FARMINGTON, Conn., Sept. 23, 2021 /PRNewswire/ -- Otis
Worldwide Corporation ("Otis") (NYSE: OTIS), the world's leading
elevator and escalator manufacturing, installation and service
company, today announced a tender offer through its wholly-owned
subsidiary, Opal Spanish Holdings, S.A.U., for all of the shares it
does not currently own of Zardoya Otis, S.A. ("Zardoya Otis" or the
"Company") for an offer price of €7.00 in cash, with the intention
to delist Zardoya Otis subsequent to the tender. The offer price
represents a premium of 28.9% to the Company's 1-month volume
weighted average price implying a total equity value for Zardoya
Otis, including Otis' existing interest, of €3.3 billion.
Headquartered in Madrid, Spain,
Zardoya Otis is a premier elevator original equipment and service
business with operations in Spain,
Portugal and Morocco. Its product portfolio comprises
vertical and horizontal transportation systems as well as moving
walkways and accessibility products. In addition, the Company
offers a range of maintenance programs and a remote elevator
monitoring system for optimizing elevator performance. Zardoya Otis
generated revenue of €801 million and EBITDA of €223 million,
representing an EBITDA margin of 28%, for the 12 months ending
May 31, 20211.
"Zardoya Otis has been an integral part of Otis since 1972 and
its products, services and geographic footprint are critical
components of our long-term growth strategy," said Judy Marks, Otis' President and Chief Executive
Officer. "While we have deep respect for Zardoya Otis' heritage,
delisting the Company will simplify Otis' corporate structure,
provide for more streamlined management of the business, and
generate operational efficiencies for both businesses."
The transaction is structured as an all-cash voluntary tender
offer with an intention to delist Zardoya Otis from the
Madrid, Barcelona, Bilbao and Valencia
Stock exchanges and is expected to close in the second
quarter of 2022, subject to its approval by the Spanish Securities
Exchange Commission (Comisión Nacional del Mercado de Valores). Starting 2023, it is
expected to be up to mid-single digit percentage accretive to Otis'
adjusted EPS. Given the timing of the close and the pace of the
acquisition of shares, 2022 EPS accretion is expected to be in a
range of 3 to 5 cents. Since
Otis is already the majority holder of Zardoya Otis and has
operational control, there should be no significant change to the
Company's employment as a result of this transaction.
Otis has obtained fully committed bridge financing from Morgan
Stanley and expects to replace the bridge facility with permanent
debt financing. Otis continues to target its current investment
grade credit ratings and plans to repay $800
million of existing debt and suspend share repurchases in
2022.
For further details on the terms and conditions of the tender,
please see the regulatory announcement published on the following
link:
https://www.cnmv.es/portal/verDoc.axd?t=%7b0eba7ec2-1df8-444f-b5fc-be85402f9d30%7d
Advisors
Morgan Stanley & Co. LLC is serving as exclusive financial
advisor to Otis, and Uría Menéndez and Wachtell, Lipton, Rosen
& Katz are serving as legal counsel.
Use and Definitions of Non-GAAP Financial Measures
Otis Worldwide Corporation ("Otis") reports its financial
results in accordance with accounting principles generally accepted
in the United States ("GAAP"). We
supplement the reporting of our financial information determined
under GAAP with certain non-GAAP financial information. The
non-GAAP information presented provides investors with additional
useful information, but should not be considered in isolation or as
substitutes for the related GAAP measures. Moreover, other
companies may define non-GAAP measures differently, which limits
the usefulness of these measures for comparisons with such other
companies. We encourage investors to review our financial
statements and publicly filed reports in their entirety and not to
rely on any single financial measure.
Organic sales, adjusted selling, general and administrative
("SG&A") expense, earnings before interest taxes and
depreciation ("EBITDA"), adjusted EBITDA, adjusted operating
profit, adjusted net income, adjusted diluted earnings per share
("EPS"), adjusted effective tax rate and free cash flow are
non-GAAP financial measures.
Organic sales represents consolidated net sales (a GAAP
measure), excluding the impact of foreign currency translation,
acquisitions and divestitures completed in the preceding twelve
months and other significant items of a non-recurring and/or
nonoperational nature ("other significant items"). Management
believes organic sales is a useful measure in providing
period-to-period comparisons of the results of the Otis' ongoing
operational performance.
Adjusted SG&A expense represents SG&A expense (a GAAP
measure), excluding restructuring costs, other significant items
and allocated costs for certain functions and services previously
performed by United Technologies Corporation ("UTC") prior to our
separation ("UTC allocated costs") and including solely for fiscal
years prior to 2020 estimated standalone public company costs, as
though Otis' operations had been conducted independently from UTC
("standalone costs"). Standalone costs for fiscal years prior to
2020 are based on quarterly estimates determined during Otis'
annual planning process for the 2020 fiscal year. Recurring
standalone costs for 2021 and 2020 are not adjusted.
Adjusted operating profit represents income from continuing
operations (a GAAP measure), excluding restructuring costs, other
non-recurring significant items, UTC allocated costs and including
solely for fiscal years prior to 2020 estimated standalone public
company costs.
Adjusted net income represents net income from continuing
operations (a GAAP measure), excluding restructuring costs and
other non-recurring significant items and UTC allocated costs and
including solely for fiscal years prior to 2020 estimated
standalone public company costs, estimated adjustments to
non-service pension expense, net interest expense and income tax
expense as if Otis was a standalone public company ("standalone
operating income adjustments"). Adjusted EPS represents diluted
earnings per share from continuing operations (a GAAP measure),
adjusted for the per share impact of restructuring, other
significant items and solely for fiscal years prior to 2020
standalone operating income adjustments.
The adjusted effective tax rate represents the effective tax
rate (a GAAP measure) adjusted for the tax impact of restructuring
costs, non-recurring significant items and solely for fiscal year
prior to 2020 the tax impact of the additional adjustments
(estimated standalone public company costs, interest expense and
non-service pension expense).
EBITDA represents net income from operations (a GAAP measure),
adjusted for noncontrolling interests, income tax expense, net
interest expense, non-service pension expense and depreciation and
amortization. Adjusted EBITDA represents EBITDA, as calculated
above, adjusted for the impact of restructuring, other significant
items and UTC allocated costs, including solely for fiscal years
prior to 2020 estimated standalone public company costs. Management
believes that adjusted SG&A, EBITDA, adjusted EBITDA, adjusted
operating profit, adjusted net income, adjusted EPS and the
adjusted effective tax rate are useful measures in providing
period-to-period comparisons of the results of Otis' ongoing
operational performance and to the extent applicable as if it had
been a standalone public company for fiscal years prior to
2020.
Additionally, GAAP financial results include the impact of
changes in foreign currency exchange rates ("AFX"). We use the
non-GAAP measure "at constant currency" or "CFX" to show changes in
our financial results without giving effect to period-to-period
currency fluctuations. Under U.S. GAAP, income statement results
are translated in U.S. dollars at the average exchange rate for the
period presented. Management believes that this non-GAAP measure is
useful in providing period-to-period comparisons of the results of
Otis' ongoing operational performance.
Free cash flow is a non-GAAP financial measure that represents
cash flow from operations (a GAAP measure) less capital
expenditures. Management believes free cash flow is a useful
measure of liquidity and an additional basis for assessing Otis'
ability to fund its activities, including the financing of
acquisitions, debt service, repurchases of common stock and
distribution of earnings to shareholders.
When we provide our expectations for organic sales, adjusted
operating profit, adjusted net income, adjusted effective tax rate,
adjusted EPS and free cash flow on a forward-looking basis, a
reconciliation of the differences between the non-GAAP expectations
and the corresponding GAAP measures (expected diluted EPS from
continuing operations, operating profit, the effective tax rate,
net sales and expected cash flow from operations) generally is not
available without unreasonable effort due to potentially high
variability, complexity and low visibility as to the items that
would be excluded from the GAAP measure in the relevant future
period, such as unusual gains and losses, the ultimate outcome of
pending litigation, fluctuations in foreign currency exchange
rates, the impact and timing of potential acquisitions and
divestitures, and other structural changes or their probable
significance. The variability of the excluded items may have a
significant, and potentially unpredictable, impact on our future
GAAP results.
About Otis
Otis is the world's leading elevator and escalator
manufacturing, installation and service company. We move 2 billion
people a day and maintain approximately 2.1 million customer units
worldwide, the industry's largest Service portfolio.
Headquartered in Connecticut, USA,
Otis is 69,000 people strong, including 40,000 field professionals,
all committed to meeting the diverse needs of our customers and
passengers in more than 200 countries and territories worldwide.
For more information, visit www.otis.com and follow us on LinkedIn,
Instagram, Facebook and Twitter @OtisElevatorCo.
Cautionary Statement
This communication contains statements which, to the extent they
are not statements of historical or present fact, constitute
"forward-looking statements" under the securities laws. From time
to time, oral or written forward-looking statements may also be
included in other information released to the public. These
forward-looking statements are intended to provide management's
current expectations or plans for Otis' future operating and
financial performance, based on assumptions currently believed to
be valid. Forward-looking statements can be identified by the use
of words such as "believe," "expect," "expectations," "plans,"
"strategy," "prospects," "estimate," "project," "target,"
"anticipate," "will," "should," "see," "guidance," "outlook,"
"confident," "goals" and other words of similar meaning in
connection with a discussion of future operating or financial
performance or the separation and distribution. Forward-looking
statements may include, among other things, statements relating to
future sales, earnings, cash flow, results of operations, uses of
cash, share repurchases, tax rates, R&D spend, credit ratings
and net indebtedness, other measures of financial performance,
potential future plans, strategies or transactions, including
anticipated benefits of the proposed transaction, including
estimated accretion, cost savings or other operational
efficiencies, the expected timing of completion of the proposed
transaction, estimated costs associated with such transaction and
other statements that are not historical facts. All forward-looking
statements involve risks, uncertainties and other factors that may
cause actual results to differ materially from those expressed or
implied in the forward-looking statements. For those statements,
Otis claims the protection of the safe harbor for forward-looking
statements contained in the U.S. Private Securities Litigation
Reform Act of 1995. Such risks, uncertainties and other factors
include, without limitation: (1) the effect of economic conditions
in the industries and markets in which Otis and its businesses
operate in the U.S. and globally and any changes therein, including
financial market conditions, fluctuations in commodity prices,
interest rates and foreign currency exchange rates, levels of end
market demand in construction, the impact of weather conditions,
pandemic health issues (including COVID-19 and its effects, among
other things, on global supply, demand, and distribution
disruptions as the outbreak continues and results in an
increasingly prolonged period of travel, commercial and/or other
similar restrictions and limitations), natural disasters and the
financial condition of Otis' customers and suppliers; (2)
challenges in the development, production, delivery, support,
performance and realization of the anticipated benefits of advanced
technologies and new products and services; (3) future levels of
indebtedness, including in connection with the proposed
transaction, and capital spending and research and development
spending; (4) future availability of credit and factors that may
affect such availability, including credit market conditions in the
U.S. and other countries in which Otis and its businesses operate
and Otis' capital structure; (5) the timing and scope of future
repurchases of Otis' common stock, which may be suspended at any
time due to various factors, including market conditions and the
level of other investing activities and uses of cash; (6)
fluctuations in prices of and delays and disruption in delivery of
materials and services from suppliers; (7) cost reduction or
containment actions and restructuring costs and related savings and
other consequences thereof; (8) new business and investment
opportunities; (9) the anticipated benefits of moving away from
diversification and balance of operations across product lines,
regions and industries; (10) the outcome of legal proceedings,
investigations and other contingencies; (11) pension plan
assumptions and future contributions; (12) the impact of the
negotiation of collective bargaining agreements and labor disputes;
(13) the effect of changes in political conditions in the U.S.,
including the new U.S. Administration, and other countries in which
Otis and its businesses operate, including China's response to the new U.S.
administration and the United
Kingdom's recent withdrawal from the European Union, on
general market conditions, global trade policies and currency
exchange rates in the near term and beyond; (14) the effect of
changes in tax, environmental, regulatory (including among other
things import/export) and other laws and regulations in the U.S.
and other countries in which Otis and its businesses operate,
including changes as a result of the new U.S. Administration; (15)
the ability of Otis to retain and hire key personnel; (16) the
scope, nature, impact or timing of acquisition and divestiture
activity, including among other things integration of acquired
businesses into existing businesses and realization of synergies
and opportunities for growth and innovation and incurrence of
related costs, including in connection with the proposed
transaction; (17) the expected benefits of the separation and
distribution and the timing thereof; (18) the determination by the
Internal Revenue Service and other tax authorities that the
distribution or certain related transactions should be treated as
taxable transactions; (19) risks associated with indebtedness
incurred as a result of financing transactions undertaken in
connection with the proposed transaction; (20) the risk that
dis-synergy costs, costs of restructuring transactions and other
costs incurred in connection with the separation will exceed Otis'
estimates; and (21) the impact of the separation and/or the
proposed transaction on Otis' businesses and Otis' resources,
systems, procedures and controls, diversion of management's
attention and the impact on relationships with customers,
suppliers, employees and other business counterparties.
In addition, with respect to the forward-looking statements
specifically relating to the proposed transaction, additional risks
and uncertainties relating to the proposed transaction include
whether Zardoya Otis shareholders will tender their shares in the
transaction; the possibility of competing offers; risks relating to
filings and approvals relating to the transaction; Otis' ability to
finance the transaction; the satisfaction of any relevant closing
conditions; and the possibility that the proposed transaction will
not be completed on the contemplated terms or timeline or at
all.
The above list of factors is not exhaustive or necessarily in
order of importance. For additional information on identifying
factors that may cause actual results to vary from those stated in
forward-looking statements, see Otis' registration statements on
Form 10 and Form S-3 and the reports of Otis on Forms 10-K, 10-Q
and 8-K filed with or furnished to the SEC from time to time. Any
forward-looking statement speaks only as of the date on which it is
made, and Otis assumes no obligation to update or revise such
statement, whether as a result of new information, future events or
otherwise, except as required by applicable law.
Media
Contact:
|
Investor Relations
Contact:
|
Ray
Hernandez
|
Michael
Rednor
|
+1-860-674-3029
|
+1-860-676-6011
|
Ray.Hernandez@otis.com
|
investorrelations@otis.com
|
1 Based on Zardoya Otis' reported financial
statements, which have been prepared in accordance with
International Financial Reporting Standards endorsed by the
European Union (IFRS-EU)
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SOURCE Otis Worldwide Corporation