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- >Note 2
1. Basic information and principles of the report
2. Changes in Group structure
Acquisition of the Sanitec Group
On October 14, 2014, Geberit AG submitted a takeover bid to the shareholders of Sanitec Oyj, Helsinki, Finland (Sanitec) to acquire all Sanitec shares at a price of SEK 97 per share in cash. The Sanitec shares were listed on the NASDAQ Stockholm stock exchange. Sanitec is a leading European producer and supplier of bathroom ceramics. The Group achieved net sales of MEUR 689 and an EBIT margin of 11.4% in 2014. The company employs 6,200 people in 18 production facilities and 24 sales units. Sanitec sells its products primarily in Europe under 14 leading brands that are firmly established in their local markets. For Geberit, the acquisition of Sanitec represents an expansion of its product range. Its portfolio will be enhanced with the addition of the Sanitary Ceramics area. The new company will be the European market leader for sanitary products and will, in particular, strengthen its position in those European markets in which Geberit had not yet gained a firm foothold, i.e. the Nordic Countries, France, UK and Eastern Europe. It combines technical know-how in sanitary technology “behind the wall” with design expertise “in front of the wall”. The acquisition also bolsters the Group's key sales and earnings drivers.
The relevant competition authorities granted all the required approvals in late January 2015. At the end of the acceptance period on February 2, 2015, 99.27% of the Sanitec shares had been tendered to Geberit. The purchase/sale of these shares was effected on February 10, 2015 and was financed by Geberit using its own funds as well as new debt. Following an extended offer period, Geberit held 99.77% of the shares, with a squeeze-out process instigated for the remaining shares and completed successfully in September 2015.
The purchase price for the Sanitec Group in cash amounted to MCHF 1,203.5 plus additional transaction costs of MCHF 22. Of the latter, MCHF 10 is attributable to consultation fees (of which MCHF 3 was already incurred in 2014) and MCHF 12 was incurred in connection with the financing. Of the financing costs, MCHF 6 is recognised in the 2015 income statement and a further MCHF 6 is being amortized over the term of the financing instruments. In addition debt of MCHF 184 had to be refinanced.
The acquisition was financed by means of bond issues, bank loans and from own funds. Geberit has issued the following three bonds: a bond for MCHF 150 with a term of four years and a coupon of 0.05%, a bond for MCHF 150 with a term of eight years and a coupon of 0.3% and a bond for MEUR 500 with a term of six years and a coupon of 0.688%. A bridge facility in the form of a syndicated bank loan amounting to MCHF 900 was available for the period between the closing of the transaction and the issue of the bonds. In addition, a second syndicated bank loan (“term loan facility”) amounting to MEUR 325 was drawn on and existing funds of MCHF 247 were used.
The instruments for hedging the foreign exchange risks were released on the closing and reflected in the acquisition price. The corresponding effect is contained in the “Cashflow hedge accounting” item in the consolidated statements of comprehensive income.
The following assets and liabilities were incorporated at fair value into the consolidated balance sheet of the Geberit Group when the Sanitec Group was consolidated for the first time on February 10, 2015:
|Cash and cash equivalents||18.1|
|Trade accounts receivable||36.2|
|Other current assets and current financial assets||40.5|
|Property, plant and equipment||9||165.2|
|Deferred tax assets||18||20.0|
|Other non-current assets and non-current financial assets||1.0|
|Trade accounts payable||64.7|
|Tax liabilities and tax provisions||31.2|
|Other current liabilities and provisions||13||85.5|
|Accrued pension obligations||16||40.3|
|Deferred tax liabilities||18||88.7|
|Other non-current provisions and liabilities||19||10.5|
|Acquired net assets||303.2|
The “Intangible assets” item largely contains the Sanitec trademarks (MCHF 229.1) and technology know-how (MCHF 129.2). The trademarks were assigned an indefinite term and are therefore not being amortised. Technology know-how is being amortised over four years.
The goodwill largely results from the following synergy potential:
- Cost reduction in administrative and corporate functions
- Sales promotion in the complementary markets
- New product combination opportunities
- Joint development of products
Any possible amortization of goodwill is not tax effective.
The cashflow from this transaction is as follows:
|Existing cash and cash equivalents||-18.1|
|Cash used in investing activities||1,185.4|
From the time of its acquisition, Sanitec has contributed from the ordinary business (without one-off and recurring acquisition costs) net sales for the reporting period of MCHF 649.0 and net profit of MCHF 51.3 to the Geberit Group. If the acquisition had already taken place on January 1, 2015, net sales for the reporting period would have amounted to MCHF 709.1 and net income to MCHF 55.5.
In addition, the changes in the Group structure are as follows:
- Geberit Service AB, Bromölla (newly founded)
- Keramag Service GmbH & Co. KG, Pfullendorf (newly founded)
- Contura Steel AB, Bromölla (sold)
- Geberit RUS LLC, Moscow (newly founded)
- Geberit Finanz AG, Rapperswil-Jona (newly founded)
- Geberit Investment Oy, Vantaa (Helsinki) (newly founded)