Zurn Elkay Water Solutions Corporation · NYSE:ZWS
Zurn Elkay Water Solutions — Regal Beloit — Merger or Acquisition (February 2021)
22 slides from Zurn Elkay Water Solutions's merger presentation, Feb 16, 2021
Slide 1: Regal Beloit to Combine with Rexnord's Process & Motion Control Segment
February 16, 2021 Regal Beloit to Combine with Rexnord’s Process & Motion Control Segment C R E AT I N G A P R E M I E R G LO B A L P O W E R T R A N S M I S S I O N P RO V I D E R ©2021 Regal Beloit Corporation 1
Slide 2: Cautionary Statements
CAUTIONARY STATEMENTS Additional Information suppliers) being greater than expected following the transaction; failure to consummate or delay in consummating the transaction for other reasons; Regal’s ability to retain key executives and employees; risks associated with litigation This communication
Slide 3: Non-GAAP Financial Measures; Certain Financial Metrics
NON-GAAP FINANCIAL MEASURES; CERTAIN FINANCIAL METRICS In this presentation, we disclose the following non-GAAP financial measures: Certain Financial Metrics: The transaction described in this presentation is adjusted EBITDA, EBITDA margin, return on invested capital (ROIC), unlevered free structure
Slide 4: Today's Presenters
TODAY’S PRESENTERS Louis Pinkham Rob Rehard Todd Adams Chief Executive Officer Chief Financial Officer Chairman, President & Chief Executive Officer ©2021 Regal Beloit Corporation 4
Slide 5: The New Regal – Transformed Strategically and Financially
THE NEW REGAL – TRANSFORMED STRATEGICALLY AND FINANCIALLY Process & Motion Control (PMC) Light-weight power transmission space, with strong distributor and e-commerce channels Heavy-weight and critical power transmission applications, with established IOT offering Global leader in electric motors an
Slide 6: Compelling Value Creation for All Shareholders
COMPELLING VALUE CREATION FOR ALL SHAREHOLDERS + Process & MotionControl (PMC) Attractive Financial Impact Pro Forma 2019 Pro Forma 2020 Pro Forma 2022 $4.6B $4.1B $4.5B 33%+ >500bps Sales Sales Sales Combined 2022E Adj. EBITDA1 margin expansion by gross margin 2024E Accretive2 + Dividend ~1.1x2 ~$8
Slide 7: Transaction Summary
TRANSACTION SUMMARY • Regal to combine with Rexnord’s PMC business in a tax-efficient Reverse Morris Trust (RMT) transaction valued at $3,688M1 • Economic allocation of 61.4% for Regal shareholders and 38.6% for Rexnord shareholders with potential for an ownership and dividend adjustment to preserve
Slide 8: Significant Value Unlocked for Rexnord Shareholders
SIGNIFICANT VALUE UNLOCKED FOR REXNORD SHAREHOLDERS Significant ownership Compelling Strong cultural Creates standalone in highly-attractive value creation fit between logical best-in-class water combined PT business opportunity for all partners management business stakeholders Regal the clear “best
Slide 9: Strategic Transaction with Compelling Value Creation
STRATEGIC TRANSACTION WITH COMPELLING VALUE CREATION Creates a premier power transmission player, combining highly complementary portfolios Generates significant cost synergies, worth at least $120M annually Cross marketing opportunities improve growth potential and provide upside beyond cost synerg
Slide 10: Delivering Unmatched Capabilities Across the Entire General Industrial Drive Train
DELIVERING UNMATCHED CAPABILITIES ACROSS THE ENTIRE GENERAL INDU STRIAL DRIVE TRAIN Sensing Sensing Brakes Monitoring Motors Fluid Couplings Gear Drives Complementary offerings, Grid Couplings Disc Couplings adding real value to customers: Clutches • Engineered to work better together • Reduced comp
Slide 11: Portfolios with Highly Complementary Products and Solutions
PORTFOLIOS WITH HIGHLY COMPLEMENTARY PRODUCTS AND SOLUTIONS Product Segment Regal Strength PMC Strength Broad standard-purpose grid & gear Couplings High-performance disc couplings couplings Gearing Right-angle worm gears Large parallel gear drives Mounted bearings Light/medium-duty ball bearings He
Slide 12: Results in Premier Power Transmission Player
RESULTS IN PREMIER POWER TRANSMISSION PLAYER Pro Forma 2020 PT Revenue by End Market G.I. 8% F&B Regal Brands PMC Brands 4% Greater End 5% 26% Metals/mining A&D 6% Market Non-res 7% Diversity Alt. E Power 7% 17% Whse. 9% 11% O&G Other Pro Forma 2020 PT Revenue by Geography 19% ~30% Europe outside of
Slide 13: Unlocks Meaningful Synergies
UNLOCKS MEANINGFUL SYNERGIES Significant Cost Synergies1 Significant Cross-Marketing Synergies ($M) $120 $100 $70 • Capabilities across the drive train • Cross-selling opportunities • Expanded geographies • Enhanced aftermarket support • Strengthens digital capabilities 2022 2023 2024 Procurement Fo
Slide 14: Drives Growth via Improved Value Proposition
DRIVES GROWTH VIA IMPROVED VALUE PROPOSITION Enhanced service Cross-selling to shared capabilities customer base Better service levels through expanded flexible global Harness proven technologies across combined manufacturing network, more robust aftermarket support customer base to support increase
Slide 15: Complementary Offerings Create Full-Lifecycle Support
COMPLEMENTARY OFFERINGS CREATE FULL -LIFECYCLE SUPPORT Educate Diagnose & Design Select Procure + Search Replace Install Full digital coverage of Repair Adds value for customers by: customer lifecycle • Asset Management Operate • Improved Asset Performance • Increased Component Reliability Maintain
Slide 16: Broader Capabilities to Drive Innovation
BROADER CAPABILITIES TO DRIVE INNOVATION Make it Easier to Order Augmented Reality Predictive Analytics Seamless Transactions Interactive Environment Prognostic Action Guided digital handoffs between end Provide real time insight on the Deploy products and services Just-In- user, channel partners, a
Slide 17: Creates More Balanced Regal Portfolio
CREATES MORE BALANCED REGAL PORTFOLIO Product Mix Original Equipment vs. Aftermarket Mix (2020 Sales) (2020 Sales) 21% 15% 30% 34% Regal 38% Regal 55% Regal + Regal + 24% PMC PMC 66% 70% 47% Motors PT Niche / Specialty Motors PT Niche / Specialty OE AM OE AM Power Transmission to contribute almost 5
Slide 18: Expanded Energy Efficiency Platform
EXPANDED ENERGY EFFICIENCY PLATFORM ESG Enabling Products & Solutions1 Grove Gear Drive Helps save 30 megatons CO2 /year by increasing power production 15-25% (2020 Sales) (2022E Sales) Dry Run Conveyance Systems 43-48% 40-45% In 2020, dry run solutions saved 163 million gallons of water globally Re
Slide 19: Robust Cash Flow Generation
ROBUST CASH FLOW GENERATION Accelerating Cash Flow Generation Continued Disciplined Capital Allocation Unlevered Free Cash Flow ($M) Synergy Investments for organic growth contribution1 27% ~$750 ~$590 Continued return of capital to shareholders via dividends and share purchases ~$390 Process & Moti
Slide 20: Ownership Adjustment Mechanism
OWNERSHIP ADJUSTMENT MECHANISM Ownership and Dividend to be Adjusted Based on Available Shareholder Overlap at Closing • Transaction structure with dividend determined at closing ensures transaction meets RMT ownership requirements in all circumstances • The companies will seek a private letter ruli
Slide 21: Strongly Aligned Cultures and Mission
STRONGLY ALIGNED CULTURES AND MISSION Integrity Customer Continuous A passion success improvement to win We create a better tomorrow by energy-efficiently converting power into motion ©2021 Regal Beloit Corporation 21
Slide 22: Strategic Transaction with Compelling Value Creation
STRATEGIC TRANSACTION WITH COMPELLING VALUE CREATION Creates a premier power transmission player, combining highly complementary portfolios Generates significant cost synergies, worth at least $120M annually Cross marketing opportunities improve growth potential and provide upside beyond cost synerg