PBG acquires a majority stake in RAFAKO and makes a strong entry into the power engineering sector. As part of a single group, the companies will jointly bid for multi-billion projects.
- The PBG Group gains a new member – RAFAKO, one of the largest players on the power engineering markets in Poland and abroad.
- PBG will acquire 50% of the share capital plus one share in RAFAKO for nearly PLN 541m.
- The equity link between PBG and RAFAKO will allow both companies to significantly scale up their operations in the power engineering sector.
- The transaction will contribute to building a strong Polish group providing contractor services in the power sector.
PBG signed a preliminary agreement on the acquisition of a special purpose vehicle, wholly-owned by Elektrim SA, which holds a 50% interest plus one share in RAFAKO SA. PBG will acquire 34,800,001 shares, representing in aggregate 50% of the share capital plus one share in the company and the same proportion of the total vote at its general shareholders meeting, for PLN 540.840m. The transaction will be completed on condition that PBG obtains anti-trust clearance from the President of the Office of Competition and Consumer Protection (UOKiK).
RAFAKO has operated in the power engineering industry for several dozen years and is an internationally recognised and valued Polish company. The transaction is consistent with PBG's strategy of development based on power engineering projects. Thanks to the transaction, we are gaining capabilities previously unavailable within the Group, while significantly increasing the scale of our operations. I believe that the business profiles of RAFAKO and PBG perfectly complement each other. In my opinion, the transaction will benefit both parties. Moreover, it will increase our chances of winning multi-billion power engineering contracts. Today, we view power engineering as an area of key importance, as it offers the highest potential for growth. – said Jerzy Wiśniewski, President of the Management Board of PBG.
RAFAKO is a major player on the power engineering market.
At present, it is one of four European companies, alongside ALSTOM, Hitachi Power Europe and Doosan Babcock, which have a comprehensive technology for building conventional power generation units. It is one of Europe's largest producers of boilers and environmental protection equipment for the power sector. The company has over 60 years of operating history. It has delivered boilers to virtually all Polish utility power plants and executed international contracts on such markets as China, Turkey, India, former Yugoslavia, Germany, France, Switzerland, Belgium, the Czech Republic and Scandinavia.
In 2010, RAFAKO reported nearly PLN 1.2bn in consolidated revenue, on EBITDA of PLN 72.1m and the parent undertaking's net profit of PLN 43.6m.
Power engineering projects implemented in Poland will be one of the key drivers of the Polish construction market for the next few years.
Depending on the source, it is estimated that over the next nine years the Polish power sector will attract PLN 150bn-200bn* in investments. The four key players in the power sector, namely PGE, Tauron, Energa and Enea, plan to significantly increase capital expenditures in the coming years. They want to focus not only on constructing new conventional power plants, but also plants using renewable energy sources. The power companies also intend to invest in maintenance and upgrade of the existing units. In connection with its preparations to participate in the largest projects in Poland, the PBG Group has established strategic alliances with foreign partners specialising in power engineering and possessing the required qualifications. One of such partners is ALSTOM. Following the integration of RAFAKO into its Group, PBG will further improve its chances of winning power engineering contracts. Currently, the consortia in which PBG is a member are bidding for contracts worth more than PLN 30bn.
The inclusion of RAFAKO in the PBG Group will increase our chances of winning multi-billion contracts on the prospective power engineering market, which – we are confident – is bound to enhance the Group's financial performance. RAFAKO boasts valuable credentials and a sound financial standing. The transaction price of PLN 15.54 per share exceeds the current market price, but is justified in light of the future prospects for the power engineering industry. The transaction will be financed with the use of a long-term loan - comments Przemysław Szkudlarczyk, Vice-President of the Management Board of PBG.
*source: "Budownictwo energetyczne w Polsce 2011 - Prognozy rozwoju i planowane inwestycje" ("Power Engineering in Poland 2011 – Development Prospects and Planned Projects"), PMR Publications, Ministry of Economy, Strategy of Poland's Development 2007-2015, Energy Regulatory Office
Transaction structure
The completion of the transaction is conditional on obtaining anti-trust clearance from the President of the Office of Competition and Consumer Protection and on realignment of the Elektrim Group's corporate structure for the purposes of the transaction. After the anti-trust clearance is obtained, PBG will undertake a due diligence exercise to assess the company's financial, economic, legal, tax and technology position. The purchase price may be reduced if any material circumstances affecting the value of RAFAKO are identified. After the conditions for completing the transaction are satisfied, PBG will acquire 50% of the share capital plus one share in RAFAKO. As the next stage, a tender offer for RAFAKO shares will be announced in order to achieve 66% of the total vote at its general shareholders meeting. The tender offer price will be equal to the transaction price of PLN 15.54 per share.
We expect the transaction to take place at the end of this year, and the tender offer to be carried out at the beginning of next year. The transaction will be financed with the proceeds of an investment loan (25% will be financed with equity). While this financing structure will cause an increase in the PBG Group's debt, it will remain at a safe level. RAFAKO is not using any credit facilities, so its inclusion in the Group will not result in any additional debt burden on our balance sheet. – said Przemysław Szkudlarczyk, Vice-President of the Management Board of PBG.
RAFAKO's role within the PBG Group
We intend to base our operations in the power engineering sector on RAFAKO, as the leading company responsible for consolidation of the segment within the PBG Group. Our contract execution capabilities will be further strengthened and complemented by Energomontaż-Południe and Hydrobudowa Polska. Consequently, we will be able to comprehensively execute projects in the capacity of General Contractor in the area of engineering, technology deliveries, assembly of equipment and steel structures, as well as installation and construction. Let me stress that the acquisition of RAFAKO will not change our approach to the cooperation with Alstom. We intend to continue our strategic cooperation in the execution of Poland's largest contracts. – added Jerzy Wiśniewski, President of the Management Board of PBG.
The PBG Group provides specialist construction services in the area of gas and oil production facilities and fuel facilities, as well as general contractor services in the area of infrastructural, industrial, road and housing construction.
Contact person:
Kinga Banaszak – Filipiak
Spokesperson; Director of Equity Markets Communication
+48 691 470 491; kinga.banaszak@pbg-sa.pl