Good morning, ladies and gentlemen. I welcome you to this press conference this morning. I thank you very much that you made it in such a big number to Tüffenwies on such short notice. I also welcome everybody who follows us on the web this morning. As you could see from the press release announced this morning, we could find an agreement with Saint-Gobain and with the family to put an end on this three-and-a-half year dispute we have over the ownership of Sika. In the name of the board and management, I can say that we are all very happy and very pleased with the outcome. We have achieved all the targets we were working for over the past three and a half years. I will explain a bit more in detail the transaction and the impact on Sika.
Afterwards, our CEO, Paul Schuler, will talk about the consequences for our growth strategy. Let me first come to the highlights of the transaction. What does it mean for Sika? As a whole, most importantly, we transfer all the control premium that was before with the family to all shareholders. That's for sure the most important point and outcome. As we combine this transaction with a capital reduction, it will also be immediately accretive in terms of earnings per share in the area net of about 5%-6%. We will also have a much more efficient capital structure in our balance sheet, and we will be able to create a modern governance model, which I will come to in a minute. Most importantly, we will be able to even accelerate the implementation of our growth strategy. What is the transaction?
When you analyze it, you have to look at it as a whole comprehensive transaction, but consisting of two steps. For this transaction, we pay a control premium of CHF 754 million compared to the closing Wednesday evening, which means a 23% premium calculated on the total package SVH holds. This is to compensate for control, and it has to be put in perspective for instance, with the premium Saint-Gobain was ready to offer the family of about 70%, so it's about one-third of that premium at that time, and it has to be put in perspective of the total capitalization of Sika of close to CHF 20 billion. We're talking about a 4% of total capitalization of Sika company. The transaction is implemented in two steps. We buy in a first step, 6.97% of our capital and at a price of CHF 2.08 billion.
This price includes the total of the control premium, and we will use those shares for cancellation and hence reduce the capital of our company. After the lockup of two years, we have the right of first refusal for the other 10.75% still held by Saint-Gobain, and we have this right of first refusal forever as long as Saint-Gobain wants to keep those shares. We have full control on where these shares go. This two-step process has a big advantage for us. We can keep the strong investment-grade credit rating, which is very important for the continuation of our growth strategy. The transaction is fully funded by UBS, and we can choose the refinancing, in terms of time and means. We have all the options open.
The transaction includes also the end of all the litigations, which there are quite many. Indirectly, it means that the decision of the Kantonsgericht with regards to the voting rights is now valid. In order to implement this modern governance structure, we will, next week, invite for an extraordinary shareholders meeting scheduled for June 11th with the main topics you see here on the screen. We will cancel 6.97% of shares, by the way, of a capital reduction. This means the accretion of earnings per share for all shareholders, I was mentioning before. We will vote on an introduction of a single class registered share, so one share, one vote. We will propose a share split of 1 to 60 to make our shares more tradable.
We will remove the currently existing opting out. We will remove the transfer restriction, the 5% voting right restriction which we applied up to now. We also will propose to discontinue this special expert committee. What is the financial impact on Sika? We still continue with a strong balance sheet. Equity ratio will initially go down to about 25%. Net debt over EBITDA will be around 2. With our strong cash generation, we will be able to improve those indicators very quickly and, hence, have enough resources for external and internal growth in the future. This transaction is immediately EPS accretive for all shareholders. As you could see from the press release, Saint-Gobain will remain a shareholder in Sika, and yes, is the biggest shareholder at this time in Sika. After the capital reduction, they will hold 10.75% in Sika.
I can assure you we have full control over this shareholder. They fully support the one share, one vote decision and all the other decisions going with this at the extraordinary general assembly. They are quite heavily restricted in what they can do with their stock. You can see it on the slide here. For 2 years, there is a lock-up, mainly tax reasons for that. There is a standstill agreement up to 6 years, where in the last 2 years, they might slightly be able to increase their participation. The most important, the shares always have to be offered first to Sika, as long as they hold a stake in Sika. For 6 years, they are not allowed to do a public tender for Sika.
Quite a lot of restrictions around this shareholding. The consequence is that for Saint-Gobain, this is basically financial participation in Sika. To summarize, I think we have to put this transaction in perspective. I want to show on this chart the value creation Sika could do in the past 5 years. We could show a total shareholder return of 272%. This equals about CHF 12 billion. The chart compares the value creation with our peers. We did about 3 times the value creation of our peers. This transaction assures that we can continue with our value creation, and I think this has to be seen in this overall scheme. It becomes understandable that board and management, we are very pleased with the outcome of this transaction, and it was worthwhile fighting for this in the past 3 and a half years.
I now want to hand over to Paul Schuler, who will talk to us about how we continue our success story. Thank you.
Thank you. Good morning. Glad to spend the long weekend with you guys. It is very nice to see you again. If you look at the share price development in the last years, and especially on the left side, on this side, where the big drop came, then the development of the share, I think it is a very successful story. This story is based on success on the company of our employees, on the growth rate. If you look at our net sales increasement over the years, it is a nice good increase. Also on the EBIT margin, it is a great increase. This is based on the success of the company. Our five pillar strategy for market penetration, for the innovation, new products, emerging market, all the acquisitions, and also our values. We really have a high speed with a successful target market concept.
We have megatrends driving our growth. We have a lot of new opportunities. We have 217 new patents. We have 20 global technical centers. We opened 27 new plants in the last 3 to 4 years. We acquired 17 companies with an amount of around CHF 705 million. As you probably know, we have a strong corporate culture and very motivated people. I think this is the time now the management look forward. It is a time we can now focus on the business. We don't spend our weekends on lawyers, even though I like all the lawyers, thank you for your support, but glad to go somewhere else now on the weekends. I think we can focus on the business, and with this focus on the business, we first can confirm the Strategy 2020. We will stay there.
However, we feel very confident that we can review now and update it, and can come out with new targets one year earlier than planned. We will present that then from bottom up. We will work together top-down. We will present the new targets in 2019. With the 6%-8% annual growth rate, I think we can continue with this one. We then have 30 new plants, 105 new subsidiaries, 14-16. We will work over this target and come up with new targets in due time. We feel good that with this one, we can grow even faster. We have now a huge market potential. If we look at the market size, first, the market size is growing from the market size is growing from CHF 70 billion to CHF 80 billion and still continue to CHF 80 billion and still continue.
We have the seven target markets where we have not enough market share everywhere around the world. Also there, huge opportunities. With our people, we have 100 countries. We have strong management team committed and now can focus on the business. We feel very strong that also the growth story goes on. On the acquisition side, now we have not any more family shareholder. They don't want to invest in big deals or bigger deals. We have now, with the new structure, the opportunity to find new acquisition, find bigger acquisition, and even increase the speed there. On one side, we can grow with our organic growth. We are strong there. The other side, we are able now to look little bit out and see other nice companies to increase our leverage.
Overall, the first 2018, we have a strong growth strategy. We work very well. We have excellent first four months. It's very good. It's the first time we want to overachieve CHF 7 billion. Last year, remember, we had CHF six, now we want to go to CHF seven. Confident we can do that. We already announced that we will grow higher than 10%. We have the challenge with the raw material. We're used to that. We will increase our price. We will leverage. We have more efficiency. Overall, we also want to improve our operational EBIT into 2018. The outlook we can confirm and confident we can deliver.
Thank you. Paul?
Let me come to the summary and again repeat the highlights of the transaction. Most important, we transfer the control premium to all shareholders. The transaction is immediately EPS accretive. We will be able to even accelerate Sika's growth strategy, as Paul has just shown. We will review our targets and come up with new targets at early 2020. We will have a more efficient capital structure, and we will be able to create a modern governance model. I can just again say we've achieved all the targets we were standing for in the past three and a half years. It's the moment to thank first the management and all the employees of Sika. With the tremendous value creation they made this solution possible financially. Thanks to all who helped us from the outside, legal side, finance support, also the public relation support we got.
A special thank to the core team who worked on this project very hard over the last three and a half years. Also to all my colleague board members who did stand for this project over the past three and a half years. We are all glad we could bring it to a positive end today. Thank you for coming, and we are open for questions. Yeah.
Dan Pomeroy from Vontobel. Good morning. First of all, thank you for having fought so long, this really terrible fight, and not for having gone the easier way. I think in the beginning, obviously, it looked very dark, and now you have been able really to sign a deal, which resulted, in my view, in a win-win-win situation. When looking back, how much impacted this fight your operations, your ability to retain good people, your ability to find new good people, your ability to do acquisitions, also larger acquisitions? What should we expect from now on in gaining new talents, being even more active in acquisitions, et cetera?
You know I can send now our sales guys out here, the KL, the people. It will be quite an impact. Even if we always try to focus on the business, we spend many hours in discussing, find solution. From that side, we can grow faster. I think the people are relieved now. We are still discussing all the meetings. On the acquisition side, I already said, we always were a little blocked by the major shareholder not to make big acquisition. We always had an internal fight. Now with the new structure, I think we really can explore the possibility of Sika. We believe it's a good impact. We will show it in 2019 when we have the strategy. I think that's what we go for.
Excellent.
We also had, in some cases, acquisition targets which were not ready to sell as long as the situation is not clear. Now situation is clear, we can go back to some of those targets.
Excellent. One technical question. Did I get it right that Saint-Gobain can slightly increase their stake from 10% to 12% in the coming years, but not to do a takeover?
No. That was a request from their side. We don't understand exactly why. This was a concession we had to do. It's a minimal increase and not really an issue.
Okay. Excellent. Thank you, Paul.
More questions? Yeah.
Thank you. Patrick Rafaisz, UBS. three questions, please. The first is on the representation on the board. Will the family exit immediately at the extraordinary general meeting? Do you know, will Saint-Gobain ask for a seat, or will they refrain from that?
Very good question. Note family and all the conflicted board members have stepped down as of today. No further representation of the family on the board. Saint-Gobain will not have a board seat. It's also not possible as they are a competitor to us. We will obviously now work on evaluating additional board members for latest next general assembly.
Okay. Then the 6.97% you're buying back.
Yeah.
Can you give us more color? What was the thinking behind this number? Why not more, why not less?
Yeah. Good point. The structure of this transaction is, to a large extent, is driven by tax optimization. This is also the reason why Saint-Gobain wanted to stay as part of the shareholding and needs 10% minimum for these tax reasons.
The last question is just a quick follow-up on Dan's question on M&A. In the past, you've said the family or the situation did not impact your ability to do deals, and you were very active more recently, right?
Yeah.
Since at the end of 6/2017. What has really changed, and where do you see now with the new balance sheet, the firepower you have?
Thank you, Patrick, for the question. I think we did a great run, but if you look at our acquisition, we did probably three or four. Even last time, we already told you that we want to go for bigger ones. Bigger, I mean around CHF 300 million, CHF 400 million, CHF 500 million. Even bigger ones. With the new balance sheet and the new shareholders, I think we can go there. You will see some nice acquisition in future, and we have the firepower.
More questions?
Just two questions. First of all, on acquisitions. Sorry. You say up to CHF 500 million. Is it possible you might go bigger? I mean, you talk about-
Yes
consolidation in the sector.
It's clear. We always see an acquisition as a platform to grow. That's very important. Then, if strategically it fits either for market extension or it fits for technology. If it's in the right strategy, we are able to go even higher.
My second question is whether the EGM would also propose compensating the board members for their loss of compensation over the last three, or was it four years?
You can assume so, yeah.
We are not sure yet.
Mr. Immenklee. I think you had
You write in your press release that you will seek to further expand the relationship with Saint-Gobain. In which kind of business will you work with Saint-Gobain?
It is a part of the contract, and we've done, obviously in the beginning, when this whole thing started already, some analysis. Saint-Gobain is one of our biggest customers, and that will be the base, and we'll see what will be possible.
It's in the contract that you work together.
Yeah.
Philippe Rey, L'Agefi. Where do you see the best organic growth opportunities in the next couple of years?
We are in the very lucky situation that in our seven target markets, we have everywhere opportunity to grow. I think with urbanization, mainly on the construction side, where we have, from concrete to roofing to waterproofing, great opportunities. If you look at the industry side with the automotive, with the industry, with the car production, we have great opportunities, also great. We look at our other countries where we have excellent organizations. One is territory-wise and one is better market penetration. We see it everywhere, and I think in the moment, we have more than 55 countries, they grow double-digit very often. We're very confident we can continue this.
More questions? Yeah.
Oliver Hirt Reuters. With the new shareholder structure, without a major anchor shareholder, do you think you might become a takeover target?
I cannot say. Might be.
Raphael Knecht, 20 Minuten. Concerning your cooperation with Saint-Gobain. You have had a pretty grueling three and a half years. Doesn't that also affect your ability to cooperate with someone that might have been in a sort of antagonistic role in the past?
No, we are very nice guys. We are easygoing, and we are good customers, and we will find a way to see what we can do.
Okay.
So far, it has not impacted the operational relationship. Any more questions? Yeah.
What do you say that the court in Zug, it took so long time to make a decision? I think companies, investors, everybody depends on fast decision-making. Now, it took about one and a half years since the Kantonsgericht has published a decision, and we don't have anything. It seems to me quite a long time and not very positive to make business in circumstances.
I cannot speak for the court, so I don't know why it took so long. In the recent time, they knew that we were talking.
They knew.
Yeah. Any other questions? Doesn't seem to be the case. Again, I thank you for coming on such short notice. We offer some drinks and some bits and bites to eat. I'll see you all. Thank you for coming. This ends the press conference of this morning. Thank you.