Good morning, everyone, and welcome to today's webcast. My name is Carlos Lora-Tamayo, and I am the Chief Investor Relations and Communication Officer of Acerinox. First of all, thank you very much for joining us today on such a short notice. As you know, we announced today that we have entered into an agreement to acquire Haynes International, US-based producer in high performance alloys. We are proud of this decision and are confident that it will strengthen our business in line with our strategy to increase our exposure in high added value material. For those of you who follow our Capital Markets Day, the top side of the pyramid. This acquisition not only solidifies our industrial leadership in the US, but our global position in stainless steel and high performance alloys. Now let me introduce our main speakers today.
Today, the presentation will be led by our Chairman, Carlos Ortega, our CEO, Bernardo Velázquez, VDM CEO, Dr. Niclas Müller, and last but not least, Acerinox CFO, Miguel Ferrandis. Without further ado, I would like to give the floor to our Chairman. Please, Carlos, go ahead.
Thank you, Carlos, and thank you all for attending this presentation. As you may have seen this morning, we have very exciting news. We have reached, as Carlos has said, an agreement for a US deal in high performance alloys for our US-based North American Stainless, NAS, to acquire 100% of Haynes International, another US company, a player in high performance nickel and cobalt alloy. NAS, as you know, is 100% owned subsidiary of Acerinox. This transaction is fully aligned with Acerinox strategy, as you may have seen in the recent Capital Markets Day in Germany. This is a strategic investment. It's not a financial one. It is not an opportunistic one. This supports our strategy towards higher value added products, specialty and stainless, and high performance alloys.
This expands our already strong presence in the U.S. market and increases our exposure to the aerospace segment, creating a very solid growth platform. Also, this strengthens our already strong global leadership position in a high-performance alloy segment, led by VDM, and in our case, Niclas will speak later. We expect a very strong financial performance from Haynes going forward that will deliver significant pro forma growth and margin enhancements. We are becoming an R&D, research and development, powerhouse. We are adding extensive R&D capabilities with Haynes and their very strong patent portfolio. We will also unlock sizable potential synergies of circa $71 million. Niclas will explain this a bit better later, but these are already identified synergies, both on the revenue and cost side, and these are credible synergies.
We have already achieved synergies in a very strong way with our VDM acquisition, in this case, led by Bernardo and Niclas himself. We are very happy that Haynes' strong ESG performance and their commitments will be further strengthened with Acerinox ownership. Valuation, we're offering a share price of $61 per share, which represents a fully diluted equity value of close to $800 million. This implies 8.7% premium to last Friday's close and a 22% premium to a 6-month weighted average price of Haynes. This purchase price represents a EV/EBITDA multiple of 10.1x 2024 consensus estimates, which brought down to 5.8x once we include the synergies that we're going to achieve. This meets all our KPIs.
This meets our 15% target of return capital employed that we discussed at our Capital Markets Day, already in year one, and it will be already accretive, 11% accretive on an EPS basis, earnings per share basis, from year one as well. This, again, will be further explained by our CFO, Miguel. Miguel will also explain that this will be fully funded, with our cash, existing cash, position, actually in NAS, in Acerinox balance sheet in North American Stainless. The pro forma leverage, EV/EBITDA, will increase to 1.5x, but we will go back to our target of 1.2x EV/EBITDA, pro forma net debt to EBITDA, for next year already. This will not change our dividend policy. Our shareholder remuneration will stay the same. The conditions are, we expect the shareholders' approval of Haynes.
They will call for an extraordinary general meeting for the shareholders' approval, and there will be other customary regulatory approvals, CFIUS, antitrust, among others. Timetable is that we expect this deal to close by the Q3 of this year. Let me reemphasize that this is a strategic investment. It is not a financial one, nor an opportunistic one. We truly believe in the outstanding platform we are creating in the US and in HPA to generate significant value to our shareholders. Bernardo?
... thank you, Carlos. As you mentioned, it is completely aligned with our strategy and have a very strong rationale. For many of you that attended our Capital Markets Day, it is not unexpected. And we are very happy and very excited to announce this transaction today. In that, based on our recent experience with integration of VDM, that was mainly done in Europe, we have found the possibility to extend our presence in United States by creating a platform that will integrate NAS, North American Stainless, with VDM United States and Haynes. And the combination will be the best and the biggest stainless steel and HPA platform in the United States.
A one-stop floor with the widest portfolio of products in the industry, from commodity stainless steel to tailor-made stainless steel and the most sophisticated alloys, all in flat and in long products. The Acerinox Group will grow in United States, will grow in high-performance alloys and high added value products, and in aerospace, all areas of a high potential. Haynes will be easily integrated in our group due to its long tradition in specialty metals manufacturing, its committed and skilled people, and its reputation in R&D, quality, and good customer service. I think it is not just a company, it is a group of talented and experienced people with a leading position in number and development of new patents, and with access to the most exigent customers in the industry that is very difficult to obtain.
Both groups will benefit of the group knowledge and opportunities that, and will contribute to make things better with the modernization of the equipment, with the increase of capacity. The combination with NAS and VDM USA will increase the product range and, of course, the customer base. And customers will also benefit of the widest commercial network in our industry. Haynes will benefit of, of the Acerinox purchasing power, because in a similar, industry, equipment, most of the equipment, consumables, and raw materials are almost the same. Also, a main Haynes location in Kokomo, Indiana, is only two hours away from our North American Stainless facility. So with this situation, will let us process some, HPA in North American Stainless and some stainless steel in Kokomo, so we'll increase the range of our products.
Of course, we will continue supporting our people, as usual, and the local communities, what we are very proud of, continuing with our legacy. The price offered is a good value for Haynes shareholders and opens an exciting future for the Acerinox shareholders, creating value since day one. I think it's a, it's a great combination of two groups that will make something better. As we used to say, one plus one is more than two.
What today we are explaining is a combination of two leading American businesses. You know that more than any other, we are an American group. 50% of our sales is in North America. Our strong market is North America. But in addition, what's clear is that actually, North America is, in our sector, the best performing market. Is the one who is expected to perform more robust growth. In addition, is the one where we are finding a more competitive energy cost. We are also seeing several manufacturers coming back to the States as a consequence of the ongoing regionalization process, as well as, as a consequence of the geopolitical issues.
And also, we are seeing that the steel for our sector and for the demand in our sector, still is pending the coming all the contribution of the infrastructure through the IRA program that will keep the demand strong. So clearly, for us, North America is the place to be, and North America is the place to grow. Through this deal, what we are explaining today is that North American Stainless should pay Haynes shareholder $61 per share. This means a 9% increase with the closing of the trading of Haynes share last Friday. If we go to the last six months, it's a premium of 22% of the average of the last six months. This brings us to an equity value of the deal of $798 million.
In addition, with the debt and debt-like adjustments of $172 million, we reach the enterprise value we are explaining of $970 million. In terms of the timeline, the board of directors of Acerinox and Haynes approved yesterday the deal. As has been explained by our chairman, it's expected a extraordinary shareholders meeting to take place in April, and after that, any time in the Q3 , when obtaining all the customary regulatory approvals, Haynes could be fully integrated in Acerinox group. For those of you who are not so familiarized with American businesses, we want to explain, Haynes obviously is a listed company. This means that you have a lot of public data available in their excellent web page.... Haynes is a manufacturer of nickel and cobalt-based alloys.
Two thirds of its production is in flat products. They are mostly oriented to high temperature applications, but also with corrosion resistance applications. And what, for us, is extremely relevant is their aerospace presence. They have a strong presence in the aerospace sector, and with a high certification level for several players in the aerospace industry. This, for us, clearly has been one of the main virtues for thinking about Haynes. Niclas shall explain later in more detail, the footprint in commercial and also in production, but when we also analyze the geographical diversification, we see that North America means 58% of their sales. So mostly 60% takes place in North America. So you must understand, and I want just to make a simple definition, but for us, in our strategy, Haynes is a triple A rating investment.
Triple A, because it's alloys, it's aerospace, and it's America. This is our focus. When we go to look at the financials of Haynes, at the end, we understand that the deal is to be closed and the integration is to be done in the Q3 this year. In the Q3 this year is when, more or less at third of September, is the fiscal year closure of Haynes. So consequently, we understand that the most accurate and the most relevant figures to analyze are those that the consensus of analysts at FactSet consider for Haynes in this year. We are talking about almost $650 million by the consensus analyst, with an estimation EBITDA around $96 million, which means an EBITDA margin of 15%.
We have been, as you may understand, analyzing Haynes in deep detail for several months, and after also the due diligence that have been taking place, we are absolutely comfortable with this consensus for putting in place this deal and this transaction today.
Haynes is having three production sites. The site with the largest number of employees by far is Kokomo in Indiana. Since all the forging and all the melting, casting, hot forming, cold forming, and finishing is performed there, and the majority of the R&D activities are also located in Kokomo, apart from headquarters. In Arcadia, Louisiana, Haynes is operating a tube-making plant for cold-worked, seamless, and welded tubes from own HPA material ex-Kokomo, and third-party purchased titanium pre-material. In Mountain Home, North Carolina, they're operating a finishing draw wire and welding consumable plant. Once again, based on their own material from Kokomo and based on stainless steel. Apart from that, Haynes in custom in LaPorte, Indiana, are operating a custom, custom metal processing center.
Here, Haynes offers value-add services like slitting, cutting to size, stretch leveling, blanking for Haynes material, but also for material from other producers, standard steel producers, for example, like NAS. Let me now talk about some of the most important characteristics of Haynes. Haynes is a fully integrated high-performance alloy producer, focused on high-end value-add nickel- and cobalt-based high-performance alloys. Well-positioned, and that's important, as mentioned before, in the aerospace industry. For this, Haynes is operating unique world-class equipment in Kokomo, including a four-high reversing hot rolling mill that has been visited by an expert team from NAS and VDM recently.
As mentioned already by Bernardo, it's a very dedicated and experienced workforce, and Haynes, like VDM, and that's very, very important, and Bernardo will comment on that a little later. It is very much innovation-driven and holds a significant portfolio of alloy patents. Haynes, like VDM Metals, does not just sell or distribute high-performance alloys. They do application engineering for their customers for new and existing alloys. They provide technical sales support for their customers, and Haynes is offering value-adding processes in their service centers.
And why Haynes? I think, this operation is a consequence of our strategy, the same strategy that we announced with the VDM's acquisition, with the same strategy that we reinforced in our Capital Markets Day recently. We are growing in high added-value products. We will create a platform to consolidate the stainless steel and HPA, and we did it in Europe, and we will do it in the United States now.
... This operation has a very strong strategic rationale. We are filling the pyramid of corrosion and heat-resistant materials, that I will explain later. From mild steel, that we are now producing in South Africa, to commodity and specialty stainless steel, and the most sophisticated nickel and cobalt alloys. With this group, we will take a more relevant position, we will be clear leaders in R&D, and tailor-made solutions for the industry with sustainable materials. We'll focus in innovation and efficiency, and we'll be connected to our society values. It's a clear cultural fit with a committed and loyal working force. This exciting operation is a milestone in the history of Acerinox. It will create value for our shareholders and warrant our future success. It's fully aligned with our strategy.
With this, CapEx that we have also announced for the expansion plan, we will develop a platform to integrate stainless steel and HPA, and obtain synergies of more than EUR 70 million. On this chart, you can see two, maybe the two most important rationales of this deal: the revenue by region and the revenue by end market. You can see that VDM Metals, of course, as the market leader worldwide, is having a very strong presence in Europe, and naturally, Haynes is having a very strong presence in the North American market. If you combine these two entities, you can see that the footprint of HPA alloys of the Acerinox Group will significantly increase by 12% from 16% in North America today, to 28% in the future.
On the other side, you see at the bottom column, the aerospace exposure of VDM Metals is fairly low, and as mentioned before, very important, the attractive aerospace market that Haynes is serving with nearly 50% of their shipments and revenues is very strong. Combined, the HPA division of Acerinox in the future will increase their market share in the shares in the aerospace sector from 9% up to 20%. By doing this, and if you look at the very right-hand side, we're creating the most probably most balanced portfolio company regarding customer and industries. Summary is, Acerinox will significantly increase its presence in North America and in the aerospace market. The acquisition of Haynes will not be the new status quo.
We, as Acerinox, want to further grow our business, our HPA business, and stainless steel business together with Haynes. This is why we are committed to invest more than EUR 200 million in the next 4 years in the U.S. Most of these investments will be invested in Kokomo. We're looking at a new vacuum induction melting furnace, a new forge and new finishing lines, and we will invest around about EUR 30 million in hot rolling mill components in North American Stainless. It will be a combination of replacement and capacity expansion investments, and these investments will be the precondition for the full amount of 71 million synergies that had been identified.
If you were to ask me why Acerinox, by far, will be the best earner of Haynes, then because I can't think of any other company in the world that is having such a strong selling platform of stainless steel and high-performance alloys in Europe and in the US. And because of this, Acerinox can generate such a significant synergies, and by doing that, is adding value to Haynes and the existing portfolio companies of the Acerinox Group, in this case, NAS and VDM Metals. I can't and I don't want to get into details regarding these synergies, but I can tell you that the team of Haynes and the team of VDM Metals and the stainless steel colleagues of NAS, independently from each other, estimated, due to compliance reasons, the possible synergies, and we came to very, very similar numbers.
To just give you a few examples, Haynes is operating, as I said, a finishing drawing operation for a welding wire, but they don't have any wire rod production facilities. We will supply wire rod via NAS to Haynes to have integrated wire production line in North America. At the same time, NAS will have the plate rolling done partly in Kokomo, which also generates synergies. And, of course, we will improve our European and U.S. sales network, because you can imagine that if VDM is able to sell Haynes products in Europe and vice versa, Haynes can sell VDM products in North America, that will definitely increase our market shares. The important message on these synergies is, and that had been mentioned already: we know how to manage post-merger integration processes.
We have shown that by integrating VDM into Acerinox, and this is why the EUR 71 million synergies are reliable.
... and realistic, and that's important, and we will perform these synergies, although it will take some time because of the necessary investments for that.
And, of course, we cannot develop our strategy to be focused on high-performance alloys and high added-value materials if we don't focus on R&D. And in this sense, Haynes, more than a simple industrial company, is a research center that, combined with VDM and Acerinox, will be the most powerful in history. We will have 62 dedicated people in HPA for innovation and R&D activities, and we will have to add another 42 people dedicated in stainless steels. So that means more than 100 people dedicated to R&D, to new developments, new applications, new alloys, and of course, to serve and to give the best solutions to our customers.
In this sense, I wanted to explain that Haynes will be incorporated to a think tank that we have internally in Acerinox at the global level between all the companies that is called Materials for the Day After Tomorrow. In this think tank, we are analyzing the mega trends of the industry, trying to anticipate the necessities with new alloys, trying to focus the development of new patterns and new alloys to the necessities of the future, and of course, will be needed for a sustainable development of the industry and the energy transition. We will have together more than 70 patents and more to come, and no other group can provide the variety of solutions than we can offer.
It's an absolute proper fitting of Haynes in Acerinox's structure, and one of the relevant areas is that we are sharing strong commitments to ESG, but in addition, several of these KPIs are common and are as ambitious in both of the companies. There is a strong similarity you can appreciate in the chart of the public data available from both financial statements in terms of the GHG emissions. Also, in terms of efficiency and energy, Haynes is absolutely favorable, even farther than us, being in America. At the end, as you know, for us in Europe, the situation always is a bit more difficult, but where they are also absolutely brilliant, and I think very ambitious, and they have demonstrated, is in waste recycling.
We are very proud of our 90% waste recycling commitment for 2030, but in their case, it may be even higher. So it's a full alignment in all these areas, as well as it's a full alignment in terms of culture and especially in the safety performance. So consequently, it's an absolute ideal fit among the cultures of the two companies. But also talking about ESG, what's relevant is that with the investment that has been already decided, we shall be even improving the actual KPI parameters for Haynes. And at the end, what also is even more important is that we are the one that produce the sustainable solutions to the low-carbon economy that actually, day by day, is more demanded.
As mentioned before, this is totally aligned with our strategy. For many of you that follow our presentations with VDM acquisition or in the last Capital Markets Day, you know that we are basing our strategy in four strong pillars. It's added-value products that will make us different, a strong and diversified product range that will grow by combining processes in the different plants, and the most extensive commercial network with presence in more than 90 countries. Excellence is a cultural matter for both groups. You know how important it is for Acerinox. We have recently released the Beyond Excellence plan, and Haynes, that already has its own excellence plan, will be incorporated to Beyond Excellence.
Of course, everything have to be, have to be done in a sustainable business model, and we produce in a sustainable way with sustainable process, mainly using scrap as our most important raw material. And we are producing long-lasting products, 100% recyclables, that will be used and will be necessary for the sustainable industry of the future. As we always say, we cannot have this without a financial, a strong basement. We maintain our target of a net financial debt of less than 1.2 x EBITDA. We will maintain our shareholders' remuneration policy, and of course, we will maintain the dividend. So as promised, are committed with the market, always looking for the most valuable capital allocation. In this slide, you can see what we call the pyramid of corrosion and heat-resistant materials.
Bigger volumes in the basement, smaller volumes in the top, but smaller margins in the basement, bigger margins in the top. With this announcement, we will increase our presence in HPA, in the top of the pyramid, but also with all the R&D capabilities, we will develop something that is in between the stainless steel commodity grades and the tailor-made stainless steel grades. We will develop the super stainless steel, super austenitic, super ferritic, super duplex, and then we will fulfill the whole pyramid, offering the widest range of products in the industry. With this strategy, we will increase our presence in HPAs and high added value products by 8 percentage points.
We will increase our presence in end users and in projects, and we will increase our profitability, our profitability between 2.5 and 3.5 percentage points. We'll grow in HPA, as mentioned. We will strengthen our leadership in United States, that is clear in the stainless. We will extend our broad portfolio of products. We will increase our presence in aerospace. We will exploit the synergies, and we will be a leader in technology and R&D. So this is something unique. We will create a new platform, United States, as we have done and we are doing in Europe, and we'll be market leaders in technology, market leaders in end users, market leaders in high performance alloys, and market leaders in customer service and customer providing the best solution for the industry.
I think this is very relevant, and we will concentrate in our two major markets, in Europe and United States, with the complete platform of materials from stainless steel to high-performance alloys.
Two months ago, in our Capital Markets Day in Düsseldorf, we presented exactly this slide. The goal of the Capital Markets Day was for you to have a deep understanding of VDM, of VDM success, as well as to know better the alloys world and its possibilities for the future. What appears obvious now is that we were preparing you for understanding the rationale of the deal that we were close to announce, and that we are explaining you today. What we explained at that time is that our strong balance sheet allows us to prioritize on capital allocation, to pursue a strategic, organic, and inorganic growth options. Today, we are presenting both. We are covering both growth options through this deal. It's obvious that it's a inorganic growth.
We are making a strong and relevant acquisition by acquiring Haynes, but in addition, it's followed by further organic growth, because what we are also now teaching you and putting on the table is that it shall come additional $200 million investment for improving and reinforcing Haynes. So it's a deal that brings both organic and inorganic growth, and at that time, we explained the what we consider that should be the five conditions for this growth. And you can realize very simply that exactly all the comments we are making today in these presentations are for covering the five conditions, which were strategy, which were synergies, value accretive, cultural fit, and diversification.
When we go for giving you some financial parameters in regard to the significant value creating for shareholders that we are bringing today, we want to reinforce again that this is a transaction that shall be closed and shall be integrated at the Q3 . So consequently, as we explained, we are keeping the consensus as analysts expected for Haynes, which we are comfortable. Through this, the multiple enterprise value/EBITDA for 2024 is going to be around 10.1, which is absolutely in line with the specialty steel in the States. And consequently, this is something that we are comfortable with, because this is the multiples at which American specialty steels companies are trading.
In addition, what we also must put on the table and increase our further comfort, is that with the precise and realistic synergies that Nicholas explained, coming after the investments that also we have been talking about, that we are making, we are obtaining these EUR 71 million synergies, and with this, the pro forma reduces the enterprise value to a level of 5.8 x, which by far makes this deal absolutely attractive. What shall take place after this transaction in the closing of the financial statements of Acerinox this year? This is also, for us, another relevant topic to explain, because with this relevant deal, even in the first year, we are not spoiling the key PI that we are establishing for through the cycle period.
Even though in this year, at the closing, at the closing of our financial statements, we can keep the 15% ROCE, so the return on capital employed shall be fully aligned with our standard for through the cycle. We don't know now in which part of the, or in which month finally, and how many months shall be contributing hence in this year. But any case, the analyzed figure shows that the more or less ending per share accretion in a twelve-month period should be around 11%. So this is also a very extreme pleasant accretion on the earnings per share.
And also, what is very relevant is that in the time in which we are making the deal, in the closure or our financial statements, in the peak, obviously, of the debt influence of the deal in our financial statements, we understand that we shall be in a debt, in an net debt to EBITDA figure of around 1.5. 1.5 debt to EBITDA ratio for our industry, no doubt, is a really low ratio. In addition, as you know, we have no covenants in all our financing structure linked to profitability, but even though, if we should have that, by far, the covenant should be substantially above the 1.5. So we are extremely comfortable living with that.
We shall finish this year probably with that ratio, and what we have also the clear certainty is that probably from 2025, 2026, we shall by far be below the 1.2 that also we establish as a reference for us through the cycle.
Thank you, Miguel. You have seen that with this transaction, we're strengthening already a world leader in stainless and high-performance alloys. This is, as I mentioned earlier, a strategic step. Strategic, not financial and opportunistic. We will reinforce our leadership position in high-performance alloys, as you know, as Niclas has mentioned, Bernardo. With a strong focus on the U.S., we already were a U.S. company with the majority of our sales in that market. Now, we're becoming even more U.S., more American. A great market, as Miguel has said, with significant additional future potential that we want to be part of. We will also reinforce our position in the aerospace industry. High growth, high value-added industry. As mentioned earlier, this is a highly synergistic transaction, with already identified estimated synergies of $71 million.
As mentioned, we are creating a group that will be a best-in-class solutions provider through addition of extensive R&D capabilities and a very significant, patented alloys portfolio. As I hope we have conveyed, we are very excited about this transaction, this industrial use acquisition that perfectly fits with our strategy to deliver significant value to our shareholders. With that, we are happy to answer any questions you may have. Thank you.
Thank you very much. Thank you very much, Carlos, and the rest of the speakers for this very detailed presentation. Let's move now to the Q&A session. As in other occasions, please state your name and company before the question. Thank you.
Thank you. Please press star followed by the number one if you'd like to ask a question, and ensure your device is unmuted locally when it's your turn to speak. We have our first question from Tristan Gresser of BNP Paribas. Please go ahead. Your line is open.
Yes. Hi, good afternoon, and thank you for taking my questions. I'll start with two questions. The first one is on the synergy. I understand the commercial synergies you discussed and the track record you have with VDM, but the synergies are still quite large, especially if we compare to the VDM acquisition. So could you provide a bit more color on the cost synergies, I think are two-thirds of the total? And also, on timing, you mentioned you expect to generate most synergies by 2027. Does that mean we should not expect anything in 2025, 2026? And also, what is the biggest contributor to the synergies when you look at the $200 million investment plan? I start there.
Let me answer that question. First of all, it is important to understand that you can't compare the acquisition of VDM and the integration of VDM into the Acerinox Group, because Acerinox at that stage was not having any HPA division. So the synergies because of this are significantly higher. I don't wanna get too much into details at that stage, but I can tell you, for example, I'll give you an example, that of course, we will investigate, and we're having a good idea about what's happening or what is the potential. That we will, of course, have a look at who can produce which alloy the most cost efficient, and this is by far one of the biggest synergies that we identified.
Yes, the most synergies will be generated without investment until 2027. And of course, we will like the VDM integration will start immediately after the deal is closed, with generating synergies on the sales side, on the production side. Therefore, yes, you can expect synergies from 2025 on. That's by far. One of the biggest contributors I mentioned already will definitely be the investment into a new vacuum induction melting furnace. The industry in general is short with these capacities. We identified additional potential on products that need a vacuum induction melting facility, and this facility will be invested in Kokomo. Of course, it will take time to engineer it, to build it, to ramp it up, and get the necessary certifications.
This is why synergies out of investments can only be expected after 2030.
I can add something. With the new investment, of course, we will increase our capacity, our quality, the cost of the product. But it will also be very important that North American Stainless will be able to start production in HPA long products. Haynes is more based in flat products, and with the support of NAS, that is, you know, the most powerful company in the region. You know, we'll be able to develop HPA in the competitive unit of North American Stainless. We'll be able to roll wire rod there, and also to produce bars that are so important for the aerospace industry. So many synergies will also come from the stainless steel side.
That's helpful. But just a quick follow-up on the synergies. When I look at the investment plan to build a new furnace, new lines, how should I think about this as being to, you know, unlocking synergies versus growth? If Haynes decide to build a new furnace, new lines, it'll bring additional EBITDA as well. So I'm just trying to figure out if, out of this growth investment plan, there's also some additional EBITDA tied to it that is not reflected in the synergies number you provide.
See where I understand, and I really understand your question, right. Of course, there is certain EBITDA effects out of the investments like furnace, like new forging facilities. As Bernardo said, this forging facilities is necessary to on the long term, mid- and long-term basis, increase the long product line. Haynes and VDM both are very much flat focused, and the potential that we see in combination with NAS is to get a significant player in long product range. So partly there will be EBITDA figures coming out of investment. But of course, the biggest part of the synergies that will be unlocked until 2027 are without any significant investments.
Of course, at the time being, we cannot provide too much information, too much detail in information about the investment plan, and something that we will do it later, once we have the control of Haynes. But of course, some of the EBITDA will come from the increase of capacity.
Okay. That's, I understand. That's, that's clear then. And second question on the unions. I believe the majority of employees, notably in Indiana, are member of unions. Has there already been some dialogue with the unions regarding the transaction? What has been, you know, the initial reaction there? Any color would be appreciated. I'm asking because we've seen recently some pushback from unions on other deals in the metal space in the U.S. Thank you.
Of course, still, we didn't have the opportunity to speak with the unions. We understand that they will receive the message very well. I think, to receive an investor and a new shareholder that will start investing in the area, is gonna be good for the unions. I don't see they are going to face problem with us. This is a unionized company, but it's not necessarily bad. I mean, as the unions can contribute very much to communication with the management and with the strategies in the case of North American Stainless, and we are in Kentucky, we are in a non-unionized state, and we are not unionized in North American Stainless, but that is not going to create any conflict.
I mean, something that we'll have to do later.
In any case, as we understand, Haynes' managing team has already discussed this transaction with union representatives, so they are aware of the transaction. We haven't heard feedback from it yet, but they are aware of it.
Yes. That's, that's very helpful. Thank you.
Our next question comes from Sandeep Peety of Morgan Stanley. Please go ahead. Your line is open.
Hello. Hi, thank you for taking my questions. I have three. I'll take one at a time. So first, does the Haynes acquisition prompt you to entertain a U.S. listing more actively?
Haynes acquisition, as we said, is an industrial strategic transaction. It is not a financial one. We are not looking at anything at the moment, but getting the right synergies, getting the company in place in our, in our world, and making sure we deliver the synergies we are promising to you today, and making sure we are integrating the company the best way we can, as we did with VDM. So we are not discussing or we're not thinking about anything else right at the moment. Thank you.
Perfect. Thank you. And then the second question is on synergies. So, the target of $71 million has suggest a very significant uplift, related to company's recurring earnings basis. Can you please articulate in greater how the $200 million CapEx plan support this target? I.e., this is a continuation of prior question. How much of that $71 million is linked to $200 million of spending?
I don't want to get too much into details at that stage, but the majority of the synergies is not linked to the $200 million. But of course, in terms to growth and further development of the HPA business in the United States, the minority is, of course, also linked to the $200 million, but the majority is linked is not linked to the investments.
Then last question. What's the recurring EBITDA for Haynes today, before synergies? Is $100 million the right level, with synergies coming on top, is that the right way to think about it?
It appears, obviously we are moving in that direction, but still is a bit premature. So more or less, this is the synergies, definitely that we have allocated. We think it's a precise figure, and we wanted to be precise on that. You know, Sandeep, you know our style. We always prefer to be overprudent. We were prudent in the, in the VDM deal, and then we by far have overperformed in terms of the synergies. And what we wanted to give always as always, the explanation to you, is that this is not just a pure consultant estimation as a percentage of savings or combined growth or whatever. So we have... And our technicians have made a proper analysis, and we consider this is achievable.
Obviously, it's achievable, but in the meantime, there should be investments in order to be able to reach that synergy. It's a clear scenario for growth for Haynes in the future, making the proper investments, which obviously for Haynes financially, supported by the financial strength of Acerinox Group, Haynes shall be in position to go ahead through these synergies. We are confident that these investments shall be covered and financed with the cash flow generated, and consequently, this is obviously another virtue. But then the rhythm of the timing for the implementation and so on still is pending to determine. We shall give additional color as much as the pending issues that still are to be defined shall be coming.
In terms of your question on the EBITDA before synergies on Haynes, the consensus estimate for 2024 is $96 million, but that's a consensus estimate.
Perfect. Thank you very much.
Our next question today comes from Tom Zhang of Barclays. Your line is open. Please go ahead.
Hi, both. Thank you very much. Only two questions left from my side. The first one, just sorry, on the synergies again. I mean, with the VDM acquisition, you guys always talked about the initial synergy number as a sort of minimum, and the sort of one plus one is greater than two, kind of discussion. Should we read the EUR 71 million as a more sort of accurate target, or do you think there's upside to that number? That's the first question. Thanks.
I think that we have to be conservative, you know? And still, we have an entry in detail in this analysis. And you have to understand that we cannot share detailed information between the two companies, and that will need further investigation, and we are conservative in our numbers. Normally, in this kind of merger, this kind of operations, the most or the biggest synergies are known or come later, especially from the commercial side, no? For the top line. I think we can wait until we can find some more synergies or go into detail. But today, we think that $71 million is reasonable and is something that we can consider conservative.
Got it. Thank you. And then just the other question. I mean, how do you think about the political risk of this kind of deal? Because I guess it's similar to the union question before, where you've seen obviously push back politically to European or European-owned companies taking stake of US companies, particularly for, you know, an aerospace focus and potentially defense-focused company. Any sort of thoughts you have on that side would be appreciated. Thanks.
We believe this is a very different operation than the large Nippon Steel, U.S. Steel. We are a U.S. company. Our main asset is in the U.S., and that is the company that is buying or is acquiring Haynes. So it's a U.S. company buying another U.S. company. So we don't see why it should be a political issue. On top of it, this U.S. company is going to reinvest additional investments to generate additional synergies, the ones we discussed. So it will be better and good for Kokomo, for Indiana, and for the U.S. in general. In terms of the defense sector, there is a small part of Haynes that dedicates itself to defense, but it's a small part.
According to our discussions, we understand that none of their materials, products in defense are unique. They are not one of the patents, so I don't think, we don't think it should be a problem. In any case, this is going to be discussed with our regulators on CFIUS, and we'll wait for their approval when the time comes... but we don't believe it's going to be the same. We don't think it's the same situation as other foreigners coming into the U.S. with no U.S. presence. We are an American company already. Thank you.
We are an American company and with a very good reputation in, in United States. We are employing more than 600, 1,600 people in, in North American Stainless. We have invested in North American Stainless more than $2.5 billion since the beginning of the, of the plant. I think that our reputation in, in Kentucky and in the United States will be very helpful for this.
In addition to that, the exposure to defense should be limited.
That's very clear. Thank you very much.
Our next question comes from Bastian Synagowitz of Deutsche Bank. Please go ahead.
Yes, good afternoon all. I've got three one left, three questions left, please. The first one is actually on the $200 million CapEx number, which you disclosed in relation to the transaction. Does that mean that the total CapEx number for Haynes will be at a $50 million per annum run rate? And maybe also, can you give us a bit of an early gauge where the overall CapEx for the newer Acerinox Group and the new structure will settle in 2024 and 2025? That is my first question.
Thank you, Bastian. Well, basically, more or less the run rate could be considered. As we have already stated, we cannot give too much color actually on this. Keep in mind that this is the CapEx that has been designed by ourselves. Still, we have not asked to the suppliers for the equipment with all the precise indications and precisions and so on. So consequently, this is something to be determined. We understand that this run rate that you mentioned should be adequate, but we cannot give a further color on that.
This is in addition to the CapEx program that we have in the group, and at the end, this is in addition with the CapExes that already Haynes is contemplating to keep. You can follow their statements on that. This is in addition. So this is as a consequence of this deal, as a consequence of the areas of growth, and as a consequence of the support we are providing Haynes by entering in the Acerinox Group. But we keep our CapEx plan, actually in base. You know that in North American Stainless, we are also expanding. As you may remember, we clearly indicated in the Capital Markets Day that probably the annual estimation of our CapEx should be EUR 200 million.
This obviously is in addition, so the business as usual for Acerinox is $200 million, and these CapExes come in addition.
No, thanks, Miguel, for clarifying. But so that means that the overall CapEx run rate actually will be more like EUR 250 roundabout and actually not go up to, like, EUR 300 or so?
Now we have no further plans. We are respecting and understanding the CapExes that Haynes is actually putting in place and contemplating. And in addition, we have found the areas for growth and the areas for additional volume growth, which is relevant in the States, especially in the sectors where Haynes is strong. So this is an addition.
So, Bastian, remember that the maturity of our investments now in this sector, if you're the one building furnace, you know, the time of construction will be minimum two years. I mean, so we'll start investing with the first payment to send the order. Then we will be busy with the civil works to install later this equipment. Then we receive the equipment, and we have another payment, and then at the end, after testing everything, we will do the last payment. So that process can take easily four years, so that will not be an extreme necessity for forecast for Acerinox Group.
Great, thank you. Then, just to stay on the financial context and, and the balance sheet implications, and can you please let us know how you aim to get back to 1.2 x financial net debt by next year already? What are the building blocks to get there? Are you—like, are there large amounts of working capital synergies as well, maybe from that transaction? And also, do you rule out any equity measures to get there?
Well, it's just more or less following our business projection. As you know, we are presenting four weeks from now our full year statements. You shall see more or less how has been the cash generation of the group in the Q4 and for the full year, which is something that obviously we discussed with you in the Capital Markets Day. We are a consistent cash generator at the group.
The basis for Haynes is also that it shall be a cash contributor, and consequently, the cash generated by the group in the business, combined with EBITDA contribution, which at the end also, as you realize, among our peers, we are the one with the strongest EBITDA generation and the ones that may neutralize the fact that in this year, we increase the debt for financing this deal. It's going to be a cash-
... It's going to be a cash deal, as has been previously. Our strategy for years has been being very strong and keeping a strong cash position in the States. This has been a very successful financial strategy, and this allows us to make a very simple deal in the terms of making a cash acquisition in the States. But the deal still is moving, so consequently, we are comfortable that with this peak in this year, which at the end is absolutely affordable peak, it shall be reduced, and we shall be at the level of 1.2, probably for less than 20 months from now, a year and a half. But we understand that in 4 or 5 years, we could be in the actual levels.
We are a strong cash generator, and we shall keep doing it. Also, Haynes is probably a strong cash generation and shall even go further now in the Acerinox Group.
Great. My last question is actually, slightly higher level question, if I may. And let's say, if we go back to the VDM transaction, it's been very successful. I think you massively overachieved on the synergies. I think your valuation multiplier has not really been reflecting that. You know, you obviously buy even more exposure to the U.S. and to the specialty markets, and you're paying a multiplier, which is considerably above your own valuation and probably much closer to the valuation where you should be trading on.
I know this may be very early days, but with your U.S. and specialties, earnings stream getting to probably 70%-80%, if not even higher, and even with a much more critical mass, is the U.S. listing something which you would consider further down the road, if it would be required to really unlock that valuation discount?
Thanks, Bastian. We already mentioned the issue of the US listing. This is a transaction, industrial transaction, and right now, we are focusing on getting the best out of the business, getting the best out of Haynes, to be incorporated into the Acerinox Group and delivering together a great financial performance. This is what we're focusing right now. It is true that we're becoming a more American company, but that is based on our decisions to go into the market, a very attractive market that we continue to believe in, and we believe it's gonna be very good for the future. We have not discussed the US listing right now. We are focused on the industrial side. Thank you.
Thank you.
Our next question comes from Patrick Mann of Bank of America. Your line is open.
Good day. Thank you very much for the presentation. Most of the questions have been asked. I just wanted to ask, obviously, with the timeline you've given, you're not foreseeing any significant regulatory hurdles to overcome. I just wanted to ask: Could you talk a little bit about the end markets that you'll be operating in and what your market share will be? Are there any end markets where you might face some competition issues? Thank you.
We cannot, due to compliance reasons, we cannot speak about market share. We would not expect any problem with the competition authorities. I think the new group will be very far from the 30% that start to worry the authorities. And we don't foresee any problem, but even and we have to submit it to antitrust and also to CFIUS authorities. Nicholas, you want to add something in the end uses?
No, I don't see any problems there, especially not regarding specific market shares in end industries being far away. I, as I explained to you, the deal is more is very complementary, since the exposure to aerospace or VDM is very low, so therefore, we don't see any problems at end user markets at that stage.
Great. Thank you very much for that color. Appreciate it. That's all. Thanks.
Our next question comes from Alberto Espelosín of JB Capital. Please go ahead.
Yeah, good morning, and thank you for taking my questions. Most of them have already been asked. I have three, if I may. First one is on the strategy with VDM assets in the US. Are you going to operate two different HPA companies in the US, or is Haynes going to be an Acerinox platform in the US and VDM will focus in Europe? Because I see that each group is exposed to different segments, so I assume both companies are different, but they are probably complementary products range. So if you could please elaborate on your strategy here, will be great. Thank you.
We did not define this yet. We will have a very careful look after closing of the deal, and then we will decide exactly how we're gonna run this business in the US.
The States, like, 6 facilities. We have North American Stainless, we have New Jersey for VDM and Reno for VDM as well, and the 3 locations that Niclas explained before in this. So we can combine all our, all our, our businesses, and we will see how we can optimize the future functioning. I think that VDM, it has a small presence in United States, but with a very strong and loyal base of customers. So that will also give us or will strengthen our position in the United States.
Yeah, that's good. Thank you. My second question is, how sure are you that Haynes shareholders will accept this $61 per share price? And also, is it like a hundred or nothing acquisition, so if 51% of shareholders accept the bid, will they still go through?
We are not certain. We don't have a crystal ball, as you can imagine, but we are confident that we are offering a very good value, very good price for Haynes. We have discussed this with the management team and the board of Haynes, and they're confident that this is a good value for the shareholders. So we just believe that our valuation will be the right one for them. And we believe, according to what we hear, that the main shareholders should be going for the approval of the transaction, because, again, it's a very good transaction for the shareholders and for the stakeholders, both in Indiana and the other locations.
We are reinvesting in the company, we're reinvesting in Indiana, and the shareholders should be, we believe, happy with the cash offer here.
Okay, thank you. My last question. Seeing that you are fully focused on HPA and growing on the stainless steel in the U.S., and I know today is time for the acquisition of Haynes, but just one question on your strategy: Should this acquisition accelerate the various exit, and does it close the door to a share buyback due to balance sheet, even if you get more visibility on stainless steel? Thank you.
I think it's in our strategy, as mentioned recently, we are clearly focused on our biggest markets, that is, Europe and the United States. Peru, as I mentioned before, is not a problem for us because we are not losing money there, but very clearly, the geostrategic situations and the new trends in the world are changing. The world is becoming more regional, and we want to concentrate our efforts in Europe and the United States, that are our natural markets. Of course, not forgetting that we have the strongest presence in Africa, no?
So we'll continue with our strategy, focusing on HPA, focusing on United States, but we don't forget what we have in the rest of the group that is giving us the strength that we have as the most global player. For the buybacks question, what we always said is that we will have a... So we will. We published our remuneration policy, and it is based on a sustainable not EUR 0.6 per share, but maintaining the total remuneration. And when we have a buyback, then we increase the per share value. But we always said that we will continue with our industrial plans, that we are an industrial company, and the strategy is to go ahead with the industrial plans.
And when we have an excess of cash or a good opportunity, we can enter in another buyback program. But this is not something that what we are thinking today.
Mentioned earlier by Miguel, this transaction does not change our remuneration policy. So as Bernardo said, if there is opportunity for a share buyback, and we still believe that our share price is quite low, that's a good opportunity to invest as well. But we have not changed our remuneration policy, and year on year, we'll see how best way to remunerate shareholders. But again, this transaction does not affect that.
Perfect. Thank you.
Our next question comes from Iñigo Egusquiza of Kepler. Your line is open.
Good morning. Thanks for taking my questions. Iñigo Egusquiza from Kepler Cheuvreux. Most of them have been already answered, but I have three follow-up questions or new questions. The first one is, Miguel, if you can please elaborate a bit on the net debt of Haynes International, 'cause you are mentioning $172 million to get to the enterprise value that you put on your presentation. And according to Bloomberg and the numbers I have seen published by Haynes, the net debt of this company is slightly lower than that. I don't know if you can explain the difference between these two numbers. This is the first question. Thank you.
Yes, sure, Iñigo. What we were contemplating for reaching the enterprise value was not only the pure financial debt, but also the debt-like items, which include other areas, post-retirement, and so on. So, all the issues that at the end have the relevance on the enterprise value, not only the pure financial debt. So with all of these is where we reach to $172.
Okay. Thank you. A follow-up, Miguel, on the CapEx. You mentioned the EUR 200 million for Acerinox before this new acquisition. This EUR 200 million include the expansion plans in both the US and VDM, that's right?
What I said was that our standard business as usual now is in the range of EUR 200 million. In addition, as you know, it was designed a further investment program in VDM, which is something in addition to that. And also in addition, we are actually respecting and keeping obviously the CapEx plan coming from Haynes, keeping in mind that obviously, after the deal, a lot of issues should be precise or harmonized. In general, we could analyze the standard program of Haynes at a range of EUR 25-30 million. And in addition, we are having for the next more or less 4 years, starting whenever the transaction is closed, the additional program of EUR 200 million.
These $200 million is our business as usual, and in addition, we are in a special investment phase in VDM that has been explained, as well as the ones that now Haynes provides.
Okay. Thank you, Miguel. Very clear. And just a final question to Carlos, if I may? It's a follow-up on Alberto's question on the position from Haynes' shareholders and the potential acceptance or not. I understood your answer, Carlos, but the question is whether you have a minimum capital to go ahead with the acquisition, in case there is a proportion of shareholders that decided not to accept, or you will also only go with the acquisition if you acquire 100% of the company. Thank you.
This is... Thank you, Iñigo. This is special or different statutory merger regulation in the U.S. than we have in Europe or in Spain. In there, we can have a 50.1% vote, affirmative vote from shareholders, and with that, we get to 100% of votes. So we are going for the 51%, favorable votes from shareholders to get to the 100%. So we are not going to get a stake in Haynes. We're gonna get the full Haynes to be able to realize potential synergies and unlock the value that we believe the company has together with us. I don't know if I answered the question, Iñigo.
Yes. Thank you. Gracias.
The next question comes from Maxime Kogge of Oddo BHF. Please go ahead.
Yeah, good morning. I mean, most of my questions have been answered, maybe one on pollution. Actually, the company, Haynes, had been accused previously of pollution, I mean, emitting harmful gases. Do you think that the situation is now under control, or are you completely reassured in that respect, or... And if not, what do you plan to do in that area?
You know, all the industrial companies can have a problem, you know, that is something that is not, is not unusual, is not desirable, but is not unusual. And Haynes has a very clear environmental policy, is very focused on ESG, especially in this part, that is environmental. And I fully believe that this is a past problem, and of course, we will put all our efforts to not to happen again, but nobody, nobody's free in this business to have a problem from time to time because of the failures in equipment or whatever, but it is not a badly reputed company, is the opposite.
Okay. Okay, thank you.
The next question comes from Krishan Agarwal of Citi. Please go ahead. Your line is open.
Hi, thanks a lot for taking my question. I have only one remaining, as most of them have already been answered. Are there any kind of a breakup fees associated with the transaction in any given circumstances if the transaction is not able to go through?
We got it, the question correct. Are you asking about the break fees on the transaction?
Yes.
Well, there are a standard breakup fees in case the transaction doesn't go ahead, in case, Haynes, management decides not to go ahead with the transaction, which they have already agreed to. And this standard, standard, breakup fee, which, as you know, in the U.S., between 3% and 4%, is quite standard, so it's thereabout.
Sorry, 4%? Okay. Okay.
To 4% is quite standard there.
Yeah. Understood. Okay, thank you.
Our final question comes from Robert Jackson of Santander. Please go ahead.
Please go ahead.
Hi, good afternoon, gentlemen. Just a general question. What would you say would be the main challenges that you think you face with the integration over the coming 6-12 months? And secondly, what was the thing you most liked about Haynes? Thank you very much.
I think, in the post-merger integration process is always the biggest challenge to get the management and the team aligned. I think it's gonna be one of the big challenges will be to create a post-merger integration, integration process on eye level. It very much depends, of course, you're always having cultural differences in different countries and different companies, but this is something that we experience as a very positive impact with the VDM integration.
... So therefore, I'm quite positive that with the social competence and the common knowledge about this industry, that we more see the chances than the risks, and that this is gonna make this process as successful as the integration of VDM.
I think that first of all, we have the very recent experience in VDM, and it's, I think it's a successful story. Also, you know that from all our history, we have been very proud to say that we are a very lean company, so we don't have an excess of personnel in any area. And third, I think that we have met the management team of Haynes. We are very happy with the reception. I think that we are very much aligned. Of course, we will have cultural issues, but we are very much aligned. I think that they are happy to have Acerinox as a shareholder. I think that this is, as Niclas mentioned, the best shareholder that they can have.
It's a shareholder that is committed with the company, that is committed with the growth of the company, so this is very important. Of course, we are welcoming all the management and all the people working for Haynes as they become a part of the Acerinox family. I think that they will be very well received here. They will be welcome, and we are happy to have all the efforts and all the skills that Haynes has, and all the tradition and reputation in specialty metals making.
As Bernardo said, we are very excited about Haynes. We are very excited about what they have, about the products, the end markets, what they are producing in those three plants. But what I would say, you ask about what is, what we like the most, as well as said, the management team. We have met them a few times. We like them. It's not that we just like the CEO or the chairman, with whom we have discussed many, many times over the last few weeks, but also second-level management team. They are extremely professional, and we hope and count that they will continue with us to deliver good value for our shareholders. So management team, for us, is a key.
As well as I said, the cultural fit is also important, and we believe we have that cultural fit with them.
Okay. Thank you very much indeed.
Okay, thank you. Thank you very much. That conclude today's conference call. Thank you for joining us today. Thank you for all the presenters. As you can see, we are very excited with this announcement. We will continue to exchange opinions with you in the coming weeks, and we hope to see you in the next set of results that will take place the 1st of March. We will release on the 29th of February, and have the presentation on the 1st of March. Thank you very much.