Atlas Copco intends to announce an invitation to holders of notes issued under its Euro Medium Term Note (EMTN) Program to consider waiving and amending certain terms and conditions of the notes in connection with the announced potential split of the Group in 2018.
On January 16, 2017, Atlas Copco’s Board of Directors announced that it will prepare a proposal to its Annual General Meeting in 2018 (expected to be held in April 2018) to split the Group into two companies: Atlas Copco, focused on industrial customers, and Epiroc, focused on mining and civil engineering customers. Atlas Copco is seeking to ensure there is no possibility of an event of default occurring or being deemed to occur in connection with or as a result of the potential split.
Atlas Copco’s policy historically, as illustrated by its net debt/EBITDA ratio over the last ten years, has been to have a capital structure which maintains investor, creditor and market confidence and supports the future development of the business. Assuming that the Annual General Meeting 2018 approves the split, the plan is to continue with the same policy for Atlas Copco following the split. The expectation is that the net indebtedness of the Atlas Copco Group will be allocated between Atlas Copco and Epiroc approximately corresponding to their respective profitability (operating profit and EBITDA) and cash flow metrics (operating cash flow). This is aimed at ensuring that Atlas Copco will continue to have a strong financial profile, consistent with the past. If the split is approved, Atlas Copco’s outstanding notes will remain with Atlas Copco and some other Group debt will be allocated to Epiroc.
Selected illustrative financial information of Atlas Copco after the split
In connection with the consent solicitation, Atlas Copco has prepared the following unaudited selected illustrative financial information of Atlas Copco after the split to provide additional information for the noteholders. The unaudited selected illustrative financial information of Atlas Copco after the split gives effect to the split as if it had been completed as described in the full selected illustrative financial information of Atlas Copco after the split, which is attached.
- Revenues of BSEK 74.1 in 2016, BSEK 70.1 in 2015 and BSEK 20.6 in the first quarter of 2017
- EBITDA(*) (1) of BSEK 18.3 in 2016, corresponding to an EBITDA margin(*) of 24.7%
- Operating profit(*) (2) of BSEK 15.3 in 2016 (BSEK 14.7 in 2015), corresponding to an operating profit margin(*) of 20.7% (21.0% in 2015)
- Net cash from operating activities(*) (3) of BSEK 13.0 in 2016
- Cash flows from investments in PPE and intangible assets(*) (4) of BSEK -1.6 in 2016
- Total assets of BSEK 87.6 as at December 31, 2016
(*) The indicated financial performance measures are not defined according to IFRS. These performance measures provide complementary information and are used to help investors as well as Atlas Copco’s management analyze Atlas Copco’s operations and facilitate an evaluation of the performance. Since not all companies calculate financial performance measures in the same manner, these are not always comparable with measures used by other companies. These financial performance measures should therefore not be regarded as a replacement for measures as defined according to IFRS.
(1) EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization – equals operating profit plus depreciation, impairment and amortization.
(2) Operating profit equals revenues less all costs related to operations, but excluding net financial items and income tax expense.
(3) Includes a non-recurring income tax payment amounting to BSEK 2.3 related to the European Commission’s decision on certain Belgian tax rulings.
(4) Cash flows from investments in PPE and intangible assets include investments in property, plant and equipment and intangible assets, but exclude the cash flows from goodwill, intangible assets and property, plant and equipment through acquisitions. For the avoidance of doubt, investments in rental equipment are not included in cash flows from investments in PPE and intangible assets as they are included in net cash from operating activities.
The full selected illustrative financial information of Atlas Copco after the split is attached.
Some statements herein are forward-looking and the actual outcome could be materially different. In addition to the factors explicitly commented upon, the actual outcome could be materially and adversely affected by other factors such as the effect of economic conditions, exchange-rate and interest-rate movements, political risks, the impact of competing products and their pricing, product development, commercialization and technological difficulties, supply disturbances, and major customer credit losses.