Good afternoon, ladies and gentlemen. Welcome to Swire Pacific's investor briefing. Joining us at the briefing today are Mr. Guy Bradley, Chairman of Swire Pacific; Mr. Martin Murray, Finance Director of Swire Pacific; and Mr. Patrick Healy, Chairman of Swire Coca-Cola. Today's briefing will consist of a presentation, followed by a Q&A session. On the bottom right of your screen is a Q&A box, where you may submit questions at any time during the briefing. Without further ado, may we invite Mr. Guy Bradley to kick off the presentation. Guy, please.
Good evening. Thank you for joining this investor briefing. We welcome the opportunity to share with you why Swire Pacific is excited about this transaction, and also to highlight the merits for Swire Pacific from a transaction that increases our strategic focus and strengthens our financial position. Let me first start with the transaction overview. There are three key parts to this transaction: the sale of our USA beverage business for $3.9 billion, or HKD 30.4 billion; the special dividend; and thirdly, the Management Services Agreement, where Swire Pacific will continue to provide management and administrative support services in relation to Swire Coca-Cola USA. We see a number of clear benefits. The transaction realizes value for our US beverages business at a very attractive valuation.
The transaction multiple of 12.4x EV/EBITDA, represents the highest multiple paid for a U.S. beverages business in for at least the past decade. This results in a gain of $2.9 billion, or HKD 22.8 billion upon disposal. The Management Services Agreement also allows for Swire Pacific to continue to manage our U.S. beverages business, maintaining a very sizable franchise population of over 880 million across four countries. With the Management Services Agreement, we will continue to maintain our global relationship with The Coca-Cola Company, while retaining some economic exposure to the U.S. business via the service fee. Substantial net proceeds also allow Swire Pacific to return immediate cash by a special dividend of $1.5 billion to shareholders, which is larger than the last three years of ordinary dividends.
The transaction strengthens the company's balance sheet, providing us with ample headroom to navigate the uncertain environment ahead, and is also consistent with our strategic focus on Greater China and Southeast Asia, where we remain committed to executing our exciting investment pipeline. Going into some of the key terms of the transaction here. Proceeds for the sale of our USA beverage business are $3.9 billion, or HKD 30.4 billion, this follows an arm's length negotiation between Swire Pacific and John Swire & Sons. Both parties were separately advised by international, financial, and legal advisors. Furthermore, the group has formed an independent board committee, who will be making a recommendation to shareholders in due course, with the support of an independent financial adviser.
As part of the transaction, we will also enter into a Management Services Agreement with John Swire & Sons, and continue to provide ongoing management services in relation to the U.S. beverages business, whilst maintaining some of the economic exposure to the business via the service fee. The Management Services Agreement provides additional value to Swire Pacific on top of the consideration, with an annual fee of no less than 6% of recurring EBIT. There is also a proposed $1.5 billion special dividend, which allows Swire Pacific shareholders to share in the value creation via an immediate and substantial return of cash. In terms of next steps, a circular will be published after the release of the interim results.
The circular will contain further details about the transaction, a letter from the IBC to the independent shareholders, a letter from the IFA to the IBC, and details of the EGM. Turning to the numbers, the $3.9 billion consideration represents 12.4x the target's 2022 EBITDA, pro forma adjusted for the fee payable under the Management Services Agreement. The multiple represents the highest multiple paid for a U.S. Coca-Cola bottling business in at least the past decade, and a significant premium over the median multiple of comparable peers. The offer represents an approximate 300% premium on Swire Coca-Cola, USA's book value, and we will also book a very substantial HKD 22.8 billion gain on disposal.
We will distribute approximately 50% of the gains as a special dividend to shareholders, which is in line with our dividend policy. The transaction reinforces our strategy to deliver sustainable growth in shareholder value and return value to shareholders via various channels. We have grown our annual ordinary dividends at a CAGR of over 30% over the past three years. We also announced an up to HKD 4 billion share buy-back program last August. We have repurchased HKD 3.3 billion worth of A and B shares since announcement of the program. The proposed special dividend of HKD 8.12 per A share, and HKD 1.62 per B share, is a sizable return of capital to our shareholders.
As you can see in the chart, is higher than the cumulative ordinary dividends paid over the last three years. Turning to the balance sheet. The disposal substantially strengthens the balance sheet. Adjusted for the disposal and special dividend, our net debt decreases from HKD 57 billion to HKD 38 billion, while our total equity increases from HKD 316 billion to HKD 327 billion. Our pro forma gearing reduces from 18% to 11.6%, and our cash interest cover increases from 6x to 7.3x. This provides us with ample buffer to navigate the continued macro uncertainties ahead, while providing further balance sheet strength to fund our long-term investments.
Capital commitments increased by over 30% to HKD 38 billion at the year end, 2022, and we continue to add to our pipeline of investments in our strategic focus area of Greater China and Southeast Asia across our core divisions. As mentioned, we will enter into a Management Services Agreement with John Swire & Sons in return for an annual management fee. Scope of services will include management and administrative support services, as listed in the slide there. Management fee will be no less than 6% of Swire Coca-Cola, USA's recurring EBIT. We expect this to be a long-term agreement, and importantly, the Management Services Agreement allows Swire Pacific to continue to manage our US beverages business, preserving our global relationship with The Coca-Cola Company, whilst maintaining some economic exposure to the US business via the service fee.
With that, I'll pause, and we're happy to take some questions. Thank you.
Thank you very much, Guy. We will now proceed to the Q&A session. We've received a few questions. Let's start with the first one: Why are you selling part of the beverages division?
Well, as I've just covered earlier, I think it's just a really strong rationale. You know, we managed to negotiate a very attractive offer. We get to retain the ongoing management of the business. We return substantial immediate cash to shareholders, strengthen our balance sheet, and get to focus on expanding in our portfolio of businesses in Greater China and Southeast Asia. Overall, it looks a terrific deal.
Thank you very much. We have the next question, which says: What is the use of the proceeds?
After the special dividend, which represents about half of the expected gain on disposal, the remainder of the proceeds will be applied towards the potential investment opportunities in Greater China and Southeast Asia, for beverages, for real estate, and potentially for our healthcare division.
Thank you. The third question is: What is the rationale behind the Management Services Agreement, the MSA?
Sure. Let me take that one. Look, there are two major advantages to the Management Services Agreement. The first one, which is most significant, is that it preserves the global footprint of our overall Swire Coca-Cola business. As Guy mentioned in his presentation, that's a very significant global footprint. You know, we serve over 880 million consumers worldwide. Because we'll be continuing to manage the business of Swire Coca-Cola, USA, and therefore, the relationship between Swire Coca-Cola here in Hong Kong and Swire Coca-Cola, USA, and also the relationship between Swire Coca-Cola and The Coca-Cola Company, will remain unchanged. That's absolutely critical, because that's a relationship that we value enormously, and it's been extremely successful for us.
The second reason Guy also touched on is the management fee, right? You know, this will continue to provide an income stream for us, and it will give us economic exposure to the future growth of Swire Coca-Cola, USA. We believe that for both of those reasons, the Management Services Agreement is an absolutely critical part of this overall deal.
Thank you very much. Next up, we have received a few questions on a similar topic. Summarizing it, the question would be: What impact does this have on your balance sheet?
Well, I think that was covered in the presentation. Even after the special dividend, the net debt will go down by HKD 19 billion. Our gearing reduces from 18% to 11.6%, and interest cover increases from 6 to 7.3 times. As the chairman said, that strengthens the balance sheet to focus on our pipeline investments in our core markets.
Thank you. The next question is: What was the process to ensure you received a competitive offer?
The terms were negotiated through a very rigorous arm's length process, taking into account the historical performance of the business, future prospects of the business, as well as trading multiples of comparable companies, and precedent comparable bottler transactions globally. Both parties were separately represented by their own advisors. An independent board committee has been formed, and will be assisted by an independent financial adviser, who will help the committee formulate a recommendation to our shareholders.
Thank you very much. We'll now take one final question, again, summarized from the Q&A box: What are the next steps in the process?
A circular will be expected to be dispatched shortly after the interim results in August, which will contain further details on the transaction, a letter from the independent board committee, an opinion letter from the IFA, and a notice of the EGM to be convened to all shareholders. Our EGM is expected to take place on or around the thirty-first of August, 2023. Subject to the independent shareholders' approval at that EGM, the completion will take place on the fifth business day after the date that the transaction becomes unconditional.
Thank you very much. Thank you, Guy, Martin, and Pat. That concludes our investor briefing. Thank you once again for joining us. As a couple of housekeeping, the video of this webcast will be available on swirepacific.com later tonight. If you have any further questions, please email ir@swirepacific.com. Thank you very much. Goodbye.