Sandvik announces a recommended public offer to the minority
shareholders of Seco Tools
This press release may not be published or distributed, directly or
indirectly, to or within jurisdictions where the publication or the
distribution would not comply with laws and regulations in such
jurisdictions, including the United States, Australia, Hong Kong, Japan,
Canada, New Zealand or South Africa. The Offer is not being made to (and
acceptances will not be accepted from) persons in or from jurisdictions
where the announcement of the Offer or approval of acceptances of the
Offer would require further documentation, filings or other measures in
addition to those required by Swedish law.
This press release has been published in Swedish and English. In the
event of any discrepancy in content between the language versions, the
Swedish version shall prevail.
Sandvik AB (”Sandvik”) today announces a recommended public offer to
acquire all remaining shares in its subsidiary Seco Tools AB (“Seco
Tools”), one of the world's largest manufacturers of innovative
metal-cutting tools (the “Offer”). For each class B share in Seco Tools,
Sandvik offers 1.2 shares in Sandvik. The Offer is part of Sandvik's
strategy to continue to strengthen its world-leading position within the
new business area Sandvik Machining Solutions. The Offer is recommended
by the Board of Directors of Seco Tools. Further, Alecta Pension
Insurance and Swedbank Robur Funds, major shareholders of both Seco
Tools and Sandvik, are positive towards the Offer.
Summary
· Sandvik's group strategy confirms cutting tools as a core area,
emphasized by the forming of the new business area Sandvik Machining
Solutions, with significant growth and profitability potential. Seco
Tools' strong brand and customer offering within cutting tools
complements Sandvik's multi-brand portfolio, and bringing Seco Tools
closer would enable Seco Tools to get full access to Sandvik's resources
and competence, mainly within product development, production technology
and supply chain capabilities.
· The Offer is unanimously[1] recommended by the Board of Seco Tools.
Further, Alecta Pension Insurance and Swedbank Robur Funds, representing
18.3% of the shares and 4.9% of the votes in Seco Tools, are positive
towards the Offer, and also intend to vote in favor of an authorization
to issue consideration shares at Sandvik's EGM.
· It is Sandvik's intention that the management team of Seco Tools
will continue as today. Seco Tools will be an independently managed
product area under the umbrella of Sandvik Machining Solutions, just as
Walter and Sandvik Coromant. There is currently no intention to carry
out any material changes regarding Seco Tool's employees, terms of
employment or the places of business.
· The Offer to the shareholders of Seco Tools consists of new shares
in Sandvik. This will make it possible for the current shareholders of
Seco Tools to benefit from the combined strength of Seco Tools and
Sandvik in the area of metal cutting solutions. For each class B share
in Seco Tools, Sandvik offers 1.2 shares in Sandvik. If the Offer is
accepted in its entirety, 69,195,888 new shares in Sandvik will be
issued to the shareholders of Seco Tools, corresponding to a dilution of
Sandvik's existing shareholders of about 5.5%.
· The Offer will not give rise to any immediate Swedish tax
consequences for individual shareholders of
Seco Tools.[2]
· The Offer is anticipated to, apart from strengthening the customer
offering and increasing the competitive strength, generate annual cost
synergies of approximately 300 MSEK, with full effect from 2014.
· The acquisition does not require the approval of competition
authorities.
· The acceptance period of the Offer is expected to run from 1
December 2011 up to and including 10 January 2012. An EGM in Sandvik
will be held the week of 12 December 2011 to authorize the Board of
Directors to decide to issue the consideration shares.
CEO's comment:
”This is a natural step, with a clear industrial rationale, in line with
our strategy to continue to strengthen our leading position in the
global market for cutting tools. Our subsidiary Seco Tools has a strong
brand that complements our total customer offering very well, and Seco
Tools will remain independent as a separate brand within our new
business area Sandvik Machining Solutions. Bringing Walter from being a
separately listed company into the Sandvik's multi brand model was a
success and generated higher growth and profitability. Treating Seco
Tools in a similar way will enable us to leverage on the total resources
and investments in for example research and development, which will
further strengthen our position in the increasing global competition”,
says Olof Faxander, Sandvik's President and CEO.
Shareholders Alecta Pension Insurance and Swedbank Robur Funds
Alecta Pension Insurance and Swedbank Robur Funds, representing 18.3% of
the shares and 4.9% of the votes in Seco Tools, are positive towards the
Offer, and also intend to vote in favor of an authorization to issue
consideration shares at Sandvik's EGM.
Background and reasons for the Offer
Sandvik's group strategy confirms cutting tools and the new business
area Sandvik Machining Solutions as a core area with significant future
growth and profitability potential. The rapid change and increasing
competition in the global markets for Sandvik's products emphasizes the
advantage of economies of scale and importance of fast development of
products and production technology. Seco Tools' strong brand and
customer offering within the cutting tools industry complements
Sandvik's current business well. Seco Tools is however considered too
small to safeguard the long term value creation on its own. As a
separately listed company, held at arm's length, Seco Tools has not been
able to fully leverage the strengths of Sandvik. A completion of the
Offer would therefore strengthen the global competitiveness of both
businesses.
Seco Tools would be able to benefit from Sandvik's resources within
product development, production technology and supply chain
capabilities. It is also anticipated that the transaction would generate
annual cost synergies of approximately 300 MSEK, with full effect from
2014.
The Offer
For each class B Seco Tools share tendered, each shareholder will
receive 1.2 new shares in Sandvik.
The Offer represents a premium of approximately 22.9%[3], based on the
volume-weighted average share price on NASDAQ OMX for both shares during
the last month up to and including 4 November 2011. Compared to the last
closing price for Seco Tools' class B shares on NASDAQ OMX on 4 November
2011, being the last day of trading prior to the announcement of the
Offer, of 81.30 SEK per share, the Offer represents a premium of
approximately 32.0%.[4]
The Offer is equivalent to a value of approximately 107.34 SEK per Seco
Tools share.[5] Thus, the total offer value for all shares in Seco
Tools, not held by Sandvik, is approximately 6,190 MSEK.[6] The Offer
values Seco Tools in its entirety at approximately 15,615 MSEK.
If the Offer is accepted in its entirety, 69,195,888 new shares in
Sandvik will be issued under the Offer, corresponding to 5.5% dilution
for Sandvik's existing shareholders. Only whole shares in Sandvik will
be issued to Seco Tools shareholders accepting the Offer. Fractions of
shares will be combined and sold in the market on behalf of shareholders
concerned, and the consideration will thereafter be distributed between
these shareholders in relation to the size of every shareholder's
fraction of a Sandvik share.
Shares in Sandvik issued as consideration under the Offer entitle to
dividend for the first time on the first record day for dividend
occurring after the day when the new shares were entered in Sandvik's
share register.
The Offer will not give rise to any immediate Swedish tax consequences
for individual shareholders of Seco Tools who exchange their shares in
Seco Tools for shares in Sandvik provided that the roll-over relief
provisions are fulfilled. The shares in Sandvik are considered to have
been acquired for a consideration equal to the tax basis of the divested
shares in Seco Tools.[7]
No commission will be charged in connection with the completion of the
Offer.
As per the day of the announcement of the Offer, Sandvik owns, through
subsidiaries, all 43,500,000 class A shares and 44,304,450 class B
shares in Seco Tools, corresponding to 60.4% of the shares and 89.3% of
the votes in Seco Tools.
Financial effects on Sandvik
Sandvik is Seco Tools' parent company and therefore already includes
Seco Tools in its consolidated financial statements. This means that the
effect of the Offer on Sandvik's result and financial position is
limited mainly to that the part of the period's result and equity
related to non-controlling interests is eliminated and replaced by
equity related to equity-holders of the parent. Further, Sandvik will
access 100% of the cash flow generated in Seco Tools.
Set out below is a summary of financial information based on Sandvik's
financial accounts for 2010 as well as for the period January -
September 2011 assuming that all of the shares are tendered in the
Offer. The information is derived from Sandvik's public financial
reports and has not been adjusted with regards to estimated synergies or
transaction costs.
Full year 2010
MSEK Sandvik Adjustments Pro forma
Jan-Dec 2010 Jan-Dec 2010 Jan-Dec
2010
Revenue 82,654 82,654
Operating profit/loss (EBIT) 11,029 11,029
Operating margin 13% 13%
Profit for the period 6,943 6,943
Equity holders of the Parent 6,634 294 6,928
Non-controlling interest 309 -294 15
Equity[8] 33,813 0 33,813
Equity holders of the Parent 32,580 1,128 33,708
Non-controlling interest 1,233 -1,128 105
January - September 2011
MSEK Sandvik Adjustments Pro forma
(unaudited) Jan-Sep 2011 Jan-Sep
2011
Jan-Sep 2011
Revenue 68,980 68,980
Operating profit/loss (EBIT) 8,498 8,498
Operating margin 12% 12%
Profit for the period 5,058 5,058
Equity holders of the Parent 4,767 285 5,052
Non-controlling interest 291 -285 6
Equity[9] 33,830 0 33,830
Equity holders of the Parent 32,541 1,186 33,727
Non-controlling interest 1 289 -1 186 103
According to IFRS (International Financial Reporting Standards),
additional acquisitions occurring post a controlling interest has been
obtained are viewed as ownership transactions and are accounted for
directly in equity. Thus, no goodwill arise and the effect will be
limited to non-controlling interest in Sandvik related to the minority
ownership in Seco Tools being replaced by equity related to
equity-holders of the parent. Sandvik's transaction costs are estimated
to a total of 60 MSEK.
Additional pro forma financial information for the new group under IFRS
will be included in the offer document relating to the Offer.
Ownership structure
If the Offer is accepted in its entirety, 69,195,888 new shares in
Sandvik will be issued to the shareholders in Seco Tools. After the
completion of the issue of new shares, the total number of shares in
Sandvik will be 1,255,483,063 shares. Current shareholders in Sandvik
will hold shares corresponding to approximately 94.5% of the shares and
votes in Sandvik, while Seco Tools' current shareholders (excluding
Sandvik) will hold shares corresponding to approximately 5.5% of the
shares and votes in Sandvik. The dilution for Sandvik's existing
shareholders will consequently be approximately 5.5%.
The tables below set out the ownership structure in Sandvik before and
after the completion of the Offer, assuming full acceptance of the
Offer. The information is based on the ownership structure in Sandvik
and Seco Tools as per 30 September 2011 and known changes thereafter.
Sandvik's largest shareholders before
the completion of the Offer
Name Number of shares Percentage of shares
and votes
AB Industrivärden 144,594,300 12.2%
Swedbank Robur Funds 58,275,167 4.9%
Handelsbanken Pension Foundation 47,000,000 4.0%
Alecta Pension Insurance 43,045,000 3.6%
Harbor Funds Inc. 31,997,853 2.7%
State of Norway 31,272,287 2.6%
Göransson Foundations 27,118,377 2.3%
LE Lundbergföretagen AB 25,900,000 2.2%
AMF Pension Insurance 19,375,000 1.6%
Handelsbanken Funds 16,675,127 1.4%
Others 741,034,064 62.5%
Total 1,186,287,175 100.0%
Source: SIS Ägarservice as per 30 September 2011 and known changes
thereafter.
Sandvik's largest shareholders after
the completion of the Offer[10]
Name Number of shares Percentage of shares
and votes
AB Industrivärden 144,594,300 11.5%
Swedbank Robur Funds 72,822,659 5.8%
Alecta Pension Insurance 60,380,200 4.8%
Handelsbanken Pension Foundation 47,000,000 3.7%
Harbor Funds Inc. 31,997,853 2.5%
State of Norway 31,272,287 2.5%
Göransson Foundations 27,183,639 2.2%
LE Lundbergföretagen AB 25,900,000 2.1%
AMF Pension Insurance 19,939,692 1.6%
Nordea Funds 17,998,553 1.4%
Others 776,393,880 61.8%
Total 1,255,483,063 100.0%
Source: SIS Ägarservice as per 30 September 2011 and known changes
thereafter.
Condition for the completion of the Offer
Completion of the Offer is conditional upon Sandvik's shareholders
adopting the resolutions necessary to issue new Sandvik shares in
connection with the Offer. Sandvik reserves the right to withdraw the
Offer in the event that it is clear that the above condition is not
satisfied or cannot be satisfied.
Board recommendation
The Board of Directors of Seco Tools unanimously[11] recommends that the
shareholders of Seco Tools accept the Offer. The Seco Tools Board has
received a fairness opinion from SEB Enskilda according to which, based
on the assumptions made in the opinion, the Offer consideration is fair,
see separate press release published by Seco Tools today.
Extraordinary General Meeting (EGM) in Sandvik
The Board of Directors of Sandvik will convene an EGM, proposing that
the EGM shall authorize the Board of Directors to decide to issue new
shares in Sandvik as consideration for the acquisition of shares in Seco
Tools under the Offer. The EGM will be held in the week of 12 December
2011. The notice will be made public in a separate press release.
AB Industrivärden, Swedbank Robur Funds, Handelsbanken Pension
Foundation and Pension Fund, Alecta Pension Insurance and LE
Lundbergföretagen AB together representing 27.6% of the shares and votes
in Sandvik, have declared that they intend to vote in favor of an
authorization to issue the consideration shares at the EGM.
Certain related party information
As per the day of the announcement of the Offer, Sandvik owns, through
subsidiaries, all 43,500,000 class A shares and 44,304,450 class B
shares in Seco Tools, corresponding to 60.4% of the shares and 89.3% of
the votes in Seco Tools. As the parent company of Seco Tools, Sandvik
receives certain financial information from Seco Tools on a regular
basis. Two members of the Board of Directors of Seco Tools, Annika
Bäremo and Peter Larson, are employees of Sandvik.
Indicative time table
The Offer document regarding the Offer is expected to be published on or
around 25 November 2011. The acceptance period of the Offer is expected
to run from 1 December 2011 up to and including 10 January 2012.
Settlement is expected to commence on or around 20 January 2012. Sandvik
reserves the right to extend the acceptance period as well as to defer
the date for settlement.
Compulsory acquisition
In the event that Sandvik obtains more than 90% of the shares in Seco
Tools, Sandvik intends to initiate a compulsory acquisition procedure
under the Swedish Companies Act (SFS 2005:551) to acquire all
outstanding Seco Tools shares.
Applicable law and disputes
The Offer is made under Swedish law. NASDAQ OMX's rules regarding public
offers on the stock market (the “Takeover Rules”) and the Swedish
Securities Council's rulings regarding interpretation and application of
the Takeover Rules apply to the Offer. In accordance with the Swedish
Public Takeovers on the Stock Market Act (SFS 2006:451), Sandvik has
undertaken towards NASDAQ OMX to comply with the rules established by
NASDAQ OMX for such offers and submit to the sanctions that NASDAQ OMX
may decide upon in event of violations of these rules. Any dispute
relating to, or arising in connection with, the Offer shall be settled
exclusively by Swedish courts, with the Stockholm District Court as the
court of first instance.
Advisers
Access Partners and Handelsbanken Capital Markets act as financial
advisers and Mannheimer Swartling as legal advisers to Sandvik.
Sandviken, 7 November 2011
Sandvik Aktiebolag (publ)
The Board of Directors
Sandvik will arrange a telephone conference today, 7 November 2011 at
12.00 (CET), where President and CEO Olof Faxander will give a brief
presentation of the Offer. Presentation slides will be available on
info.sandvik.com
To participate in the telephone conference, please call:
Sweden: +46 8 506 269 00
Pin code: 387 055 #
A recorded version of the telephone conference will be made available on
Sandvik's website.
Sandvik AB discloses the information provided herein pursuant to the
Securities Markets Act (SFS 2007:528) and the Takeover rules. The
information was submitted for publication at 8:00 CET on 7 November
2011.
For further information, contact Jan Lissåker, Vice President Investor
Relations, +46 26 26 10 23 or Anders Thelin, President Business Area
Sandvik Tooling, +46 26 26 63 82.
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The Sandvik Group
Sandvik is a global industrial group with advanced products and
world-leading positions in selected areas - tools for metal cutting,
equipment and tools for the mining and construction industries,
stainless materials, special alloys, metallic and ceramic resistance
materials as well as process systems. In 2010, the Group had about
47,000 employees and representation in 130 countries, with annual sales
of nearly 83,000 MSEK.
For more information visit www.sandvik.com
Seco Tools
Seco Tools is one of the world's largest manufacturers of cutting tools.
In 2010 the group had about 5,300 employees with annual sales of
approximately 5,900 MSEK. Seco Tools has representation in about 60
countries, in all continents, and has more than 50 wholly-owned
non-Swedish subsidiaries. The company is listed on NASDAQ OMX since
1989. For more information visit www.secotools.com
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[1] Annika Bäremo and Peter Larson have not participated in the Seco
Tools Board's deliberations and decision-making regarding the Offer.
[2] Provided that the roll-over relief provisions are fulfilled. Other
rules apply to other categories of shareholders including limited
liability company shareholders.
[3] Based on the volume-weighted average share price on NASDAQ OMX
during the last month up to and including 4 November 2011 of 81.40 SEK
per Seco Tools share of series B and 83.40 SEK per Sandvik share.
[4] Based on the latest closing price for Sandvik's share on NASDAQ OMX
on 4 November 2011 of 89.45 SEK per share.
[5] Based on the latest closing price for Sandvik's share on NASDAQ OMX
on 4 November 2011 of 89.45 SEK per share.
[6] Based on the latest closing price for Sandvik's share on NASDAQ OMX
on 4 November 2011 of 89.45 SEK per share and 57 663 240 class B shares
in Seco Tools not held by Sandvik.
[7] Other rules apply to other categories of shareholders including
limited liability company shareholders.
[8] Adjustments consist of issue in kind of 6,190 MSEK, elimination of
non-controlling interest in Sandvik related to the minority ownership in
Seco Tools amounting to 1,128 MSEK, and a negative effect on equity
related to equity-holders of the parent of 5,062 MSEK.
[9] Adjustments consist of issue in kind of 6,190 MSEK, elimination of
non-controlling interest in Sandvik related to the minority ownership in
Seco Tools amounting to 1,186 MSEK, and a negative effect on equity
related to equity-holders of the parent of 5,004 MSEK.
[10] Assuming full acceptance of the Offer.
[11] Annika Bäremo and Peter Larson have not participated in the Seco
Tools Board's deliberations and decision-making regarding the Offer.
Sandvik announces a recommended public offer to the minority shareholders of Seco Tools
| Source: Sandvik AB
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