SeaLink Travel : holds Extraordinary General Meeting

On Tuesday, 8 October 2019, SeaLink announced that it had entered into binding agreements to acquire 100% of Transit Systems Pty Ltd, Tower Transit Group Ltd and their broader group of entities (including trusts) (together the 'Transit Systems Group') (the 'Proposed Acquisition') and that it proposed to conduct an associated capital raising comprising a fully underwritten placement of SeaLink Shares and a fully underwritten pro rata, accelerated, non-renounceable entitlement offer of SeaLink Shares to raise in aggregate approximately A$154 million ('Equity Raising').

The purpose of this General Meeting is to vote on the Acquisition Resolutions and certain Ancillary Resolutions which relate to, or are necessary or prudent because of, the Proposed Acquisition.

Summary of Proposed Acquisition

Subject to the satisfaction of certain conditions precedent, SeaLink will acquire 100% of the Transit Systems Group for an enterprise value of A$635 million plus an earn-out component of up to A$63 million, comprising:

• Upfront Consideration comprising A$269 million in SeaLink Shares issued to the Scrip Vendors at a price of A$3.691 per SeaLink Share, A$118 million cash, and assumed Transit Systems Group debt and debt-like items of approximately A$211 million (largely being refinanced);
• Deferred Consideration comprising A$37 million of non-contingent cash consideration paid in three equal instalments over three years; and
• Earn-out Consideration comprising up to A$63 million of contingent cash consideration based on Transit Systems Group FY20 pro forma normalised EBITDA (straight line sliding scale from A$79 million to A$86 million), also paid in three equal instalments over three years.

As announced to the ASX on 9 October 2019 and on or about 1 November 2019, SeaLink has now successfully completed the Equity Raising. In aggregate, SeaLink has raised approximately A$154 million through the Equity Raising.

The proceeds of the Equity Raising will be used to partly fund the Proposed Acquisition and pay transaction costs associated with the Equity Raising and Proposed Acquisition.

At Completion of the Proposed Acquisition, the Scrip Vendors will become substantial holders of SeaLink and are expected to hold in aggregate approximately 33.4% of SeaLink Shares.

Deferred Consideration and Earn-out Consideration, to the extent paid, will be funded from operating cash flow and available debt capacity.

Overview of Transit Systems Group

Transit Systems Group is Australia's largest private operator of metropolitan public bus services and an established international bus operator in London and Singapore. The business was founded in Perth in 1995 after winning the first competitively tendered public to private bus contract in Australia.

Today, Transit Systems Group operates approximately 2,366 buses across Australia, 396 buses in London and 367 buses in Singapore largely on behalf of governments and transport authorities as contract counterparties. The contract portfolio at the beginning of the current financial year consists of 16 contracts in Australia, 23 contracts in London and 31 routes under 1 contract in Singapore.

Combined, SeaLink and the Transit Systems Group will create a large Australian marine and bus multi- modal transport provider, with established international operations. The key strategic advantages of the Proposed Acquisition for SeaLink include:

• creation of a leading Australian integrated land and marine passenger transport business, with enhanced scale and capabilities to compete for large government contracts and ability to provide multi-modal solutions;
• diversification of SeaLink's end-market exposure, growing the contribution from resilient passenger transport earnings, with an enhanced domestic footprint and scalable platform for significant international expansion from established businesses in Singapore and the United Kingdom;
• significantly increased exposure to long term government contracted revenues and reinforcing SeaLink's position as a trusted counterparty to governments, with a strong track record of delivering long term services reliably and safely;
• greater ability to benefit from the extensive pipeline opportunities both domestically and internationally by leveraging combined expertise, client relationships and geographical presence;
• realisation of synergies through delivery of potential cost savings of A$4.0 - A$4.6 million per annum, largely from the removal of cost duplication and scale benefits; and
• combination of two highly skilled and experienced management teams with complementary expertise and capabilities across bus and passenger management operations.

Impact of the Proposed Acquisition and Equity Raising

The Proposed Acquisition and Equity Raising are expected to deliver FY19A pro forma EPS accretion of over 20%, pre-synergies, pre-bonus adjustment and before transaction and implementation costs and more than 30% post synergies.

New SeaLink CEO

Subject to Completion of the Proposed Acquisition, Clint Feuerherdt, current Group CEO of Transit Systems Group, has agreed to lead SeaLink as Group CEO following Jeff Ellison's retirement. Clint is well credentialed to lead SeaLink going forward and the SeaLink Board considers Clint's previous experience as ideal for this role.

Jeff will retire as CEO following Completion of the Proposed Acquisition and has agreed to provide ongoing executive support to Clint to ensure a smooth transition of leadership, following which he will become a non-executive Director on the SeaLink Board. Neil Smith, current Chairman of Tower Transit Group and founding shareholder of Transit Systems Group, will join the SeaLink Board as a non- executive Director of SeaLink immediately upon Completion of the Proposed Acquisition.

Independent Expert

SeaLink has obtained an Independent Expert's Report from Grant Thornton to assist SeaLink Shareholders in deciding whether or not to approve Resolutions 1 and 2 (as set out in the Notice of Meeting). Resolution 1 relates to the acquisition by the Scrip Vendors of an aggregate approximate 33.4% interest in SeaLink Shares at Completion, approval of which is a condition precedent to the Proposed Acquisition. Resolution 2 relates to the acquisition by SeaLink of approximately a 33.4% interest in SeaLink Shares by virtue of it entering into escrow arrangements with the Scrip Vendors in relation to their SeaLink Shares.

A copy of the Independent Expert's Report was originally provided to ASX on 8 October 2019, and an amended copy is set out in the Explanatory Memorandum. The Independent Expert's Report has been updated to reflect the recent share price performance of SeaLink and other transaction events to 23 October 2019.

In its report, the Independent Expert has concluded that the Proposed Acquisition of Transit Systems Group and the issue of SeaLink Shares to the Scrip Vendors is fair and reasonable to Non-Associated Shareholders.
The Explanatory Memorandum sets out further details of the Proposed Acquisition.

Whilst the Directors unanimously recommend that you vote in favour of the Acquisition Resolutions, there are a number of potential disadvantages and risks associated with them as set out in detail in Sections 1.5 and 6. I trust you have all read the Explanatory Memorandum in full before making your decision and voting on the Acquisition Resolutions at the General Meeting.

The Directors consider that the Proposed Acquisition represents an attractive opportunity to transform SeaLink into a leading global multi-modal transport and tourism company and encourage you to support the Proposed Acquisition. If you wish the Proposed Acquisition to proceed, it is important that you vote in favour of the Acquisition Resolutions.

View the General Meeting presentation from 18th December 2019.