Schouw & Co. acquires Borg Automotive Investor presentation 20 - PowerPoint PPT Presentation

Schouw & Co. acquires Borg Automotive Investor presentation 20 March 2017 CEO Jens Bjerg Sørensen | IR Kasper Okkels

Acquisition of Borg Automotive 20.03.2017 2 Borg Automotive, a leading remanufacturing company Borg Automotive at a glance Product split ▪ Borg Automotive is a remanufacturing company 100% 3% founded in 1979 by Søren Toft-Jensen 6% 7% ▪ The company specialises in the production and 34% sales of remanufactured parts for the automotive industry like alternators, starters, brake calipers 50% ▪ Borg is Europe's leading independent auto remanufacturer with broadest product range and All sales in almost all European countries products ▪ Customers (+100) are wholesalers, distributors EGR Starters & Brake Steering AC com- and OES/OEM’s; largest ~10% of sales valves alternators calipers pressors ▪ Headquarter in Silkeborg with production sites in Poland and UK, and a R&D facility in Belgium Revenue EBIT ▪ The group consists of Borg Automotive (Denmark/Poland) and Car Part Industries (UK/Belgium), which was acquired in 2011 +11% +72% ▪ FTEs: ~1,400 13/14 14/15 15/16 16/17E 13/14 14/15 15/16 16/17E Due to one-offs Notes: Negative EBIT in 2014/15 is related to transfer of brake caliper production to Poland, various restructuring in UK and significant loss on a single customer

Acquisition of Borg Automotive 20.03.2017 3 Remanufacturing in Europe to grow ~8% European remanufacturing drivers European auto remanufacturing market EUR billion 1 Growing carpark 2.3% annual car park Forecast & new sales growth towards 2020 2 ~8% 11.6 Longer vehicle +1 year in average life- 10.8 lifetime time since 2010 10.1 9.4 ~7% 3 8.7 Declining num- 1% annual reduction in 8.0 7.4 ber of accidents accidents since 2010 7.0 6.5 4 Structural Growing aftermarket change liberalisation via regul. 5 Maturing reman. Drives industry promo- capabilities tion/knowledge sharing 6 Global green Supply concern ‘critical’ 2012 2013 2014 2015 2016 2017 2018 2019 2020 agenda to EU (focus on CO2) 1 Notes: 1) The remanufacturing of automotive components yields some 88% materials savings compared to using a new product, with an associated 53% decrease in CO2 emitted and 56% lower energy requirement (EU Commission, 2015)

Acquisition of Borg Automotive 20.03.2017 4 Acquisition makes good business sense Rationale, conglomerate level Rationale, business level ▪ Current capital structure provides room for significant ▪ Borg Automotive fulfils all investment criteria investment on top of current investment programs ▪ Leading position – leading position in Europe ▪ Span of control target of 5-7 businesses enables new value ▪ B2B – processing of remanufacturing auto parts servicing enhancing platform investments global wholesalers, buying groups and OES/OEMs ▪ Internationally focused – sales throughout Europe with ▪ Continue value-creation of the conglomerate by pursuing production in Poland and UK attractive buy-and-build opportunities ▪ Strong management – highly skilled management team ▪ A new platform investment is key in ‘the next step’ of willing to step-change the company Schouw & Co. ▪ Active ownership – significant opportunity for transformation through active ownership 2016 Revenue (DKKm) ▪ Borg Automotive is well-run and among the best-in-class 2016 EBIT (DKKm) to deliver growth and profitability 8.867 ▪ Well positioned with solid presence in attractive markets 1.792 1.747 and all major product categories 1.301 ~900 * 877 ▪ Industry growth of ~8% is unique 581 246 ▪ Significant opportunities to drive further growth in a ~125 * 111 81 61 fragmented industry, organically and through M&A Notes: *) Borg Automotive’ s accounting principles will be changed following the acquisition to adapt to IFRS. Pro-forma FY2016 revenue and EBIT before any effect of PPA

Acquisition of Borg Automotive 20.03.2017 5 Transaction details Current structure 3 Valuation Transaction Søren Borg Toft-Jensen Fonden ▪ Enterprise Value is ▪ Complex transaction due to previous DKK ~1,150m ownership structure where ‘Borg Fonden ’ 100% 81% 19% owned a minority in one of the two entities in Car Parts Borg For 100% of the shares incl. Industries Automotive the transaction scope estimate of the fair value of the minority interest ▪ Schouw & Co. has an option (and an Intermediate structure (½-2 years) ▪ Financial estimates obligation) to obtain full ownership within a Søren 2017 (Jan-Dec) relatively short period of time Schouw & Co. Toft-Jensen Sales 1 DKK ~1,050m ▪ Following a string of transactions Schouw & 15% 85% Co. will own 85% of the combined Borg EBITDA DKK ~170m Borg Holding Automotive Group and Søren Toft-Jensen will EBIT 2 DKK ~160m own the remaining 15% Car Parts Borg 100% 100% ▪ Transaction multiples Industries Automotive ▪ Due to the purchase obligation of the 15% Sales ~1.1x ownership stake, Schouw & Co. will recognize EBITDA ~6.8x a liability in the balance sheet at fair value, End structure (+2 years) i.e. treat the option as a debt-like item rather EBIT 2 ~7.2x than a non-controlling interest (NCI) Schouw & Co. ▪ Recognised in Schouw ▪ Any communication on purchase price of the 100% & Co. 2017 Q2-Q4 company incorporates the fair present value Borg Holding Revenue DKK ~800m of the minority share and hence assumes a valuation comparable to 100% of the shares EBIT 2 DKK 110-130m Car Parts Borg 100% 100% Industries Automotive Notes: 1) New accounting principles lifts revenue and is not comparable to existing practice; 2) Before effect from PPA; 3) Illustrative only