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BUNKER INDEX :: Price Index, News and Directory Information for the Marine Fuel Industry
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Aegean buys Melissanidis-owned firms; founder's group to become biggest shareholder

Boardroom power play as acquired firm is set to nominate three board members - including founder's son George.



Dimitris Melissanidis, founder of Aegean Marine Petroleum. Image credit: Aegean


Updated on 21 Feb 2018 07:16 GMT

Aegean Marine Petroleum Network Inc. has announced that it has entered into a definitive agreement to acquire all of the outstanding share capital of H.E.C. Europe Ltd (HEC), the parent company of Hellenic Environmental Center S.A. and a group of companies that together provide global port reception facilities services, for an aggregate amount of approximately $367 million.

The acquired businesses are owned and controlled by Aegean's founder and former Head of Corporate Development, Dimitris Melissanidis, in addition to certain members of his family and the Agiostratitis family.

The deal is said to include the assumption of "certain indebtedness", which will be payable in the form of a combination of debt, the assignment of certain accounts receivables, cash and shares of Aegean common stock, which will represent approximately 33 percent of the issued and outstanding common stock of Aegean after giving effect to the issuance.

According to Aegean, the acquisition was unanimously approved by the Aegean board upon the recommendation of a special committee of independent directors - and without the approval of its shareholders.

"In making its recommendation, the Special Independent Committee consulted with its independent financial advisor, Clarksons Platou Securities, Inc. and outside legal counsel. The acquisition does not require the approval of Aegean's shareholders," Aegean explained.

Aegean says it expects the acquisition, which "results from several months of negotiations", to be immediately accretive to adjusted earnings per share in year one.

Investor rights agreement

Aegean and the sellers also entered into an investor rights agreement in which:

- effective upon closing of the acquisition and for so long as the sellers and their controlled affiliates collectively own at least 25 percent of the issued and outstanding voting stock of Aegean, (i) the sellers, acting unanimously, will have the right to designate two nominees for appointment or election to the board of directors of Aegean, and recommend one nominee (who shall be independent) for appointment or election to the Aegean Board;

(ii) the sellers and their controlled affiliates shall vote all Aegean shares beneficially owned by them in accordance with the recommendations of the Aegean board with respect to the appointment and removal of directors; and

(iii) the sellers and their controlled affiliates shall not in the aggregate acquire beneficial ownership in excess of 40 percent of the issued and outstanding share capital of Aegean (subject to certain exceptions).

- the sellers agree not to sell, transfer or assign their shares of Aegean common stock for a period of at least one year.

- Aegean agrees to register Aegean common stock for resale upon the request of the sellers, subject to the expiration of the 'lock-up period'.

- the sellers and their controlled affiliates agree not to compete with HEC for a period of 24 months.

In addition, Aegean said it expects to appoint one additional independent director to the Aegean board, effective as of the closing of the acquisition - creating an eight-member board of directors.

Aegean said the four new board members expected to be appointed at the close of the acquisition are Demetrios Diakolios (a new independent director to be appointed by Aegean's existing board members), George Melissanidis - the son of Aegean founder Dimitris - and Darren Laguea (the two nominees expected to be designated by the sellers) and Alexis Rodopoulos (an independent director expected to be nominated by the sellers and acceptable to Aegean).

Shareholder group

Details of the investor rights agreement and expected board member appointments follow recent announcements made by the Committee for Aegean Accountability - a group of long-term shareholders of bunker supplier Aegean Marine Petroleum who collectively control around 12 percent of the company - which on Monday stated that it was "gravely concerned that the Board's silence means it is contemplating a transaction designed to dilute shareholder influence at Aegean".

"We caution the Board against any attempt to suppress the voting rights of shareholders through a dilutive transaction," the shareholder group said, whilst adding that it intends to serve the company with a books and records request.

Acquisition highlights

According to Aegean, the highlights of the acquisition are as follows:

- Significant synergy potential: The combined company has the potential to achieve significant synergies through repurposing/redeploying idle or underutilized Aegean vessels and consolidating corporate facilities.

- Improved utilization of geographic footprint: The HEC Group can leverage Aegean's existing team and port relationships to expedite its market penetration. The expanded geographic footprint will allow the HEC Group to sell its services into more than 30 markets worldwide.

- Attractive, 'utility-like' business model: The transaction is expected to help diversify Aegean's current business model and reduce its dependency on bunker-market-related sales. HEC Group's high-margin and recurring revenues, which are secured by long-term significant port relationships, are expected to further improve stability of cash flows of the combined company.

- Entry into an exciting and untapped Market: The combination of the HEC Group and Aegean creates one of the largest providers of port reception facility services and establishes a committed market leader in the rapidly growing global environmental market. Environmental regulatory trends in the industry are expected to generate increased and sustainable demand for HEC Group's services.

- Increased long-term customer base: Customers from both companies will benefit from the complementary services that the HEC Group and Aegean can provide. Through this combination, there will be significant marketing opportunities.

- Significant upside growth potential: In addition to strong organic growth, the HEC Group's identified acquisitions and geographic expansion projects provide immediate and actionable growth opportunities. Aegean believes that the HEC Group can be a global industry leader with significant growth in EBITDA over time.

- Financial impact: Aegean expects the acquisition to be immediately accretive to adjusted EPS in year one. Post-closing of the transaction, expected additional 2018E revenues will amount to approximately $60-65 million and 2018E EBITDA will amount to approximately $35-40 million, which assumes timely closing of the transaction and completion of targeted acquisitions in 2018.


Comments

Dimitris Melissanidis, founder of both Aegean and HEC, stated: "The combination of Aegean and HEC, two companies that I have been involved with since their creation, unites two businesses that are essential to shipping. Just as Aegean has grown to become a worldwide brand synonymous with high quality physical supply of bunker fuels, H.E.C.'s business has the opportunity to expand globally, and become the market leader in the provision of essential environmental services to vessels and ports. I am happy to return as part of the group that will be the largest shareholder of the combined company as we focus on improving the overall health of the combined business and commit ourselves to a greener world."

Yiannis Papanicolaou, Chairman of the Board of Directors of Aegean, remarked: "For the past several quarters, the Board and senior management have contemplated strategic options for Aegean reflecting the prospects of the traditional bunkering business, the challenges associated with the transition towards a market with a different product mix and the ever-growing needs of the shipping industry for greener products and services. The acquisition of HEC, a world leader in its field, is our first decisive step in the direction of combining higher profitability for our shareholders with environmental sustainability and social accountability. Our next priority is the elaboration of a roadmap to operate successfully within the new landscape post-2020 IMO regulatory changes and beyond."

Jonathan McIlroy, Aegean's President, commented: "I want to welcome Darren and the HEC team to the Aegean family. The acquisition of HEC enables Aegean to pursue a complementary high margin business with global growth opportunities, while simultaneously enabling the group to continue the optimization of its global asset base and infrastructure. The combination of these two companies creates a leading service provider to the maritime industry that not only supplies the fuel that enables world trade, but now with HEC, cares for the waste created by that trade and in doing so, safeguards our environment."

Darren Laguea, Group CEO of H.E.C. Europe Limited, said: "I have spent my entire career working in the bunkering industry and port reception facility services. Our team at H.E.C. is extremely excited to be joining Aegean's global network. We believe there are significant synergies to be gained through the cooperation of our two companies and see exciting growth prospects in our future."






Related Links:

Aegean shareholder group nominates director candidates for next AGM
Aegean completes repurchase of founder's shares
Aegean founder set to bank $99.6m from share sale
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