Nisshinbo press release_tmd_friction

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  • 1. This document, intended for informational purposes only, is NOT an official translation of Nisshinbo Holdings Inc.’s 26 Sept 2011 “Acquisition of shares in TMD Friction Group S.A.” document Nisshinbo makes no guarantees regarding the accuracy or completeness of this document and assumes no liability for any errors, omissions or inaccuracies. This English version does not contain or constitute, and should not be relied upon as, an offer or invitation to make an offer or to acquire any securities in any jurisdiction. September 26, 2011To whom it may concern Company Name Nisshinbo Holdings Inc. (Code: 3105) Representative Shizuka Uzawa Representative Director & President Person in charge of Masahiro Murakami this press release Director & Managing Officer Chief of Business Support Center Acquisition of Shares in TMD Friction Group S.A.Nisshinbo Holdings Inc. (“Nisshinbo”) is pleased to announce that, on September 26, 2011, its board ofdirectors approved the transaction to acquire all issued shares of TMD Friction Group S.A. (“TMD”), a companyincorporated in Luxemburg, for a consideration of EUR 440 million. A share purchase agreement is scheduledto be executed today.1. Objectives of the share acquisitionNisshinbo has defined its management policy for this fiscal year to be the development of its global strategies.The company has been aggressively promoting overseas investments to establish its position as a globalcompany in the areas of brake, mechatronics, textile, electronics and others. In the brake business, in order toaccommodate the rapid expansion in automotive manufacturing in China, Nisshinbo is expanding its existingmanufacturing capacity in China and establishing a new manufacturing facility in a suburban area of Shanghai.With the added advantage of a strong Japanese yen, Nisshinbo has been seeking overseas M&A opportunitiesas well as investments in emerging markets.Within this context, Nisshinbo has decided to acquire TMD, a leading global brake friction manufacturer, whosebusiness is complementary to Nisshinbo’s brake business in terms of market and technology focus. Nisshinbohas had a long-standing technical alliance with TMD even within the competitive landscape and with this -1-
  • 2. acquisition, will increase its global share in the automotive brake friction market to more than 15%, enabling thecompany to become the No.1 brake friction manufacturer (according to company estimates).Nisshinbo’s brake business is operated globally by Nisshinbo Brake Inc. and its oversea subsidiaries(“Nisshinbo Brake”), which include manufacturing facilities in Japan, South Korea, North America, China,Thailand, and India.TMD and its subsidiaries (“TMD Group”) is a leading global brake friction manufacturer with strong brandrecognition and established century-old technology leadership. TMD Group has significant presence in Europeas well as in China, South America and other regions.Strategic rationale for the acquisition of TMD by Nisshinbo includes:(1) Global leadership Global presence, along with cost competitiveness is the key success factor in the brake friction market. As a combined entity, Nisshinbo Brake and TMD Group will be present in most countries that have a significant brake friction market. With its strong cost competitiveness and presence in Europe, Brazil, Mexico, etc., where Nisshinbo Brake has no operation, TMD Group will complement Nisshinbo Brake to become a leading global brake friction manufacturer. The OEM customer portfolio for the two companies is also very complementary, with Nisshinbo Brake supplying mostly to Japanese or Korean OEMs, and TMD Group to European OEMs. TMD Group’s strong aftermarket offering will also enable Nisshinbo Brake to penetrate the aftermarket, where Nisshinbo Brake currently has limited presence.(2) Expansion through complementary technology 1 Nisshinbo Brake mainly uses a material called N AO※ for its products and is able to maintain the same ※2 quality standards globally across all its manufacturing facilities. TMD Group uses LS in its manufacturing process in automated facilities. With a broader range of production technologies and materials now available, the combined entity will supply a wider range of products and meet the various performance requirements of the customers.(3) Competitive advantage Given the trend of merger and acquisitions in the global brake friction market, the acquisition of TMD Group will provide Nisshinbo Brake with enhanced technology and global scale, and allow the company to maintain its competitive advantage across key markets.(4) Corporate governance The relationship with TMD Group started in1964 when its predecessor company, Small and Parks Limited, provided technical assistance to Nisshinbo Brake. Based on a successful history of technical alliance, Nisshinbo is confident that this relationship and mutual trust will enable it to establish good corporate governance within TMD Group. TMD Group board members and senior management have expressed their support for this transaction※1 Non Asbestos Organic: Brake pad is classified into three types of materials depending on the ratio of steel fiber included– Semi-Metallic, Low Steel, and NAO. These three types have different characteristics and NAO is popular in Japan with low brake noise.※2 Low Steel: Low Steel is popular in Europe with its high coefficient of friction. Besides Low Steel, Semi- Metallic is also popular in the USA with its wear resistance. -2-
  • 3. and are expected to continue to manage the TMD Group activities. Nisshinbo will acquire all issued share capital of TMD and this transaction is expected to be completed in a timely manner, subject to competition authority clearance in each relevant country and conditions determined in the share purchase agreement.2. Outline of Nisshinbo Brake and TMD Group Nisshinbo Brake TMD Group (Nisshinbo Brake Inc. and its oversea subsidiaries) (TMD Friction Group S.A. and its subsidiaries) Business and Products Manufacturing and sales of brake pads, Manufacturing and sales of brake pads linings and brake assembly and linings plus related parts for automotive, rail, industrial brakes Location of operations 2 locations in Japan 4 locations in Germany USA 3 locations in UK Thailand Spain South Korea France 2 locations in China Romania India (minority ownership) 2 locations in China USA(small) Mexico Brazil South Africa Sales JPY 46.1 billion (as of March 2011) EUR 637 million (as of December 2010) Operating Income JPY 5.0 billion (as of March 2011) EUR 35 million (as of December 2010) Number of employees Approximately 2,300 (as of March 2011) Approximately 4,200 (as of June 2011)3. Outline of the company becoming a subsidiary of Nisshinbo(1) Name of the company TMD Friction Group S.A.(2) Address 46a, Avenue J.F. Kennedy, L-1855 Luxembourg, Luxembourg(3) Representative Derek Whitworth (CEO)(4) Business Manufacturing and sale of brake pads, linings and related parts(5) Amount of capital EUR 31,000(6) Established date March 18, 2009 (Establishment of holding company)(7) Shareholders Pamplona Capital Partners II, LP 89.96% Management shareholders 10.04%(8) Relationships Capital relationships None between Nisshinbo and the Company Personnel relationships None Business relationships Cross-License of technologies and support for manufacturing technology, know-how and assistance for sales(9) Financial results for the past three fiscal years (consolidated, in ’000 EUR) Fiscal Year December 2008 December 2009 December 2010 Net Assets (312,244) 158,085 168,755 Total Assets 448,656 490,799 536,821 Sales 637,981 530,239 637,008 Operating Income (330,160) (26,938) 35,715 Net Income (369,515) (68,318) 11,1834. Outline of the major entity from which the shares are to be acquired(1) Name of the company Pamplona Capital Partners II, LP -3-
  • 4. (2) Address C/O M&C Corporate Services Ltd, PO Box 309 GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands(3) Jurisdiction of establishment Limited partnership under Cayman Islands law(4) Purpose of establishment Private equity investment(5) Established date September 12, 2007(6) Amount of capital EUR 1.3 billion committed capital(7) Investors Alfa Finance Holdings SA and Pamplona Private Equity Carryco II LP(8) General partner Name Pamplona Equity Advisors II Limited Address C/O M&C Corporate Services Ltd, PO Box 309 GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands Representative Directors: David Bree, Don Seymour and Aldo Ghisletta Business Management and operation of Pamplona Capital Partners II, LP (the Fund) Amount of Capital EUR 100(9) Representative in Japan None(10) Relationships Relationships None between Nisshinbo and the between Nisshinbo and the company company Relationships None between Nisshinbo and the general partner5. Number of shares owned before and after the acquisition Number of the shares owned before the acquisition 0 shares (Ownership ratio 0%)(1)(2) Number of shares to be purchased 3,100,000 shares (Purchasing ratio 100%) (The purchase price is EUR440 million, or 3 approximately JPY 46.2 billion※ )(3) Number of the shares to be owned after the acquisition 3,100,000 shares (Ownership ratio 100%)6. Schedule(1) Date of resolution from board of directors September 26, 2011(2) Execution of share purchase agreement September 26, 2011 (planned)(3) Share transfer date End of November 2011 (planned) (※) We assume that the share transfer date will be end of November 2011 following notification of antitrust clearance in Germany, Poland, Turkey, Brazil and other countries if any.7. Future outlookAny impact that this transaction may have on Nisshinbos consolidated financial statements for the fiscal yearended March 2012, will be announced once the forecast has been prepared. Contact Masataka Makio (Mr.) / Hiroaki Hashimoto (Mr.) Investor Relations and Public Relations Group (Tel: +81-3-5695-8854)※3 The above amount in yen is based on the exchange rate of EUR 1 =JPY 105. -4-