7 December 2015 Challenger Acquisitions (CHAL.L) LeisureChallenger & Attractions was formed as a vehicle to undertakeAcquisition acquisitions of ofStarneth highly prospective completed companies within the “attractions” sector of the leisure market. The company recently acquired the Starneth Group which specialises in the design and engineering of large observation wheels and structures. Starneth is currently a providerChallenger of technical was support formed services as a tovehicle the New to undertakeYork Wheel acquisitions project, a development of highly prospective in which Challenger also has a direct equity interest. Part ofcompanies Challenger’s within core the strategy “attractions” is to acquire sector ofsignificant the leisure equity market. interests The company in additional recently iconic giant observation wheel projects around the world.acquired the Starneth Group which specialises in the design and engineering of giant observation wheels. Starneth currently provides technical support services to the New York Wheel project, a development in which Challenger has a direct equity interest. We believe that Starneth’s activities coupled with a very exciting project pipeline are highly complemented by Challenger’s strategy to acquire equity interests in additional iconic giant observation wheel projects around the world. Source: LSE Challenger raised £1.1m upon admission to the LSE in February 2015 and a further £3.0m through the issue of convertible notes in April. The company subsequently Market data invested US$3.0m for a 2.463% equity stake in the New York Wheel Project which is Price (p) 38.0 expected to open in mid-2017. 12m High (p) 78.5 12m Low (p) 13.0 Challenger completed the acquisition of the Starneth Group for €7.2m in July 2015. We Shares (m) 13.3 believe that Starneth is the only global provider of turnkey design and engineering Market Cap. (£m) 5.1 solutions in the highly specialised giant observation wheel sector. EV (£m) 4.5 The acquisition excluded two subsidiaries; Starneth B.V. and Starneth LLC. Starneth B.V. EPIC CHAL is currently engaged in legal arbitration in Singapore with a substantial claim against Free Float (%) 45% Hyundai related to the Dubai-I project. Starneth LLC is part of the joint venture which Market LSE has been contracted to design, engineer and supply the giant observation wheel for the New York Wheel Project and could not be acquired for contractual reasons. Challenger Description retains its involvement in this project through the provision of technical services to Challenger is an investment vehicle Starneth LLC from a wholly owned subsidiary. formed to undertake value adding The iconic observation wheel market is characterised by a small number of high value acquisitons in the 'attractions' sector of the leisure market. The company is contracts. Challenger believes that a major project is completed every 2-3 years and currently focused on the global market the market could consist of up to 10 such projects over the next 10 years with a for giant observation wheels. potential value of at least US$1.0bn. With at least 25 opportunities in Starneth’s project pipeline and discussions regarding several major projects close to fruition, we believe that the potential for winning exciting new mandates is huge. Directors and Company information Mark Gustafson Chairman The company is in advanced discussions to provide turnkey project management Markus Dieter Kameisis CFO services for a US$121m iconic wheel project in Jakarta in Indonesia. The group is also Gert Rieder Non-Exec conducting negotiations with regards to 24 other potential giant observation wheel +1 604 454 8677 projects. www.challengeracquisitions.com These projects provide the prospect for near term revenue generation. However, highly leveraged upside will be derived from direct equity ownership in major projects Analyst through which Challenger has the potential to derive highly significant long term Barney Gray income streams. +44 (0)207 186 9950 At its core, we believe that Challenger represents a highly attractive management play. In particular, the group has retained Starneth’s founder, Chiel Smits, who has unrivalled experience in the sector and is the architect of Starneth’s growth. This expertise is complemented hugely by the existing Challenger team which has wide experience in the acquisition of funding for major industrial and commercial projects. Year end Dec (£000) Dec-15E Dec-16E Dec-17E Dec-18E Revenue 3,250 36,724 63,954 82,067 EBITDA -386 4,191 7,991 11,313 Profit (loss) before tax -638 3,942 8,003 11,421 EPS fully diluted (p) - 17.8 29.4 37.8 Net cash 594 5,946 13,960 24,763 7 December 2015 Introduction to Challenger Challenger Acquisitions Limited (LSE: CHAL) is a holding company for the recently acquired Starneth Group which specialises in the design and engineering of giant observation wheels and structures. Prime examples of these include the London Eye which opened in 2000 and the upcoming New York Wheel which, when completed in mid-2017, should be the tallest of its kind in the world. Challenger also has a 2.463% equity interest in the New York Wheel. This investment of US$3.0m was completed in May 2015. The New York Wheel Project which is located on Staten Island includes a 630 foot high observation wheel with 36 viewing capsules. In addition, the wider project includes 68,000 square feet of retail and leisure space and a large parking garage for 950 vehicles. Recent landmarks Challenger was incorporated in November 2014 as an investment vehicle with a clearly stated aim of making acquisitions in the leisure and entertainment sectors. At this stage, the company outlined its intention to focus specifically on acquiring business in the “Attractions” sector. Challenger was admitted to trading on LSE in February 2015 raising initial capital of £1.1m before expenses. Co-operation agreement with Starneth In March 2015, Challenger announced the landmark step of signing a cooperation agreement with Starneth Holding B.V. As outlined previously, Starneth and its subsidiaries specialise in the design and engineering of giant observation wheels and structures. Of particular interest to Challenger was the fact that the Starneth team is comprised of several people who were involved in the design and construction of the London Eye. In particular, the Starneth CEO, Chiel Smits was the project manager for the London Eye project. Mr Smits’ detailed biography and those of his colleagues on the Challenger management team can be found in Appendix B. Initial funding At the end of April, Challenger raised approximately £3.0m through the issue of convertible notes. These funds were earmarked for the purposes of future acquisitions. An initial tranche of approximately £2.2m was received in early May and the balance of £850,000 was received by July 2015. These notes accrue interest of 12% per annum payable quarterly or upon conversion in cash or ordinary Challenger shares. The shares can be converted at either a fixed price of 50p or the market price at the time less 7.5%. Challenger has the option to redeem the notes at any time at a 10% premium anytime that the market price is below the fixed conversion price of 50p. Investment in the New York Wheel As a result of the funding conducted in the previous months, Challenger was able to participate as an investor in the New York Wheel project. The company invested US$3.0m for a 2.463% interest in New York Wheel Investor LLC at the end of May 2015. Under the terms of the investment, Challenger may be required to make further capital contributions in the event of a cash shortfall during the construction phase of the project. However, given the comparatively modest initial interest that Challenger has acquired, we would not expect this to be a significant contribution. 2 7 December 2015 Acquisition of Starneth Challenger completed the acquisition of the principal operating businesses of Starneth in mid-July. On 15 July 2015, Challenger entered into a Share Purchase Agreement (SPA) with the sellers: Smits International B.V. Yamapro Trading - F.Z.E. Systems Engineering International, Inc. The SPA related primarily to the acquisition of all the shares in Starneth Holding B.V., and its subsidiary companies. These are outlined in the pre-acquisition group structure below. At this stage, it should be noted that the post-acquisition group has several significant differences to the model below. Starneth: Pre-acquisition structure Source: Challenger Acquisitions Consideration The total consideration under the SPA was equivalent to €7.2m in cash and shares plus a variable component. As the table below depicts, €1.25m was paid in cash upon closing and two further cash payments of €1.25m will be made on the first and second anniversary of the initial closing date. The balance of the fixed consideration will be settled in Challenger shares. A total of 1,100,000 Challenger shares were issued to the sellers upon closing and two identical instalments will be made on the first and second anniversary of closing. It should be noted that all the Challenger shares already issued and those to be issued to the sellers are valued at 75p per share, a significant premium to the share price prior to suspension. Applying a Euro/Sterling exchange rate of approximately €1.40 to the Sterling valuation of £2.475m for the equity component of the acquisition implies a valuation of €3.45m for the shares. This brings the aggregate total up to €7.2m as per the original news release. 3 7 December 2015 Summary of the SPA terms Item Consideration Notes Total consideration (€) 7,200,000 Cash instalment (€) 1,250,000 Cash paid on closing (paid) Cash instalment (€) 1,250,000 1st anniversary (c.