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Structured FINANCE Konferenz

“Von der LBO- zur Post-IPO-Finanzierung”NORMA Group AGDr. Othmar Belker , CFOKarlsruhe, 9. November 2011

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Agenda

1. About NORMA Group

2. NORMA Group´s LBO Financing

3. Post-IPO vs. LBO Financing of NORMA Group

4. NORMA Group´s Post-IPO Financing

5. NORMA Group´s financial outlook

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Who needs joining technology?without NORMA Group

A world without NORMA Group

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Solving customer problems with more than 35.000 articles

NORMA Group products

NORMAFLUID®

Specific customer requirements driven by megatrends

Assembly time reduction / ease of

assembly

Space reduction

Emission reduction

Modularisation

Product availability / local

presenceLeakage reduction

Weight reduction

NORMACLAMP®

NORMACONNECT®

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10.000 customers in „every“ industry

More than 35,000 products, manufactured in 17 locations and sold to more than 10,000 customers in 80+ countries Presence in Brazil, Russia, India, China and South Korea already established Top 5 customers account for only ~18% of 2010 sales

Examples of NORMA Group’s key end-markets

Passenger vehiclesConstruction / water managementCommercial vehiclesEngines Construction equipment

Agricultural equipment Shipbuilding White goods Wholesalers Technical distributors

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Building a global market leader in a fragmentedmarket environment

Taken advantage of market fragmentation

1965

1948

1949

1955

1973

18961999

2001

2003

Merger

Rasmussen

Foundation of BREEZE®

Opening of headquarters in Maintal

Start of production

Foundation of Rasmussen

Foundation of Allmänna Brandredskaps Affären

TERRY® (UK) and Serralub ®

GEMI® (D, F, CZ)

20071972

20032006

Acquisition

TORCA®

Start of production in Germany

Foundation of R. G. Ray Corporation

SERFLEX® (F)

Start of production in Mexico

2010

2004

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Agenda

1. About NORMA Group

2. NORMA Group´s LBO Financing

3. Post-IPO vs. LBO Financing of NORMA Group

4. NORMA Group´s Post-IPO Financing

5. NORMA Group´s financial outlook

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Steps of LBO Financings Acquisition of Rasmussen Group by 3i and related funds May 2006

First LBO financing of Rasmussen Group

Merger with ABA Group end of 2006Second LBO financing of NORMA Group (Amendment)

Acquisition of Breeze-Torca (US) November 2007Third LBO financing of NORMA Group (Amendment)

Due to 3i sponsorship NORMA had a typical LBO financing structure

Characteristics of the LBO: High leverage High risk premium (margins) Tight covenants Detailed requirements of reporting (“Extraordinary”) Investment decisions to be accepted by the lenders

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Covenants and risk structure

Covenants: Total Net Debt (EBITDA to Net Debt – risk profile) Cash Flow (Cash Flow to Net Debt Service – can NORMA pay?) Interest Cover (EBITDA to Interest – bank interest comes first) Capital Expenditure – don’t overspend!

Driving covenant: Total Net Debt – EBITDA development over time

050

100150200250300350400450500

2008 2009 2010

Sales and EBITDA/Net debt Multiple

Sales

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

EBITDA Multiple

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Different types of lenders – not typically bankingdriven

3 different currencies More than 25 different Lenders

31%

33%

21%

15%

Lenders split up

Fonds

Banks

Corporates

Landes/Raiffeisenbanken

35%

61%

4%Currency split up

USD-FacilityEUR-FacilitySEK-Facility

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Overview of LBO facilities back in 2010

Notes:1 Maximum drawdown of RCF for acquisitions and JVs: EUR 30m2 Based on 2010 EBITDA

Favourable due to 80% yank-the-bank clause

Set-up of the senior syndicate

2 Lead IPO

Banks15%

Other banks65%

Funds20%

Former LBO financing (in EUR m)

Facility Total Commitment Drawn x EBITDA Margin MaturitySenior TLA 66.0 66.0 0.7x Low % 14 Nov 2014

Senior TLB 107.0 107.0 1.1x Mid % 14 Nov 2015

Senior TLC 107.0 107.0 1.1x High % 14 Nov 2016

Mezzanine 54.0 54.0 0.5x Very high Cash + 5.50% PIK

14 Nov 2017

RCF/Acquisition

64.0 0.0 0.0x 1.75% 14 Nov 2018

Total 398.0 334.0 3.4x

1

2

Below market pricing, sufficient maturities, BUT two layer structure /LBO style undertakings

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Agenda

1. About NORMA Group

2. NORMA Group´s LBO Financing

3. Post-IPO vs. LBO Financing of NORMA Group

4. NORMA Group´s Post-IPO Financing

5. NORMA Group´s financial outlook

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In April 2011 NORMA Group went public on the Frankfurt stock exchange

Parallel a new Post-IPO financing was negotiated Characteristics of this Post-IPO financing:

Reduction of leverage Half risk premium (due to strengthened Equity position) Covenants with sufficient head-room for future growth Reporting requirements same as for the shareholders Investment decisions to be accepted by the lenders up to certain limits

Post-IPO vs. LBO Financing of NORMA Group

31,862,400Total Number of Shares

€ 336 millionTotal Issue Volume

€ 147 million from Capital Increase from Newly Issued Shares€ 189 million from Secondary Placement by Selling ShareholdersProceeds

A new comprehensive refinancing scheme was established on 18 April 2011.The credit facility consists of a term debt of € 250 million and a revolving credit facility of € 125 million with a total volume of € 375 million and a maturity of five years.These new facilities were used to replace all existing loans from 2007.

Successful Refinancing

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Post-IPO capital structure from equity perspective

Equity investors’ expectations towards post-IPO financing

Leverage

Capitalstructure

Maturities

Support of equity story

Dividendcapacity

Structuringlimitations

Pricing

Disclosure

Criteria Key requirements

Appropriate financial leverage in line with peers Leverage should offer sufficient headroom to support the equity story

Preferably simple structure with one senior debt layer, mezzanine rather unusual No shareholder loan – all instruments on shareholder level need to be common shares

Sufficient maturities – at least 2-3 years No major amortisations during the next 3 years

Ability to finance working capital swings Flexibility to finance acquisitions out of free cash flow or with unfunded facilities as part of the equity story

Ability and sufficient headroom to pay dividends out of earnings generation Should be in line with the major peers

Ability to apply corporate / crossover features where appropriate Substantial covenant headroom (no capex covenant), limited security package

Clarity on debt cost prior to IPO (key input for research analyst model)

No surprises through the bank market due to different reporting schedules

Equity investors do not generally require a rating or an investment grade status at IPO

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Refinancing objectives of NORMAOverview

Get most attractive pricing for implied rating

Check supply demand relation in each market (instrument, currency, region…)

Gain flexibility to reach long-term strategic targets and support business plan

Reduce number of covenants and increase headroom

Spread out maturities to better reflect operating cash flows

Use most liquid markets to attract high demand and most attractive pricing

Directly or indirectly match currency exposure of operating business

Work on hedging agreements

Base group financing on various sources of funding

Create relationship bank syndicate

Liquidity Pricing

Maturity Flexibility

Covenants

CurrencyHedging

Diver-sificationNORMA

Besides transaction certainty, NORMA considered a number of criteria to arrive at themost appropriate funding structure

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Valuation

Rating

EV / EBITDA P / E ratio Dividend capacity

Implied equity ratio Financial risk profile and liquidity status Peer comparison Adjusted leverage (incl. pensions, leasing)

Corporate versus cross-over especially with regard to covenants, dividends etc.

Favourable leveraged features

Initial leverage versus future leverage (incl. RCF / capex)

Pricing Pace of deleverage Dry powder for acquisitions

Documentation / flexibility

Operational gearing

Key determinants of post-IPO leverage

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3.2x 3.1x 3.0x 3.0x 2.9x2.7x 2.6x

2.3x 2.3x

1.9x1.6x

1.2x1.0x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

4.0x

Dama

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Rexe

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Gerre

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Chr.

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Bren

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Prys

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Post-IPO leverage considerations – comparison

Leverage ratios of key peers Leverage of selected European sponsor IPOs1

Notes:1 IPOs >€500m2 Net debt excluding pensions3 European peers include Alfa Laval, Assa Abloy, Atlas Copco, Halma, IMI, Legrand, Renishaw, Rotork, Sandvik, SKF, Spirax-Sarco, Weir Group4 German peers include Bauer, Demag Cranes, GEA, SGL Carbon, Tognum, Wacker Neuson

ElringKlinger Low Median High Low Median High

Net d

ebt2 /E

BITD

A

European “best in class”3 German midcap4

Net d

ebt2 /E

BITD

A

Average: 2.3x

0.5x

(0.8)x

0.5x

1.8x

(0.1)x

0.1x

3.4x

(2.0)x

(1.0)x

.0x

1.0x

2.0x

3.0x

4.0x

Norma at IPONorma at IPO

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Financing options available to NORMA

1. Retain existing LBO financing 3. Full refinancing2. Amendment

Majority consent Unanimous consent

Description No change to the existing financing terms Proceeds from IPO to repay senior debt to

achieve targeted post-IPO leverage

Amendment of certain terms (66 2/3%)

IPO proceeds to repay mezzanine

No increase in RCF / acquisition line

Amendment of certain terms (100%)

Increase in RCF / acquisition line

‘Backstop’ facilities required

New corporate / cross-over style loan agreement

Proceeds from new facility and IPO to repay all existing debt

Execution

Costs

Acquisition financing

Dividend capacity

Flexibility

After careful consideration and assessment of available options, NORMA decided to pursue the refinancing route

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Post-IPO vs. LBO Financing of NORMA Group

Banking syndication of 15 banks(only typically banking)

One term debt with one margin (thump rule: half the margin of the LBO)

Entire term debt with a fixed repayment schedule (50% bullet)

Only EUR facilities (however swapped into four currencies, 4 legal lenders)

Revolving facility is not linked to special uses – mainly for M&A

Nearly 30 different lenders (banks and funds)

Different facilities with different margins (up to near 10% Mezzanine)

Maturity profile 5-7 years – only partially repayments, high share of bullet facilities

Three different currencies (EUR, USD, SEK, 7 legal lenders)

Revolving facility mainly to finance working capital

LBO Financing Post-IPO Financing

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IPO milestones and refinancing process

First filing of prospectus with

BaFin

Start of inv. education

Feedback pre-screening

Analyst presentation

Second filing of prospectus with BaFin

Third filing of prospectuswith BaFin

Start of bookbuilding and roadshow

Start of trading

Settlement and closing

End of bookbuilding and roadshow

Release DD

Feedback and pre-selection of MLAs

Pilot fishing meetings

Financing committed(credit approval)

Loan documentation signed

Closing / funding

Management presentation

w13w51

Mar

w52 w1 w2 w3 w4 w5 w6 w7 w8 w9 w10 w11 w12 w14 w15 w16 w17

February 2011January 2011December April 2011March 2011

IPO

Fina

ncin

g

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Agenda

1. About NORMA Group

2. NORMA Group´s LBO Financing

3. Post-IPO vs. LBO Financing of NORMA Group

4. NORMA Group´s Post-IPO Financing

5. NORMA Group´s financial outlook

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Facility Total Commitment Margin MaturitySenior TLA 250.0 (near) inv. grade 25 Mar 2016RCF/ Acquisition 125.0 (near) inv. grade 25 Mar 2016

Total 375.0

Three underwriters

Selected terms Corporate documentation with additional cross-over features Selected leveraged features (e.g. YTB) Securities limited to share pledges and guarantees RCF available for acquisitions (up to EUR 100m)

xXx

Process stepsDetermination on preferred refinancing route

Negotiation of common long-form term sheet

Selection of terms representing the best of both worlds LBO vs. corporate style

Achieving highly competitive pricing Steep margin ratchet (xy bps initial margin for a

BB- credit) High flexibility with relation to baskets,

acquisitions, covenants and dividends

Selection of underwriters

Achieving oversubscription of underwrites Besides scaling back of banks each

Agreeing final take And introduction of two more banks prior to

primary syndication

Benchmarking agreed terms Compared to other pre-IPO financings

Final debt structure and key highlightsThe refinancing (in EUR m)

Attractive terms of a strong cross-over credit

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NORMA Group´s Post-IPO Financing After the IPO and the refinancing NORMA Group has a strong financial position

(revolving facility not utilized up to now - 1/3 of potential debt is “firepower”)

EUR Term Debt was completely hedged against interest movements

To be in line with NORMA´s Cash Flow – the EUR Term debt was swapped into the main currencies (USD, SEK and GBP)

All Cross-Currency-Swaps are fully hedge accounting compliant – no P&L risk

28%

43%

29%

Split of Post-IPO Financing Lenders

German Banks

International Banks

Landes/ Raiffeisenbanken

44%

40%

4%

12%

Currency split of Post-IPO Financing

Synthetic USD debtEUR Term debtSynthetic GBP debtSynthetic SEK debt

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Find a “clean” solution to support the equity story early on High level of operating and covenant flexibility Positive impact on equity capital markets

Run a competitive process Make sure you have enough banks in the process to create competitive tension Bring in new relationship banks – fit your new financing to your new situation Make sure JBRs contribute to the financing

Carefully select your MLAs Define criteria Reassess at different stages of the process

Consider that refinancing is a time consuming process Factor in the management capacity absorbed Start early and set a tight timeline Consider hiring external know how (debt advisor) to support management

Lessons learnt

Key take-aways

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Agenda

1. About NORMA Group

2. NORMA Group´s LBO Financing

3. Post-IPO vs. LBO Financing of NORMA Group

4. NORMA Group´s Post-IPO Financing

5. NORMA Group´s financial outlook

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NORMA Group´s financial outlook Both the IPO and the Refinancing allows NORMA to finance the development of the

group: Potentially 9% growth track per year

80% of the revolving facility can be used for external M&A growth Certain requirements on the potential target must be fulfilled Lenders must agree on transaction if purchase price exceeds a certain level High “firepower” to develop the group

The revolving facility could also be utilized to finance the dividend cash outflow –due to NORMA´s strong cash generation profile not needed

All negotiated covenants show sufficient headroom for further growth of the group

IPO leverage covenant (Net Debt to EBITDA ) target of 2,25 – 30.06.2011already at a level of 2,0

IPO equity ratio covenant (Equity to Balance sheet) target 27,5% –30.06.2011already at a level of 37%