Sanistål focuses and divests steel activities to Tibnor A/S
- The steel activities are divested to Tibnor A/S, a subsidiary of the SSAB Group, for a cash consideration of DKK 450 million.
- Focus on strengthening Sanistål’s position as a value-creating digital partner for customers in the construction and industry sectors.
- Agreement with Tibnor ensures continuation of Sanistål’s sales of steel and metal products.
- Proceeds from the divestment will significantly lower Sanistål’s interest-bearing debt to a level corresponding to 3x the expected operating profit (EBITDA) from the remaining activities in 2018.
- Investment in efficiency enhancements in the remaining business.
- Divestment entails adjustment of 2018 outlook.
Sanistål A/S has today entered into an agreement to divest its steel activities to Tibnor A/S, a subsidiary of long-standing collaboration partner, the SSAB Group, for a cash consideration of DKK 450 million. The transaction is conditional only on approval by the competition authorities.
“The divestment is a very good solution for Sanistål. The proceeds from the sale allow us to significantly reduce our interest-bearing debt, which has been an obstacle for Sanistål’s strategic development for years. The normalisation of the interest-bearing debt will provide greater freedom of action and allow us to invest in the continuing activities to strengthen our market-leading position,” says Chairman of the Board of Directors, Jens Jørgen Madsen.
After closing, Sanistål will be a strong and focused wholesale and service business, to the benefit of shareholders. Revenue in the continuing activities is expected at around DKK 3.6 billion in 2018 with an operating profit (EBITDA) in the range of DKK 80-100 million after certain one-off expenses. The divestment of the steel activities will significantly strengthen the balance sheet and yield a solvency ratio above 50% after closing.
The Board of Directors assesses that the divestment will benefit customers and employees as well: A business agreement with Tibnor ensures that Sanistål will continue to offer customers steel and metal products from Tibnor and other international suppliers. And the affected employees will become part of a strong international steel producer and distributor with sufficient resources to further develop the activities.
The divested activities
The divestment includes Sanistål’s steel business in Denmark and Latvia with approximately 130 employees led by Director Michael Lund, who will take up the position as CEO of Tibnor Danmark following the transaction. The divested activities, which up till now have been integrated into Sanistål’s Industry and Construction divisions, generated revenue of approximately DKK 1.3 billion in 2017. In comparison, Sanistål’s group revenue amounted to more than DKK 4.7 billion in 2017.
In connection with the divestment, Tibnor acquires various tangible fixed assets, supplier and customer relationships as well as inventories. The value of the divested assets is depreciated by around DKK 225 million with no cash impact. The depreciation relates in particular to the 42,000 square meter central warehouse in Taulov, which was erected in 2008, as well as the steel business’ ERP system.
“Based on an overall assessment of the situation, it is the view of the Board of Directors that we have achieved an attractive sales price. If we had continued as an owner of an – by international standards – smaller steel business in a highly competitive market, it would have taken several years to generate a cash flow that would match the sales price. We will now receive this income immediately, allowing us to normalise the interest-bearing debt and invest in Sanistål’s future,” says Chairman of the Board of Directors, Jens Jørgen Madsen.
The Board’s assessment of the sales price is supported by a Fairness Opinion prepared by Danske Bank.
As the German steel business is not part of the transaction and will not be included in Sanistål’s remaining activities, this business will be wound up at a later stage in a controlled process taking employees and customer relations into consideration.
The remaining activities
After the divestment of the steel business, Sanistål will focus on expanding its position as a value-creating digital business partner to professional customers in the construction and industry sectors. Sanistål markets a large and wide range of around 130,000 products from respected manufacturers, and the company is positioned among the market leaders in Denmark, Latvia and Lithuania with additional presence in northern Poland and Germany.
The product range is supported by digital and logistical concepts, analytical tools and specialist competencies. In addition, the company’s offering includes direct guidance and support from own stores – a network of 45 stores providing nationwide coverage in Denmark as well as 18 stores in other markets.
The remaining activities are growing. Revenue grew by around 6.2% annually (CAGR) from 2015 to 2017, and growth is expected to continue in 2018, albeit at a slightly lower pace.
When the divestment of the steel business has been completed and the interest-bearing debt has been reduced, Sanistål’s interest-bearing debt is expected to amount to 3x the expected EBITDA result in the remaining activities in 2018. That is a significant improvement over 2017 where interest-bearing debt amounted to 5.1x EBITDA. The reduction of interest-bearing debt is expected to lower financial costs by approximately DKK 10 million on an annual basis.
Based on the lower interest-bearing debt and an improved capital structure, Sanistål will strengthen the profitable parts of the remaining activities. Focus will, among other things, be on development of new concepts within service, product preparation and logistics, further digitalisation of collaboration and information flow with customers and suppliers, acquisition of strategic product categories, etc.
Meanwhile, the efforts to optimise operations and reduce costs continue. The divestment of the steel business will simplify and focus Sanistål, and a new ERP system – which is launched in the first half of 2019 – will contribute further to enhancing efficiency and reducing costs.
Revised 2018 outlook
Sanistål expects EBITDA from remaining activities at the level of DKK 80-100 million in 2018. As stated previously, the outlook includes non-recurring costs related to the implementation of a new ERP system as well as adjustments of the cost base.
Combined EBITDA from the divested activities and the German steel business is expected to amount to DKK 20-30 million before special items, which are expected to be at the level of DKK 225 million. Special items include depreciation of assets divested to Tibnor and the steel business’ ERP system.
Sanistål previously expected an operating profit (EBIT) of DKK 60-90 million for the group. At group level, the new expectations correspond to an EBIT result within this previously communicated range excluding special items related to depreciations as well as transaction cost.
Chairman of the Board of Directors Jens Jørgen Madsen, tel. (+45) 9630 6000
CEO Christian B. Lund, tel. (+45) 9630 6000