M&A Announcement

Jun 14, 2016

Slides

Good morning, everybody. I welcome you to this press conference today on our acquisition project of Premier Farnell. This is a very important milestone for our group, and it's a very important day for us. I've with me, Neil Harrison, the CEO of TECO, Technical Components Division, Rator Velte, our CFO and, dear Climprecht, currently CEO of Seating Solutions, and he will be my successor as of, 1st January 2017. Before we will talk about this transaction, our Chairman, Ole Schraff, will give you a review on our portfolio management, in the past years and show the relevance of this transaction, in our overall portfolio Oliver. None. It's good. Daryl, ladies and gentlemen, I will give you, as far already, as said, a short overview on our strategy and portfolio management. We are continuing to focus on the structure of a industrial holding with an impact of Mason, Strategy medium term and financial planning as well as monitoring of the corporate divisions. With the divisions, IT, HR, PMI, and communications, a clear guidance has been set. Management capabilities will be increased qualitatively and quantitatively according to requirements of group and divisional strategy. We consider ourselves as multi niche player. The target niches should have a high potential for growth, definable for markets and customers, with a clear differentiation from the mass of competitors. Ideally, the niches are globally with high entry thresholds. Concerning multi niche player, we defined strategic guidelines such as focus on markets where we can develop a leading position, focus on system political application in sealing, or time critical services in high service distribution. This principle did guide us in our portfolio management. In 2006, we have been a conglomerate with 5 divisions. That hasn't been interdivisional synergies. And of course, there have been differences in performance and strategic positioning. After the 1st phase of improvement of efficiency in the existing segments, we focused afterwards on improving the portfolio of the group. And the aim was to achieve high portfolio price earning values, enabling us to profitable increase capital for acquisition without losing the majority in both capital. Cabling solution has been privatized and is not anymore part of the debt to Euler Group. In the past 10 years, we have completely restructured our portfolio. We have divested an accumulated turnover of about CHF 700,000,000. These are the red cons and acquired about 700,000,000 in the same time. These are the green columns. The portfolio changes combined with operational improvements, did lead to more than 100% higher EBIT margin. As a group, we have not grown because of the divestments on the one hand, on the other hand, of the strengthening of the 3 strengths. But the quality of the portfolio has however improved considerably. To that today, we have 2 focused divisions. Fielding solution is a result of the merger of the Rubber And Pharmaceutical Sectors is a Global Operating Division. And in Ceiling Solutions, we have already reached the target of being the leader in our market segments such as Automotive Pharma Civil Engineering and Nespresso. In technical components, we are leader in some geographies only. This acquisition now makes us also in technical components, a global leader, a target we had in mind since 2006. The current uncertainty on Brexit and the management changes in Premier Farnell opened a window for us to do this important transformational move for that trailer. Okay. That was my short overview. We'll hand over to Parnow, who will explain the transaction. Thank you very much. So we now go in the details of the transaction as it was announced, this morning and give you some more, information about the different aspects will also hear more details about the strategic rationale directly from, Neil Harrison Let me do first, a summary. So we offer, as you could see from the press release, 165p per share, of Farnell. This compared to, to yesterday closing means, a premium of 51 percent. Here, I want to make the remark that the shares of Premier Farnell are trading at around a 7 times EBITDA multiple. And, whereas most, businesses in distribution trade around the 10 time or higher 10 to 11 time EBITDA multiple. The total value of the offer for the equity part is £615,000,000. This corresponds to CHF 848,000,000 if we calculate with, exchange rate of 1.38 Swiss francs per pound. Then if we go to the enterprise value, we're talking a £792,000,000 or close to CHF 1,100,000,000. There are already estimates, out in the market on the EBITDA multiple of this enterprise value, which are clearly considerably below the 10 times multiple. So compared what the valuation is of distribution businesses, we think this is quite an attractive price. The offer is, recommended by the board, of directors. And, I can also, say here that 18 18.5 percent of the shareholders are in support of this transaction. We expect that closing can happen in Q4 2016, and we follow a scheme of arrangement where there will be a general assembly in Premier Farnell and then a court meeting. And obviously, we also have to wait for, approvals, antitrust approvals, mainly Austria, Germany, Poland, and to United States. We do not see any concerns with this regard. Short summary on the strategic rationale, We clearly can create in one go, a leader in the high service electronic components distribution. You will hear a lot more about that, from Neil. The product range and the geography are very complimentary and we will be able to offer our customers, won't stop shopping which obviously will increase the attractiveness of our web shop a lot. We expect considerable synergies in the area of $50,000,000 to $70,000,000 annually as of end of 2019. And the CapEx, we expect are in the area of CHF 80,000,000 and about CHF 40,000,000 of one time cost. The financing is committed and fully in, in place. And, we envisage also, equity increase of about SEK 200,000,000 to which I will come later. The acquisition will be accretive increase earnings per shares immediately even before any, synergies have been achieved and implemented. So all in all, a quite, attractive move, but obviously, the most important is the strategic rationale And for this, I hand over to the expert, Neil. Thank you. Thank you very much, Paul. I hope your morning has been as interesting as mine and will continue to be so. It's probably true to say that when I joined DATVela 18 months ago, it was very clear that we had some operational challenges that could be very quickly addressed through in essence a revamped team and a revamped focus on some of the basics of a distribution business and we are making some good progress there. New products introductions that we talked about in our last investor conference in October on track, We've launched our own own brand, with great take up from customers. Our active customer base is growing and has been doing so for a number of months. And perhaps most importantly, in relation to this particular transaction, our systems deployments are now being deployed on time on budget. With very smooth integrations. Of course, none of these things are ever perfect, but compared to where we were a few years ago, we really now know how to deploy the right kind of systems at the right time to cost in these businesses. And indeed, a number of our brands are also growing Internationally as well, in particular, the Rykall brand, which is very exciting for the TECO division. But With all of that said, it was very evident 18 months ago and very evident before then that the Teco business would face a strategic challenge. And I can probably articulate that for you in 3 very simple terms. If you take a look back into the marketplace, You've either been a new entrant into the e commerce, high technical, high service distributor space, and you've done so with common warehousing, very perform and one web shop with very limited local presence because you can now trade globally from anywhere in the world and shipped generally on a 1 or 2 day basis. Or you are, what you might call, a traditional high service previously catalog distributor, and you're then trying to transition your business model to be competitive in this new online digital world. And that's clearly the place that we find ourselves in. Yeah. That's one. So that transition generating the right economies of scale to be able then to invest in the other one, which is increasingly our customers want a one stop shopping experience. They value convenience. They would like all of their purchases, their non production, but increasingly critical time critical, service critical for maintenance, for design, they would like to have all of that through ideally 1 or 2 suppliers. And therefore, you have to have critical mass both in distribution. You have to have both critical mass in product range. You have to have to some degree, an international presence as many of our customers themselves are indeed international. So that's absolutely critical. So that mass the customer who obviously generates the revenue and the ultimate profitability in the business. And perhaps most importantly, in addition to those 2 things is our suppliers. We are a trading company. We buy and we sell. We add value in between. And our suppliers are increasingly looking for and will support and indeed will favor those distributors that can feed the market with their new technology. And that's critical in high service technical distribution. Now I know there are many questions, which I'm sure we'll be happy to answer later around the business model and is it sustainable? I would just highlight that those who have entered this market without the traditional, if you like, burden of some of the infrastructure investments, if you take Mauser, for example, who have recently said that they are making double digit returns. The number was 16%. If we look at our own businesses in Rykald, it makes double digit returns. If you look at Farnell's European business, it makes double digit returns. If you look at the CPC business, it makes double digit returns and sustainable market share gaining returns. So I passionately believe this is a marketplace that can make very good returns for the business. So that's kind of the summary, because just take you through some of the actual numbers. Pretty much overnight, we become either the or one of the largest distributors of high technology, high service components in the world, yes? With total sales of CHF 1,800,000,000. That gives us the scale that we need to operate and drive efficiency in the marketplace both in operations, in logistics, in marketing expenditure and investments in web shops and the like. It really gives us a completely different dynamic. If you then look to the right hand side, we have, with this particular acquisition of Premier Farnell, amazing synergies on the geographic footprints. We are, of course, extremely strong in Sweden. We're extremely strong in Switzerland. We have a growing presence in Eastern Europe, but Premier Farnell has strongholds in the UK, the U. S, an ever growing presence in Asia Pacific, which is where the growth in this industry is mainly being driven from. It's not just a production environment in Asia. It's also a design environment. It's a maintenance environment. Increasingly, it's an increasing design environment as well as education really has taken that population to a completely different level. So we have great geographic synergies. We also see through the amounts of Google search in a number of these markets that actually combined, we are often the number one search for business. In these marketplaces based on our relative brands. So there's a real demand for the 2 business propositions, and that's really very, very exciting. Yeah. And then if you look at this scale, over 1,000,000 products stocked in warehouses around the world goes this idea of completing the shopping basket of customers. And just a little snippet on that, our product range will be substantially different to any of our competitors. If you take the Nadis product range, all of the cabling, battery packs, even though that's more of a retail business, the product range and the own brand capabilities that range with higher margins normally is also cross sellable through all of the other brands. In Rykals, very popular in three d printing, very popular in some of the more hobbyist maker technologies, Arduina, Raspberry Pi, and that also cross sells through to the business to business distribution. Predominantly in distroelect, Farnell New York, the Element 14 trading brands of Premier Farnell. So that product distinction and the ability to cross sell will come on to you later, but also I think stands out in this particular acquisition. And I think almost from an immediate point of view, we will have one of the lowest cost. Now we've completed a number of of our integration project structure in our business model and we'll continue to drive that efficiency. Customers are in this marketplace willing to pay a premium for efficient same day or next day delivery. We have to continue to drive the efficiency used in the economies of scale deliver the promise. But most of all, they value convenience. They want quick search. They want a full product range. They want it in stock. And they want to know they're going to get it before 12 o'clock tomorrow. Yeah. And you have to have excellent operating infrastructure to be able to achieve that, which we have both developed and which we will acquire. So I think basically the marriage, if you like, of Premier Farnell and DATVILO and in particular the Teco division has so many perfect matches both in geography and product range in shared learnings on infrastructure, that it really is very compelling. Now that said, we will become one of the largest in the world, and certainly I suspect in Europe. However, even when we can count the top 5 turnover of our major ourselves and our major competitors, We will still be in a market where we can address 80% to 85% of a highly fragmented, distributed market. So it's not like we're becoming the big fish in a small pond. We're becoming one of the biggest fish in a very big pond. We're therefore able, I believe, through all of that propositional enhancements to begin to increase share of mind in customers, through to share of wallet, through to increase shareholder value. Because that's really how this business will work. I think you know these slides already, but on the top right, just to be very clear, we operate in either side of the product life cycle. So an area is where it is quite critical. A design engineer looking to develop a new technology quickly bring it to market, has both a technical requirement, a technical support requirement, which keeps many competitors out of that marketplace. Even if they could get the franchise, which often you can't, you still need to have the technical support capabilities, the data sheets, the ability to talk about design ins, Premier Farnell, with that brings a very advanced set of businesses in Avid, M Best and their Raspberry Pi experience. To help us improve our technical support capabilities. So that's very exciting for us in an area where traditionally TECO has not been particularly strong. We are growing in our electromechanical, in our test and measurement areas, but in our active and passive, so microprocessors, resistors, condensers. These kind of things is really where Premier Farnell is particularly strong. There is as we move through more into manufacturer supplying directly and volume distribution, then there is clearly a need both to maintain products. In MRO. And there's also an increasingly exciting market in both robotics, where actually electronics and automation and sensing really come together. And also in the internet of things, which will be a massive, market for high service technical distributors. Both in the design in stage as people build modules to connect every single device we own, our clothing, our kitchens, our cars are already there. To the World Wide Web. But also if you think of large capital equipment in the likes of GE and various other, factories. They will also have to retrofit. They will have to put these products into those machines so they can start doing diagnostics on whether that machine needs maintenance, when it needs maintenance, what's wrong with it. And therefore, there's a massive market available to us in that new technology. So even though we're seeing some areas of the business commoditize on the product side, a whole new exciting area of product development and technology is also helping us to think about further growth in that marketplace. So just to reposition, also to summarize on this ticker side, We are in the system time critical area of the business where, price is not the main driver. It's search, its product selection, its availability, its delivery. And then if you can do that at a fair price, then that is in essence what the market accepts. And normally price in our surveys comes around about 5 or 6 behind the things I've just mentioned. Yes. We need the size both from an economies of scale in the logistics infrastructure. We need the size in terms of brand positioning. We need the size in terms of market awareness. We need the size in terms of investments in some critical areas, particularly in product, a new product and in digital because these are the areas online technical distributors really need to invest. And you can't make the level of investments you're talking about whilst you're the number 10, 12, You're in the 85% of the market, which is due for increased consolidation, I believe, And actually, again, when you look at the own brand development we have in the NEDIS business, increasingly introducing own brands within the distroTech business, Premier Farnell brings a number of well established owned brands which traditionally have a lower price point, but margins typically in the 60 plus arena. Which is also a very attractive part of our future business model. And we are seeing, as I say, certainly in distroiliac, a great take up on those own brand introductions. Within two months, to give you a number, we already have 1000 unique customers, and we've only introduced 800 products so far. So I think again, looking at margin and margin generation flowing through to ensure we generate a double digit return business, it's all there. Play for. If we take a quick look at the Premier Farnell business, really just summarizes a little bit what I've said. It's a global player. 38 Countries, very representative, it gives a broad range of industries, 150 industries in total, with a clear focus on the Electronic Design Engineering segments, a massive customer base or contacts, 2,000,000 individual contacts in many hundreds of thousands of customers, and we'll come on to why we think that will drive some critical parts of the synergies. Lots of products. Revenue 1,300,000,000 has been largely stable, have to say, well, a number of competitors have been able to grow in the marketplace, which we would love to address. And an EBIT margin, which again, I think, is being suppressed because they're having to go through this restructuring of the organization to prepare the business ready for the future market dynamic I articulated earlier. And obviously cash positive. It has a number of strong brands, in particular, around the EDE side of things with the community websites with some of the supporting non component elements in particular, their ability, like with the Raspberry Pi to actually manufacture the Raspberry Pi and have dual exclusivity on the distribution, both the manufacturing and the distribution of some of the latest technologies, including the latest BBC micro bit, which is also getting huge attention, not just in the UK, but globally and is beginning to generate very significant growth in essence educating the design engineers of the future and capturing them with our brand at the start of that process, which is also critical. Very quickly. I think you're very we really tend to look at this business through the lens of the customer. Are you an MRO customer? Are you an electronic design engineer customer? Are you a hobbyist? You may be a design engineer in Siemens in the e day and you go your garden shed and you do something in your garden shed or you may just be an interested electrician? And through to a consumer electronics and retail, and what we quickly see here is that the tie up between, in essence, on the left are more business to business brands, if you like. In the middle, our business to consumer brands, and they'll be increasing sort of product availability as well both ways from Natus and the MCM, CPC and Rykall brands. So we have great coverage the business to business area of course will be really helped by the element 14 part of the acquisition. Just be clear, if you're not familiar, element 14 is really the 3 Asian brand element 14, final element 14, in Europe, a newer element 14 in the U. S. So that explains why we just call it element 14 for the time being. That will represent about 75% of the revenue in the future and 25% will come via the more business to consumer business to retail operations. Yeah. If we then move to Synagis, we are I'm incredibly excited about the synergies. We have identified pretty much 2 relatively even aspects in the synergies I imagine the first you could only work out, which is we each have in each of our businesses product advantages that the others can benefit from. So, Element 14, Premier Farnell, brings a very strong ED proposition that distroelect has, in essence, been lacking for some time. Distrulette brings a great MRO addition, also some computing to that picture. And then with Natus, we also bring a whole variety of consumable electronic, whether it's cables, and the like that we can also cross sell pretty much through each other's brands. Rykals, in particular, with CPC and MCM, will also benefit from our close association through this acquisition with Raspberry Pi, one of the fastest growing products in the world in high-tech distribution and extremely demanded for by pretty much every distributor out there in the world to go obviously with an exclusive agreement we can support Rykult in a very favorable fashion through that agreement. And then perhaps one thing you're not familiar with, but I'll just try and explain. If you look on paper that the the two margins of the various businesses look quite similar, but freight is adjusted in the TECO businesses on the OpEx level, whereas in the Premier Farnell businesses, it's adjusted in the margin level. So in essence, there's a 6% to 7% delta in the margins on the buy price. That's predominantly because distroelect is too small often to buy, especially electronic components directly from the supplier. We have to buy through 3rd party distributors. Of course, those third party distributors make a margin. And with our new scale and more direct supplier relationships, we would look to drive those margins more aggressively through direct sourcing. Obviously, when our existing inventory begins to turn, Okay. So here, we are very confident and probably even more confident, especially after some of our due diligence in the cost synergies. We see cost synergies very much obviously in the corporate space, very much in the fact that we'll have, in essence, 2 sets of group functions in pretty much every area of the business. And ultimately, we'll need to move that to one holistic team in the core businesses. Sometimes that will mean a 2 for 1, sometimes it will mean a 3 for 2, but we're very confident that we can achieve those synergies. And also we will look for savings from logistics synergies in driving more efficiency and putting volume in essence through the most efficient parts of our logistics operations. Okay. So altogether, With that, we see sort of CHF 50,000,000 to CHF 70,000,000 improvements on EBITDA by the end of 2019. Of course, we will need to invest in the integrated businesses to get them there. The major part of that really will come in the replacement of the ICT infrastructure and ERP system. Premier Farnell does have a very old legacy AS400 based system, very similar to actually what Teco had many years ago. Obviously, we now have lots of experience or the lessons learned if you like from that integration. And now that we're progressing very, very smoothly, we believe we can make that a very successful integration. So, but we will take investments. We do need to optimize warehouse capacity in certain locations. We also need to, in certain locations, expand our warehouse capacity to make that happen. And we will obviously to invest in certain areas to achieve cost savings as well. So we estimate circa CHF 80,000,000, in terms of capital expenditure in this deal. And then finally, to achieve, in essence, some of those operational efficiencies, organizational efficiencies and the like, we estimate a 1 off cost of $40,000,000 to achieve those. Okay. So, I for 1, incredibly excited about this opportunity I think this market is absolutely ready for consolidation. I think we have lots of good peer examples who have made this transition or indeed who haven't made this transition had to and who in essence are generating the kind of returns that we would expect to make in the future of the business. And with that, I'll hand over to Mr. Help. So, a perfect strategic fit and, no wonder that this company has been on our wish list since quite a while. The uncertainty around the British pound and management changes, in Farnell. And then our poker with our platform, have now opened this window of opportunity to do this offer and go for this acquisition at this time point in time. I'd like now to give you a view on how our group will look like after this acquisition. So on the left side, you see technical components combined with Premier Farnell, whereas before we had leading positions in some areas but not globally and we were mainly focused on Europe. We can now say we have a leading position globally, in this business. As we already have, in all our businesses in, Seiling Solutions. So as a result of these acquisitions, all our businesses will be either number 1 or number 2, globally. So, we've clearly achieved what we had as a strategic target. You might now ask, why do we invest in technical components who did show lower margin than, in seeding solutions, we've done constantly every year in our strategy review a number of, portfolio scenarios where we really simulated acquisitions, towards several directions, in all our businesses, so we developed scenarios how would that wire look at as a pharmaceutical supplier as an automotive supplier as a packaging company because we have all these bridge hats to be able to develop such as scenarios or to become mainly distribution business. And very clearly, it has shown that doing this kind of an acquisition in the distribution business will lead to the highest returns because there are immediate synergies where none of the other scenarios there would be, such immediate synergies. We basically, in many cases, would buy future EBITDA with the cash of today. So we think in the overall portfolio, this is the right move to do. And as I said in the beginning, puts all our businesses now in a leading position. I'd like to go a little bit more into the numbers now they are based on the 2015 published numbers and converted to Swiss francs So you see technical components on the left, stand alone, $459,000,000 in sales at 2.5 percent EBIT margin last year because of, this building of the new platform and the restructuring. By far, not in the optimum. If we now combine the numbers with, Premier Farnell, the business, is $1,800,000,000 in turnover at the EBIT margin of 5.4 percent. Which still is below what we think these businesses can do. Then if we look at the group, standalone SEK 1,200,000,000 in sale at 11.9 percent EBIT margin combined with Premier Farnell, $2,500,000,000 in sales at the 9% EBIT margin, but with an increase of absolute EBIT from CHF 139,000,000 to CHF222 1,000,000. When we now do, outlook to 2020, where we always, set our targets we, have set us a target to clearly improve the technical components business we believe we can grow it above the 2,000,000,000 turnover line and we clearly want to achieve double digit margin in this business by 2020. This acquisition will not stop us from growing the ceiling solution business, also not from doing acquisitions. Which means that the total business now, including the growth we can expect from ceiling solutions, would bring to the group to an annual turnover of more than CHF 3,000,000,000 and the EBIT margin, we already had forecasted of higher than 12 percent as a as a group. So we, we clearly are committed to deliver much higher results on the technical components business and are committed to the margins we've already set out earlier for 2020. I now want to come to the financing. As I said earlier, the equity part has a cost in Swiss francs of CHF 848000000 We have existing cash of SEK 162,000,000. This is the excess cash we do not need for our operations, cash at hand. There is a term load of close to SEK 300,000,000, which is quite flexible in terms of a repayment we plan to place a bond of about NOK 140,000,000 to NOK 150,000,000 And we have, shells for the worth $60,000,000, which we plan to place and we plan equity increase of SEK 200,000,000 And obviously, we expect PEMA to participate in this increase. So PEMA will keep the same financial participation and a portion of voting rights. So the financing is completely secured. And we reduce the leverage by doing the capital increase. If I do the summary on the financial impact, we'll have an immediate, increase in earnings per share. You can, model it on the 2015 numbers. And you will see that the increase is between 3040 percent. The expected leverage after acquisition is below 2.5 times net debt over EBITDA with a very strong deleveraging, because all our businesses are very cash flow intense. We also have quite attractive financing terms in this current environment. And, also, the debt while our share is trading at high evaluation compared to Premier Farnell, which also will have an impact. Let me now have an outlook on the timing and the next steps. So we have the announcement coding called in UK, the 2.7 announcement, announcement of the offer today. Now Farnell will prepare the scheme documents where they have 28 days the time after today. So before or in somewhere in July, there will be the scheme document out together with an invitation for a general assembly. And we expect a court meeting in August where the offer or the scheme would be approved. In parallel, We are working on the antitrust approvals. We expect them to be ready, also somewhere in the third quarter. Court approval of the scheme, somewhere probably late third quarter, early 4th quarter, which would mean closing we expect by Q4 2016. This brings me, to the conclusion and the summary. So with one acquisition, we can become a leading high service electronic components distributor increase our scale. At the same time, global presence and the purchasing power, very complementary product range between the two companies, a very complementary geographic footprint and it's earnings per share accretive from day 1, even if we would do nothing, so pre impact of synergies and one time costs and investments. The synergies are quite considerable, $50,000,000 to $70,000,000 per annum on an EBITDA level. And the target for 2020 is $3,000,000, $3,000,000,000 revenues for the total group at an EBIT margin of higher than 12%. A very exciting project. We are all committed to deliver those targets and those numbers. And are looking forward, taking up this challenge. And with this, I conclude the presentation. And obviously, now we are open for Q And A, and I'm sure there will be a lot of questions. Thank you very much. Any questions? Earnings per share. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Sorry, 30% to 30% increase compared to 2015, this I assume this is for 2017 after the integration or the consolidation of or is this for 2016? When you expect to close it? You can take the 2 P and Ls. You add up the profits and you do the the $200,000,000 capital increase and then you get to these numbers. So consolidation is 2016 already? No, this is a pro form a simulation based on the 2 15 numbers, including a capital increase of $200,000,000. Thank you. Pascal side, it's at capital. Looking at the share price of Premier Farnell last year, coming down from 200 to 100 given to profit warnings, then new CEOs and so on, are you engaging now in a new restructuring case, which takes, obviously, maybe a bit of a time. And giving your not so successful integration experiences from the last what's now different and what does he make so, so comfortable that now this time will lead to, you know, in the end to success story. You want to answer? Yes, sure. I mean, it's a great question. I think first of all is the rest of the second one first. I believe that during the last 18 months, we can clearly demonstrate a much more efficient accelerated as I said before, on time, to plan, to scope, to budget deployment of all of the new systems. The phases, even just recently, you're putting the merge to warehouse management systems of Natus and just to let together, just went live 2 weeks with pretty much no issues. We will complete Switzerland's transition in July, the last phase of a business transition was in June, what we call phase 4, which was Austria and Italy pretty much went without any interruptions whatsoever. So a new web shop and basically the full SAP rollouts. And clearly, we now have the full centralized distribution center in place and getting to a good, not perfect, I have to say, but getting to a good operational standard. And clearly, we need to drive continuous improvement in that as well. So I think the legacy of the last 4 years has generated a great list of learnings. I think we can confidently say those learnings have been applied because we're much more stable set of rollouts over recent times. My particular view of, Premier Farnell is that they've been they've taken quite a long time to reach a target operating model. There's been I think a couple of years of quite a lot of degree of uncertainty in the organization about what model they were going to move towards. I think if I look at the differentiation then for, and I'm not a share analyst, I'm sure you're much more familiar with us than I am, but if I look through the the share deviation that's occurred between let's say electrodes and Premier Farnell over the course of that couple of years, I don't see that reflecting the trading differences. Think it's much more about the confidence in the management's ability to drive the business forward. And I think we can demonstrate with that deal as values, with the experiences in TECO and indeed with some of the progress we've made in TECO already, that we are up for the challenge. So our 1 100 year slogan would say. I think the Brexit. Sorry, Felsk is no introduction to Tareto. You have mentioned the Brexit it opening up a window for you. Can you elaborate a bit on that? Why that is? First question. And in terms of staff, do you plan any layoffs now as a result of that? How big will they be? Yeah, that's my two questions for them. The why is Brexit a window of opportunity? Obviously, there is an impact on the valuation of the pound. We've, we've played with all scenarios. We can live with both outcomes, because Merefennel has over proportional cost base in the pound. So should the market suffer from a Brexit in U. K, we would have the advantage of a lower cost base. If there's no Brexit then there is no impact on the market. So from this standpoint, for us, it's neutral. But it helps in terms of valuation of the pound. With regard to measures on personnel, it's honestly too early to say anything, in more detail. Mikolina, MainFirst. I have a couple of questions on the product, on the, on the page 8 probably on the overlaps. It looks like you have, a lot of products or at least end markets within the same direct orders and products that are completely the same that you have, for example, Pernail will not sell any longer and TECO will sell them. And Also, do we have to expect you further acquisitions? I mean, you showed the slides that 85% of the market still, there are many players there. So I assume if you see other targets going forward that you will not holdback probably. And, a bit on the timing, the cap increase, do we have to expect that? I assume after the closing, And also on the Seating Solutions, I think there are probably investors that are a bit worried about the Seating Solutions part. I mean, it now it's smaller part in the division and it used to be the larger or at least a better performing part. So what can we expect there in the future? I mean, it looks like perfect set up to split it in 4 years, sorry to be frank here, but I mean, instead, I know you cannot probably give details here, but is that the thinking that you also had when you were thinking about Premier for now? Thank you. Can you take the product? No, on the product side, I mean, there's a there is, as a try to ex articulate, there's a lot of There is some commonality, certainly around, standard electronic components. And just to be clear, that sort of the active and passive world of microprocessors and these kind of things. But what Premier Farnell brings is a much deeper range of both the product and the services associated with that because a lot of that requires design and support. And that's something that in essence the distroelect brand in particular in TECO has not been very strong at and that's one of the areas of our proposition that's actually been declining and not growing as we've been growing in more of a Harland area where we have, in essence, more MRO customers and more MRO products to sell. So there will be some shared products. That's where we believe we will gain both efficiencies and availability. We believe we will also have the ability to negotiate better terms from direct supply, as well as higher quantities. So that's also a benefit. And then we're also ultimately I think we will see benefits in things like inventory provisioning as we'll then have a much more sellable, modernized range in that area. And then on the other side, And this will really transact across all of the brands where the products suit the brand proposition, we will have new products to bring to the Premier Farnell businesses in the MRO, particularly in the automation space, the maintenance space, some of the Scandinavian brands we have like Nordic Power, and all of these kind of products. And of course, both Ryald, Natus, CPC and MCM, as 25% of the turnover will also have the benefit of having that crossover of products. So it is probably the most compelling addition from a product range perspective that you can make of an acquisition that will of those that are out there that gives you both that geography and product synergies. On the capital increase, yes, you're right, that it'll be after closing. And, on split, there is no discussion around that. Charlie. Yes. Johannes Voner from San Antonio Invest. I have a question regarding the Premier Farnell business outside of Europe, which doesn't look to perform overly good, if I may say, in terms of margins, Can you elaborate what's missing there and whether it's how you can fix this problem? Or should we be prepared that what you're showing us in terms of synergies that's really focused just on Europe and the rest is just diluting then the overall portfolio? What are the measures you're going to take there? I mean, certainly the I believe the strategic issue in the U. S. Business is that I think Premier Farnell has had a very easy global strategy, which in essence is really focused on the electronic design engineer and contract was in that space. The Newark business was, you probably know the history, but I knew it was part of a fairly expensive acquisition many, many years ago. That New York business had a very strong legacy and customer base in MRO. And I think the push from a global organization to switch that business more into an EDE business as opposed to its inherited it's a heritage of an MRO business has seen that business underperform because it doesn't necessarily a bit like we're articulating in TECO. It doesn't have the economies of scale doesn't have the depth of product proposition to win against the EDE competitors in that marketplace. Strategically, I think it finds itself in a position where we have to really look to carve out the right kind of niches for that business. And at the same time, drive operational efficiencies into the business as well, yes? So that's from a strategic assessment point of view. Actually, Asia is rapidly growing, very rapidly growing part of the business. I think Premier Farnel reached a trading trading statement today. Is that right? Is it today? Yes, today, which talks to, I think, very strong growth in their Asian business. I think, again, there is the possibility of what's kind of happened in the past is it's global Premier Farnell organize I personally believe has maybe been overdone. And that's driving markets through a more centralized common infrastructure will also reveal increased profitability in the Asian business, but it is growing very, very strongly, particularly China, very strong business in the Anzac region, good solid market positions in Singapore, Malaysia. So I think we can expect very strong growth and increasingly drive increased profit out of that growth. Questions. Roman Zena from Vontobel. 2 or 3 questions. First of all, you're changing your balance sheet completely. You're going from a company with a net cash in to a company that is reasonably highly leveraged. Is that something that you have discussed with your largest shareholder, are they happy about this? Because obviously, your sort of structure from a balance sheet perspective really changes a great deal and is completely different to what it has been historically? Our main shareholders are the members of the board and they've been completely involved obviously in what we are doing and feel very comfortable with this situation. Again, if you go with Bank And History, our businesses are both ceiling solutions and technical components very strong in cash flows. And we this did lead us to the very strong balance sheet And again, going forward, please remember that half of the dividends we pay out remain under the control the board and can be reinvested into the business. And this is exactly what we are now currently using and what helps us to do this transaction and to finance the transaction. No, that is a very high comfort level, with that balance sheet. And Maybe you can help me. It's sort of very difficult for me to make, build sort of the bridge from your old targets, from Premier Farnell's old targets. Into the new targets that you have because obviously your new target states above 10%, which could mean anything above 10%. But if we take it as sort of, and then please correct me if this assumption is wrong, if we take it as a starting point to 10% you're basically from your own targets with now synergies of sort of between 1,000,001,000,000 after right, that offs 40,000,000 to 60,000,000. You still have sort of the same margin that you already targeted for technical components at that field are only about 3, 2, I would say 2 years later with including a lot of synergies, which are roughly about sort of 3, 4 percentage points at the net debt level of the combined company. How should I think of where you intended to go on a standalone and where you're going now, including synergies? You know, we had set out a target for 10% 2017 for our business. We still stand behind this target. Now, however, there is a much bigger portion coming in addition, a business that is not yet at the 10%, which we also have to calculate in plus the synergies. And if you do, the mathematics it's relatively easy then to come to that 10% target. Currently, both companies together have close to SEK 100,000,000 EBIT you add about the 30 to 40 coming from the improvements from our business plus about the 50 from, at the synergies plus about 2030 probably from improving the funnel business and then you're at the 10% perhaps somewhat plus, EBIT by 2020. And maybe last one, how did he go about valuing Premier Farnell? So with teams, there's a first glance that price is not exactly cheap, but this is probably how things go. But, in terms of who gets which synergies, because after all, sort of, you have a certain amount of synergies that you drive with an M and A transaction like this. And finally, somebody gets those and they can go one way the other way or a bit both ways. How should we think about valuation? How do you approach that? Because, sort of, the main statement seems to be, we have EPS accretion of 30% to 40%. Quite honestly, if you leverage balance sheet in a 0 interest rate environment, that's easily to achieve and does not necessarily mean that you're creating value. So how did you go about valuing Premier Farnell? You know, it's probably not the right approach to just take the premium and compare it with the with the synergies alone, you also have to take into consideration where this kind of business is straight. And obviously that had to flow into the valuation. As I told you before, typically distribution business is straight in the 10 to 11 times EBITDA multiple. If you do the mathematics on our offer, And you take the consensus of EBITDA that is out in the market for Premier Farnell. You come something to a 9 plus EBITDA multiple, which will be, let's say, fair valuation of the stand alone. So including the synergies, if they've considered the synergies, it's, it's an attractive, proposition, I think, for both sides. So what you're saying is basically you just have taken the view that, this is what the multiple should be. That's the peer group multiple. And that space I'm not saying only, but it did flow in. Yeah. And then there's always a discussion about price the end, and both sides have to agree. One more question, about cultures. You know, I mean, You have to integrate it. Do a lot of integration work now. I mean, you are a former Premier funnel man. So you should know the business quite well. Still, there could be, some frictions. You know, I mean, how optimistic do you feel about cultures bring these 2 cultures together. Yeah. I mean, certainly, it's something we're very conscious of. And, yes, I am now, thankfully, familiar with cultures of both organizations. I passionately believe actually that the DATVela core values in particular is really drive our culture about entrepreneurialism. Customer focus about executing brilliantly, that those values are inherent actually in the grassroots of the Premier Farnell business. And I think those grassroots really welcome, those values and hence embrace the culture. Yes, there will be some cultural issues sick from a geographic point of view, and we'll need to manage those relatively well through open communication and dialogue and consultation, of course, but actually the DATVILA 4 core values are what I believe Premier Farnell has stood for for 70 plus years. One understanding question concerning the ideal fit that you mentioned I mean, have you had a look at other players? You mentioned mouse or you mentioned electro components, or was it like from the very beginning on clear that it had to be premier for Nell, and that may be there for Neil Harrison was engaged visionary 2 years ago already. What was the thinking behind? It would be nice if all could be planned so well, but, obviously, when when we looked at the list potential targets that there was this facility company top on the list. And for the reasons we've just heard, has to do with the complementarity of products, which would not be the same with electro components. And, and then when you look we look at some of the other bigger players, Mauser was mentioned on the chart Digi Key. They are either private and want to remain private or are part of a bigger group and hence, is, not really on the market. Yep. Does it mean that Neil Harrison will become CEO of Takeo, of the new Takeo? For sure, yeah, that's, he will lead the combined entity. Any more questions? Do we have any questions on I think we're going out here with all of them. One of the questions is how would, for now, Semiconductors business interact with that as product structure? Yes. So very neatly, in fact, as I started to articulate before, both from a product management perspective, both from a purchasing perspective, Premier Farnell has leadership in the semiconductor arena, both in two sides, just we're very clear, there is the side of supply and there's also the side of a part of the business, in particular in Envest, Avid and Raspberry Pi where we would also be doing some manufacturing, and both of those offer tremendous synergies to the distillate business, a little less so to the Rykall business. And probably not very much at all to the Natus business, but those synergies are very attractive. Just to be very clear that that's an area of the business that's Teaker that's really been struggling with because that's normally inventory, high technology, you need very strong franchises you need deep investment in inventory because it's a global product, but there's lots of variants of the same type of device just to give you an idea, I think someone like a Digiaki or Mauser would say they've got a 1,000,000 different references. In that kind of product range. So scale is super important. We will get that scale. And then if you look at our key markets in particular, where before you were looking at in Sweden where we generate the more Google searches than anybody else in Switzerland where we generate more Google searches than anybody else in other markets. They will then, through those searches, suddenly have access to, through their preferred brands, this amazing electronic proposition? There's another question here we mentioned that Mowsett generates, mid 10s operating margin, but it operates from a single distribution center in the U. S. What does he, what do you think is the appropriate, distributions and the footprint for the combined distillate Premier for now business? How many distribution centers will it require? Yes. I mean, obviously at the moment, there are many distribution centers throughout the business. It's actually a little bit too early to decide and say what we think the footprint would be. What we certainly do need to do is increase capacity in certain of those locations anyway to facilitate the growth, but that will be part in essence of our strategic review upon completion of the acquisition. Another question, is this the biggest takeover for Dapwallers so far? And the question is whether we plan further acquisitions in ceilings and oceans? I think, do you want to answer? Yes, we are working on several projects at Civilian Solutions. But as you know, always, it belongs 2 parties to agree, but we have several projects, in work at work. Yes. Another question is regarding the gross margin decline. Over the past years, actually, and how, what would be our reaction on that? Sure. I mean, certainly, I think, gross margin, I think, is well documented from a Premier Farnell's perspective. Anyway, they articulate, obviously, the impact of FX some discount management issues I think was in the last report. And indeed, the product mix that has come through in essence Raspberry Pi, which transacts at lower margins, but obviously, if you can try and bundle that together with other products, you get more margin dollars on the transaction. I believe the list prices in the business are now sustainable. I think we have seen particularly 4 or 5 years ago with some U. S. Entrants with some dollar based pricing that that did adjust the price position in the marketplace that I think many Europeans were slow to react to. I think that adjustment at list price has now taken place. I think it's now about driving value and ensuring that where discounts are given that they drive appropriate volume I think that's something I'm particularly focused on in the TCO business. And we will apply the same focus to this business. There's another question regarding antitrust, the question is about why there is no approval needed for the UK market and, why did the transaction actually take so long, whether we would expect them to trust issues You probably cannot You can probably answer that one. The UK is easy. There is no overlap in the UK. I mean, the Premier Connell does have the UK business, that valid does not have. And, we do not expect issues in antitrust at all. In the different markets, we are post active. I think these were the main points. Okay. If any more questions come up in the room here? No. Then, I thank you very much for taking the time to come here for the interest in our group. And, there is, I think, some drinks and a bit of food outside. Thank you very much.