Case Study: Corporate Advisors

Folkestone Education Trust (ASX: FET)

BG Capital Corporation (“BGC”) has acted as Corporate Advisor to the Responsible Entity (“RE”) for FET since the management rights were acquired by Folkestone (advised by BGC) from the previous RE, Austock Property Funds Management Ltd in late 2012.

FET is the largest listed owner of early learning centres in Australia and New Zealand measured by both number of centres and market capitalisation of circa$310M and total assets of $433M (post the December 2013 capital raising).

The management and Board of Directors of the RE had determined an expansion strategy to increase the number of centres in the Fund to strategically enhance the quality and geographic spread of its portfolio, with a view to improving the long term earnings and distributions to AEU unit holders. A secondary consideration was to improve the spread of institutional and retail unit holders and as a consequence increase the overall liquidity of the securities on issue.

BGC was appointed Advisor and Joint Lead Manager, in October 2013, of a $45M secondary market capital raising comprising of:

  • A $20M institutional placement of new units to institutions and exempt Section 708 investors which included existing investors, and
  • A $25M accelerated non-renounceable entitlement offer to existing eligible unit holders
  • In combination called the Offers

Moelis Australia Advisory was also appointed Joint Lead Manager and Underwriter to the Offers.

Our specific and general roles prior to and during the capital raising were as follows:

  • Advising the RE on the structure of the Offers
  • Assisting management in the financial modelling and impact of the Offers on the financial structure of the Trust and the impact upon unit holders
  • Assisting management and the Underwriter with drafting the Investor Presentations and Retail Entitlement Offer Booklet
  • Attending Due Diligence meetings of the RE in relation to the Offers and managing material issues arising from the Due Diligence with Directors, Management, the Underwriter and legal counsel
  • Reviewing the draft Underwriting Agreement to ensure the commercial aspects of the Agreement were appropriate and in accordance with normal practice, on behalf of the RE
  • Liaising with legal counsel on ASX listing rules pertaining to the Offers and ASIC waivers-if applicable
  • Analysis of and recommendations on the pricing of the Offers in conjunction with the Underwriter
  • Advising on the allocation of Placement units in the book build process and sub underwriting risk positions in conjunction with the Underwriter and Client

The Placement and Institutional accelerated entitlement were successfully completed and oversubscribed. The retail entitlement offer, which closed on 9th December 2013, was subscribed fully, either by existing investors taking up their entitlements or by sub-underwriters subscribing for any shortfall.

During the Offer period the unit price of FET traded above or at the issue price with a significant increase in liquidity of the stock.

Case Study: Mergers & Acqusitions

Sarkis Bros Acquires Gosford Quarries December 2012

BG Capital was appointed as M&A advisor to acquire Gosford Quarries Limited by Sarkis Bros Pty Ltd, an independent, highly regarded family owned quarrying, wholesaler, retailer and installer of quality sandstone products to the building and renovation industries.

Gosford Quarries (‘GQ”) was a subsidiary of the listed invested company GPG Limited (“GPG”). GQ is an iconic business and brand in the sandstone quarrying market, established over 90 years ago. GPG embarked upon a whole of portfolio divestment programme of its investments.

GPG called for expressions of interest from parties to acquire its 100% ownership of GQ. Subsequent to the presentation of our credentials and capabilities, BGC was appointed to act on behalf of Sarkis Bros to compile a competitive expression of interest to acquire GQ.

Sarkis Bros was selected as the preferred bidder.

BGC’s role included the following:

  • Compiling the written Expression of Interest including a pre due diligence valuation model of the acquisition target and a merged financial model of the combined businesses
  • Subsequent to Sarkis being appointed as the preferred bidder, BGC worked closely with our client, legal and accountancy advisors during the formal due diligence process, including industry analysis, site visits, management interviews, asset valuations and detailed financial modelling of the proposed acquisition
  • Our financial modelling and valuation were an integral part of our client’s submission to their bankers to provide debt financing for the acquisition. BGC negotiated with the bank the terms and conditions of the debt financing proposal to optimise the short and medium term cash flow outcome of the merged group
  • BGC advised upon the optimal acquisition structure and provided commercial advice and assistance to the client’s lawyers in their drafting of the Contract of Sale of shares in GQ
  • BGC was integral in the structuring of the funding and execution of the transaction on behalf of the Sarkis Bros.
  • The acquisition of a significantly larger competitor enabled Sarkis Bros to position itself as a predominant sandstone product processor and supplier to the building industry.