Good morning and most welcome. I will start with an introduction before we look at the slides. We have been following Frank Moon AS for several years and we are delighted that we have reached an agreement to acquire the company. The timing is right for both seller and buyer and I will highlight 3 things. First, we now extend our fluid handling portfolio with high performance products and systems for customer segments where we already have a strong position.
Hence, we stick to the technologies and industries we know and where we have a common customer base. 2nd, system is critical to the operation of a tanker, which makes it a key decision for the shipowner. For a product tanker, the system normally makes up 5% to 7% of the total value of the ship and boosts productivity and overall energy efficiency. 3rd item, the transaction risk is limited, both from a cultural and financial perspective. Our companies share the same core values and both enjoy a premium position with our offerings.
A solid order backlog and stable historical operating margins over the business cycle gives us financial comfort. Finally, we have successfully acquired 20 companies in the last 5 years with combined sales of about SEK 7,500,000,000. Most of them had been fully integrated, including our previous major acquisition, Old Bar Industries, in 2011. With this good experience, we were ready for more. And now we move over to the slide presentation.
Here you see a summary of the press release that was sent out this morning. We are paying NOK 13,000,000,000 on a cash and debt free basis, and the transaction is EPS accretive as from closing. In 2013, the sales of Frank Moon was NOK 3,400,000,000 and the order intake was NOK 6,100,000,000. Hence, we anticipate a significant increase in sales in 2014 2015 based on the large order backlog. The operating margin is significantly above Al Falawal average.
Moving over to the next slide. Frank Moon is a global leader in pumping systems for the shipping and offshore oil and gas industries with about 1200 employees. The vast majority is based in the Bergen area in Norway. Marine and offshore pumping systems. Next slide.
The Marine Pumping Systems made up 50% of sales in 2013. Frank Moon is the global market leader for cargo pumping systems for product and chemical tankers. The company also supplies carbon heaters and coolers. Oil and Gas Offshore Pumping contributed with 23%. Here the company supply water injection pumps, fire water pumps and submersible seawater lift pumps.
Frank Moon also has an interesting environmental business supplying oil recovery systems. It is both equipment that collects oil spills from the surface of the sea and equipment for emergency offloading also from sunken ships. Finally, 21% came from service, where Frank Nune has 50% of the installed base covered by service contracts. Now we move over to the rationale. Alphanarval is extending the fluid handling portfolio by adding high performance, high quality products and systems.
These additional systems are critical to the operation of the ship and offshore installations. We are acquiring a market leading position in Pumping Systems since Frank Nu is the market leader in its core business and it strengthens our leading position by adding another unique high technology offering. Transmoo is benefiting from favorable market trends and attractive long term growth prospects. Next slide. It is an excellent fit.
And on this slide, you see the segments where Anfelaravel has closed products today. And with the addition of Frank Moon, we strengthened our offering. On the next slide, you see all the products that the combined companies will offer on board a ship, which makes us an even more attractive which makes us even more attractive to our customers. On the next slide, you see what we jointly will offer onboard an oil and gas offshore installation. Here, we anticipate revenue synergies from our combined offering.
We will be an attractive supplier with an even more comprehensive product portfolio. Next slide. Frank Moon and Alfa Rawang share 3 structural growth drivers: globalization that drives transportation by sea demand for energy and finally, increased environmental demands. On the next slide, you see favorable market trends that affect product and chemical tankers. Refineries are built closer to the source, giving increased need for transport of refined products instead of crude oil.
Shale gas in the U. S. Means less import of crude oil and more export of refined products. Fossil fuel continues to be the dominant energy source with liquids being the larger part. High demand for petrochemicals for plastics production, especially in Asia, means demand for chemical tankers.
The need for Logic Products and Chemical Tankers favors Frank Moon since this is where they have their strongest position. And ship owners want higher flexibility in transporting multiple products and maximized efficiency in offloading and loading. Frank Moon is the given choice for these demands. On the next slide, we see the split between the divisions before and after the acquisitions based on sales in 2013. Equipment, 29% Marine and Diesel, 30% and Process Technology 41%.
We see that there is a more even distribution of the size between the divisions and the 3 divisions have different business cycles. This contributes to the stability of the Anfanavel Group. We move over to the next slide. Here you see the pro form a distribution of sales for the Marine and Diesel division. Traditional sales to shipping stands for 40%.
Sales to offshore oil and gas contributes with 10%. Sales driven by environmental legislation and focus on fuel cost reduction, 10%. Land based diesel power stations, 7%. And finally, we have service with 33% contributing to stable revenues. Now we move over to the next slide.
The role of Frank Moon in Alfa Laval. The company will be included as a segment in the Marine and Diesel division. The company will be kept together led by the same management as today. And the activities in Bergen will become Anfalgarve's operational center for marine and offshore pumping systems. As you see to the left, we already have 3 centers in Sweden and Denmark, and we have a track record of successfully operating from a Scandinavian base.
And now I hand over to Thomas Sturluson for the financial part.
Good morning, all of you. Yes, maybe that's Lars here to give you some numbers related to this transaction. To start with, let me give you a sense of the impact on Alfa Laval in terms of orders, backlog and sales. The slide you have on the screen, you see the pro form a numbers for 20 13, including Frank Mone AS. Note the substantially higher orders received than sales for 2013.
To be explicit, orders received amounted to $6,500,000,000 in 2013. Sales was only 3,600,000,000. This gave a backlog end of 2013 of ARS 5,900,000,000. This is of course giving a good deal of comfort for 2013 2014 and to some extent, quite some extent, I should say, also for 2015. If we then move on, how are we then going to fund this acquisition?
Well, let me start with some real news. We have today a totally unutilized senior facility. We will make use of approximately 40% of this senior facility, EUR 2,000,000,000. In addition, we will utilize a bridge facility of SEK 12,000,000,000 provided by one of our banks, SEB. We will, of course, establish a longer term solution gradually starting shortly after closing.
So what will the if we move on, what will the implications be on our balance sheet? Well, to start with, the price agreed will give a value in addition to the net asset value acquired of approximately SEK 12,300,000,000 or in Norwegian kroner 11,600,000,000 On the slide, you can see the expected impretentions on our capital structure in terms of debt to EBITDA on a pro form a basis. We expect to end up about 2.5 percent pro form a 2013. And debt we're collecting we expect to be about 1. With regard to rating implications, we've analyzed the possible impact in house of increased indebtedness.
We believe that the new situation post closing is likely to render a downgrade with, let's say, 1 notch. We are currently rated at single A minus and that would then mean triple D plus However, we will all know shortly when S and P has analyzed the new situation and come to their conclusion. And with that, I hand back to Norris for a summary.
To summarize, Antalvan is acquiring a leader in marine and offshore pumping systems and extends the current fluid handling portfolio with systems that are critical to the operation of the ship and offshore installations. The combination will provide a very attractive offering to the marine and offshore markets. The operating margin is significantly above Alfa Laval average. Transactional risks are limited both from a cultural and a financial perspective. And Frank Moon is present in areas with attractive long term growth prospects.
And that completes our presentation. And now I hand over to the operator for the Q and A session.
Thank you. Well, we will not disclose the details on the operating margin simply for competitive reasons. We think this is in the best interest of Frank Mown and, of course, going forward, Frank Mown as a part of Alfa Laval. We stick to the statement in the press release. The operating margins are significantly above what we generated over the last few years in Alfa Laval, And the company has shown a very large amount of stability when it comes to these margins throughout the cycle.
Okay. On orders, given the
Well, if we look at the forecast, for instance, from Clarksons, we know that they are forecasting somewhat of a reduction in contracting to shipyards 2014 compared to 2013. And of course that we expect will have implications on frac known AS well. It is not in any way a dramatic decline looking at the forecast. And then if we look at the lead time from a contract to a yard until there is a contract phase for pumping systems, we have learned during our diligence process that the lead time tends to be shorter than what we used to for traditional alpha Laval products of 9 months and for onboard products of 6 months, we're rather talking 2 to 3 months as a common delay in phasing orders by yards or ship owners.
Got it. Thank you.
And then the final one, Well, we can give you one number. We can say that our current analysis indicates that we will have something like SEK 120,000,000 per quarter of step up amortization hitting the P and L. And of course, the deal as such with $12,300,000,000 of value paid surplus to net assets will of course have an adverse impact on return on capital employed. But then again being EPS accretive, it should have a positive impact on return on equity. We will not provide any details because that would mean we are providing a forecast for 2014.
And as you know, that is not our tradition.
The seller has decided to sell, and this has been the right timing. The seller wants to sell, and we see it's a good timing for us to buy since the markets have been good 2013, and we also see going forward that it looks promising. And why it is unique? That is you can say that Trent Moon is if you talk about product and chemical tankers, which is the majority of their business, they are supplying a complete system, not single components. And it is a complete system with a hydraulic power unit, pumps and pipings.
And this and by supplying the complete system, they can guarantee the reliable operation of offloading and loading. And this is absolutely crucial for the ship owner. That's why in these cases, it is the ship owner that is the decision maker. And when once the ship owner has specified, usually, this system is specified before the ship owner decides what yard that will build the ship. And the 21%, well, they are doing a very good job today with Transmune.
And however, we believe with our very good presence, we have more than 100 service centers around the world. We believe that we will be able to contribute to continued positive development for the service business of Fremont.
I think if I may in jet loss according to the diligent information we've gotten, they now have service contracts for about 50% of their installment base. And well, that, of course, represents a bit of an opportunity considering, as Lars touched upon our presence.
And Fenavan is a fairly small supplier to Frank Moon. We are supplying gas heated plate heat exchangers that are included in their systems, but it is a relatively small value. Thanks.
Then moving on to your questions about the synergies. Well, the bulk of the synergies specified to NOK 120,000,000 net gradually kicking in over a 3 year period. The bulk of it is in on the cost side. And primarily there, it's about procurement synergies with the size of Alfa Laval and with the combined base of suppliers, we're convinced that we would be able to generate savings. For the overhead side, it's a truly slim organization and it's a high performing organization.
So of course, there are no sort of regular opportunities to do anything on the overhead side. That is not what we're seeing. On the revenue side, yes, we see opportunities. But then again, we only see those coming in towards the back end of this 3 year period because it all takes time to get organized around cross selling opportunities. Okay.
That's so much for that. As a follow-up on the orders,
you mentioned in fairly short time,
Well, again, the lead time from order for the yard until pumping systems are actually ordered is, as I mentioned before, quite short compared to what we used to only a few months. And that, of course, indicates that the uptick we saw from late 2012 and then on a high level through 2013 is largely reflected in the level of orders that Frank Monet has enjoyed during 2013. And I mean, you've got access to the Clarksons forecast for 2014, so you know what is anticipated. And then coming back to this backlog, it means a great deal of comfort for 2014. But of course, there is a backlog into 2015, a good path into 2015.
And then for the offshore oil and gas, of course, we have orders that are going to be delivered into 2015 as well.
Hello. I've got 3
Really, if we look at terms on the bridge loan as opposed to our regular funding. Of course, the validity of a bridge loan is typically shorter. That's the nature. So even if we have gotten, we think, good terms on this bridge, of course, it's a lot shorter. The fees will be more expensive in relation to the time the leveling is actually running, but otherwise not vastly different.
As far as regular depreciation is concerned and CapEx going forward, it is not vastly different from what you're used to from today's half of the month. And then as I said, when it comes to amortization on step up values, our current estimates indicate about SEK120 1,000,000 per quarter.
If the current management that
you've announced today having any burnout and also the overlap with the sort of retained management and owners are, I. E, are we now having
We are very glad that the existing management team of Frank Moon, They are excited about the acquisition and that they see that they have got another long term owner of the company. We have the long term industrial view, and they intend to continue with the company. And that's the way we normally operate that when we buy well managed companies, they also we want them to stay and they are happy to stay with us. And then you had the second question, I didn't hear fully.
So my first question was, are there any earn outs?
The second question was whether There is no earn out. And
when it comes to possible overlap, if we look at today's senior management in from they have been co owners next to the Moon family for years and as a well managed and very profitable organization. Of course, they have as co owners benefited from those profits historically. So I believe that we have some new colleagues that have been enjoying a good result historically, and we look forward to continue to work with them as colleagues. And as Lal said, there is no Thank you.
Yes. We don't disclose the market shares for competitive reasons, but we can clearly state that they are by far the market leader in their focus areas, and they are significantly bigger than anyone else. And you find the installed base, the ship owners. If you take the 4 biggest there, you have, 1st of all, you have Greece. 2nd is Japan.
3rd is Norway. 4th is Germany. So that shows that there you have the ship owner, the ship owners that are the decision makers. Then most of these types of ships are built in Korea. So the invoicing address is Korea.
So it will significantly increase our invoicing to Korea. So Korea as a market will increase significantly.
On the value per shift, and of course, as you said, you're a sales, Andre, that can vary a great deal. But just looking at the value of what Frank Monet is offering and what traditional Alfa Laval and Orboy is entailing, you can easily get to something which is between 5% 10% of the value, of course.
And when it comes to offshore, there, Frank Moon has pretty much the same customer base as we have. When we have been going through their books, We see that they are supplying to a good extent to the same type of rig owners and whether it's in the North Sea or outside the Australian coast or outside Brazil.
Got it. Thank you.
Thank you. Okay. So thank you very much for your attention. We'll show short notice.