The conference is now being recorded. Good afternoon, ladies and gentlemen, and welcome to the Gerresheimer conference call regarding the acquisition of Centor. At the moment, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Now I hand over to Benjamin Strohmeyer, Manager, Investor Relations and Credit Relations at Gerresheimer AG.
Thank you. Ladies and gentlemen, thank you for joining the conference call. Earlier today, we announced the acquisition of Centor. We are pleased to provide you with more information about this acquisition on this conference call. The remarks are accompanied by a set of slides. The press release is posted on the IR page of our website at gerresheimer.com/investorrelations. Our agenda for today starts with the presentations by our CEO, Uwe Röhrhoff, and our CFO, Rainer Beaujean. At this time, all participants are in a listen-only mode. After the presentation by our CEO and CFO, we will enter into a Q&A session. Before we start, I would like to remind you that the presentations and discussions are conducted subject to the disclaimer. We will not read it, but propose we take it as read into the records for the purpose of this conference call.
It is now my pleasure to turn the call over to Gerresheimer CEO, Uwe Röhrhoff.
Thank you, Benjamin. Ladies and gentlemen, good afternoon and welcome to our call. I think this is an exciting day for Gerresheimer. As announced this morning, we reached an agreement with Nemera Development S.A. to acquire Centor, the number one supplier of plastic vials for oral prescription drugs in the U.S. This acquisition represents a very important step in extending Gerresheimer's footprint in the primary pharmaceutical packaging market in America. In the U.S., we are already very strong in pharmaceutical primary packaging made of glass, and we are growing with drug delivery devices and now extend our business with vials and closures for oral drugs for the pharmaceutical retail market. This page outlines the key terms of the transaction. The total consideration of $725 million represents an EBITDA multiple of 9.8 times, based on last 12 months pro forma figures as of June 2015.
The acquisition will be fully debt-financed and driven by the high cash generation of Centor. We expect significant deleveraging within a short time frame. We expect that the acquisition, which is only conditional to antitrust approval and therefore should be closed in Q4 of our financial year 2015, will be very beneficial for our shareholders. That means that we expect this transaction to be directly adjusted EPS accretive by a low double-digit percentage already in 2016. On slide four, you can see that it's not only the new financials that are compelling, but also the strategic rationale behind the acquisition makes perfect sense. We are pleased to highlight that with Centor, we will acquire a business which meets all our acquisition criteria.
Centor is the market-leading supplier of plastic vials, an iconic must-have product in the U.S. prescription drug dispensing infrastructure, by the way, a market with significant entry barriers. In this market, Centor is the clear number 1 player. Centor has a focused business model characterized by a secured customer base, long-term relationships, and an industry-leading manufacturing capabilities. We see a perfect fit with Centor because the primary plastic packaging business is one of our core competencies in our group. We are very familiar with the production process and the material used at Centor, which is plastics. The only difference is the new sales channel, but there Centor has a very experienced and strong sales team already in place.
Plus, the business has very high barriers to entry, such as strict regulatory requirements, compatibility with existing infrastructure in the pharmacies, relatively low cost for the vials relative to the revenues in the pharmacy, and a clear customer preference for Centor's product. We expect moderate growth going forward, in line with the very stable market development expected by IMS Health, and this combined with the proven capability of Centor to pass on inflation to customers. For the Gerresheimer financials, that will actually mean that the group's adjusted EBITDA margin will go up directly in full year 2016 by about two percentage points as a result of the Centor acquisition. As already mentioned, the transaction should be adjusted EPS accretive by a low double-digit percentage, starting directly to be accretive in the financial year 2016. Centor will directly increase the financial strength of Gerresheimer.
The next few slides will give you a little bit more details about Centor's business. On page five, you see a very brief business snapshot of Centor. Centor provides plastic vials and closures for the U.S. prescription industry, which is structured around the so-called pour-and-count system, whereby the exact number of prescription, typically pills, is delivered to patients in vials. Pour-and-count is an established feature of the American health system, with vials constituting the standard for oral drug packaging. With vial closures, Centor supplies the complete system. I would like to highlight the following key facts around the company. Centor is a carve-out of Nemera Group, which is fully owned by Montagu Private Equity. Nemera is a former business of Rexam Healthcare, divested in 2014. Today, Centor operates largely standalone with very limited services provided by Nemera.
The entire production is concentrated in one highly automated manufacturing plant, which is located in Berlin, Ohio. This plant is in excellent condition regarding all aspects of production and technology. Centor has a focused product portfolio with about 85% of sales derived from the two leading product families in the U.S. vial market, the Screw-Loc and the 1-Clic, which are the gold standard product in the market. Every American basically has used these products already and does so regularly. Accordingly, Centor is a clear number one player because the end customers, which are the patients, have a clear preference for its product. Moreover, the performance in the current financial year further underlines the strong financial track record over recent years. From full year 2016 on, Centor will contribute to our consolidated group figures.
To give you an impression, in the last financial year 2014, Centor had pro forma revenues of $167 million. On page six, I would like to explain why Centor is such an interesting business operating in a very attractive niche market. The business has strong characteristics. About 4 billion retail prescriptions are dispensed per year in the U.S., which is a massive amount. About 80% of those are filled with generics. About 62,000 pharmacies use plastic vials and closures for the retail market. About 70% of retail prescriptions are dispensed in plastic vials. The U.S. prescription retail market is expected to grow by a bit more of 2% per year until 2019. This market, in which Centor is a clear number one, has high barriers to entry. Regulatory requirements are in place.
The compatibility with the existing infrastructure means that robots in pharmacies need to be able to handle the retail vials. Here, a very high share of installed robots are calibrated exclusively to Centor vials. Low costs, and that means that typically the cost of these plastic retail vials in the pharmacy amount to less than 0.1% of the revenues generated, while they represent a significant value added for the user. That means that customers have a clear preference for Centor's product, which are absolutely iconic because really every American knows intuitively how to use them. It's a standard product on the market. Centor has very long-standing customer relationships with prime direct customers, such as the big pharmacy chains like Walgreens or Rite Aid, or supermarkets like Kroger. It also has long relationships with prime wholesalers like McKesson or AmerisourceBergen.
Additionally, the business profits from the fundamental growth drivers that strongly underpin continued growth. These are the growing and aging of the population, increased medical coverage, and the need for affordable drug therapies. These trends are definitely here to stay. That is why it is expected that this niche market continues to grow in the midterm, thanks to the clear preference of the end customer for convenience. Now I hand it over to Rainer, who will go with you through the financials.
Thanks, Uwe. Good afternoon, ladies and gentlemen. Also from my side, a warm welcome. On page seven, you see a very high-level overview of selected pro forma financials. Please note that these pro forma financials are based on 2014 actuals. Do not incorporate the effects from the disposal of our tubing operations announced earlier this year. The only exception is the illustration on the pro forma adjusted EBITDA and margin, which excludes the tubing business. You can see why we are very excited about the financial contribution of Centor to our group financials. First, it significantly strengthened our presence in the Americas region, underpinned by the fact that the plastic packaging business now also has a major production footprint in the U.S. The relative EBITDA and operating cash flow contribution reflects the strong margin and cash profile of Centor.
With this acquisition, we will for sure also significantly increase our overall profitability as well as our cash conversion rate in the whole Gerresheimer Group. The pro forma profitability will increase markedly by about two percentage points from 18.6%-20.8% adjusted EBITDA margin. The strong cash conversion rate, the ratio of operating cash flow to adjusted EBITDA actually increases from 41%-48%. For sure, a lot higher than before. Let's spend a few words on the planned financing of the transaction. Please note that no capital increase is needed to finance this acquisition. The transaction will be fully financed through our existing revolving credit facility and a new bridge loan provided by our relationship banks.
Due to a competitive process, we were able to achieve highly attractive terms for the bridge loan, which will be replaced by long-term debt instrument after the closing of the transaction. Pro forma for the acquisition, net leverage will increase temporarily above three times EBITDA. However, proceeds from the sale of the tubing division will soon reduce the initial debt financing volume. Moreover, the outstanding financial performance and cash generation of Centor enables a quick deleveraging and in general leads to a more stable business due to even more regional and product diversification. With this, let me hand it back over to Uwe.
Thanks, Rainer. I move on to slide nine now. Assuming that the acquisition of Centor will be closed during the fourth quarter of the financial year 2015, Gerresheimer expectations for 2015 remain exactly the same. We fully confirm our guidance for the full year 2015. Gerresheimer anticipates organic revenue growth between 1%-3%. This corresponds to a revenue corridor of approximately EUR 1.3 billion-EUR 1.33 billion. Regarding adjusted EBITDA, Gerresheimer expects an increase in a target corridor of €255 million-€265 million at constant exchange rates. Capital expenditure in financial year 2015 is forecasted to represent around 9%-10% of revenues, again, at constant exchange rate. Here you see there's absolutely no change, and we remain fully on track to meet this guidance. Any contribution from Centor in Q4 2015 would increase the reported figures. That is for sure important to remember.
Please move on with me to slide 10 that show the first indication on our midterm outlook with Centor as part of Gerresheimer. Assuming completion of the Centor acquisition during the fourth quarter and completion of the sale of the glass tubing business by the end of the calendar year 2015, we update our outlook for the coming years in order to reflect also the financial impact of the Centor acquisition. Our expectations for the financial years 2016 to 2018 are included in our first indication, including Centor now as follows. Annual organic revenue growth is expected to average 4%-5%, and that on an increased base in full year 2016 if the Centor deal goes through in Q4 2015 as expected.
The reported base revenues for full year 2016 would be higher due to the initial revenue contribution from Centor, which generated $167 million in full year 2014 on a pro forma basis. The adjusted EBITDA margin will be approximately 22% by 2018, two percentage points higher than before in our old midterm outlook. Overall, that means that Centor will directly improve our strong financial profile even more. To clarify, this means that the adjusted EBITDA margin will be about two percentage points higher in every year from 2016, driven by Centor. This first indication should help you to understand the implications on our group, assuming, again, that the Centor acquisition will be closed latest by the end of the financial year 2015. Finally, let me wrap up the key points from the presentation. We are very excited to inform you about this value-generating acquisition.
The acquisition expands our primary packaging offering in the U.S. as the company focuses on stable niche markets for prescription packaging. We do not foresee any issues with regards to the integration of the business, driven by the fact that Centor's operations are, to a large extent, independent from the current owner, and that Centor will continue to operate within the Gerresheimer Group. Centor shows an excellent financial performance with superior profitability and high cash conversion, which will now benefit the whole Gerresheimer Group. This means that we expect that the acquisition will be very beneficial for our shareholders. With that, I hand it back to Benjamin.
Thank you both for your presentations. We will now open the call to questions. The lines are now open for any questions you may have. To ask questions, please dial the nine, plus star on your phone. Okay. The first question comes from David Adlington from J.P. Morgan.
Good evening, guys. Thanks for the questions. Some housekeeping ones first, please. Just maybe if you could give us an idea of the depreciation we should be assuming on Centor and the interest rate on the debt. Secondly, you're not assuming, I don't think, any synergies as part of the transaction. Do you see any scope, particularly around some cost synergies? It looked like you should have some cost synergies, at least on the bottles business. Finally, just a sort of slightly bigger picture question. Obviously, this was part of an asset that came up for sale a couple of years ago, but you walked away from it then. I suppose it's not quite the same asset. What's changed since you originally looked at it to make you re-look at this asset this time around? Thanks.
Yeah. Thanks, David Adlington. This is Uwe Röhrhoff. I'm going to answer the last part of your question. Yeah, we certainly took a look at the Rexam Healthcare business, which consisted at this time out of three components. Centor was one part of it, and at that time already looked very attractive. The overall package for us at that time was not attractive. Since we were now able to look at a separated, highly focused business, this presented itself as an attractive opportunity for us to pursue this acquisition. The synergy potential, I'd say, is, given the bottom line contribution by Centor, rather immaterial. We certainly integrated into our overall larger footprint in the U.S. with synergies on the HR side, on the IT side, on the financial side. In the line of the overall numbers, that is really not such an important effect here to look at overall.
From that perspective, we expect some synergies. There are clearly no synergies on the sales side since this is a new channel for us, and particularly, Centor has a very strong and experienced sales team completely dedicated to that channel. Of course, expect us a little bit to do on the technology side. As I mentioned before, this is a highly automated plant, there is a limited need to start activities here right after the acquisition. Synergies, again, are not playing a major role in this acquisition subject.
Let's talk a little bit about interest rates. You've seen that we are doing a bridge financing of EUR 550 million. In bridge financings, you normally have the situation that the margin during the first three months is lower than the margin in the last two months of the bridge financing. We have a bridge financing for 12 months, and we also can go further another six months. When you would do an assumption and you would say, "Okay, we take six months, and after six months, we hopefully have done the takeout." For the first six months, you can assume that the margin is pretty close to the revolving credit facility, the interest rate. Overall, that means roughly around 1.1%, then you have on top of that a one-time cost, which normally can come up to EUR 3 million.
This together would be an assumption for the first year. If we can make Centor takeout after six months, we don't know. If you would assume it's going longer and long-term, it's difficult to forecast, but with around 3%, 3.5%, you're not totally wrong long term. We have to think how we refinance it long term, and that's, I would say 3%-3.5% is what perhaps is not totally wrong. Third question was about depreciation. Depreciation is
Well below the normal depreciation which we have, which you normally should assume based on low CapEx. This is not a very CapEx-driven business overall, as Uwe already said.
Okay, great. Actually just one follow-up question as well. Will this have any impact on the group tax rate given the U.S. exposure?
We believe, when you look at our tax rate right now, which you normally should assume between 30%-32%, that this won't change dramatically because there's always the tax group, which you will have in the U.S. We also can handle a couple of tax based on the things which we are doing there.
Great. Thanks very much, guys.
Good. Next up is Daniel Wendorff from Commerzbank.
Thanks for taking my questions. I have two remaining, actually. One is considering the entry barriers for the business. Maybe you can talk a little bit more about them, also in particular with regards to regulatory requirements. What are these actually? Do the plastic containers have to be approved for this purpose, for example? I don't know. That's why I'm asking. Second question would be regarding the market share of Centor in the U.S. You mentioned it's by far the number one. Can you potentially attach a figure to that? That would be helpful. Thank you.
Yeah. Uwe. The market share is over 50%, is what I want to say. As I said, in a small niche market, that's significant. Entry barriers are various. Of course, primary packaging is somewhat regulated. It is, however, not as regulated as, for example injectable packaging by the FDA. From an FDA perspective, that is certainly less. Regulation comes more through some typical USP. Second, you have obviously the convenience aspect, since I've lived in the U.S. for quite a while. You basically go in, particularly elderly people, and try to buy their prescription always at the same pharmacy to basically obtain the same type of packaging, because then they know exactly how to do this and how to open it. Here, Centor has actually a patented product family that's particularly attractive for the use, because it can be used with a child protection feature.
If you reverse the cap without a child protection feature, it is particularly attractive to elderly people, because it is much easier to open. If you use it the other way and you have no smaller children. The Screw-Loc product is basically the standard of the American market, so everybody, I think, knows how to open it, other than you are an immigrant and you buy it the first time, like it happened to me once. That is from a convenience aspect. Second is almost 40% of the pharmacies use robots. Those robots are extremely expensive, and the robots are generally calibrated for the product of a certain manufacturer. Most of the robots in the U.S., due to the high market share of Centor, are calibrated for Centor.
Second, due to the channel, you basically need particularly to service smaller regional pharmacy chains. You need the access with larger contracts to large wholesalers like McKesson, that basically service the pharmacies with all of their pharmaceutical products. If you have that access, then you basically can automatically dispense the vials through that. If you do that in a different way, that is obviously much more expensive than servicing the pharmacies. Centor actually has most of the large wholesalers in contract and actually has about more than 1,000 contracts with end customers directly. We believe that out of this makeup, a very well-balanced system. Not to mention that this is a product in the U.S., completely different than in Europe. Here, it's cost-effective.
You dispense mainly unbranded pharmaceutical prescription drugs, oral drugs in a packaging that also has basically no branding on it other than the name of the pharmacy. That's extremely attractive for the channel to use and a system that is in place I think for almost 100 years. Very stable business environment.
Thank you very much.
The next question comes from Madelynn Matlock from Pioneer Investments.
Yes. I just wanted to ask a little bit more about this pour-and-count system that's used in the U.S. that's different than other parts of the world. Why do you think that is, and do you see any long-term risk or opportunity in that system as it stands now?
I think that for us was actually one of the key questions to assess the business model in the United States. Mexico and actually Canada are using that system. It has been introduced for a very long time and basically set up to allow the exact dispensing and the reduction of waste by medication to the patient. The label tells you exactly how to use it, what's in it. There's the actual amount of pills per prescription is in, and the cost, obviously, for the packaging is extremely low. We basically have not found using market know-how and consultants that see the risk for that business model to change. I think that is pretty much common understanding in the United States and in Canada.
We believe, particularly with the trend to more unbranded generics making the majority of the dispensing of pills, that this system is uniquely qualified to deliver what the design of the health system in the United States has planned with it, basically to keep the cost low.
Thank you.
Okay. The next question comes from Oliver Reinberg from Kepler Cheuvreux.
Yeah, good afternoon. Can you hear me?
Yes.
Great. Oliver Reinberg from Kepler Cheuvreux. Three areas of questions for me. Firstly, just to understand the business a bit better. The Revatio, which obviously calibrated for you, is it actually just one manufacturer of this Revatio? And also, what is actually the percentage of sales of Centor that is derived by the top three U.S. pharmacy chains? Secondly, on the growth, you talked about the market growth was 2%. Shall we assume a similar growth rate for Centor given the fact that they're market leader? And can you also talk about the margin level? Is this sustainable? Is there a kind of downside pressure or can you actually further leverage that? And also on growth for the Gerresheimer Group. I think on one slide you indicated that the deal on a pro forma basis has about 220 basis points of margin accretion.
I guess it's now even higher given the stronger U.S. dollar. If I do my math and baking that onto 2016 consensus estimates, I think the margin accretion post the consolidation of Centor is somewhat limited. Can you give us any kind of color? What is the growth potential for EBITDA of the Gerresheimer Group post the consolidation of this transaction? Probably just finally in terms of housekeeping, can you just confirm, I assume there's no minority charges that apply and I assume that the fair value and amortization are tax-deductible and can you quantify them? Thank you.
A lot of questions. I think.
Should I start?
Rainer starts. Okay.
Okay, start with the fair value amortization. First of all, we haven't done our purchase price allocation. That's something which we have to perform at that moment when we have closed the deal. Uwe will talk a little bit about customers in a second, and how the situation looks like. We hopefully can put a lot on customers. For sure, we also will write off pretty fast, specific parts of the difference, because that's also important for the internal capital employed. On that basis, it has to increase then further on because the capital employed is then pretty high because as you know, we take goodwill also as part of the capital employed and therefore we really calculate correctly.
It is important for us that we also write off and make a fair value amortization, which is pretty high in the first years. We don't know right now because it all depends on the purchase price allocation, which we haven't performed as of now. Margin level. We believe that the margin level is pretty sustainable. Uwe already explained the market, we don't see a decline there. We believe that the margin is good and, but, we're not telling you right now how this can increase, go down or whatever, because we believe it's stable and, we have to finish our work and then we have to make, first of all, our initial consolidation and thereafter, and that's the reason why we also call it first indication, because we really would like to finish it because we have two transactions right now.
First of all, the sale of the tubing business, which has to be finished up to the year-end as well as the first consolidation or initial consolidation of Centor. That's something which we have to do first before we can be more precise on that. I think some-
Minorities.
Sorry?
Minorities.
Minorities. There are no minorities coming with this transaction. We buy this company 100%.
On the customer concentration, Centor has a significantly higher customer concentration than the Gerresheimer portfolio generally has. That is due to the nature of the business in the U.S. with some larger wholesalers servicing a lot of end customers. On the other hand, it is worth mentioning that Centor owns contracts with the end customers that are serviced through wholesalers or a larger part of the end customers, so that there is a direct line always to the pharmacy or to the pharmacy chain. From a concentration perspective, there is a significant amount of revenues going through the top 10 of the customers. On the risks for growth, we basically, in our due diligence, looked at a number of things.
I have already touched on one, which is the risk for the pour-and-count system to stay in place in North America, which we saw extremely low. The second one is obviously a potential consolidation in the market, even though that the last already, the CVS or Walgreens are already quite large. We looked at that consolidation of the pharmacies has actually not happened in the past. There was always a slight increase, but just recently CVS bought the pharmacies of Target, and there was a consolidation. We basically have taken that into account in our due diligence and our assessment of the company that there is a potential for consolidation. Probably not a top-line risk.
The second one is we looked at balances for opportunities, and there are a number of areas in the market where Centor has larger opportunities, where the share of Centor at certain customers or certain chains is very low. We believe that the company has a very balanced risk and opportunity profile for the revenues. I would say going forward, my advice to you would be in your models, let it grow with the market. That is probably a fair and safe assumption.
From currency, the risks are only translational.
Right. Can you just confirm the amortization charges are tax-deductible, correct?
Yes. At the end, you have to take a deferred tax calculation on that basis, we will find, and we have analyzed for sure also the tax situation so that we are pretty optimistic, that we can, as I already said before, that normally if you would assume in the U.S. that the tax rate is around 38%, depends on which part of the U.S. you are, in some case could also be lower, that we can keep the overall tax rate for the group at around 30% to 32%.
All right. Thanks. The last follow-up, can you just give us a number, what percentage of your sales of Centor are the top three clients? Also what kind of EBITDA growth we should expect for the Gerresheimer group post the consolidation?
Unfortunately, we cannot give you guidance on that today. We have to stick to the guidance we have provided on the midterm. Sorry that we cannot help you further on that.
The client concentration?
As I said, the top 10 customers make a significant amount of the overall revenues.
Okay. Thanks very much indeed.
Good. Let's hear the questions of Jan Keppeler from HSBC.
Thanks for taking my questions. Only two remaining. The first one, you already touched this, is on ROCE. I was just wondering if you could quantify it a bit further, what the impact on the ROCE will be from the acquisition. Secondly, I mean, you have now acquired another strong cash-generating unit. I was just wondering if this somehow is impacting your view or your strategic view on the life science division, especially with the increased leverage.
Life science I can answer pretty easily. Nothing has changed here. It is at the end, a cash generator. We have a high return on capital employed. On the other side, long term, it is like in the past, not strategic, but as long as there is no good opportunity for us to divest, we're not doing it. We like it because it's generating cash and that's the reason why we think it fits our group and helps us to set the basis also for further acquisitions or other stuff. Return on capital employed, as I said, very important is the purchase price allocation, because it all depends, also going on further, how much goodwill you will have, because goodwill is not written off. This is influencing. At the end, you have all the numbers there.
You've got the adjusted EBITDA multiple. You can make up your mind for the return on capital employed. For us, most important here is that the group EPS is increasing very well, as already said. Overall, it's a very good financial deal and makes me happy because from a financial point of view, it's a very good deal.
All right. Thank you.
Let me ask you, are there any more questions? If yes, please dial nine plus star. Okay, another round. Let's start with Marcus Wieprecht from MainFirst Bank.
Yeah, good afternoon. Marcus Wieprecht here. One question on the history. Maybe you could share with us a little bit the previous historic performance of Centor in terms of revenue growth and margin development. As I understand, it's a pretty historic company with roots that date back many decades ago. How good is your visibility backwards?
Well, I can actually, without going into too much detail, because we all have responsibilities for certain confidentiality. I can tell you, I do know the business for 25 years personally. It has been an old OI business, Owens-Illinois. Gerresheimer goes back to an old OI history as well. Most of the management has been there for many, many years, so it's extremely stable. I can tell you that the management team here has always delivered extraordinary financial performance over the years. Revenue growth that you would expect from a market leader.
Okay. Any meaningful volatility on the margin side, or has that also been fairly stable over the years?
What you can expect is always the same, what you generally see in a plastic business. You have three main drivers for margins on the short term, which is your resin prices, where the business here, Centor, has pass-through clauses. That goes always with a small time delay that might impact margins short term favorably or unfavorably before it catches up. The second one is you have contract durations between two and three years. Here and there, you might see growth opportunities, profit improvements, if you capture more volume or if you have a discount, a small dip, but very, very stable. I tell you, over the years, a very, very stable, unbelievably stable financial performance from my perspective. That is the nature of the business because the spending on those type of product is not discretionary.
You have a prescription, you go and fill it, and the likelihood that it's filled with the Centor product is larger than 50%. I think that is a nice situation.
Yeah, indeed. Thanks very much. Very helpful.
Okay. Next question comes from Gunnar Romer, Deutsche Bank.
Good afternoon, everyone. Gunnar Romer, Deutsche Bank. Thanks for taking my question. The first one would be with regard to integration cost, whether you can quantify those and some timing behind. Second question, coming to the margins of the acquired business. When I do my calculations, I think it should be more like 240 basis points accretive to your margin, if not more. Therefore, I have to basically come back to Oli's question earlier, whether there's anything we should bear in mind with regard to the margin outlook of Centor for next year, potentially, or is it just conservative planning at your side? Lastly, whether you can comment on EPS accretion on a reported basis and the timelines you would be considering in this regard. Thank you.
For the reported EPS, we never guided that, by the way, because it's very difficult and it all depends on the purchase price allocation, because it depends how much fair value amortization I have, and so on. Therefore, we would never go this path. Before we haven't finished the purchase price allocation, we have to wait up to this point. Integration costs. We believe this is a very small number overall because it's a business in the U.S. We already have businesses in the U.S. We manage our U.S. business in a tax group, and this tax group is also leading it. Therefore, and this is close to Vineland, and that's at the end what we do there, and there we will integrate it, and at the end, then we manage all of that from an operational point of view.
For sure, we'll be part of Plastics & Devices, the top managers in Plastics & Devices will take the responsibility for that. For finance and legal and personal and so on, it will be managed with the help of our people, which we have in the U.S. Third question.
Margin.
Can it be more or less? First of all, we give you a first indication. I think it's a good indication. It's not a full outlook, normal outlook we normally will do when we have finished our year. Again, I have to repeat it. We have to, first of all, finish our sale of the tubing business, as well as we have to start with our initial consolidation. We know, and we hope it will happen for Centor in the last quarter of this year. Thereafter, we have a better feeling, and then we will discuss further other indications or outlooks later on.
Okay, thank you. Maybe just one follow-up, and sorry to insist here. Can you comment on the margin development of Centor next year? Or to put it differently, would you be in a position to rule out a margin decline at Centor next year relative to the pro forma numbers you've provided?
Number one is that we give you guidance for next year. When we give guidance for next year, which is January, generally in February. We have to see how the integration goes. We have a transition service agreement with the business for a while and integrated. There could be obviously smaller impacts due to the integration and the separation, but we do not expect that to be of any significance for the business going forward. Unfortunately, I have to ask for your patience to get more details up to the point when we generally do that. We foresee the margin to be stable.
That's fair. Thank you very much.
Okay, last chance to ask questions. Nine plus star. Okay, if that's not the case, we would like to thank you for joining us today. Please note that we are going to publish our Q3 results on October 8, 2015. Goodbye.
The conference is no longer-