Bilfinger is selling its building and facility business segment to Swedish private equity firm EQT for around €1.2 billion.
The decision by the executive board of German-based Bilfinger SE was said to be the result of an intensive review of several purchase bids for the segment. The group’s supervisory board has approved the sale, which remains subject to regulatory approval.
The agreement comprises two purchase price components that are payable when EQT re-sells the company. Bilfinger said that on the one hand, it had agreed with the acquiring company on a vendor claim agreement for a portion of the purchase price of €100 million, with annual interest of 10% upon maturity.
It said that on the other hand, a further portion of the purchase price in the amount of approximately €200 million would be transformed into an arrangement similar to an earn-out. It said this entitled Bilfinger to 49% of the resale proceeds from EQT.
It said it would therefore continue to participate in a proportionate way in the development of the divisions that had been sold. Bilfinger added that an expected capital gain at group level of approximately €500 million remained.
Chief financial officer Axel Salzmann said, “The sale of the segment generates the greatest value for Bilfinger and opens up new perspectives.
“With additional liquidity, we will expand our position as market leader for industrial services in the process industry through targeted acquisitions and investments in the future. In this regard, we are focusing on our technology and service competences, which are greatly appreciated by our customers.”
He added, “At the same time, building and facility gets a growth-oriented investor with proven expertise in the services sector.”
Bilfinger said it would invest a substantial share of the proceeds from the sale in these targeted acquisitions. The group said it was particularly planning investments in future-oriented fields, for example in Industry 4.0 (the “fourth industrial revolution” covering such areas as automation, data exchange and manufacturing technologies).
It said the core business would be developed in a targeted manner – particularly in the growth markets of pharmaceuticals, chemicals and in the food sector.
In addition, it said, the proceeds would enhance the financial strength of the group, adding that together with the future CEO Tom Blades, who will take office in the third quarter at the latest, the executive board would determine exactly how the funds would be used.
With its core business in industrial services, Bilfinger said it would fully focus on this area in the future. It said the group would therefore become more transparent and much less complex, with shorter decision-making paths and greater efficiency.
In the industrial business segment, it said it generated an output volume of approximately €3.65 billion, with 31,000 employees around the world in its four divisions – industrial maintenance; insulation, scaffolding and painting; oil and gas; and engineering solutions.
The process of selling Bilfinger’s power division was initiated in mid-2015, and now the executive board has decided to pursue the sale of individual parts of the business, instead of focusing on the sale of the business as a whole. At the same time, individual areas will be further restructured and repositioned.
It said this meant that the conditions for the presentation of the power business segment as discontinued operations in the group’s figures were no longer met. Power will, therefore, once again be presented as continuing operations from the financial statements as of June 30, 2016.
Bilfinger said that as a result of the purchase agreement, the building and facility business segment would be presented as discontinued operations in the financial statements for the period ending June 30, 2016. For this reason and in the course of the re-allocation of power, the previous year’s figures will be adjusted accordingly.
In the industrial business segment, as a result of weakness in demand in the oil and gas market and expiring projects, Bilfinger said it expected a significant decrease in output volume in 2016.
With regard to adjusted EBITA (earnings before interest, taxes and amortization), the company expects a higher margin and a figure at the level of the previous year or slightly higher thanks to positive effects from programmes for efficiency enhancement and process optimisation.
In the 2016 financial year, Bilfinger said it expected a significant decrease in output volume at group level and, as a result of the re-allocation, a significant improvement in adjusted EBITA as compared to the previous year’s figure of -€25 million.