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      TUESDAY, 07/11/2017 - Scope Ratings AG
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      Franz Haniel & Cie. GmbH: ROVEMA deal in line with Scope’s rating case

      Announced acquisition of German engineering company ROVEMA supports Scope’s rating case as regards further portfolio diversification

      Announced acquisition of ROVEMA GmbH. Franz Haniel & Cie. GmbH signed an agreement on 24 October 2017 to acquire 100% of Germany-based ROVEMA GmbH from Equita GmbH & Co. CoVest KGaA and from the CEO of the company, Thomas Becker. ROVEMA is a turnkey provider of packaging machines and systems which are used for dosing, vertical form filling and sealing, cartooning and final packaging in different consumer staple areas (powdered, chunky, frozen and liquid products). The transaction remains subject to the approval of the antitrust authorities responsible and is expected to be closed by YE 2017.

      ROMEVA looks back at a history of around 60 years and is expected to generate revenues of about EUR 100m in 2017. According to previous data, the company achieved an EBITDA margin of around 10% in 2015 and spreads its operations across more than 50 countries (revenues generated outside of Germany accounted for more than 80% in 2015). While Scope generally considers manufacturers of machinery equipment to be comparatively cyclical, ROMEVA’s business patterns are likely to be offset to some extent due to its customer base which mainly comprises non-cyclical food companies.

      Continuous execution of long-term investment strategy focusing on mature European SMEs (so-called ‘Mittelstandsinitiative’). Following the integration of Rentokil Initial’s continental European business activities (in the areas of hygiene, workwear and cleanroom services) into CWS-boco earlier this year, Haniel is further developing its investment portfolio with the ROMEVA deal. Scope regards the transaction as further evidence of Haniel’s continuous portfolio development, particularly as appealing deals are hard to find given the current strong competition in tenders and the resulting premium valuations. Consequently, the ongoing portfolio rebalancing with a broader foundation of smaller, dividend-paying companies addresses one of Haniel’s major credit weaknesses in terms of the limited number of companies in its portfolio.

      Further reduction of concentration risks and sufficient financial headroom for further portfolio additions. Haniel did not comment on the agreed takeover price for ROMEVA. Given the company’s size with regard to turnover and EBITDA, Scope assumes that the future ROMEVA investment is likely to represent the smallest part of Haniel’s portfolio. Following the new transaction for ROMEVA and the deal with CWS-boco and Rentokil Initial earlier this year, Haniel’s exposure to its largest shareholding is likely to drop from almost 40% at YE 2016 to around 25% at YE 2017 (based on market portfolio values). Scope presumes that Haniel retains sufficient capacity for further acquisitions over the next years in light of its headroom of around EUR 1bn at HY 2017 to its communicated maximum debt target.

      This publication does not constitute a credit rating action. For the official credit rating action release click here. On 21 February 2017, Scope affirmed the issuer rating of BBB- for Franz Haniel & Cie. GmbH. On 24 February 2017 assigned an issuer rating of BBB- to the financing subsidiary Haniel Finance Deutschland GmbH. Senior unsecured debt issued by either Franz Haniel & Cie. GmbH or Haniel Finance Deutschland GmbH is rated BBB-. The short-term rating is S-2. The Outlooks are Stable.

      Download the most recent rating report here.

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