Pitch Best Deal 2020: HAL Investments – Royal IHC
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Name of the deal: HAL Investments, Ackerman & van Haaren and others – Royal IHC
Date: Announced 30 April 2020, closed 4 June 2020
Published value: €750 Million
Buyer(s): HAL Investments, Ackerman & van Haaren, MerweOord, Huisman Group, Atradius Nederland, Ministries of Economic affairs and Finance
Target: Royal IHC
Seller: Royal IHC shareholders
M&A Database: View more details of this deal
Involved firms and advisors sell side:
Stibbe (Legal Advisory Corporate M&A), Freshfields Bruckhaus Deringer (Legal Advisory Corporate M&A)
Involved firms and advisors target:
Lazard (M&A Advisory), PwC (Financial Due Diligence), Allen & Overy (Legal Advisory Corporate M&A), PwC (Consultancy)
Involved firms and advisors sell side:
Rothschild & Co (M&A Advisory), KPMG (Financial Due Diligence)
Pitch
Brief description deal / Deal outline:
Royal IHC specializes in complex vessels and vessel systems. Traditionally, the company has a strong focus on the dredging market but it handles a lot of offshore vessels as well. It is often referred to as the Silicon Valley of shipbuilding as for many years, the shipyard has had a leading role in maritime innovation. The shipbuilder also is of crucial importance for the many maritime suppliers in the region.
IHC was going through a difficult period. It struggled with lower demand from the offshore sector and cost overruns on some major projects, including contracts with DEMEIn July, the company stated that it would have to look for ways to strengthen its capital in order to survive. In 2018, the Group suffered a loss of eighty million euros. In the first half of 2019, the company was in the red again. As a result of the continuing losses, the equity position has come under considerable pressure.
Sources from the banking sector indicate that a Chinese company is also interested in the acquisition of IHC. However, HAL, a major shareholder of dredger Boskalis, and Dutch dredging/offshore contractor Van Oord and Belgian dredging/offshore company DEME have a strong interest in ensuring that IHC does not come into the possession of a Chinese competitor.
This would mean that the innovative technology and knowledge of the Kinderdijk-based shipbuilder would also land in Chinese hands. This would enable the Chinese to produce advanced dredgers themselves. IHC is the world market leader in this sector.
It is for that reason, the Dutch government and its major clients wanted to prevent the financially struggling shipyard from falling into Chinese hands.
To prevent this from happening, the shipbuilder has now been taken over by a consortium of HAL Investments, Ackermans & van Haaren, MerweOord and Huisman. HAL Investments is a large maritime investment company and the majority shareholder of Boskalis. MerweOord is the investment company of the Van Oord family which owns the eponymous Dutch offshore and dredging company. Ackermans & van Haaren is a Belgian investment company and the majority shareholder of DEME. And Huisman Equipment is the well-known Dutch offshore crane manufacturer.
By establishing a continuity foundation which will hold the shares in IHC Merwede Holding, “the consortium aims to retain for the Netherlands both Royal IHC’s leading technology and its position as an important hub in the maritime cluster”, the companies state.
The rescue mission of the four companies is supported by the Dutch government, which is contributing about EUR 400 million. The State itself is a major creditor of IHC, so trying to save IHC is also a way to minimise losses on outstanding amounts as much as possible.
The Heads of Agreement is made possible by a short-term bridging loan and guarantee facility from the Ministry of Economic Affairs and Climate Policy, and an export credit insurance contribution from the Ministry of Finance. In this way the State supports the preservation of high-quality technology and employment for the Netherlands.
The 400 million euros the State will contribute consist of an early claim payment on the construction of ships of 167 million euros, guarantees of 30 million euros, a credit guarantee for 140 million euros in bank loans and a bridging loan of 40 million euros.
The state aid comes with several terms and conditions. One is that “the private parties involved in IHC should make an effort similar to that of the State”, the Dutch Minister of Economic Affairs and Climate Eric Wiebes writes in a letter to parliament.
Why should this deal win the Award for Best Deal 2020?
This deal is a great example of teamwork between entrepreneurs and investors to preserve a Dutch Gem and to help a business survive and grow into a next successful phase. The deal is based on a long term vision and gives Royal IHC a new perspective for the future.
Deal rationale:
With the proposed acquisition and refinancing Royal IHC will receive a significant financial injection and regain a strong balance sheet, necessary for the continued development of high-quality vessels and equipment. This includes both new equity and credit lines. Atradius Dutch State Business, as trade credit insurer, has pledged its full support for future export projects.
What is the impact of this deal for the company?
Following the agreement, Gerben Eggink has been appointed as the new interim CEO. He succeeds Dave Vander Heyde and will lead Royal IHC through this new phase.
“I am looking forward to working hard with colleagues to restore the profitability of the business while maintaining our high quality and the satisfaction of our customers for the solutions Royal IHC delivers. That will require a major effort from everyone, especially in these difficult times worldwide. But Royal IHC is more than worth it”, Eggink says.
What is the impact of this deal for the direct stakeholders?
Jaap Huijskes, Chairman Royal IHC: “I am very pleased to announce today the Heads of Agreement with an industry consortium of major players in the maritime sector to acquire and refinance Royal IHC. It demonstrates the confidence of many stakeholders in – and their commitment to – Royal IHC's high-quality shipbuilding. This is an important step for the continuity of shipbuilding in the Netherlands, including employment opportunities and the sector’s global export position. We are convinced that, with this agreement, we will strengthen Royal IHC’s innovative power and the leading position it has held in the maritime sector for more than 350 years.”
What is the impact of this deal on society?
By the establishment of the Foundation Continuiteit IHC, HAL Investments, Ackermans & van Haaren, MerweOord and Huisman have joined forces to retain Royal IHC's knowledge and expertise for the Dutch maritime cluster.
What was most complex about this deal?
The number of parties involved and the innovative deal structure including a continuity foundation which will hold the shares in IHC Merwede Holding.
