Morning, and my apologies for these technical issues we had. I hope everyone had a chance now to dial in. If this is not the case, of course not for your listeners, but for the others, we will also have at 3:00 P.M. another conference call where we will go to all the details of the slides. Today in the morning, we tried to keep it quite short. We wouldn't do a quick presentation, just to give you some highlights on the chart and give you guys some chances to ask questions afterwards. The idea is to conclude that call in, let's say, 30-40 minutes, and let's say give you the chance for the most pressing questions. As I said, we will elaborate a bit more deeply, also for our U.S. friends, in the afternoon at 3:00 P.M.
Last but not least, I would remind you that we have a safe harbor statement stated as usual in the front of the presentation. With that, I would like to turn over to Markus.
Good morning, everyone. It's a morning where Covestro made a significant step forward to also become a leading sustainable coating resin player. As you have read this morning, we reached agreement with DSM to acquire DSM's resins and functional materials business. With this conference call, we will present you the details of this transaction, and you will see how attractive this acquisition is for our CAS businesses. DSM's resins and functional materials business, in short, naming it RFM, is a compelling strategic fit with a highly complementary portfolio and technology. With the acquisition, we are shifting our CAS portfolio further towards high-growth markets, which are driven by sustainability. Strong synergistic benefits will create significant value, and the integration will benefit from comparable sustainability and innovation-driven cultures and corporate values. Now, on slide number three, you see the overview of the transaction.
I will not go through all these details because we will cover that throughout this presentation. So therefore, I would like to ask you to turn to page number four. Here you get an overview on what RFM is. In 2019, with 1,800 employees, RFM generated sales of around EUR 1 billion and EBITDA of EUR 141 million. This was an EBITDA margin of 14% and went along with a free operating cash flow of EUR 93 million. RFM is a global leader of sustainable coating resins, majorly active in specialty resins and also in energy-curable solutions, as well as powder coating resins.
You also see the industries that RFM serves and which are highly complementary to our CAS business, with, for example, exposure in architectural and packaging. Now I'm skipping the next page, and I'm directly going to slide number six. You see how excellently RFM contributes to our sustainable vision.
Around 85% of its sales in 2019, RFM achieved with sustainable technologies. In the overall coating resins market, the share of sustainable technology is 55%, and demand is strongly increasing. So with RFM's very high share of sustainable technologies, we are expecting from RFM a high-growth CAGR of around 5% per year. And so RFM and CAS combined will found a leading supplier of sustainable and high-quality products with low environmental impact. From slide seven, you get the structure of our future CAS segments. The bolt-on acquisition of RFM increases CAS sales from around EUR 2.4 billion to EUR 3.4 billion, and it increases the share of coating resins to 60% of total CAS. RFM's product portfolio is complementary to CAS. CAS is in a well-established position in water-based polyurethane dispersions. RFM adds the complete range of water-based polyacrylate resins.
So this is a significant step in our long-term strategy to strengthen our sustainable and innovation-driven businesses. You also see here the comparison of industry shares within coating resins before and after the integration. You see how the integration of CAS and RFM leads to a much more balanced portfolio of customer industries. And with that, Covestro also becomes a global leader in the attractive growth market for coating resins. This is an overview on the business impact. And for the financial impact, I'm now handing over to Thomas.
Yes, thank you, Markus. Thank you very much, and also a very warm welcome to everybody on the call from my side. I'm on page nine of the presentation, and as Markus said in the beginning, the excellent fit of the RFM business creates significant synergies of EUR 120 million. And I would like to show you where these synergies are coming from. So if you look at that slide, you see that out of the EUR 120 million total synergies, we identified EUR 80 million of cost synergies, so this is two-thirds of it. And for this, we will bundle our sales and marketing functions, where we have overlapping applications and customers, and you can see this makes up about 25% of the total cost synergies that we identified.
And the other big chunk is in G&A functions, where we will integrate the RFM functions into the existing Covestro support structure that we have. What you also see is that we have quite a high contribution from purchasing synergies, and I can tell you that since our product portfolio goes along very well with the RFM business, we also have very complementary raw materials, so we can use the optimum from both sides, and we can shift also from external to in-house sourcing with the new product that we are bringing together. And last but not least, I would just, say one word on production, that will ultimately really contribute when we bring our efforts together. We will not only save on the CapEx side, but we will also have significant synergies on the OpEx side. So with that, let's turn to the next page.
Slide 10 shows you the remaining synergies in order to reach the EUR 120 million, and that is EUR 40 million from revenue synergies. And as you can see here, the biggest chunk comes from cross-selling, which we have identified, and that potential mainly derives from two sources. First of all, the complementary product portfolios increase the share of wallet at the customers, so we can approach the customers with a full portfolio at once. And secondly, since RFM did not have a full global presence so far, we can use the existing Covestro setup to market the RFM products in additional countries. And then in a subsequent step, we will then also create benefits from combining and integrating both portfolios and use this combined portfolio as a basis for new product development, which will, of course, take slightly more time.
Now, talking about timing, if you switch to slide 11, you will see the ramp-up of the identified savings, and, again, you will find the EUR 120 million, which represents 12% of the RFM sales in 2019. And in order to integrate the RFM business into Covestro and to realize those identified synergies, we're expecting total implementation costs of EUR 140 million, which will mainly occur in 2021, and you will find this statement also in the second bullet on the right-hand side. So what is important to me is that by 2023, two-thirds of the identified synergies will be fully realized, and that goes along with a very quick realization of the cost synergies, while it is obvious that the identified revenue synergies will require a slightly longer ramp-up phase. But latest by 2025, we are expecting all synergies to be fully realized.
So with that, let's just have a quick look on slide 12, where you see our transaction compared with some selected other acquisitions in the chemical industry, and I would just like to make two statements. First of all, on the left-hand side, if you compare the multiple of our transaction, which is 10x pre-synergies, that is fully in line with the median of other chemical industry transactions, and it is also fully in line with other coatings resins transactions, which you've seen. But what sets us apart is what is depicted on the right-hand side, which is we're expecting significant synergies, 12% of RFM sales, and that is clearly above the 7% median of other peer transactions, which we've seen in the past. So with that, let's go to the next page, 13, that shows you the overall valuation.
On the left-hand side, you find the EV of the transaction, which is EUR 1.55 billion. And if you put that into relation to the 2021 standalone EBITDA, which you'll find on the right-hand side, that gives you a multiple of 10.3x . However, as I said, the clear distinguishing factor for the transaction is the synergies that we are expecting, and therefore, if you look at the synergized EBITDA of EUR 270 million, which you find on the right-hand side, that gives you a multiple, including synergies, of 5.7x , and that, I think, is a very good indication, representation of the high value that our acquisition creates for our shareholders. Now, as you've heard from Markus in the beginning, on top of the core RFM business, the acquisition also includes three currently small startup ventures, which we essentially received for free.
On page 14, they are described, and we will go into more detail on those businesses in our session this afternoon. For the time being, I would like to go straight to page 15, which describes the financing structure of the acquisition, so first of all, we have a full bridge financing in place for the entire purchase price, which has been fully underwritten by two relationship banks with very attractive rates, and what is important to us is that we are fully committed to maintain our solid investment-grade rating, and therefore, for the refinancing of that purchase price, we created a combination of financing components, which comprises a EUR 450 million envisaged equity increase from new shares, and which also comprises up to EUR 600 million from a bond issuance.
And the remainder, as you can see in the chart, which is roughly EUR 550 million, we envisaged to finance from own cash at hand, also supported by the strong free combined cash flow, which we're expecting from the two businesses' integration. So just, to mention one thing here, we see no material M&A activity during both the integration and also the leveraging phase. You have that as a clear statement in the last bullet on the lower right-hand side. And I think with that, I would like to hand it back to Markus for his closing remarks.
Yeah, thank you, Thomas, and I'm now on slide number 17. So let me summarize the transaction for you one more time. With this bolt-on acquisition to CAS, Covestro receives a very attractive target and becomes a global leader, also in coating resins. We are diversifying the CAS portfolio towards a more balanced and resilient product and industry mix. In addition, we are shifting the CAS portfolio to a high-growth, market driven by sustainability. We talked about the significant synergies that are identified and that lead to the extremely attractive valuation multiple, and with our solid financing structure, we continue to be committed to a solid investment-grade rating of Covestro. We thank you now for your time and interest, and I'm now happy to take your questions.
Thank you, ladies and gentlemen. At this time, we will now begin the question and answer session. For those who wish to ask a question, you will need to press star and 1 on your telephone keypad. Your question will be answered in the order they are received. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. Please stand by until we have reached the first question. The first question comes from the line of Mr. Markus Mayer from Baader Bank. Please go ahead with your question.
Good morning, gentlemen. I have two questions from my side. The first of all is on the EBITDA numbers of your transaction. You said EUR 140 million in 2019, and you expect EUR 150 million in 2021. Can you elaborate on the expectations for this business to achieve this year? That's the first question, and the second question is there's a small discrepancy between the press statement of DSM and you regarding revenue and EBITDA numbers. I think DSM is at EUR 133 million, you say EUR 140 million. Maybe you can also elaborate where this comes from. Thank you.
Yeah, let me start with the second question. That's an easy one. The EUR 133 million is including the innovation ventures. And we have been clear also in our statement that they are included in the deal, but they are slightly loss-making. So that is exactly the bridge between the EUR 133 million and the EUR 140 million. Now, with respect to your first question, what is the decrease in 2020? I would say it is slightly down than in 2020 relative to 2019, but rather resilient. So I can say we have from the development that we've seen over the course of this year full confidence that the step-up in 2021 is absolutely realistic.
Okay. Thank you so much.
Thank you. The next question comes from the line of Nikola from Exane . Please go ahead with your question.
Hi, everyone. Thanks for taking my questions. Firstly, I wanted to ask whether you see any risk of dissynergies, you know, in terms of overlapping customers, because I know you showed that sort of pie chart with, you know, adding a more diverse customer mix, but could you talk about if there's any dissynergies, and then, just in terms of sort of CapEx or investment, I know that, you know, DSM had spent some time restructuring or reshaping this business, among the materials side. So I was wondering whether you see a need to reinvest at all in this area.
Yeah, Nikola, this is Markus speaking. Thanks for the question. In terms of dissynergies, to be very frank, we see very limited dissynergies, if at all. It is simply that we see the opposite more coming through, which, if you just recall what Thomas has presented on the potential savings that we expect from combining those two businesses. Part of this is top-line synergies, and that is exactly coming from that we can even, let's say, offer a much broader product portfolio and even additional technologies that are building on each other in the coatings area. So we would rather expect that this would be one of the key value creative steps for this deal, that we can serve customers broader and better. With regard to your second question on CapEx, I would hand over to Thomas.
Yeah. So I think with respect to the second one, so first of all, general statement, we had the opportunity to visit in person all the important sites of RFM. I think that's a very important thing. What we found is that they are absolutely at par with our standards and also with our, let's say, investment philosophy, and therefore we did not identify, in any respect, any pent-up investment requirements. Overall, the CapEx that we are expecting is limited, and I would say around EUR 50 million a year is a number that you should take into account.
Thank you.
Thank you. The next question comes from the line of Mr. Christian Faitz from Kepler. Please go ahead with your question.
Yes, good morning from my side. Good morning, Markus. Good morning, Thomas. Congrats on the deal. Still, I have two questions. First of all, why do a capital increase rather than a higher debt issue? Would that have breached some covenants or challenged your investment-grade rating? And then second, since we have the benefit of having you on the phone, could you please give us an update on current business conditions, and also comment on the rising Chinese MDI price? Thank you.
Yeah, let me start with the first one, question. So first of all, no, we don't have any covenants. I think there's nothing in our current financing structure that would oblige us to do that. It is simply driven by the clear commitment that we have to maintain our solid investment-grade rating, which is currently a Baa2 rating. That is what we want to maintain. And you see this is a pretty elaborate number, EUR 450 million. So after very careful and intensive consideration, we have come to the conclusion that it is exactly that number that it requires to maintain that rating. So I can tell you we are extremely mindful with the issuance of new equity, and we will not do more than required.
But we have, after, as I said, careful consideration, come to the conclusion that it's exactly this amount which will be needed to make sure that we're not running any risk.
Okay. Thank you.
And then maybe to your second question, Q3 trading. I mean, I gave an interview some four or five weeks ago where I kind of gave you my expectations for the quarter. And I think what I can report since then is that we've seen very good momentum over the course of September. We also see that pricing is constructive. So I would say our confidence to reach the numbers that I indicated has rather increased since then.
Many thanks.
Thank you. And your next question comes from the line of Mr. Sebastian Bray from Berenberg. Please go ahead with your question.
Good morning, and thank you for taking my question. I would just focus on the revenue synergies, please. The guidance of EUR 40 million per annum, if we take an RFM-style mid-teens EBITDA margin, would imply over EUR 300 million run rate in sales terms. And I'm just wondering about the composition. Is this DSM's higher margin products in fiber optic resins, which probably have 30%+ EBITDA margins, being cross-sold more? Or could you give an idea of the composition of sales? There was very little impact where the solar sales have got to break even. It just seems like quite a big figure, relative to the cost synergies promised. Thank you.
Yes, I think on that question, so first of all, I think you're looking at the EBITDA margin, but what you have to look at is the gross margin, of course, because the trick of the synergies is that, yes, we will increase the revenues, but we will not increase the cost base at the same time, and therefore, the EUR 300 million of sales that you derive from that is too high of a number, relative to our business plans because the gross margin that counts. It will not predominantly come from the fiber optics coatings business, because we are not in that business. We think it's highly attractive, and we think it has very, very promising growth rates, especially with the transition to 5G.
The main synergies mainly come from the specialty resins, where we will bring together our portfolios, and the synergies are driven by that one.
If I may add, this is Markus speaking because it's an excellent question that was also key of our due diligence and also how we have assessed the top-line synergies, because as you rightly point out, that is definitely one of the key questions always. Just to give you some flavor, I mean, we are watching this business now for, I would say, a couple of years and have increased over those couple of years significant understanding. Secondly, we have similar business in-house. Thirdly, we have done an intensive bilateral DD. So we also know the business, I would say, by heart. We had 150 people on that process over the last couple of weeks, if not months, to say the least.
So I think we have a pretty strong view and a very solid view about those, about those synergies, also with regard to the top-line here, and last but not least, as I'm a chemist by training, and if you look the way how coating systems are built, we are now entering into, let's say, different layers of the coatings business, if I may say so, chemically speaking, and can offer this complementary to our customers, plus enlarging the regional footprint, plus have the opportunities to use the 20 additional production sites plus that we are having, to distribute our production portfolio, across more production sites closer to customers. That means we're increasing from every angle that I could imagine our customer proximity. And that really gives us confidence also, and particularly, on the, on the, so-called revenue synergies.
If I may follow up, if the number is not EUR 300 million, is EUR 150 million a better guess?
Nice try.
Thank you.
So it's between two and EUR 300 million.
Yeah. That's, that's also what I think is a fair assessment.
Thank you very much.
Thank you.
Thank you. And your next question comes from the line of Chetan Udeshi from J.P. Morgan. Your line is now open.
Yeah, hi. Thanks. But I mean, first, just wanted to clarify, I mean, how do we get to the 10 times, pre-synergies number? Because it seems the total EBITDA for the acquired businesses is 133. The EV is 155. So clearly, it seems more than 10x . So maybe it would be good to just get an EBITDA number that you are using to get to the 10x pre-synergies number. That's number one question. And the second was, just coming to the cost synergies bucket, you know, like you said, it does seem even on a cost synergies basis, it's probably a bit higher than what we've seen from other transactions. And it doesn't feel like the overlap is that significant.
Maybe if you can give us some color on where is the overlap between the businesses you are acquiring and the existing cash business of Covestro, that would be useful.
Chetan, let me start with the first one. I think the bridge is pretty simple. The EUR 133 million that you may have taken from the DSM announcement includes the innovation ventures, which we have also clearly stated have a negative EBITDA number. So we essentially got those for free. The 2019 EBITDA of the core business that we're acquiring is EUR 140 million. And the expected EBITDA for 2021, which I think is the relevant one for the valuation, is EUR 150 million. And you also have those details in our slide deck. And if you then put that into relation to the EUR 1.55, that gives you the roughly 10x multiple. So I think that is the bridge.
And as I said in one earlier question, also from the current trading, we have very high confidence that the EUR 150 million expected for next year is a more than realistic number. So I think that on the first clarification one, not sure, Markus, do you want to take the cost synergies question?
Yeah, I'm happy to do so, Chetan. Thanks for the question. So to give you a flavor about where the major, let's say, cost synergies are, we see sales and marketing here as one of the key driver, let's say, a quarter of the cost synergies, simply due to the facts that I have elaborated earlier on, with overlapping customers. And that is the benefit exactly of that deal that we can offer more, for example, with similar salespeople, same salespeople. So we expect synergies coming particularly from that area. In addition, G&A, in a similar order of magnitude, as we believe that we could, let's say, add on this EUR 1 billion, without adding, let's say, more than we have today on sales, sorry, on G&A. And then not to forget, purchasing synergies, where we also see larger size of the cost synergies.
And then, in order of magnitude, decreasing production. Production particularly comes also from the opportunity to use the batch production that they have for our products or our batch production for their products in the combined businesses. And then there's logistics, and some R&D and others. So that is how we look at the business. And once again, we have had a very intensive, very, let's say, diligent due diligence process that was based on a bilateral basis, which gave us much more time to really look into many, many details and understand the business really on a level of detail that you normally, for example, in a different process would not find. In addition, we know in particular those businesses and customer industries by heart, to a large overlap.
Plus, we also had more than 150 people, let's say, on that particular business over the last couple of weeks and months, and that really makes us confident on both sides, revenue as well as cost synergies, that we can fully exploit those numbers.
Markus, if I can follow up, do you have any number on top of your mind, like how much of your raw material basket is similar to the businesses you are acquiring? So in general, is it 20%, 30%? So what is a common percentage in terms of raw material, key raw material?
I don't have the exact number. I don't have the exact number at hand, but it is a very significant number. So we're not talking maybe exactly about a billion, but we're talking, I would say, about a high, high triple-digit million number. That's what we're talking about.
Understood. Thank you.
Thank you. And your next question comes from the line of Geoff Haire from UBS. Your line is now open.
Good morning, and thanks for the opportunity to ask some questions. You historically have talked about your mid-cycle net debt/EBITDA being at 1.5x . If that's still the case, could you just tell us how long it would you think it will take you to get back to that level, with this transaction? And I was also wondering, given obviously the increase in debt, what impact does this have on your thinking of proceeding with Baytown as well? And I think, Markus, you said, sorry, sorry, Thomas, you said that you, you're committing to not doing any M&A, while you're going through the integration and deleverage. Does that also include entering negotiations with people that may mean that there's a change of ownership of Covestro?
So, okay, let me start by expanding on this leverage question. So first of all, what we said is a mid-cycle 1.5x leverage relative to net debt, that is still what we're shooting for, give or take. And the 2.5x , that is in line to achieve our solid investment-grade rating also at a lower point in the cycle, which is currently still the case. So I think, to bring those two numbers together, we definitely in 2020, I think we would all agree is the low point of the cycle. And therefore, our leverage number is higher than 1.5x , still absolutely in line with what we said, solid investment-grade rating, and that is the Baa2 number where we're currently at.
1.5x is, if you take what we're expecting as a mid-cycle EBITDA and put this into relation to our net debt number, that is still absolutely in line with our guidance and what we're shooting for. Your second question was our commitment not to embark on any bigger M&A. I'm not sure whether I got your question totally correct. What I can tell you is, we're committing not to look into any other deals during the integration and deleveraging phase. Just to give you also the confidence, this is now not the start into a big, let's say, pipeline of further M&A transactions, which we're envisioning. We do not have anything in the pipeline, and we do think this is a once-in-a-lifetime opportunity. Therefore, we went for it now.
But it is nothing that would now be or mark the change in our strategy to be solidly financed and to focus on the operational excellence of the company. So I think that is why we clearly wanted to make this statement.
And then, you had one question with regard to relevance of change in ownership of Covestro, if I'm not totally mistaken. Let me be clear here. That has no relevance in change of ownership. Once again, we worked on that deal to put it into perspective for many years with ever-increasing intensity over the last couple of months. And it is not, let's say, at all driven, for example, by any recent rumors. I hope that answers your question sufficiently. And then, maybe on the MDI 500, that will be reviewed as we have always communicated, end of 2021. So, no implications on that from the deals as of today's perspective.
Okay. Thank you.
Thank you.
Thank you. And your next question comes from the line of Oliver Schwarz from Warburg. Please go ahead with your question.
Thank you. Got two questions, please. Firstly, it seems like you were able to leapfrog competition and became number one in the respective markets in regards to your enlarged CAS segment. Could you please elaborate on mid-term growth perspectives of the combined enterprise, whether you might be to outgrow the market despite being number one in regards to the performance of the combined business, or whether you are more likely to grow in line with markets despite the sales synergies that you anticipate? That would be my first question. Second question, the treatment of the three startup enterprises that generate a net loss of EUR 8 million. I'm just wondering why that is not integrated in the EBITDA number you gave.
Are those enterprises to be sold, or are they most likely to come into black figures already in 2020, or what's behind the not recognizing the losses that those businesses incurred? Thank you.
Oliver, thanks for the, for the question. I would dare to take the first one, Thomas, then the second one in terms of outgrowth. Very simple picture here, but it explains the story, I think, quite nicely. On the one hand, if you look and being the or one of the leading companies by the combined business in that market, you would tend to say, well, with that, you can only grow with the market. But there's one key element that makes this combination so unique and so value-creating, and that is exactly the high share of both companies in sustainable coating solutions. Those sustainable coating solutions have proven over the last years to drive substitution. So solvent-borne systems are substituted by waterborne business, by waterborne solutions, and we now combine, as outlined earlier during my speech, the polyurethane and the polyacrylate technology for water-based systems.
These systems will continue to replace solvent-borne systems. That in combination, so the leading market position plus the substitution, will lead to a, let's say, CAGR of 5% that we expect for this business in combination. That's why we believe we can outgrow the market, at least for the foreseeable future.
And then on your second question, Oliver, so first of all, we want to be totally transparent on the numbers, so there's nothing about disguising that the innovation ventures do have a still negative EBITDA because those are investment cases, and they're really in their early stage. But I think you have to clearly distinguish between what is the core Resins and Functional Materials business, which we're acquiring, and that has an EBITDA number of EUR 140 million, and it comes with an enterprise value, which we have clearly disclosed. And the ventures, which are in their early and still investment phase, but very promising, we have essentially taken over for free, so with a zero enterprise value.
Our view is that they fit very nicely into our business, especially when it comes to the 3D printing and the Niaga recycling business, because it fits our vision very well. But we will give you, of course, more details in our more detailed call this afternoon. But we want to be fully transparent on the numbers here. It is what it is.
Thank you very much.
Thank you. And your next question comes from the line of Tom Wrigglesworth from Citi. Please go ahead with your question.
Good morning, everybody. Tom Wrigglesworth, from Citi. I just shortened my name. Two questions. The first one is on, I guess, the competition for capital within Covestro. Obviously, you've highlighted the organic spend. But does this deal, you know, widen the opportunity for Covestro to allocate capital inorganically further into CAS in the future? And I guess, and the second question, which is a corollary to that, is, you know, do you feel that do you want Covestro to be considered more as a coatings company? Do you think that's underappreciated in your portfolio, by the market, versus the kind of consumer durables autos exposure? Thank you.
I think, I mean, to your question, we've always very clearly said that M&A is part of our strategy, and that we're looking for both acquisitions, especially in the field of CAS, because we feel that antitrust would not allow us to look for opportunities in the other two segments. I think here it is. This is the deal that we've been looking for and working on for months and years. I think it's fully consistent with our communication that we've made earlier. However, it is not a shift in strategy. We're not saying that this marks now the beginning of further acquisitions, but it is really absolutely in line with what we've said earlier. I think that that's what I would, how I would characterize it.
Do we think that CAS is a beautiful segment and that it should be valued by the market? Yes. It hasn't been maybe so far, maybe a little bit overlooked in light of the bigger size of the other two segments? Yes. So I think the market should very clearly look into what we have in our portfolio, and CAS, in our view, is definitely a jewel.
Okay. Just a follow-up to that. When does bolt-on become transformational? I mean, you know, EUR 1.6 billion is certainly, to my mind, at the higher end of bolt-on. Can you help me with your definition?
I would agree with your definition.
Okay. Thank you very much.
Thank you. And your next question comes from the line of Isha Sharma from MainFirst Bank. Please go ahead with your question.
Hi, good morning. Thank you for, thank you for taking my question. Historically, EBITDA margin at CAS has been north of 20%. How should we think of the margin going forward, please, as you almost double the coating raw materials business, and we don't have the subsegment shift of margins? The next one would be, could you please tell us what would be the timing of the equity raise? Thanks.
Can you just repeat the last part of the question because the connection was?
Sorry about that. Did you get my first one on the margin?
Yes.
And then, the second one was, if you could please tell us what would be the timing of the equity raise?
Yeah. Let me start. I mean, first of all, the if you look at the margins, as we've talked about the synergies, so I would say the margin profile, including RFM, should be a similar margin, what we have today in CAS. And that's, Isha, is also why we have the confidence that the synergies that we have laid out are fully realistic because we do own a business, which is very, very similar, and where we do see margins that are currently in the range of 20% and have been there very consistently. So this is what gives us the confidence that we will also bring the RFM business to at least that margin profile. And that is what is reflected in our synergy assessment.
I think, quite frankly, capital raise, I cannot give you an exact timing, but this is something that we will look into over the next weeks.
Thank you very much.
Thank you. And your next question comes from the line of Georgina Iwamoto from Goldman Sachs. Please go ahead with your question.
Thank you. Good morning, Markus. Good morning, Thomas. And thanks for taking my question. Hope you're both very well. I was just wondering if you could give us a bit of background about the timing of this deal announcement. You have been clear that, you know, you've been thinking about doing this kind of a deal for some time. How long have you been looking at the specific asset? How are you thinking about making this kind of announcement versus the cycle, the economic cycle, but also your business cycle? If you could just give us a bit of background to that and whether the process was competitive at all.
I think, Georgina, maybe in terms of timing, I can say this is something which we have had on our data screen, I would say, for years. I think we told you many times that our M&A department is screening tens, if not, maybe up to 100 companies and opportunities that we would take into consideration. I can tell you that this business was always absolutely on top of the list because we felt this is, in terms of the synergies and the fit and also the cultural fit, the absolute perfect addition to our CAS segment, and therefore it has been on the data screen for years, and I think it's also no secret that it was for years not able to transact and to act on that opportunity, for various reasons.
So I think now the opportunity has come, and therefore, of course, the micro timing, we were not able to manage that with respect to any cycle or with respect to any business performance in the cycle or anything. We think the timing for this one is right anytime. I would almost say that the crisis has helped because, of course, the multiples have not come down, but I think the expectations for those businesses have come down. So I think the timing for us was positive. It was not an option, but we were probably the preferred partner from DSM because they wanted to find a good home for this very traditional DSM business, and they felt that we would be the right partner to do that.
So it was a very intense process over the last number of months, which gave us plenty of opportunity to look into this, but it was not a competitive option.
If I may add, I think, Georgina, what's pretty important. This is Markus speaking. We know these businesses, these types of businesses by heart. We have a very similar culture in both organizations. We have excellent people on both sides, in particular when it comes to the innovation capabilities and bring those innovations to the markets. I think in that context I could say that we also are a preferred partner from the seller side.
Great. That's very helpful. Thank you.
Good. Thank you very much. There is no one else in the queue, as I see. So, as I said before, you will have another chance to ask more questions this afternoon. We also obviously scheduled for our, especially U.S. friends, these are the new call, but everyone is obviously welcome to ask more questions. We will tell you potentially a bit also more about the innovation businesses, and we might give you a bit more, more background in general on the business, and I hope that will be also then helpful. In between, between obviously to now and 3:00 P.M., feel free to call IR if you have further questions. Then potentially speak to you later. Bye.