Valmet and Neles to merge creating a leading company with a unique offering for process industries globally

Valmet and Neles Corporation announce that their respective Boards of Directors have today signed a combination agreement and a merger plan to combine the two companies through a merger .

• The Combined Company will be a leading company with a unique offering for process industries globally with illustrative combined net sales for 2020 of approximately EUR 4.3 billion. In addition, it will have a globally balanced expert organization of approximately 17,000 professionals.
• The Combined Company expects to have growth potential in all current businesses and in new emerging sectors supported by favorable megatrends. It will also have enhanced growth opportunities across automation and flow control serving a range of various process industries with a strong sustainability focus. The Combined Company will benefit from broader revenue and cost synergies anchored in the strong industrial logic of combining flow control and automation systems.
• The combination is expected to generate annual run-rate synergies of approximately EUR 25 million of which approximately 60 percent are expected to be achieved by 2023 and approximately 90 percent by 2024. Total one-off implementation costs related to synergies are expected to be approximately EUR 25 million.
• The proposed combination will be implemented as a statutory absorption merger whereby Neles will be merged into Valmet.
• Neles may distribute to its shareholders an extra distribution of funds in the amount of up to EUR 2.00 per shareeither as dividend or return of equity or a combination of the aforementioned prior to the Effective Date.
• The merger consideration, noting additionally the above-mentioned extra distribution of funds, implies a value per Neles share of EUR 14.22 using Valmet’s closing share price of EUR 37.29 on July 1, 2021, corresponding to a premium of 16.4% compared to Neles’ closing share price on July 1, 2021 and a premium of 19.8% compared to the last three-month volume-weighted average price ending on July 1, 2021.
• The Boards of Directors of Valmet and Neles have decided that it is in the best interest of their respective shareholders to propose the combination to their respective EGMs.
• Shareholders representing approximately 16.9 percent of the shares and votes in Valmet, and shareholders representing approximately 15.4 percent of the shares and votes in Neles, have subject to certain customary conditions irrevocably undertaken to vote in favor of the combination. Together with Valmet, the above-mentioned shareholders in Neles hold approximately 45.0 percent of the outstanding shares and votes in Neles.
• The Board of Directors of Valmet has together with its management considered appropriate preliminary financial targets for the Combined Company and agreed on the following framework: net sales for services and automation business to grow over two times the market growth, net sales for capital business to exceed market growth, Comparable EBITA margin to be 12–14%, Comparable return on capital employed (ROCE) before taxes to be at least 15%, and dividend payout to be at least 50% of net profit.
• Valmet has obtained necessary commitments for the financing of the completion of the merger and Neles has obtained necessary commitments for the extra distribution of funds.
• The combination is subject to, among other items, approval by a majority of two-thirds of the votes cast and shares represented at the respective Extraordinary General Meetings (“EGM”) of Valmet and Neles, and the obtaining of merger control and other regulatory approvals.
• The completion is expected to occur on or about January 1, 2022, subject to all conditions for completion being fulfilled.
• It is proposed that the Board of Directors of the Combined Company will include six directors from the current Board of Directors of Valmet and two directors from the current Board of Directors of Neles. It is proposed that the Combined Company’s Chairman of the Board of Directors will be Mikael Mäkinen and that the Combined Company’s Vice Chairman of the Board of Directors will be Jaakko Eskola.
• Pasi Laine will continue to act as the President and CEO of the Combined Company after the completion of the merger.

Valmet President and CEO, Mr. Pasi Laine, said: “We are delighted with the announcement of the merger which will create an even stronger Valmet with a strong offering to global process industries and a global team of 17,000 professionals around the world. The Combined Company will have solid business fundamentals, a strong financial profile, attractive growth potential and estimated synergies contributing to the enhanced shareholder value.”