Freightways to acquire Big Chill Distribution Limited

NZX RELEASE

30 October 2019

FREIGHTWAYS TO ACQUIRE BIG CHILL DISTRIBUTION LIMITED

Freightways Limited (Freightways) announces it has entered into a sale & purchase agreement to acquire
Big Chill Distribution Limited (Big Chill, or the Acquisition).
Big Chill is a New Zealand market leader in temperature-controlled transport, specialising in fast moving
consumer goods (FMCG) and time critical parcel freight, both chilled and frozen. Big Chill operates a fleet
of over 200 temperature-controlled trucks and trailers and delivered more than 2 million shipments in 2018
through its nationwide network of depots and purpose-built cool stores.
Commenting on the Acquisition, Freightways’ CEO, Mark Troughear, said “the acquisition of Big Chill
represents a highly compelling transaction and will provide Freightways with both short and long term
growth opportunities, while further diversifying its earnings base. Big Chill’s founders and senior
management have done a fantastic job growing the business and we look forward to working together,
recognising the strong cultural alignment between our two businesses.”
The Transaction
Freightways has agreed to purchase 100% of the shares of Big Chill, subject to Overseas Investment Office
approval, with completion of the Acquisition expected to occur in the first half of Calendar 2020.

The Acquisition involves an initial payment of $117m, representing 80% of an agreed enterprise value (EV)
for Big Chill, and a final payment later in 2022, representing 20% of Big Chill’s EV at 30 June 2022 (FY22),
which will be calculated by reference to the FY22 EBIT
1
at a multiple based on the growth in EBIT achieved
for the 15 months ending 30 June 2021 (FY21) compared to the financial year ending 31 March 2020. When
each of the initial and final purchase price payments are settled, completion adjustments will be made in
respect of Big Chill’s net debt, employee entitlements and working capital positions.

The initial purchase price payment represents a 7.9x EV/EBITDA
2
multiple based on the expected earnings
from Big Chill in the first 12 months of Freightways’ ownership, before synergies, which are expected to be
minimal.
Acquisition Rationale
1. Big Chill operates high quality temperature-controlled fleets and facilities in an attractive industry, with
increasing consumption of fresh and frozen foods. Fresh food is a necessity which exhibits resilience to
economic cycles.
2. The national network of temperature-controlled 3PL facilities and delivery fleet that Big Chill operates
is a strategic asset in New Zealand’s food supply chain and its established cold storage 3PL strategy
provides a compelling avenue for future expansion.
3. Big Chill is a leader in express delivery of chilled and frozen products, providing a complementary
service offering to Freightways’ express package capabilities, which also include a fleet of temperature-
controlled vehicles. The Acquisition significantly accelerates Freightways’ development of a strategic
new vertical market in temperature-controlled express package services, diversifying its earnings base,
while also leveraging its core skill set of small parcel delivery, storage and logistics.

4. Given the Acquisition is likely to complete toward the latter part of Freightways’ 30 June 2020 financial
year (FY20), it is expected to deliver only modest EPS accretion for FY20, but increase to mid-single
digit annual EPS accretion, before synergies. Freightways expects to be able to realise a range of benefits
from leveraging the respective strengths and areas of expertise of the combined businesses, plus some
cost benefits in time.
Transaction funding
The initial payment of $117m will be funded using existing and increased bank facilities, with settlement
expected in the first half of calendar 2020. Upon settlement it is expected Freightways’ pro-forma net debt /
EBITDA will move up toward 2.00x briefly. Consistent with recent years, Freightways expects the historic
trend of debt amortisation to continue, which together with other business initiatives is expected to bring the
gearing back to ~1.75x in the short term.

Advisers
Forsyth Barr is acting as Freightways’ financial adviser. EY has provided accounting and tax due diligence
services, while Russell McVeagh and Keegan Alexander have provided legal advice.


Note:
1. Earnings before interest and tax (not adjusted for IFRS16 lease accounting)
2. Earnings before interest, tax, depreciation and amortisation (not adjusted for IFRS16 lease accounting)

ENDS

For further information please contact
Mark Troughear, Chief Executive Officer, Freightways Limited, +64 9 571 9675

---

ACQUISITION OF BIG CHILL DISTRIBUTION
30 October 2019

TRANSACTION SUMMARY
Slide 2
| © Freightways 2019
Transaction
overview
Big Chill
overview
Acquisition
rationale
•
A New Zealand market leader in temperature-controlled transport, with a growing presence in cold storage
•
Big Chill has delivered revenue and EBITDA CAGR of
12% and 6%, respectively, over the last 3 years
•
Highly-experienced management team and vendor shareholders retained to drive further growth
•
Acquisition of 100% of Big Chill Distribution Limi
ted (“Big Chill”) – 80% upfront, 20% deferred to 2022
•
Initial purchase price payment
of $117m to be debt-funded and represents a 7.9x EV/EBITDA
1
multiple based
on the expected earnings from Big Chill in the
first 12 months of Fr
eightways’ ownership
•
Completion is expected in first half of
Calendar 2020, subject to Overseas Investment Office approval being
received and other conditions being satisfied
•
Attractive growing industry supported by consumer trends
and demand for frozen & chilled products and on-time
delivery
•
Similar to Freightways’ existing areas
of expertise and existing cool supp
ly chain express freight capabilities
•
Financially accretive transaction
1.
Earnings before interest, tax, depreciation and amor
tisation (not adjusted for IFRS16 lease accounting)

ACQUISITION RATIONALE
Slide 3
| © Freightways 2019
Attractive industry
•
Sector growth from
increased consumption of fresh & frozen foods
•
Fresh food is a necessity,
thereby exhibiting resilience to economic cycles
•
High quality fleets, facilities
and food-handling practices
Substantial platform
with significant growth
opportunity
•
Nationwide platform with
purpose-built facilities
•
Key strategic asset in New
Zealand food supply chain
•
Established cold storage
(3PL) strategy with future expansion opportunities
Complementary
•
Big Chill is a leader in the
express delivery of chilled &frozen products, providing a complementary service offering to Freightways
•
Diversifies Freightways’
earnings base, while leveraging Freightways’ core skill set of small parcel delivery, storage and logistics
•
High level of alignment
between company cultures
Financially accretive
transaction
•
Benefits expected to be
realised from leveraging respective strengths and areas of expertise
•
Expected to be immediately
EPS accretive (pre synergies) upon settlement

OVERVIEW OF BIG CHILL DISTRIBUTION
Slide 4 | © Freightways 2019

MARKET LEADING OPERATOR
Big Chill is New Zealand’s leading temperature-controlled transport operator
200+Chiller / freezer truck and trailer fleet
2
2
million
Shipments in 2018
500+Active customers with long tenure. Averageassociation of Top10 customers > 10 years
11,000
sqm
Purpose-built depots over 9 sites nationwide, growing 3PL facilities
Highly experienced management with long tenureOver 95 years sector experience across management and vendor shareholders
370+Full time staff and contractors
Slide 5
| © Freightways 2019
2.
Comprising approximately 150 owned trucks and
approximately 65 leased trucks and trailers

Big Chill operates a nationwide network of
9 modern, purpose-built depots covering 11,000sqm
NATIONAL REACH
Putaruru• Opened in 2014• 4 loading docks
Auckland• New facility opened in 2016• 15 loading docks• Chilled & frozen storage
Palmerston North• New facility opened in 2013• 6 loading docks
Hastings• New facility opened in 2014• 4 loading docks
Wellington• New facility opened in 2014• 4 loading docks
Blenheim• New facility opened in 2013• 4 loading docks
Cromwell• New facility
opened in 2017
• 4 loading docks
Christchurch• New extension in 2018• 4 loading docks• Truck park
Dunedin• Refurbished in 2017• 4 loading docks
Slide 6
| © Freightways 2019

PROVEN BUSINESS MODEL
Big Chill operations are primarily linehaul and metr
o chilled deliveries with a growing 3PL
operation
Pick
 
up
• Daily linehaul between all 9 depots
nationwide
• Dedicated full truck runs for select larger
customers
• Hub & spoke model servicing chilled and
frozen FMCG
• 1 and 2 day delivery intra and inter-Island,
respectively
• 9 purpose-built depots, incorporating cross-
dock facilities
• Current investment into chilled & frozen
storage services (3PL)
• Ability to offer full storage / delivery offering
Pick up
Deliver
Process
Deliver
Process
 
/
 
Store
Linehaul &
 
FTL
Depots
 
/
 
3PL
Metro
 
deliveries
Slide 7
| © Freightways 2019

GROWTH OPPORTUNITIES
• Expansion of Auckland facility to 9,300 pallets to be
completed in March 2020 in response to customer demand
• Favourable supply-demand imbalance in the current
temperature-controlled 3PL market
New
 
freezer
 
extension
New
 
freezer
 
extension
Existing
 
chiller
Existing
 
chiller
Auckland expansion
Existing
 
office
 
with
 
new
 
fit
 
out
Cold
 
3PL
 
expansion
 
Network
 
enlargement
 
Synergies
 
• Strong demand is supporting network expansion • Number of extensions to existing depots and new
locations are well advanced
• Potential last mile servic
e / temperature-controlled
delivery fleets
• Cross-selling across respective customer bases and
utilisation of respective network strengths

Slide 8 | © Freightways 2019

COMPLEMENTARY CAPABILITIES
Freightways
Big
 
Chill
Big Chill shares common elements with Freightways’ Express Package capabilities
Slide 9
| © Freightways 2019
National branch network
Ambient
Chilled & frozen
Fleets
Packaged-perishables and last mile
temperature-controlled B2B & B2C
Temperature-controlled linehaul and
last mile B2B
Technology
Real-time online tracking
Manual proof of delivery
Strong service culture
Experienced staff & strong
operational disciplines
Experienced staff & strong
operational disciplines
Customer loyalty
Long tenure of customers
Long tenure of customers
Driver model
Contractors
Employees
Warehousing and distribution
Documents / ambient products
Chilled & frozen products

FINANCIAL OVERVIEW AND TRANSACTION FUNDING
• Initial purchase price payment in cash
of $117m for 100% of Big Chill, represent
ing 80% of Big Chill’s enterprise value
(EV), adjusted for completion adjustments, and a final payment later in 2022
• To be funded through existing and increased bank facilities• Post-acquisition, Freightways will briefly have pro-forma net
debt / EBITDA approaching 2.00x. Consistent with recent
years, Freightways expects the historic trend of debt amor
tisation to continue, which together with other business
initiatives is expected to bring the gear
ing back to ~1.75x in the short term
• Big Chill operates an owned/leased fleet ownership model, ut
ilising subcontractors to supplement its own nationwide
network, as required
• Assuming settlement in the first half of Calendar 2020, Freight
ways anticipates the transaction
will deliver mid single-digit
EPS accretion on a pro-forma full year basis (pre-synergies)
• The value of the final purchase price payment will represent
20% of Big Chill’s EV as at 30 June 2022, calculated using
actual FY22 EBIT
3
at an agreed multiple determined by EBIT gr
owth achieved for the 15 months ended FY21
Slide 10
| © Freightways 2019
3.
Earnings before interest and tax (not adjusted for IFRS16 lease accounting)

THANK YOU
Slide 11
| © Freightways 2019
Disclaimer: This presentation has been prepar
ed by Freightways Limited ("Freightways")
for information purposes only. This pres
entation is not a product disclosur
e statement, prospectus or inve
stment statement. Nothing in
this presentation constitutes an invitation
to subscribe for shares, securities or
financial products in Freightways. Nothing i
n this presentation constitutes legal
, accounting, financial or taxati
on advice or any other advice of
any kind. Any investor should consult t
heir own professional advisors and conduct t
heir own independent invest
igation of Freigh
tways and the information contained in this pres
entation, including any
statements relating to
the future performance of Freightways. The information in th
is presentation is given in
good faith and has been obtained from so
urces believed to be reliable and accurate at the
date of this presentati
on. This presentation
includes forward
‐
looking statements regarding future events and the future financ
ial performance of Freightways and Big Chill Distribution (“Big
Chill”). Such forward
‐
looking statements are based
on current expectations and
involve risks and uncertainties. Actual results may be mate
rially different from t
hose stated in any forward
‐
looking statements. Nothing
contained in this document is or should be relied on as a promise as to the future
performance or condition of Freightways or Bi
g Chill or as to any other future events. Except as required by law or the NZX Lis
ting Rules, Freightways undertakes
no obligation to update any forward
‐
looking statements,
whether as a result of new information, future ev
ents or otherwise or to report against any forward
‐
looking statements. None of Freightways, their affiliates, or t
heir respective advisers or representatives, give any warranty o
r
representation as to the accuracy or completeness of the information contained in this presentation, and exclude their liabilit
y to the maximum extent permitted by law.