Major changes are proposed at Atlas Copco, including splitting the group into two listed companies, and divesting its road construction equipment division, including the Dynapac brand.
And Mats Rahmström has been appointed president and CEO, taking over the role on April 27, 2017. He will replace Ronnie Leten, who is to leave his position after having managed Atlas Copco for eight years.
Based in Stockholm, Sweden, Atlas Copco has said it plans to make a proposal to the Annual General Meeting in 2018 to decide on a split of the group into two listed companies – Atlas Copco and company with the working title of NewCo – and to distribute NewCo to the shareholders.
It said NewCo would focus on mining and civil engineering customers, and include the existing mining and rock excavation technique business area, and the construction tools division with related service operations.
It said this business had approximately 12,000 employees, and had pro forma revenues of SEK28 billion (€3.0 billion) and an operating margin of about 16% for the 12 months ended September 30, 2016.
Atlas Copco would focus on industrial customers, it said, and include the compressor technique, vacuum technique and industrial technique business areas plus the portable energy division, including service, and the specialty rental division.
It said this business had approximately 33,000 employees and pro forma revenues of SEK 74 billion (€7.9 billion) and an operating margin of about 20% for the 12 months ended September 30, 2016.
Hans Stråberg, chair of the board of directors of Atlas Copco, said, “The board and management believe that long-term shareholder value will be created by splitting the group into two separate companies.
“Both businesses are global leaders in their respective fields and will benefit from a more focused management responsibility.”
The Atlas Copco Group was described as covering a diverse range of business segments and end-customers. The company said it had grown profitably over the years, and developed strong customer relations globally.
Outgoing president and CEO Leten said, “The two businesses have different demand drivers and demand characteristics. A split will increase their respective abilities to add value to customers, grow the business and attract talent.”
If the shareholders approve the proposal, the split of the group is planned to be through a share distribution, whereby Atlas Copco’s shareholders will receive shares in NewCo in proportion to their existing shareholding. The intention is to list NewCo on the Nasdaq Stockholm stock exchange in Sweden during the second quarter of 2018.
Meanwhile, Atlas Copco’s board of directors has decided to divest its road construction equipment division.
The planned divestment was said to be because the division did not have the economies of scale to become number one or two in this market segment. The company said that with the divestment, Atlas Copco aimed to find a better owner for the business.
The company said that indicative valuations of the business showed a need for an impairment charge of approximately SEK2 billion (€210 million), primarily related to intangible assets. The impairment charge will be included in the group’s 2016 accounts.
The road construction equipment division – part of the construction technique business area – manufactures rollers for asphalt and soil applications, planers and pavers. The products are known under the Dynapac trade name.
The business includes sales and service operations in 37 countries and production units in five countries – Sweden, Germany, Brazil, India and China.
The business has 1,265 employees and was said to have had revenues of approximately SEK2.90 billion (€309 million) in 2016.
Request to leave
Atlas Copco said that Leten had requested to leave his position after having managed the company for eight years.
His successor, Mats Rahmström, is currently senior executive vice president and president of the industrial technique business area.
He began his Atlas Copco career in 1988. He held positions in sales, service, marketing and general management within industrial technique during the first 10 years. Between 1998 and 2006, he held positions as general manager for customer centres in Sweden, Canada and then in the UK.
Before he took on his current position in 2008 he was president of the tools and assembly systems general industry division within the industrial technique division.
Stråberg said that Rahmström had a strong business focus and was “an appreciated leader who is living and breathing the Atlas Copco values”.
He added, “During his time as head of industrial technique, he has transformed the business which has led to a strong profitable growth. I am convinced that we have found a new solid leader inside the company, who can further develop Atlas Copco.”
He is a board member of Permobil Holding and of CIBE Lifts.