03 October 2019
Webster Limited (Webster) today announced that it has entered into a binding Scheme Implementation Agreement (SIA) with PSP BidCo and Sooke Investments Inc, each indirect wholly-owned subsidiaries of PSP Investments, one of Canada’s largest pension investment managers. Under the SIA it is proposed that PSP BidCo will acquire all of the ordinary shares in Webster that PSP Investments does not already own for a cash price of $2.00 per Webster share (Scheme Consideration) by way of a Court-approved scheme of arrangement(Scheme).
PSP BidCo also intends to acquire all of the Webster preference shares on issue for $2.00 in cash per preference share via a separate, contemporaneous scheme of arrangement (Preference Share Scheme).
The Scheme and Preference Share Scheme (together the Proposed Transaction) imply a market capitalisation for Webster of approximately $724 million (1) and an enterprise value of approximately
$854 million (2).
Webster is one of Australia’s leading agribusinesses, operating walnut and almond orchards in NSW and Tasmania, irrigable land for cotton and other annual crops, cattle and dorper sheep production, a portfolio of water entitlements and an apiary business in NSW.
PSP Investments invests funds for the pension plans of the Canadian Federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Forces. Through its Natural Resources group, PSP Investments invests globally in agriculture, timberland and related opportunities via direct investments. It partners with like-minded peers and best-in-class operators who are committed to implementing best practices particularly in the areas of employee health and safety, the environment and sustainability. PSP Investments currently owns 19.1% of Webster’s ordinary shares.
Overview of the Scheme
Under the terms of the Scheme, Webster ordinary shareholders will be entitled to receive $2.00 per share in cash, subject to all applicable conditions being satisfied or waived and the Scheme being implemented.
The Scheme Consideration represents a:
Intentions in relation to certain Webster assets
Should the Scheme be implemented, Webster will transfer certain assets to a separate, newly formed PSP Investments group entity (KoobaCo) for a value of $276.7 million plus the net working capital acquired with the business (3). These assets would comprise the Kooba property aggregation and business, the Hay properties and business, the southern grazing stock and business, the apiary business and certain water entitlements related to the Kooba and Hay properties.
Belfort Investment Advisors Limited (Belfort) and Verolot Limited (Verolot) will be offered an opportunity to acquire a 50.1% ownership interest in KoobaCo after implementation of the Scheme. Belfort and Verolot own 12.5% and 10.7% respectively of Webster’s ordinary shares and are entities associated with Chris Corrigan and David Fitzsimons respectively, both of whom are directors of Webster. Belfort and Verolot remain free to vote on the Scheme but will only be entitled to acquire the ownership interest in KoobaCo if the Scheme is approved by the requisite majorities of the other Webster ordinary shareholders (i.e. excluding any votes cast in favour by Belfort and Verolot). The Scheme is not conditional upon Belfort and Verolot acquiring any interest in KoobaCo.
As a consequence of these arrangements, Chris Corrigan and David Fitzsimons have not been involved in the Webster Independent Board Committee’s consideration of the transaction or participated in the recommendation to Webster shareholders in respect of the schemes.
Further disclosure in relation to these arrangements, including an Independent Expert opinion as to whether the arrangements provide any ‘net benefit’ to Belfort and Verolot, will be provided in the Scheme Booklet to be sent to Webster shareholders.
Key terms of the Scheme Implementation Agreement
Implementation of the Scheme is subject to Webster ordinary shareholders approving the Scheme by the requisite majorities. Webster ordinary shareholders will have the opportunity to vote on the Scheme at a meeting (Scheme Meeting) expected to be held in early 2020.
Implementation of the Scheme remains subject to certain other customary conditions, including:
Implementation of the Scheme is not conditional on the implementation of the Preference Share Scheme.
Under the SIA, Webster is bound by customary exclusivity provisions, including "no shop", "no talk" (subject to Webster directors' fiduciary obligations), and "notification" obligations, as well as "matching rights". A break fee of $5.5 million representing 0.76% of the aggregate Scheme Consideration will be payable to PSP BidCo by Webster in certain circumstances.
A copy of the SIA, which includes full details of the conditions to the Scheme, is attached to this announcement.
Preference Share Scheme
Pursuant to the SIA, PSP BidCo intends to acquire all of the Webster preference shares on issue for $2.00 in cash per preference share via the Preference Share Scheme. This price represents:
Implementation of the Preference Share Scheme is conditional upon Court approval of the Scheme for the ordinary shares and other customary conditions, including:
If the Scheme is implemented but the Preference Share Scheme is not implemented, PSP Investments will seek to:
Recommendation of the Independent Board Committee of Webster
Webster has established an Independent Board Committee comprising Maurice Felizzi and David Cushing (Nonconflicted directors) to consider the merits of the Proposed Transaction and to make recommendations to Webster ordinary shareholders and preference shareholders. The Independent Board Committee does not include those Webster directors associated with PSP Investments, Belfort or Verolot. The Non-conflicted directors have established protocols to ensure that the best interests of Webster and its shareholders are advanced by the proper development, analysis and evaluation of the Proposed Transaction and any potential counter-proposals that may arise.
The Non-conflicted directors will unanimously recommend that Webster ordinary shareholders vote in favour of the Scheme, in the absence of a superior proposal and subject to an Independent Expert concluding that the Scheme is in the best interests of Webster ordinary shareholders.
Each Non-conflicted director intends to vote all of the Webster ordinary shares controlled or held by, or on behalf of that Non-conflicted director in favour of the Scheme, subject to those same qualifications.
Similarly, the Non-conflicted directors unanimously recommend that Webster preference shareholders vote in favour of the Preference Share Scheme in the absence of a superior proposal and subject to an Independent Expert concluding that the Preference Share Scheme is in the best interests of Webster preference shareholders.
Three entities associated with David Cushing hold Webster ordinary shares. Maurice Felizzi holds ordinary shares issued under the Webster executive long-term incentive plan under which unvested shares vest automatically on implementation of the Scheme and may be entitled to certain benefits under his employment contract as a result of implementation of the Scheme. Details of these interests will be disclosed in the Scheme Booklet to be sent to ordinary and preference shareholders.
The Webster Independent Board Committee intends to appoint KPMG Corporate Finance (Independent Expert)as an independent expert to report on the Scheme and the Preference Share Scheme. The Independent Expert will also report on whether Belfort and Verolot will receive a net benefit from the proposed Kooba sale arrangements and, if required by ASX, whether the sale consideration is fair and reasonable to shareholders of Webster not associated with PSP Investments, Belfort and Verolot. The Independent Expert’s report will be included in the Scheme Booklet to be sent to Webster ordinary and preference shareholders.
Update on Webster earnings guidance for FY19
At its half year results released on 22 May 2019, Webster advised that due to continued drought conditions affecting all areas of production and lower than expected walnut production and pricing, it expected to record a near breakeven position for the full year to 30 September 2019.
Subject to audit of its accounts, Webster remains of this view.
Commentary on the Proposed Transaction
Managing Director and Chief Executive Officer of Webster, Maurice Felizzi, said the Proposed Transaction represents an attractive value for Webster shareholders.
“In assessing the Proposed Transaction, the Non-conflicted directors considered Webster’s revenue and earnings profile, the current value of its underlying assets and concluded that the offer from PSP BidCo provided ordinary shareholders with the opportunity to immediately realise a significant premium to the share price without the inherent risks associated with agricultural enterprises.
“The Proposed Transaction provides a substantial premium for both Webster ordinary shareholders and preference shareholders and also provides enhanced certainty and accelerated value for their shareholding.
“We also concluded that Webster and PSP Investments have complementary, long-term growth aspirations making PSP Investments a logical and suitable owner of the Webster asset portfolio. We are encouraged by their understanding of our business and its ongoing importance to regional and rural communities in Australia.
“PSP Investments has a proven track record in managing and investing in agricultural assets over the long term for sustainable value creation and therefore we believe this transaction represents a positive outcome for all stakeholders in our business.”
Webster shareholders do not need to take any action in relation to the Proposed Transaction at this stage.
A Scheme Booklet containing information relating to the Scheme and Preference Share Scheme, reasons for the Non-conflicted directors’ recommendations, an Independent Expert's Report and details of the Scheme and Preference Share Scheme meetings is expected to be despatched to Webster ordinary shareholders and preference shareholders in the December 2019 quarter.
Ordinary shareholders will have the opportunity to vote on the Scheme at a Court-convened shareholder meeting, which is expected to be held in early 2020. Preference shareholders will have the opportunity to vote on the Preference Share Scheme at a Court-convened meeting to be held immediately following the Scheme meeting.
Subject to shareholder approval being obtained and the other applicable conditions of each scheme being satisfied, each of the Scheme and the Preference Share Scheme are expected to be implemented shortly thereafter.
Webster will continue to keep its shareholders and the market updated on the transaction process in accordance with its continuous disclosure obligations.
(1) Based on 362,245,163 ordinary shares on issue
(2) Based on net debt of $130 million
(3) Subject to adjustments for changes in certain assets and liabilities.
CEO, Webster Ltd
Tel. (02) 8249 2305