McMillan Shakespeare Limited

11/08/2018 | Press release | Distributed by Public on 11/07/2018 19:50

McMillan Shakespeare and Eclipx merger

ASX ANNOUNCEMENT

McMillan Shakespeare and Eclipx merger

Creates a leading salary packaging and fleet management company

  • MMS and Eclipx have agreed to merge pursuant to a Scheme Implementation Agreement whereby MMS will acquire all shares in Eclipx

  • Eclipx shareholders are to receive 0.1414 MMS shares plus 46 cents cash for each Eclipx share held, implying a total value of $2.851 per Eclipx share

  • The industrial logic of combining these complementary businesses is compelling

  • Anticipated ultimately to deliver EBITDA run-rate synergies of $50 million per annum following integration, before implementation and transaction costs

  • The merger is expected to be EPS accretive pre synergies

  • Delivers an improved offering for all customers and material benefits for employees

  • The shareholders in each company continue to retain upside of their respective businesses, in addition to sharing in the growth opportunities and synergies of the combined group through their holdings in the merged group under MMS

  • MMS Board expanded to include three Eclipx directors. MMS CEO and CFO, Mike Salisbury and Mark Blackburn, to continue as CEO and CFO of the combined group

  • The merger to be put to Eclipx shareholders in early 2019 is unanimously recommended by the Board of Eclipx

Merger overview

McMillan Shakespeare Limited ("MMS", ASX: MMS) and Eclipx Group Limited ("Eclipx", ASX: ECX) are pleased to announce that the companies propose to merge in a Scheme Implementation Agreement, establishing a leading salary packaging and fleet management company ("Combined Group"). The proposed transaction (the "Merger"), which is subject to conditions, will be implemented by MMS acquiring all shares in Eclipx under an Eclipx Scheme of Arrangement ("Eclipx Scheme").

Upon completion of the Merger, the Combined Group's Board will include three current Eclipx Directors. The Chief Executive Officer and Managing Director of the Combined Group will be MMS' Mike Salisbury and MMS' Mark Blackburn will be Chief Financial Officer.

1 Based on MMS' last closing price of $16.90 on Wednesday, 7 November 2018

McMillan Shakespeare Limited

Level 21, 360 Elizabeth Street, Melbourne, Victoria 3000

ABN 74 107 233 983

AFSL No. 299054

Phone: +61 3 9097 3273

Web:www.mmsg.com.au

Page 1

The Merger is unanimously recommended by the Board of Eclipx, in the absence of a superior proposal and subject to an independent expert concluding that the Merger is in the best interests of the Eclipx shareholders. Subject to those same qualifications, the Directors of Eclipx intend to vote all Eclipx shares held or controlled by them in favour of the Merger.

Merger terms

Under the terms of the Merger, Eclipx shareholders will receive 0.1414 MMS shares plus 46 cents cash for each Eclipx share held ("Consideration").

The Consideration implies a total value of $2.85 per Eclipx share based on MMS' last closing price of $16.90 on Wednesday, 7 November 2018. The Consideration represents a 33.2% premium to Eclipx's closing price of $2.14 on Friday, 17 August 2018, the last trading day prior to SG Fleet's unsolicited, non-binding and indicative proposal to acquire all shares in Eclipx for $2.52.

Upon completion of the Merger, existing MMS shareholders will own circa 64% of the Combined Group and Eclipx shareholders will hold the remaining circa 36%.

The Combined Group is anticipated ultimately to realise an estimated $50 million in EBITDA run-rate synergies per annum, to be fully realised in the third year following completion of the Merger. Given the complementary nature of each business, it is expected that there will be scope to extract additional benefits over time.

Benefits to key stakeholders of the Combined Group

The Merger is anticipated to deliver a number of benefits to stakeholders of the Combined Group:

  • Establishes a leading provider of salary packaging, novated leasing, fleet leasing and fleet management services within Australia, combining the best-in-breed of both organisations

  • Creates an enhanced service and product offering to the merged client base and provides a strong foundation to pursue growth opportunities in business adjacencies and other jurisdictions, in part, arising from access to the enlarged customer base

  • The Merger is anticipated to generate shareholder value and be earnings accretive in the first full year following completion, before realisation of EBITDA run-rate synergies of an estimated $50 million per annum following integration

  • The Combined Group will benefit from a robust balance sheet, underpinned by Eclipx's sophisticated funding solutions, allowing for improved optionality in capital allocation

  • The profile of the Combined Group will possess a significantly larger revenue base as well as improved customer and geographic diversification

  • Increased financial capability to invest in innovation and technology solutions for customers

The Directors of MMS and Eclipx consider the Merger not only represents a unique opportunity to create significant value for shareholders but also gives the Combined Group additional capabilities to provide a more compelling offer to customers and material benefits and opportunities to employees, partners and key stakeholders.

MMS Chairman Tim Poole commented "We are delighted to announce the Merger of two industry leading businesses to create a unique, diversified and best-in-class platform. We are confident in the strategic and financial logic of this combination and look forward to partnering with the highly skilled Eclipx team."

McMillan Shakespeare Limited

Level 21, 360 Elizabeth Street, Melbourne, Victoria 3000

ABN 74 107 233 983

AFSL No. 299054

Phone: +61 3 9097 3273

Web:www.mmsg.com.au

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Eclipx Chairman Kerry Roxburgh stated "There is strong industrial logic for the proposed Merger on the terms agreed between Eclipx and MMS, which provides a strong foundation for future success. The Merger will ensure our shareholders retain exposure to the quality of the Eclipx portfolio, whilst also participating in the synergistic benefits that arise from a combination with MMS. We strongly believe that this Merger represents a unique and compelling value creation proposition for both companies. As a Combined Group, we will deepen management capabilities, reinforce the balance sheet and, in turn, deliver stronger returns for shareholders."

Scheme Implementation Agreement

The attached Scheme Implementation Agreement contains customary terms and conditions on which MMS and Eclipx will implement the Merger, including:

  • Approval by Eclipx shareholders of the Eclipx Scheme;

  • Receipt of certain regulatory approvals;

  • No material adverse change and prescribed occurrences;

  • An independent expert concluding that the Eclipx Scheme is in the best interests of Eclipx shareholders; and

  • Court approval for the Eclipx Scheme

Customary deal protections have also been agreed by MMS and Eclipx.

Timetable and next steps

Under the proposed timetable, a Scheme Booklet is expected to be circulated to all Eclipx shareholders in December 2018 / early January 2019 and an Eclipx Scheme Meeting to consider the Eclipx Scheme is likely to be scheduled for February 2019. Subject to conditions defined within the Eclipx Scheme being satisfied, MMS and Eclipx anticipate the Merger to complete in the first quarter of 2019.

Advisers

Deutsche Bank AG, Sydney Branch is acting as financial adviser to MMS, King & Wood Mallesons is acting as legal adviser.

UBS AG, Australia Branch is acting as financial adviser to Eclipx, Herbert Smith Freehills is acting as legal adviser.

About MMS: Operating in both Australasia and the UK, MMS' business divisions collectively provide expertise in novated leasing, salary packaging, associated Fringe Benefits Tax administration and management, operating leases and asset management for 'tool of trade' vehicles and other business assets, retail finance, insurance and warranty.

About Eclipx: Eclipx is a leading provider of fleet, equipment leasing and management, vehicle rentals and online auction services to corporate, SME and consumers in Australia and corporate and SME customers in New Zealand. As at 30 September 2018, Eclipx managed or financed 117,060 vehicles with $2.4 billion in assets under management. It operates in Australia and New Zealand under nine primary brand names,

"FleetPartners", "FleetPlus", "CarLoans.com.au", "Georgie", "areyouselling.com.au", "FleetChoice", "AutoSelect", "Right2Drive" and "GraysOnline".

McMillan Shakespeare Limited

Level 21, 360 Elizabeth Street, Melbourne, Victoria 3000

ABN 74 107 233 983

AFSL No. 299054

Phone: +61 3 9097 3273

Web:www.mmsg.com.au

Page 3

Webcast

MMS will hold a webcast on Thursday 8 November 2018 at 12.00pm.

The link to hear the live presentation will be placed on the McMillan Shakespeare website www.mmsg.com.au

Alternatively, investors may go direct http://openbriefing.com/OB/3125.aspx

For more information please contact:

Mark Blackburn

CFO and Company Secretary McMillan Shakespeare Limited

McMillan Shakespeare Limited

Level 21, 360 Elizabeth Street, Melbourne, Victoria 3000

ABN 74 107 233 983

Phone: +61 3 9097 3273

AFSL No. 299054

Web:www.mmsg.com.au

Page 4

Scheme Implementation Agreement

Dated 8 November 2018

McMillan Shakespeare Limited (Miller)

Eclipx Group Limited (Elliot)

King & Wood Mallesons Level 50

Bourke Place 600 Bourke Street Melbourne VIC 3000 Australia

T +61 3 9643 4000 F +61 3 9643 5999 DX 101 Melbournewww.kwm.com

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