icelandair group hf
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ICELANDAIR GROUP HF.Shareholders‘ Meeting | 30. NOVEMBER 2018
Úlfar Steindórsson, Chairman of the Board
Icelandair Group Shareholders‘ Meeting
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Election of a Moderator and Secretary
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Agenda
1. That the shareholders’ meeting approves the Company’s acquisition of 100% of
the share capital in WOW air hf.
2. Proposal for the Board of Directors to be authorised to increase the Company’s
share capital for the purposes of making a payment under a purchase
agreement.
3. Proposal for the Board of Directors to be authorised to increase share capital.
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1. That the shareholders’ meeting approves the Company’s acquisition of 100% of
the share capital in WOW air hf.
2. Proposal for the Board of Directors to be authorised to increase the Company’s
share capital for the purposes of making a payment under a purchase
agreement.
3. Proposal for the Board of Directors to be authorised to increase share capital.
5
Agenda
Bogi Nils BogasonINTERIM PRESIDENT AND CEO ICELANDAIR GROUP
WOW air Acquisition Overview
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On 5 November 2018 Icelandair Group
entered into a Share Purchase Agreement
(SPA) with the intent of acquiring all shares in
WOW air
The transaction was subject to certain
conditions that were to be met or satisfactorily
resolved before closing
The final purchase price, payable in two
separate payments, was to be adjusted in line
with WOW air’s financial standing and
estimated cash-flow needs
The Transaction Purchase Price Structure
Total issued shares in Icelandair Group
(pre-money)
Payment 1 (floating): Base case
178,066,520 shares in the Seller
Purchase price adjustment principle (max price 240,630,432 shares)
Base estimate of WOW’s cash flow deficit
until end of May 2019
In case the due diligence findings estimate
the cash flow deficit to be greater
In case the due diligence findings estimate
the cash flow deficit to be less
Payment 2 (fixed): 94,275,347 new shares
in the Seller
5,000,000,000
3.5%
(0-4.8%)
Confidential
Fewer shares
More shares
1.8% of total shares
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Status
Mutual decision to abandon the SPA
N/A
Negotiation were not concluded
Negotiation were not concluded
Negotiation were not concluded
Key Conditions of the Sales and Purchase
Agreement
Approval by Icelandair Group’s shareholders’ meeting
Approval by the Competition Authority
A satisfactory result in WOW air fleet negotiations relating
to lease terms and overtaken aircraft
A confirmation that the priority clause of Icelandair pilots
collective wage agreements would not apply to WOW air pilots
A satisfactory agreement being reached with WOW air
bondholders
A satisfactory financial, tax and legal due diligence results
Initial findings showed a larger cash flow
deficit than previously assumed and
other issues
Key Conditions of the Agreement
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Synergy Potential was the Key Rationale for the Transaction
Route network
optimisation
1Fleet Network 2 Flight operations 3 General Administration
and Sales & Marketing
Aircraft handling
Ground services
Aircraft maintenance
Head office cost
Sales & marketing
Certain financial criteria was set for the transaction
1. Investment needed to turn WOW air cash positive
2. Estimated cash flow to WOW air’s operations
3. Estimated one-off costs to realise synergies
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Business plan
created for the
combined company
Deal negotiated with
WOW air based on
the business plan
Íslandsbanki
conducted a cash
flow analysis
based on the
business plan
Seabury, a
specialist aviation
consulting firm,
developed a
business strategy
Kunde & Co
performed a brand
analysis
The Due Diligence and Vetting Process
Initial Deal
AnalysisDue Diligence
Business & Brand
Analysis
Cash Flow
Analysis
Deloitte and Logos
conducted
pre-acquisition
due diligence of
WOW air
Icelandair
Analysis
Icelandair
conducted analysis
of a possible fleet
and route network
optimisation and
synergy potential
Following the analysis it was clear that the main assumptions of the transaction were not in line with what
was initially assumed when the SPA was signed
1. That the shareholders’ meeting approves the Company’s acquisition of 100% of
the share capital in WOW air hf.
2. Proposal for the Board of Directors to be authorised to increase the Company’s
share capital for the purposes of making a payment under a purchase
agreement.
3. Proposal for the Board of Directors to be authorised to increase share capital.
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Agenda
Organic Growth Opportunities
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Route Network
Increase flights to key
destinations
Improve load factor on
existing routes
Expand network to new
destinations
Icelandair Plans to Increase Flights to Key Destinations and
Expand Network in 2019
| Targeting new destinations
| Considering additional leisure
focused destinations
| Up to 10 locations under
consideration
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3 3
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| Fleet plan assumes 3 new aircraft in 2019
| Room for significant internal near term growth while
maintaining a uniform Boeing aircraft fleet
| The introduction of the two bank system in 2019
creates flexibility to increase the utilisation of the
fleet significantly
| Creates equivalent to 4-5 new aircraft capacity
| Further capacity growth can be achieved by sourcing
aircraft on a relatively short notice from lessors
| Opportunity to utilise differently configured aircraft to
add low cost flights under a side letter to the pilot
collective labour agreement
| Assuming a similar passenger mix as in 2018
Icelandair could increase number of tourists by
approximately 350 thousand
Achievable Growth in Capacity 2019
Potential to Increase Capacity by 35% from 20181)
Base Fleet
2019
Fleet 2018 MAX 9MAX 8 B757-
200
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1) In Available Seats
9%
35%
14%
12%
Additional
source-able
capacity
Base fleet
growth
Better fleet
utilisation
Achievable
growth
Fleet StrategyPassenger Fleet Composition 2019
1.262
1.768
2.195 2.350
650
700
2015 2016 2017 2018E 2018EBreakdown
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Number of Tourists Through KEF: 2015-2018 | Thousands
Other airlines 31%
27%
42%
1) Icelandair estimation
Icelandair
WOW Air
Other Airlines
Breakdown by airline in 2018 1)
1.000
Number of Tourists to Iceland
1)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
| l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l |
North America Europe North America
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
| l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l |
North America Europe North America
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
| l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l | l |
North America Long Europe Short North America Long
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Better Fleet Utilisation with Long North American Flights
Connecting to Second Bank
Bank 1
06:00 15:30 17:0007:30
09:00
09:00
10:30
10:30 17:00
20:0018:30
16:00
Bank 2
Connectivity
between
banks
Passengers
from long
N-American
flights connect to
second bank
Passenger
from European
flights connect
from
first bank
Organic Growth Opportunities In Summary
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Substantial growth can be achieved in current operations without considerable
investment
Making changes to current network, extending existing aircraft lifecycle and
new aircraft provide scope for growth
Additional opportunity in changing the mix of To/From Iceland versus via traffic
on existing network
New Share Offering
Private PlacementNew shares in
the nominal value
of up to
499 million
Public OfferingNew shares in
the nominal value
of at least
126 million
| Shares will be sold at a fixed price determined by the Board of Directors at least 3 days
prior to the offering
| The offering is made to existing shareholders at the end of trading on the day the price
is set
| Minimum subscription in the amount equaling EUR 100,000
| The offering to take place 14 December 2018- December 2018 -
- March 2019 -
| Shareholders will have priority rights to subscribe to new shares in the Offering,
excluding shareholders that were allocated shares in the Private Placement
| Price not to exceed the price set in the Private Placement
| The total number of shares being offered will be at minimum 126 million but can
increase in case demand in the Private Placement is less than the allotted 499 million
| The offering to take place in March 2019
| Íslandsbanki and Landsbankinn have been co-mandated to manage the offerings
A Two-fold Share Increase of up to 625 million Shares
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Key Dates
Timeline of Share Offerings
December March
Investor presentation
Meetings with shareholders
Share offering
Private Placement
10.
10-13.
14.
-
-
Week 10-11
Route network and aircraft fleet planning
for 2019 is close to be completed
Key figures will be made available in the
investor presentation before the share
offering in December
Share offer price to be determined at least
3 days before the private placement
Public Offering
The share offerings are planned on the above listed dates, however the final timeline could be subject to change
1) Based on current market price. USD/ISK 125
2) Book value of equity
30.09.2018Before Share
Capital Increase
30.09.2018Pro Forma for
Capital Increase
Assets
Operating Assets 674 674
Other non-current assets 276 276
Total non-current assets 950 950
Other current-assets 473 473
Cash and cash equivalents 175 230
Total current assets 649 704
Total assets 1,598 1,653
Equity and liabilities
Share capital 39 44
Share premium 134 184
Other equity 403 403
Stockholders equity 575 630
Equity ratio 36% 38%
Bonds 214 214
Other liabilities 809 809
Total liabilities 1,023 1,023
Total equity and liabilities 1,598 1,653
Balance Sheet | USD million Icelandair Possible Cash Flow Sources | USD million
Cash and cash equivalents at end of Q3 2018
Icelandair Hotels currently held for sale and signing
anticipated by end of Q1 2019
Discussions with USD unsecured bondholders ongoing
| A written procedure will be submitted on 30 November 2018
Strong Balance Sheet
Aircraft financing and off balance sheet financing of predelivery
payments for new aircraft estimated in December 2018
Share capital increase in December 2018 and March 2019
175
762)
200
501)
Possible partial prepayment of USD unsecured bonds~
Expected negative cash flow in Q4 2018~
Capex in 2019 – 6 Boeing 737 MAX, market value over USD 300m~
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The Board proposes a share increase authorisation to prepare for organic growth opportunities
and strengthening the Company’s financial standing
| Icelandair’s strategy is to be well capitalised with ample liquidity to be prepared for changing market
conditions
| Organic growth plan entails a considerably lower risk than the acquisition
| Company resources focused on core operations opposed to a large scale restructuring and a complex
integration process
| Rationalisation within the region will lead to a more sustainable operating environment – more than 20
airlines have exited the European market since 2010
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The Board’s Proposal
Board of Directors Authorisation to Increase Share Capital
It is proposed that the following provision be adopted as Article 15.2 of the
Company’s Articles of Association:
“The Company’s Board of Directors is authorised to increase the Company’s share
capital by up to ISK 625,000,000 nominal value (ISK six hundred twenty-five
million). The Board of Directors shall decide on the share price and the subscription
terms of the new shares. The intention is that the share offering, in part or wholly,
be made towards Company shareholders registered at the end of trading on the
date on which the price is set for the offering. The shares shall be offered under the
following terms:
a) Shareholders, and as the case may be, others, shall be offered to subscribe for new shares of up to
ISK 499,000,000 (four hundred and ninety-nine million) nominal value through a private placement.
The minimum subscription amount of each individual subscriber shall be at least the equivalent of
EUR 100,000. The new shares shall be sold at a fixed rate to be determined by the Board of
Directors no later than three days prior to commencement of the offering and the purchase price
shall be paid in cash. The Board of Directors shall decide the commencement date of the
subscription period, which shall expire no later than 14 December 2018 and the subscription price
shall be paid no later than 31 December 2018. Participation in the share offer precludes
shareholders from participating in the public offering provided for in point (b) of this Article except to
the extent there will be insufficient subscriptions in the public offering. The priority rights of
shareholders to this part of the share capital increase pursuant to the Act on Public Limited
Companies and the Company’s Articles of Association shall not apply, as per Article 34 of Act No.
2/1995 on Public Limited Companies.
Board of Directors Authorisation to Increase Share Capital
The Company’s Board of Directors shall be authorised to decide further terms and conditions, the
allocation of the new shares and the implementation of the private placement. Subscriptions that lead
to the payment of a purchase price that is an amount less than the equivalent of EUR 100,000 in ISK
shall be void. The costs incurred by the Company as a result of the share capital increase and its
registration is estimated at ISK 100.000.000. The cost of the private placement shall be paid in
accordance with invoice.
Board of Directors Authorisation to Increase Share Capital
b) Shareholders shall be offered to subscribe to new shares of nominal value up to ISK 126,000,000
(one hundred and twenty-six million) in a public offering, taking into account the results of the
private placement pursuant to point (a), so that if insufficient subscriptions have been received in
the private placement, the authorisation of the Board of Directors according to point (b) shall
increase accordingly. Shareholders shall have a priority right to subscribe to new shares in this part
of the share capital increase, in accordance with Act No. 2/1995 on Public Limited Companies and
the Company’s Articles of Association, except that those shareholders who participated in the
private placement pursuant to point (a) shall be considered to have waived their priority rights to
subscribe to shares in the public offering. The new shares shall be sold at a price that does not
exceed the price set in the private placement pursuant to point (a) of this Article. Prior to the public
offering, a prospectus will be issued. The costs incurred by the Company as a result of the share
capital increase and its registration is estimated at ISK 50.000.000. The cost of the public offering
shall be paid in accordance with invoice.
Board of Directors Authorisation to Increase Share Capital
The shares will belong to the same share class as other share capital in the Company. The new shares
shall remain subject to any restrictions and redemption obligations set out in the Company’s Articles of
Association and Icelandic law. The new shares provide rights in the Company from the date of
registration of the share capital increase. The Board of Directors may establish further rules on the sale
of the shares. The authorisation of the Board of Directors pursuant to this Article shall be valid until 1
December 2019, to the extent that it has not been utilised.”
Board of Directors Authorisation to Increase Share Capital
This presentation is for information purposes only. The information in this presentation is based on material from Icelandair hf., and other
public statistics.
The material used in this presentation is based on sources that Icelandair hf., believes to be reliable. However, Icelandair hf., cannot
guarantee that the information contained in this presentation, or that the conclusion drawn from the information, is without fault or entirely
accurate and does not assume any responsibility or liability for any reliance on the information contained herein. Such guarantee is
hereby excluded. Information and opinions in this presentation may be subject to change, update, final release or reissue, which may
include changes from the information contained in this presentation.
All forecasts in this presentation are subject to uncertainties and risks, which include (among others) the risk of adverse or unanticipated
market, financial or political developments and, in international transactions, currency risk.
Icelandair hf., has not substantiated or evaluated the validity of this information by independent surveys.
This presentation does not include recommendation from Icelandair hf., to make any investments on the basis of it.
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Disclaimer
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