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08/14/2021 | 04:32pm EDT

Hella's HMI Interior solution capabilities, its portfolio of body electronics (access, comfort, seat), sensors and actuators will support value creation through new customer experiences.

- Creating a Lifecycle Value Management activity, in line with environmental concerns and industry evolutions

The combination will bring opportunities to build a real lifecycle value offer, including Aftermarket, Services & Repairs and Special Applications. Faurecia will be able to enhance the very well established Hella brands. It will allow to leverage potential business in eco-design products, sustainable materials and circular economy.

3/ Accelerating innovation with strong R&D capabilities

With 18,500 highly talented and motivated engineers and specialists, including 3,000 software engineers, the new Group will boost the development of advanced innovation projects with high technology content, short time-to-market and sustained profitability.

4/ Capitalizing on complementary customer portfolios across all geographies and leveraging Faurecia's strong position in Asia, particularly in China

The combination will bring together two companies with established and complementary positions. It will open new sales opportunities for Hella by leveraging Faurecia's privileged access to key Chineseand Japanes OEMs. It will increase Faurecia's intimacy with German Premium OEMs, thanks to Hella's strong position. Both will benefit from complementary intimacies with US based OEMs.

Five of the six Business Groups - Electronics, Lighting, Seating, Interiors, Clean Mobility - will each exceed EUR3bn of sales. The newly created Business Group Lifecycle Value Management will contribute to grow this segment with a leading position.

5/ Generating significant synergies to drive profitability and cash generation improvement Cost synergies and optimization, including procurement, SG&A and other operating expenses, should generate > EUR200m EBITDA run-rate. The P&L impact should gradually ramp up from 40% in 2023 to 80% in 2024, to reach 100% in 2025. Sales synergies should generate between EUR300m and EUR400m of sales by 2025, capitalizing on Faurecia's strong footprint in China, Japan and the Americas to sell Hella brand and on Hella's Electronic position with German OEMs to enhance Faurecia's market share. In addition to these synergies, cash flow optimization by c. EUR200m per year on average from 2022 to 2025 will be generated mainly through working capital and capex.

6/ Leveraging common ESG commitments and priorities Both companies share strong values, including an industry-leading ESG approach with an ambitious CO[2] neutrality roadmap. The combined Group will be a driving force in the decarbonation and sustainability of mobility. 2022 - 2025 ambition for the combined Group: strong sales outperformance, best-in-class profitability and EUR5.5bn net cash flow generated Projected key financial metrics for the combined Group, including the above mentioned synergies, demonstrate:

- Strong sales growth to reach above EUR33bn in 2025, broadly doubling the market's average growth,

- Best-in class profitability with an EBITDA margin above 15.5% and an operating margin above 8.5% in 2025, exceeding previous companies' individual targets,

- Solid cash generation, with net cash flow reaching c. EUR1bn in 2022 and representing above 5% of sales in 2025.

              2021 pro forma* 2022 ambition 2023 ambition 2025 ambition 
Sales            c. EUR23bn      c. EUR26.5bn    c. EUR28.5bn      > EUR33bn 
EBITDA           c. EUR3.2bn       c. EUR4bn      c. EUR4.4bn      c. EUR5bn 
% of sales        c. 14%         c. 15%         > 15%        > 15.5% 
EBIT margin**      >= 7%          c. 8%        c. 8.5%       > 8.5% 
Net Cash Flow     > EUR750m        c. EUR1bn     c. EUR1.25bn    c. EUR1.75bn 
% of sales         > 3%          > 3.5%         > 4%          > 5% 

Note: Ambition is based on public targets communicated by both companies at their respective recent Capital Markets Day, and includes cost synergies and optimization * Non-calendarized. Projections for sales, EBITDA and EBIT calculated as Faurecia FY2021 guidance + Hella Preliminary Results for FY2020/2021 (ending May 2021) ** At Faurecia's definition, i.e. before amortization of intangible assets, restructuring costs, other non-recurring operating income & expense and earnings from investment accounted for using the equity method Quick deleveraging post-acquisition Strong cash generation, supported by continuous capex and WCR optimization, will allow quick deleveraging with:

- Net-debt-to-EBITDA ratio back to 1.5x at the end of 2023, equivalent to Faurecia's ratio as of June 30, 2021, before the acquisition

- Net-debt-to-EBITDA ratio at 1x at the end of 2025

                            2022 ambition 2023 ambition 2025 ambition 
Net debt-to-EBITDA ratio        <= 2x         1.5x           1x 

Fully secured debt financing Credit ratings expected to be confirmed

Faurecia has fully secured the financing of the acquisition of Hella through a committed bridge facility of EUR5.5bn. Except for the bridge to equity component of EUR800m, such facility will be mostly refinanced through bond issuance and bank loans.

The bridge to equity of EUR800m will be refinanced through a rights issue with maintenance of the preferential right of subscription of the shareholders. The Family pool undertakes to participate in such rights issue in proportion to its then prevailing shareholding in Faurecia.

Peugeot 1810 and Bpifrance, currently and respectively owning 3.1% and 2.4% of Faurecia's share capital, have already expressed their intention to participate in the rights issue, with maintenance of the preferential right of subscription, in the amount of their prevailing shareholding in Faurecia, subject to the final terms of this rights issue.

As of June 30, 2021, Faurecia had strong liquidity of EUR4.5bn, including EUR3.0bn of available cash and EUR1.5bn from fully undrawn Secured Credit Facilities.

Faurecia's credit ratings are expected to be confirmed by all three agencies shortly. An accretive deal generating strong value for all shareholders

The combination of Faurecia and Hella will deliver significant value creation for its shareholders. The combined Group will enjoy a double-digit EPS accretion (including goodwill amortization & synergies implementation costs) of c. 14% in 2023 and >20% in 2024, and a double-digit net cash flow per share accretion of >=10% in 2022 and 2023 and >=20% in 2024.

It will also create value as measured by ROCE (Return on Capital Employed, including synergies) exceeding WACC (Weighted Average Cost of Capital, estimated at 7.5%) as from 2023 and >10% as from 2024.

Public Tender Cash Offer

A dedicated Faurecia subsidiary (to be named in the future Faurecia Participations GmbH) will launch a voluntary public tender offer in cash for all Hella shares.

The public tender offer price will be EUR60 per share. Shareholders will benefit, in addition, from the pre-closing paid dividend.

The definite terms and conditions of the tender offer, as well as further provisions concerning this offer, will be included in the offer document, which is to be approved by BaFin. Following approval by BaFin, the offer document will be published, and the initial acceptance period will commence. The offer document and all other information about the tender offer will be published on the following website: Timing and approvals

The completion of the transaction (including the settlement of the public tender offer) and its calendar remain subject to approvals by the relevant regulatory authorities. Faurecia will launch information procedure with European Company Committee and other employee representative bodies.

The completion of the transaction does not require any approval by the shareholders of Faurecia; the issuance of new Faurecia shares for the exchange against Hella shares or as part of the rights issue being in the range of the authorizations granted by the Faurecia shareholders meeting on May 31, 2021.

The transaction is expected to close early 2022.

Faurecia is assisted by Lazard as financial adviser, Société Générale as rating and financing adviser, Natixis as financing co-adviser and White & Case as legal adviser.

Bank of America provided a fairness opinion to the Board of Directors of Faurecia. Webcast Audio / Video

A webcast will be held on Monday, 16^th of August 2021 at 10am CET, hosted by Patrick Koller and Michel Favre, respectively CEO and CFO of Faurecia.

If you wish to follow the presentation using the webcast, please access the following link: webcast-faurecia-pressconference-16082021 The presentation will be available at 9:30am CET on

Press contact                        Analysts/Investors contact 
Eric Fohlen-Weill                    Marc Maillet 
Corporate Communications Director    Investor Relations Vice President 
Tel.: +33 (0) 6 81 07 91 02          Tel.: +33 (0)1 72 36 75 70 
Guillaume Granier                    Matthieu Fernandez 
FTI Consulting France                Deputy Investor Relations 
Tel.: +33 (0)7 84 24 32 30           Tel.: +33 (0)6 22 02 01 54 
Carolin Amann 
FTI Consulting Germany 
Tel.: +49 (0)175 299 3048 

(MORE TO FOLLOW) Dow Jones Newswires

August 14, 2021 16:31 ET (20:31 GMT)

Stocks mentioned in the article
ChangeLast1st jan.
BANK OF AMERICA CORPORATION 0.95% 37.02 Delayed Quote.-16.79%
COMBINED GROUP CONTRACTING COMPANY - K.S.C. (PUBLIC) 2.95% 0.384 End-of-day quote.8.47%
DJ INDUSTRIAL 1.76% 33212.96 Real-time Quote.-10.19%
FAURECIA SE 0.44% 25.37 Real-time Quote.-39.35%
FTI CONSULTING, INC. 1.26% 167.08 Delayed Quote.8.90%
LAZARD LTD 2.66% 35.57 Delayed Quote.-18.47%
SOCIÉTÉ GÉNÉRALE -0.10% 24.88 Real-time Quote.-17.63%
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