DENTSPLY International and Degussa Dental Enter Into an Agreement to Combine Businesses.Business Editors/Health & Medical Writers YORK York, former name of Toronto, Canada York, Ont.: see Toronto, Ont., Canada. York, city, England York, city (1991 pop. 123,126) and district, North Yorkshire, N England, at the confluence of the Ouse and Foss rivers. , Pa.--(BUSINESS WIRE)--May 30, 2001 Creates a Global Powerhouse A fourth-generation language from Cognos that was introduced in the late 1970s for midrange computers. It supports both character-oriented, terminal-based applications as well as Windows clients. Applications developed under PowerHouse can be imported into Cognos' Axiant client/server environment. in the Professional Dental Products Industry DENTSPLY International Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :XRAY) and Degussa Dental, a unit of Degussa AG since 1970, (Frankfurt:DGX DGX Dogfishes (FAO fish species code) ) announced today the signing of a definitive agreement providing for the combination of the two companies through a cash acquisition by DENTSPLY valued at euros 576 million (approximately U.S. $500 million). The Boards of Directors of DENTSPLY and Degussa AG and the senior management team of Degussa Dental unanimously support the combination. The transaction, following regulatory approval in the U.S., Germany and certain other countries, is expected to close in July 2001. Strategic Highlights -- Offers substantial growth and synergies -- Increases scale worldwide including the three largest dental markets: U.S., Europe and Japan -- Broadens extensive consumable and laboratory product lines to include key precious metal dental alloys and ceramics -- Provides exceptional opportunity to increase penetration in the Japanese market -- Expands established leading brand names -- Adds leading technology platform for the production of high-growth, high- margin ceramic products -- Provides significant sales force expansion -- Enhances strong R&D platform -- Adds strong management team in Europe The transaction combines DENTSPLY International, the world's largest manufacturer of professional dental products, with Degussa Dental, the second- largest dental company worldwide and the market leader in Germany and Europe and the only significant non-domestic dental company in the Japanese market. This combination creates a professional dental products company, more than three times the size of its nearest competitor. Degussa Dental is expected to add approximately $430 million to DENTSPLY's annual sales. The combined company is expected to generate total revenues in excess of $1.5 billion in calendar 2001, with EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become in excess of $250 million. While the transaction is dilutive by approximately $0.10 per share for the balance of the current year, it is expected to be $0.01 to $0.03 accretive to earnings per share on a reported basis in calendar 2002 under current FASB FASB See: Financial Accounting Standards Board FASB See Financial Accounting Standards Board (FASB). rules and accretive by $0.15 to $0.20 to reported earnings per share in 2003. The proposed change by FASB for handling the treatment of goodwill is now expected to be effective in the last half of 2001 and would increase reported earnings per share for this transaction by approximately $0.10 to $0.12 annually. On a cash earnings basis accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the is expected to be approximately $0.30 to $0.35 per share in 2002 and $0.45 to $0.55 per share in 2003. John C. Miles II, Chairman and Chief Executive Officer of DENTSPLY, stated, "Degussa Dental is an excellent fit both strategically and operationally. This is a highly synergistic synergistic /syn·er·gis·tic/ (sin?er-jis´tik) 1. acting together. 2. enhancing the effect of another force or agent. syn·er·gis·tic adj. 1. union that clearly furthers DENTSPLY's strategic mission of being 'First in Dentistry dentistry, treatment and care of the teeth and associated oral structures. Dentistry is mainly concerned with tooth decay, disease of the supporting structures, such as the gums, and faulty positioning of the teeth. .' This strategic action is also in keeping with our proven business strategy of adding complementary businesses that broaden DENTSPLY's leading product offerings and significant global market presence. In short, this is a winning combination for all our stakeholders Stakeholders All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government. including customers, employees and investors. "Degussa Dental's key product categories, most notably, precious metal dental alloys This is a list of alloys for which an article exists in Wikipedia (or is proposed but not yet written). They are grouped by base metal, in order of increasing atomic number. Within these headings they are in no particular order. and ceramics ceramics (sərăm`ĭks), materials made of nonmetallic minerals that have been permanently hardened by firing at a high temperature, or objects made of such materials. , further enhance DENTSPLY's worldwide leadership in dental consumables and laboratory products. Degussa Dental is the leading supplier worldwide for precious metal dental alloys, an estimated $1 billion market business where DENTSPLY does not have a product offering. Degussa Dental's growth strategy has been to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. the accelerating trend towards highly aesthetic ceramics through its proprietary application of CAD/CAM CAD/CAM in full computer-aided design/computer-aided manufacturing. Integration of design and manufacturing into a system under direct control of digital computers. techniques. Its proprietary products, Cicero and Cercon, add true technology leadership in the production of ceramic This article is about ceramic materials. For the fine art, see Ceramic art. The word ceramic is derived from the Greek word κεραμικός (keramikos). products and address an estimated $180 million market that is expected to grow between 15% to 20% annually," continued Mr. Miles. "Our combination with Degussa Dental also strengthens our presence in Europe and Japan. Degussa Dental holds the number-one position in Europe, and also importantly, is the market leader in Germany, which represents over 40% of the European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. market. In Japan, Degussa is the third-largest dental company, providing us with an exceptional opportunity to increase share in this large, untapped market, which has historically been very difficult to penetrate," added Mr. Miles. Gerd Schulte, Chief Executive Officer of Degussa Dental Group, stated, "We are extremely pleased to be combining resources with DENTSPLY International, thus creating the clear premier dental products company worldwide. Our strong worldwide market positions will be supported by our powerful brand names, the tremendous breadth and depth of our consumable A material that is used up and needs continuous replenishment, such as paper and toner. "The low-tech end of the high-tech field!" and laboratory product lines, innovative and successful research and development programs and geographic diversity. The senior management team of Degussa Dental is very excited about the opportunity to contribute to the further development of the combined company." Gary K. Kunkle, Jr., President and Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. of DENTSPLY, stated, "Our two companies share common operating philosophies, including the same strong commitment to technological innovation, product quality and customer service. We both have marketing programs primarily focused on the dental professional to enhance our product leadership worldwide, including extensive programs to train laboratory technicians and dentists Dentists can refer to one of the following:
"Further, by leveraging the strengths of our combined research and development efforts, we have substantial opportunities for product innovation. In fact, the combined company holds more than 1200 patents and brought more new products to the dental office and dental laboratory A dental laboratory is a light manufacturing facility for the production of dental restorations on the order of a dentist. Dental laboratories may make dentures, crowns, or other dental restorations such as implant crowns. than any other manufacturer in our industry. Our combined company is very well positioned to provide significant value to our worldwide customers," noted Mr. Kunkle. Mr. Miles stated, "In summary, this combination will provide substantial synergistic opportunities including significant cross-selling opportunities worldwide. In particular, we believe there are substantial opportunities associated with global presentation of the highly promising Cercon and Cicero technologies and the opportunity to market more DENTSPLY products in Japan. Further, the integration of infrastructure and marketing programs is expected to ultimately generate cost savings of approximately $15 to $20 million annually." DENTSPLY will finance the transaction with a planned $400 to $450 million Eurobond Eurobond A bond that is denominated in a different currency than the one of the country in which the bond is issued. Notes: A eurobond is usually categorized by the currency in which it is denominated, and is usually issued by an international syndicate. offering. Upon completion, including the sale/leaseback of precious metals Precious Metals Valuable metals such as gold, iridium, palladium, platinum, and silver. Notes: Investing in precious metals can be done either by purchasing the physical asset, or by purchasing futures contracts for the particular metal. , DENTSPLY will have a debt-to-capitalization ratio of approximately 59%. Credit Suisse First Boston Credit Suisse First Boston was originally the trading name of the Financière Crédit Suisse-First Boston, a London-based 50-50 investment banking joint venture formed in 1978 between the First Boston Corporation and Credit Suisse. acted as financial advisor to DENTSPLY International. DENTSPLY Conference Call Information: DENTSPLY will hold a conference call on Wednesday, May 30, 2001 at 10:00 a.m. Eastern Day Light Time. To access the call, please dial: domestic 800/553-2178 and international 303/224-6997. This conference call will be broadcast live on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at www.dentsply.com or www.StreetEvents.com. An audio replay of the conference call will be available for one week. To access the replay, please dial: 800/696-1588. Passcode: 1052285. DENTSPLY manufactures a broad range of products in two key categories: Dental Consumable and Laboratory Products and Dental Equipment. The Company is the number one or two-market leader in most product categories in which it competes. DENTSPLY is committed to the development of innovative, high quality, cost-effective cost-effective, n the minimal expenditure of dollars, time, and other elements necessary to achieve the health care result deemed necessary and appropriate. new products for the dental market. The Company distributes its dental products in over 120 countries under some of the most well established brand names in the industry. Degussa Dental Group is a subsidiary of Degussa AG, the worldwide leading specialty-chemicals company and a subsidiary of the E.ON E.ON Energy On (German energy company) Group. Degussa Dental is a global provider of dental materials to the professional dental products industry. Headquartered in Hanau-Wolfgang, Germany since 1992, Degussa Dental Group has modern production facilities throughout the world. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. regarding future events or the future financial performance of the combined company, including, without limitation, statements regarding operating results in calendar 2001, earnings per share in 2001 and 2002, growth opportunities, and other statements that refer to DENTSPLY's plans, prospects, expectations, strategies, intentions, and beliefs. These forward-looking statements are based on information available to DENTSPLY today, and DENTSPLY assumes no obligation to update these statements as circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or change. There are risks and uncertainties that could cause actual results to differ materially from the forward-looking statements, including, without limitation, the difficulty of successfully combining the operations of Degussa with those of DENTSPLY in a timely manner, the ability to continue to generate sufficient cash flow to pay down the additional debt as planned, the potential loss of key employees as a result of uncertainty caused by the acquisition, the failure to achieve the costs savings, revenue growth or synergies expected to be realized as a result of the acquisition, the significant increase in DENTSPLY's debt-to-capitalization ratio as a result of the acquisition and the diversion A turning aside or altering of the natural course or route of a thing. The term is chiefly applied to the unauthorized change or alteration of a water course to the prejudice of a lower riparian, or to the unauthorized use of funds. of resources to debt service rather than for investment in DENTSPLY's existing businesses. For an additional description of risk factors, please refer to the Companys Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. filing with the Securities and Exchange Commission. See the attached Press Release Fact Sheet
DENTSPLY MAY 30, 2001 PRESS RELEASE FACT SHEET
(Dollars in Millions)
----------
DENTSPLY DEGUSSA COMBINED
DENTAL
---------- ---------- ----------
2000 Operating Data:
Revenue $ 994.6 $ 430.0 $ 1,424.6
Revenue (ex. PM) $ 994.6 $ 195.9 $ 1,190.5
Gross Profit $ 510.0 $ 122.2 $ 632.2
EBITDA $ 230.0 $ 30.4 $ 260.4 (1)
Operating Income $ 183.9 $ 12.7 $ 196.6 (1)
3/31/01 Balance Sheet Data: (2)
Total Assets $ 1,075.8 $ 228.0 $ 1,657.0 (2)
Total Debt $ 273.6 $ 0.0 $ 788.6 (2)
Shareholders' Equity $ 536.5 $ 154.0 $ 536.5 (2)
Margin Data:
Gross Margin % 51.3% 28.4% 44.4%
Gross Margin % (ex PM) 51.3% 62.4% 53.1% (3)
EBITDA Margin % (ex PM) 23.1% 15.5% 21.9% (3)
Operating Income
Margin % (ex PM) 18.5% 6.5% 16.5% (3)
Geographic Mix:
US 59.4% 12.6% 45.3%
Europe 25.6% 70.3% 39.1%
Japan 3.1% 15.0% 6.7%
ROW 11.8% 2.1% 8.9%
---------- ---------- ----------
Total 100.0% 100.0% 100.0%
Product Mix:
Consumables 80.0% 100.0% 86.0%
Equipment 16.0% 0.0% 12.0%
Other 4.0% 0.0% 2.0%
---------- ---------- ----------
Total 100.0% 100.0% 100.0%
Market Share Rank:
Worldwide No. 1 No. 2 No. 1
US No. 1 NA No. 1
Europe No. 4 No. 1 No. 1
Japan NA No. 3 No. 3
3/31/01 Capitalization:
Total Debt / Capitalization 33.8% NA 59.5% (2)
Total Debt / LTM EBITDA 1.3x NA 2.8x (2)
Equity Market Value $ 2,195.0 NA $ 2,195.0
Employees:
Total Employees 6,485 1,515 8,000
Sales Representatives 1,250 330 1,580
Research & Development 215 120 335
Sites:
Sales Distr. &
Manufacturing Sites 71 35 106
Note: Assumes a .4505 $US/DM exchange rate.
DENTSPLY is pro forma as if the AZLAD and Friadent acquisitions
were done at the beginning of 2000.
(1) Before synergies.
(2) Pro forma for US $400 - 450MM Eurobond financing, additional bank
financing, and asset write-ups assuming transaction occurs in
July.
(3) Excludes effect of precious metals "pass-through" sales.
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