Today, Scandinavian Tobacco Group (STG), the parent company of General Cigars, has agreed on the terms and conditions for the acquisition of all of the shares of Agio Beheer B.V. from Highlands Beheer B.V. Agio Beheer B.V. is the holding company of the Royal Agio Cigars group which includes the Premium Balmoral brand. The acquisition is on a debt and cash free basis and valued at EUR 210 million. It will be financed by cash at hand and debt.
The transaction is subject to a statutory employee consultation process in The Netherlands and must be approved by European jurisdictions. This process is expected to complete in the first half of 2020 with details of the expected financial impacts after closing.
Royal Agio is has a small footprint in the US market, but a much larger one in Europe. Their brands include: Mehari´s, Panter and Balmoral. The company is based in Duizel, The Netherlands and has approximately 3,200 full-time employees. Royal Agio’s reported annual net sales full year 2018 were EUR 133 million (DKK 995 million) with an EBITDA of EUR 18 million.
Royal Agio will give Scandinavian Tobacco Group a stong position in key European machine-made cigar markets, with an emphasis on France, Belgium and The Netherlands and secondarily Spain and Italy. If the companies were combined in 2018, the group net sales would have been be approximately DKK 7.7 billion with a combined workforce of more than 10,000 employees.
CEO of Scandinavian Tobacco Group, Niels Frederiksen says: “I am very pleased and proud that we have taken this important step towards an acquisition of Royal Agio. If completed, the acquisition will be an important step in our ambition of becoming the global leader in cigars, as it significantly strengthens our position in several key machine-made cigar markets in Europe and enables us to deliver an attractive range of cigars of the highest standards to our consumers.”
The transaction is expected to be EPS accretive no later than in year 2 after completion. The Group leverage ratio (net interest-bearing debt/EBITDA) will, if the transaction proceeds to completion, temporarily exceed the target of 2.5x.
Scandinavian Tobacco Group’s full-year financial guidance for 2019 is unchanged:
>5% organic growth in EBITDA
Free cash flow before acquisitions >DKK 750 million
Special items, excluding costs related to the acquisition of Royal Agio, are unchanged and are expected to be DKK 85 million. Acquisition costs regarding due diligence, advisors etc. in 2019 are expected to be at the level of DKK 20 million and expensed as special items in 2019.
The ambition of delivering an annual growth in ordinary dividend payments is unchanged, including for the financial year 2019.