M&A Announcement

Aug 6, 2020

Welcome, everybody, to the presentation of Nolatos acquisition of GW Plastics. We are very pleased that we can inform that we have been able to take an important step in the Nolato development and inform about the acquisition. If you have the presentation in front of you, we will start on Page 2, showing the L'olato geographical presence before this acquisition. And on this slide, you will see our very good strong footprint in Europe, a good footprint in Asia, but somewhat comparable weaker footprint in North America. If we then turn to Page 3, summarizing up GW Plastic a little bit. We have been following this company for many years and been intrigued by the success and the performance of GW Plastic. It's a very well managed company with an excellent fit within a lot of corporate culture. The GW Plastics was founded in mid-50s and has been under the same ownership since 1983. So it's a family controlled company previous to our acquisition. GW Plastics has headquarters in Bethel, Vermont and have a total of 7 production facilities in United States, Mexico, China and Ireland. GW has established a position as an excellent industrial leader specializing in complex injection molding of thermoplastic and silicon solutions, which is an excellent fit for the LASO offering to the market. We found in Jidau Plastics a very high degree of innovation, very good extensive engineering and technology know how and in combination with the world class scientific molding expertise in this company that we see have a great fit together within a lot of offering. So we can get synergies from the 2 parts on the market side and on the offering to our customers. Turning to the next page, showing a slide where we put in the GW Plastics facilities around the globe. So with the combination of the 2 companies, we have a solid global positions on the 3 important continents with significant market synergies across all business areas. So the U. S. Footprint is good. We have an excellent footprint in Europe and, of course, a strong footprint in Asia. On next slide, we show some pictures of the 7 facilities within GW Plastics. It's well invested production facilities on a very, very high standard, total of 50,000 square meters of production area, including 12 state of the art medical clean rooms. So it's very much similar to the Nalatto standards in the facilities. It's world class and good clean rooms and good production footprint. Next slide, we show some of the GW plastic, the most important customers of GW. It's a very small overlap with the existing Lotto customer base. So we see very good growth opportunities with both GW Plastics customers and the existing Nolato customer relationships. Approximately 85% of GW Plastics sales is in within Pharma and Medical Device, and the rest, 15% is within Automotive and General Industry, fitting very good into our Industrial Solutions business area. Good afternoon. Per Glahermsturm, presenting some of the numbers from this acquisition, showing size, focus and geographic presence, making an ideal strategic combination. Annual net sales of around SEK 1,800,000,000 with an EBITA margin of around 7%. The company has 1100 employees at 7 production plants. The sales of the company will have has about 4pits of the business related to medical devices, and the remainder is relating to the automotive industry. The company has a diverse customer base. The largest single customer accounts for around 20% of the total sales. And even that concentration, it is spread among a lot of different projects and products. It's a growth oriented company. It has achieved average annual growth of about 10% over the past 10 years. Turning to Page 8, financial effects of the acquisition. The acquisition price, including contingent considerations of a maximum around SEK 400,000,000 is estimated to about SEK 2,000,000,000. And the initial payment will be SEK 1,800,000,000 at closing, and the rest is then the assessed continued consideration. The business is expected to be consolidated into the Novartis Group from September and having a marginal positive effect on Novartis earnings per share for the current year. We are waiting for approvals from U. S. Authorities. And when those have been achieved, the closing will take place. And as I said, we are estimating that for September. The transaction will be financed with our own cash funds and about onethree of the initial purchase price will be from our own cash, and new credit agreements will pay for the rest of the remaining twothree. Even if Chongqing has not taken place and we don't have the final balance sheet numbers and we haven't made the final purchase price allocation. We assess the goodwill and total group values to be about SEK 1,500,000,000 from this acquisition. The full and final acquisition analysis will be disclosed in our Q3 report. We will now open up for questions. Thank And we have no questions on the line at this time. Please go ahead, speakers. Thank you for your interest in Novartis acquisition of GW Plastic, and I hope you have a great rest of your day. Thank you.