New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Tourism Holdings Revised approach to Apollo deal</h2>
The protracted anti-trust process for Tourism Holdings’ (THL) proposed acquisition of Apollo Tourism &amp; Leisure (ATL) has entered a new phase with THL now seeking competition authority clearance on the basis that it divests certain assets of ATL in New Zealand and Australia. It has entered into exclusive negotiations with Next Capital to sell a material proportion of ATL’s larger berth (4-6 berth) vehicles to Jucy Rentals (Next Capital has recently entered into an agreement to acquire a controlling interest in Jucy Rentals).
We believe there is now a significantly higher probability that the deal is approved by the Commerce Commission (ComCom) and ACCC, but the upside if successful, is less than what it would have been previously.
Cost synergies would be unchanged but the revised approach would create revenue dis-synergies as THL would have a smaller fleet from which to extract rental revenues. Moreover, the overall industry rental fleet would be larger (than under the original deal), potentially impacting rental yields, as THL would be divesting vehicles to a competitor, rather than divesting into the private market.
In summary
<ul>
<li>THL would have a smaller fleet, even after the anticipated fleet divestments as a result of the original deal</li>
<li>A smaller fleet would mean lower potential rental revenues</li>
<li>It would be selling market share to a competitor and providing it a means of scale entry into the larger berth segment of the market</li>
<li>The expected NZ$17m-NZ$19m of cost synergies from the original deal would still be applicable. THL would still have a larger footprint business and would not divest any of ATL’s smaller berth fleet to Jucy</li>
</ul>
Our view
The ‘new deal’ is less attractive&nbsp;than&nbsp;the original deal, but has a higher chance of obtaining competition clearance. The key question for investors is whether or not, it is better than no deal. In the absence of ‘new deal’ detail this is difficult to determine with any conviction.&nbsp;However, management’s track-record of value accretive decision making suggests that it is better than no deal.

Tourism Holdings Revised approach to Apollo deal
The protracted anti-trust process for Tourism Holdings’ (THL) proposed acquisition of Apollo Tourism &amp; Leisure (ATL) has entered a new phase with THL now seeking competition authority clearance on the basis that it divests certain assets of ATL in New Zealand and Australia. It has entered into exclusive negotiations with Next Capital to sell a material proportion of ATL’s larger berth (4-6 berth) vehicles to Jucy Rentals (Next Capital has recently entered into an agreement to acquire a controlling interest in Jucy Rentals).
We believe there is now a significantly higher probability that the deal is approved by the Commerce Commission (ComCom) and ACCC, but the upside if successful, is less than what it would have been previously.
Cost synergies would be unchanged but the revised approach would create revenue dis-synergies as THL would have a smaller fleet from which to extract rental revenues. Moreover, the overall industry rental fleet would be larger (than under the original deal), potentially impacting rental yields, as THL would be divesting vehicles to a competitor, rather than divesting into the private market.
In summary

THL would have a smaller fleet, even after the anticipated fleet divestments as a result of the original deal
A smaller fleet would mean lower potential rental revenues
It would be selling market share to a competitor and providing it a means of scale entry into the larger berth segment of the market
The expected NZ$17m-NZ$19m of cost synergies from the original deal would still be applicable. THL would still have a larger footprint business and would not divest any of ATL’s smaller berth fleet to Jucy

Our view
The ‘new deal’ is less attractive&nbsp;than&nbsp;the original deal, but has a higher chance of obtaining competition clearance. The key question for investors is whether or not, it is better than no deal. In the absence of ‘new deal’ detail this is difficult to determine with any conviction.&nbsp;However, management’s track-record of value accretive decision making suggests that it is better than no deal.

Tourism Holdings: Revised Approach to Apollo Deal