Datwyler to acquire Premier Farnell for an enterprise value of CHF1,0921 million in a recommended all-cash offer.
Today, the boards of Dätwyler Holding AG ("Datwyler") and Premier Farnell plc ("Premier Farnell") have reached agreement on the terms of a recommended all-cash offer by Datwyler for the entire issued and to be issued share capital of Premier Farnell (the "Transaction"). Premier Farnell and Datwyler are two leading distributors of electronic components with complementary product ranges and geographic market presence. The combination of Premier Farnell and Datwyler creates a leader in high-service distribution of electronic components and in doing so realises significant value for the shareholders of both companies.
Premier Farnell is a leading multi-channel, high-service electronic components distributor, marketing and distributing a comprehensive range of products and services and solutions globally.
The transaction is in line with and supports Datwyler’s stated strategy: · Complementary product ranges and geographic footprints strengthen our position as a leading high-service electronic components distributor · Increases scale and global presence, with combined revenues of c. CHF1.8 billion in the distribution business and combined revenues of c. CHF2.5 billion for the new combined group2 · EPS accretive from year one (before any impact of synergies and implementation costs) · Expected run-rate synergies of CHF50-70 million p.a. on an EBITDA level by the end of 2019
Under the terms of the Transaction, Datwyler has agreed to pay each Premier Farnell shareholder 165 pence in cash per Premier Farnell share, which represents a premium of approximately 51 per cent to the closing price of 109.3 pence on 13 June 2016. The Transaction values the entire share capital of Premier Farnell at approximately CHF848 million (£615 million) with an enterprise value of CHF1,092 million (£792 million) 1 .
It is intended that the Transaction will be effected by means of a court-sanctioned scheme of arrangement under Part 26 of the UK Companies Act 2006 (the "Scheme"). The Transaction is subject to the satisfaction or (where permitted) waiver of certain conditions including approval of the Scheme by Premier Farnell shareholders and the Court, certain anti-trust approvals and other customary conditions, and to such further terms as set out in today's firm offer announcement (the "2.7 Announcement") and as will be set out in the Scheme document.
Commenting on today’s announcement, Ulrich Graf, the Chairman of Datwyler said:
- “Premier Farnell and Datwyler both have long and successful histories in high-service distribution for electronic components. By combining forces, we expect to significantly increase our competitiveness and extend our product range, facilitating a one-stop-shopping experience for our wide range of customers from a multitude of industries.”
Scale, product availability and short delivery times represent the key differentiators for B2B distributors for both sales and sourcing. In the electronic components industry, spanning a range of product offerings for EDE (Electronic Design Engineers) and MRO (Maintenance Repair Operations), manufacturers and suppliers look for high-service distributors with strong brands, high quality technical support and readiness for delivery. Datwyler believes the combination with Premier Farnell represents a strong strategic fit. Both companies share very similar strategies and business models and are complementary in terms of product range, distribution channels and geographic footprint. While Premier Farnell holds a strong position in the EDE segment, Datwyler has historically focused more on the MRO segment. The Transaction creates a leading electronic components distributor for all customer groups globally. We believe that the new size enables the combined group to realise significant economies of scale compared to a standalone strategy. Complemented by efficiency gains from overlapping cost bases, increased capillarity and acceleration of ongoing restructuring efforts on both sides, the combined group is also expected to deliver enhanced margins going forward. The Transaction is expected to close in Q4 2016 and to be EPS accretive from year one (before any impact of synergies and implementation costs).
Significant expected synergies
The combined group will target run-rate synergies of CHF50-70 million p.a. on an EBITDA level by the end of 2019. These expected synergies include approximately CHF25-35 million of annual cost savings to be achieved over the first three years following completion of the Transaction. In addition, the increased scale and complementary nature of the Transaction is expected to generate gross profit synergies of c. CHF25-35 million. One-time integration and acquisition related costs are expected to be c. CHF40 million incurred over two years. Further, in order to achieve the targeted synergies, we expect additional capital expenditures of approximately CHF80 million for investments in our combined infrastructure within the first three years following the Transaction. Taking into account the depreciation on the envisaged additional investments, the expected run-rate synergies on EBIT level are in a range of CHF40-60 million p.a. by end of 2019.
The combined group
Based on financials of the two companies for the most recent financial year, the combination of Datwyler and Premier Farnell is expected to create a leading high-service electronic components distributor with combined revenues of c. CHF1.8 billion in the Technical Components division, complemented by Datwyler's Sealing Solutions revenues of c. CHF0.7 billion which results in combined revenues of c. CHF2.5 billion for the new Group. With its two focused divisions, the combined group is targeting revenues in excess of CHF3 billion and an EBIT-margin above 12% by 2020. The new Technical Components division, including Premier Farnell’s business, is targeting total revenues in excess of CHF2 billion and an EBIT-margin above 10% by 2020.
Financing of the Transaction3
The financing requirement for the transaction in the amount of £615 million (CHF848 million) is secured through £118 million (CHF162 million) of existing cash, a five-year £207 million (CHF286 million) term loan4 and a £290 million (CHF400 million) bridge facility, of which CHF140 million (£102 million) is expected to be refinanced at a later stage in the public bond market and the remainder through an equity issuance. The equity component is expected to be raised through a capital increase in the amount of approximately CHF200 million (£145 million) and a placement of treasury shares with proceeds of c. CHF60 million (£43 million). This financing structure has been chosen to maintain a solid capital structure post-acquisition, with an expected initial leverage ratio of less than 2.5x net debt to last twelve months EBITDA and an expected strong de-leveraging profile. The Board of Directors expects that Pema Holding AG, the long-time majority shareholder of Datwyler, would participate proportionally in any envisaged capital increase, thus maintaining its current ownership as a percentage of capital and votes. UBS acts as sole financial adviser and as sole underwriter of the acquisition financing facilities available to Datwyler.
Preliminary Schedule (indicative) 14 June 2016
– 2.7 Announcement July 2016
– Posting of Scheme document to Premier Farnell shareholders August 2016
– Court meeting and Premier Farnell shareholder meeting Q4 2016
– Anti-trust approvals received Q4 2016
– Court approval of Scheme Q4 2016
– Closing of transaction
Invitation to the analyst and press conference
- An analyst and press conference by Datwyler including a video webcast in English will be held today, Tuesday, 14 June 2016, at 11.00am CET. The conference will take place at Hotel Park Hyatt, BeethovenStrasse 21, 8002 Zürich. To watch the conference as a live video webcast please use the following link from 10.45am CET: http://services.choruscall.eu/links/datwyler160614.html
- A repeat of the conference will be available via the same (above) link or online at www.datwyler.com from about 3.00pm CET.
- The 2.7 Announcement as well as the press releases in German and English can be downloaded immediately online at www.datwyler.com.
The slides for the press and analysts' conference are available online from 12pm CET. Enquiries Datwyler: +41 41 875 19 00 Guido Unternährer, Head of Corporate Communications UBS Investment Bank (Financial Adviser): +44 (0) 20 7567 8000 Jonathan Rowley Martin Kesselring Jean-Baptiste Petard Sandip Dhillon Datwyler Group (www.datwyler.com) The Datwyler Group is a focused industrial supplier with leading positions in global and regional market segments. With its technological leadership and customised solutions, the Group delivers added value to customers in the markets served. Datwyler concentrates on markets that offer opportunities to create more value and sustain profitable growth. The Technical Components division is one of Europe’s foremost high-service distributors of electronic, ICT and automation components and accessories. The Sealing Solutions division is a leading supplier of custom sealing solutions to global market segments, such as the health care, automotive, civil engineering and consumer goods industries. With a total of more than 50 operating companies, sales in over 100 countries and some 7,000 employees, the Datwyler Group reported annual net revenue of some CHF1,165 million for the financial year ending 31 December 2015. The Group has been listed on the SIX Swiss Exchange since 1986 (security number 3048677).
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