Webjet Announces Successful Completion Of Institutional Entitlement Offer

Funds Raised For Acquisition of Destinations of the World: Webjet Limited’s (ASX:WEB) stock plunged 8.4% on November 7, 2018 after coming out of the trading halt. WEB stock was placed in trading halt until 7 November 2018 at the request of the company due to fund raising for the acquisition of Destinations of the World. The company has today completed the institutional component of its fully underwritten 1 for 9 accelerated non-renounceable entitlement offer and has raised approximately A$92 million. Â

Primarily, the move related to subscriptions for fully paid ordinary shares (new) in Webjet made at A $ 11.50 per New Share as the offer price. The Institutional Entitlement Offer received very strong support from institutional shareholders with a take-up rate from eligible institutional shareholders of 97%. The retail component of the Entitlement Offer will be now open on 12 November 2018. WEB is acquiring Destinations of the World (“DOTW”), which is a leading B2B travel business, for the total consideration of US$173 million (A$240 million) with additional performance based earn-out up to US$25 million (A$35 million). This deal represents a substantial increase in WebBeds' scale, with incremental TTV from DOTW of US$529 million (A$734 million) and directly contracted hotel relationships increasing from c.23,000 to c.28,500.

Further, the acquisition will enhance the geographical footprint of WebBeds from the existing APAC and Americas businesses and will further expand the company’s presence in Europe and MEA. The projected cost synergies from the deal is of US$3 million (A$4 million) per annum (excluding one-off costs to achieve), commencing in FY19, with full year impact in FY20. The projected revenue synergies is of US$7 million (A$10 million) per annum (excluding one-off costs to achieve), expected to be achieved in full in FY20. The transaction is mid-single digit EPS accretive in FY19 before synergies and in excess of 20% EPS accretive in FY19 including synergies (excluding one-off costs to achieve). Moreover, the transaction has received the Vendor confidence in the combination, with DOTW’s private equity backer, Gulf Capital, founder and management to take US$20 million (A$28 millon) of consideration in WEB shares. A$102 million (US$73 million) of cash, will be funded through a new debt facility and existing debt facility.

Managing Director, John Guscic, planned to take up his entitlement under the Entitlement Offer to the maximum extent possible under the already disclosed structured option and financing agreement in place with UBS AG. Mr Guscic also plans to commit to sub-underwrite A$33 million of the Retail Entitlement Offer on the same terms as other sub-underwriters, except that he will not be paid a fee for his commitment. The arrangements are in place between Mr Guscic and UBS AG whereby Mr Guscic may, at his option, will fund part of his sub-underwriting obligation by way of a limited recourse loan facility from UBS AG. It is planned that any shortfall of shares under the Retail Entitlement Offer will be allocated to the sub-underwriters and will be allocated to them on a pro rata basis. Overall, the acquisition is expected to complete on 22 November 2018.

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