Trelleborg Group To Acquire Smiths Polymer Sealing
GROUPTrelleborg Group to acquireSmiths Polymer Sealing SolutionsPress conference - July 21, 20031
Key messagesGROUPMain topics for today’s presentationTransactionTransaction &&DealDeal RationaleRationalePSS - a leader in thepolymer sealsindustrySignificantvalue creationAdding a strongplatform for furthergrowth2
The transactionGROUPTrelleborg to acquire Smiths PSSTrelleborg has signed an agreement with Smiths Group plcto acquire its Polymer Sealings Solutions (PSS) division for 495 M or approx. 6,500 MSEK on a net debt free basisPSS is a world leader in design, manufacture and supply ofhigh-quality, high-specification polymer seals and sealingsolutions to a diverse range of end-user marketsFor the last 12 months ending June 2003 PSS had(according to Trelleborg estimates)-Sales of approx. 5,500 MSEK- EBITDA of approx. 880 MSEK- EBIT of approx. 680 MSEK- Approx. 6,000 employees3
Deal rationaleGROUPPSS – a leader in the polymer precision seals industryPSS has leading market positions across a number ofsegmentsExtensive product range focused on high-value applicationsand world-class engineering and proprietary materialstechnologyIndustry leading financial performanceAdding a new strong growth platform based on polymertechnologyPositive annual cost synergies estimated approx. 100 MSEKwith full efftect after 3 yearsEarnings enhancing already 20044
Key messagesGROUPMain topics for today’s presentationTransaction &Deal RationalePSS - a leader in thepolymer sealsindustrySignificantvalue creationAdding a strongplatform for furthergrowth5
A SEK 53 billion market with high entry barriersGROUPGlobal polymer seals overviewPolymer seals market, Europe and North AmericaSEK 41 billionPipeAerospace5%8%45% IndustrialAutomotiveMarket drivers More demanding applications Tougher environmental legislation Customer demands for improvedreliability Extended product life Whole-life cost Zero-defect supply42%6
Precision seal products .GROUPIn three polymer areas – Rubber, Polyurethan and PTFEO-ringsHydraulic sealsRotary sealsV-ringsGasketsLinear & rotary bearingsPipe sealsDiaphragmsAirframe seals7
GROUP. in safety-critical environments well-known toTrelleborgPSS sales by end user, 2003P, SEK 5.1 8
Leader in European Industrial polymer sealsGROUPPSS IndustrialNiche player in North AmericaMarket drivers Environmental legislation Capital goods market Reliability of OEM equipment Extended product life Reducing supplier baseIndustrial seals market, EuropeSEK 9.3 billionPSS20%Other 42%20% FreudenbergNOK4% 6% 8%FederalParker HannifinSKFMogulIndustrial seals market, North AmericaSEK 9.3 billionOther24%Federal 5%Mogul5%SKF5%PSS11%Greene TweedFreudenberg25% NOK25%ParkerHannifin9
Leading-edge in premium Automotive sealsGROUPPSS AutomotiveSpecialized niche player in Europe and North AmericaMarket drivers Environmental legislation Car and light truck production volumes Reliability of OEM equipment Extended product life New applications Material development and processingskillsAutomotive seals market, EuropeSEK 8.0 billionFreudenberg22% NOKOther 43%10% Hutchinson6%PSS6%4%4% 5%BrussFederalSKF Parker HannifinMogulAutomotive seals market, North AmericaSEK 9.3 billionOther20%Freudenberg25% NOKPSS 5%SKF 15%15%Parker Hannifin20% FederalMogul10
Global supplier of Aerospace polymer sealsGROUPPSS AerospaceEuropean leader and a runner-up in North AmericaMarket drivers Commercial and military aircraftproduction volumes Reducing supplier base Passenger air miles Military activity Weight reductionAerospace seals market, EuropeSEK 1.3 billion23%PSSOther 46%20%Hutchinson4% 7%Greene Tweed Parker HannifinAerospace seals market, North AmericaSEK 2.0 billionParker31% HannifinOther 50%9%PSS3% 7%Hutchinson Greene Tweed11
Leading-edge in European Pipe polymer sealsGROUPPSS PipeIn a growing marketMarket drivers Construction activity Infrastructure improvements Economic development in EasternEurope Switch from concrete to plastic pipes Ease of installation Extended product lifePipe seals market, EuropeSEK 1.3 billionBodeOther20%30%18%Hultec6%10%MOLPSS16%Denso & Stein12
Strong presence in Europe and North AmericaGROUPPSS sales by region, 2003P, SEK 5.1 billionShowing stronggrowth in Asia PacificNorthAmericaLatinAsia AmericaPacific3%1%22%74%Europe13
Global manufacturingGROUPOverview of production locationsIndianaFort terMilford arkForshedaMörbylångaPolandKrakow eBrazilSao Paulo 4,300 manufacturing personnel in27 facilities worldwide– 3,300 Europe/Asia/Pacific– 900 North America– 100 latin America14
A complete sealing solution providerGROUPPSS Industrial marketing key markets, Europe/Asia/Pacific, % of salesClose to end-users 70% manufacturedin-house 30% aw material processing 2%Chemical/pharma 2%Oil & gas 2%Marine 3%5%SanitationElectronics15% Fluid riculturalequipment15
Strong R&D and testing capabilitiesGROUPProduct development overview - safety critical products Closely aligned with business linesand coordinated globally Research primarily driven bycustomer requests, but also generic 6 main development centers inEurope and North America 310 employees engaged inengineering and technical supportroles New proprietary materials cooperation with polymer rawmaterial suppliers Full 3D modeling reduces cost 71 product design patents (existingor pending)16
Key messagesGROUPMain topics for today’s presentationTransaction &Deal RationalePSS - a leader in thepolymer sealsindustrySignificantvalue creationAdding a strongplatform for furthergrowth17
Positive contribution from the outsetGROUPKey financials, Roll 12 M per June 2003SalesMSEKOperating Profitexcl gw amort, MSEK 32%22,431EPS, excl. goodwill amort.**SEK 38%12.30 ***Trelleborgpro forma Approximate figures according to Trelleborg estimates **Excluding non-comparable items*** At average rate GBP/SEKTrelleborgPSS***Trelleborgpro formaTrelleborgPSSTrelleborgpro forma18
Substantial synergiesGROUPSynergy overviewSales and distributionSite consolidationPurchasing/sourcing materialsRationalization of certainactivities (e.g., mixing)Annual synergies –excl synergies from sales expected to be MSEK 100 full effect after 3 yearsCosts associated withsynergy extraction estimatedto MSEK 60Stronger sales growththrough medium/long termcross selling19
Obtaining targeted “normalized” gearingGROUPDebt/equity ratio, Trelleborg, Proforma as per June 2003150129Group target75-125%10050040TrelleborgJune 2003TrelleborgJune 2003pro forma20
Key messagesGROUPMain topics for today’s presentationTransaction &Deal RationalePSS - a leader in thepolymer sealsindustrySignificantvalue creationAdding a strongplatform for furthergrowth21
Adding leading industry positions to our GroupGROUPWith excellent opportunities to grow2002Automotive AVSIndustrial AVSBrake shimsBootsAgricultural tiresSolid industrial tiresIndustrial hoseIndustrial hose/distributionMarine fender systemsIndustrial profilesRubber membranesPSS Aerospace sealsPSS Automotive sealsPSS Industrial sealsPSS Pipe seals111132111113121222132-1211112-Share of core business2002 pro forma incl. PSS2002 90% 80%22
A balanced organization structureGROUPWith maintained PSSMixingMaterialPurchasing24%40%8%13%15%Share of pro forma 2002 core operations sales (MSEK 22,500)23
Entering a phase of Profitable GrowthGROUPIllustrative milestonesTurnover increase by 110%,from SEK 8 to 23 billionFocusedindustry group4.5.ProfitablegrowthEfficiency & Product- ¯o adjustmentmarket-drivenCompany & ownorganic growth2.share purchases AcquisitionPortfolio Staff reductionsdriven growthoptimization Plant shut-downs Leading Strategic acquispositionsitions, primarily Leading Divestment ofwithinAutomotivetechnologiesDistribution 51% Active share re Divestment ofpurchase programsector Other3.1.New strategicdirectionConglomerate Broad anchoring Polymer focus1999Achievedgoals2003Clear directionEnthusiasm &commitmentStrategic &operationalfocusReleasedcapitalStrengthenedmarket positionsCritical massTechnology pPending AcquisitionPSSNormalized gearing24
To sum up .GROUPMain topics for today’s presentationTransactionTransaction &&DealDeal rationalerationale GBP 495 million acquisition of Smiths PSS Perfect fit within focused polymer trackPSSPSS -- aa leaderleader inin thethepolymerpolymer sealssealsindustryindustry Attractive SEK 53 billion polymer seals market Precision seals in safety-critical environments Leading industry positions Global manufacturing and strong R&DSignificantSignificantvaluevalue creationcreation Solid strategic and commercial rationale Positive contribution from the outset Substantial synergies Obtaining targeted “normalized” gearingAddingAdding aa strongstrongplatformplatform forfor furtherfurthergrowthgrowth Leading positions, leading technologies Improved balance in business portfolio Combining profitability and growth25
GROUPQ&A26
Trelleborg to acquire Smiths PSS Trelleborg has signed an agreement with Smiths Group plc to acquire its Polymer Sealings Solutions (PSS) division for 495 M or approx. 6,500 MSEK on a net debt free basis PSS is a world leader in design, manufacture and supply of
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Trelleborg is a world leader in engineered polymer solutions that seal, damp and protect critical applications. The Group comprises three business areas – Trelleborg Industrial Solutions, Trelleborg Sealing Solutions and Trelleborg Wheel Systems, and a reporting segment, Businesses Under Development. SALES NUMBER OF EMPLOYEES
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