Sika Ag · SIX:SIKA

Sika — Merger or Acquisition (January 2019)

26 slides from Sika's merger presentation, Jan 8, 2019

  1. Slide 1: Sika Made Binding Offer to Acquire Parex

    SIKA MADE BINDING OFFER TO ACQUIRE PAREX MEDIA AND ANALYST PRESENTATION JANUARY 8, 2019

  2. Slide 2: Agenda

    AGENDA  TRANSACTION HIGHLIGHTS  PAREX – A LEADING MORTAR MANUFACTURER  TRANSACTION RATIONALE  FINANCIAL CONSIDERATIONS  TENTATIVE TIMELINE TO CLOSING  SUMMARY 2

  3. Slide 3: Transaction Highlights (1/2)

    TRANSACTION HIGHLIGHTS (1/2)  Sika made binding offer to acquire Parex from CVC Fund V  Parex, an excellent company  A leading mortar manufacturer – great expertise in facade, tile adhesives, waterproofing  Impressive track record of profitable growth (7 year growth CAGR of 7%; 2018E sales: CHF

  4. Slide 4: Transaction Highlights (2/2)

    TRANSACTION HIGHLIGHTS (2/2)  Financial parameters  Enterprise value of CHF 2.5 billion  Annual synergies of CHF 80 – 100 million expected  Bridge loan facility for the full amount committed by UBS/Citi  Multi-step transaction  Sika signed exclusive put option agreement  Consummation of trans

  5. Slide 5: Parex – A Leading Mortar Manufacturer

    PAREX – A LEADING MORTAR MANUFACTURER 80% OF SALES THROUGH DISTRIBUTION CHANNEL Key facts Key figures 2018  Strong position and expertise in mortar solutions for Sales CHF 1,204 million renovation and new builds EBITDA approx. CHF 195 million  Addressing increasing urbanization, growing market Wat

  6. Slide 6: Parex – A Portfolio of Strong Brands in Key Markets

    PAREX – A PORTFOLIO OF STRONG BRANDS IN KEY MARKETS Segments Brands 8 Key Markets Ceramic Tile  Self-leveling compounds Setting  Ceramic tile adhesives Materials China France  Grouts (incl. epoxy 40% grouts)  Grey mortars Facade USA Argentina Protection &  Mineral mortars Decoration  Organic r

  7. Slide 7: Parex – Track Record of Consistent Profitable Growth

    PAREX – TRACK RECORD OF CONSISTENT PROFITABLE GROWTH Strong organic and acquisitive revenue growth (in EUR bn) … and EBITDA growth (in EUR mn) 1.1 200 1.0 0.9 0.8 150 0.7 0.6 100 0.5 0.4 0.3 50 0.2 0.1 0.0 0 2011 2012 2013 2014 2015 2016 2017 2018 2011 2012 2013 2014 2015 2016 2017 2018 7

  8. Slide 8: Transaction Rationale: Expand Highly Profitable Mortar Business

    TRANSACTION RATIONALE EXPAND HIGHLY PROFITABLE MORTAR BUSINESS Combined Adhesive Systems Thermoplastic Adhesive Mortars 23% Systems Systems 100% Concrete 28% 26% Systems 14% CHF7.1bn CHF1.2bn CHF1.1bn CHF8.3bn Coating Systems Coating Concrete Thermoplastic 12% Systems Systems Systems 14% 17% 24% Mor

  9. Slide 9: Sika and Parex Combined - Global Player in Mortars

    TRANSACTION RATIONALE SIKA AND PAREX COMBINED - GLOBAL PLAYER IN MORTARS Double sales in mortars and significantly increase expertise in key technology (in CHF bn) 2x  Mortar is a key growth technology for Sika and one 2.3 of its most important earnings contributors  In line with past acquisitions

  10. Slide 10: Transaction Rationale: Strengthening Across All Regions

    TRANSACTION RATIONALE STRENGTHENING ACROSS ALL REGIONS + 13% + 43% + 17% + 17% 1.18 1.68 7.09 8.29 1.82 2.12 Americas 3.17 3.57 Asia/Pacific Total1 Sika 2018 Sika 2018 (in CHFm) post acquisition EMEA (in CHFm) Note: 10 1 Including Global Business segment

  11. Slide 11: Transaction Rationale: Broaden Global Production Footprint

    TRANSACTION RATIONALE BROADEN GLOBAL PRODUCTION FOOTPRINT EMEA + 1,300 employees + 20 plants Americas + 1,200 employees + 29 plants APAC + 2,000 employees + 23 plants Sika factories (mortar) Parex factories 11

  12. Slide 12: Channel Complementarity – 80% Sales in Distribution

    SIKA AND PAREX COMBINED CHANNEL COMPLEMENTARITY – 80% SALES IN DISTRIBUTION (SIKA: 31%)  Cross-selling opportunities through access to new sales channels for construction chemicals:  Sika gains access to extensive distribution network of Parex  Parex gains access to Sika’s well established direct

  13. Slide 13: Sika and Parex Technology: Many Synergies from Complementary Applications

    SIKA AND PAREX TECHNOLOGY MANY SYNERGIES FROM COMPLEMENTARY APPLICATIONS Sika Traditionally Strong in Engineered Mortars Traditional  Low shrinkage Example  High durability Cementitious Precision Grout  Low heat build-up SikaGrout 212  Excellent pumpability  Superior freeze/thaw resistance Pare

  14. Slide 14: Example France: High Product and Channel Complementarity

    EXAMPLE FRANCE HIGH PRODUCT AND CHANNEL COMPLEMENTARITY Highly complementary applications Well Known Products and positioning in distribution  Technical mortars  50% sales through distribution with  Industrial Flooring focus on: Sealing & Bonding, technical mortars, Waterproofing  Roofing & Wate

  15. Slide 15: Example China: High Channel Complementarity and Cross-Selling Potential

    EXAMPLE CHINA HIGH CHANNEL COMPLEMENTARITY AND CROSS-SELLING POTENTIAL Parex strong in distribution, Sika strong in direct business Expanded footprint in China  Technical mortars  Sika with 90% of direct business in  Industrial Flooring China  Roofing & Waterproofing  High complementarity in di

  16. Slide 16: Example USA: Facade and Tile Systems as New Growth Platforms

    EXAMPLE USA FACADE AND TILE SYSTEMS AS NEW GROWTH PLATFORMS  Refurbishment  Expand factory footprint for mortars with Parex plants in  Industrial Flooring Florida, California, New York and New Mexico  Roofing & Waterproofing  Parex’s Facade/EIFS business connects well with Sika’s wall insulatio

  17. Slide 17: Example Latin America: High Complementarity in Key Markets

    EXAMPLE LATIN AMERICA HIGH COMPLEMENTARITY IN KEY MARKETS  Technical Mortars, Tile Adhesives  Parex’s strong position in Facade Mortar and Tile Adhesive  Industrial Flooring business fills important gap for Sika  Roofing & Waterproofing  Sika footprint in all of Latin America will multiply Pare

  18. Slide 18: Financial Considerations

    FINANCIAL CONSIDERATIONS  Financial parameters  Enterprise value of CHF 2.5 billion  Annual synergies of CHF 80 – 100 million expected  11.3x EV / pro forma EBITDA 19E multiple, less than 8.5x EV / EBITDA incl. full run-rate synergies  EPS accretive from first full year post closing  Financing

  19. Slide 19: Synergies to Drive Sustainable Margin Enhancement

    FINANCIAL BENEFITS FROM TRANSACTION SYNERGIES TO DRIVE SUSTAINABLE MARGIN ENHANCEMENT EBITDA margin 17.1% 16.2% >17.5% + 25% EBITDA 2017 (CHFmillion) 80-100 1,330 – 1350 180 1,070 Parex Run-rate synergies1 Pro-forma Note: 19 1 Based on 2017 actuals, full run-rate revenues and cost synergies (EBITDA

  20. Slide 20: Revenue and Cost Synergies

    REVENUE AND COST SYNERGIES EXPECTED RUN-RATE SYNERGIES OF CHF 80-100M  Cross-selling of Sika products through Parex distribution  Expected run-rate channels (Acrylics, PUs, Epoxies etc.) synergies of Revenue CHF 80-100m p.a.  Leverage Sika’s direct access to jobsites for Parex products synergies

  21. Slide 21: Tentative Timeline to Closing

    TENTATIVE TIMELINE TO CLOSING Regulatory approvals French consultation process Regulatory approval process 7-Jan-2019 Q1 / Q2 2019 Q2 / Q3 2019 Signing of put option Signing of SPA Closing agreement 21

  22. Slide 22: Summary: Stronger and More Competitive

    SUMMARY: STRONGER AND MORE COMPETITIVE  Bringing two growth engines together  Product offerings are highly complementary. No overlaps in sales channels  Strong player in construction chemicals and industrial adhesives with sales in excess of CHF 8 billion  Excellent footprint with more than 300

  23. Slide 23: Questions?

    QUESTIONS? BUILDING TRUST

  24. Slide 24: Strong Growth Momentum Continues

    STRONG GROWTH MOMENTUM CONTINUES + 13.7% 13.7% SALES GROWTH (13.4% IN CHF) IN 2018 + 14.2% + 5.5% 7.09 + 11.7% Group + 29.2% 1.18 1.82 Asia/Pacific Americas 3.17 0.92 EMEA Global Business 12M 2017 12M 2018 (in CHF billion, growth in LC) 24

  25. Slide 25: Strong Outlook for 2019

    STRONG OUTLOOK FOR 2019 CONTINUATION OF SUCCESSFUL GROWTH STRATEGY  Volatile and rising raw material prices will continue to be a challenge  For business year 2018, a record EBIT in the range of CHF 940 million to 960 million expected  For business year 2019, sales increase in line with Growth St

  26. Slide 26: Forward-Looking Statement

    FORWARD-LOOKING STATEMENT This presentation contains certain forward-looking statements. These forward-looking statements may be identified by words such as ‘expects’, ‘believes’, ‘estimates’, ‘anticipates’, ‘projects’, ‘intends’, ‘should’, ‘seeks’, ‘future’ or similar expressions or by discussion o

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