- Depending on the value of the Earn-Outs achieved, the transaction price represents between a 2.7% discount and a 2.7% premium to the Book Value as of the third quarter of 2022.[1]
- Samhällsbyggnadsbolaget i
Norden AB (publ) ("SBB") contributes itsSEK 44.9 billion [2]social infrastructure portfolio for public education to a newly formed SBB subsidiaryEduCo AB [3] ("EduCo"). - Brookfield, one of the world's largest infrastructure investors, through its open-ended core infrastructure fund (
Brookfield Super-Core Infrastructure Partners ), acquires a 49% minority stake in EduCo from SBB (the "Transaction") for approx.SEK 9.2 billion in cash up front, plus up to approx.SEK 1.2 billion [4] in cash through earn-outs ("Earn-Outs"). - EduCo will be operated and managed by SBB through an asset management agreement with respect to the management of the EduCo portfolio in its entirety.
- EduCo offers strong and predictable, low-risk, inflation-secured cashflows backed by "AAA" government funding[5].
- Proceeds from the Transaction will mainly be used to deleverage SBB, in line with its communicated strategy, bringing SBB's loan-to-value ratio to approx. 42.4%[6] from approx. 46.9% as of the third quarter of 2022.
1. Key transaction terms
Brookfield will pay SBB approx.
In addition, EduCo will enter into an asset management agreement with SBB, whereby EduCo will pay SBB 1.8% of the net operating income per annum.
Debt financing of EduCo will consist of existing external bank financing of approx.
2. Overview of EduCo
The investment strategy of EduCo will be to invest in and manage social infrastructure assets within the public-backed education sector in
The EduCo portfolio will consist of 585 income producing assets spread across the Nordic region (55% by GAV in
EduCo will be chaired by
SBB's majority stake in EduCo forms the basis for SBB's segment Social infrastructure for Public Education.
- Social infrastructure for Public Education
- Social infrastructure for Elderly Care
- Social infrastructure for Health Care
- Social infrastructure for Special Residential Care
- Government infrastructure and municipal buildings
- Swedish Rent Regulated Residentials
- Associated companies and investments
3. Transaction rationale
The transaction provides multiple benefits for SBB. EduCo is a leading, difficult-to-replicate, Nordic social infrastructure portfolio for public education favored bypreferred relationships with municipalities and publicly funded operators in the Nordics within the educational sectors. It benefits from strong and predictable, inflation-secured cashflows backed by "AAA" government funding[13] and the essential nature of underlying assets in the Nordics in a market with favorable tailwinds.
Partnering with Brookfield best positions SBB to continue delivering critical social infrastructure for municipalities within public education. The Transaction will also enable diversification of funding sources and acceleration of deleveraging of SBB's balance sheet with pro-forma loan-to-value of approx. 42.4%[14] and interest coverage ratio of 5.1x[15], from approx. 46.9% and 4.8x, respectively as of the third quarter 2022.
"We are delighted to join forces with Brookfield, a world-class, highly reputable infrastructure asset investor. Establishing EduCo will make us even better placed to continue delivering important infrastructure to the Nordic welfare states. There will be an increasing need for schools, preschools and university buildings in the Nordics, a market in which we already have a strong foothold. With Brookfield as our long-term partner we will also benefit from diversifying
4. Indicative timetable
The Transaction is unconditional and expected to be completed in two steps, a first closing and a second closing, with approx. 77% of the assets value expected to be transferred into EduCo in the first closing and the remaining approx. 23% of the assets value is transferred in the second closing.
The parties' intention is to complete the first closing on
5. Previously announced letter of intent
SBB has prior to the entering into the Transaction terminated the Letter of Intent related to the proposed divestment of a portfolio of approx.
Investor presentation
SBB will present the Transaction at
The presentation will be held in English and will be concluded with a Q&A session. Questions can be asked on the conference call or in written form through the webcast. No pre-registration is needed.
Webcast link: https://financialhearings.com/event/46251
To participate via telephone please dial-in on the numbers below
SE: +46 856642651 PIN: 33406246#
US: +1 6319131422 PIN: 33406246#
After the presentation a recording of the webcast will be available on the webcast link.
Advisors
For further information, please contact:
tel +46 705183967
This disclosure contains information that Samhällsbyggnadsbolaget i
About Brookfield
Brookfield (NYSE: BAM, TSX: BAM.A) is a leading global alternative asset manager with over
For more information, please visit our website at www.brookfield.com.
About SBB
Samhällsbyggnadsbolaget i
Appendix A - Transaction Price Overview
|
| SEK billion |
A | Transaction Price, incl. 100% Earn-Outs ( | 46.1 |
B |
(-) Earn-Outs (assumes 50% of max. value of | 1.2 |
A - B = C | Transaction Price, incl. 50% Earn-Outs ( | 44.9 |
D |
(-) Earn-Outs (assumes 50% of max value of | 1.2 |
C - D = E | Transaction Price | 43.7 |
F | (-) Deferred Tax Liabilities ("DTL") | 2.7 |
E - F = G | Transaction Price, excl. DTL | 41.0 |
H | (-) Calculated present value of management fee under the asset management agreement ("CPV") payable by EduCo to SBB | 1.0 |
G - H = I | Transaction Price, excl. CPV | 40.0 |
J | (-) Existing external bank financing | 6.9 |
K | (-) Inter-company financing provided by SBB to EduCo | 14.5 |
J + K = L | Total Financing | 21.5 |
M | (-) Cash | 0.3 |
L - M = N | Net Debt | 21.2 |
I - N = O | Equity Value (100%) | 18.8 |
49% * O | 49% Equity Value Purchase Price by Brookfield | 9.2 |
N / E = P | Loan-to-value | 48.6% |
Transaction Price elements
- Transaction includes two separate Earn-Outs, expiring after 6 years from the date of the first closing of the Transaction, based on:
- (i) achieved refinancing terms for outperformance on cost of debt on the new financing once the take-out has been fully completed; and
- (ii) achieved net operating income yield for outperformance on capex deployment on new developments and acquisitions, respectively.
-
Total maximum cash amount payable to SBB from Brookfield for Earn-Outs will not exceed approx.
SEK 1.2 billion (B + D)[16].
-
Transaction Price of approx.
SEK 43.7 billion (E) -
Transaction Price, exclusive of
SEK 2.7 billion of DTL, ofSEK 41.0 billion (G) - CPV payable by EduCo to SBB, based on 1.8% of the net operating income per annum (H).
-
Existing external bank financing of approx.
SEK 6.9 billion (J) and approx.SEK 14.5 billion of inter-company financing provided by SBB to EduCo with a tenor of up to 6 years with a fixed interest rate of 3.0% (K). -
Brookfield acquires 49% of EduCo through approx.
SEK 9.2 billion upfront in cash (O).
[1] 2.7% discount calculated as Transaction Price of
[2] Book value as of the third quarter of 2022 for the assets contributed to EduCo amounting to
[3] Goldcup 31998 AB (under name change to
[4] Total maximum cash amount payable by Brookfield to SBB for Earn-Outs will not exceed approx.
[5] Approx. 95% by Gross Asset Value ("GAV") of EduCo portfolio located in "AAA" sovereign credit ratings countries (55%
[6] SBB loan-to-value ratio calculated as SBB's net debt / total assets as of the third quarter of 2022, pro-forma for (i) the Transaction, (ii) assets divestments to date since the latest reporting as of the third quarter of 2022, and (iii) tender offer on hybrid and debt securities as communicated on
[7] Total maximum cash amount payable by Brookfield to SBB for Earn-Outs will not exceed approx.
[8] Being above SBB's current average cost on outstanding debt.
[9] Revenue in 2023E, calculated as revenue earnings capacity as of the third quarter of 2022, adjusted for 2022E inflation.
[10] Net operating income in 2023E, calculated as net operating income earnings capacity as of the third quarter of 2022, adjusted for 2022E inflation.
[11] Calculated as: net operating income in 2023E / (Transaction Price of
[12] Calculated as: net operating income earnings capacity as of the third quarter 2022 / (Transaction Price of
[13] Approx. 95% by Gross Asset Value ("GAV") of EduCo portfolio located in "AAA" sovereign credit ratings countries (55%
[14] SBB loan-to-value ratio calculated as SBB's net debt / total assets as of the third quarter of 2022, pro-forma for (i) the Transaction, (ii) assets divestments to date since the latest reporting as of the third quarter of 2022, and (iii) tender offer on hybrid and debt securities as communicated on
[15] Interest coverage ratio calculated as EBITDA / net interest expense, pro-forma for (i) the Transaction, (ii) assets divestments to date since the latest reporting as of the third quarter of 2022, and (iii) tender offer on hybrid and debt securities as communicated on
[16] Total maximum cash amount payable by Brookfield to SBB for Earn-Outs will not exceed approx.
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