Charlie's Group receives cash takeover offer from Asahi

Asahi Beverages New Zealand Limited (Asahi) is to offer NZ$0.44 in cash for each share in Charlie’s Group Limited (Charlie’s)
Charlie’s major shareholders, including the founders, representing 52.17 per cent of the Charlie’s shares have agreed to accept the Offer
The Charlie’s Board of Directors recommends that Charlie’s shareholders accept the Offer in the absence of a superior proposal and subject to the offer price being within or higher than the Independent Adviser’s valuation range
The Offer is subject to a number of conditions, including Asahi obtaining acceptances for 90 per cent of the shares in Charlie’s and consent from the Overseas Investment Office (OIO)

The Board of Directors of Charlie’s (Charlie’s Board) advises that it has received a Takeover Notice from Asahi Beverages New Zealand Limited, a wholly owned subsidiary of Asahi Group Holdings, Ltd., stating Asahi’s intention to make an offer under the New Zealand Takeovers Code to purchase 100 per cent of the issued share capital of Charlie’s (the Offer).

The Offer is for NZ$0.44 in cash for each Charlie’s share and represents a 57 per cent premium to Friday’s closing share price of NZ$0.28.

The Offer is subject to a number of conditions, including Asahi receiving acceptances for shares which confer 90 per cent or more of the voting rights in Charlie’s and all consents required from the OIO. The full conditions of the Offer are set out in the Takeover Notice, which has been lodged with NZX.

Approach by Asahi and commitment to accept by major shareholders

Following an approach by Asahi in relation to a potential acquisition of all the shares in Charlie’s, the Charlie’s Board agreed to provide Asahi with a short period of due diligence on the Charlie’s business.

Upon completion of that due diligence, Asahi has entered into lock-in agreements with interests associated with the founders of the business (Stefan Lepionka, Marc Ellis and Simon Neal), Collins Asset Management and Charlie’s director Tim Cook. Together these shareholders hold a total of 52.17 per cent of the shares in Charlie’s and have committed to accept the offer when it is made.

The Offer Document is expected to be despatched to shareholders in the week commencing 18 July 2011.

Charlie’s Chief Executive Officer and co-founder, Stefan Lepionka says the Offer represents a great outcome for the business and its brands at this stage of the group’s lifecycle.

“As a proud New Zealand company, we have fought hard to take Charlie’s to the world, and we continue to do so. To take Charlie’s to the next level, our brands will benefit from the substantial resources that Asahi brings to the table.

“Asahi admires our team and recognises the value in keeping Charlie’s as it is, to nurture our ‘honest’ ideology and reputation for innovation.”

Asahi’s intentions for Charlie’s

If Asahi acquires all of the Charlie’s Shares, it intends to continue to operate the Charlie’s business as a standalone business, while supporting the existing management team in their current plans for growth, as well as providing access to the Asahi Group’s distribution network, innovation and other technical capabilities. Asahi has indicated that it intends to continue to invest in Charlie’s to grow its brands, while retaining their premium positioning and strong culture of innovation.

Managing Director of Asahi Group Holdings, Ltd.’s wholly owned subsidiary, Schweppes Australia Pty Ltd, David Beguely said “We are thrilled to be part of this very exciting venture and are excited to partner with such an innovative organisation with quality, premium brands. Charlie’s complements the Schweppes Australia business very well. It particularly enhances our position in the premium beverage segments as well as providing a foothold in the New Zealand market.”

“We are very much looking forward to working with Stefan and Charlie’s to help grow and expand the reach of their brands.”

Director’s recommendation

Asahi’s offer price of NZ$0.44 per Charlie’s share, which the major shareholders have agreed to accept, represents:

a 57 per cent premium to the closing price and a 55 per cent premium to the one month volume weighted average price of Charlie’s shares on NZX; and
EV/EBITDA multiples of 27.4 times the midpoint of Charlie’s EBITDA guidance for the financial year ended 30 June 2011 and 11.5 times Charlie’s EBITDA guidance for the financial year ending 30 June 20121

For shareholders who acquired shares on Charlie’s listing in 2005, the offer price represents a 340 per cent total return.

The Charlie’s Board unanimously recommends that Charlie’s shareholders accept the Offer in the absence of a superior proposal and subject to the offer price being within or higher than the Independent Adviser’s valuation range. The Independent Directors have commissioned Grant Samuel to provide an Independent Adviser’s report as required by the Takeovers Code.

The Independent Directors have indicated they will accept the Offer in respect of the Charlie’s Shares they own in the absence of a superior proposal and subject to the offer price being within or higher than the Independent Adviser’s valuation range.

Charlie’s Chairman Ted van Arkel said that the Offer represents a strong endorsement of Charlie’s and its market positioning, and that the Board has been pleased with Asahi’s commitment to the process of making an offer for the group.

“Mark Darrow and I as independent directors are charged with representing the interests of all shareholders, and we have ensured that a robust process has been undertaken which has led to this offer. As a result, Asahi’s intended offer represents a very strong premium over market for shareholders to consider. ”

Mr van Arkel noted that no action in respect of the Offer is required from shareholders at this stage, however, in the interim if they are considering selling their shares they should seek independent advice.

Update on Charlie’s trading

The Charlie’s Board believes that Charlie’s is well placed to continue to grow strongly and capitalise on recent successes including distribution agreements with Coles and Woolworths in Australia and several customers in Asia.

Charlie’s reiterates guidance previously provided on 12 April 2011 for the financial year ended 30 June 2011:

Gross sales of between NZ$48 million and NZ$50 million;
EBITDA (earnings before interest, tax, depreciation and amortisation) of between NZ$4.5 million and NZ$5.0 million; and
NPAT (net profit after tax) of between NZ$2.2 million and NZ$2.5 million.
The Charlie’s Board has approved a budget for the year ending 30 June 2012 with gross sales growing to NZ$91 million, EBITDA rising to NZ$11.3 million and NPAT to NZ$7.1 million.

The improvements in sales, EBITDA and NPAT reflect sales growth in the Australian grocery channel, including previously announced ranging by Coles and Woolworths of Charlie’s products, as well as improved margin performance arising from increased economies of scale at Renmark and Henderson and improved terms for certain raw material contracts. The budget figures stated above for the year ending 30 June 2012 do not include any costs relating to the potential sale of shares to Asahi Beverages New Zealand Limited.

Takeover offer documents

The Charlie’s Board and Asahi have agreed to co-ordinate the preparation of the documents they are each required to send pursuant to the Takeovers Code, with a view to Asahi sending its Offer Document together with the Charlie’s Target Company Statement, including the Independent Adviser’s report and the Charlie’s Board’s recommendation, to Charlie’s shareholders in the week beginning 18 July.

Charlie’s is being advised by Macquarie Capital and Harmos Horton Lusk. Asahi is being advised by Rothschild, and Bell Gully.