Freudenberg to become sole owner of Vibracoustic

DARMSTADT, Germany—Trelleborg A.B. and Freudenberg Group are moving ahead with a plan under which Freudenberg will become sole owner of giant joint venture TrelleborgVibracoustic GmbH.

Freudenberg reached an agreement in principle with JV partner Trelleborg to acquire its 50 percent interest in the producer of anti-vibration products for the global automotive and commercial vehicle industries April 7, just three days after the companies announced that TrelleborgVibracoustic will be renamed Vibracoustic GmbH.

The transaction is subject to signing a final agreement and conditional upon the approval from relevant regulatory authorities. The deal is expected to be completed in the second quarter and would be effective Jan. 1, 2016.

Trelleborg said the acquisition of its half of the JV is based on an enterprise value of a little more than $2 billion. The company will receive about $7.7 billion in addition to a dividend of $1.6 billion it received in December, putting the total value of deal at approximately $9.3 billion.

About 10 percent of the purchase price is subject to TrelleborgVibracoustic's forecasted sales performance in 2016 and 2017, Trelleborg said. Because of that, the final value of the deal may be somewhat higher or lower than the equity value.

By purchasing the remaining shares of the JV and becoming the sole shareholder, “we will have the flexibility to develop and support Vibracoustic strategically and financially,” according to Freudenberg Group CEO Mohsen Sohi.

“Through the cooperation with Trelleborg's automotive anti-vibration business, Vibracoustic has become a global and market technology leader in vibration control components and modules in the automotive industry,” he noted.

A Freudenberg spokeswoman added that, “naturally, we want to maintain that lead.” It was formed in July 2012 when Freudenberg merged its Vibracoustic business with Trelleborg's automotive anti-vibration operation.

With Weinheim, Germany-based Freudenberg's long-term orientation and financial solidity, the spokeswoman said, the company will have all the necessary support to implement its strategy of driving growth and efficiency.

No changes in the management team and work force are expected once the transaction is finalized, a Vibracoustic spokeswoman said. “We will continue on our growth track” with Freudenberg at the helm, she said.

In terms of long-term succession planning for Vibracoustic, the firm's shareholders have selected Frank Mueller as CEO, Jorg Bocking as chief technical officer and Stefan Eck as chief financial officer—”three top managers with long standing experience in automotive and finance to further develop Vibracoustic”—to lead the company, according to the spokeswoman.

Freudenberg and Trelleborg had been working on plans for an initial public offering of Vibracoustic for several months. In June 2015, Trelleborg CEO Peter Nilsson said all the internal legal matters associated with the IPO were being completed, and the companies could move forward with their plan whenever they thought it was the right time.

However, Freudenberg said when the sale of the JV was announced April 7, the joint IPO preparation process has been halted.

It said Freudenberg would be a long-term anchor shareholder, and it will examine various strategic options to guide the company forward in the best possible way.

Trelleborg said the proposed transaction represents the conclusion of a prior plan for its exit from the joint venture.

According to a Trelleborg spokeswoman, the firm had said from the start it would evaluate its participation in Vibracoustic “at each point in time, and we believe this is a good time for us to exit the joint venture and focus on further developing our leading positions in selected segments, which basically are all the operations we have today.”

Stockholm-headquartered Trelleborg is in the midst of making structural changes to better position its group of companies in the markets it serves and the sale of Vibracoustic, along with the acquisition of CGS Holding, “are two major structural changes we see in 2016,” she said.

It struck a deal to purchase CGS, headquartered in the Czech Republic and the parent of tire producer Mitas, for about $1.25 billion with an aim of bolstering its agricultural and specialty tire business, as well as the engineered polymer solutions end of its business. The purchase is expected to close in the first half of 2016.

In 2015 alone, Trelleborg completed eight acquisitions and established a factory for agricultural tires in North America. The purchased companies, including Brazil's Standard Tyres Group, represent $60 million in annual sales

Nilsson said the acquisitions “will strengthen our total offering and market positions in selected segments. We will continue to actively seek bolt-on acquisitions.”

Commenting on the sale of the firm's half of the anti-vibration automotive parts joint venture to Freudenberg, he said “TrelleborgVibracoustic has successfully integrated two global leaders within automotive anti-vibration solutions, and in the process delivered significant synergies, improved its footprint and strengthened its positions over the past years.

“Throughout this journey, we have enjoyed great cooperation with Freudenberg.”

Completing the transaction will allow the company to further focus on its overall strategy aimed at developing leading positions, the firm's spokeswoman said.

From a financial point of view, Trelleborg does not have direct access to the cash flow generation of Vibracoustic, other than through dividends, she said. “Now we will get that cash flow.”

When the JV was formed almost four years ago, the parent companies agreed to use the dual brand name of TrelleborgVibracoustic for a transitional period.

That ended April 4 when TrelleborgVibracoustic was renamed Vibracoustic. With the introduction of its new name, the firm said it is underlining its now well-established stand-alone position as the global market leader in automotive anti-vibration products, the Vibracoustic spokeswoman said.

Its new name signifies the essence of the company's business and emphasizes key elements of its products: leading edge solutions aimed at reducing vibration and disruptive noise to enhance driving comfort and safety, the firm said.

The global renaming process will take place in several steps. The holding company, TrelleborgVibracoustic GmbH, will carry the name Vibracoustic GmbH immediately, the firm said, but international subsidiaries will use the affix “a company of the Vibracoustic Group” for the short term. Over the next several months, all legal entities gradually will be renamed Vibracoustic.