NRC Group Holding AS, a wholly owned subsidiary of NRC Group ASA (“NRC Group” or the “Company”), has on 12 August 2019 entered into a Share Purchase Agreement (“SPA”) with Sweco AB (“Sweco”) for the sale of all issued and outstanding shares in NRC Holding Design Oy (“NRC Design” or the “Design Business”), an entity to be formed prior to closing resulting from a planned demerger of NRC Holding Finland Oy and NRC Group Finland Oy (the “Demerger”), for an enterprise value of EUR 42.5 million on a cash and debt free basis with normalised working capital (the “Transaction”).
The divestment is a strategic step towards focusing on NRC’s core business, and releases resources to drive growth in other business areas. The net proceeds from the Transaction will be used to repay parts of the Company’s bank debt, which increases the flexibility both financially and strategically. The net gain to be recognised is estimated to be approximately EUR 9 million and will be reported as part of discontinued operations at closing.
Completion of the Transaction is subject to certain customary conditions being satisfied or waived, such as inter alia the required competition clearance(s) being obtained, and the Demerger being duly completed.
In order to ensure a successful completion of the Transaction and subsequently a successful integration, the parties have simultaneously entered into: i) a transitional services agreement whereby Sweco will receive certain transitional services from subsidiaries of NRC Group during a specified integration period with effect from closing of the Transaction, and ii) a cooperation and subcontracting agreement regarding treatment of certain joint agreements of NRC Group and NRC Design (and their respective group companies) and the commercial relationship of such parties following the completion of the Transaction.
The parties expect that completion of the Transaction will occur on or around 1 November 2019.
Description of the business
The Design Business is the market leader in railway and light rail related design and consultancy work in Finland with a growing presence in Sweden. The Design Business has comprehensive railway and light rail competences covering the entire transport infrastructure value chain, and strong experience from transport infrastructure alliance projects in Finland. The Design Business had 315 employees as of December 2018. NRC Group has owned the Design Business since its acquisition of VR Track Oy in January 2019.
The table below set out selected key figures from the income statement for the years ended 31 December 2017 and 2018, in addition to Q1 2018 and 2019. All numbers for 2017 and 2018 are based on the management accounts for VR Track Oy according to Finnish GAAP. 2019 numbers are based on the segment reporting of NRC Group. No significant differences between Finnish GAAP and IFRS are identified.
Income Statement (EURm) Q1-19 Q1-18 2018 2017 2016
Net sales 10 9 40 34 35
EBITDA 1 1 4 5 6
EBITA 1 1 4 5 6
Significance of Transaction and rationale
The Design Business represents less than 10% of NRC Group’s pro forma revenue for 2018 and will not affect the overall strategy of NRC Group. The Design Business operates in the Nordic countries in a different part of the value chain than the core construction and maintenance operations of NRC Group. The synergies between design and the remaining core business of NRC Group are limited, and in some cases even negative due to customer purchasing behaviour. The design market is consolidating driven by large focused businesses. By being part of an independent engineering consultancy business, the Design Business will be in a better position to invest in and successfully develop its business. NRC Group’s construction and maintenance business will not be affected by the Transaction.
“The infrastructure market is growing rapidly in all the Nordic countries. NRC Group concentrates on developing our maintenance, construction and environmental activity to strengthen our core business. We see significant synergies between maintenance and construction and want to have enough management and financial capacity to grow both of these businesses, to reach our goal of becoming a leading entrepreneur in the infrastructure segment in the Nordics”, says Henning Olsen, CEO of NRC Group.
“We continue to deliver on our growth strategy with the ambition to become market leader in all of our key markets. With the acquisition Sweco strengthens its offering in a segment with large investment needs and a strong market. We become the leading, full service railway design expert in Finland, while at the same time reinforcing the position in Sweden,” says Åsa Bergman, President and CEO of Sweco.
Management and Board of Directors
The Design Business’ executive management team consist of the following persons:
• Mirka Nevala (Acting Managing Director, Finland)
• Curt Johansson-Holmertz (Interim Managing Director, Sweden)
The Design Business’ Board of Directors consist of the following persons:
• Henning Olsen
• Dag Fladby
• Alfred Beck
There are no existing or contemplated agreements in connection with the Transaction that involve extraordinary benefits for senior employees or members of the Board of Directors of NRC Group or NRC Design.
Carnegie AS acts as financial adviser and Advokatfirmaet Schjødt AS acts as lead legal adviser to NRC Group in connection with the Transaction.
+47 91 74 15 92henning.olsen[at]nrcgroup.com