REG - DP Poland PLC - Acquisition, Board Changes & Issue of Options

DP PolandAnnouncement

15/06/2022 07:16

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RNS Number : 8990O  DP Poland PLC  15 June 2022

15 June 2022

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.

DP Poland plc

("DP Poland" or the "Company")

Proposed Acquisition, Proposed Board Changes

and

Issue of Share Options

Highlights

·    DP Poland, the operator of pizza stores and restaurants across
Poland, is pleased to announce that it has agreed terms (the "Agreement") to
enter into a Share Purchase Agreement ("SPA") to acquire the entire issued
share capital of All About Pizza d.o.o, trading as Domino's Croatia (the
"Transaction").

 

·    The Company will acquire the entire issued share capital of All About
Pizza d.o.o for a total consideration of approximately £2.4 million to be
satisfied by the issue of 29,787,234 ordinary shares in DP Poland based on an
8p per share issue price.

 

·    All About Pizza d.o.o signed a Franchise Agreement with Domino's
Pizza International Franchising Inc. in July 2019 to operate Domino's stores
in Croatia and now operates two stores in Zagreb, with a third fully
prefinanced and scheduled to open in June 2022.

 

·    Proposed conditional appointment of Nils Gornall, Chief Executive
Officer of All About Pizza d.o.o, and Andrew Rennie, ex-CEO of Domino's Pizza
Enterprises in Europe, to the Board as Chief Executive Officer and
Non-Executive Director respectively.

 

·    A new stock option plan has been agreed which will be effective upon
the proposed board appointments.

 

Przemyslaw Glebocki, Non-Executive Director of DP Poland and Managing Partner
at ACP, the Company's largest shareholder, said: "We are very excited at the
prospect of Andrew and Nils joining DP Poland. The Company has been
transformed and is growing at a high pace, but we have an ambition for more.
These appointments bring us the best in class Domino's operational and
strategic experience. We remain acquisitive and Andrew's experience in that
sphere is very valuable for us. We are also inspired by the achievements of
Andrew and Nils, not only in Australian and West European markets but also in
Croatia, which is a market with similar economic profile to Poland. We are
excited seeing their store performance and we look forward to having that
replicated into our stores. I am also happy that Andrew and Nils will become
shareholders of DP Poland, as that aligns our interests and reconfirms our
belief in the successful outlook for DP Poland."

 

Andrew Rennie, Non-Executive Director, said: "I am excited to join DP Poland,
as well as becoming a significant shareholder. I have worked in a variety of
Domino's businesses globally and I believe that Poland has the right
structural conditions for the business to flourish. Poland has a population
approaching 40 million and DP Poland now has 122 stores, this provides a
strong platform to deliver rapid sales growth and I look forward to
contributing to its success."

 

Nils Gornall, the incoming CEO, said: "I'm delighted to be joining DP Poland,
Poland is one of the largest markets in the EU and the business is showing
strong sales growth. I've had the opportunity to meet our executive team and I
am excited by their enthusiasm for the potential of the business. There is an
opportunity to transfer learnings from the recently successful launch of
Domino's in Croatia to further optimise operations and this work will begin
immediately. I look forward to creating a profitable business at scale and
emulating the success of other listed Domino's businesses from around the
world."

 

Details of the Transaction

DP Poland has agreed terms to enter into a SPA with Pine Hills d.o.o., Pant
& Thijs Enterprises B.v., Down Under Enterprises d.o.o., Pantoffel B.V.,
Pant B.V., MS Ventures j.d.o.o. and M-SV B.V. (the "Sellers") to acquire the
entire issued share capital of All About Pizza d.o.o, trading as Domino's
Croatia. Due diligence on All About Pizza d.o.o is complete and the terms of
the SPA are in agreed form. The Transaction is expected to complete following
a reorganisation of All About Pizza d.o.o (the "Reorganisation"). The
Agreement provides that the Reorganisation is to be completed prior to the
Transaction and that all reasonable endeavours will be applied to enter into
the SPA and procure completion as soon as reasonably practicable, and in any
event by 30 June 2022 or otherwise, with the consent of the parties, by the
longstop date of 29th July 2022. A further announcement will be made on
completion of the Transaction.

All About Pizza d.o.o signed a Franchise Agreement with Domino's Pizza
International Franchising Inc. in July 2019 to operate Domino's stores in
Croatia and now operates two stores in Zagreb, with a third fully prefinanced
and scheduled to open in June 2022.

 

For the year ended 31 December 2021, All About Pizza d.o.o generated revenue
of €951k and EBITDA losses of -€110k, with net assets (prior to the
Reorganisation) of -€781k at year end. The run rate revenue and store
EBITDA(1) for the year ended 31 December 2022 are €1.241m and €189k
respectively for the two operating stores. The Board believes that the
estimated market potential is approximately 50 stores across Croatia.

 

(1)Store EBITDA is stated before total overheads costs of €274k.

 

Proposed Acquisition Terms

 

The SPA provides that the Company will acquire the entire issued share capital
of All About Pizza d.o.o for a total consideration of approximately £2.4
million to be satisfied by the issue of 29,787,234 ordinary shares in DP
Poland based on an 8p per share issue price ("Consideration Shares").

 

The SPA also provides that Andrew Rennie, shareholder of All About Pizza d.o.o
and ex-Chief Executive Officer of Domino's Pizza Enterprises in Europe, will
subscribe for 2,127,660 ordinary shares in DP Poland at a price of 8 pence per
share for a total subscription price of £170,212.77, at the date of the SPA
("First Subscription"), and a further 3,191,489 ordinary shares at a price of
8 pence per share for a total subscription price of £255,319.15 within 12
months following completion of the Transaction ("Second Subscription").

The directors of All About Pizza d.o.o are Nils Gornall and Micael Sviben who
are currently the beneficial owners of 90% and 10% respectively. Ahead of the
Acquisition, All About Pizza d.o.o will undergo a Reorganisation which will
result in an ownership structure consisting of the Sellers.

 

The SPA includes a call option which grants the Sellers the option to
repurchase All About Pizza d.o.o (the "Option") through the repurchase of
shares in an amount equal to each of their percentage of shares held
immediately prior to the Acquisition (the "Option Shares"). The terms of the
Option, as set out below, have been agreed and following the grant of the
Option these terms will not be subject to further negotiation or agreement.
The Option may only be exercised on or before 31 December 2022 and the purpose
of the Option is to enable the Sellers to take advantage of any higher offer
received from a counterparty to purchase the entire share capital of All About
Pizza d.o.o. The consideration payable on exercise of the Option shall be
satisfied in cash and shall be an aggregate amount of i) £2,553,191; plus ii)
an amount equal to any capital expenditure paid by DP Poland to or on behalf
of All About Pizza d.o.o between completion of the Transaction and the
exercise of Option, or any capital contributions made by DP Poland, or any
member of its group, to All About Pizza d.o.o between completion of the
Acquisition and 31 December 2022. In addition, if following the exercise of
the Option, any of the Sellers sell any of their Option Shares during a two
year period, the relevant Seller shall pay 20% of the gross amount by which
the proceeds received exceed the consideration paid for the Option Shares to
DP Poland.

 

When issued, the Consideration Shares, and the ordinary shares to be issued
pursuant to the First Subscription ("First Subscription Shares") and Second
Subscription ("Second Subscription Shares", together, the "Subscription
Shares"), will rank pari passu with the existing ordinary shares of the
Company and application is being made to the London Stock Exchange plc for
admission of the Consideration Shares and First Subscription Shares to trading
on AIM ("Admission"). Details of the admission of the Subscription Shares will
be announced on completion of the Transaction.

 

Proposed board changes

DP Poland is pleased to announce the proposed appointment of Nils Gornall,
Chief Executive Officer of All About Pizza d.o.o, and Andrew Rennie, ex-CEO of
Domino's Pizza Enterprises in Europe, to the Board as Chief Executive Officer
and Non-Executive Director respectively.

The proposed appointments of Mr Gornall and Mr Rennie are conditional on:

i)             completion of the Transaction;

ii)            completion of the Company's annual general meeting
("AGM"), which is expected to take place on Friday 15 July 2022; and

iii)           completion of normal regulatory due diligence being
carried out by Singer Capital Markets in its capacity as the Company's Nomad.

If all of the conditions are satisfied, the appointments of Nils Gornall and
Andrew Rennie will be effective from 16 July 2022, being the date following
the Company's AGM. A further announcement confirming the appointments
disclosing information in respect of Schedule 2(g) of the AIM Rules will be
made when appropriate.

From the date of appointment of Nils Gornall as Chief Executive Officer, Piotr
Dzierzek, current Chief Executive Officer of DP Poland, will remain as the
Deputy Chief Executive Officer of DP Polska S.A. and Dominium S.A., the
operating entities in Poland, however he will step down from the Board as a
Director of the Company from this date.

Nils Gornall is a veteran of Domino's Pizza with 28 years of operational
experience; most of his career he has worked alongside Andrew Rennie, who
employed him in 1994. He is currently the CEO of Domino's Croatia and prior to
that he acted in various roles in Domino's Australia (one of the most
successful Domino's markets with more than 1000 stores) where he was awarded
national store manager of 1999 and 2000, new franchisee of the year in 2001.
Nils owned 23 stores in total as a franchisee, including 5 of the top 10
performing stores in Australia for a period of two years.

Nils Gornall's service agreement in respect of his appointment as a director
of the Company, contains the following principal terms:

i)             remuneration is £15,000 per annum;

ii)            the appointment is subject to review and re-election
on an annual basis at the Company's annual general meeting and Nil's continued
employment under the terms of the employment agreement with the Company's
trading subsidiary;

iii)           the Company can terminate Nils' appointment at any
time with immediate effect in certain circumstances, or with three months'
notice by making a payment in lieu of notice; and

iv)           standard provisions relating to confidentiality,
restrictive covenants, and conflict of interest .

In addition, Nils will have local contracts entered into directly with the
operating companies within the Group. Nils' total fixed compensation including
the director's fee referred to above, shall be €90,000.

Andrew Rennie served as the Chief Executive Officer of Domino's Pizza
Enterprises in Europe for seven years, including but not limited to France,
Belgium, Netherlands and Germany, where he was instrumental in acquiring local
pizza chains to be converted to Domino's stores. Prior to this, Andrew was the
COO of Domino's Australia.

Andrew Rennie's non-executive director letter of appointment contains the
following principal terms:

i)             an annual fee of £30,000 per annum payable in
monthly instalments in arrears;

ii)            the fee will be reviewed annually and any increase
will be entirely at the discretion of the Company

iii)           the appointment is for an indefinite period subject
to three months' notice by either party at any time and re-election on an
annual basis at the Company's annual general meeting; and

iv)           standard provisions relating to confidentiality and
conflict of interest provisions.

In addition, Nick Donaldson, Non-Executive Chairman of the Company, confirms
he will retire from the Board at the end of 2022, rather than the date of the
2022 AGM as previously announced.

Issue of Share Options

A new stock option plan has been agreed, which will comprise a total of
49,280,351 share options over ordinary shares of 0.5 pence each ("Share
Options"). Share Options will be granted to Andrew Rennie and Nils Gornall,
effective upon the proposed board appointments, as follows:

 Name           Number of Share Options granted  % of Issued Share Capital (following Admission)  Vesting Commencement date
 Andrew Rennie  14,080,100                       2.2%                                             16 July 2022
 Nils Gornall   10,560,075                       1.6%                                             16 July 2022

 

Of the Share Options issued to Nils Gornall and Andrew Rennie, 50% will
time-vest and 50% will vest subject to meeting certain performance indicators
being met or exceeded. Of the time-vesting portion, 25% vest 12 months from
the Vesting Commencement date and 75% vest in 36 equal monthly instalments
thereafter. The Share Options linked to key performance indicators carry the
performance criteria of EBITDA which must be achieved annually over the
vesting period and total number of stores target.

The exercise price of the Share Options granted is 8 pence per share and
aligns the interest of the Share Options beneficiaries with the shareholders
who subscribed for the equity in 2021 at 8 pence per share.

Enquiries:

 DP Poland plc                                              Tel: +48 22 654 64 15
 Przemyslaw Glebocki, Non-Executive Director

 Singer Capital Markets (Nominated Adviser and Broker)      Tel: +44 (0) 20 7496 3000
 Shaun Dobson / Will Goode / Amanda Gray

 

Notes for editors

About DP Poland plc

DP Poland, through its wholly owned subsidiary DP Polska S.A., has the
exclusive right to develop, operate and sub-franchise Domino's Pizza stores in
Poland. Following its acquisition of Dominium S.A., which constituted a
reverse takeover under the AIM Rules for Companies, the group now operates
over 100 stores and restaurants across a number of cities and towns in Poland.

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