STOCK EXCHANGE RELEASE JULY 4, 2003 9.00 a.m.
YIT BUYS ABBS BUILDING SYSTEMS BUSINESS IN THE NORDIC COUNTRIES, THE BALTIC STATES AND RUSSIA
By an agreement signed today, YIT Corporation ("YIT") has purchased from ABB Ltd ("ABB") the companys Building Systems operations, which offer technical building systems, property and industrial services in Finland, Sweden, Norway, Denmark, the Baltic states and Russia. The value of the acquisition is EUR 203 million. The cash amount to be paid in the transaction will be finalized when the deal is completed, whereupon the negative difference of the assets and liabilities of the balance sheet items being transferred in the asset purchase transactions will be subtracted from the transaction value. The transaction must be approved by the competition authorities before it enters into force. The transaction is estimated to be completed by September 1, 2003.
The acquired Building Systems business had net sales in 2002 of about EUR 1,130 million. The adjusted operating profit before financial items, taxes and amortization (EBITA), further corrected for the ABB Groups internal charges, was about EUR 40 million. The calculations have been made on the basis of the figures available to YIT. The figures for Building Systems are based on local GAAP accounting practice. The acquisition value corresponds to an EV/EBITA multiple of about 5 (EV = Enterprise Value). The number of personnel in May 2003 was 9,080.
The acquired business together with the present YIT Building Systems unit in Finland and Calor AB in Sweden will form the Groups largest business segment, YIT Building Systems. It will be a central part of YITs core business, whose technical and financial performance will be developed in accordance with the Groups strategy. Because the deal will not bring new capacity to the local markets, the competition situation will remain unchanged.
The operations of YIT and the acquired Building Systems business in the Nordic countries complement each other. Overlapping operations are minimal. In Finland and Sweden the present heating and plumbing know-how of YITs Building Systems units will be complemented by the electrical and air conditioning expertise of the acquired Building Systems operations. Completely new markets will open up to YIT in Norway and Denmark. The acquisition will strengthen YITs market position. YIT will be able to offer its customers improved and more comprehensive services during the entire life cycle of properties. YITs maintenance network will now cover all the Nordic countries.
Building systems will account for a growing share of construction costs and of the repair and maintenance works for existing properties. Automation along with telecommunications technology make up an ever-increasing proportion of building services equipment and systems. This is why building systems is a major growth area in YITs strategy both in Finland and the other Nordic countries.
The dependence of YITs net sales and earnings on the ups and downs of the business cycle has been purposefully reduced by expanding maintenance and upkeep operations within the companys different business areas. Following the acquisition, the share of maintenance and upkeep operations within consolidated net sales is estimated to rise, gauged by the previous years net sales breakdown, to about 30 per cent, against 25 per cent of YITs total net sales in the first quarter of 2003.
This acquisition will make YIT a major and genuinely Scandinavian service company whose local subsidiaries deploy domestic resources to serve our customers in over 500 regional offices in all the Nordic countries, the Baltic states and Russia,ö observes Group CEO Reino Hanhinen.
YITs post-acquisition net sales
In 2002, YIT had consolidated net sales of EUR 1,763 million. The net sales of the acquired Building Systems business in the Nordic countries totalled about EUR 1,130 million in 2002. Combining YITs figures for 2002 with the figures of the acquired Building Systems operations puts YITs post-acquisition net sales at about EUR 2,890 million, which would be divided among the different business segments as follows: Building Systems about EUR 1,520 million, or 52%; Construction Services EUR 1,086 million, or 37%; Services for Industry EUR 230 million, or 8% and Telecom Services EUR 78 million, or 3% (part of the YIT Group from June 1 to December 31, 2002). The aim of combining the figures is to give an operational overview of the new entity.
By country, the net sales breakdown according to 2002 net sales figures would be as follows: Finland EUR 1,670 million, the other Nordic countries EUR 1,040 million, Baltic states EUR 110 million, Russia EUR 40 million and other countries EUR 20 million.
The number of employees will rise to nearly 21,700
An important consideration in arriving at the deal was ABB Building Systems positive technology image and the professional skill of its personnel,ö says Group CEO Reino Hanhinen. The continuous development of the personnel and operations are central elements of YITs key performance objectives. YIT is well placed to carry out integration of the personnel and operations because the Group has experience and a proven track record of successfully handling the integration aspects of previous acquisitions.
The YIT Groups personnel numbered 12,600 employees at the end of May 2003. Following the acquisition, the Groups personnel strength will rise to 21,680 employees. The acquired Building Systems business has a staff of 9,080 employees. The breakdown by country is as follows: Finland 2,300, Sweden 2,900, Norway 2,700, Denmark 950, the Baltic states 200 and Russia 30.
Financial effects of the acquisition
YIT will finance the acquisition with debt capital. As a consequence of the acquisition, the companys equity ratio will fall. YITs objective is to restore the equity ratio to the target level in 2006 at the latest. YITs strategic target level for the equity ratio is 40%, with an average growth target of 510% a year, a return on investment of 18% and a dividend payout of 3050% of profit after taxes and minority interests. It is estimated that the effect of the deal on earnings per share will be positive beginning in 2004. The Building Systems business is characterized by a strong cash flow generation, low investment requirements and a good return on investment.
YIT estimates that the acquisition will annually yield synergy benefits of about EUR 10 million beginning in 2004. The synergy benefits will come primarily in the areas of purchasing, administration and information technology as well as through technology transfer between existing and new units. With increased resources, well be able to offer our customers integrated deliveries with expanded content as well as large-scale projects in the Nordic countries and their nearby areas,ö explains Group CEO Reino Hanhinen.
The integration costs are estimated to come to about EUR 6 million in 2003 and 2004. The main items making up the integration costs are information technology, changing the external identity and training for the personnel. In Sweden, measures to improve operational profitability are continuing. The objective is to generate a profit in 2004.
The acquisition of the Building Systems operations in Finland, Norway, Denmark, Estonia and Latvia will be carried out as asset purchases. In Sweden, Russia and Lithuania, the entire shares outstanding of the local companies will be purchased. The purchase of the business operations will result in tax-deductible goodwill of about EUR 180 million. The goodwill is to be amortized over 10 years, with the exception of Denmark, where a 7-year amortization period is used. It is estimated that the Building Systems operations will be consolidated within YIT on September 1, 2003.
Group structure and organization
Via the acquisition, YITs Group structure will change. The Groups operations will be divided into four divisions: Building Systems, Construction Services, Services for Industry and Telecom Services.
The acquired Building Systems operations in the Nordic countries together with the present YIT Building Systems unit in Finland and Calor AB in Sweden will form the Building Systems business segment, whose parent company is YIT Building Systems Ltd. Also to be placed within it are YIT Rapido Property Management Services Ltd and YIT Primatel Ltds property networks business. Building Systems will be YITs largest business segment in terms of net sales and number of employees. YIT Construction Ltd will be responsible for construction services. Investment and upkeep services for industry will be offered by YIT Industria Ltd and YIT Service Ltd. YIT Primatel Ltd will offer telecom infrastructure services.
The president of YIT Building Systems Ltd will be the present president of YIT Installation Ltd, Juhani Pitkäkoski, LL M (45) and its executive vice president will be YITs present Vice President, Corporate Planning, Sakari Toikkanen, Lic. (Tech.) (35). The management of YIT Building Systems Ltd will be headquartered at YITs head office in Helsinkis Käpylä district.
YIT Building Systems business segment will be divided into operations in Sweden, Finland, Norway and Denmark. Operations in Finland will also comprise the operations in the Baltic states and Russia. The present president of Calor AB, Kari Kallio, M.Sc.(Eng.) (53), will be responsible for the Building Systems operations in Sweden. The president of the Finnish subsidiary YIT Building Systems Ltd will be the head of ABB Oys Building Systems Finland, Antti Rantanen, M.Sc.(Eng.) (57) and the executive vice president will be the present president of YIT Huber Ltd, Pekka Hämäläinen, M.Sc.(Eng.) (51). The president of the Norwegian subsidiary YIT Building Systems AS will be the present head of ABB Building Systems Norway, Arne Malonæs, M.Sc.(Eng.) (45) and the president of the Danish subsidiary YIT Installation AS will be the present head of ABB Building Systems Denmark, Leo G. Sørensen, M.Sc.(Eng.) (50).
Ilpo Jalasjoki, (52), M.Sc.(Eng.), will continue as president of YIT Construction Ltd. Services for Industry will be headed by Raimo Poutiainen, (49), M.Sc.(Eng.), who will also continue as president of YIT Industria Ltd. Juha Moisio, (49), M.Sc.(Eng.), will continue as president of YIT Service Ltd and Hannu Leinonen, (41), M.Sc.(Eng.), will continue as president of YIT Primatel Ltd. Juha Kostiainen, M.Sc.(Eng.), D.Sc.(Admin.) (38) has been appointed YITs Vice President, Corporate Planning. He has been responsible for development activities in YIT Construction Ltd. Pitkäkoski, Jalasjoki, Poutiainen, Leinonen and Kostiainen as well as Executive Vice President Esko Mäkelä and Vice President, Corporate Communications, Veikko Myllyperkiö, will report to Group CEO Reino Hanhinen.
The main details of the Group structure and country-specific organizations are available on our website at the address: www.yit.fi.
Press conference and event for analysts on July 4, 2003
A press conference on the transaction will be held in Helsinki at 11.00 a.m. (Finnish time) at Scandic Hotel Simonkenttä, Simonkatu 9.
An event for securities analysts and investors will be arranged at 1.00-2.00 p.m. Finnish time in Helsinki, Scandic Hotel Simonkenttä, Simonkatu 9. Group CEO Reino Hanhinens and Executive Vice President Esko Mäkeläs presentations at the event can be viewed as a direct webcast in English at 1.00 p.m. Finnish time at the address www.yit.fi. A telephone conference will follow the presentations. The material for the presentation as well as the corresponding recorded webcast presentations in Finnish and Swedish with the related material can also be found at the address www.yit.fi.
Veikko Myllyperkiö Vice President, Corporate Communications
YIT offers investment and upkeep services for housing, work environments, the public sector, industry and telecommunications. In all sectors of operations, the Groups services cover the entire life cycle of projects. YITs main market areas are Finland, Scandinavia, the Baltic states and Russia. YITs strategy for building an international presence is to strengthen the market position of YIT Building Systems in the Nordic countries and the market position of YIT Construction and YIT Primatel in the Baltic states and Russia. YITs share has been listed on Helsinki Exchanges since September 4, 1995. The share is quoted on the Main List under the Other Services heading.
Building Systems, with operations throughout Scandinavia, will be an integrated supplier of HEPAC, electrical and automation services and systems spanning the propertys entire life cycle. The property services it offers will ensure high-quality and overall cost-effective upkeep and facility management services for buildings and business locations. Building Systems will provide a local capability for offering information technology and telecommunications services as well as services for industry and system deliveries in all the Nordic countries as well as in the Baltic states and Russia.
For additional information, contact: Group CEO Reino Hanhinen, YIT Corporation, tel. +358 20 433 2454, email@example.com Executive Vice President Esko Mäkelä, YIT Corporation, tel. +358 20 433 2258, mobile +358 40 826 1199, firstname.lastname@example.org Veikko Myllyperkiö, Vice President, Corporate Communications, tel. +358 20 433 2297, email@example.com Director of Corporate Planning Sakari Toikkanen, YIT Corporation, tel. +358 20 433 2336, firstname.lastname@example.org President Juhani Pitkäkoski, YIT Installation Ltd, tel. +358 20 433 3738, email@example.com Petra Thorén, Manager, Investor Relations, YIT Corporation, tel. +358 20 433 2635, mobile +358 40 764 5462, firstname.lastname@example.org
For additional information, see: www.yit.fi
DISTRIBUTION: Helsinki Exchanges, principal media, www.yit.fi
YIT is the largest Finnish and significant North European construction company. We develop and build apartments and living services, business premises and entire areas. We are also specialised in demanding infrastructure construction and paving. Together with our customers, our nearly 10,000 professionals are creating more functional, attractive and sustainable cities and environments. We work in 11 countries: Finland, Russia, Scandinavia, Baltic Countries, the Czech Republic, Slovakia and Poland. The new YIT was born when over 100-year-old YIT Corporation and Lemminkäinen Corporation merged on February 1, 2018. Our restated pro forma revenue for 2018 was approximately EUR 3.2 billion. YIT Corporation’s share is listed on Nasdaq Helsinki Oy. www.yitgroup.com