- Cash consideration at least EUR 81m
East Capital Explorer AB (publ) (“ECEX”) has reached an agreement in principle
to pursue a sale of its entire 63 percent stake in Starman Group, the pan-Baltic
cable TV and broadband provider, to Providence Equity. The transaction, which
will result in an exit gain for ECEX of at least EUR 35m, corresponding to a
gross IRR in excess of 30 percent, will consist of an upfront cash consideration
of approximately EUR 81m with the potential for an additional earn-out of up to
EUR 5m payable in 2017. The transaction will represent an implied total
enterprise value of approximately EUR 210m.
East Capital Explorer acquired a majority stake in the Estonian operator Starman
in 2013. Since then, Starman’s revenues and EBITDA have grown by an average of
11 percent per year. In February 2015, East Capital Explorer made an add-on
investment in Starman which enabled Starman to acquire its Lithuanian peer
Cgates, thereby creating the first pan-Baltic cable TV and broadband provider.
The two equity investments amounted to a total of EUR 46m.
Mia Jurke, CEO of East Capital Explorer, commented: “This transaction will
crystallize significant value for our shareholders, and prove our past three
years’ strategic focus on investments in private equity and real estate in the
Baltic countries. We welcome the financial flexibility that this transaction
will give us. We believe that our strategic investment focus and a continued use
of available tools such as buybacks, dividends and share redemptions, can
altogether increase shareholder value.”
Kestutis Sasnauskas, Head of Private Equity and Real Estate at East Capital,
said: “I am pleased to announce this, which will be one of the largest private
equity transactions in the Baltics to date. We have strengthened investments in
technology, product development and market consolidation, and worked closely
together with the management team. This has enabled Starman to outgrow its
competitors and transform from a national challenger into a regional leader. We
are confident that Providence will enable Starman to continue to develop
successfully in this exciting and fast evolving market.”
Aivo Adamson, CEO of Starman Group, said: “Starman has in recent years
intensively focused on growth and expansion in our Baltic home market, supported
by East Capital Explorer. We are committed to offering our clients innovative
and superior telecom and entertainment solutions. We are confident that with the
addition of a strong financial investor, with over 25 years of experience of
telecom investments, as our new majority owner, we can continue on the path of
innovation and growth in the Baltic region.”
Karim Tabet, Managing Director at Providence, said: “The acquisition of Starman
Group would represent Providence’s continued commitment to investing in
infrastructure to support the delivery of high quality media and communication
services in the Baltic region.” Robert Sudo, Managing Director at Providence,
added; “We look forward to supporting the company’s strategy to improve customer
experience and provide access to best-in-class services and content.”
The transaction will provide East Capital Explorer with an annualized return
(IRR), net of all fees (management fees, carried interest and transaction
costs), of between 24 and 27 percent. The exit gain will result in a carried
interest of approximately EUR 6.5m, equal to 20 percent of the net exit gain
based on the upfront consideration, according to the investment agreement
between East Capital and ECEX. The amount will be treated as a liability in
ECEX’s balance sheet as of Q1 2016. Payment of the carried interest will,
however, be subject to a number of conditions as described under section “Fees”
in East Capital Explorer’s latest financial report. The net positive effect on
ECEX’ NAV will be approximately EUR 3m, over the recorded fair value of Starman
of EUR 72m.
The earn-out will be based on the success of ongoing strategic projects as well
as achieved EBITDA targets during 2016 and will, if the conditions are met, be
received in 2017 following the approval of the audited annual accounts of
Starman.
Terms and conditions
The minority shareholders in Starman will be offered by Providence to sell their
shares to Providence on the same terms and conditions offered to ECEX. The
minority shareholders have a pre-emptive right, which allows them to purchase
ECEX’ shares at the same terms and conditions proposed to ECEX. If the minority
shareholders do not exercise this pre-emptive right or otherwise agree to sell
their shares to Providence, they will be obliged to sell their shares to the
buyer under existing “drag-along” provisions. The transaction will be subject to
local competition and regulatory approval as well as minority shareholders not
exercising their pre-emptive rights, and is expected to close during Q2 2016. A
break fee will be payable if, in certain circumstances, the transaction does not
close. The transaction agreement will include representations and warranties
that are customary for a transaction of this nature.
About Starman
Starman is the leading TV and internet provider in the Baltics. Founded in 1992,
Starman has been a technology pioneer and innovator in the Estonian
telecommunication sector, developing the first broadband services, most advanced
digital TV services and unique TV Everywhere solutions. In 2015, Starman
expanded its reach to Lithuania through the acquisition of Cgates. Today, the
group offers cable TV, broadband, DTT and fixed-telephony services with over 500
thousand RGUs across Estonia and Lithuania. Starman has approximately 500
employees and is headquartered in Tallinn.
About East Capital Explorer
East Capital Explorer AB (publ) is a Swedish investment company with a Net Asset
Value of EUR 254m, created with the aim of bringing unique investment
opportunities in Eastern Europe to a broader investor base. The company makes
direct investments into primarily private companies and real estate, but has
also invested through East Capital’s alternative investment funds. East Capital
Explorer’s main investment theme is domestic growth and the Company targets fast
growing sectors such as retail, telecom and real estate. East Capital Explorer
is listed on Nasdaq Stockholm, Mid Cap.
About Providence
Providence is a premier, global asset management firm with $45 billion in assets
under management across complementary private equity and credit businesses.
Providence pioneered a sector-focused approach to private equity investing with
the vision that a dedicated team of industry experts could build exceptional
companies of enduring value. Since the firm’s inception in 1989, Providence has
invested in more than 150 companies and is the leading equity investment firm
focused on the media, communications, education and information industries.
Providence is headquartered in Providence, RI and also has offices in New York,
London, Hong Kong, Singapore and New Delhi. Visit www.provequity.com for more
information.
Contact information
East Capital Explorer:
Mia Jurke, CEO, East Capital Explorer, +46 8 505 885 32
Lena Krauss, CFO and Head of Investor Relations, East Capital Explorer, +46
73 988 44 66
Providence Equity:
Jonathan Doorley/Conrad Harrington, Sard Verbinnen & Co, +44 (0)20 3178 8914
This information is disclosed in accordance with the Securities Markets Act, the
Financial Instruments Trading Act and demands made in the exchange rules. It was
released for publication at 15:00 CET on 14 March 2016.
