Sulzer: Formation of two fully independent pure-play companies
At the annual press conference on March 9, 2001 Sulzer presented its concept of separating Sulzer and Sulzer Medica. The annual general meeting of Sulzer AG on April 19 is to decide upon the spin-off. This separation will result in two fully independent companies clearly focused on their respective core businesses.
As has already been announced on February 23, Sulzer regards the public tender offer and related attempts to seek control of the board launched by InCentive Capital AG as unacceptable. The proposed bid undervalues the industrial businesses by far and offers no clear strategy.
Sulzer has, as was indicated last year, over the last months been analysing possible structures for a separation of Sulzer Medica from the industrial activities of Sulzer. Based on the analysis Sulzer has developped a separation concept that respects all the criteria set.
The annual general meeting of Sulzer Ltd on April 19 will decide upon the spin-off of Sulzer Medica. If approved, it is expected that at the end of the transaction – presumably in August – Sulzer shareholders will receive two Sulzer Medica Ltd shares additionally to each Sulzer Ltd share. The solution chosen is both fast and tax efficient. In the third quarter of 2001 an extraordinary shareholder meeting of Sulzer Medica Ltd will elect new board members and decide upon the amendment of articles of incorporation.
Sulzer to be a purely industrial company
The “new” Sulzer Corporation – a pure-play industrial company – is well positioned to meet the challenges ahead. CEO Fred Kindle and his management team have laid the foundations for a successful future with strong earnings for 2000, and an excellent outcome both of the “Performance” restructuring programme and last year’s acquisitions (Ahlstrom Pumps for Sulzer Pumps; Interturbine for Sulzer Metco and Sulzer Turbomachinery Services).
As an industrial company, Sulzer will build in future on the attractive core activities Sulzer Metco, Sulzer Turbomachinery Services, Sulzer Pumps and Sulzer Chemtech. All these businesses have outstanding market positions (top 3) which will be further developed with a pronounced growth and value-oriented strategy. Expectations for the Sulzer Hexis fuel cell project are high: currently there are more than 50 pilot installations and these are showing good operating results. A market launch is already planned for next year, and a break-even is expected by 2006.
CEO Fred Kindle gives high priority to the independent development of these businesses under the Sulzer corporate roof: “Although synergies will naturally be exploited, our chief priority is to ensure that each core business activity is competitive in its own right and generates shareholder value.” It is to this end that the future corporate center will be realigned and tightly organized.
The divestiture programme for the non-core industrial businesses is well underway. The sale of Sulzer Turbo has been completed, while the negotiations on disposals of the businesses of Sulzer Infra and Sulzer Textile are well advanced. The divestiture of Sulzer Burckhardt will be started in the second half of 2001 (following turnaround).
Takeover bid unacceptable
Sulzer Chairman Ueli Roost has reiterated at today’s media conference that the Sulzer Board of Directors firmly rejects the two-pronged approach proposed by InCentive Capital AG. The first InCentive proposal is a set of resolutions to the Sulzer April 19 Annual General Meeting. If passed, these would give InCentive control of both Sulzer Ltd and Sulzer Medica without InCentive paying anything and before shareholders are able to decide on its bid; this is unacceptable. The second InCentive proposal is a tender offer of CHF 410 per share for Sulzer Industries; this is far too low. Much of the evidence for why it is too low lies in the financial results and forward strategy presented today.
The Sulzer Board will propose removal of voting restrictions at the General Meeting following the spin-off but opposes removal of such restrictions at the time of an unfriendly takeover approach.
The Sulzer Board has reviewed its own clear industrial strategy and is convinced that the team under Fred Kindle will create more value for shareholders than the opportunistic approach by InCentive.
