NKT Holdings transforming transactions - in a treasury perspective

Transcription

1 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 1 6 NKT Holdings transforming transactions - in a treasury perspective 15 March 2017 Torben Skovsted, Head of Group Treasury

2 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 2 21 Sep 2016: Intention to split NKT Holding and acquisition of ABB HV Cables NKT has decided to split the Holding company into two separately listed companies NKT Cables will become one of the leading power cable companies in Europe, while Nilfisk is already a leading player in the professional cleaning equipment industry With the transaction, both Nilfisk and NKT Cables will be stand alone, listed companies Group Treasury NKT Holding NKT Cables to acquire ABB s high-voltage cables business, creating a leading power cables company Total enterprise value of EUR 836m (DKK 6.2bn), incl. ABB HV Nilfisk NKT Cables Photonics Group Cables investment of EUR 124m (DKK 0.9bn) for a new, cuttingedge cable-laying vessel to be delivered and paid in Q Strong strategic rationale for acquiring a leading DC high-voltage power cables producer and allow NKT Cables to enter a market with attractive growth outlook and to unlock significant synergy potential Combined business will be strongly positioned in the growing offshore wind industry and development of the interconnector grid in Europe

3 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 3 Intention to split NKT Holding into two separately listed entities Listed entity Nilfisk NKT Cables Underlying businesses Key highlights A leading professional cleaning equipment company with strong global market position Organic growth potential Significant M&A opportunities Strong cash flow Combined, NKT Cables and ABB HV Cables is to become a leading AC and DC high-voltage power cables supplier with a strong project backlog Significant synergy potential A leading high-end photonics player Significant growth and M&A potential Revenue EUR 1,059m EUR 1,684m* EUR 43m Oper. EBITDA EUR 117m EUR 148m* EUR 6m * Pro forma figures are 2015 NKT Cables actuals, combined with 2015 proforma figures for ABB HV Cables. Revenue is in market prices and no synergies are included

4 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 4 Motivation and timing

5 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 5 Strategic scenarios NKT Holdings value creation and best owner strategy Proven track record of value adding acquisitions and divestments Nilfisk acquired in 1989 Lauritz Knudsen acquired in1990 and divested in 1999 Giga established in 1998 and divested in 2000 NKT Elektronik divested in 1994 NKT Flexibles established in 1999 and divested in 2012 Strategic endgame for two companies with different stand alone potentials Invest in Nilfisk Fix NKT Cables The conglomerate discount (13-15%?) Very exciting HV cables opportunity appears in 2016

6 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 6 Financial strength Net interest-bearing debt Low leverage EURm x Significant debt capacity Share buyback stopped x Additional equity necessary to complete transaction x 0.9x 0.9x 1.1x 1.0x 1.0x x Net interest-bearing debt Net interest-bearing debt relative to operational EBITDA, LTM 0.0x

7 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 7 Timeline for split of NKT Holding September 29 September 3 October 4 October 21 February 1 March 21 April Early August 17 August 2nd Half 15 November Announcement of ABB HV Cables business acquisition and intention to split Divestment of NKT Cables APAC activities and Automotive business Raise of new equity 2016 Annual Report Nilfisk CEO replacement Closing on ABB HV Cables acquisition AGM Latest start date of Nilfisk CEO Q2 Interim Report Split window open Q3 Interim Report

8 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 8 ABB HV Cables transaction

9 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 9 The new combined company will have a fuller HV product range Interconnector onand offshore (DC XLPE) Interconnector offshore (DC-MI) nkt cables ABB HV cables Integrated company Offshore wind Onshore Installation/ turnkey

10 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 10 Take-over of ABB HV Cables in March 2017: The perfect match 1 Creation of a leading power cables company Journey towards becoming a leading high-voltage power cable company with increased scale and share of higher margin project business Strategic partnership between NKT Cables and ABB Group on future projects Well-placed for growing offshore wind industry and for European interconnector grid 2 Strong, complete product offering Strong, complete offering for customers also in offshore wind and interconnector markets 3 Strong backlog and visibility Strong order backlog 4 Best-in-class manufacturing facilities Combination of best-in-class production facilities 5 Synergy potential Significant cross-utilisation potential of production facilities 6 Strong cultural fit Strong Nordic heritage of both companies and significant knowledge sharing

11 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 11 Splitting NKT Holding

12 Other Tax Considerations Legal Market Company NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 12 Overview and key characteristics of structuring alternatives a Base Case: Partial demerger Partial demerger through listing of Nilfisk, and a continued listing of NKT Holding, containing Cables and Photonics Current Parent shareholders 100% 100% NKT Holding Nilfisk NewCO Holding Cables & Photonics Nilfisk

13 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 13 Acquisition and split Challenges for Group Treasury

14 NKT Holding team Workstreams NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 14 Project governance structure to ensure split execution efficiency Steering committee: Direction setting, monitor progress and key separation decisions NKT Holding Board members Management Advisors Bi-weekly on Fridays at CET 2 hours set off (time as needed) Project management: monitor workstreams and ensure coordination, identify critical steps and plan for follow-up NKT Holding Advisor A Advisor B Weekly conference calls depending on project intensity 1 Transaction Structure & Legal Documentation Corporate Governance Separation Equity Story & Investor Marketing Communication Financial Reporting & Disclosure Business Plan, Valuation & Capital Structure Due Diligence Regulation & Listing TS, Group Treasury TS, Group Treasury Advisors 1 Weekly workstream update call: identify workstreams progress, complete specific tasks through focus group meetings / conference calls

15 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 15 Split related treasury activities Design funding plan for acquisition and split incl capital increase* Capital structures for Nilfisk and NKT Cables* NKT Holding as Borrower to be replaced by Nilfisk and NKT Cables Splitting internal bank Cash pool redesign Split Group Treasury into two new treasury organisation in Nilfisk and NKT Cables Staffing Policies Systems (TMS) Project plan and follow up Context Process / Task Owner Start Date End Date Treasury Project Partitus Nilfisk refinancing T. Skovsted 1/Nov/16 Project Partitus Prepare and distribute tender material T. Skovsted 1/Nov/16 Project Partitus Review proposals and conduct negotiations with invited banks T. Skovsted 15/Dec/17 Project Partitus Finalize loan agreements T. Skovsted 1/Aug/17 Project Partitus Loan agreements signed T. Skovsted 1/Aug/17 Project Partitus Treasury separation - Define treasury policies and reporting for Cables and Nilfisk T. Skovsted 1/Feb/17 Project Partitus Review existing treasury policy T. Skovsted 1/Feb/17 Project Partitus Align and support H. Mølgaard in Nilfisk T. Skovsted 1/Feb/17 Project Partitus Define new treasury policy for nkt cables T. Skovsted 1/Feb/17 Project Partitus Adjust current treasury report to nkt cables T. Skovsted 1/Apr/17 Project Partitus Treasury separation - Redesign cash pool structure T. Skovsted 1/Feb/17 Project Partitus Review current cash pool structure J. Hansen 1/Feb/17 Project Partitus Dialogue with banks J. Hansen 15/Feb/17 Project Partitus Prepare new agreements for signing J. Hansen 1/Apr/17 Project Partitus Treasury separation - Define organization and staffing (including temps.) T. Skovsted 1/Dec/16 Project Partitus Agree future roles with current staff T. Skovsted 1/Dec/16 Project Partitus Initiate recruiting process (involve HR) T. Skovsted 1/Jan/17 Project Partitus Sign with new Group Treasurer T. Skovsted 15/Jan/17 Project Partitus Identify need for temporary support T. Skovsted 1/Dec/16 Project Partitus Source temporary staff T. Skovsted 15/Jan/17 Project Partitus Treasury separation - Decide and implement TMS (etc.) for Nilfisk and Cables T. Skovsted 1/Jan/17 Project Partitus Scoping of processes, business - and IT requirements T. Skovsted 1/Jan/17 Project Partitus Screening, evaluation and short-listing of vendor (if relevant) T. Skovsted 20/Jan/17 Project Partitus Design, build & roll- out approach and cost estimate T. Skovsted 1/Feb/17 Project Partitus Final recommendation T. Skovsted 20/Feb/17 Project Partitus Implementation M. Bredkjær 1/Mar/17 Project Partitus Capital structure T. Skovsted 1/Jan/17 Project Partitus Evaluate if partial demerger is still the prefered model T. Skovsted 1/Dec/16 Project Partitus Ongoing capital considerations T. Skovsted 1/Dec/17 Project Partitus Final decision on splitting group debt T. Skovsted 1/Mar/17

16 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 16 Acquisition related treasury activities Funding* and hedging Financial risk management Portfolio of ~600 FX and commodity hedges terminated at Closing and to be reestablished by NKT Effective handling of significant number of transactions Liquidity/market effect of for instance SEK 4,500m Project plan and follow up Bank guarantees and PCGs Bank guarantee portfolio ~EUR 400m PCGs ~EUR 1,350m Cash management Start using current bank accounts Inclusion in cash pool awaits SAP integration Initial manual IC funding Around 250 credit cards Staffing No treasury resources transfered to NKT Acquired business supported by ABB Group Treasury located in Schwitzerland and local Swedish setup

17 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 17 Demanding on resources! On my own until announcement on 21 September 2016 Motivating lenders Lenders presentation Discussing structure Negotiate term sheet Finalise Certain Funds No time for planning Used consultants for resource planning and task follow ups Legal advisors on loan documents Treasury consultant in two months prior to acquisition Closing

18 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 18 Funding the acquisition

19 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 19 Acquisition funding is committed by Nordea and Danske Bank 1. Aug. Discussion with banks starts 24. Aug. 5. Sep. 9. Sep. 12. Sep. 4. Oct. Banks to credit committee Credit approvals from banks Finalise commitment letter and term sheet Certain funds for Crown Accelerated bookbuilding & Treasury shares Term Sheet: Key terms Committed Amount to NKT Holding: EUR 825m Facilities: Facility A: EUR 150m bridge-to-equity Facility B: EUR 550m term loan to finance purchase of Crown Facility C: EUR 125m term loan, fund new cable-laying vessel Select undertakings: NKT will, subject to market conditions, attempt to raise proceeds via ABB equity offering amount at first window post closing date Maturity: May 2018 Facility continues for NKT Cables after demerger event March 2017 Separation Closing of Crown facilities drawn Refinancing of Nilfisk facility, proceeds to partly repay NKT Holding bridge facility Bridge facility continues for NKT Holding/CablesCo as company deleverages Nilfisk refinancing clause: Nilfisk refinancing will be signed before the demerger event Nilfisk repays IC debt to NKT Holding, which is used to facility repayment Financial covenants: Financial covenants in relation to the facilities, tested quarterly on a backward looking basis: I. Net debt / EBITDA II. EBITDA interest cover ratio May 2018 Final maturity date, Refinancing of NKT Holding/CablesCo

20 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 20 From a capital markets perspective, nkt cables and Nilfisk can comfortably trade with leverage of ~1.5x and ~2.5x respectively nkt cables Nilfisk A Peer capital structure H NIBD / LTM EBITDA 1 5.2x 2.4x 2.0x Median: 2.4x H NIBD / LTM EBITDA 1 0.9x 1.7x 2.3x 0.0x Median: 0.9x 0.2x B Selected Nordic industrials capital structure Latest reported NIBD / LTM EBITDA 1 4.5x 3.7x 2.9x 2.8x 2.5x 2.0x 2.0x 1.9x 1.3x 0.7x 0.7x 0.6x -0.1x Median: 2.0x -0.1x C Recent selected Nordic IPO leverage levels Danish IPOs 3 NIBD / LTM EBITDA at-ipo Median: 2.3x 3.0x 2.9x 2.3x 0.8x 2-0.3x 3.9x 3.9x 3.7x 3.2x 3.2x 3.2x 3.2x 3.2x Other Nordic IPOs 3.0x 2.7x 2.7x 2.6x 2.5x 2.5x Sponsor 2.1x 2.0x Non-sponsor 1.8x 1.6x Median: 2.7x 1.6x General considerations High leverage levels among nkt cables peers (median of 2.4x) while Nilfisk peers have acquisitive strategies with significant headroom, hence currently lower levels (median of 0.9x) e.g. Electrolux failed attempt to acquire GE Appliances in 14/15 Nordic Industrials companies at leverage levels of around 2.0x, in-line with long term target levels within the space Recent Nordic IPOs have listed at leverage levels around 2.5x - 3.5x, although majority of these are sponsor backed with high pre-ipo leverage Investors generally willing to accept high at-ipo leverage levels if a clear path to deleverage is clearly communicated and viable General view that leverage level should ensure deleveraging ability combined with long term capital structure while potentially leaving some flexibility for acquisitions or payout/dividend yield (depending on whether company is positioned as a yield or growth case) Furthermore, a well-crafted capital allocation policy and ability to demonstrate EBITDA and cash conversion resilience will benefit a higher leverage level 1 Includes unfunded pension liabilities 2 EBITDA excludes amortisations on trademarks and goodwill impairments 3 DONG Energy IPO June 2016 excluded due to unusual debt composition

21 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 21 NKT Holdings debt allocation: Comfortable cap. structures for Nilfisk and Cables First priority: Protect the shareholders value From a capital market perspective Nilfisk and NKT Cables should have long-term sustainable leverages of: Nilfisk: ~ 2.5x ND/EBITDA nkt cables: ~ 1.5x ND/EBITDA This is based on an assumptions of a lower shadow investment grade profile The above levels should be considered target run-rate levels. Certain deviations will normally be accepted following an M&A event or capital markets transaction, if the above levels can be re-established within months NIBD/EBITDA * * Examples for illustration purposes

22 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 22 Market reaction Conglomerate discount?

23 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 23 NKT Holding public market overview 5 year share price performance (OMXC20 rebased to NKT share price) 1 Analyst comments 2 DKK NKT Holding OMXC20 Broker consensus Broker target DKK We continue to see the acquisition of ABB s HV business as highly supportive for the cable business, allowing NKT Cables to improve the EBITDA margin Jyske Bank, Feb There are a number of triggers and events ahead for NKT, with the closure of the ABB Cables transaction (Q1 2017E) and the subsequent break-up of the conglomerate being the most important ones Nordea, Feb Announcements of ABB HV Cables acquisition and intention to separate 0 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Source: Broker research, FactSet as at March 9, OMX Copenhagen 20 index rebased to NKT share price as at January 1, Analyst reactions post announcement of ABB acquisition and intention to separate Replacement of CEO in Nilfisk i.e. split postponed to H A split-up of NKT has been a cornerstone of the case. The announcement is therefore a release of a major trigger Danske Bank, Sep 2016 The consolidation of NKT Cables and ABB HV Cables improves NKT Cables market position as well as its product offering Danske Bank, Sep 2016

24 NKT I Group Treasury I Split and acquisition in treasury perspective 15 March 2017 I 24 Q & A