Market Announcement
Evaluation of the
Acquisition of Ciclus
through the Merger of CS Infra shares into SIMPAR
STRICTLY CONFIDENTIAL | OCTOBER 2021
Transaction Overview
Acquisition of Ciclus through the merger of CS Infra shares into SIMPAR: increase of the concessions portfolio with a focus on the provision of long-term services and resilient revenues, enabling the entry into a new sector (solid waste management and valorization)
Transaction Proposed by SIMPAR
Business Scope
Swap Ratio and Price
Methodology and Fairness Opinion
Valuation
Financial Economic Rebalancing
Subscription Bonus
Approval Process and Governance
- Acquisition of Ciclus through the Merger of CS Infra shares into SIMPAR, a vehicle that will consolidate all the Group's concessions
- Ciclus: Company that performs the integrated management (transshipment, transportation, final disposal, treatment and valorization) of domestic solid urban waste in the cities of Rio de Janeiro, Seropédica, Itaguaí, Mangaratiba, Piraí and Miguel Pereira, mainly through a long-term concession contract with COMLURB¹, besides commercial clients and large generators²
- Transaction 100% in shares, through the issuance of SIMH3 shares:
- No Rebalancing: Initial issuance of 23,010,721 new SIMH3 shares, with exchange ratio of 0.38351027 SIMH3 shares for each CS Infra shares. JSP's stake in SIMPAR will go from 57.1%³ to 58.3%³, with a 2.8% dilution of minority shareholders
- With 100% rebalancing: Issue of subscription bonus attributed to JSP whose exercise will enable the subscription of up to 32,084,167 new SIMPAR shares. JSP's stake in SIMPAR will go from 58.3%³ to 59.9%³, with a maximum final dilution of 6.4% of minority shareholders
- Valuation of SIMPAR and Ciclus based on discounted cash flow
- SIMPAR: Valued at R$16,914 to R$23,848 bi | R$21.10/share to R$29.74/share
- Ciclus Without Rebalancing: Valued at R$514 to R$561 mm | from 17.3 mm to 26.6 mm SIMH3 shares → Swap ratio within the fairness range
- Ciclus With Rebalancing: Valued from R$1,139 to R$1,223 mm | from 38.3 mm to 57.9 mm SIMH3 shares → Swap ratio within the fairness range
- Objective: Rebalance of the monthly tariff paid in the contract with COMLURB and increase in the contractual term, due to a new operational reality, cost variations and tax differences
- In October 2020 an addendum was signed to the concession contract that formalized the complete rebalancing, which is under analysis by TCM4
- This subscription right will be conditioned to the partial or total obtaining of the Rebalancing, being the same conferred in a proportional way (Pro rata)
- The merger will become effective after corporate approvals, and the EGMs of SIMPAR and CS Infra will be held, on first call on November 29, 2021
- The controlling shareholder will follow the minority shareholders' decision
Notes: (1) COMLURB is a mixed economy company that operates in the urban cleaning of the city of Rio de Janeiro; (2) These are private companies that generate more than 120 liters of waste per day; (3) Considers the total shares of SIMPAR excluding treasury shares; | 2 |
(4) Court of Auditors of the Municipality of Rio de Janeiro | |
Reorganization Overview
Creation of a holding company focused on long-term service concessions with resilient revenues, respecting capital and return discipline
1. Pre-Transaction Structure | 2. Post Transaction Structure² |
JSP
Holding S.A.
JSP
71.9% | 63.0% | 71.9% | 100% | 100% | 100% |
100% | 57.1%² |
100% | 64% | 100% | 100% | 49.75% |
Highway | Port Terminal | Port Terminal | BRT Sorocaba | |
Transcerrados | ATU-18 | ATU-12 | ||
100%
Concessions currently owned by CS Brasil
Subsequent Movements
- SIMPAR will transfer the infrastructure assets of CS Brasil (Aratu-12 and Aratu- 18 port concessions, Transcerrados highway and BRT Sorocaba) to CS Infra, strengthening the long-term concessions platform.
- With this transfer, CS Brasil will be left with municipal passenger transport contracts, Heavy GTF, GTF with driver and residual Light GTF contracts, which did not obtain client consent for incorporation by Movida.
Notes: (1) Considers SIMPAR's total shares excluding treasury shares; (2) SIMPAR's stake in subsidiaries disregards treasury shares; (3) Shareholding after initial incorporation, without considering the effectuation of 100% of the financial economic rebalancing and exercise | 3 |
of the subscription bonus | |
Ciclus: Integrated Management in the Solid Waste Sector
Location
Founded in 2010, Ciclus is a reference in integrated management (transshipment, transportation, final disposal and treatment) and valorization of solid waste including biogas, energy and carbon credits with first class infrastructure
Operates for the city of Rio de Janeiro, a concession contract signed with COMLURB (concessionaire of 100% of the waste of the city of Rio de Janeiro), with an original term until 2026 and an additional one until 2036², with potential additional extension to be agreed upon by the parties
Final disposal also of waste from the cities of Seropédica-RJ, Itaguaí-RJ,
Mangaratiba-RJ,Piraí-RJ and Miguel Pereira-RJ
One of the largest Waste Treatment Centers (WTC)³ in Latin America, located in Seropédica-RJ,in addition to 5 waste transfer stations in the city of Rio de Janeiro that serve as transshipment areas
Waste
Transfer
Station
WTC
WTC
Marechal Hermes WTS
1 WTC + 5 WTS4 | 2.8 mm m2 | +18 years | 10,000 ton/day | +20,000 Nm³/hour | ||
CICLUS IN | Ciclus Assets | WTC area | WTC Capacity | Treatment, transportation | Biogas volume | |
and final destination | ||||||
NUMBERS | 2.5 mm | 418.7 thousand | R$326 mm | R$147 mm | 45.0% | |
Carbon Credits in stock5 | Carbon Credits generated in | Net Revenue 2Q21 LTM6 | EBITDA 2Q21 LTM6 | EBITDA Margin 2Q21 LTM6 | ||
2020 | ||||||
Notes: (1) COMLURB is a mixed economy company that operates in urban cleaning in the city of Rio de Janeiro; (2) Amendment under review by the Court of Accounts of the Municipality of Rio de Janeiro; (3) Composed of a bioenergy landfill, a purification station and biogas | 4 |
recovery plant and a leachate treatment plant; (4) Waste transfer station; (5) Credits already issued (1.6 million) and to be issued (0,9 million) by UN; (6) Last 12 months considering full rebalancing since November/20 | |
Rationale for Merger of CS Infra
Development of a holding company focused on long-termconcessions, increasing its potential to generate value;
Incorporation of an asset through payment in SIMH3 shares, adding predictable, resilient and long-term revenue, which presents multiple opportunities for additional revenue generation;
Sector with opportunities for organic growth, due to the new regulatory framework that encourages the development of the segment, and with potential consolidation in a still fragmented market, which will benefit from SIMPAR's M&A expertise;
Firm guarantee of long-termrefinancing (9 years¹) of Ciclus' debts, improving its cash flow due to the extended repayment schedule and more competitive costs, enabling a greater allocation of capital into acquisitions and organic growth projects;
Evolution of the ESG agenda, in line with SIMPAR's strategic plan to promote growth and generate sustainable value.
Note: (1) Average refinancing term | 5 |
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Simpar SA published this content on 29 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 October 2021 05:57:08 UTC.