Update: Fenner acquisition finalised

Clermont-ferrand, France — Group Michelin has finalised its acquisition of Fenner PLC and named Fenner's chief financial officer as the CEO of the new wholly owned subsidiary.

The deal became official 31 May after Fenner shareholders nearly unanimously approved the acquisition on 16 May, followed by court approval during a 25 May hearing.

Under the agreement, each Fenner shareholder will receive about $8.13 (€6.96) per share on or before 14 June, valuing the company at about $1.73 billion (€1.48 billion) on an enterprise value basis.

The appointment of Fenner CFO John Pratt as CEO of the new subsidiary by the new board of directors was revealed in Michelin's 31 May news release announcing completion of the deal.

The acquisition also will provide a comprehensive offering to mining customers, Michelin CEO Jean-Dominique Senard said in an earlier analyst and investor conference call.

"We understand that by combining Michelin's mining tire and Fenner's conveyor belt product and services, we will be better positioned vis-à-vis our major customer in the world," he said.

It also will expand Michelin's engineered materials division with a complementary polymer portfolio, according to a Michelin presentation 30 May to an investors conference in Milan.

Hessle, England-based Fenner provides conveyor belts and reinforced polymer products for the mining and general industrial markets.

The expanded polymers portfolio gives Michelin the opportunity to break into the reinforced polymer markets, notably in consumer goods, industrial services and medical segments, according to a previous Michelin statement.

Michelin will benefit from new materials expertise with high-tech non-rubber polymers, thermoplastic elastomers and complex textile reinforcements, according to the investor presentation. It will leverage its expertise into polymer research and compound design; performance understanding, modeling and testing; product performance enhancement through raw materials expertise; and metal 3D printing and innovation in manufacturing.

Michelin and Fenner share some overlap in footprint, but the gaps offer significant potential, Marc Henry, Michelin CFO, said in the previous analyst conference call. For example, Michelin has a strong South American presence, but Fenner could grow in that area.

Fenner also has an overlap with a focus on services in its Engineered Conveyor Solutions (ECS) portfolio, Henry said. Of Fenner's returns for fiscal year ended  31 Aug, 2017, services made up 22 percent of the whole, compared to 78 percent in products.

That drive matches with Michelin's strategy to increase its position in the servicing sector of the tire industry, Henry said.

Fenner has picked up positive financial momentum in the past two years, with efficiency plans and gains achieved, as well as multiple expansions with diversified industrials and health care markets, Henry said.

Michelin and Fenner identified opportunities to achieve material cost savings by unlocking processing efficiencies and leveraging research and development skills, with $42.1 million in immediate annual synergies, the company said.

Those synergies are expected to reach full effect within two years, with limited implementation cost, Michelin said. Efficiencies include procurement, with Fenner benefiting from Michelin's purchasing expertise, industrial processing, cross-fertilisation between Fenner and Michelin on processes, leverage in customer service organisation, and Fenner's access to Latin America and Asia.

Fenner reported net sales of $870 million in 2017, with a 2010-17 net sales average of $921 million. Its ECS division reported net sales of $480 million in 2017, and its Advanced Engineered Products (AEP) division returned net sales of $391 million in the same time.

Fenner's revenue by region in fiscal year 2017 included 47 percent in the Americas, 21 percent in Europe, the Middle East and Africa, and 32 percent in Asia-Pacific.

By division, its ECS division accounted for about 55 percent of Fenner's overall revenues, with 36 percent of its businesses in the Americas, 21 percent in EMEA and 43 percent in Asia-Pacific.

AEP made up 45 percent of sales, with 61 percent of the unit's revenues from the Americas, 21 percent in EMEA and 18 percent in Asia-Pacific.

Fenner has 37 facilities globally, with 4,330 employees as of August 2017, according to the presentation.