Duty Free International to sell minority stake to Heinemann Asia Pacific

SINGAPORE/MALAYSIA. Singapore-listed Duty Free International (DFI), a subsidiary of Atlan Holdings, is to sell an initial 10% stake in its duty free business to Heinemann Asia Pacific, with options to sell a further 15%.

The deal could be worth up to €52.21 million (RM239.1 million) to DFI at current exchange rates.

DFI’s board of directors said the company had entered into a sale and purchase agreement on 17 March to dispose of 10% equity interest plus one share, comprising 20,996,384 shares in DFZ Capital Berhad (DFZ), a subsidiary of the company, to Heinemann Asia Pacific Pte. Ltd. for a consideration of €19.7 million.

DFI has also granted call options to Heinemann Asia Pacific to acquire a second tranche of shares within 18 months of the initial sale, and an option to acquire a third tranche 12 months later (after the expiry of the second call option period).

Shares offered under the call options can represent up to 15% of the share capital in DFZ, so Heinemann Asia Pacific can ultimately control 25% plus one share.

Each call option may only be exercised once. The third tranche call option will remain valid and binding even if the second is not exercised.

The initial transaction is expected to be completed by June 2016.

The Zon Duty Free: DFI's key retail brand, with stores in airports across Malaysia
The Zon Duty Free: DFI’s key retail brand, with stores in airports across Malaysia

DFI said in a statement: “The company views Heinemann Asia Pacific as a strategic investor, and the proposed disposal is expected to enable the company to benefit from the resources and expertise of Gebr. Heinemann and Heinemann Asia Pacific in the areas of product assortment and costing, retail store management, distribution and logistics management of DFZ products.

“The investment in DFZ will allow Malaysians and visitors to Malaysia an enhanced travel retail experience, one on par with the best available in the world. The proposed disposal is also expected to further strengthen the group’s financial strength, enabling the group to consider future business opportunities.”

Heinemann Asia Pacific CEO Max Heinemann said: “Looking at the similar business models and corporate cultures of both companies, Gebr. Heinemann and DFI believe this joint venture to be a great strategic fit for further growth together in Malaysia.”

In addition to board seats at DFZ Capital Berhad, Heinemann Asia Pacific will be involved in day-to-day operations and overall decision making of the business.

The partners will strike a shareholders’ agreement, a management agreement and a supply and distribution agreement through which Heinemann will have extensive rights for the purchase, and exclusive supply of, certain product categories to DFZ.

Premised on the agreed enterprise value (EV) of the DFZ Group in respect of the first and second tranche sale shares, the company valuation of €197 million represents a EV/EBITDA ratio of around 11.5 times (based on the latest audited consolidated financial statements of the DFZ Group for FY2015).

The agreed enterprise value of €216,700,000 in respect of the third tranche represents a EV/EBITDA ratio of approximately 12.6 times.

DFZ runs duty free and duty paid stores at various locations throughout Peninsular Malaysia such as Padang Besar, Langkawi, Bukit Kayu Hitam, Kuala Lumpur International Airport and Johor Bahru. The company was incorporated in Malaysia in 1983 under the name of Usaha Borong Sdn Bhd and in 1986, it changed its name to Sriwani Holdings Sdn Bhd. In 1991, DFZ was converted into a public limited company under the name of Sriwani Holdings Berhad and renamed as DFZ in 2005.

DFZ Group revenue for FY2015 decreased by RM9.11 million or -1.6% compared to FY2014, hitting RM559.52 million. The decline in revenue was mainly due to change of sales mix, lower demands for certain products and also the closure of the retail outlet at the Low Cost Carrier Terminal in May 2014.

Profit before taxation declined by RM93.72 million or -55.97% mainly due to the one-off gain on disposal of investment in subsidiaries in the property arm of the group linked to an internal reorganisation in 2014.

DFZ Group performance 2013 to 2015
DFZ Group performance 2013 to 2015
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