NEO INDUSTRIAL OYJ STOCK RELEASE 13 October 2014 at 2.50 pm
NEO INDUSTRIAL TAKES NEXT STEP IN ITS STRATEGY BY MAKING CORPORATE ACQUISITION, LAUNCHES SHARE ISSUE AND REARRANGE PART OF ITS FINANCING
Neo Industrial has today signed a sale and purchase agreement on buying all the shares of Reka Rubber Ltd. The sale and purchase agreement is related to financing arrangements of Neo Industrial and share issue to raise new capital. The whole arrangement is conditional to the acceptance of the Extraordinary Shareholders´ meeting to be held on 3 November 2014.
Improved capability to make profitable results
The corporate acquisition is part of the total arrangement where Neo Industrial enlarge its industrial segments, acquires new equity with share issue and rearranges part of the financing of the group.
With the total arrangement the Balance Sheet of Neo Industrial will be stronger and the capability of making profitable results as well cash flow in the future improves significantly.
Reka Rubber (Reka Rubber Ltd and its subsidiaries) is one of the European leading manufacturers of small and medium-sized rubber components to the heavy vehicle and machine building industries. Reka Rubber has manufacturing units in Finland (Aura) and in Poland (Dopiewo). In addition to that the rubber products are manufactured in Asia through the subcontracting network managed by Reka Rubber.
| Reka Rubber key figures: | 2012 | 2013 | 1-6/2014 |
| Turnover, EUR million | 16.8 | 17.3 | 9.8 |
| Operating result, EUR million | 1.1 | 1.4 | 1.1 |
| % | 6.3 | 84 | 11.1 |
| Personnel | 176 | 188 | 203 |
The seller is Reka Ltd, a Finnish family-owned company in the group to which also Neo Industrial belongs.
The corporate acquisition is financed by share issue in deviation from the shareholders´ pre-emptive rights totalling 4,000,000 B shares as payment of the shares of Reka Rubber Ltd. Part of the possible positive result development of Reka Rubber will be paid, provided that terms of contract are fulfilled, to the seller. The amount of additional payment can be at maximum of EUR 1.2 million total during five years.
Stronger Balance Sheet
The total arrangement is remarkable for the group. As a part of the arrangement new equity and funds is acquired to implement finance rearrangements by share issue in deviation from the shareholders´ pre-emptive rights totalling about EUR 2 million.
In the rearrangement of financing the interest bearing liabilities will be cut by EUR 7.8 million. Of this amount over EUR 5 million takes effect immediately when the total arrangement is carried out. In addition to that maturity of EUR 1.1 million loan is prolonged by ten years.
Improved cash flow
The arrangement has significant effect also during coming years. According to the preliminary calculations the cash flow of 2015 will be improved by close to EUR 4 million due to the arrangement. The positive effect on cash flow is result of from the cash flow of Rubber industry, synergy benefits and diminishing instalments of debt as well remarkably smaller interest expenses.
Managing Director Jari Salo: "The total arrangement to be made has extremely strong effect on to the strategic development of Neo Industrial. With the arrangement new industry segment, rubber industry, is created alongside with cables industry. The company to be acquired is profitable and has positive cash flow. Also the rearrangement of financing, together with decrease of debt and share issues, strengthen the Balance Sheet of Neo Industrial significantly and enables the management to focus on developing the business and making profitable results."
Nearterm outlook
The arrangement does not effect on the operating result of cables industry. However, the arrangement significantly improves the Balance Sheet and financial situation of Neo Industrial. The net result of the group is estimated to be positive.
Hyvinkää, 13 October 2014
Neo Industrial Plc
Board of Directors
Further information:
Jari Salo, Managing Director, tel. +358 20 720 9196
Sari Tulander, CFO, tel. +358 20 720 9192
Neo Industrial's strategy is to invest mainly in industrial companies with similar synergic benefits. The aim of investments is with active ownership to develop the purchased companies and establish additional value. Returns are sought through both dividend flow and an increase in value. Neo Industrial's class B shares are listed on the NASDAQ OMX Helsinki Stock Exchange. Neo Industrial's business segments in future are Cable Industry and Rubber industry provided that the Extraordinary Shareholder´s meeting confirms the purchase of the shares of Reka Rubber Ltd.