Further to Toyota’s merger with Uster Technologies
By Virginia F. Bodmer-Altura
On February 29, 2012 all the compulsory and companies’ statements of Toyota Industries (today owning 50.34 % of Uster’s shares) and Uster Technologies as well as Uster’s 2011 annual report are on the table. The public offer for all outstanding shares is published. We have studied all items for you in order to offer the latest details
The share price
The most important news we have reported already before such as the offering share price (nominal value CHF 9.40) of CHF 44.00 plus a non-deductible dividend of CHF 2.50 per share paid out from capital reserves. The fairness opinion established by Ernst & Young consultants and its variation calculation on the share price come to results between CHF 47 to over CHF 59 underlying different assumptions. Also the officials from Uster will tender their shares and this is also their recommendation to all other remaining public shareholders. The offering period will start March 15 to April 13, 2012. The result of the offering will be published and in case not all of the shares are in the hands of Toyota a possible extension period will take place from April 20 to May 4, 2012.
The reasons for extending the term of final public offering
We remind you that Toyota has purchased in two steps the stakes from Alcide Limited, Channels Islands, bringing up Toyota’s stake in Uster Technologies from 22.46 % (share since 2009) to 50.34 %. Now it is also clear why there were extensions to the final public offering were necessary. First of all, it was the pricing of the shares and secondly the Swiss Takeover Board and Toyota wanted to await all approvals of the merger control authorities, especially the consent of the Chinese Ministry of Commerce on the purchase of the 21.88% Uster stake from Alcide.
The Fairness Opinion
To evaluate the Uster fair value Ernst & Young was comparing Uster with the following testing and measurement companies: Intertek Group p.c., SGS SA, Mettler Toledo International, Cognex Corp., Oxford Instruments p.c., Spectris plc, Toyoda Tsusho Corp., MTS Systems Corp. and Bureau Veritas SA. In view to textile machinery manufacturers the comparison was made with Picanol N.V., Rieter Holding AG, OC Oerlikon Corp. and Schweiter Technologies AG. Also a comparable transactions analysis was made on the following transactions: AB Lorentzen (S), industrial machinery; Omega Engineering (USA, electronic equipment), Savio Machine (I, textile machinery), Industria Contro Group (GB, electronic equipment) and Saurer (CH, textile machinery).
Details on Uster group of companies
Uster Technologies owns the following active companies: Uster Technologies (India) Pvt.Ltd. Bangalore (Service Center), Uster Technologies (India) Marketing Pvt. Ltd., Bangalore (Sales Office), Uster Technologies K.K. Osaka-fu (J), Service Office, Uster Technologies (Shanghai) Trading Co. Ltd. (Sales Office PRC), Uster Technologies (Suzhou) Co. Ltd., PRC, Technology Center, Uster Technlogies Sulamericana Ltda., Alphaville-Barueri SP, Brazil), Service Center; Uster Technologies Holding (Thailand) Ltd, Bangkok, Uster Technologies Inc., Knoxville, USA (Technology Center) and Uter Teknoloji Ticaret A.S., Adana, TR (Service Center). There are additionally to dormant companies: Uster Technologies de Mexico S.A. de C.V., Tlalnepantla and Uster Technologies GmbH, Neuss (D).
The Uster 2011 results
Uster’s gross sales increased from CHF 132,84 million to CHF 192,51 million and net sales amounted 2011 to CHF 188.15 (CHF 130,1) million and the operating income (EBIT) was CHF 41.36 (CHF 19.43) million and total profit increased from CHF 20.76 to CHF 36.24 million.
The segments testing instrumentation grew from CHF 114.15 to CHF 174.51 million and the share in gross turnover increased from 85.9 % to 90.6 %. Service Sales amounted to CHF 18.00 (18.69) million and its share dropped from 14.1 % to 9.4 %. Geographically a share of 1.3 (1.1) % derived from Asia, 98.0 (98.1) % from Europe and the Americas achieved a share of 0.7 (0.8) %.
The view of the Uster Board of Directors
The Uster Board of Directors consider in their Report now Toyota as an excellent strategic fit and complementing each other as well as enjoying already a close cooperation in developing new products and the merger as a logical step to strengthen the existing partnership. They add: The combination of the two companies’ unique portfolios in terms of technology and market expertise offers great potential for joint business development opportunities, from which all stakeholders, including existing and new customers, business partners and the highly skilled staff or Uster, are likely to benefit. The even closer collaboration backed up by the financial power of the Toyota Group of Companies offers significant opportunities to Uster and the combination opens interesting additional growth potential for Uster.
The long standing management team of Uster voices great confidence in Toyota and Toyota is convinced of being able to successfully capture the opportunities arising from this combination together with this well established team. Toyota considers the corporate culture of Uster an important asset and vital that it will survive. Toyota does not intend to fully integrate Uster into the Toyota group of Companies and it intends to basically continue to operate the existing Uster production sites and to basically also keep the workforce.
Members of the Uster Board of Directors and Senior Management are actually holding 699368 share or 8.27 % of the voting rights. Additionally they hold 147500 restricted stock units (RSU) and as the merger is qualifying as a forfeiture event all holders of RSU awards will be entitled to acquire one Uster share at the nominal price of CHF 9.40. This means at the end of the day that under this program they will have a gain of CHF 34.60 per share plus a dividend of CHF 2.50 or totally of CHF 37.10 per share.
The prospects for Uster
The Uster management expects a decline in sales in 2012 but at strong maintained profitability. Uster Technologies will offer in the future textile producers unique know-how and expertise in meeting current and future industry requirements as well as in applying state-of-the-art technology that enhances customer’s production efficiency, quality excellence and competitiveness. The Ernst & Young publishes also the five year planning horizon of the Uster Board of Directors. Their projections are as follows and by product category for 2012 CHF 107 million for yarn online, CHF 33 million for Fibre Testing & Classing CHF 19 million for Yarn testing and CHF 17 million for After Sales Service or in total CHF 176 million. For 2013 Yarn Online is projected at CHF 109 million, Fibre Testing & Classing at CHF 37 million, Yarn Testing at CHF 21 million and After Sales Services at CHF 17 million, in total CHF 184 million. 2014 Yarn online should produce CHF 112 million, Fibre Testing and classing CHF 40 million, Yarn Testing CHF 25 million and After Sales Services CHF 17 million bringing the total to CHF 194 million and for 2015 it is expected that Yarn online contribute CHF 115 million, Fibre Testing and Classing CHF 40 million , Yarn Testing CHF 29 million and After Sales Services CHF 18 million or totally CHF 202 million.