Background

 

Williams' lock division is one of the world's leading manufacturers of locks, lock cylinders and safes and includes some of the best known brand names within security including Chubb, Tesa, Union and Yale. The lock division has important market positions in the UK, the US, Spain, the Netherlands and Italy and is well positioned in emerging markets such as Brazil, South Africa and China. The business is recognised within the residential segment through Yale, probably one of the world's best known lock brands. The division employs in excess of 13,000 people globally.    

 

ASSA ABLOY was founded in 1994 through the merger of ASSA and ABLOY and was listed on the Stockholm Stock Exchange in the same year. It has grown from sales of SEK 3.5 billion to pro forma SEK 13.0 billion since listing. ASSA ABLOY's growth strategy is based on a combination of organic growth driven by an increasing need for security, the establishment of sales offices in new markets and targeted acquisitions. Through benchmarking and sharing of best practice, considerable efficiency gains are achieved in this process. In addition, the Group benefits from synergies in R&D, production and cross-selling of Group products. This is particularly true in the area of electromechanical products, where up-front investments are higher and world wide distribution is important. The acquisition of Williams' lock division is an important step in this strategy.

 

"The combination with Williams' lock activities represents the most significant step forward for ASSA ABLOY since its foundation and has been on the management team's wish list for many years. It combines high quality brand names within security, strong management teams, complementary geographical positions and a strong product line for all segments. It provides a great platform for continued growth and offers many opportunities for profitability improvements through increased efficiencies within the combined group. We also look forward to welcoming Williams PLC as a new shareholder in ASSA ABLOY," said Carl-Henric Svanberg, CEO of ASSA ABLOY.       

 

Roger Carr, CEO of Williams stated "We are delighted to be involved in the creation of a world leading and focused lock company and to participate in its success through our shareholding. We feel this transaction represents a great opportunity for our shareholders, employees and customers."

  

Williams' lock division

 

The activities to be acquired include all of Williams' lock and safe businesses globally, with the exception of the Tesa hotel locks business. It includes some 25 operating units on five continents. 36 percent of sales is generated from locks in Europe, 39 percent from locks in North America and 7 percent from locks in emerging markets. The safes business, which has major operations in the UK, Netherlands and Indonesia, represents the remaining 18 percent. 

 

In 1998, the division reported an operating profit exceeding GBP 70 million. In 1999, operating profit amounted to GBP 59 million when the business was affected negatively by restructuring in the UK following the merger between Chubb, Union and Yale and the restructuring of the safes business following the Indonesian turmoil, where the division has a large manufacturing unit.

 

ASSA ABLOY expects the division to reach sales in excess of GBP 520 million in 2000 and through the ongoing restructuring, restore the operating profit before synergies to the 1998 level.

 

Opportunities for the new combined group

 

The two groups have complementary strengths and there is little geographical overlap. In addition, the acquisition gives ASSA ABLOY an increased exposure to the residential segment, a segment with increasing demand for security. In this segment, sales through DIY (Do-It-Yourself) chains are increasing and the new Group will more efficiently serve this sector through its extended pan-European distribution base.

 

There are considerable organic growth opportunities available through cross-selling within the new Group. Each Group company has increasing opportunities to widen their product range with products from other Group companies. In addition, there are exciting growth opportunities in new markets. ASSA ABLOY has a strong presence through its sales companies in Eastern Europe and South East Asia and Williams' lock division has a strong presence in mainland China, India, Indonesia, South Africa and South America. In these areas, there is an increasing need for better locks driven by higher security demands and new construction activities. The new Group will be better able to serve these needs.

 

In electromechanical products, Williams' lock division and ASSA ABLOY will benefit from shared R&D activities, creating a stronger technological platform to source from and accelerating the introduction of innovative products.

 

Finally, the global lock industry is still very fragmented and ASSA ABLOY's global market share remains small.

 

Financing partly through shares and a rights issue

 

The acquisition will be partly financed through a directed issue to Williams, a rights issue to ASSA ABLOY's shareholders and a new debt facility. Williams' shareholding in ASSA ABLOY post acquisition will be 5.5%. Under the letter of intent, Williams may reduce its shareholding by 50% 12 months after closing and the remaining part 24 months after closing.

 

Pro forma financial effects

 

The acquisition price is GBP 825 million, on a cash and debt free basis and is being paid with GBP 618.75 million cash and 19,765,000 B shares in ASSA ABLOY. The number of shares to be issued is based on a price of SEK 145, being the average closing price over recent weeks.

 

ASSA ABLOY's pro forma sales will increase through the acquisition, from SEK 13 billion to in excess of SEK 20 billion.

 

The proposed acquisition will be strongly CEPS accretive immediately and is expected to be EPS neutral in 2001.

 

The pro forma net assets of the division are approximately GBP 250 million, resulting in goodwill from the acquisition of approximately GBP 575 million, which will be amortised over 20 years.

 

Williams' lock division has over the last few years experienced weakening operating efficiency. Through the ongoing restructuring programme of the division, supported by ASSA ABLOY's benchmarking process, the margins are expected to recover to historical levels, as business efficiencies improve and operating synergies are realised.

 

ASSA ABLOY is been advised on the transaction by Enskilda Securities.

  

 

 

For further information, please contact

Carl-Henric Svanberg, President & CEO, tel: +46-8-506 48552 or +46-8-510 0551,

or Göran Jansson, CFO, tel. +46-8-506 485 72 or +46-70-698 8572

or Ian Macfarlane, Enskilda Securities, tel. +44-171-246 4213 or +44-385-392-918

  

 

ASSA ABLOY AB (publ)

P.O. Box 70340, S-107 23 Stockholm

Tel: Int+46-8-506 485 000, Fax: Int +46-8-506 485 85

Visiting address: Klarabergsviadukten 90

 

 

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