growth opportunities, an ability to focus on adapting to evolving sector trends such as the growing adoption of electric vehicles, a greater degree of flexibility on leverage, and will allow the group to benefit from Blackstone’s significant investment experience and access to opportunities across its markets including the US,” the company said.

The takeover bid is being structured as a so-called scheme of arrangement, which would require the approval of 75 per cent of shareholders at an extraordinary general meeting as well as the nod of the High Court. The full bid document will be published by February 5th and the deal is expected to be completed in March, subject to necessary approvals.