PKC Group has agreed to buy AEES from Platinum Equity. The purchase price consists of 109 million euros cash (US$155 million) and 1.25 million new issued PKC shares. Farmington Hills, Mich.-based AEES makes wiring harnesses for heavy and medium duty trucks in North America. The deal is expected to close by Oct. 1.
PKC Group (“PKC”) has today signed an agreement for the purchase of AEES companies (“AEES”) from funds controlled by Platinum Equity. AEES is one of the leading North American wiring harness manufacturers for heavy and medium duty trucks and it also has a significant position in light vehicle wiring harnesses. In addition, AEES provides components and wires to other contract manufacturers. AEES’ largest customer accounts within the truck industry are e.g. Daimler Trucks North America, Navistar and PACCAR. Major customer accounts relating to the light vehicle industry include i.a. Continental, Ford, General Motors, Harley Davidson and Lear.
In 2010, AEES generated net sales of EUR 454.0 million. AEES has operations in USA, Mexico, Brazil and Ireland and had about 13,800 employees at the end of June 2011.
HARRI SUUTARI, PRESIDENT AND CEO:
“We are excited about this unique opportunity to acquire AEES, as it offers an ideal strategic fit for our business through a highly complementary geographic footprint and customer base. By combining AEES, a major North American truck wiring harness manufacturer, with PKC, one of the leading wiring harness manufacturers for trucks in Europe and South America, we create a leading global truck wiring harness supplier. Following completion of the transaction, the combined entity supplies wiring harnesses to the six leading Western truck groups. With this acquisition, we also enter the automotive industry in North America and Brazil. Currently, PKC manufactures wiring harnesses also to light vehicles, buses, recreational vehicles as well as construction, forestry and agricultural equipment in Europe and South America, and has a small percentage of sales in North America. The acquisition hereby provides access to new customer segments and also offers PKC an opportunity to expand its product and service offering, e.g. via manufacturing of components and wires. The combined entity will employ about 22,000 employees.
During the past years, AEES has successfully implemented a comprehensive rationalisation programme to enhance the company’s overall efficiency and competitiveness. The costs related to the rationalisation programme have burdened the results for 2010 and the first half of 2011 and will also have a slight impact on the second half’s results. However, we believe that the above-mentioned actions, in combination with a rebounding market environment, will ensure growth in profitability, as well as add further strength to the outlook for the combined entity.
The acquisition of AEES is the result of PKC´s strategic work to grow by targeted acquisitions, a strategy we introduced two years ago. This acquisition strengthens and expands PKC’s wiring harness business to a level that meets the future necessities of its global clientele. PKC entered the North American market in year 2006 when we acquired Electro Canada companies that have been successfully integrated with PKC’s operations. I am confident that we will achieve the same with AEES. All in all, I believe this transaction has significant benefits for our customers and employees and provides an excellent value-creation potential for our owners”, states President and CEO Harri Suutari.
ROB JOUBRAN PARTNER AT PLATINUM EQUITY:
“Following two years of complex international restructuring AEES is now thriving as a profitable, growing business. Combining with PKC is a logical and exciting next step,” said Rob Joubran, partner at Platinum Equity. “We are proud of the role Platinum Equity has played in establishing AEES as a leader in North America and look forward to continuing on with the organization as a shareholder.”
PURCHASE PRICE AND FINANCING
The debt-free purchase price of AEES consists of EUR 109 million in cash and 1.25 million in newly issued PKC shares. The cash portion of the purchase price will be financed mainly with a long-term credit facility agreement. The shares issued for the seller are subject to a lock-up until the time of public listing of the shares, which shall take place within 180 days after the closing of the transaction. The share consideration relating to the transaction will be based on the authorisation granted to PKC’s Board of Directors by the Annual General Meeting on 30 March 2011.
KEY FINANCIALS OF AEES
The key combined financials of AEES for fiscal year 1-12/2010 (audited) and interim period 1-6/2011 (unaudited) were (based on US GAAP):
(EUR million) 1-6/2011 1-12/2010
6 months 12 months
Profit and loss
Net sales 265.7 454.0
rationalisation costs) 13.4 14.7
EBITDA (reported) 5.1 -4.8
Fixed assets 26.1 25.7
Net working capital 43.3 37.4
Note: USD/EUR exchange rate average for a given time period. Balance sheet items converted at rate of the balance sheet date.
A clear majority of the rationalisation costs for 2011 have already been booked in the first half of the current fiscal year.
CLOSING OF THE ACQUISITION AND EFFECTS ON PKC
The closing of the acquisition is subject to fulfilment of customary terms including competition authority approvals. The intention of the parties is to close the acquisition by 1 October 2011 and AEES will be consolidated to PKC as of closing. PKC will publish a separate release regarding the closing of the transaction. The acquisition is not expected to have a significant effect on PKC’s 2011 result.
TRUCK MARKET OUTLOOK
The North American heavy duty truck market has rebounded during the first half of this year, with the manufacturers’ deliveries increasing by about 45% compared to the same time a year ago. Truck manufacturers’ combined order book was about 125,000 heavy duty trucks at the end of June. Whole-year sales are estimated to reach between 180,000 and 250,000 vehicles.
The European market (the EU countries, Switzerland and Norway) has witnessed a similar growth pattern with new registrations of heavy trucks increasing by about 56% year-on-year in the first 6 months of 2011. A total of about 120,000 new heavy trucks were registered during the period and the deliveries for the full year are forecast to increase to 230,000 — 250,000 vehicles
Sales of trucks increased also in Brazil in the first six months of 2011, with heavy truck deliveries increasing by about 20% over the comparison period. The industry expects registrations over the full year to increase by about 10% over the previous year.
PKC GROUP OYJ
Board of Directors
President & CEO
For more information, please contact:
Harri Suutari, President & CEO, PKC Group Oyj, tel. +358 (0)400 384 937
Financial and Legal Advisors:
Bank of America Merrill Lynch acted as sole financial advisor, Attorneys at law Borenius Ltd as principal legal advisor, and Deloitte as finance and tax advisor for PKC. Carnegie Investment Bank AB, Finland Branch acted as an advisor for PKC in regards to the transaction financing.
PRESS AND INVESTOR CONFERENCE
A conference will be organised for press, analysts and investors on 9 August 2011 at 4.00 p.m. Finnish time at the address World Trade Center, Aleksanterinkatu 17, meeting room Marski Hall, 2nd floor, Helsinki. A teleconference regarding the transaction will be held by PKC on the same day starting at 6.00 p.m. Finnish time, tel. +358 (0)9 2313 9201, confirmation number 901440. The language of the teleconference will be English.