Icelandic Competition Authority approves merger of Hagar and Olís with conditions

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Today, a settlement was signed between Hagar hf. and the Icelandic Competition Authority regarding the conditions for Hagar's acquisition of Olíuverslun Íslands hf. (Olís) and the real estate company DGV ehf. Hagar’s advisors in the transaction were Arctica Finance and Landslög.

The purchase agreements for the transactions were signed on April 26, 2017, subject to due diligence results, approval from the Competition Authority, and approval at a Hagar shareholders’ meeting for a share capital increase. The due diligence condition was waived on July 13, 2017, and the share capital increase was approved at Hagar’s Annual General Meeting in 2018.

The main conditions for the merger are:

1. The merging parties commit to:
   1. Offer the same prices for groceries at all Olís stations nationwide.
   2. Sell fuel to new resellers, upon request, on wholesale commercial terms.
   3. Sell the operations and property at Faxafen 14, where a Bónus store is operated.
   4. Sell the operations and properties of the Olís service stations at Háaleitisbraut 12 and Vallargrund 3.
   5. Sell the operations of the Bónus stores at Hallveigarstígur 1 and Smiðjuvegur 2.
   6. Sell the operations of the Olís store in Stykkishólmur.
   7. Sell the operations and facilities of the ÓB stations at Starengi 2, Kirkjustétt 2–5, and Knarrarvogur 2 in Reykjavík.
2. Ensure that fuel resellers have access to storage facilities at Olíudreifing to the extent Olís is able to grant as a co-owner of the company.
   
   
3. One of the sellers of Olís, FISK-Seafood ehf., commits to the Competition Authority to partially sell the share in Hagar it receives according to the purchase agreement. Hagar has simultaneously agreed to waive the transfer and disposal restrictions included in the April 26, 2017 purchase agreement.

Hagar has already signed purchase agreements for all the aforementioned assets. The merger will not be implemented, however, until the Competition Authority has assessed the eligibility of the buyers, which Hagar hopes will be completed no later than mid‑November.

The purchase agreements specifically address employee rights and ensure job security for staff.

According to the agreement between Hagar, Olíuverslun Íslands, and DGV, the total enterprise value of Olís is ISK 16,082 million, with net interest-bearing debt of ISK 5,928 million. The equity purchase price is therefore ISK 10,154 million. DGV’s total enterprise value is ISK 1,040 million, with ISK 640 million in interest-bearing debt. The equity purchase price for DGV is ISK 400 million, bringing the total transaction value to ISK 10,554 million.

Olís’ EBITDA for the 2017 operating year was about ISK 2,300 million, and net interest‑bearing debt was ISK 5,036 million. The purchase price will be paid partly with the delivery of 111 million Hagar shares and partly in cash. The company owns treasury shares with a nominal value of nearly ISK 69.2 million, and Hagar’s board has approved increasing the share capital for the remainder, in accordance with the company’s bylaws. For calculating the purchase price, a Hagar share price of 47.5 was used. The cash portion of the purchase price is financed for the next 12 months with a loan agreement from Arion Bank. The terms are identical and comparable to the company’s existing long‑term loans.

Following the merger, Hagar will work on restructuring its capital structure to maximize asset utilization and streamline operations. Advisors estimate annual synergies of ISK 600 million, representing approximately 3% of the combined operating costs. The combined Net Debt/EBITDA ratio is expected to be approximately 2.0.