Welcome to this webcast presentation in connection with Aqualis Braemar's announced acquisition of LOC Group. My name is Hakum Vanlure, and I am the director of strategy and corporate development at the Qualys Braemar. I'm joined here today by our chairman, Glen Radlan, and our CFO, Dejan Susic, who will take you through the presentation. There will be a Q and A session afterwards, and if you'd like to ask a question, please ask it through the chat module during the presentation, and we will answer it at the end. Before we start, I would like to bring your attention to the disclaimers on page two of the presentation.
And with that, I will hand the word to our presenters. Over to you, Glenn.
Thank you very much, Hakon. Yes, could we switch to Slide three? Aqualis Braemar is a marine and offshore consultancy. Our business model is based on hourly billing and pretty similar to the Scandinavian civil engineering consultancy of Sveco, IFPoire, and Multiconforth. Or the common denominator for most of the work we are doing is to work for the marine and energy insurance industry.
Our biggest hubs and our key customers are based in London, Lloyds of London. We all know Singapore, Houston, New York and Oslo. Those are the hubs for the marine insurance industry. We divide what we are doing for the industry into three separate area. We do project consulting within offshore wind, marine operation, harbors, and removal of wrecks.
Accident prevention, something we call the marine warranty certificate or marine warranty service. That's approval of complicated marine operation, in order to be, insured during the operation. And then from time to time, accidents happen in our industry, in the energy industry or in the shipping shipping industry, and we manage the the accidents on behalf of the insurance company and to limit the damage and to also take care of of the interest of the insurance industry. So if we switch to page four, Aqualis Bremer as of today before the transaction with LOC, we will get back to that, but I thought we should take the time to to go through our business since we are a small company and relatively unknown to many. Renewable is one division.
We have historically been involved in more than 50 offshore wind projects, and that represent more than 25 of the global installed capacity of offshore wind, including in those projects we are working on four floating offshore wind. So the industry is about to move gradually from only having bottom fixed offshore windmill to also floating. I'll get back to that. Offshore, a lot a lot is is about moving rigs. Last year, 2019, we moved to more than 600 rigs or rig moves, and we were involved in more than 300 marine warranty service projects in offshore.
Marine, the shipping fleet, we are a large player in the hull and machinery area. And last year, we were involved in close to 2,000 instructions globally. And we were involved in repair after accidents of more than half a billion dollars last year. Adjusting is mostly working with the oil and upstream, downstream, midstream industry. We were involved last year in two seventy five incidents in the energy industry, and and we were also involved in the five largest, casualties in the Lloyds market last year.
Page five, just give a short example of some of the projects we are involved in. This is an offshore wind project, the Airbus offshore Wales. It's a floating wind project. Most floating wind projects so far have been one or two or three mills just to test the concept. This is a full scale and the world's first full scale development of offshore wind floating project.
We are in total involved in four of these offshore wind projects that are floating offshore wind projects right now. So there is a market that is about to emerge. And with our background within offshore and marine, we have a very good competitive advantage to capitalize on this market as it moves forward. Page six, another we outside The United States, outside the East Coast of United Of U. S, we are involved in the project now with Shell and EDP Renewables outside Massachusetts, significant development, and we expect this market to develop quite rapidly going forward.
Page seven, just another example of what we are involved with. This is a floating solar on a dam in Thailand. The plan is to build 15 of this in Thailand alone. We also, many of you might be aware that Skatek Solar just recently in October, bought SN Power. And the concept of Skatek Solar is to to use floating offshore floating solar together with hydropower.
So during the day, you use a lot of the capacity come from solar, and during night, it's, of course, water. So it's a good combination. We are already involved in this in Thailand as well. Page eight, another example of how we are well involved with this. We are working for Kai Yang O Young Offshore with two new builds.
We previously also worked with two, in 02/1819. So these are four, wind installation vessels that we have been working with for a Chinese client. Similar for SET PMC, a big Chinese yard group, we are now working on the first float over of of a transmission station that is being fabricated in China. If we go to Page nine, that's just another example of how we can use our marine competence, not only for ships and for oil and gas, but also for bridges, installation of bridges. And we have also been involved with aquaculture, fish farming, offshore.
The more offshore it is, the more complicated it is, the more it fits with the competence of Ahold. And finally, before I start talking about the transaction, page 10, This is also on the due to the rapid development of offshore wind and energy offshore, a lot of harbors need to be modified, extended, and and upgraded. And we are involved we have been involved in a lot of harbor projects. And, just recently, The UK announced a a program to invest more than £160,000,000 over the next few years in, and similar programs are have been announced in The US. Page 11.
Just showing this company is coming from a shipping and offshore energy, offshore oil and gas background. We bought offshore wind consultants back in 02/2014. And since then, offshore wind since first quarter twenty eighteen, offshore wind and renewable have gone from 6% of our revenue and latest in third quarter was twenty one percent. And our goal, as I will get back to, is to get renewable up to 50% of our revenue. Okay.
Then we are on page 12, and now we are getting into the transactions. So what I've said so far was more introduction just to give you a flavor of what kind of capacity and and and competence we have in our group. So the strategic vision of Aqualis Braemar is is on three pillars. One, expand into the rapid growing offshore renewable industry. I mentioned, offshore wind, offshore solar, but also tidal energy and wave energy is, of course, part of this.
The second thing is that we have a strong position in the traditional mature areas as oil and gas and shipping, marine. And the strategy is to consolidate and leverage our position so we can be profitable within this industry for many, many years going forward. And the third pillar of our strategy is to use capital efficiently and maximal maximize return on capital and return pay a steady stream of an increasing stream of dividend to shareholders. And this is at the bottom of this slide, the ambition is to be at 50% renewable within 2025. So then we are on page 13.
Aqualis have today announced that we are acquiring one of our strongest and best most well run competitors, LOC Group, London Offshore Consultants Group. We are doing this for several reasons. First, as I said about the strategy, we want to consolidate the traditional business, marine and offshore oil and gas. LOC is highly complementary. There's very little cannibalization from acquisition.
With LOC, we are broadening our service offering and our scale. We estimate that the synergies from this is at least 3,500,000 per year. And, of course, also combining the companies make it even easier to opt optimize the use of capital in the company. And finally, but not last, LOC is also a very strong player in the offshore renewable market, and we increased our footprint and reaffirm our commitment to the energy transition through this acquisition. Page 14.
So this, is combining this is looking at the two companies. Back in 02/2019, Aqualis brought brought to Braemar. At that time, we doubled our revenue about. This time, we do another doubling. So since 2019 until today when we closed LOC late in December, we will have more than four quadrupled our revenue as a company.
And over the last twelve months, we see that the combined group have had a revenue of $139,000,000 We have had EBITDA over the last twelve months of 12,500,000.0 as a combined group, and our backlog is about $83,000,000 And remember that both LOC and Aquales and the combined group, we have no backlog when it comes to marine accident and also accidents within the oil and gas. That's that's something that is never in the order book. Those are call out orders. And the same goes for a lot of the work we do in the Qualys Framework within offshore. It's and it will never end up in the order book.
It it's frame agreement with large rig owners and ship owners. Employee, we will be close to 900 when we have merged these two companies with highly specialized mariners and engineers. Page 15. Okay. Short about the Qualys.
I also said something at the outset. We have three brand names. It's a Qualys Braemar, and we have a Qualys Braemar yachting service. We are the leader in the world with offices in in in the Mediterranean and in Florida and in order to have for the big super jobs. And it's a very profitable niche we are doing.
And then we have have the offshore wind consultants, which you which is our renewable arm. If you look historically, we have had a downturn in revenue from 2014 to 02/2015, stabilizing around $70,000,000 and then improving to $76,000,000 this year from 73,000,000 last year. What is still very encouraging is that our margin have increased quite a bit in 2020 or last twelve months. And the acquisition of Braemar reduced our overhead by in twelve months, we reduced our overhead with 5% of revenue. So a lot of increase we see from 2.3% to 7.5% in margin on the key financial graph down to the left is related to synergies when we did the Waymar acquisition.
We have office locations all over the world, as you can see from the map on the lower right. Similar, if we go to Page 16, LOC also have four trading names. It's the London Offshore Consultants, the main company. It's the Longitude, which is their engineering and design consulting within shipping and offshore. Innosea is a French based company they bought back in 2018.
It's specialized in offshore wind, waves and tidal energy, and it complement very well with our offshore competence in Aqualis Bremer as of today. And then finally, Jan Leboris, which is a WIG approval service, is also very complementary to the service we have in Aqualis Pueblo. You can see on the lower left that LOC have been very profitable even in the downturn. They came from $100,000,000 of revenue and fell down to 60,000,000 in 2018 and is now on its way up. But the margin have improved quite substantially lately, even though we are not back to the level of before the oil price dropped.
I think there will be a lot of synergies. We will get back to that when we put the two companies together, especially on the back office side. Okay. If we go to page 17, I think this is something, both LOC and, Aqualis Braemar is bragging a lot about. We are a global industry.
We need to be where the shipping industry is, where the trade is, where the oil and gas industry is located offshore. But, so this is something we are bragging about. But this is also the, what should I say, the problem of this industry. We are a a thousand employees or 900. I'm sorry.
Just south of 900. But we are working in micro offices. And what we saw with, and and back before we did Braemar, we were three companies, Aquales, Braemar, and LOC, and we had the same footprint, more or less. What we are doing now is bringing all these three offices together. We have already done Aquales and Braemar.
Now we also do LOC. And by doing this, there's a lot of cost synergies. The number of offices which you see on the left is 85, but 18 of those are common, like in London and Abu Dhabi, Dubai, Mumbai, Singapore, and so on, Houston. So we will reduce the number of locations with 18. And just there, there was a huge benefit without reducing our footprint.
So I think this is a strategic strength, what you see on Page seventeen, but it's also where we have the most opportunities by combining these offices. Go to Page 18. Looking at the two groups, Aqualis, Bremer and LOC, you see on revenue so far year to date, LOC is very strong in Europe, 49%. Aqualis, Waymar is stronger in Asia and The Middle East with 2835%. If you look on the far right, you see that when we combine these two companies, we see that we are much more balanced.
Europe will be the largest market for the new company. APAC, Asia Pacific, the second largest. And then Middle East, Africa with 17% and America with 18%. If you look on where we have our revenue, Aqualis Braemar has now less than 50% of our revenue from oil and gas. LOC have more from oil and gas.
But when we combine these two companies, what we see is interesting is that the renewable side, these are the last twelve months, is 18% for the combined group. So we are not losing, what should I say, momentum. But lately, if you look on third quarter stand alone, as I explained earlier in my presentation, we were above 20% within renewables. So this is looking in the rearview mirror the last eighteen months. Oil and gas is just above 50% for the combined group.
But due to the renewables growing so fast, I think this when we get to 2021, oil and gas will be below 50%, and marine will also lose markets here to renewable. Not because the revenue is going down in oil and gas, and marine is also quite stable, slowly growing, but it is because renewable is growing. So with that, we can turn to Slide 19, and I would like to give the word to Dan
Thank you, Glen. This is Dejan Zusick. Zusick, CFO of the company. Let me just run you some of the run you through some of the transaction figures. As you see on Page 19, we are doing this transaction at an enterprise value of approximately $19,000,000 for LOC.
Cash consideration of around $20,000,000 We are also offering $2,000,000 of conditional warrants for Qualys Bremar shares to the owners of LOC, which NOK1 million become valid if the share is above NOK7.5 over the next eighteen months and the other million if the share price is over 10 over the next thirty six months. We are taking over a company with a net cash position of $2,000,000 They have $15,000,000 in debt, but they have sorry, 30,000,000 in interest bearing debt, 15,000,000 in cash, which gives us a net cash position of 2,000,000 and the sum of this brings us to the $90,000,000 in entity value in enterprise value that we are paying here. We plan to finance this with an equity issue at fully subscribed. We did send a stock exchange notice this morning about that. It's done at NOK6.10.
Also have announced a subsequent offering, a so called repair issue. We are we have secured a US15 million dollars net debt facility with Nordea, and we will be using US5 million dollars of our own cash. So total source is $5,000,000 that will be used for the cash consideration of 2020, the repayment of current debt in LOC by 12,000,000 and we expect costs and integration costs of around $3,000,000 Completion expected on or about the twenty first December has to be approved by the EGM, which is summoned for the fourteenth December. We have already commitments more than 67% of the share owners. So we are very, very confident that we will be able to close on December 21 or around that date.
If we move on to Page 20, as Glen has already mentioned, the combination of these two companies puts us in a different league, the way we, I mean, view it. The combined company almost doubles its revenues, 140,000,000 for the first nine months of this year, which is equivalent to the sum for the whole year of 2019. So, there is significant and nice growth in both of the companies in 2020. We will have a combined we have a combined EBITDA of $12,500,000 last twelve months ending Q3 of this year, which is a doubling from the EBITDA in 2019. And as Glenn also mentioned, the order backlog of $83,000,000 And again, let me just repeat that a lot of our business does not have an order backlog, especially the accident side of the admin business, which we're talking about 30% to 35% of our admin revenues.
So, 83,000,000, which is a significant increase from 2019. If we move on to Page 21, showing a bit simplified pro form a combined cash and debt position of the two companies. We are starting with ZAR14 million of cash in Aqualis Braemar at the end of Q3. The transaction finance with ZAR15 million equity issue and ZAR5 million of our own cash, sum up to the $20,000,000 That is the cash consideration that we are paying to the owners of LOC. Dollars 3,000,000 in transaction cost and contingencies.
I mentioned the 15,000,000 equity issue. We have $15,000,000 in cash in LOC as of September 30. New debt facility with Nordea of 15,000,000 repayment of debt with 12 will give us at the end the combined cash balance of $24,000,000 which is much higher than what the combined interest bearing debt of $15,000,000 So the net interest bearing debt in the combined company will be a positive $9,000,000 very comfortable cash position to be in. We will keep a $05,000,000 facility from LOC, so the total interest bearing debt will add up to $15,500,000 but that is still much, much lower than what our combined cash balance is. If we move on to Page 22, synergies, as have been mentioned, we do expect to take out cost synergies of $3,500,000 stemming from four main areas: SG and A and back office optimization facility redundancy.
Glenn showed you a map showing that we have an overlap of, I mean, offices. We will obviously combine these in cities where we have several offices. Utilization optimization, which we will be able to achieve by access to a larger consultant base and the better utilization of people across the two companies and by increasing our capital efficiency. We have not counted in any revenue synergies, but it shouldn't come as a surprise to anyone that increases the market share, which is basically getting doubled. We are doubling the size of the company and by the selling of complementary services to each other's clients should result in revenue synergies that will come on top of this NOK3.5 million.
And there will be focus on capital efficiencies. We've had a lot of focus on that in Qualys Bremar. I know they're focused on that in LOC also. We will have a stringent cash flow management regime in the company and optimize, try which means reduce our net working capital that will allow us to pay our dividends as we have done in the future as we have done in the past in Aqualis Bremar as well. If we move on to Page 23, just kind of to show a bit where we are on synergies and how we think.
When Aqualis acquired Bremar in June 2019, we had an initial estimate of cost synergies or an initial target of $1,100,000 which represented 1.5% of the combined revenues. That was supposed to be implemented over the next two point five years. As of Q3 twenty twenty, Aqualis Brumard actually realized $2,400,000 on run rate cost synergies and increased the target to $2,800,000 which represents 3.8% of our combined revenues by the 2021. We are starting the acquisition of LOC with a target of 2.5% of revenues, which amounts to $3,500,000 And given our history and experience with the Bremar merger, we are pretty, pretty confident to be able to achieve the 2.5% in cost synergies over the next six to eighteen months. And with that, I think I'll give the microphone back to Glen.
Thank you very much, Dion. If we turn to page 24. So we think this is like a kinder rig, three wishes of the same time, this transaction. It's good for our customers. We get the new capabilities.
We increase our scale, and we have a global wider global footprint. Most of our clients are truly global, shipping and energy. And, there's very little, overlap in what we are doing, and, we are just being able to to increase our involvement with our customers' key projects. Employees, of course, with operations in more than 40 countries and with working on all kind of high end projects within the energy industry and shipping industry, it give a much, much better career prospect and more opportunities for our employees. And I also think that we will be a more attractive employer than we are today.
And finally, the shareholders, there's a lot of synergies. We have estimated them to 3.5 at at as a starting point. We see, also opportunities to increase revenue over time, because there was more possibilities of cross selling because we are complementary. And finally, but not last, LOC are very also very complementary to us on the on the renewable sites. They are more into tidal, into turbines and also marine warranty for this project.
So we expect this to even increase our growth within renewables that we combine the two companies. So if we go to page 25, summing up again, just to be short, this is a consolidation of the mature part of the industry, oil and gas and marine. I think that's a key theme for for mature industries. They need consolidation in order to to deliver good profitability going forward as the industry is flattish or maybe even going gradually down, goes for oil and gas beyond 20, 30 maybe. LOC, highly complementary.
I have mentioned that before. Scale, synergies, broadening service offering, especially capital, use of capital. There's one we we are the operating margin we have is is attractive compared to peer group like Multicon Search, Sveco, and and I Poirier, as I mentioned at the outset. Our problem is that we tie up too much cash, 24,000,000. They are you just went through it, and we also have too much, working capital, outside cash.
So this is going to be worked on very professionally. And, finally, but not last, this, LOC transaction, is a contrib contribution and a commitment to the energy transition going forward. So with that, I stop the presentation, and we open up for questions.
Right. Thank you, Glenn. The first question we have is, can you give a reason for the apparent low multiples LOC Group is being acquired at? Did you get the question?
Sorry. I'm sorry. I I I forgot to unmute. Yeah. Thank you for that question, Hakon.
Going a little bit back in history, this this start this process started back in the 2019 just after we had bought Braemar. And it kicked off. Really, the first meeting was in early March, just before the lockdown, both in UK and Norway and everything. So this process has been going on in a lockdown. That's one thing.
Secondly, oil and gas is still 50% of this group. So I think we are priced as an oil and gas provider, and everybody know that oil and gas have been very out of favor lately. That goes for a policy framework, share price and also indirectly for LOC value. And then, of course, what happened with COVID and all that have been a difficult period. And I think also the last one is, of course, that Aqualis Braemar, we can't pay more for an acquisition than how we are priced ourselves or else we will destroy value.
So that has also been a limiting factor. So I would say that I think both companies are quite small. Combining these two companies, we will be more visible in the market, more visible with customers, in the stock market. We get a lot of synergies. So I hope that the multiple we bought the company for and we also at ourselves that over time, we will have a a gradually a multiple expansion.
And, of course, also that we are have renewable, a renewable agenda and also a fast growth in renewable probably also will gradually help with the multiplier. So I think I hope that over time, we will have a gradual repricing of the company as well. So but it is what it is. It's two medium sized small companies, and they are normally not priced at very high multiples combined with COVID and oil price fall led to that we were able to complete this transaction.
Thank you, Glenn. Then we have a question on who will be invited to participate in the subsequent offering and when the last day to own shares to participate was. And I can answer this since it's a quite technical question. All shareholders as of the November who did not participate in the private placement or, was given the opportunity to participate with a significant amount of time and elected not to participate will receive rights in the subsequent offering. So if you were a shareholder and did not participate, you will receive rights.
The ones that participated will not. And for the Vodafone, so that Braemar will not receive subscription rights for the subsequent offering. Then the next question here is is the LOC ownership in InnoC still 70%? And if so, is it possible and or plan to merge it with OWC SS, or does it need to remain stand alone?
Yeah. I can answer that one. The ownership right now is 70%. There is an agreement with this company was bought. It's a French company, as I mentioned.
It's a French company that LOC bought back in 2018. There have been an earn out and also an agreement to buy the remaining 30 for a relatively moderate amount, less than $1,000,000 at a later stage. And we haven't decided on this, but it's likely that we will buy the last 30% and be a 100% owned. Regardless of 70% or 100% of InnoSea, this is going to be integrated and coordinated well with our offshore wind consultants. They are very complementary, and this is going to happen regardless of the ownership.
Okay. Thank you, Glenn. The next question is for Deion. USD 3,000,000 of transaction and contingencies costs appears high. Could you elaborate and split this?
Okay. Let me just I won't split it. But what I can say as a general comment is that financial and legal due diligence in 30 jurisdictions and equity issue of $15,000,000 debt stake up of $15,000,000 If you sum all of this up, I do believe that $3,000,000 is in line with what you will see in the main market, even if it does look higher at the first glance compared to the total value of this trend per section.
And the other, if I may add to that, I think also some of the cost of taking out synergies is included in that number as well. That's right. Not all necessarily, but some of them. So and and also to the last question about why did we buy this at such a low multiple. Of course, it is a complicated transaction.
It's a small company, a lot of jurisdictions, and that have also influenced. And we had high cost, and that should be viewed as part of the purchasing price. So if you take the CHF 19,000,000, maybe the correct answer is to think about this as CHF 22,000,000, if you include the full cost. It's still a decent deal, I think.
Thank you, Glenn. The next question is how much revenue cannibalization do you expect considering that your two main competitors merging, especially where you have overlapping locations?
There are some cannibalization, to call it that, overlap where we we can't be competing. Or And we have we are working on on two sites. We could be working for the insurance company on one site as LOC, and then we maybe work as as the consultancy for the for the energy company on the other side. So so that that can be happening going forward. It's a bit like the the auditing industry.
You have to either be auditing the company or you can advise the company. But, but we have studied this very thoroughly, and that has been part of the due diligence. And the cannibalization or the overlap is much, much less than we thought. So actually, I think there will be more revenue synergies than there will be cannibalization even in year one from this transaction. That's all we have at least.
Thank you. The next question is what do you think are your main competitive advantages in renewables, and how comfortable are you with your competitive position in renewables in five to ten years as new competition enters the market?
Yes. I I think our remember, we don't do offshore wind on land, not at at this point at at least. We are focusing on the inheritance and the competence that these two groups have built over years and years and years. Remember that Aqualis Braemar, one of our companies within marine, dates back to 1856. Okay.
There's not much technology from 1856 you can use today, but it just show the the tradition. So we are working with offshore wind and offshore energy renewables as such. And using the competence we have developed, together with our clients year, for many years within, oil and gas, within marine, shipping and now applying that in offshore renewables. Yes. There are a lot of people moving into this space.
Everybody want to get into this space. And I think on electrical engineering, a lot of other things that are nonmarine, there are a lot of competition, and there will be a lot of competition. And I I to put it, also, of course, in marine space, there will also be a lot of competition. But I think in the the marine part, the installation of with vessels and and the geotechnical as a seabed analysis and and mooring or floating and all that, that's the same kind of confidence we use for oil and gas and for other industries we are involved with. So I think as long as we stay ahead the competition, are sharp, and we can have a competitive advantage.
And I think one of our competitive advantage is that we can follow for instance, from Denmark to to Germany to The United States to Taiwan to Vietnam or whatever. So that's also something that we have this global network that is also something that is not easily replicated because we have built this network based on marine and offshore oil and gas historically. So that was a long answer to a short question, but I think, we are confident that the marine part of this, have a competitive advantage. And how long it lasts is up to us. Okay.
Thanks, Glenn. The next
question is on our financial targets. The current financial targets of Aqualis Braemar are 5% organic growth and 10% EBITA margin over the cycle. How will these targets look following the LOC acquisition? And we also had a related question on what we will guide in terms of EBITA going forward.
To take the last one first, I don't think we will guide on EBITDA. That that's that's not something we have done. But I can say in general terms, there is two ways of what we are focusing on is return on capital, and, there's two ways of getting, the return of capital, at a decent level. If you look on I I like to look on the best in this industry. If you look on Sveco, they've been listed for many, many years.
They have delivered an average return on capital because this industry is very capital light of 25%. And that comes about in Sveco's, If you look at them, they have had about 10% margin, EBIT margin over average, a bit up and down, but they want just out of 10. But they are turning around their capital two and a half times a year. So very so that that if you multiply those two, two and a half times return turning over all your capital and times 10%, you end up with 25%. We I think this industry, if you look on the history, I've been involved with this industry since 02/2005, 02/2006.
And, in the heydays, this industry was, above 15. We were up all the almost to eighteen eighteen, 20%, some of the best firms. On average, we are probably not that far off from the SPECOM multi consultant RF Poirier 10 plus. I think we can have a plus beside, because we are very niche. But it's all about how efficient we are with the capital.
So if we end up with 10% and we can improve our capital, use of capital, which we have started on, for those that have followed Aquarelle's framework, you see we have freed up quite a lot of capital over the last two or three quarters. And that is going to continue. And when we combine the group, we will do more. So I'm hoping that we can deliver north of 10 on average. We will have good years.
We will have some bad years. But of course, are getting more and more diversified. We are not that dependent on the cyclical oil and gas. Marine is quite stable. And then we have renewable that is growing quite fast.
So I think there will be less cyclicality in this industry than compared to what it was five years ago when it was a lot about oil and gas and possibly marine as well. Now we will be more balanced. And yes, I think that's a long answer without giving you any concrete numbers. But capital efficiency and operating margin is what we are focusing on. And returning cash to our shareholders, of course.
I think that leads nicely into the next question, Glenn, and that is how will this acquisition impact your dividend policy of 50% to 70% of earnings per share? And is there any guidance we can give for dividends for next year?
How we have financed this with this for the first time, we have a debt in this company. I've never had that. We have been at a 100% equity finance. So, of course, we need to service our debt. But, how we have done this, we have what you know, of course, 2021 is not done, and 2020 is almost done.
But what I can say, unless something changed completely for where we see it now, we will continue to pay a dividend at the same time as we are able to service our debt. And it's a combination of the EBITDA level and the cash flow from operation on the same time as we continue to free up capital from the balance sheet and make the balance sheet slimmer and more efficient. So that's the plan. No promises given. We are on a good track with the Braemar acquisition, and I think we should not go off that hopefully, not go off that track when we combine with LOC.
So that's the plan. So we maintain our dividend target. That's the plan. Having said that, that's a target over time that might be when we digest transaction that we, what should I say, instead of increasing dividend, we have a year with flat dividend or something like that. But this is we haven't discussed this, but everything is catering for that we can pay an annual dividend even with this transaction.
Thank you. The next question is for Deion. Could you please elaborate on the details of the NOK 2,000,000 warrants given to the sellers? And how much will the sellers pay for the shares under the warrants?
Yes, I could do that quickly. To ask to answer the second question first, they will pay NOK0.1. So they're basically going at face value. The other is in terms of there's NOK1 million with that become valid when the share passes SEK 7.5, and there's 1,000,000 when it become valid when the share passes SEK 10. So basically, SEK 0.1 for 2,000,000 warrants.
Yep. Then another question here. What are the explanations for the difference in revenue and margin for Qualys Braemar and LOC since 2014? And are they expected to be more similar going forward?
I think maybe yes. The LOC has been LOC all the way. So that's LOC, nothing else. If you look on Aqualis Waymar, we merged with Waymar last year. So we have just, what should I say, put together the results of the two groups.
And Braemar, before we took over the company, was, through some very rough years, and that's, of course, influencing the numbers. Aqualis was a start up back in 02/2013. We had this zero revenue in 02/2012, and we did some acquisition. And we were running with a deficit until 02/2017. That was our first year with profit.
So in the beginning, we were running with a a loss because we were growing very fast. We went from nil to 40,000,000, 42,000,000 of revenue in two years. So it was a lot of investments being done. And then the oil price hit us very dramatically in 2014, 2015, but we were back. So it's it's more the history of the group than than anything else.
Right now, the the two companies are running rather similarly when it comes to margin and revenue development. So I think going forward, LOC might history of LOC might might be a more relevant one than the Qualys Waymo, which is kind of a hybrid of a start up company and, established a company that was part of a big conglomerate. Not big, but a conglomerate, at least.
Thank you. Then we have a question for Deion. Can you elaborate on how you calculated expected synergies? It seems that LOC's margins are much higher than BTS, yet you are expecting synergies of 2.5% of sales, which is slightly below what you realized on BTS. Have you done detailed bottom up analysis of synergies?
Or is it just based on a percentage of sales?
To answer that, we are pretty confident on our estimate of $500,000 It has been done through a bottom up. Analysis main drivers, as I did mention, will be the optimization of the back office and the facility redundancies. There are a lot of places in the world where we have offices both of us. We obviously will not need that going forward. And I have a list just on the facility side that adds up to $2,500,000 So it has been a thorough bottom up analysis.
Thank you. Then we have a question. Please elaborate on the Braemar warrants and how you have estimated how many warrants they will exercise.
Yeah. The the Braemar warrant was a it's a bit we did we have used the same kind of principle, also with Bridgepoint, which is selling LOC. So we we paid a price that we thought was fair for Braemar back in 2019. Had a we paid at that time a little bit north of $7,000,000 for the for the company at that time, but we gave them warrants depending on two variables. One was the gross margin of adjusting and marine over twenty four months.
So that ends in March 2021. That is in, say, four point five months. And then the second one was the combined group's EBITDA figures for the next twelve months. What we can say is that the gross margin for is has not met the expectations. So that will most likely be zero.
But of course, that was still left four months, but it's so way off that. And then the other half of the warrants is depending on the EBITDA. And as it looks now, there will be some warrants that will become effective on that. So we haven't disclosed any figures. But let's say, if you take half of the warrants that we have published, it's a fraction of the half.
So it's not a big, what should I say, dilution we expect unless a miracle happened. But that's fine, then we can live with that because that would imply that we have fantastic earnings the next two quarters, in Q4 this year and Q1 next year. So but that's a bit the same on the warrants. We agreed on the price. And if this goes very well, Bridgepoint will get some more through the warrant.
So we have you we copied the call it the transaction model, but they are different, though, but, but, a bit of the same. Call it a regret, compensation if if this goes much better than what the seller is expecting.
Thank you. The, two final questions here are quite technical ones on the subsequent offering. One is whether the subscription rights will be tradable. They will not be. The second is how many subscription rights will be given for each share owned at the end of last week.
That ratio has not been exactly calculated yet, but it will be roughly point six subscription rights for each share owned. However, oversubscription will be allowed, but the board may choose to limit allocation to the pro rata ownership held prior to the transaction. So we expect all shareholders to be able to repair their position from before the transaction. And with that, we have no further outstanding questions. So we would like to thank you all for participating in this webcast and encourage you to reach out to us individually afterwards if you have any further questions.
Thank you.