Schouw & Co. acquires Borg Automotive - Investor presentation 20 March 2017 CEO Jens Bjerg Sørensen | IR Kasper Okkels
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Schouw & Co. acquires Borg Automotive Investor presentation 20 March 2017 CEO Jens Bjerg Sørensen | IR Kasper Okkels
Acquisition of Borg Automotive 20.03.2017 2
Borg Automotive, a leading remanufacturing company
Borg Automotive at a glance Product split
▪ Borg Automotive is a remanufacturing company 100%
founded in 1979 by Søren Toft-Jensen 6% 3%
7%
▪ The company specialises in the production and 34%
sales of remanufactured parts for the automotive
industry like alternators, starters, brake calipers 50%
▪ Borg is Europe's leading independent auto
remanufacturer with broadest product range and All
sales in almost all European countries products
▪ Customers (+100) are wholesalers, distributors
Starters & Brake Steering AC com- EGR
and OES/OEM’s; largest ~10% of sales alternators calipers pressors valves
▪ Headquarter in Silkeborg with production sites in
Poland and UK, and a R&D facility in Belgium
▪ The group consists of Borg Automotive Revenue EBIT
(Denmark/Poland) and Car Part Industries
(UK/Belgium), which was acquired in 2011 +11%
+72%
▪ FTEs: ~1,400
13/14 14/15 15/16 16/17E 13/14 14/15 15/16 16/17E
Due to one-offs
Notes: Negative EBIT in 2014/15 is related to transfer of brake caliper production to Poland, various restructuring in UK and significant loss on a single customerAcquisition of Borg Automotive 20.03.2017 3
Remanufacturing in Europe to grow ~8%
European remanufacturing drivers European auto remanufacturing market
1 EUR billion
Growing carpark 2.3% annual car park
& new sales growth towards 2020 Forecast
2
Longer vehicle +1 year in average life- ~8% 11.6
10.8
lifetime time since 2010 10.1
~7% 9.4
3 8.7
Declining num- 1% annual reduction in 8.0
ber of accidents accidents since 2010 7.4
7.0
6.5
4
Structural Growing aftermarket
change liberalisation via regul.
5
Maturing reman. Drives industry promo-
capabilities tion/knowledge sharing
6
Global green Supply concern ‘critical’ 2012 2013 2014 2015 2016 2017 2018 2019 2020
agenda to EU (focus on CO2)1
Notes: 1) The remanufacturing of automotive components yields some 88% materials savings compared to using a new product, with an associated 53% decrease in CO2 emitted and 56% lower energy requirement
(EU Commission, 2015)Acquisition of Borg Automotive 20.03.2017 4
Acquisition makes good business sense
Rationale, conglomerate level Rationale, business level
▪ Current capital structure provides room for significant ▪ Borg Automotive fulfils all investment criteria
investment on top of current investment programs ▪ Leading position – leading position in Europe
▪ Span of control target of 5-7 businesses enables new value ▪ B2B – processing of remanufacturing auto parts servicing
enhancing platform investments global wholesalers, buying groups and OES/OEMs
▪ Continue value-creation of the conglomerate by pursuing ▪ Internationally focused – sales throughout Europe with
attractive buy-and-build opportunities production in Poland and UK
▪ Strong management – highly skilled management team
▪ A new platform investment is key in ‘the next step’ of willing to step-change the company
Schouw & Co.
▪ Active ownership – significant opportunity for
transformation through active ownership
2016 Revenue (DKKm)
2016 EBIT (DKKm) ▪ Borg Automotive is well-run and among the best-in-class
to deliver growth and profitability
8.867
1.792 1.747 ▪ Well positioned with solid presence in attractive markets
1.301 and all major product categories
877 ~900*
581 ▪ Industry growth of ~8% is unique
246 111 ~125* ▪ Significant opportunities to drive further growth in a
81 61
fragmented industry, organically and through M&A
Notes: *) Borg Automotive’ s accounting principles will be changed following the acquisition to adapt to IFRS. Pro-forma FY2016 revenue and EBIT before any effect of PPAAcquisition of Borg Automotive 20.03.2017 5
Transaction details
Current structure3
Valuation Transaction Søren Borg
Toft-Jensen Fonden
▪ Enterprise Value is ▪ Complex transaction due to previous
DKK ~1,150m ownership structure where ‘Borg Fonden’ 100% 81%
19%
For 100% of the shares incl. owned a minority in one of the two entities in Car Parts Borg
the transaction scope Industries Automotive
estimate of the fair value of
the minority interest ▪ Schouw & Co. has an option (and an Intermediate structure (½-2 years)
▪ Financial estimates obligation) to obtain full ownership within a
2017 (Jan-Dec) Søren
relatively short period of time Toft-Jensen
Schouw & Co.
Sales1 DKK ~1,050m ▪ Following a string of transactions Schouw & 15% 85%
EBITDA DKK ~170m Co. will own 85% of the combined Borg Borg Holding
EBIT2 DKK ~160m Automotive Group and Søren Toft-Jensen will
own the remaining 15% Car Parts
100% 100%
Borg
▪ Transaction multiples Industries Automotive
▪ Due to the purchase obligation of the 15%
Sales ~1.1x ownership stake, Schouw & Co. will recognize
EBITDA ~6.8x a liability in the balance sheet at fair value, End structure (+2 years)
EBIT2 ~7.2x i.e. treat the option as a debt-like item rather
than a non-controlling interest (NCI) Schouw & Co.
▪ Recognised in Schouw
& Co. 2017 Q2-Q4 ▪ Any communication on purchase price of the 100%
company incorporates the fair present value Borg Holding
Revenue DKK ~800m of the minority share and hence assumes a
EBIT2 DKK 110-130m valuation comparable to 100% of the shares Car Parts
100% 100%
Borg
Industries Automotive
Notes: 1) New accounting principles lifts revenue and is not comparable to existing practice; 2) Before effect from PPA; 3) Illustrative onlyYou can also read
