ATS AUTOMATION TO ACQUIRE A LEADING PHARMACEUTICAL AND PERSONAL CARE TUBE FILLING AND CARTONING MACHINERY GROUP
ATS Automation Tooling Systems Inc. (TSX:ATA) (“ATS” or the “Company”) today announced that it has entered into a definitive agreement to acquire all shares of IWK Verpackungstecknik GmbH as well as OYSTAR IWK USA, Inc. (“IWK”), a leader in technology driven high performance tube filling and cartoning machinery for the pharmaceutical and personal care industries.
The acquisition of IWK aligns with ATS’s stated strategy of scaling its leading position in the global automation market and enhancing growth opportunities, particularly in strategic customer segments and with technology leadership. IWK is expected to add core capability in primary packaging (tube fillers) and secondary packaging (cartoners), which management expects can be leveraged into other markets ATS currently serves. IWK brings new relationships with key pharmaceutical and personal care customers, which management expects will improve ATS’s position in the Life Sciences and Consumer Products sectors. IWK also allows ATS to consider future acquisition possibilities that would be a strategic fit with IWK to provide the Company with deep capabilities across several core elements of the customer value chain.
“We welcome the addition of IWK’s highly skilled people, customers, complementary technologies, scale and worldwide presence to our world leading automation business,” said Anthony Caputo, ATS Chief Executive Officer. “This acquisition significantly enhances our capability, and deepens our involvement with two attractive customer segments, pharmaceuticals and consumer products.”
Headquartered in Germany, and established 120 years ago, IWK engineers, assembles and markets primary packaging and secondary packaging machinery and provides services, for blue-chip companies and local customers around the world. As part of ATS, IWK will continue to enhance its portfolio and serve customers under its own brand.
IWK’s approximately 420 employees are based at production facilities near Karlsruhe, Germany and Bangkok, Thailand, and at sales/services centres in the US, Europe and Southeast Asia.
In calendar 2012, IWK had revenues of approximately €82 million and Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) of approximately €11 million. Sales to customers in the pharmaceuticals and personal care sectors evenly account for over 90% of IWK worldwide revenues. New equipment systems and standard automation each account for approximately 30% of total revenues, with services activity accounting for the remaining 40% of total revenues. European and North American markets each account for approximately a third of revenues, Asia 25%, and the balance largely represented by South America.
The purchase price is approximately €103 million (CDN $144 million at current exchange rates), subject to net debt and working capital adjustments which is expected to result in net cash paid of approximately €95 million, funded substantially from the Company’s cash on hand. For its first full year within ATS, IWK is expected to contribute approximately $120 million in revenues and approximately $18 million in EBITDA. The Company expects approximately 50% of the purchase price will be allocated to goodwill. ATS expects to complete the acquisition in the third quarter of fiscal 2014, subject to customary closing conditions, including applicable antitrust approvals. The acquisition is expected to be immediately accretive to Earnings Per Share (EPS) and Cash Flow Per Share (CFPS). Based on current financial results and near term expectations, the Company expects the transaction to contribute approximately 7 cents per share to EPS and approximately 19 cents per share to CFPS for FY2015.
Conference Call and Webcast
At 11:00 a.m. eastern Tuesday September 3, 2013, the Company will host a webcast with accompanying slides and an analyst conference call with follow-up question and answer period to discuss the transaction.
The listen-only webcast can be accessed live at www.atsautomation.com. The conference call can be accessed live by dialing 416-644-3414 five minutes prior.
A replay of the presentation will be available on the ATS website following the call. Alternatively, a telephone recording of the call will be available for one week (until midnight September 9, 2013) by dialing 416-640-1917 and entering passcode 4638351 followed by the number sign.
Notice to Readers: Forward Looking Statements:
This news release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of ATS, or developments in ATS' business or in its industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward-looking statements include all disclosure regarding possible events, conditions or results of operations that is based on assumptions about future economic conditions and courses of action. Forward-looking statements may also include, without limitation, any statement relating to future events, conditions or circumstances. ATS cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. Forward-looking statements relate to, among other things: core capabilities that IWK is expected to add and ATS’ ability to leverage those into other markets; customer relationships that IWK is to bring and expected impact on ATS; the potential consideration of future acquisitions that would bring strategic fit with IWK; the continued enhancement of IWK’s portfolio; expected net debt and working capital adjustments; funding of the transaction substantially from cash on hand; the expected revenues and EBITDA of IWK in its first full year with ATS; percentage of purchase price expected to be allocated to goodwill; expected timing of closing the transaction and conditions in relation thereto; contractual relationships to be addressed by the parties; expected accretive effect and dollar impact to earnings per share and cash flow per share. The risks and uncertainties that may affect forward-looking statements include, among others: impact of the global economy and the Eurozone sovereign debt crisis; general market performance including capital market conditions and availability and cost of credit; performance of the market sectors that IWK and ATS serve; foreign currency and exchange risk; the relative strength of the Canadian dollar; impact of factors such as increased pricing pressure and possible margin compression; the regulatory and tax environment; failure or delays associated with the new customer programs; that this acquisition is not integrated as quickly or effectively as planned or expected; that strategic initiatives in relation to this acquisition are delayed, not completed, or do not have intended positive impact; inability to successfully expand through further acquisitions, due to an inability to identify, negotiate and conclude one or more acquisitions; or to raise, through debt or equity, or otherwise have available, required capital; that IWK’s business does not perform as expected during 2013; that net debt and working capital adjustments as of closing are other than as expected; that amount to be allocated to goodwill is other than as currently expected; inability to close the acquisition, or delays in closing it, resulting from failure or delays in relation to satisfying conditions of closing, and/or addressing certain contractual relationships prior to closing; labour disruptions; that one or more customers, or other persons with which IWK has contracted, experience insolvency or bankruptcy with resulting delays, costs or losses; political, labour or supplier disruptions; the development of superior or alternative technologies to those developed by IWK; the success of competitors with greater capital and resources in exploiting their technology; market risk for developing technologies; risks relating to legal proceedings to which IWK and/or ATS is or may become a party; exposure to product liability claims; risks associated with greater than anticipated tax liabilities or expenses; and other risks detailed from time to time in ATS's filings with Canadian provincial securities regulators. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and other than as required by applicable securities laws, ATS does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change.
ATS Automation provides innovative, custom designed, built and installed manufacturing solutions to many of the world's most successful companies. Founded in 1978, ATS uses its industry-leading knowledge and global capabilities to serve the sophisticated automation systems' needs of multinational customers in industries such as consumer products & electronics, energy, life sciences and transportation. It also leverages its many years of experience and skills to fulfill the specialized automation product manufacturing requirements of customers. Through its Ontario solar business, ATS participates in the solar energy industry. ATS employs approximately 2,200 people at 20 manufacturing facilities in Canada, the United States, Europe, Southeast Asia and China. The Company's shares are traded on the Toronto Stock Exchange under the symbol ATA. Visit the Company’s website at www.atsautomation.com.
For more information, contact:
Maria Perrella, Chief Financial Officer
Carl Galloway, Vice-President, Treasurer