Agreement to acquire Veyance Technologies Inc.
Hanover – February 10, 2014
http://www.continental-ir.com
Wolfgang Schaefer – CFO
Disclaimer
›
This presentation has been prepared by Continental Aktiengesellschaft solely in connection with the Analyst and
Investor conference call on the occasion of the agreement to acquire Veyance Technologies Inc. on February 10,
2014. It has not been independently verified. It does not constitute an offer, invitation or recommendation to purchase
or subscribe for any shares or other securities issued by Continental AG or any subsidiary and neither shall any part
of it form the basis of, or be relied upon in connection with, any contract or commitment concerning the purchase or
sale of such shares or other securities whatsoever.
›
Neither Continental Aktiengesellschaft nor any of its affiliates,
affiliates advisors or representatives shall have any liability
whatsoever (in negligence or otherwise) for any loss that may arise from any use of this presentation or its contents
or otherwise arising in connection with this presentation.
›
This presentation includes assumptions, estimates, forecasts and other forward-looking statements, including
statements about
b
our beliefs
b li f and
d expectations
i
regarding
di future
f
d
developments
l
as wellll as their
h i effect
ff
on the
h results
l off
Continental. These statements are based on plans, estimates and projections as they are currently available to the
management of Continental. Therefore, these statements speak only as of the date they are made, and we
undertake no obligation to update publicly any of them in light of new information or future events. Furthermore,
although the management is of the opinion that these statements,
statements and their underlying beliefs and expectations,
expectations are
realistic or of the date they are made, no guarantee can be given that the expected developments and effects will
actually occur. Many factors may cause the actual development to be materially different from the expectations
expressed here. Such factors include, for example and without limitation, changes in general economic and business
conditions fluctuations in currency exchange rates or interest rates,
conditions,
rates the introduction of competing products,
products the lack
of acceptance for new products or services and changes in business strategy.
›
All statements with regard to markets or market position(s) of Continental or any of its competitors are estimates of
Continental based on data available to Continental. Such data are neither comprehensive nor independently verified.
Consequently, the data used are not adequate for and the statements based on such data are not meant to be, an
accurate or proper definition of regional and/or product markets or market shares of Continental and any of the
participants in any market.
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
2
AGENDA
1 Strengthening
St
th i a Global
Gl b l Player
Pl
in
i Rubber
R bb and
d Plastic
Pl ti Technology
T h l
2 Transaction Rationale
4
7
14
15
3 Financial Impact and Mid Term Targets
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
3
1) Strengthening a Global Player in Rubber and
Pl ti Technology
Plastic
T h l
›
Veyance (Sales 2013E: ~€1.5 bn1; EBITDA 2013E: ~€204 mn1) and ContiTech
(Sales 2013E: €3.9
€3 9 bn; EBITDA 2013E: €576 mn) will form a global player for
Advanced Rubber and Plastic Technology
›
Highly complementary acquisition expands Continentals non-OE Automotive business
and balances regional sales:
›
›
ContiTech’s non-OE Automotive share to improve to 60% (before 47%)2
›
ContiTech sales split improves to 46% EU (66%) / 21% NA (8%) / 11%
LATAM (9%) / 10% Asia (8%)2
Deal will be immediately accretive to earnings3
›
Enterprise Value amounts to ~€1.4 bn4 ($1.9 bn)
›
Transaction multiple at 7.3x EBITDA and 0.96x sales
›
Transaction can be financed from existing cash and credit lines
›
Rating expected to stay in investment grade category. Net debt / EBITDA
will stay below 1
1.0x
0x by the end of 2014
›
Closing is subject to the regulatory approval
1
2
3
4
Average EUR/USD exchange rate 2013: 1.3284
Based on 2012 data
Pro forma 2014, adj. for PPA assuming 28% tax rate
EUR/USD exchange rate: 1.3635
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
4
1) Strong Track Record in Integrating Businesses
1
C tiT h V
ContiTech:
Value
l creation
ti th
through
h acquisitions
i iti
Parker Hannifin’s automotive
air conditioning business and
Freudenberg Sealing
Technologies GmbH
Combined sales: ~ €180 mn
Matador Rubber s.r.o.,
Slovakia
Conveyor Belts
Sales: ~ €30 mn
Phoenix AG,
AG Germany
Rubber products
Sales: ~ €1.0 bn
Impact of the Global
Financial Crisis
(GFC)
Roulunds A/S, Denmark
Transmission Belts
Sales: ~ €45 mn
2,894
2,869
30%
2 063
2,063
11%
2004
3,064
32%
Legg Company Inc.,
USA and Metso Corp.,
Finland
Conveyor Belts
Combined sales: ~ €60 mn
3,583
3 712
3,712
39%
39%
2011
2012
3,878
3,095
3,007
30%
Tianjin Xinbinhai
Conveyor Belt Co.,
China and Mining Industrial
Resource Supplies Pty Ltd.,
A t li
Australia
Combined sales:
~€15 mn
2,406
35%
~ 36%
17%
14%
2005
2006
2007
2008
2009
ContiTech Sales (€ mn)
1
2
All mentioned sales are pro forma sales
in the year of the acquisition
2004 – 2011 not restated for IAS 19 (rev. 2011)
2010
ROCE
2013E
2
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
5
AGENDA
1 Strengthening
St
th i a Gl
Global
b l Pl
Player iin R
Rubber
bb and
d Pl
Plastic
ti T
Technology
h l
2 Transaction Rationale
4
7
14
15
3 Financial Impact and Mid Term Targets
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
6
2) Transaction Rationale
O
Overview
i
ContiTech
C tiT h
ContiTech FY 20131
› Sales: €3.9
€3 9 bn
› EBITDA: €576 mn
› Employees: 29,700
› More than 80 locations in 27 countries2
› 40 R&D-locations
› 47% non-OE Automotive3
Share of sales in %
Elastomer
Air Spring
Coatings
Systems
3%
7%
Compounding
7%
Fluid
Technology
38%
Vibration
Control
9%
Benecke-Kaliko
Group
10%
Power
Transmission
p
Group
11%
Conveyor
y Belt
Group
15%
2,869
CAGR:
4%
3,878
15%
~15%
2006
2013E
1
Based on preliminary data
Status 7/2013
3 As of 2012
2
Sales (EUR mn)
EBITDA margin
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
7
2) Transaction Rationale
O
Overview
i
V
Veyance
T
Technologies
h l i IInc.
Share of sales in %
Veyance Technologies Inc. FY 2013E
› Sales:
S l
~€1.5
€1 5 b
bn1
› EBITDA: ~€204 mn1
› Employees:
p y
~ 9,000
,
Other Products
5%
Air Springs
7%
Conveyor Belt
47%
Power
Transmission
12%
› Representations in over 27 countries
› More than 27 locations in 11 countries
› 16 R&D-locations
› 90% non-OE Automotive
Fluid
Technology
29%
CAGR:
4%
1 990
1,990
1,510
~14%
10%
1
2006
Average EUR/USD exchange rate 2013: 1.3284
Sales (USD mn)
2013E
EBITDA margin
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
8
2) Transaction Rationale
St
Strengthening
th i P
Product
d t PF
PF, Regions
R i
and
d Aft
Aftermarket
k tB
Business
i
Conveyor Belts
Fluid Technology
Americas
26%
Americas
29%
Europe
34%
Europe
34%
~$5 bn
~$16 bn
CAGR:
4% p.a.
Asia
40%
CAGR:
3% p.a.
Asia
37%
2012 2018
› The acquisition will balance and enhance
ContiTech’s
ContiTech
s global reach
2012 2018
› Veyance Fluid business will complement
ContiTech’s
ContiTech
s industrial hose
hose- and air-conditioning-,
air conditioning
brake- and coolant hose portfolio
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
9
2) Transaction Rationale
St
Strengthening
th i P
Product
d t PF
PF, Regions
R i
and
d Aft
Aftermarket
k tB
Business
i
Power Transmission Belts
Air Springs
Americas
31%
Americas
33%
Europe
37%
Europe
46%
~$4 bn
~$1.3 bn
CAGR:
3% p.a.
CAGR:
5% p.a.
Asia
23%
Asia
30%
2012 2018
› Veyance gives ContiTech access to the
aftermarket business in NAFTA and helps growing
the industrial business in NAFTA and Mercosur
2012 2018
› The acquisition will expand ContiTech’s footprint
and market access in NAFTA and Brazil
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
10
2) Transaction Rationale
F
Forming
i a Gl
Global
b l Pl
Player iin R
Rubber
bb and
d Pl
Plastics
ti T
Technologies
h l i
6,000
R
Revenues
2012 ((mn €)
4,000
Veya
ance
5,000
3 000
3,000
2,000
1,000
0
ContiTech
Bridgestone Freudenberg Hutchinson Tokai Rubber NOK Seal
Industries
business
Diversif ied (Seals and
Products
Vibration
C t l)
Control)
Pinaf ore
(Tomkins)
Cooper
Standard
Parker
Hanif in
Trelleborg
AB (excl.
wheel
b i
business)
)
Source: Company websites, Annual reports 2012, Bloomberg and European Rubber Journal (ERJ)
Exchange rate (as average 2012): EUR/USD 1.2860; EUR/JPY 102.69; calendarized to Dec year-end for NOK Corporation & Tokai Rubber Industries
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
11
2) Transaction Rationale
C
Complementary
l
t
Gl b l P
Global
Presence1 off ContiTech
C tiT h
ContiTech 2013 € 3.9 bn
China
8%
RoW
9%
Europe
66%
Latin America
9%
North America
8%
1
2
Veyance 2013E2 € 1.5 bn
RoW
12%
Europe
5%
RoW
12%
China
10%
China
15%
Latin America
16%
Combined 2013 € 5.4 bn
North America
52%
Latin America
11%
Europe
46%
North America
21%
Regional sales split based on 2012 data
Average EUR/USD exchange rate 2013: 1.3284
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
12
2) Transaction Rationale
1
St
Strengthening
th i the
th Non-OE
N OE Automotive
A t
ti Business
B i
Continental AG / ContiTech
Veyance
10%
29%
47%
53%
40%
68%
90%
Outer Circle: Continental AG
Inner Circle: ContiTech
Based on 2012 data
32%
60%
71%
1
Continental AG pro Forma
Outer Circle: Continental AG
Inner Circle: ContiTech
Non OE Business
OE Business
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
13
AGENDA
1 Strengthening
St
th i a Gl
Global
b l Pl
Player iin R
Rubber
bb and
d Pl
Plastic
ti T
Technology
h l
2 Transaction Rationale
4
7
14
15
3 Financial Impact and Mid Term Targets
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
14
3) Financial Impact and Mid Term Targets
P F
Pro
Forma Sales
S l and
d EBITDA Eff
Effectt1
Pro forma ContiTech Sales 2013 (bn €)
Pro forma ContiTech EBITDA 2013 (mn €)
1.5
204
780
Veyance
ContiTech
C
Pro forma
5.4
3.9
ContiTech
576
Veyance
ContiTech
Pro forma
Pro forma Continental Sales 2013 (bn €)
C
ContiTech
Pro forma Continental EBITDA 2013 (mn €)
1.5
0.2
34.8
33.3
53
5.3
5.1
Continental
1
Veyance
Continental
Pro forma
Continental
Veyance
Continental
Pro forma
Average EUR/USD exchange rate 2013: 1.3284
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
15
3) Financial
Fi
i l Impact
I
t and
d Mid Term
T
Targets
T
t
›
Enterprise
p
Value amounts to ~€1.4 bn1 ($
($1.9 bn))
›
Transaction will result in a goodwill2 amounting to approximately €300 mn and
intangible assets2 of about €800 mn
›
Intangible2 assets will be amortized over a period of max. 10Y and would result
into a PPA2 effect of about €80 mn p.a. (€0.30 per share3)
›
On a pro forma basis deal is immediately accretive to earnings4
(adjusted for PPA effect)
›
Transaction can be financed from cash and available credit lines
1
2
3
4
EUR/USD exchange rate: 1.3635
All values mentioned are highly indicative and will be finalized in accordance with IFRS 3 within one year after closing
Assuming 28% tax rate
On a pro forma basis for 2014, adj. for PPA
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
16
3) Financial Impact and Mid Term Targets
Expected Revenue and Cost Synergies1 of ~€75 mn (net) until 2017
Cost synergies to amount
to ~€100 mn
Others
Revenue synergies from
cross selling opportunities
amount to ~€20 mn
Integration & restructuring
cost to amount to ~€45 mn
› Business roll out in
› Integration cost mainly
combined conveyor
y belt
activities
IT
› Aftermarket and industry
business in Power
Transmission Group
› Additional market
Productivity
1
Purchasing
opportunities
pp
for industrial
hose business in the Fluid
Technology area
stemming
g from integration
g
of IT systems
› Only minor restructuring
expenses
p
expected
p
as the
acquisition is highly
complementary to the
ContiTech portfolio
EUR/USD exchange rate: 1.3635
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
17
3) Financial
Fi
i l Impact
I
t and
d Mid Term
T
Targets
T
t
›
›
2014 effect:
›
Only minor impact on ContiTech’s adj. EBIT margin
›
Transaction will dilute ContiTech’s ROCE to about 15%
›
Continental’s ROCE will decline by about 0.6%
Mid Term targets 2017:
›
ContiTech’s reported EBIT margin to be restored to 12%
›
ContiTech’s ROCE will improve to 25%
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
18
Thank y
you for y
your attention!
Official Sponsor of the 2014 FIFA World CupTM
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
19
Contact
E it and
Equity
dD
Debt
bt Markets
M k t R
Relations
l ti
Vahrenwalder Str. 9
30165 Hanover
Germany
Klaus Paesler
Phone: +49 511 938 1316
e-mail: klaus.paesler@conti.de
Rolf Woller
Phone: +49 511 938 1068
e-mail: rolf.woller@conti.de
Sabine Reese
Phone: +49 511 938 1027
e-mail: sabine.reese@conti.de
Ingrid Kampf
Phone: +49 511 938 1163
F
Fax:
+49
49 511 938 1080
e-mail: ir@conti.de
www.continental-ir.com
Michael Saemann
Phone: +49 511 938 1307
e-mail:
il michael.saemann@conti.de
i h l
@
ti d
Henry Schniewind
Phone: +49 511 938 1062
e-mail: henry.schniewind@conti.de
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
20
Continental
Fi
Financial
i lC
Calendar
l d
2014
Annual Financial Press Conference
March 6, 2014
Annual Shareholders’ Meeting
April 25, 2014
Q1 Financial Report
May 6, 2014
Half Year Financial Report
July 31, 2014
Ni M
Nine
Month
th Fi
Financial
i lR
Reportt
N
November
b 4
4, 2014
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
21
Continental
Sh
Share
D
Data
t / ADR D
Data
t
Share Data
T
Type
off share
h
N
No-par
value
l share
h
Bloomberg Ticker
CON
Reuters Ticker
CONG
German Security Identification Number (WKN)
543 900
ISIN Number
DE0005439004
Sh
Shares
outstanding
t t di as att December
D
b 31
31, 2013
200 005 983
200,005,983
ADR Data
Ratio (ordinary share: ADR)
1:5
Bloomberg Ticker
CTTAY
Reuters Ticker
CTTAY PK
CTTAY.PK
ISIN Number
US2107712000
ADR Level
Level 1
Exchange
OTC
Sponsor
Deutsche Bank Trust Company Americas
Hanover – February 10, 2014
EDMR – Equity and Debt Markets Relations
22