M&A Announcement

Oct 16, 2019

Ladies and gentlemen, welcome to this call for the presentation of SignifAI Acquisition of Cooper Lighting Solutions. For the 1st part of this call, all participants will be in listen only mode and afterwards there will be a question and answer session. I would now like to give the floor to Robin Janssen, Head of Investor Relations. Mr. Jansen, please go ahead. Yes, thank you very much, Sarah. Good morning, everyone, and welcome to this call. We are pleased to announce the acquisition of Cooper lighting from Eaton. With me are Eric Rondolas, CEO, SignifAI and Stephargujo, CFO. In a moment, Eric and Stephane will take you through the presentation to describe the key features of this transaction. After that, we will be happy to answer your questions. Related press release, slide deck were published yesterday evening. Both documents are available for download from our Investor Relations websites. A full transcript of the conference call will be made available as soon as possible on our Investor Relations website. With that, I will now hand over to Eric. Thank you, Robin. Good morning, everyone, and thank you for joining us today. We are indeed very pleased to announce the acquisition of Cooper Liding. Let's go directly to Slide 3, where you can see the key in terms of the transaction. So we are buying copper lighting for USD 1,400,000,000 in cash. The acquisition will be fully funded with Teck. For which there is a committed bridge financing in place, and we intend to replace the bridge loan and the existing term loan debt obtained at IPO with a new financing structure before or shortly after the closing of this transaction. Based on our strong free cash flow generation, we expect to drive down the net leverage ratio from around two times at closing to below one time net debt to EBITDA within the 3 years. Closing the transaction is expected to take place in the first quarter of 2020. Of course, subject to regulatory approvals and other customary conditions. Let's now go to Slide 4, which captures how Chuck this transaction is for us. So the transaction offers a clear strategic fit, further strengthening our position globally and in North America. The largest professional lighting market in the world, which is valued at $12,000,000,000. Based on the attractive financial terms of the transaction the sizable cost synergies we've identified. This transaction offers a lot of value creation potential. Finally, it will be beneficial to all stakeholders. So as you can see, this transaction strengthens our market position globally and in particular in the North American professional lighting market. It is the largest lighting market in the world, which is growing on the back of the continued conversion to LED and also the increased demand for connected lighting systems months in R&D, we will further strengthen our offering in the North American professional lighting market, particularly in connected lighting. Next to that, the largest scale will enable us to achieve substantial operational synergies that will allow our offering to be more cost efficient. I propose that we now move to Slide 6 to take a closer look at the Northern American market. North America is the largest lighting market in the world with a total market size of $23,000,000,000. Of which $12,000,000,000 is related to professional lighting. It is one of the most advanced lighting markets in the world. And the largest lighting systems market globally. It serves as an innovation hub for connected lighting where many new features are developed and rolled out. Let's now go to Slide 7 and to provide you with a snapshot of Cooper lining. So Cooper Lighting is a leading provider of professional lighting with a large breadth of product and applications both in indoor and outdoor that are sold under renowned brands in North America, including brands like Hello, metallux, Corelight, and Magro Edison. Cooper lighting generated $1,700,000,000 of sales in 2018, of which 95% were generated in North America, 84% were LED based, and 11% connected. The company reported EBITDA of $187,000,000 free cash flow of $143,000,000 in 2018. Let's now have a look at Slide 8 to take a closer look at Cooper's lighting extensive product offering and brands. So the breadth and depth of Cooper Lighting's portfolio, of which you see a selection on this slide, is among the best in the industry with strong positions in most of the segments. Next to that, Cooper lighting has built industry leading brands that are well known and highly regarded by North American customers. Let's now move to Slide 9, where I would like to give you a bit more details on Cooper lighting strong go to market setup, which reflects a comprehensive coverage of all channels. Indeed, and Coopulating has a strong agent network in North America, with more than 125 agents strategically located, which will continue to operate independently. They have a long lasting relationship with their agents with an average tenure of more than 20 years. Around 90 percent of Cooper's light sales are realized through these agents who are generally specialized either on commercial and industrial end markets or on outdoor and infrastructure. They generally tend to have very high rankings in the districts they cover. Cooper lighting also has a solid position with major contributors carrying a broad portfolio. It also has a team that is fully dedicated to serve large specifiers in North America, as well as end user sales team, which have direct relationships with key accounts. I will now hand over to Stephan, who will tell us more about the value creation potential, the integration plan and our capital allocation policy once we have completed that transaction. Yes, thank you, Eric. Let's now turn to Page 10. Which gives you more details on the significant value creation potential that these deals provide. As mentioned by Eric, we are acquiring a great business with substantial cost synergies opportunities and at attractive acquisition multiples. The enterprise value, when you net it of the future tax benefits, is close to $1,300,000,000 and that translate into an EBIT to EBITDA multiple of 7 times before synergy and 5.3 times after synergies. Overall, we've been very disciplined in our due diligence in order to set the price given the strategic fit given also the attractiveness of the business and the potential for value creation that we have identified. We've made a very thorough assessment of the cost synergies that we can generate. These cost synergies are expected to reach more than $60,000,000 per year. And we believe they will be largely achieved in the 1st 3 years. All in all, this transaction scores very well on our value creation criteria. For instance, it will be highly accretive to our earnings per share. With an expected increase in the mid teens in the 1st year. The ARIC of the transactions is also expected to see our weighted average cost of capital after the 1st year. If you turn to Slide 11, you will see in more details how and where we expect discussed synergies of more than $60,000,000 per year. When you look at the bill of material, it will be optimized through a number of things like negotiation with suppliers, consolidation of suppliers and also reengineering of the product lines wherever possible. On the supply chain side, this is also an important area of savings. They will be achieved among others. Through the collaborative implementation of manufacturing standards and operational excellence across the two companies. Finally, the combination of our 2 businesses will allow for sourcing optimization for instance, Once part of SignifAI, Cooper lighting will source more drivers and other electronic components from us. And as mentioned before, we expect the vast majority of these savings will be achieved within the next three years. At Slide 12, as we lay out the integration plan for highlighting. So during the due diligence, we took a lot of time thinking on what is the best way to integrate this business. And we wanted to make sure we would ensure the continued commerce success, both of their business and our business, while still being able to capture very rapidly the synergies. That's why we've decided that the respective brand and product portfolios as well as sales, marketing and the product development will remain separate and this will allow Cooper lighting to maintain its growth momentum and to avoid disruptions for customers, agents and distributors. The core innovation capabilities, technologies and IP will be leveraged globally. With respect to the cost synergies, we are focused on rapidly generating the identified savings by sharing the expertise and the optimization opportunities both ways. And next to that, of course, the back office functions will be integrated in order to optimize the support function cost and leverage the scale. On the next page, slide 13, you can see how this acquisition will improve our business mix and further increase our presence in North America on the basis here of the 2018 full year numbers. First, our business mix will improve and the share of our professional business will increase from 42% to 53% of our total sales after the acquisition. Again, this is based on the 2018 numbers. So a bit more than 10 points of increase. Secondly, the proportion of our sales in North America Now let me hand before I hand back to Eric, I'd like to go to Page 14 and update you on our capital allocation policy in light of this transaction. Overall, as we have always said since the IPO, our intention is maintain a robust capital structure and to continue to aim towards a financing structure that is compatible with an investment grade profile. Since the IPO, we've been very clear and consistent in our capital allocation policy. Following this transaction, we will change the order of priority of how we allocate our capital. First, we will prioritize the deleveraging with a strong free cash flow that is expected to drive down our net leverage ratio from around 2 times at closing to below 1 times net debt to EBITDA within 3 years. Furthermore, we plan to pay a stable or increase our dividend per share. While we prioritize leveraging, we will continue to invest organically in R&D and other organic growth opportunities. And finally, as we will focus on integrating Cooper lighting business. And on delivering the synergies, M and A will have a lower priority. Let me now hand back to Eric for the final part of this presentation. So, thank you Stephan. Let's move to, the last slide, the slide team to recap, a position of Cooper lighting represents, for us to change a milestone in the execution of our strategy. The combination will create a strong force in North America, benefiting our customers, agents, employees and shareholders. They have built a high performance company based on professionalism, truly innovative offers, and a long and strong relationship with their customers. And we've been able to, be with them and see that we share a true genuine passion and single focus for lighting and also successful track record in innovation. So with that, I would like to end this presentation and open the line to hear your questions. Thank you. Thank you. Let's wait for the first question. And our first question comes from the line of Lucy Carrier from Morgan Stanley. Please go ahead. Your line is now open. Good morning, gentlemen. Thanks for taking my question. The first one I was hoping if you could give us a little bit more a little bit more granularity on the financials of Cooper. And if you could maybe give us a sense of how much that business has been growing organically, over the last 3 to 5 years. What do we kind of look at in terms of EBITA margin? Because EBITA is kind of the number you guys are guiding on? And if you can speak maybe a little bit around the level of investment in the business, I mean, is the business well invested? Because of course, it had been marked as non core by Eton. So is it well invested? And where is the manufacturing? So that was my first question more on the profile of Cooper. Yes, maybe you see, let me start and first say that because we are the time of signing and not closing and because of course, this is not a business that is disclosed by Ethan. Unfortunately, there is not much that we can provide in terms of data will be integrated in our books. We will provide some pro form a and therefore more color. So we won't be able to specific, but we can give you directionally some elements here. So in terms of growth profile, as they went historically, through the conversion to LED, of course, there was the weight of the decline of conventional, lesser than what we suffered. So they got a better growth profile than we had. And on the LED business, they enjoyed a pretty satisfactory growth over the last few years. On the capitalization of the business, even though it was not core, it's been well capitalized. They've continued to invest in terms of CapEx they have a CapEx level that is a little bit higher than ours. And what we've seen in our due diligence in their operations and in their manufacturing is that they are they've been investing in order to have their operations at the right level. We've seen opportunities to improve in terms of manufacturing during standouts and operational excellence. But again, the business has enjoyed continued investment. Their manufacturing is both largely in the U. S. And in Mexico. And these are the 2 main regions where they have manufacturing locations. But it's a business that is operating Thank you very much for that. My second question as a follow-up, and I guess this is somewhat linked to the growth profile. I mean, we were getting in the past some indication around the growth. I mean, I was hoping we could get something a bit more precise, but I understand it's not possible, but previously it seemed over the last few years business was not massively growing, I mean, higher than the SignifAI, but probably more in a low single digit range. So to me, at least from the outside, the business seems a fairly mature business in lighting and seems also quite comparable with what you are already doing. So I was just curious to understand, what does Cooper really bring in terms of specific technology or capabilities that you guys do not have already in professional lighting and wasn't there maybe in the industry more innovative or highly growing business that you guys could have gone after? Well, when it comes to the growth profile, the way we looked at the company, because we had some information, of course. So we see that company growing and growing profitably. And we will stay at that level at this point in time because as Stefan has said, there's not much more that can, that we can disclose. Now all the companies that were in the transition in the lighting industry had a part of conventional and a part of LED, a part of conventional declining and a part of LED growing. The penetration of LED of Cooper lighting is 84%, which is the average of companies that are involved in the luminaire space. If you were looking at only our professional business, we would also be at these levels. I think it's a company that has moved on over the years making the transition of LED happening. And I tell you, we have been looking at the growth profile and the profitability. And it was, and it was fine for us. Now what are they bringing? So first of all, when you look at the 2 companies, there's a high level of complementarity, which was very important us in order to move forward, and that was one of the main strategic points, complementarity in terms of offering, and not to go into many details where we're going to be probably a bit more involved on the outdoor part of the business. They're probably going to be a bit more involved on the indoor part of the business. And I'm being very simplistic here because then we need to go into more details and SKU by SKU. But globally, that was one of the first approach. The second one is a complementary approach when we talk about go to mark our strategy going to the market in Northern America. And specifically, I'm talking here about U. S. And Canada. Is probably not to go in district and region with 1 only agent, but to go with many different agents. And as we have said previously, the front office, the operational front office, which is sales, marketing and R and D are going to be left independent. The other element, which is also important for me, and for us, is and I've just hinted that 11% of the business today is already connected. And it's connected partly in the home part of the business, the professional part of the business, with system but also with loose controls of that. Which we believe is an asset that can be deployed further in North America and beyond. And lastly, We have a lot of technology, as you know, that we are developing in a SignifAI for many years now when it comes not only it's not only about connectivity in lighting, but it's also what we do for solar, what we do for 3 d printing, what we do for horticulture or agriculture, what we're now doing also for LIFI. And we see that platform, the collecting platform and go to market, a very interesting one to also promote all these new technologies in order to penetrate the Northern American market faster. Once again, it's the most progressive and the biggest lighting market in the world. Thank you. Our next question comes from the line of Joseph Sou from Redburn. Please go ahead. Your line is now open. Hello, Eric and Stefan. Thank you for taking my questions. I have 2. And my first question is about what you will do during the deal. So this deal clearly moves you from a number 4 player to a two player in the North American market and compared to the generalized deal? And what would you to differently this time, we all know that you have been around in the U. S. For more than 10 years now. And there must have been a lot of lessons learned from the Gen Life deal. I wonder what's three different things that you would do now compared to Gen Life. I think one other point you mentioned was the brand consolidation. And maybe you can elaborate a little bit on that as well. Thank you. That's my first question. Yes. Good morning, Joseph. I think your read is direct, in terms of positioning. Now I would say that it's not only a different company that we are acquiring, but we're also different in terms of our maturity and understanding of the of the U. S. Market. You would remember that at the time, Genlight was the entry of what was the company at the time, Phoenix lighting in the in the lumen markets in the I would say that the company is radically different. You know, when you look at Genlight, Genlight was a very decentralized organizations with a very with a lot of very autonomous brands and autonomous P and L, 48 of them at the time. And moving through the transition, especially the LED transition was very complicated to maintain such a platform that was not offering enough possibilities to rationalize and optimize. When we look at, Cooper lighting, it's a company which is very similar to us. In the way that's the business, in the way it is organized, from a value standpoint, you know, I was myself here, not yesterday, it was Monday, in Atlanta, and I was discussing with the management team over there, and it was not the first discussion we had. And every discussion we have had along that sets, reinforced the fact that we were sharing common values. We were sharing, the same vision about the business, strategically. From an organizational standpoint, we're talking about a company, which is very similar to the way we do things. So in terms of integration, in our sphere. We're not talking about bringing a totally different animal, if I can put it that way. It's an organization that is fairly well structured in accordance to what we believe is the right way to do things. Gen Light, we had to substantially change the setup not only from a manufacturing standpoint, not only from a supply chain standpoint, not only from a commercial standpoint. We have to modify so many things from what genelite was, originally. That's not going to be the case here for Cooper lighting. You have probably heard me in terms of integration plan, there's a very important mention, which is to maintain the front of his independent, meaning that there will not be brands rationalization. We would keep the brands as is, and we're going to reinforce further the strength on the market, which means that the sales force, the agents, at the same time, the marketing and the R and D, which is providing adapted offer to that channel, will be maintained independent. From a strategic standpoint, this is also what we wanted to do at SignifAI if we had not done that acquisition, which is operate in the different district in Northern America with many reach to the market depending on what are the different abilities of agents to sell and what are the markets of destination. So it is, it is, yeah, it is not only a different company on this side. I think we are a different company, on our side. And, of course, the lesson learned from a gen light was the disruption of the front office that you have now understood, we're not going to do, this time. Yes. Thank you, Erica. That's very helpful. And my second question is on your channel strategy strategy. We understand that the U. S. Market is very dominated by the lighting agents And do you see any risk from competing with your existing brands in the U. S? And what is the level of overlap in terms of the Asian networks in the different regions in the U. S? So, you know, we start from a situation that, exists today. And today there may be, in some situation, competition. Now you named it yourself, we'll go from a position of number 4, number 3 to a position of number 2. And if we have a position of number 2 and you look at the market that is not ours, there's a big market outside. And so the way I look at it, I'm not obsessed about what are going to be the point of friction, which is the market share that we own, but I'm much more interested in how dynamic the two front office are going to be trying to take market share, of what is not ours. So at this point in time, we are monitoring the situation. Yesterday, we have been calling all our agents on both sides in order to explain to them the basic principle of that integration in order for them to have a very clear understanding of what, of what we want to be doing. But once again, we're talking about stability, and we're talking about continuity. I have myself, you know, a lot, I see a lot of opportunities in us catching up market share in the market share, which is not ours, which is the vast, which is still the vast majority. Thank you. Our next question comes from the line of Andreas Willie from JP Morgan. Please go ahead. Your line is open. Yes, good morning. Thanks for your time. I have some questions around your, assumptions for the EPS accretion calculation. Could maybe help us with that. So you talked about mid teens impact in the 1st year. I assume that does that include or exclude integration costs? And what would be the integration costs that you assume And also for the refinancing of the overall Phillips debt, signified debt, what do you assume for the rate there in your calculation? And has there been anything in the 2019 performance of Cooper lighting that we should know about rather compared to the 2018 number that you have provided in the release. And the follow-up question is on the manufacturing or the setup of Cooper lighting, how many plants do they have fragmented or centralized? Is there, is there manufacturing in North America? Yes, Andreas. Thank you for your questions. So let me start with the more the financial aspects. So on the EPS, yes, indeed, on the 1st year, we expect the continued EPS to be in the mid teens. We've taken into account of cost integration cost. We've done you understood some detailed due diligence and assessment on the synergies, it's too early for us to provide some information about those costs. We have, of course, our own estimates. We will, of course, provide information about those integration costs in due time, probably after closing, but it's too early right now, but we took that into account in our business case. We took that into account of cost in the EPS. Now remember, the EPS calculation for us, especially as the basis of the dividend is an is a continuing EPS. So it takes out the restructuring it takes out all the costs that are nonrecurring so that when we serve the dividend and calculate the dividend, we do it on the basis of an EPS that is normalized. And of course, that's what we have taken into account when we've said it would be an increase of mid teens at the beginning and of course, going up later as we realize the synergy on the refinancing. So, in terms of rate, of course, it's going to depend on the ultimate financing structure that we put in place. And as we indicated, we will work on that in the coming weeks. And we expect either before closing or potentially slightly after closing to be able to put in place that final financing structure. I won't be too specific when you know about the rates and you know about the financial market conditions. So I won't be too specific. I don't want to prejudge about the discussions that we will either with rating agencies or then with lenders. So unfortunately, I won't be too specific, but I guess you can take some high level estimates This is also what we have taken into account in our business case. And then we will see what type of financing conditions we can get at the time of putting in place the financing structure. Of course, we have assumed attractive conditions because we see the financing market, how they are, and we expect that in the coming months, we'll still be able to access those attractive financing conditions. On your question regarding 2019 performance, there is not much we can say everything that we've been told and that we've discussed with them looking at their 2019 performance. Well, there was nothing particular compared to 2018. As mentioned by Eric, there's been performing in a satisfactory way. And we do not expect, at least what we have seen for the 1st 2 quarters. And the trading updates anything different from in terms of trends and performance compared to 2018. And then finally, the manufacturing, yes, they have about 10 manufacturer insights, mix of the U. S. And Mexico And, yes, from what we have seen, there are opportunities to improve the efficiencies So that's why we've indicated that in terms of synergies with respect to operational excellence with respect to manufacturing standards. Our teams. And as you know, we have a number of plants in the U. S. And in Mexico. So we have also experienced in those locations the teams would exchange to see how we can get the best practice and generate synergies there. That's what we have identified. Our next question comes from the line of Martin Wilkie from Citi. Please go ahead. Your line is open. Thank you. Yes, it's Martin from Citi. The first question is just to understand the outlook for the U. S. Market that you've embedded in your calculations for 2020, you've talked about the mid teens EPS and so forth. In that outlook, are you assuming that from a tariff perspective, from a market perspective, that it's essentially unchanged for 2019 or just kind of have a little bit the backdrop you assume for 2020? And the follow-up question would then be on tax because I understand there is net present value of a tax asset and also, Cooper was due to be spun out, Irish domicile, which would have had a very low basis. Just to just understand a little bit about where where will Cooper be domiciled? Will it meaning to lower the signify tax rate and just how you've embedded that into your EPS and return capital calculations? Thanks. Yes. So, Martin, in terms of outlook, we've taken the situation the way it is today, both in terms of tariff and tariff impact as they are known today. And that's what we have taken into account in our in our perspectives. And same with respect to the macroeconomic environment, we haven't assumed any improvement or any material degradation. But pretty much what we are seeing and the type of trading that we are seeing in the U. S. These days. On the tax assets. So as you probably know, when there are acquisitions in the U. S, this is an asset deal from a tax standpoint and there you are allowed to amortize the acquisition and the goodwill. And that lowers your tax base in the U. S. So this is what we have highlighted when we've made the calculation for the enterprise value. The amount is a little bit less than $100,000,000. And that is something that we will benefit from and will reduce our tax cash outflow moving forward. So that's, of course, both in terms of value and then in terms of business case and free cash flow. This is also what we have taken into account as a benefit. In terms of the mis ideation, at this stage, we will not change acquiring the company and we will not change the structure of the company, both in terms of legal and in terms of tax standpoint. Thank you. Our next question comes from the line of Sven Weier from UBS. Please go ahead. Your line is now open. Yes, good morning. Thanks for taking my questions. So first one is on the timing. You just said that you do not assume any change in the operating environment in the U. S. Market, which obviously has been tough also going by the acuity numbers. I mean, why is the timing then attractive to buy it given that there's unlikely to be any change in this environment, there's some structural pressure also, especially at the low end of the market. So could you just explain why the timing is attractive That's the first one. Thank you. Look, I don't specifically remember that we said that the timing is attractive. At this point in time, we know that the market is, driven by a lot of uncertainties. It's not only between China and the US is also in Europe in many different ways. Now there is a moment where, there is an asset that is coming for potential acquisition and consolidation. So you look at it whenever it comes. I'm not saying, and I don't think we have said that the timing is particularly attractive. But the, the target in terms of strategic fit is particularly attractive And I think that we have an interesting case also for value creation. And as you have seen, the way we have indicated, the value that we believe we are going to create, we are talking about synergy that are more on the back office. Of course, there are also other potential synergies on the front office, but at this point in time, we take cautious approach. And this is in general, you know, what we do, whatever the timing is for acquisition. We rely much more on the back office synergies than the front office synergies. To assess value creation. So that's the way we we behave in general. Now moving forward, what can we serve at the markets moving forward? You see the uncertainty that we see, but we believe that this opportunity to bring Coopulating in the SignifAI world is one of the opportunity that we had, to go for. If you remember, there has been a lot of different companies that came for consolidation. Worldwide and also on the U. S. Market. And if you take a bit more of distance, you would say that in the past 3 to 4 years, probably 20% to 30% of the assets and the companies operating on the lights and market have changed ownership. So we looked at all these movements. And of course, given our position, we were all the time consulted, whether we wanted to go for or not. And no, the answer was no until that asset came for sale. We looked at it and we thought that it was a center strategic fit with the potential to create value, once again, looking primarily at the back office synergies, and that's why we went for it. But in terms of timing, we'll see what the future will bring. Of course, when we have done our due diligence, we also have simulated many different scenario in terms of market with the uncertainty that we have in front of us, and we are comfortable on our capacity to adapt to whatever the market conditions are going to be moving forward. And then the follow-up questions I had was just also the deal rational in general because if I remember talking to you in the past, you always sounded relatively skeptical about doing big transformative deals. That doesn't really bring in any major new technologies. So a minor standing of your M and A strategy was more bolt on technology driven deals. Mean, you elaborated a little bit on that already on the previous question, but I mean, is it a fair assumption that you were rather a bit more skeptical on such big deals in the past and you have changed your mind? Or did I misunderstand it in the past? Well, our position, well, You're not completely wrong, but you're not completely correct, Nila. Let me rephrase what we said on and on. So we had a clear M and A strategy, which was Lumina Companies, or BRIX Systems all companies, you know, that would bring a flat platform and capabilities for services. And when we come to the first one, which is, Lumina Companies, we said We look for bolt on acquisition, probably small to medium size, unless there is a big company that come for consolidation that we would have to look at. That was our position, from the very beginning. Now I would not say that, this deal is formally transformational. I think it brings to us, complementarity in terms of offers, complementarity in terms of go to market on the market, which is extremely important in terms of size and extremely important in terms of us achieving our final objective and strategic aim, which is and to move the industry to connected lighting. So this is why it was attractive. So it's true that we very often talked about bolt on, but we never exclude the fact that if there was one big asset coming for consolidation, we would look into it. Our next question comes from the line of Mark Hessling from ING. Please go ahead. Your line is now open. Yes, thanks for taking the question. My question is actually on, your explication what this will do to the U. S. Market. You clearly reinforce your own position, but will there also be some really positive benefits for the market as a whole given that the disconsolidation is happening Yes, I believe it's good for Coppellating. I believe it's good for SignifAI. I think it's good for the market. It will help us to further develop innovative technologies. And this is, one of the things that we have started to look at also with the team of Cooper lighting, which is as I was mentioning previously. Systems, we have developed a suite of software platform by vertical that we call interact. We have developed leading technologies in agriculture, in solar, in three d printing, in LIFI, we're going to be able to bring these technologies to the go to market of Cooper Licensing. And I think that's also one clear way to bring the market up. That's also one clear way to increase the level of involvement of our customers and further differentiate the lighting industry. So yes, I believe it's positive for the U. S. Market because with Cooper lighting, we're going to be able do that much faster than what we would have done on our own. Yes. So so clearly, you talked about cost synergies, but is then there's also a significant amount of revenue synergies then? As I've said previously, what we've looked at today is the opportunity that we have. This company is being spun off, and you know, the opportunities that spun off are bringing. So we looked at it in exactly the same way. And we are focusing on that because this is something that we know how to do, which is fairly short, which is self help. Basically, we can do it whatever the conditions are on the market, and that's what we are focusing on primarily. Of course, there are other potential benefits that we have not, at this point in time, particularly sized, that's an exercise that we're going to do in more details between signing and closing. But yes, there's probably more to it than the synergy that we have described here. Okay. Thank you. Thank you. Our next question comes from the line of Daniel Acosta from Goldman Sachs. Please go ahead. Your line is open. Hi, good morning. I have only 2 things. Les, the first one is, I guess, your your own business in the U. S. Sizable as well in terms of when you go a little bit more underneath in product categories or areas, is there sort of any any trends that you would have to do, given overlaps might get too large, just thinking about sort of regulatory considerations. There? And then the second sort of a small point you mentioned ROIC above WACC has been trying to find your WACC. What do you assume for WACC in your annual report? But couldn't find it. So can you help us on that? Thank you. On your first question, Daniela, good morning. The market is very large in North America. So having offers that overlap is not really an issue. Understanding that fundamentally there's more complementarity in the catalog than overlaps. And from a regulatory perspective, I mean, we're going to go and carry the normal processes. Of course, we have simulated them in our due diligence process, and we're going to be now very active and very quick in in filing in the different jurisdiction where we need to make that happen. Yes. And, Venera, the WACC for the company is 8.5%. I don't know the page of the annual report, but you can find it, but it's 8.5%. Thank you very much. Thank you. Our next question comes from the line of Lisa Carrier from Morgan Stanley. Please go ahead, Lucy. Your line is open again. Hi, thank you. Thanks for the follow-up. Just two quick questions. The first one was around you could remind us your share of connected lighting in the professional, because I think you said Cooper was 11%. So I was just hoping we could compare between SignifAI and Cooper? And then the second question was more around the manufacturing footprint. I mean, I see it doesn't seem to be included in your, in your synergy generation. So is it fair to assume that there is no plan at the moment to consolidate the production and you will still also keep a separate kind of production footprint? Lucy, if you take into account the connected lighting, if I do a rough calculation, we said at the time, we are and we compare apples to apples. And so if we look at the professional part of the business, we said that we had around 6 1,000,000 in connected lighting, which was, slightly above 20% for professional. And about 1,000,000 for, for the home side of the business in SignifAI. So I would say that at this point in time, SignifAI would probably above the 11%. But joining forces will be a huge asset on the American market, which is the most progressive. On the manufacturing footprint, over synergies are included of any of any type. Now we are not specifically disclosing what it is. But we believe $50,000,000. Thank you. Thank you. We're now approaching the end of the call. We will now take our last question from the line of Andreas Willey from JP Morgan. Business, if you could or North American professional business, whether you're happy to share kind of where that stands now in terms of size and profitability so we can look at the 2 together. Andreas is not something that we disclose specifically, but our business has been improving over the years. After the import restoration that we had to do 5 years ago and that business is developing itself satisfactorily at this point in time. Once again, the go to market will be independent, but our business has continued to improve in that part of the world. Thank you. Thank you very much and I would like to return the conference call back to the speakers. All right. Thank you, ladies and gentlemen. Thank you very much for attending today's call and for taking part in the discussion about the trends If you have any additional questions, please do not hesitate to contact the IR team. We're very happy to answer your questions. And again, thank you very much and enjoy the rest of the day. Ladies and gentlemen, this concludes today's conference call. Thank you very much for attending. You may now disconnect your lines.