trelleborg group to acquire smiths polymer sealing...

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Trelleborg Group to acquire Smiths Polymer Sealing Solutions

Press conference - July 21, 2003

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Key messagesKey messagesMain topics for today’s presentation

Transaction &Deal RationaleTransaction &Deal Rationale

PSS - a leader in the polymer seals industry

Significant value creation

Adding a strong platform for further growth

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The transactionThe transactionTrelleborg to acquire Smiths PSS

Trelleborg has signed an agreement with Smiths Group plc to acquire its Polymer Sealings Solutions (PSS) division for £ 495 M or approx. 6,500 MSEK on a net debt free basis

PSS is a world leader in design, manufacture and supply of high-quality, high-specification polymer seals and sealing solutions to a diverse range of end-user markets

For the last 12 months ending June 2003 PSS had (according to Trelleborg estimates)-Sales of approx. 5,500 MSEK- EBITDA of approx. 880 MSEK- EBIT of approx. 680 MSEK- Approx. 6,000 employees

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Deal rationaleDeal rationalePSS – a leader in the polymer precision seals industry

PSS has leading market positions across a number of segments

Extensive product range focused on high-value applications and world-class engineering and proprietary materials technology

Industry leading financial performance

Adding a new strong growth platform based on polymer technology

Positive annual cost synergies estimated approx. 100 MSEK with full efftect after 3 years

Earnings enhancing already 2004

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Transaction &Deal Rationale


PSS PSS -- a leader in the a leader in the polymer seals polymer seals industryindustry



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A SEK 53 billion market with high entry barriersA SEK 53 billion market with high entry barriersGlobal polymer seals overview

Polymer seals market, Europe and North AmericaSEK 41 billion

Market drivers• More demanding applications• Tougher environmental legislation• Customer demands for improved

reliability• Extended product life• Whole-life cost• Zero-defect supply

Automotive

AerospacePipe

45%

42%

8%5%

Industrial

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Precision seal products ...Precision seal products ...

Hydraulic seals

Gaskets

Diaphragms

Rotary seals

Linear & rotary bearings

Airframe seals

O-rings

Pipe seals

V-rings

In three polymer areas – Rubber, Polyurethan and PTFE

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... in safety-critical environments well-known to Trelleborg... in safety-critical environments well-known to TrelleborgPSS sales by end user, 2003P, SEK 5.1 billion

Industrial60%

Automotive

AerospacePipe

26%

9%5%

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Leader in European Industrial polymer sealsLeader in European Industrial polymer sealsNiche player in North America

Industrial seals market, EuropeSEK 9.3 billion

20%

Freudenberg-NOK

42%Other

4%

20%

PSS

Parker HannifinSKFFederal Mogul

6% 8%

Market drivers• Environmental legislation• Capital goods market• Reliability of OEM equipment• Extended product life• Reducing supplier base

Industrial seals market, North AmericaSEK 9.3 billion

24%Other

25%Freudenberg-NOK

11%PSS Parker Hannifin

25%5%

Federal Mogul

SKF

5%5%

Greene Tweed

PSS Industrial

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Leading-edge in premium Automotive sealsLeading-edge in premium Automotive sealsSpecialized niche player in Europe and North America

Automotive seals market, EuropeSEK 8.0 billion

22%Freudenberg-NOK

43%Other

PSS4%

6%

10% Hutchinson

BrussParker HannifinSKFFederal

Mogul

4%5%6%

Market drivers• Environmental legislation• Car and light truck production volumes• Reliability of OEM equipment• Extended product life• New applications• Material development and processing

skills

Automotive seals market, North AmericaSEK 9.3 billion

20%Other

25%Freudenberg-NOK

15%

5%PSS

Parker Hannifin

20%15%Federal Mogul

SKF

PSS Automotive

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Global supplier of Aerospace polymer sealsGlobal supplier of Aerospace polymer sealsEuropean leader and a runner-up in North America

Aerospace seals market, EuropeSEK 1.3 billion

23%

Hutchinson

46%Other

20%

PSS

Parker HannifinGreene Tweed4% 7%

Market drivers• Commercial and military aircraft

production volumes• Reducing supplier base• Passenger air miles• Military activity• Weight reduction

Aerospace seals market, North AmericaSEK 2.0 billion

50%Other

31%

7%PSS

Parker Hannifin

9%

Hutchinson3%

Greene Tweed

PSS Aerospace

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Leading-edge in European Pipe polymer sealsLeading-edge in European Pipe polymer sealsIn a growing market

Pipe seals market, EuropeSEK 1.3 billion

Market drivers• Construction activity• Infrastructure improvements• Economic development in Eastern

Europe• Switch from concrete to plastic pipes• Ease of installation• Extended product life

18%

Bode20%

PSS

Denso & SteinMOL

Hultec

Other

16%10%

6%

30%

PSS Pipe

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Strong presence in Europe and North AmericaStrong presence in Europe and North AmericaPSS sales by region, 2003P, SEK 5.1 billion

EuropeEurope74%

North North AmericaAmerica

Asia Asia PacificPacific

Latin Latin AmericaAmerica

22%

3%1%

Showing strong growth in Asia Pacific

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Global manufacturingGlobal manufacturingOverview of production locations

SwedenErsmarkForshedaMörbylångaDenmark

Helsingør

PolandKrakow (x2)

JapanTokyo

IndiaBangalore

Malta

UKAshchurchSwadlincoteRotherhamBridgewaterMilford HavenNewtownRoss-on-Wye

ItalyLivornoModenaTurin

FranceConde-sur-Noireau

MexicoTijuana

OregonEugene

ColoradoBroomfield

IndianaFort Wayne

OntarioGuelph

New HampshireSomersworth

BrazilSao Paulo ~4,300 manufacturing personnel in

27 facilities worldwide– 3,300 Europe/Asia/Pacific– 900 North America– 100 latin America

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A complete sealing solution providerA complete sealing solution providerPSS Industrial marketing key markets, Europe/Asia/Pacific, % of sales

Machine tools/presses

16%

15%

15%

9%8%

5%3%2%2%2%

23%

Fluid power

Construction/agricultural equipmentChemical

ProcessIndustry

Electronics

Sanitation

MarineOil & gas

Chemical/pharmaRaw material processing

Miscellaneous

Close to end-users• 70% manufactured

in-house• 30% outsourced

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Strong R&D and testing capabilitiesStrong R&D and testing capabilitiesProduct development overview - safety critical products

• Closely aligned with business lines and coordinated globally

• Research primarily driven by customer requests, but also generic

• 6 main development centers in Europe and North America

• 310 employees engaged in engineering and technical support roles

• New proprietary materials -cooperation with polymer raw material suppliers

• Full 3D modeling reduces cost• 71 product design patents (existing

or pending)

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Significant Significant value creationvalue creation


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Positive contribution from the outsetPositive contribution from the outsetKey financials, Roll 12 M per June 2003

SalesMSEK

Trelleborg PSS*** Trelleborgpro forma

16,931

•Approximate figures according to Trelleborg estimates•**Excluding non-comparable items*** At average rate GBP/SEK

5,500*

22,431+32%

Trelleborg PSS*** Trelleborgpro forma

Trelleborg PSS Trelleborgpro forma

1878+57%

680*

1,198

12.30+38%

3.40*

8.90

Operating Profitexcl gw amort, MSEK

EPS, excl. goodwill amort.**SEK

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Substantial synergiesSubstantial synergiesSynergy overview

Annual synergies –excl synergies from sales -expected to be MSEK 100 -full effect after 3 years

Costs associated with synergy extraction estimated to MSEK 60

Stronger sales growth through medium/long term cross selling

Purchasing/sourcing materials

Rationalization of certain activities (e.g., mixing)

Site consolidation

Sales and distribution

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Obtaining targeted “normalized” gearingObtaining targeted “normalized” gearingDebt/equity ratio, Trelleborg, Proforma as per June 2003

0

50

100

150

40

129

TrelleborgJune 2003

Trelleborg June 2003 pro forma

Group target 75-125%

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Adding a strong Adding a strong platform for further platform for further growthgrowth

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Adding leading industry positions to our GroupAdding leading industry positions to our Group

Automotive AVSIndustrial AVSBrake shimsBootsAgricultural tiresSolid industrial tiresIndustrial hoseIndustrial hose/distributionMarine fender systemsIndustrial profilesRubber membranesPSS Aerospace sealsPSS Automotive sealsPSS Industrial sealsPSS Pipe seals

1111321-1111312

1222-1-3---2---

1211-1--1--2---

Share of core business

2002

~80%2002~90%2002 pro forma incl. PSS

With excellent opportunities to grow

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A balanced organization structureA balanced organization structureWith maintained synergies

Share of pro forma 2002 core operations sales (MSEK 22,500)

Trelleborg AutomotiveTrelleborg

AutomotiveTrelleborg Engineered

Systems

Trelleborg Engineered

Systems

Trelleborg BuildingSystems

Trelleborg BuildingSystems

PSSPSS

Purchasing

Material

Mixing

40%

13%15%

8%

24%

Trelleborg Wheel

Systems

Trelleborg Wheel

Systems

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Entering a phase of Profitable GrowthEntering a phase of Profitable GrowthIllustrative milestones

2003

Achieved goals

Conglomerate

1999

Clear directionEnthusiasm & commitment

1.New strategic

direction

• Broad anchoring• Polymer focus

2.Portfolio

optimization

• Divestment of Distribution 51%

• Divestment of sector Other

Strategic & operational focusReleased capital

3.

Strengthened market positionsCritical massTechnology & service capabilitiesFinancial balance

Focused industry group

Turnover increase by >110%, from SEK 8 to 23 billion

4.Efficiency &

macro adjustment

• Staff reductions • Plant shut-downs

Stable operational platformCredibilityTransparencyVisible leadership

Company & ownshare purchases

• Strategic acquis-itions, primarily within Automotive

• Active share re-purchase program

2003

5.Profitable

growth

• Product- & market-driven organic growth

• Acquisition-driven growth

• Leading positions

• Leading technologies

Pending AcquisitionPSSNormalized gearing

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To sum up ...To sum up ...Main topics for today’s presentation

• GBP 495 million acquisition of Smiths PSS• Perfect fit within focused polymer track

Transaction &Deal rationaleTransaction &Deal rationale



Significant value creationSignificant value creation



• Leading positions, leading technologies• Improved balance in business portfolio• Combining profitability and growth

• Solid strategic and commercial rationale• Positive contribution from the outset• Substantial synergies• Obtaining targeted “normalized” gearing

• Attractive SEK 53 billion polymer seals market• Precision seals in safety-critical environments• Leading industry positions• Global manufacturing and strong R&D

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trelleborg group to acquire smiths polymer sealing...

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