SprintItaly’s Board of Directors approved the business combination operation with SICIT 2000, already approved by the Board of Directors of the latter.
The Business Combination consists of a number of corporate transactions and will be completed through the merger by incorporation of SICIT into SprintItaly: it constitutes a reverse-takeover operation pursuant to art. 14 of the AIM Italia Issuers’ Regulations.
SprintItaly, SICIT and Intesa Holding (currently sole shareholder of SICIT) today signed the agreement governing the Business Combination. The Boards of Directors of SprintItaly and SICIT have also approved the Merger plan which will be submitted to the relevant Shareholders’ Meetings.
The objective of the operation is to support SICIT’s development strategy in the relevant markets, which in recent years recorded double-digit growth rates. The development plan is aimed at strengthening SICIT’s market leadership through an increase in production capacity in Italy and the extension of its international presence, for example in Asia and the American continent. In particular, the plan provides for the launch of a plant in South America (near a local tanning centre).
Main terms of the operation
Following the approval of the Business Combination, and in particular of the Merger, by the Shareholders’ Meetings of SprintItaly and SICIT and in accordance with the conditions contained in the Framework Agreement, SICIT will be incorporated into SprintItaly; the resulting company of the Business Combination will be named “SICIT Group S.p.A.” and will be listed on the AIM Italia, with the aim of moving to the Borsa Italiana’s Mercato Telematico Azionario (possibly the STAR Segment) when the conditions and in the necessary technical time have been met.
Before the Business Combination, SICIT and Intesa Holding are expected to carry out preliminary and preparatory activities, including the acquisition by SICIT of the entire share capital of the parent company SICIT Chemitech S.p.A., which mainly carries out research and development activities aimed at improving SICIT products and related production processes.
In relation to the Business Combination, an equity value of € 160 million was attributed to the SICIT Group; this value was determined on the basis of the estimated consolidated EBITDA of the SICIT Group at 31 December 2018 and the amount of the consolidated net cash of SICIT Group at 31 October 2018 (positive for € 3.4 million). For information only, this equity value corresponds to a multiple of Ev/EBITDA 2017 of approximately 7x and a PE of approximately 12x.
SprintItaly shareholders, with an investment of € 100 million, will initially have approximately 54% of the Combined Entity (which may become approximately 60%, fully diluted).
Of this, € 70 million will be allocated to the purchase of SICIT shares owned by the controlling shareholder, Intesa Holding, and € 30 million will be allocated to strengthen the capital and financing the growth programme, in Italy and abroad, of the Combined Entity.
The remaining resources of € 50 million will be distributed to SprintItaly’s shareholders net of the outlay for any withdrawals related to the Business Combination, in accordance with the law and the articles of association, for a total amount of the distribution between approximately € 5 million (in the event of maximum withdrawal) and € 50 million (in the event of no withdrawal).
In consideration of the need for the Business Combination and the consequent distribution of resources of the Company mentioned above, also for the purpose of a better determination of the Merger exchange, the shares of SprintItaly will be grouped together in such a way that, as a result of the Merger, the implicit value of the shares will be equal to € 10.
Moreover, prior to the Business Combination, the promoters will subscribe a capital increase of SICIT to be carried out through the issue of special shares, with characteristics in line with those of SprintItaly, at a unit price of € 10. As a result of this increase, following the Merger and therefore the grouping and exchange operations, the promoters will once again hold (considering the SprintItaly special shares already held at that date) the original 300,000 special shares of the Combined Entity (pre-conversion of the special shares).
It should be noted that, in the context of the Business Combination, the promoters of SprintItaly propose to modify the terms of conversion of the special shares, in order to align their interests with those of the investors. In fact, it is proposed to eliminate all the triggers for the conversion of special shares post Business Combination (originally set at prices of € 11, € 12 and € 13 per ordinary share) and to set a single threshold of € 13.50 with the extension of the reference period to 5 years. In this way, SprintItaly’s promoters will convert the majority (i.e. 65%) of their special shares only after market investors received the maximum number of shares from the exercise of their warrants (which, please note, have an acceleration threshold of € 13 per ordinary share) and therefore achieved an estimated total return, between shares and warrants, of more than 50%. This proposed amendment is based on the promoters’ conviction of the growth and development potential of the Combined Entity in the medium term.
In addition, in agreement between the parties, it was decided to maintain unchanged the ratio for the assignment of warrants to be assigned to the Business Combination (equal to 3 warrants for every 10 ordinary shares held prior to the grouping) and therefore of the conversion shares for investors despite the reduction in SprintItaly’s investment in the Business Combination and the consequent return of the above resources (which would normally have resulted in a proportional reduction in the warrants), thus increasing the leverage in favour of each ordinary investor who joins the Business Combination.
In order to protect the Combined Entity from any damage that is the immediate and direct consequence of past behaviour, in the Framework Agreement Intesa Holding is committed to refund the Combined Entity up to a maximum amount of € 16 million.
Finally, by the date of signature of the Merger deed, PromoSprint Holding (as promoter of SprintItaly), Intesa Holding and the majority shareholders of Intesa Holding will sign agreements, having as their object:
- the composition of the Board of Directors of the Combined Entity, which will be composed of 11 members, including 4 independent directors and 2 of the current directors of SprintItaly, in line with the provisions of the Framework Agreement;
- two lock-up commitments related to: (i) the shares held by Intesa Holding in the Combined Entity and (ii) the shareholdings held by certain majority shareholders in Intesa Holding (representing a total of 51.5% of the share capital of the same), both with a duration of 48 months from the date of effectiveness of the Merger;
- a dividend policy aimed at distributing, in each financial year, 50% of the consolidated net profit of the financial statements.
Rino Mastrotto, Chairman of the Board of Directors of SICIT, said: “I am proud of this result, which crowns almost thirty years of management by the tanners of the Arzignano district (Intesa Holding) and which brings SICIT to the Stock Exchange to guarantee a new stage of growth and development“.
Gerardo Braggiotti, Chairman of the Board of Directors of SprintItaly, commented: “The work of these months allowed us to identify a company that fully reflects the goal set and represents the best opportunity for our shareholders, also considering the current context of the financial markets. SICIT is a company that combines in an excellent way innovation, solid market positioning and high potential. The Business Combination agreement, made possible by the opening of the current ownership and the vision of a forward-looking management, will give a strong boost to the implementation of the development plan, making SICIT an ideal candidate for a successful IPO“.
The Merger Plan provides for an exchange ratio of (i) no. 1 ordinary share of the Combined Entity for every no. 1 ordinary share of SICIT and (ii) no. 1 special share of the Combined Entity for every no. 1 special share of SICIT.
The Merger will be approved on the basis of the following reference balance sheets, pursuant to Article 2501-quater of the Italian Civil Code:
- SprintItaly’s balance sheet as at 30 September 2018, consisting of a balance sheet, income statement, cash flow statement and notes to the accounts, prepared in accordance with ITA GAAP accounting principles and approved by SprintItaly’s Board of Directors on 13 December 2018;
- interim financial report of SICIT as at 30 September 2018, pro-forma to reflect the acquisition of Chemitech and the additional operations prior to the Merger provided for in the Framework Agreement, prepared in accordance with ITA GAAP accounting standards, consisting of the balance sheet, income statement, cash flow statement and notes to the accounts, approved by the Board of Directors of SICIT on 19 December 2018.
In accordance with SprintItaly’s Articles of Association, the resolution of the shareholders’ meeting to change the corporate purpose necessary to carry out the Business Combination will be resolutely subject to the fulfilment of both of the following conditions:
- the exercise of the right of withdrawal by a number of shareholders who did not participate in the approval of the aforesaid change in the corporate purpose representing at least 30% of the ordinary share capital
- the completion of the procedure for the liquidation of such withdrawing shareholders through the redemption or cancellation of a number of ordinary shares equal to or greater than 30% of the ordinary share capital. In this regard, it should be noted that under the law and the articles of association, the liquidation value of any ordinary shares of SICIT subject to withdrawal has been fixed at € 10 per share.
The shareholders of SprintItaly will be called upon to approve the Business Combination at the Shareholders’ Meeting, which will then be convened by means of a special notice published, inter alia, on the website www.sprint-italy.com in the “Significant Transaction” section.
The Business Combination is expected to be completed before summer 2019.
In the operation SprintItaly has been advised by KPMG for the financial due diligence, by Chiaravalli Reali e Associati for the fiscal due diligence, by TAUW Italia for the environmental due diligence and by WillisTowerWatson for the insurance due diligence and by Goetz for the business due diligence. Banca Finint has been financial advisor to Sicit’s shareholders, initially supporting entrepreneurs in the preparation and selection of the operation and then in the selection of SPAC and in the structuring and negotiation of the operation.
Banca IMI (Intesa Sanpaolo Group) acts as NOMAD and SprintItaly Specialist, while Gatti Pavesi Bianchi acted as legal advisor to the parties.