Hi, great writeup. One Qeustion: I stumbled across the "putable minority interests" relating to the FER_PAL acquisition (Note 25 of the annual report).
Do you have any idea what the parameters of that deal is ? In 2021, ~25 mn retained earnings disappeared because of this.
Furthermore, FER -PAL non controlling shareholders triggered the put option on march 2022 for a cash consideration of 19.1m. So the 49% of FER-PAL is now valued at 19.1x3 = 57.3m. It was 63.2m. In any case, since FER-PAL has triggered the put options.. and now that Logistec owns 67% of FER-PAL, re-evaluation will not impact too much the liabilities line. However, Logistec is forced to purchase the rest of FER-PAL over the 2 years in 2 tranches
Extract of 9month report of 2022:
LIABILITY DUE TO NON-CONTROLLING INTERESTS
On March 31, 2022, the non-controlling interest shareholders exercised their put option. On July 29, 2022, the Company
acquired an additional 16.3% investment (“first tranche”) in FER-PAL Construction Ltd. (“FER-PAL”) for a cash consideration of $19.1 million.
(1) The net indebtedness is reconciled in Note 5 of the notes to Q3 2022 financial statements.
Q3 2022 MANAGEMENT’S DISCUSSION AND ANALYSIS
For the nine-month period ended September 24, 2022, the net remeasurement of the written put option liability was a reduction of $5.0 million ($14.8 million in 2021), which corresponds to the portion of a dividend of $8.7 million (nil in 2021) paid to the non-controlling shareholders of the subsidiary, less the remeasurement of the liability of $3.7 million ($14.8 million in 2021).
Here is how I see it... in the annual report of 2017 they mentionned that in order to cover for the put option granted to the previous owner (non controlling owner of 49% of FER-PAL) they had included a 47.5 million liability at the closing (simply based on the purchase price).. then based on the profit of 2017..they reevaulated the liability to 48.1m . The evaluation of the 49% of FER-PAL (put or call option) changes based on the results of FER-PAL on a standalone basis... based on current and projected profit. I guess they have figure out some rules to re-evaluate the company, Likely based on the historical EBITDA of FER-PAL at purchase price and now ongoing EBITDA. It also enforces existing management of FER-PAL to pursue their effort to make FER-PAL more lucrative since they at some point they can sell the rest of the shares based on the profit generated.
The re-evaluation is shown in the non current financial liabilities but now also it the trades line..
At transaction: 47.5m (purchase price) = purchase price
2017 end: 48.5m
2018: 32.7m (big drop) - really bad year for FER-PAL
2019: 29.2m
2020: 31.9m (FER PAL had a good year)
2021: 64.3m (big jump.. and now split between non current and trade.. as you mentionned.
So 64.3m is not too far from the original purchase price 5 years later.. FER-PAL has some very bad years in 2018 and 2019, so they revised the price downward to as low as 29m ... then in 2021 FER-PAL probably achieved a EBITDA even better than 2017.
In 2016, FER-PAL generated 8.1m of profits. So I am assuming that 2021 was much higher than that.
Hi, great writeup. One Qeustion: I stumbled across the "putable minority interests" relating to the FER_PAL acquisition (Note 25 of the annual report).
Do you have any idea what the parameters of that deal is ? In 2021, ~25 mn retained earnings disappeared because of this.
Furthermore, FER -PAL non controlling shareholders triggered the put option on march 2022 for a cash consideration of 19.1m. So the 49% of FER-PAL is now valued at 19.1x3 = 57.3m. It was 63.2m. In any case, since FER-PAL has triggered the put options.. and now that Logistec owns 67% of FER-PAL, re-evaluation will not impact too much the liabilities line. However, Logistec is forced to purchase the rest of FER-PAL over the 2 years in 2 tranches
Extract of 9month report of 2022:
LIABILITY DUE TO NON-CONTROLLING INTERESTS
On March 31, 2022, the non-controlling interest shareholders exercised their put option. On July 29, 2022, the Company
acquired an additional 16.3% investment (“first tranche”) in FER-PAL Construction Ltd. (“FER-PAL”) for a cash consideration of $19.1 million.
(1) The net indebtedness is reconciled in Note 5 of the notes to Q3 2022 financial statements.
Q3 2022 MANAGEMENT’S DISCUSSION AND ANALYSIS
For the nine-month period ended September 24, 2022, the net remeasurement of the written put option liability was a reduction of $5.0 million ($14.8 million in 2021), which corresponds to the portion of a dividend of $8.7 million (nil in 2021) paid to the non-controlling shareholders of the subsidiary, less the remeasurement of the liability of $3.7 million ($14.8 million in 2021).
Here is how I see it... in the annual report of 2017 they mentionned that in order to cover for the put option granted to the previous owner (non controlling owner of 49% of FER-PAL) they had included a 47.5 million liability at the closing (simply based on the purchase price).. then based on the profit of 2017..they reevaulated the liability to 48.1m . The evaluation of the 49% of FER-PAL (put or call option) changes based on the results of FER-PAL on a standalone basis... based on current and projected profit. I guess they have figure out some rules to re-evaluate the company, Likely based on the historical EBITDA of FER-PAL at purchase price and now ongoing EBITDA. It also enforces existing management of FER-PAL to pursue their effort to make FER-PAL more lucrative since they at some point they can sell the rest of the shares based on the profit generated.
The re-evaluation is shown in the non current financial liabilities but now also it the trades line..
At transaction: 47.5m (purchase price) = purchase price
2017 end: 48.5m
2018: 32.7m (big drop) - really bad year for FER-PAL
2019: 29.2m
2020: 31.9m (FER PAL had a good year)
2021: 64.3m (big jump.. and now split between non current and trade.. as you mentionned.
So 64.3m is not too far from the original purchase price 5 years later.. FER-PAL has some very bad years in 2018 and 2019, so they revised the price downward to as low as 29m ... then in 2021 FER-PAL probably achieved a EBITDA even better than 2017.
In 2016, FER-PAL generated 8.1m of profits. So I am assuming that 2021 was much higher than that.