M&A announcement

Mar 31, 2025

Summary

The ~$1.7bn acquisition adds LBC’s seven terminals to an integrated chemical logistics platform, with closing expected in June 2025 subject to U.S. and Belgian approvals. EBITDA is targeted to exceed $300m by 2030, while LBC supports stable revenue and next-generation energy expansion.

Thank you for taking part in our briefing on the acquisition of LBC Tank Terminals today. We hold this briefing as this is the largest acquisition in our company's history, and we have made a strategic investment decision with the aim of further strengthening our chemical logistics business. The speakers are President Hashimoto, CFO Hamazaki, and Director General, Headquarters of Product Transport Business, Sakurada. I am Yosuke Ishii, General Manager of the Corporate Communication Division. Let us start with a few words from President Hashimoto. I am Takeshi Hashimoto, President of Mitsui O.S.K. Lines. Thank you for attending today. As announced on March 10, MOL has decided to acquire 100% of the membership rights of LBC Tank Terminals Group, primarily handling and storing chemicals in Europe and the U.S., with an acquisition price of approximately $1.7 billion. This is MOL Group's biggest ever M&A investment transaction. One of the world's largest chemicals-focused tank terminal operators, LBC, is growing rapidly. Including expansion plans already approved, LBC's EBITDA is expected to exceed $200 million in the next few years, compared with $120 million in 2023. Furthermore, we aim to achieve an EBITDA of over $300 million in 2030 by realizing the expansion plans in the study phase. MOL Group positions the chemical logistics business as a strategic business area, and this acquisition is part of that strategy. We already have the world's largest network and fleet in the chemical tanker business through the acquisition of Nordic Tankers in 2019 and Fairfield Chemical Carriers in 2024. Meanwhile, in the tank container business, where we transport small lot liquid cargos, we have acquired minority stakes in Nippon Concept and Den Hartogh and are expanding business. Now, by adding terminal operator to our business portfolio and vertically integrating the three businesses, we will establish a total chemical logistics service system that flexibly meets diverse customer transportation needs from upstream to downstream. We intend to use this system as a foothold for achieving rapid growth into a comprehensive logistics company for liquids, not only chemical products, but also liquid CO2 and new alternative fuels. We see the tank terminal business as a low-volatility business that will contribute to the portfolio strategy we are driving under MOL Group corporate management plan, BLUE ACTION 2035. Leveraging the synergies of the chemical logistics business, we will work to increase our cash generation capabilities and to grow the tank terminal business as a pillar of the group's stable revenue business. Today's briefing consists of three parts: transaction overview, strategic rationale of the acquisition, and financing and capital policy. First, for the transaction overview, I will hand over to Osamu Sakurada, the officer in charge of this transaction. Let me start with an overview of the acquisition. On March 7, 2025, we signed a sale and purchase agreement with France-based investor, Ardian, and Netherlands-based investors, PGGM and APG, who are LBC's existing shareholders, and we are going to acquire 100% of the membership rights of LBC and make LBC into a wholly owned subsidiary. The actual sale and purchase transaction is expected to be executed in June 2025, after the necessary permissions from the regulatory authorities in the U.S. and Belgium have been obtained. LBC is headquartered in Rotterdam, the Netherlands. It is engaged in the tank terminal business at a total of seven terminals located in the U.S., the Netherlands, and Belgium. With a total tank capacity of 3 million cubic meters, LBC is one of the world's largest chemicals-focused storage businesses. In the sustainability field, LBC is highly rated for its safety initiatives and environmental strategy with a platinum EcoVadis rating, which is awarded to only the top 1% of companies. A breakdown of revenue by region shows that the U.S. accounts for around 70% and Europe for 30%. The U.S. accounts for a large share of revenue because the revenue from the Houston terminal, which is the largest terminal owned by LBC, accounts for around 50% of total revenue. A breakdown by product shows that around 70% of revenue comes from chemicals, and LBC also handles petroleum and base oils. LBC is engaged in the stable revenue business of storing liquid cargos at import and export terminals, whereby revenue from tank rental that is unaffected by changes in actual cargo storage volume accounts for a large percentage of revenue. This shows the locations of LBC's terminals. On the U.S. Gulf Coast, which is a major export hub for chemicals, LBC currently operates four terminals, LBC Houston, and right next to Houston, Seabrook Logistics, LBC Baton Rouge, and LBC Freeport. In the ARA area composed of Amsterdam, Rotterdam, and Antwerp, which are major import hubs, LBC operates three terminals: LBC Rotterdam, LBC Antwerp, and LBC Lillo. In addition, LBC acquired the development rights for an ammonia terminal in Vlissingen, the Netherlands, in November 2024. This slide shows the key products handled by LBC. Chemicals are used in a wide range of consumer goods, including construction materials, pharmaceuticals, paints, and clothing. Accordingly, demand is expected to continue growing steadily in the future, alongside population growth and higher global GDP associated with higher standards of living. This slide shows the business model of the tank terminal business. MOL provides marine transportation services using chemical tankers. The tank terminal business involves providing storage services at export and import ports. At export ports, chemical tank terminals are used to temporarily store liquid cargos transported from plants via railways, trailers, or pipelines. At import ports, cargos discharged from tankers are stored at chemical tank terminals before being transported to plants. LBC's main customers are large oil and gas companies and chemical manufacturers in common with our chemical tanker business. Our expansion into the tank terminal business will help MOL Group branch out from our existing marine transportation services and expand the scope of services we can offer our common customers. LBC's strengths are its presence as a terminal operator at key ports in the world's leading chemical hubs like the U.S. Gulf Coast and Europe's ARA region, its long-term contracts and high contract renewal rate that reflect high levels of safety and efficiency, and its stable revenue base. LBC's future cash flows based on take-or-pay contracts are easy to forecast, and LBC can be expected to achieve further significant growth as chemical demand grows and the next-generation energy market matures. Looking at demand for chemicals, continued stable market growth is expected in the future and in the U.S. Gulf Coast and Europe's ARA region, where LBC operates, annual market growth of around 2% is expected from 2024. LBC plans to expand its existing terminals and expand tank capacity. Whereas in 2024, LBC's EBITDA was $142 million if we include projects already agreed with customers and under construction and operational cost reductions, LBC's run rate EBITDA is expected to increase to $208 million in a few years. In addition, there is scope to expand tank capacity by using unused land at existing terminals and replacing small tanks with large tanks, and LBC can be expected to achieve further growth to meet rising demand for chemicals in the future. By 2030, we aim to grow its EBITDA to over 300 million US dollars. Also from a long-term perspective, there is potential for significantly expanding business even more through the establishment of next-generation energy business such as ammonia and CO2. LBC already plans to build an ammonia tank at its Vlissingen terminal, scheduled to commence operation in 2028 or 2029. We will leverage our customer base built up through marine transportation and investment in upstream projects to support LBC's next-generation energy business. Next, CFO Hamazaki will explain the strategic rationale of the acquisition as the second part of this briefing. MOL Chemical Tankers, the MOL Group company engaged in the chemical tanker business, has grown into the world's largest chemical tanker company based on fleet size by making Nordic Tankers and Fairfield Chemical Carriers into wholly owned subsidiaries in 2019 and 2024, respectively. We aim to leverage our presence in the chemical tanker market to establish a total chemical logistics service system. Aside from the chemical tanker business, where we undertake the marine transportation of large-lot cargos, in the tank container business, where we undertake the marine and land transportation of small-lot liquid cargos, we have acquired a 29% stake in Nippon Concept and a 20% stake in Netherlands-based Den Hartogh. By integrating the chemical tanker business, the tank container business, and the tank terminal business, we will pursue business synergies in the form of stronger relationships with customers, joint approaches to customers, early access to new logistics demand, and efficient operation of tankers and terminals. We aim to branch out from the marine transportation business to evolve into a total chemical logistics service provider and to become a world-leading chemical logistics company. Currently, LBC's existing terminals are confined to the U.S. Gulf Coast and Europe's ARA region, which are also key ports of call for our chemical tankers. Our future growth strategy is to leverage our global network to expand LBC's area of operation beyond Europe and North America to Asia. Within the next-generation energy supply chain, we are involved in investing in upstream operations and marine transportation. Leveraging our relationships with customers and partners in these businesses, we will use LBC as an onshore storage business platform in the alternative energy business to pursue further business opportunities and contribute to the realization of a decarbonized society. The MOL Group Corporate Management Plan, BLUE ACTION 2035, sets out the goal of transformation towards a portfolio capable of maintaining profitability during shipping downturns. We are transforming our portfolio to increase the asset ratios of stable revenue businesses and non-shipping businesses to 60% and 40%, respectively, by 2035, and the acquisition of LBC is a key step for realizing this plan. Assuming completion of the acquisition of LBC, according to current projections, LBC is expected to make a contribution to fiscal year 2035 consolidated pre-tax profit of more than JPY 20 billion. Finally, I will explain financing and capital policy. The primary source of funding will be borrowings from key relationship banks and financing that has already been secured. We are preparing to execute this transaction based on this stable financial position. After closing of the transaction, we will consider optimal refinancing to replace with permanent financing, taking into account the impact on the company's financial soundness, as well as our business and financial conditions and market trends. There is no plan to do a public offering which will result in dilution. Moving on to our financial plan. The LBC acquisition is a front-loaded investment originally planned for phase II of BLUE ACTION 2035 and is positioned as part of our long-term growth strategy. We are revising our cash allocation plan to include this investment, and we plan to explain about it in fiscal year 2025. Next, our net gearing ratio is expected to temporarily deteriorate due to the impact of the acquisition of LBC. However, in the medium term, we aim for an improvement to the 0.9 to 1.0 level in line with the financial KPI under BLUE ACTION 2035. Through this, we will ensure financial stability and strengthen the foundations underpinning sustainable growth. Finally, there is no change to our shareholder return policy.