Good morning, everyone. Glad that you could join. At short notice, here at HANZA, we are really excited about today's topic: the acquisition of Leden Group Oy, and I'm Erik Stenfors, and it'll be my pleasure to report on you on this transaction, and I'll do it together with our excellent CFO, Lars Åkerblom. The agenda is this: we will first make it clear why we are making this really strategic acquisition by a short strategy recap. Next, we will review Leden and also answer then why this is the right company for us. Next, Lars will go through the transaction details and the financial impact. After that, we will look at the future, let's say the somewhat upgraded future, and as normal with the Q&A session, please use that for any questions you may have. First then, a short strategy recap.
If we look at the manufacturing chains of today, it can be quite complicated to have outsourced manufacturing. The reason is that traditional contract manufacturers, they are specializing and globalizing, and it's not unusual that you end up with a rather cumbersome manufacturing chain, as is displayed on this picture. That's why we started our company, armed actually just with the vision to make product manufacturing easy again. How do you do that? How do you make manufacturing easy? We have a business model with three parts. First, what we call the manufacturing clusters. It's our industrial parks, where we offer both the parts production and the final assembly. Then we have our service MIG. This is when we try to help our customers to relocate the manufacturing, which can be quite complicated.
Also, we have HANZA Tech Solutions, our product development part, which is then supporting. We don't have our own products, but we're supporting our customers' R&D departments, and thanks to this business model, we have been able to help many product-owning companies to find a much better manufacturing solution, so to summarize this part, it's our business model that has led to a very solid customer base, which in turn led to our solid growth. We are probably one of the fastest-growing contract manufacturers if you look over a 15-year period. You see some examples of our customers in the middle and some products also. We do different kinds of products, so you see analysis instruments to the left. We do reverse vending machines, complete, see it in the middle, and also seed drills for agricultural machinery, so this is one thing that defines HANZA, our business model.
But what also defines us is our growth model. We have a model where we have milestones two, three years ahead, where we have specific goals for operations, and then consequently, it will be financial targets. Now we are in a phase called HANZA 2025, and that phase is all about increasing presence in existing geographies. So we do this with organic expansion. We open a factory before summer in Estonia. We're about to open a new one in Sweden by the end of this year. And then we also do it through then well-chosen acquisitions. It's part of our way to have this structured expansion. And that leads us to the company in question, Leden Group. Let's have a look. We've been discussing with this company for a couple of years. It is built on factories with a long history.
They are contract manufacturers in machining and sheet metal mechanics. They have opened a new state-of-the-art factory in Oulainen, which is, if you look at the map, the top arrow there, meaning then that now we have state-of-the-art factories both in Estonia, Finland, and Sweden. The sales are about SEK 1.1 billion and a fair operating margin, especially given the recession we are in right now. Lars will come back with more numbers. They have four sites in total in Finland: Oulainen, which I mentioned, also Sievi, Nivala, which is below that arrow, and then we have Seinäjoki, also one in Estonia, Tallinn. And they are also embracing import and processing and sales of sheet metal and also producing steel profiles. All in all, about 600 people, a very strong market position, and the customer base is not overlapping with our customer base.
You see some segments down to the right. They have really good customers in energy management, drive automation, medical technology, IT infrastructure, machine industry. And why we have been able to have a very small decline in our orders this year, and now we are moving back to organic growth, is because our customer base, the same thing for them. They have a really strong customer base, and that's why they are growing. So really good combination. Also, this company will be integrated like we did with the Orbit One acquisition a year ago. Then we bought a company with sites in Sweden and Poland. We moved the sites in Sweden to Cluster Sweden, the one in Poland to Cluster Central Europe. Here, we will split the factories. So the factories in Finland go to Cluster Finland. The one in Estonia goes to Cluster Baltics.
Okay, so why is this a good acquisition for us? We have a checklist, some general acquisition parameters: geography, technology, management culture, customer base, and financials. We see them, we could take them one by one. This is strengthening our position in Finland. Finland has been the smallest part of HANZA so far by this acquisition, not anymore, and we've also talked about that the size gives us a better possibility to handle the fluctuation of the economy, so this is really important for us, then competence capacity. I would say that we get a really good competitive edge by the add of this knowledge of these people, also comes with an extremely good management and culture. You might recall that we spend a lot of time judging the company by the culture.
So when we look at a company, we not only do due diligence on the legal side and on the financial side, but also on the HR side. They have a culture which is similar to HANZA, so they have decentralization. They have a good corporate culture. So that's very important for us moving forward. And then I already talked about the customer base, which is then built by fast-growing customers from different segments, not overlapping our customer base. And Lars will talk about the financials, but that's why this acquisition is not only just in line with our general strategy 2025, but it's also a perfect fit for HANZA. But okay, then, with this, I will leave the floor to Lars, who will then give you some details about the transaction.
Good morning, everyone. Yes, this acquisition is 100% of the shares in Leden Group, and the purchase price is based on an EBITA multiple of seven, of course, with a cash and debt-free basis, and the EBITA is based for 2025. At closing, which we expect to be somewhere during Q1 2025, we will pay cash, EUR 21 million, and 2,300,000 shares, new issued shares in HANZA, and the shares we valued in the transaction at SEK 70 per share, corresponding to EUR 14 million , so at closing, it will be a total sum of EUR 35 million approximately, and the dilution for the issued shares is approximately 5%. On top of that, it can be an additional purchase price or increased purchase price of maximum 15 million EUR, and that is depending on the development of profitability during the fiscal year 2025.
It may also be an additional 300,000 shares, but that is depending on the share price development of the HANZA shares in 2025. And all the shares that are part of the purchase price will be subject to lock-up clauses. And the financing is credits from banks together with existing credit facilities and cash in HANZA Group. And the maximum purchase price can not exceed seven. It can be less, but it cannot exceed seven times the EBITA. And the financial impact, to the right, you see the growth of HANZA. And in 2024, we have taken the average of the analyst estimations of the sales in HANZA for 2024, and we added Leden sales. And that leads to that the new group pro forma will have approximately SEK 6 billion .
And I think all of you know our financial target, which is SEK 6.5 billion for 2025. Leden operates at approximately 7% EBITA margin. HANZA has increased its EBITA margin during 2025, and in Q3, we were at 6.7. Here we have the financial target for 2025 is 8% EBITA margin. We expect acquisition to increase the EPS. The balance sheet impact, depending on when the closing can be done and how the balance sheet both in HANZA and Leden looks, it might be that we for a short while will exceed the financial target of two and a half times in net debt towards the EBITA. This is expected to quite short after the closing be well below the two and a half times during 2025. The equity-to-asset ratio, where we have the financial target of 30%, we will still be well above that.
We are close to 40% in equity-to-asset ratio in HANZA today. The new group will have a strong cash flow, and we also see that the acquisition of Leden will lead to less need of investment. Leden is a well-invested company. We have said many times that we see profitability increase when our clusters reach a certain size. With this acquisition, Finland will reach the size where we see that we are normally making a higher profit and are more resistant towards changes in volumes, both up and down, so we expect this also to be the case with this acquisition, that we will be able to increase the profitability, and we also expect that Leden within the HANZA cluster concept will be able to increase their operating margin, and by that, I leave back to you, Erik.
Thank you, Lars. Okay, so let's make a short summary and look at the future before we move on to the questions. This deal is perfectly in line with our strategy. If you've been following us, it's probably not a surprise that we do this even. It is a company with an outstanding reputation, a really, really good company with the right culture, right management, right technologies. It's a fair price, as Lars mentioned, so we will not pay more than EV/EBITA seven. And, also, that Lars touched upon, the idea with acquisitions is, of course, synergies. And, you like, on the sales side, the sum to be larger than the parts. We have seen this historically. We believe it will be true also for this company that the relation with the customers on the acquisition together with the concept of HANZA will lead to cross-sales.
You will see new additional orders, maybe also this MIG concept. On the cost side, it's on the other way that you like the sum to be less than the parts. And also, as Lars mentioned, our cluster concept will make it possible to further streamline the cost side. So actually, we look at this acquisition as a catalyst for further growth and increased profitability. It means also that we are repeating our financial goals. Now, this is important. Our financial goals are not just some goals floating in the air.
They are a consequence of our operational strategy and plan, which in turn is then aiming to increase customer value. So if we fulfill our operation strategy, then we will have our financial goals. Since we by this acquisition feel that we are completely right on track with our strategy HANZA 2025, we feel confident to repeat our financial targets for 2025. By that, we open the floor for any questions.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Fredrik Nilsson from Redeye. Please go ahead.
Hi, thank you. I want to start with the sales split between main and other markets. I mean, based on the number of factories, I assume an 80%-20% split in favor of main markets is reasonable. Is that a fair assumption?
Good morning, Fredrik. We have not gone out with the details, and we have not even finalized the year, so we don't have the split for 2024. But what we can say is that we have about 600 people in this acquisition. About two-thirds of them are located in Finland. Doesn't necessarily go exactly with the sales, but that's the guidance we can give at this point.
Okay, I see. Great. And also just for clarification, the seven times EBITA, is that including or excluding earnouts?
It is both including and excluding earnout. The total purchase price, as I said, will be based on the 2025 result in Leden. And then we will pay seven times the EBITDA based on 2025.
Okay, I see. But what about the minimum purchasing price then? Is that kind of a defensive assumption for their EBITA in next year, or what do you base that figure on?
Yes, it is. You can see it that way.
Okay, great. Also, considering your quite rapid and deep integration of acquisitions, you typically see some negative impact on the margins in the first few quarters, which might have a negative impact on your target for next year. Should we assume something like that in this acquisition as well, or is there any reason to expect a more stable development also in the first few quarters when you do the deep integration?
I can start, Lars, if you'd like to then add something. There's a big difference. This is an important big difference between the acquisition of Orbit One, which we did a year ago, and this one, namely that the recession had not started at that point. Where that company was running, Orbit One was running about 6%, and they were hit by a recession, and the margin went down. We have found a way to get them back to 8%, so even above where they started. This company has already been a year in the recession and been able to have a very good earnings development already.
The answer is we don't expect. We are starting at a much better point of departure, let's say, to make sure that they reach our financial targets, and as we have stated earlier, we are already done with Orbit. So now it's about this, and they are close to our targets. So we don't expect it. And remember that our target for next year is on the whole year, meaning that we cannot be so much below 8% in the beginning if we want to have the average 8% for the full year.
Okay, that's clear. That's all for me. Thank you very much.
Thank you, Fredrik.
The next question comes from Jakob Söderblom from Carnegie Investment Bank. Please go ahead.
Good morning, Erik and Lars. Can you hear me?
Yes, we hear you. Good morning, Jakob.
That is perfect. I guess two short questions for me to begin with. If you could just tell us something, I don't know if it's possible, but the split between the three businesses in Leden, both if you look at the contract manufacturing part, the steel services, but also these own products that you're making. I wonder if it's possible for you to talk anything about this.
We cannot give you a split in numbers, but of course, we are a contract manufacturer, so the vast majority is contract manufacturing of machining and sheet metal mechanics.
That's perfect for my part, I think. But also then secondly, I think Fredrik was touching upon this before, but is it possible to talk about, do you believe that there are any sites that you are more excited about owning through these acquisitions rather than others, or are there what you can call it sites that perhaps are running at the higher utilization rate than others? Either one of those two questions, I think, could be a good way to start.
First of all, it's a good fit with our existing factories in Finland. So we see good synergies of that. Of course, the new one in Oulainen is fantastic. Always when you open a new factory, you build in also, let's say, efficiency through the layout. So that's a factory worth visiting, and we are really proud now to have state-of-the-art factories, like I mentioned earlier, both in Finland, Sweden, and Estonia.
So that is, but the others also have other technologies, and of course, we will be shuffling a bit to make sure that we have a center of excellence for the different technologies in Finland. But all of them are very competent. And the most important thing, the difference between an acquisition and when we build our factories organically is that we get competence. That was the great thing with Orbit One. We got a lot of competence with this acquisition. We also get a lot of competence, not only factories.
Perfect. Yes, the last one for me, I think a short one. Is it possible to, you said there's no overlap between the customer base, but if you think about it, is it fair to assume that in terms of concentration among the customers, is that it's quite the same as HANZA with no customer making up more than 10%? Or is it anything we should consider in terms of then the portfolio?
And then you have the divide between now and later, because of course, we like to grow with the customers, but they have a good split and distribution to start with. But most likely, we are going to increase with some of the customers, not necessarily only in the sites we have acquired, but also in other sites in HANZA. So by that, if you would then compare the aim of the new customers with the old size of Leden, then you might touch upon the 10% margin, but otherwise, we are fine.
Great. Final question, I guess. Any one of these customer segments that you feel more excited about expanding your presence within?
Let me give you a clear answer. Yes.
No potential for any more disclosure among these five main ones, or do we have to be satisfied with a yes for now?
They are in, let's say, energy management, which is a booming sector. We like it very much. And I'm sure you will hear more about this. Sorry to be a bit keeping the cards close to us, but we also have some discussions with the customers, so we cannot reveal too much. But within short, we will be able to also disclose the name of customers.
Yeah. That's the thing. That's also me. Thank you a lot, and congratulations on the acquisition.
Thank you.
There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
Okay. Again, thank you for your time and with a short notice. And if we don't talk before the holidays, we would like to take this opportunity to wish you a Merry Christmas. We saw that Christmas came early to us and our customers and hence our shareholders. But the best wishes for the future and a Merry Christmas, and bye for now.