Cibi e Bevande
Information for MBWS shareholders in advance of the AGM on 31st January 2019
Paris, 25 January 2019
Marie Brizard Wine & Spirits (Euronext: MBWS) has decided to publish today additional detailed information in advance of its General Meeting to be held on 31 January 2019, regarding the operations and proposals submitted for the approval of its shareholders.
The Group has faced significant operating and financial difficulties during the past several months which have led to the involvement of a conciliator and of an Inter-Ministerial Industrial Restructuring Committee, two independent bodies under whose guidance all solutions in the Company's best interest have been explored (refinancing, disposal of brands and assets, involvement of a financial or industrial partner, capital increase, etc.).
Thus, since March 2018, the Company's management has sought solutions to address the Group's liquidity problems. Under the guidance of the conciliator, several loans were obtained from the syndicate of banks for a total principal amount of €7.5m, as well as a current account advance granted by COFEPP for a principal amount of €7.5m. These loans were expected to enable the Group to finalize the discussions with its banking partners before the end-of-summer in 2018.
Faced with the deterioration of market conditions in France and the United States, and the delay in executing the plan of corrective measures in Poland, the estimate for 2018 EBITDA was revised downward significantly. This rendered it impossible for the Group to conclude the discussions with its banking partners before the end-of-summer 2018.
On 4 September 2018, the Group announced a project to sell some of its brands in order to cover all or part of the FY 2018 losses. This project was announced after a budgeting exercise carried out in the summer of 2018 led to a decrease in the estimated 2018 EBITDA, and highlighted the Group's weakened cash position, which – based on the assumptions made by the Group – pointed to a funding need in a range of €40m to €50m by January 2020, particularly in light of the termination of coverage by some credit insurers.
Consequently, a process (which lasted three months) to sell some brands was carried out by an investment bank. In total, approximately 40 investors were contacted formally. Some of these investors made indicative offers, but no binding offer was received as of the Board of Directors meeting on 21 December 2018, which met to close the 2017 accounts. Given this state of affairs, the Board of Directors made the decision to end the asset disposal process.
Given this situation and in light of the impossibility of finding additional debt finance ng, as well as facing the difficulty of identifying buyers for the assets that were for sale, the investment bank was also mandated to find an industrial or financial partner capable of providing the Group with the required capitalization, in the event that the asset disposal project failed.
During this period, roughly 20 investors were contacted and two firm offers were received during the week of the 17 December, after three months of analysis and advanced discussions.
After assessing the two proposals, COFEPP's offer -- after negotiation -- was chosen unanimously by the Board of Directors (excluding the Board members representing COFEPP, who abstained from participating in the deliberation and the vote) over the offer made by a foreign first-tier financial investor. The offer submitted by COFEPP was also preferred over the possibility of opening an insolvency procedure which would have significantly worsened the situation (specifically leading to the loss of credit provided by suppliers, client contracts, as well as the risk that the Group's key employees might resign or be hired away) and would have permanently damaged the Company.
The offer submitted by COFEPP was chosen based on objective criteria: a higher amount invested (€37.7m in COFEPP's Principal Option, compared to €25m in the financial investor's proposal) and a higher subscription price for the reserved capital increase (€4.00 per share offered by COFEPP, compared to €3.52 per share offered by the financial investor).
The Board of Directors also considered that an industrial partner offered the Group significant strategic advantages.
Moreover the offer made by COFEPP, which is structured in the form of a Principal Option subject to certain conditions, and – if the Principal Option is not able to be executed – an Alternative Option (under the sole condition of the approval of shareholders at the General Meeting) would secure the required recapitalization of the Group. A summarized description of the Principal and Alternative Options are included in the annexes of this press release.
The conclusion of that agreement enabled the Board of Directors to close the FY 2017 accounts on 21 December 2018, with the Company as a going concern, and to summon shareholders to an Annual General Meeting. The execution, without delays, of the binding agreement with COFEPP is a condition for the Group's status as a going concern. However, the assumptions regarding the Company's liquidity estimates relies on the disposal of assets (excluding brands). The Group has received several expressions of interest, but no firm offer has been received at present. Any disposal of significant assets will first be evaluated by an ad hoc committee.
In applying the agreement reached between the Company and COFEPP on 21 December 2018, the parties agreed to place in escrow, to be received by a conciliator as Escrow, the amount of €25m as a guarantee of COFEPP's proper execution of all of its voting, deposit, subscription and payment commitments (including a receivable offset) of said agreement. In the event that it does not respect these commitments, COFEPP has agreed to pay an indemnity of €5m, without prejudice to any enforcement of rights.
The Group's Board of Advisors and Chief Executive Officer have clearly affirmed their preference for the Principal Option of the agreement signed with COFEPP (the COFEPP Reserved Capital Increase, outlined in Resolution 28 to be proposed at the General Meeting). This is the only option which will provide the Group with sufficient funds to cover its financial requirements and to enable its turnaround.
Given the Group's liquidity challenges, and the urgency of obtaining funding as quickly as possible to enable the Group to face its financial obligations, the decision has been made to submit this operation to the shareholders at the General Meeting of 31 January 2019, without waiting for the publication of the Company's FY 2018 results or the new strategic plan. The agreement with COFEPP includes a bridge loan of €25m to be granted to the Company by COFEPP within two days following the General Meeting, in the event of a favorable vote on either of the Options. Therefore, in order to receive these funds it has become necessary to hold a General Meeting without delay. As a reminder, the agreement with COFEPP will become automatically void if a General Meeting is not held to vote on the Operation by 31 January 2019 at the latest.
Andrew Highcock, Chief Executive Officer of Marie Brizard Wine & Spirits, joined the Group at the end of October 2018. He spent the first weeks of his tenure meeting with company staff and with the largest clients across the Group's various geographies. He is currently working with the Group's employees to prepare a new strategic plan which should be presented and communicated before the end of Q1 2019.
No member of the Board of Directors, including those representing COFEPP, has yet had access to any part of the strategic plan or the future business plan.
Given the constraints as regards regulatory controls on mergers, COFEPP cannot contribute to MBWS' strategic plan before obtaining the required authorizations. Once the authorizations are secured, COFEPP will work with MBWS management to identify and to seize the possible synergies, within the confines of the best interests for each of the companies, and an equitable distribution between the two companies within the context specifically of MBWS' recovery and development.
In order to provide the best information possible to its shareholders, the Group has decided to publish its latest estimates for FY 2018. These are preliminary numbers as the auditors have not yet begun their review of the FY 2018 accounts.
Thus, for the year ended 31 December 2018, the Group expects an EBITDA of approximately -€28m and a net loss, based on the work carried out so far on the annual accounts, in a range of -€60m and -€6 5m, also including impairments.
On 23 January 2019, the creditors of the medium term loan received on 26 July 2017 and of the bridge loan received on 29 May 2018 accepted to waive the right to request the immediate repayment of the medium-term loan, with a principal amount of €45m. This waiver is valid until 28 February 2020 at the latest. During the same period, they have also agreed to waive the half-yearly payments on said mid-term loan, and -- until the realization of the capital increases outlined in the Operation (such as the term is defined hereafter) -- to the repayment of the bridge loan in the amount of €7.5m in principal, granted on 29th May 2018.
The waivers will be rescinded immediately and in advance if one of the following events takes place:
Within the framework of recent organizational changes at Marie Brizard Wine & Spirits, the General Managers of the international affiliates now report directly to the Group's Chief Executive Officer. Andrew Highcock provides the benefit of his knowledge of the international beverage and spirits markets, as he has held senior management positions in several of those countries. Consequently, Stanislas Ronteix, Deputy CEO of the Group responsible for distribution and sales development in the clusters, left the Group on 18 January 2019.
As announced in the press release of 24 December 2018, the Company has agreed to submit to its shareholders a list of nominees of members representing COFEPP with the aim of having a majority of members of the Board of Directors representing COFEPP in the event of the execution of the Principal Option of that agreement. This is valid assuming that the Capital Increase Reserved for COFEPP is realized.
Given the intention of Christine Mondollot and Constance Benqué to resign from their positions as Board members with effect on the date of the execution of the Operation (and considering Benoît Hérault's resignation with effect at the same date), COFEPP will propose to the shareholders at the next General Meeting the following representatives :
Biographical details for these candidates are available on the Company's website (in French) on the “Assemblée Générale 2019” page.
The objective of the financial and industrial investment by COFEPP in MBWS is the turnaround of the latter via the preservation and development of MBWS' business activities, particularly in light of potential synergies. Within this context, COFEPP confirms that it does not have any intention, in the short or medium term, of pursuing a merger or a contribution between MBWS and COFEPP. If such a transaction were to be proposed to shareholders at a later date, the parity to be retained would take into account the recovery of MBWS and it business potential, for the benefit of all MBWS shareholders.
As announced when COFEPP became a shareholder of Marie Brizard Wine & Spirits, opportunities for joint sales and distribution in international markets have been explored. In Spain, Marie Brizard Wine & Spirits' affiliate does not have the critical size necessary to enable it to achieve sustainable profitability.
The Company is currently assessing a number of measures to reduce operating losses tied to distribution of the Company's products in Spain. One of the options under evaluation would be to outsource the distribution of its products to a third party. In this regard, Bardinet Spain, a COFEPP affiliate, could take on such distribution. The Company's Board of Directors will consider a preliminary approval of such an arrangement. The possible distribution of MBWS products by Bardinet Spain is not in any way tied to the binding agreement signed by MBWS and COFEPP.
produces and sells a range of wine and spirits across four geographic clusters: Western Europe, Middle East & Africa, Central and Eastern Europe, the Americas, and Asia-Pacific. MBWS has distinguished itself for its know-how, the range of its brands, and a long tradition and history of innovation. From the inception of Maison Marie Brizard in Bordeaux, France in 1755, to the launch of Fruits and Wine in 2010, MBWS has successfully developed and adapted its brands to make them contemporary while respecting their origins. MBWS is committed to providing value by offering its customers bold, trustworthy, flavorful and experiential brands. The company has a broad portfolio of leading brands in their respective market segments, most notably William Peel scotch whisky, Sobieski vodka, Krupnik vodka, Fruits and Wine flavored wine, Marie Brizard liqueurs and Cognac Gautier. MBWS is listed on the regulated market of Euronext Paris, Compartment B (ISIN code FR0000060873, ticker MBWS) and is included in the EnterNext© PEA-PME 150 index, among others.
If the resolutions regarding the Principal Option -- Resolutions 28 and 29 -- do not receive a favorable vote by shareholders at the General Meeting, or if the conditions to which this Option are subject are not met, the Alternative Option will be executed by the Board of Directors. The only specific conditions on the Alternative Option are those described below.
Whichever of the two options is executed, with the only condition being the favorable vote by the shareholders at the General Meeting on one of the two options, the agreement with COFEPP calls for COFEPP to grant the Company a bridge loan in the amount of €25m (at an annual interest rate of 4.56%), maturing on 30 April 2020. This loan is to be paid within two days following the date of the General Meeting. The bridge loan will be repaid in advance at the date of the realization of one of the two options described hereunder, by inclusion in the capital.
Given the resignation intentions received, only four candidates will be nominated (and not five as listed in the Meeting Notice for the General Meeting.
Condition at COFEPP's option
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