Kaba and Dorma Announce Merger Plans

  • dormakaba
  • 05.05.15
Kaba Holding AG, headquartered in Rümlang, Switzerland, and family-owned Dorma Holding GmbH + Co. KGaA, headquartered in Ennepetal, Germany, plan to merge to become the dorma+kaba group.

A corresponding transaction agreement was signed April 29.

Dorma is a provider of access solutions and related services, and a global market leader in door closers, automatic door systems and glass fittings. Kaba is a global leader for access control, enterprise data collection and key systems. “The combination of the two strong brands Dorma and Kaba will result in the creation of a leading company in our industry," said Ulrich Graf, chairman of Kaba. "The anchor shareholders will ensure long-term orientation, which represents another true competitive advantage in our dynamic sector.”

With pro-forma sales of over CHF two billion, around 16,000 staff and locations in 53 countries, dorma+kaba will move up into the global top three in the highly fragmented market for security and access solutions. “By merging our two globally established companies, we will significantly strengthen our market position," said Dr. Hans Gummert, chairman of Dorma. "Not only do we share over one hundred years of entrepreneurial tradition and the same values, but our strategies also largely correspond with one another.”

Dorma and Kaba’s technological expertise, products as well as distribution channels complement each other very well. The shared distribution and service networks, cross selling, and the positioning as a one-stop-shop for security and building access solutions open up significant added growth potential for the merged company.
“Together with Kaba, we are taking a big step forward," said Thomas P. Wagner, CEO of Dorma. "We will broaden our offering, strengthen our global presence and increase our innovation power. This will allow us to better and more quickly take advantage of opportunities that arise through megatrends such as urbanization and digitalization.”

dorma+kaba will have production facilities in all of the industry’s key markets and will accelerate global expansion through its strengthened presence in particular in Europe, the Americas and Asia-Pacific.

On a pro-forma basis, the combined group generated sales of CHF 2,242 million for the 2013/2014 financial year (as per June 30, 2014) and an EBITDA of CHF 303 million. The pro-forma EBITDA margin was 13.5 percent.

“Dorma and Kaba are ideal partners in every respect and a compelling strategic fit," said Riet Cadonau, CEO of Kaba. "The planned merger will create additional opportunities for sustainable profitable growth – thereby providing added value to our clients, partners, employees and shareholders.”

Over the next four years, dorma+kaba aims to achieve sales growth, including revenue synergies, of 6-7 percent per year (in local currencies). Based on higher purchasing volumes, optimized infrastructure costs and efficiency gains, annual cost synergies of CHF 60-70 million are projected, which should come into full effect in the fourth year after the merger. Total one-off implementation costs are expected to reach the full cost synergies for one year.

Upon reaching the full synergy potential, an EBITDA margin of 18 percent is aimed for. The merger is expected to be double-digit (percentage) accretive to earnings per share. With regard to the future dividend, dorma+kaba is targeting a payout ratio of at least 50 percent of consolidated net profit after minority interests.

Following approval of the merger by Kaba shareholders, the Dorma owner family Mankel/Brecht-Bergen will subscribe to 380,000 registered shares with a par value of CHF 0.10 each from Kaba authorized capital. The price is CHF 178.4 million, corresponding to the 90-day volume weighted average Kaba share price of CHF 519.45 as per April 28, 2015 after market close (Bloomberg) minus CHF 50 per share in compensation for the ineligibility of the new shares for receipt of the planned special dividend. Following this capital increase, the Mankel/Brecht-Bergen family will hold 9.1 percent, and the existing Kaba family shareholders 18.2% percent of Kaba Holding.

Upon completion of the merger, Kaba Holding will contribute its operational business into today’s Dorma Holding, where the operational business will be merged, and will receive a 52.5 percent controlling stake thereof. Accordingly, the Mankel/Brecht-Bergen family will hold a stake of 47.5 percent in today’s Dorma Holding (i.e. the combined business). The group will operate under the name dorma+kaba. The SIX-listed Swiss dorma+kaba Holding, as the holding company of the new group, will be responsible for its strategic, operational and financial leadership and will fully consolidate the combined business.

To begin with, Dorma and Kaba warrant the same valuation. As a result of the agreed transaction structure, Dorma is contributed into the combined company at an EV/EBITDA multiple of 10.1 and Kaba at 12.2. Taking into account cash and cash equivalents of approximately CHF 190 million remaining at Kaba Holding, the ownership interests in the combined business will amount to 52.5 percent for Kaba and 47.5 percent for the Mankel/Brecht-Bergen family. An independent fairness opinion conducted by N+1 Swiss Capital on behalf of the Board of Directors of Kaba Holding confirms that the envisaged ownership interests are fair and balanced from a financial point of view.

In exchange for relinquishing the majority in its business, the Mankel/Brecht-Bergen family will have the right to acquire further stakes in today’s Dorma Holding at market value, in order to regain the majority should there be a change of control at dorma+kaba Holding. Shareholders of dorma+kaba Holding can rescind this right with a three-quarters majority until the end of 2018, and with a simple majority from 2019 onward, should such a change of control be forthcoming.

The family shareholders of Dorma and Kaba, who will jointly hold 27.3 percent of dorma+kaba Holding, will form a strong anchor shareholder group and have signed a long-term pool agreement. Among others, they have granted each other preemption rights and have also agreed that the sale of a block of shares of 27 percent or more to a third-party buyer would require this buyer to launch a public takeover offer to all public shareholders at the same price per share.

“We recognize our responsibility as family business owners and look forward to supporting the new dorma+kaba group as long-term oriented anchor shareholders," said Christine Mankel and Stephanie Brecht-Bergen (née Mankel), shareholders of Dorma. "By subscribing to new Kaba shares, we are also increasing our commitment to the business. In doing so, we are seizing this unique opportunity to create a leading global company in our industry.”

Ulrich Graf, Chairman of Kaba, will chair the board of directors of the combined company. The CEO of Kaba, Riet Cadonau, has been nominated CEO. Bernd Brinker, who is CFO of Dorma, is the designated CFO. Representation on the group’s management bodies is to be as balanced as possible.

Both Rümlang and Ennepetal will remain important locations for the merged company. The domicile of dorma+kaba Holding will be Rümlang, and Ennepetal will be the domicile for the future “Access Solutions DACH” division, which will be responsible for the business in the German-speaking countries.

Kaba will hold an Extraordinary General Meeting on May 22, 2015 for approval of the merger. Shareholders, and non-anchor shareholders in particular, are invited to confirm that no mandatory offer must be submitted as part of this transaction (opting-out limited to the envisaged transaction). The board of directors of Kaba will also propose the abolition of the existing 5 percent share transfer and voting rights restrictions, as well as other amendments to the Articles of Incorporation. Furthermore, the board of directors proposes the payment of a special dividend from capital contribution reserves of CHF 50 per registered share. This corresponds approximately to the inflow of capital resulting from the capital increase from authorized capital.

Christine Mankel and Stephanie Brecht-Bergen, shareholders of Dorma, and Dr. Hans Gummert, chairman of Dorma, will be proposed for election as additional Board members of dorma+kaba Holding. Thomas Pleines, who has been a member of the board of directors of Kaba since 2011, has agreed to step down from his role.

The resolutions passed at the Extraordinary General Meeting will come into effect upon completion of the merger, which is envisaged for the third quarter of 2015, subject to approval from share-holders and the competition authorities, as well as other customary requirements being met.

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