PKC Group Oyj - Tender offer

PKC BECOMES A LEADING GLOBAL HEAVY TRUCK WIRING HARNESS SUPPLIER THROUGH ACQUISITION OF AEES

PKC Group Oyj                         Company Announcement                     
 9 August 2011   2.00 p.m. 



PKC BECOMES A LEADING GLOBAL HEAVY TRUCK WIRING HARNESS SUPPLIER THROUGH
ACQUISITION OF AEES 



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
EBITDA (excl. rationalisation costs)      13.4       14.7
EBITDA (reported)                          5.1       -4.8
Balance sheet                                            
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



Harri Suutari

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. 





DISTRIBUTION



NASDAQ OMX

Main media

www.pkcgroup.com





The PKC Group offers design and contract manufacturing services for wiring
harnesses, cabling and electronics. The Group has production facilities in
Brazil, China, Estonia, Finland, Germany, Mexico, Poland, Russia and Ukraine.
The Group's net sales in 2010 totalled EUR 316.1 million. PKC Group Oyj is
listed on NASDAQ OMX Helsinki Ltd.