Third: Transaction structure and valuation of Dorma+Kaba
What does the new Dorma and Kabe holding company look like? Who brings in what and what are the new shareholding ratios?
Shareholding structure:
Kaba with 52.5% and Dorma (Mankel/Brecht-Bergen family) with 47.5%.
Following approval of the merger by Kaba's shareholders - the extraordinary general meeting will take place on May 22 - Dorma's owner family, the Mankel/Brecht-Bergen family, is subscribing for 380,000 registered shares with a par value of CHF 0.10 each from Kaba's authorized capital. The price is reported to be CHF 178.4 million, corresponding to the average volume-weighted Kaba share price of CHF 519.45 over the last 90 trading days (as of April 28, 2015, after market close) minus CHF 50 per share as compensation for the new shares' lack of entitlement to receive the planned special dividend. After this capital increase, the Mankel/Brecht-Bergen family holds 9.1% and the existing Kaba family shareholders 18.2% in Kaba Holding.
Upon completion of the Merger, Kaba Holding will contribute its operating activities to today's Dorma Holding, in which the operating business will be combined, and will receive a controlling interest of 52.5% therein. The Mankel/Brecht-Bergen family will accordingly hold 47.5% in today's Dorma Holding and in the combined business, respectively.
The holding company dorma+kaba, which will be listed on the Swiss stock exchange, will be the holding company of the new group and will be responsible for its strategic, operational and financial management and will fully consolidate the combined business.
What does the evaluation look like?
According to the information provided, Dorma and Kaba initially have equivalent valuations. Based on the agreed transaction structure, Dorma will be contributed to the combined company at an EV/Ebitda multiple of 10.1 and Kaba at 12.2. Taking into account the cash remaining with Kaba Holding of approximately CHF 190 million, this results in ownership ratios in the combined business of 52.5% by Kaba and 47.5% by the Mankel/Brecht-Bergen family, respectively. An independent fairness opinion by N+1 Swiss Capital for the attention of the Board of Directors of Kaba Holding confirms that the envisaged ownership structure is fair and balanced from a financial point of view, according to the report.
In return for relinquishing the majority in their business, the Mankel/Brecht-Bergen family receives the right to purchase shares in the current Dorma Holding at market value in the event of a change of control of dorma+kaba Holding in order to regain its majority. In the event of an imminent change of control, the shareholders of dorma+kaba Holding can revoke this right by a three-quarters majority until the end of 2018 and by a simple majority from 2019.
Strong anchor shareholder group
The family shareholders of Dorma and Kaba, who together hold 27.3% in the new holding company dorma+kaba after approval, will form a strong anchor shareholder group and have signed a long-term pooling agreement, the duo points out. Among other things, the two partners have granted each other mutual pre-emption rights and also undertake to sell a block of shares of 27% or larger to a third party only if the latter makes a public takeover offer to all shareholders at the same price per share.
Christine Mankel and Stephanie Brecht-Bergen (née Mankel), shareholders of Dorma: "We are fulfilling our obligation as family entrepreneurs and want to accompany the new group as long-term oriented anchor shareholders. By subscribing to new shares in Kaba, we are simultaneously increasing our entrepreneurial commitment."
