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Agreement concluded to Acquire Stork Food Systems

28 Nov 2007

Marel Food Systems hf., announces that it has entered into an agreement to acquire the Stork Food Systems division of Stork N.V. The acquisition price is EUR 415 million on a debt and cash-free basis.

Through the acquisition Marel Food Systems will double its revenues and strengthen the platform for further internal growth and profitability.

The acquisition of Stork Food Systems will be an important step towards achieving Marel Food Systems’ target of becoming one of the leading global innovators of food processing equipment. The businesses of Marel Food Systems and Stork Food Systems are complementary, with no overlap in their product portfolios.

Information Website

The Structure of the Acquisition

  • The transaction closure is subject to:
    • London Acquisition’s B.V., public offer for all outstanding shares in Stork N.V., being declared unconditional.
    • The advice of the Stork Works Council.
    • Clearance from anti-trust authorities.
  • Until the transaction is formally concluded, each company will continue to operate independently.
  • The purchase price for Stork Food Systems is EUR 415 million, additional transaction costs are estimated to be EUR 20 million.
  • Prior to this transaction, Marel Food Systems sold its 20% shareholding in LME Eignarhaldsfélag ehf., reflecting the offering price of EUR 48.4 per share in Stork N.V.
  • The acquisition is fully funded by proceeds of sales of shares in LME Eignarhaldsfélag ehf., an equity offering underwritten by Landsbanki, and secured long term debt financing.

Landsbanki Corporate Finance acted as financial advisor and Allen & Overy in Amsterdam as legal advisor to Marel Food Systems in the acquisition of Stork Food Systems.

About Stork Food Systems

With headquarters in the Netherlands , Stork Food Systems operates companies in the Netherlands , France, US, Spain and Brazil employing 1,875 people.

Stork Food Systems (SFS) has focused on developing advanced equipment for poultry, meat and further processing in the protein industry. Last year, the company Stork Food and Dairy Systems (SFDS) became a member of Stork Food Systems. SFDS manufactures products for the dairy, juice and food processing and pharmaceutical industries.

The overall turnover of SFS in 2007 is expected to be EUR 380 million, of which EUR 310 million comes from the core activities in poultry, meat and further processing and EUR 70 million from SFDS. The EBITDA is expected to be EUR 31 with earnings of EUR 41 million from poultry, meat and further processing, offset by a loss of EUR 10 million for SFDS including restructuring cost of EUR 6 million.

In the last four years annual organic growth of core activities has been 14%, driven by strong product development and expansion in emerging markets. Profitability (EBIT) in that period has averaged 10%. SFS has been successfully co-operating with Marel Food Systems in core activities for the past nine years, developing turnkey solutions for the poultry processing industry.

In the dairy, juice, food processing and pharmaceutical industries SFDS has a strong product portfolio in one of the fastest growing segments within the food machinery industry. A new strategy was announced on 31 October 2007, after these activities became part of Stork Food Systems. These activities are expected to return a profit in 2008.

Benefits of the Acquisition

  • The major benefits for Marel Food Systems and Stork Food Systems include:
  • Together Marel Food Systems and Stork Food Systems will have the critical mass to enter new markets in Eastern Europe, Asia and South America , where annual growth is expected to be over 7%.
  • The larger unit can take advantage of:
    • improved balance between protein segments, reducing business risks,
    • economies of scale in production with emphasis on building up production capacity in emerging markets,
    • increased purchasing power in components, metals and electronics.
  • Marel Food Systems and Stork Food Systems have successfully co-operated in development and production of systems for the poultry industry where SFS’s strength in mechanical design is supported by Marel Food Systems’ innovative software and electronics systems. The previous co-operation will support a successful integration between the companies and create value for customers.

Social Aspects

The transaction as such is not expected to adversely affect the existing employment level and employment conditions of Stork Food Systems. Marel Food Systems will respect all existing rights of company employees.

“At the beginning of 2006 we set ambitious growth targets for the next three to five years,” says Arni Oddur Thordarsson, Chairman of the Board of Directors for Marel Food Systems. “Within two years we have finalized two substantial acquisitions and are now entering into the third one. We have also invested in increased production capacity and marketing effort to support further growth. We are projecting revenues over EUR 650 million for 2008 compared to EUR 129 millions in overall revenues in 2005. Our management and employees have shown great determination during this transformation and worked hard towards the successful integration of our businesses. Marel is now better positioned to serve their global customers. Our emphasis now is to focus on internal growth and increased profitability. We are grateful for the good support we have received from our broad base of shareholders as well as from the financial markets.”

“The strong innovation capabilities of Stork Food Systems make it a perfect partner for Marel Food Systems,” says Dr. Hordur Arnarson, President and CEO of Marel Food Systems. “Our good cooperation over the past decade has generated great respect for our colleagues at Stork Food Systems and shown us the potential for growth and success. The product portfolios of the two companies are complementary with no overlap. We need size, constant innovation and a global presence to succeed in our competitive industry. After the acquisition we will be better equipped to enter emerging markets such as Asia, Eastern Europe and South America . The step we have taken now will create an opportunity for us to optimize our production capacity and technological efficiency.”

“We are pleased to join Marel Food Systems,” says Theo Hoen, President of Stork Food Systems. “It has always been Stork Food Systems’ mission to provide its customers with innovative solutions to strengthen their competitive advantage and to continue adding value to their production processes. Marel Food Systems’ continuous innovation and good reputation for reliable products in the marketplace is therefore a perfect fit with Stork Food Systems. I also would like to emphasize that Marel and Stork have worked together very successfully for almost a decade. From our previous experience we feel that the two companies have an excellent cultural fit.”

Analyst Meeting:

Marel Food Systems will hold a meeting for analysts and investors at its head office at Austurhraun 9, Gardabaer, on 29 November beginning at 8:30 am (GMT).

Contact:

For further information, please contact Dr. Hordur Arnarson, President & CEO of Marel Food Systems at tel. +354 563 8072.

About Marel Food Systems

Marel Food Systems is one of the world’s most innovative manufacturers of high-tech equipment for the food processing industry. The company provides advanced systems to all segments of the food processing industry, increasing the quality and value of fish, meat, poultry and other prepared food products around the world. The company’s innovative solutions – from single machines to turnkey processing plants – always result in significant additional value for processors, retailers and end consumers.

Marel Food Systems consists of four main business units that are complementary to each other: Marel ehf. in Iceland, AEW Delford Systems Ltd in the UK, Carnitech A/S in Denmark and Scanvaegt International A/S in Denmark. Marel Food Systems operates in 24 countries and has a network of agents and distributors covering over 40 countries worldwide. The company stays on the cutting edge by investing far more than the industry average in research and product development.

“We are innovative in everything we do and we provide outstanding new solutions and services to the food processing industry in order to create greater value for all our stakeholders.”