Hello, and good morning, everyone, and welcome to this telephone conference call concerning Electrolux's acquisition of GE's appliance business. The purpose of this call is to provide some more details and some more flavor to the announcement that you've heard about this morning. If I can direct you to the second slide, Electrolux has agreed to acquire the appliance business of General Electric, GE Appliances, a leading home appliance maker in North America. Electrolux is investing in its core appliance business to enhance its competitiveness as a global appliance maker, offering substantial benefits to our consumers, retail customers, and of course, our shareholders. This is our largest acquisition ever, and it takes Electrolux closer towards its vision to be the world's best appliance company.
Our major shareholder is supporting this transaction and has stated their intention to participate in any upcoming rights issue to finance the deal with GE Appliances. This morning, they have sent out a press release stating a commitment to continue to be a long-term shareholder in Electrolux. You can go to slide three. You can see this portfolio of brands. This slide highlights how the acquisition creates a tremendous opportunity when two portfolios of strategic brands merge together, giving an unmatched, unprecedented portfolio of strong consumer global brands. As you know, we're a global company with global brands, and GE's premium high-quality appliances complement our own iconic Frigidaire and our own premium global brand, Electrolux. On page four, this is a transformational event. It's a historic moment and an important strategic move for the Electrolux Group.
The deal provides Electrolux with the scale and the leverage to accelerate our investments in innovation and global growth. By acquiring GE Appliances, Electrolux takes an important step towards its vision to be the best appliance company as measured by our customers, our employees, and our shareholders. We will talk more about how this transaction greatly accelerates our journey in each of those dimensions in a few moments. Let's get into the specific agenda on page five, and we'll start with the transaction overview. If I can direct you to page six, we'll go through the transaction itself. Electrolux has agreed to acquire GE Appliances for $3.3 billion. The deal is an asset deal, and the transaction includes a 48.4% ownership in Mabe.
The rationale, it greatly improves our global scale in the core appliance business and increases our size there by almost 1/3 for the group. There is significant synergies, particularly in purchasing, sourcing, and operations, and the transaction is expected to be EPS accretive in its first year. Financing, it will be done with a fully committed bridge facility and a rights issue of approximately 25%. I'll ask Tomas to cover the financing in more detail in a few moments. The conditions are subject to approval from regulatory authorities. From a timetable standpoint, we expect closing in 2015, and the rights issue will be issued as soon as possible following the closing. If I could shift your attention to the second agenda point, strategic rationale, and go to page eight.
This will make us a global player, a very strong global player in home appliances, with pro forma sales of almost $23 billion, will position us to succeed in a increasingly global and competitive industry. As many of you have heard me say before, the appliance industry is a large, growing, global business that's not overly capital intensive. It is competitively intense, and the winners, however, will be able to generate substantial free cash flow. This transformational transaction, we believe, accelerates Electrolux being one of those winners and generating that free cash flow. Why? Three primary reasons. One is it enhances our position in a strong and large and stable market in North America, and expands our geographic coverage in Latin America. Two, a very attractive strategic fit. As you'll see, there are very complementary brands, products, channels, and segments.
Additionally, it is enhanced R&D, technology, manufacturing, and distribution, and sourcing capabilities. Lastly, there are substantial synergies of approximately $300 million, primarily from sourcing and operations, and will be earnings accretive. We can touch on each one of those three in the next coming slides. If I direct you to page nine, you can see the first rationale, and specifically, the increased presence in North America. Combining with GE Appliances, Electrolux North America operations will become the single largest business unit in the Electrolux Group, with close to half the annual sales of the company, approximately 47%. This means we'll have the opportunity to increase our presence in North America with broader coverage, improved productivity, and stronger mix. On page 10, if you look at strategic fit?
We see scope for potential fit between Electrolux and GE Appliances in areas which fulfills important strategic levers. There are four main areas where we see potential benefits. One, as we mentioned briefly, well-known brands and products with good position in the marketplace to complement our own product and brand portfolio. Second, the company's market focus. It has local market presence in key channels, in key segments, which gives us opportunities to expand our coverage in the U.S. market. Third, we see substantial benefits from transfer of skills and know-how within R&D and technology, where GE Appliances has made significant investments in recent years. Fourth, in manufacturing and sourcing, their production and sourcing capabilities will complement Electrolux with further potential to optimize our manufacturing footprint and bring more efficiency to our operations and therefore, better value to our customers.
If I can direct you to page 11, combining strategic fit, you can see the brand portfolio and how nicely it fits across the Electrolux brands of Frigidaire and Electrolux. This slide shows that fit between the appliance, GE Appliances brand portfolio and the current Electrolux brand portfolio. By combining the high-quality portfolio of GE Appliances, Electrolux will be able to broaden its value offering and benefit its consumers and customers. We will therefore be able to fulfill all key important price points and offer a combined better mix. Turning to the next chart, and strategic rationale three, of course, is the efficiencies or the synergies. We expect to see achieve cost synergies through the integration of the acquired business and have estimated these to amount to approximately $300 million.
A large part of this will be achieved through sourcing and operations, as you can see on the pie chart on the right. To generate the savings, we will take a one-time implementation cost of $300 million. In addition, we expect to make an investment following the first two years, and we estimate this CapEx investment to be around $60 million. The next item on the agenda is the overview of the GE Appliances business itself. On page 14, GE Appliances are primarily a U.S. business. They had 2013 revenues of $5.7 billion. They have a manufacturing footprint across five states in the U.S., with 12,000 employees. They have their own distribution and logistics network and a direct one-step channel to consumers.
They've made approximately $1 billion of investments in R&D, products, manufacturing capabilities over the last three years. They have a strong product portfolio, as I mentioned, have a 48+% stake in the company, Mabe. On the next chart 15, you can see on the left-hand side, the strength of the GE brand in the U.S. What this chart shows is that GE is the strongest brand in the consideration set by U.S. consumers, with over 30% consideration set for the General Electric brand in the appliance business. On the right side, I mentioned $1 billion of investment over the last three or four years, you can see what's happened from that and where, what, where that has gone.
There's over 10 new product platforms, over 500 new products, 6 factories have been renovated, brand-new assembly lines with modern equipment. All has been set up with a lean manufacturing approach. They've updated their product labs and laboratories for innovation and have installed substantial 3D printing capability. A broad and deep offering across the major categories. It's a very broad and strong cooking offering, dishwashers, strong stainless steel and hybrid dishwasher capability. Importantly, with the trends in the U.S., top-load, high efficiency washing platforms and a broad platforms in refrigeration, specifically in built-in and freestanding. On the next page, our deal with the GE Appliances business includes a 48.4% share of the Mexican appliance manufacturer company called Mabe. The company has strong brand value across all of Latin America, with especially good presence in the Mexican market.
We think Mabe is a very important feature of this transaction and intend to continue the collaboration established between Mabe and GE Appliances. It gives us substantially strengthened presence in Latin America. Next item on the agenda is to go through the financial impacts and funding overview, and for that, I'd like to turn it over to Tomas, to review that with you. Tomas, please.
Okay. Thank you, Keith. Let's flip to page 19, and we'll start with some of the financial highlights on this deal. Of course, this combined business of Electrolux and GE Appliances strengthens our financial foundation and enables us to accelerate our future growth. There are, as you have heard, substantial synergies through scale and efficiency, $300 million full run rate. On the deal structure, this is primarily an asset transaction, and the earnings per share is expected to be positive from year 1. On the multiple range or the multiple, the EBITDA multiple, full year 2014, it is between 7x-7.3x, and this is pre-synergies, based on an enterprise value of $3.45 billion.
The enterprise value here is made up of $3.3 billion in cash consideration and $150 million in assumed pension debt. If we flip to the next page, page 20, we have the combination of the two businesses. Let me go back one step to page 19 again. On the multiple, we should also mention that if you add the synergies to the multiple range here, we talk more about 5x EBITDA. Let's go to page 20. The combination of the two businesses, you can see Electrolux 2013, $16.8 billion, with $1.1 billion in EBITDA and a margin of 6.8%.
GE Appliances comes in with $5.7 billion and $390 million in EBITDA, same margin. The combination, 2013, would be then $22.5 billion with $1.5 billion in EBITDA and 6.8% in EBITDA margin. If we then move to page 21, a few words here on the funding or the financing. This will be a two-step financing structure. We start with a bridge facility at closing, 100% committed, arranged by Deutsche Bank and SEB. That bridge facility will then be gradually replaced by rights issue of about 25% and a bond takeout of around 75% following the completion of the transaction.
On the financial position, the net debt, the financial net debt of the group, which is today $8 billion, will increase with $17 billion, go up to $25 billion post-closing and post-rights issue. Here, it's important to say that the financing structure as such, or the ambition we have, the target we have, is to stick to investment-grade credit rating. On the right-hand side, you can just see the cash consideration of $ 3.3 billion and how we are to source that after the bridge facility. $ 2.5 billion in new debt, in a basically a bond takeout, and $ 0.8 billion in a rights issue, total of $ 3.3 billion.
Of course, also here, it's, I think it's valuable to repeat what Keith mentioned in the beginning here, that, as you have seen, our main shareholder is fully supporting the rights issue and, or, have the intention to take their part of it. With that, back to you, Keith.
Tomas, thanks very much. If I could direct your attention to the final slide, the summary slide, to round up and reconnect how the acquisition is consistent with our vision and our strategy, and how GE Appliances fits with our growth strategy, and how Electrolux will benefit from the synergies by integrating the unit, supporting our long-term value creation potential. If you look at it through our lens of our, excuse me, our customers, we want to be the best appliance company in the world as measured by our customers. GE Appliance business brings to us stronger brands positioned well in that mass premium part of the market. It brings with it significant innovation and products and platform and offering, and it brings with it significant route to market distribution capabilities for our customers and consumers. How does it advance us with our employees?
It gives us significant enhanced capabilities, across the group, but in particular in R&D and manufacturing, with over 12,000 employees, and again, strengthens our global presence across all of the Americas, North and South. Our shareholders, as we mentioned, EPS accretive, significant synergy potential, and substantially enhanced cash generation. With that, we'll go to Q&A before we have a final wrap-up. If we can open up for questions.
I think by that, we'll open up for questions. Operator, could we please have the first question, please?
Yes, no problem. Just as a reminder, if you wish to ask a question, please press 01 on your telephone keypad, then you'll enter the queue. The first question comes from Ms. Andre Kukhnin from Credit Suisse. Your question, please.
Good morning. It's Andre from Credit Suisse. Thanks very much for taking my questions. Firstly, can I just start with the $390 million EBITDA that you mentioned? Is that the clean number? Because looking at GE accounts, there are some unallocated overheads, there are some pension costs there that are not in the Appliances and Lighting division and not in Appliances. You're not taking on any of that outside of that $390 million?
No, the pension liability, the vested pension liabilities, stay with the parent, with GE. The only potential liabilities we take on, and again, we say potential because they're unvested, are that $155 million, that Tomas alluded to earlier, of unvested, potential pension liabilities. The $390 million, which includes the Mabe, 48% of the Mabe stake, is a clean number.
Great. There's no overheads that will come from GE overheads to your overheads at group level?
No, that's the standalone number.
Great. Just on the timing of synergies, then the last comment that Tomas made in terms of the EBITDA multiple falling to 5x from 7x, implies that there's like $200 million of synergies to come through. Is that all in 2015 already, or it feels a bit early? If you could just help us with the timing about how that $300 million sort of comes through.
Yeah, no, to your point, it won't happen instantaneously, of course, you know, it'll take a couple, two, three years to build up over time. you know, it'll come. Actually, what happens is, in the first two years, where, you know, we're doing the restructuring, we're making the investments to get that, so it kind of. It's actually not so linear. It's relatively low in the first two years, and then it jumps up strongly in year three and four.
Okay, just to be completely clear, when you talk about 7x-7.3x EBITDA multiple, that's for 2014, and that falling down to 5 is more of a, not necessarily. Sorry. Okay, that's with full synergies in there, right?
Yeah. Yeah, yeah.
Okay.
The notion is that once we achieve the full synergies of $300 million, of course, you know, that the value, the multiple value drops way down, of course.
Right. Just a final question, more on broad terms, we've had some consolidation in Europe with Indesit and Whirlpool, and now this with GE Appliances and yourselves. Do you think this is the beginning of sort of a new phase in the appliances developed world markets, where maybe pricing can be a bit more under control? That sort of historic disconnect between movements and raw material prices and appliances pricing could be actually closing as a result of that, i.e., you'd be passing through raw material price increases more successfully and quickly, and the other way around?
Yeah, it's probably not good for me to speculate on what's gonna happen in pricing. Obviously, this is a consolidation play, where, you know, we're combined looking at, you know, about 40% of the U.S. market, and there's gonna be significant leverage and scale that comes out of this play, which will generate substantially more free cash flow, which we'll invest more to grow the business. That's not just in North America, but globally. That's what this is about.
Great. Thank you for your time.
Could we have our next question, please?
The next question comes from Mr. Andreas Willi from JP Morgan. Your question, please.
Yeah, good morning. Thank you for your time. Maybe you could provide us with the operating profit to EBIT relative to the EBITDA number you have provided for the acquired business. The second question on antitrust, it's obviously I don't expect you to comment here in detail. I mean, you said the deal is contingent on that. There's been a lot of question marks raised given the strong position you would have then together with Whirlpool. What's your assessment of the risk and also the timing of this process? Thank you.
Thanks, Andreas. Let me start with answering the first question, and Tomas, you can do the bridge. I know there's a bridge between the EBITDA and the EBIT. I'm not sure if we're disclosing that or not, but let me answer the first question while you get prepared to answer that, the second question, you get prepared to answer that. On the antitrust, of course, there will be filing required, and we will begin filing immediately in the countries where we need to. That certainly will include the U.S. We believe that this deal will be approved by the regulators, otherwise we wouldn't be initiating it. Obviously, we've had our experts inside and outside the group and in the U.S., and believe the transaction will be approved.
We don't think it'll be a, you know, a quick decision, so we're expecting some time in 2015. It's hard to pinpoint a month, but just for, you know, round numbers, I'd probably guesstimate mid-2015 would be our best guess. Tomas, can you answer the first question or speak to the first question?
Well, I mean, for a deal like this, for an asset deal, a core value like this, the EBITDA is the most relevant number to look at, and that's why we're looking at that number. The EBIT margin is of course, lower as such.
Is there anything, like, should we just use a similar normal, for underlying depreciation, is that similar to what Electrolux is, or is there anything specific about the GE business?
Well, yeah. Well, as Keith mentioned, they have been through a major, let's say, reinvestment program over the last three years, which is paying off now. Yeah, there is a sort of a, you could say, a little bit higher depreciation than we have at Electrolux, as such.
Yeah,
for the Mabe, that's just basically equity accounting as part of the GE results, not proportionate joint venture accounting?
It will be accounted for as an associated company. So it's our net income share of Mabe will be into our books. It will not be a pro rata consolidation.
[audio distortion] t he EBITDA number you've given us?
I didn't get that, sorry.
The joint venture income is part of the EBITDA that you've given us for GE Appliances.
Yeah, yeah. Yes, it is.
Okay.
There's a Mabe number in there, yeah.
Okay. Thank you very much.
W e have the next question coming from...
Do you have the next question, please?
Yes. The next question is coming from Mr. James Moore from Redburn. Your question, please.
Good morning, everybody. Congratulations, Keith, Tomas. Looks good. A couple of questions if I could, some on synergies and some on distribution and brand. On the synergy number, the $300 million, it's a big number, 5.2%-ish of the center sales, acquired sales. What gives you the confidence on what's happening underneath in sourcing and operation synergies, which is 90% of the synergies? I think I've got an idea, but I'd be interested if you could just turn it into plain English as to where do you really get basically a doubling of the EBIT of this company from those synergies. Just trying to understand the confidence there. When you talk about the timing, could you perhaps give us a number for year two and year four, just to try and understand that ramp up?
As an aside on synergies, on revenue synergies, not really mentioned there, but why has GE never really sold outside of the US? Presumably, that could be, and do you feel it's an opportunity? That was all on synergies. On brand and distribution, just on brand, the brand agreement, can I understand it a bit better, please? What are the important things for us to know? How long does it last? What are the terms? On the distribution network, I think I'm right in saying that the distribution of GE Appliances is perhaps the best in the U.S. and very comprehensive. Can you somehow scale what that network is? Is it fully yours? Will you share it with GE? How many points of contact or warehouses does it have?
Just something to give us a sense for what that distribution is, because I would suspect that's been an important part of what you're getting here on synergies.
Okay, let me start, James. One, on the synergies, of course, you know, we've been through, as you would expect in a deal this size, pretty extensive due diligence. We've got very good line of sight to that $300 million number, and you can guess where it comes from, particularly, you know, the majority, is on the purchasing side, right? You start right there.
Mm-hmm.
-when you double the size of the business. That's a substantial part. The next largest is in manufacturing. The next part largest comes in warehousing and distribution, and then the next part comes in SG&A. Clearly, the first two are the largest by far, and we have got very good line of sight to those numbers. From a timing standpoint, as we mentioned a little earlier, you know, it'll take a couple years to get up to the full run rate. I would but it won't be linear.
I would expect that year one and year two, because we'll have some investments, some restructuring required, it'll be on the lower side, but then by year four, to answer your specific question, we'll be at the full run rate. On revenue, yes, as you stated, they've primarily been a U.S. business. I think that's just been the strategy within the portfolio of the company, which is not to expand the appliance business outside the U.S. I think it was a conscious choice, I guess, relative to other priorities. Is there a opportunity for growth and synergies, growth synergies, revenue synergies, sales synergies? The answer, of course, is yes. We've not comprehended those in the estimates that we've given you, however.
Mm-hmm.
You asked about the brand agreement. With the transaction comes, of course, importantly, the GE brand with it. We have that for an initial 40-year period, and to be renewed thereafter, essentially into perpetuity. On distribution, you're correct. They have a very capable distribution network, which incorporates about 110 breakpoints or distribution points around the U.S., where they can deliver product to consumers within 18 hours of an order. A very strong, very capable distribution network.
Thanks.
Great. Does that answer your question?
Yeah, great answers. Thanks very much.
Should we move on to the next question, please?
The next question comes from Mr. Anders Trapp from SEB. Your question, please.
Yes, hi there. Almost all my questions actually have been asked already, and actually mostly answered as well, very good. I have some details. First, well, first, actually, on the $390 million EBITDA figure that you gave, and you said include the Mabe contribution. I didn't really understand if it included the net income contribution from Mabe or the 48% share of EBITDA from Mabe. Which one is it?
It's the 48% share of net income.
Of net income?
Yes.
Okay, very good.
Yes, yes. Yeah, the EBITDA, of course, is much higher.
Yeah, okay, but that's good. Secondly, also, do I understand you correctly that you gave a guidance for 2014 of between $470 million and $490 million?
May-
EBITA 7.3 in multiple.
Well, I mean, we've given the multiple, so-
Yeah, all right.
Yeah, you'll have to make your own assumptions.
Yeah, but that, okay, that's fine. Yeah, curiosity question maybe also, how long have you been negotiating this deal? Is it, you know, a full year we're talking about here, or it has been quicker?
I would say this has not been a quick process. This has been a thorough process, I would say.
Yeah. I also wonder about the cost of $300 million to the, to gain the synergies of $300 million. Costs in this case normally are closures of plants or consolidation of plants, et cetera. Not, I mean, if you have purchasing, half of the savings or almost half of the savings is purchasing, that normally doesn't bring a lot of costs. Is that right to assume that most of the costs will be related to manufacturing, footprint changes?
Without getting into any specifics, Anders, I think, you know, your assumptions are intelligent, right? You know, the restructuring will primarily be related to the operations side of it. Yes, but we don't have any-
Yeah.
We don't have any specifics right now on that.
That's fine. also-
Uh-
Sorry. Yeah, on the GE production or manufacturing processes, et cetera, I mean, they have been known in the past of it for having outsourced a lot of their production, but they have resourced a lot recently. What is the sort of status now, when it comes to, you know, how much of outsourced of products do they have, and how much is produced by themselves?
Yeah, to your point, they've actually, over the last several years, done a fairly significant amount of insourcing of the products. They've brought a lot back as they've made these investments in their plants. I'd say the one significant, obviously, outsourcing, if you can call it that, comes from their joint venture partner, and now our joint venture partner, Mabe. There's about 25%, Tomas, 30% that's being sourced from Mabe?
Yes. Yes, around 25%, yeah.
Yeah.
Yeah. Very good. The strategic value of the Mabe ownership for your ambitions in South America or Latin America, can you say something about that, how that helps you in building and improving your position in South America?
Well, of course, you know, just start with, you know, we're now 48% or at closing, I should say, we had 48% ownership of the largest Mexican appliance company, by far. And also, as you know, strong position throughout Latin America. When you look at Electrolux, between our current position in Canada, U.S., Brazil, Chile, Argentina, and then the same now with GE Appliances, U.S., with Mabe, Mexico, et cetera, it becomes a pretty strong, presence, and ability to serve customers throughout all of the Americas.
One final question also. What do you, I don't know if you can say that, but when it comes to the financing costs, you know, the bridge financing first, but also the, I mean, it's going to be a pretty long period of bridge financing, and we're talking about the closure, hoping for mid next year. What type of costs are associated with that, i.e., interest rates, et cetera? What do you expect in terms of interest rates on the final financing, i.e., the bond that you're, that you're, once you replace the bridge financing with it, something like that?
Tomas?
Well, well, of course, if we start at the back end, of course, a significant part of the financing will be bonds on the U.S. market as we plan it right now. As, as we will significantly increase in financial net debt, we will handle this in the same way as we handle all debt. We will spread it out over a five-to-seven -year period with sort of decent or manageable refinancing risk. It will go from at anything from just a short term, very short term rate, up to five-to-seven -year bond rates according to market. Then, the first part of your question, the bridge financing, yeah, it's a lot of money, and, of course, it'll be some time here.
Yeah, it doesn't come for free. There is a cost to that. There's a commitment fee, an upfront fee, et cetera, et cetera. I would say normal market rates on that one as well.
How important is it, the keep the investment grade, considering your plans for the, you know, bond financing? I guess it's very important.
I mean, we are committed to keep the investment-grade rating. Of course, it is, I mean, to go onto the U.S. bond market, you need to be investment-grade.
Right. Okay, thank you very much.
Thank you. Before we get on to the next question, could I just please ask you to make sure that there's not too much of a background noise? It makes it a bit difficult to hear what you're saying and what you're asking and also the answers. By that, I ask the operator to move on to the next question, please.
The next question comes from Mr. Björn Enarson from Danske Bank. Your question, please.
Thank you, and, congratulations, but my questions have been asked and answered. Thank you.
Very good! Is there another question coming in right now?
Yes, we have five more questions in the queue. The next one comes from Mr. Domenico Ghilotti from Equita. Your question, please.
Good morning. Two question: the first, is, if you have considered, some, the risk of, sales dis-synergies, if you have taken into account or if you can elaborate on this risk. The second question is on Mabe. I didn't get if you have any possibility to take full control based on existing, say, agreement possibility for GE, or if you will take a minority stake.
Yeah. Let me start with the sales synergies. We've actually, in our model here, modeled some negative sales synergy. We have, as you could imply, we think there's some upside to that, where we think there's some positive sales synergies. We've modeled actually some negative sales synergies to be conservative. On the Mabe question, I think for now, the best we should answer and can answer is, you know, with this transaction, we will step into GE's shoes and be the 48.4% owner of that company, and then we'll see what the future brings down the road.
Okay. Thank you.
Thank you.
Thank you. We could move on to the next question, please.
The next question comes from Mr. Andreas Willi from JP Morgan. Your question, please.
Yeah, thank you very much. I just had a follow-up question. The first one on treasury shares. Would you plan to issue any of the treasury shares you're holding now as part of the financing, or are they still kind of earmarked long term, again, then, for being canceled? Second question on Mabe again, in terms of the cost savings. Does this include any savings you could achieve with Mabe as well, in terms of their sourcing or their manufacturing? The last question on the negative revenue synergies. You said you modeled them. Have you modeled them into a cost savings number that you've given us, so a net savings number, or is that something on top in your own acquisition model? Thank you.
Yeah. Let me start with the Mabe. We haven't comprehended any of the Mabe synergies in the $300 million we've talked to you about as straight with the GE side of it. Tomas, treasury shares, you want to answer that?
Yeah. When we talk about the 25% equity portion of the financing, that's 100% the rights issues. We have not considered to use the treasury shares at this point in time.
I'm sorry, there was a third question. What was the third part was?
You mentioned, sorry, you mentioned negative revenue synergies, that you modeled them. Have you modeled them into the $300 million cost savings number and given us a net number, or is that something you've modeled separately in your acquisition model?
Yeah. How do we model the sales, negative sales synergy relative to the cost synergies?
Sorry, you broke up a little bit there with.
Tomas, did you hear me?
Yeah, yeah. You broke up a little bit, but okay. I mean, the latter part of your question or the latter answer. It's part of our own acquisition model. Yeah. Yeah.
Thank you very much.
Thank you. Do we have any other questions?
Y es, there are four more questions.
Yeah. However, let me say that, it's part of the acquisition model, it's not part of the cost synergies, but it, of course, affects the multiples that we talk about, the 7x and the 5x. It's, of course, it's included in those ones. Yeah, I'm done.
Is that clear?
That's clear.
Thank you. Should we move on then to the next question?
The next question comes from Mr. Eric Bergman from JP Morgan. Your question, please.
Yes, congratulations, you all, to this fantastic deal. Just a quick question, half the most of my question been asked is that the exact maturity on the bridge facility is something you can disclose?
We would prefer not to, but it's enough for us. It's enough.
It's a short term or medium term?
I would call it, short, medium, I would say. Short-medium.
Okay.
Yeah.
Thank you very much.
It gives us enough time. We're not worried about that one. It gives us enough time to organize all the financing, the bond takeout, the rights issue, and all that. We don't feel any stress or time pressure on that one.
Also the, any kind of delays because of antitrust?
Taking that into consideration also.
Okay. Thank you very much.
Good. I think we have two or three more questions on the line here, so we could just move on, please.
That is correct. The next question comes from Mr. Eliason from Kepler Cheuvreux. Your question, please.
Yeah, hi, once again, congratulations to a good deal. I have just some question about Mabe. I understand they control the GE brands sort of in Latin America and part of the GE business in Canada as well. Are there any changes in that ownership? Will you be able to get hold of the GE brands outside of the U.S. as well, or?
Without getting into too many specifics, you're right. You're correct. GE has licensed its brand to Mabe in Canada and in parts of Latin America. Those rights and licensing transfer to us. When those licenses come up, we will decide whether to renew those or not, going forward.
Okay. For the time being, they will remain in Mabe, and then in whatever, 20 years or so, you will consider what to do with them, if I understand this correctly?
Yeah. It's nowhere close to 20 years.
Okay.
Um.
Good. Many thanks.
Thanks. Thank you.
All right. Could we move on, operator, please, for the next question?
Okay, the next question comes from Mr. James Moore from Redburn. Your question, please. James?
If James is not on the line, maybe we could take, as I see right now, a final question we have coming in.
Yes, the final question is coming from Mrs. Andrea Kukhnin from Credit Suisse. Your question, please. Your line is open.
EBIT. Bridge. C an you hear me?
Yes.
Yeah, great. Looking at the number you gave, $390 million for 2013, EBITDA, and from GE's disclosure, the EBIT was $247 million. That implies that there's only, I think 2.5% of sales as D&A. While you commented that sort of should be higher than your own 3%, can you just help us with reconciling this? Obviously, we need to arrive at net income by EBITDA, and from that, it's quite critical.
Tomas, can you walk through that?
I didn't really get the question right.
I guess the question is, from what you've told us about EBITDA for this business for 2013, and what GE told us about EBIT for this business in 2013 before. It implies that depreciation amortization is 2.5% of its sales. Is this the kind of right number to use for us going forward? Or are we in some kind of a ramp-up phase of depreciation amortization because of previous investment? Which is what your comments imply when you said that it should be in line with your own or a bit higher.
Well, I mean, we are in a ramp- up. Yeah, absolutely. I mean, we, this GE Appliances has made a three-year... Or yeah, they've been investing in the business. They are well invested, good facilities, et cetera, good products, good platforms and all that. That is also one of the reasons why we're interested in them.
Mm-hmm.
Because they are on a pick-up. They are, I mean, the depreciation over sales right now is a little bit higher for them compared to us. They are, I mean, they are more like, let's say, without being too specific, but if we are on, let's say, 3.5%, they are more like on a 4% level, something like that.
That's not what 2013 seems to suggest. This seems to be kind of ramping up quite rapidly, if or something is wrong with our 2013 numbers.
2014. Yeah, I'm talking about 2014 now, full year numbers. Yeah.
Okay.
Yeah.
Could you give an EBIT for 2013 for this business?
We would rather talk about EBITDA. Thanks.
Got it. Just very finally, coming back to these multiples that you gave 7x outgoing to 5x, that obviously implies $200 million of synergies, and you target $300 million. Should we read into that in terms of the negative synergies and some kind of potential rate? Would that be the right thing to do, or are we just sort of multiplying big numbers with some small numbers?
It can. It implies $300 million. If you just take $300 million on top of the $1.5 million, you arrive at something like 5x, 5.5x. I mean, then we have growth, and we have other improvements.
Mm-hmm.
Stuff like that, so it can even be better than 5.5x
Got it. Thank you.
Yep.
Do we have any further questions on the line?
Yes, there is one last question coming from Miss Amanda Bayer from Citi. Your question, please.
Yes, I'm wondering whether you keep your head office in Stockholm?
I think that's for you, Keith.
Sorry.
The answer is absolutely.
Great. That's my only question.
If there are no more questions, we will obviously make ourselves available during this week to see both sell side and investors, in Stockholm, in Europe and in North America. If you have any further questions, don't hesitate to call us and contact us and see if we could try to clarify any issues.
Katariina, maybe I can try to summarize if I could. Is that okay?
Oh, yes.
Yep. I just for everyone, here's how I think about it, how we think about it, and the board thinks about it with this transaction. If you think about, I always think about M&A as the strategic fit first. The strategic fit here to us, to me, is quite compelling. One, it's a consolidation play with significant scale and leverage benefits. B, the strategic fit is quite complementary in segments. If you think of what segments we play in, what segments GE Appliances play in, they're quite complementary. Think about builder, think about retail. Quite complementary in terms of channels, if you think about where we're strong and where they're strong. Quite complementary in terms of brands, mass versus mass premium versus premium, and quite complementary from a distribution capability, as we talked about.
Strategic fit is quite compelling. The next, of course, is the financial fit compelling? We hope you heard between the synergies, it being an asset deal, and the Mabe equity, that the financial attractiveness is quite strong relative to shareholder value creation, around EPS accretion and free cash flow. Having said that, I'd just like to remind you that this whole transaction is partly predicated on approval from all the appropriate authorities. We've got work to do, we'll do the regulatory filing over the next couple of weeks, and get that process going. We'll have to, you know, prepare for and plan for, we won't be able to execute, you know, until we get the appropriate approval from the authorities. We're very excited about this opportunity.
We think it's a transformational play, and we think it'll be very good for our customers and our shareholders. Thanks very much for joining in today. Appreciate it.