Loomis AB (publ) ($LOOMIS)

Ladies and gentlemen, welcome to the Loomis Extra call regarding the announcement acquisition of Hermes Transportes Blindados. I am George, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Aritz Larrea, President and CEO. Please go ahead.

Good morning, and welcome to our call where we will present the announced acquisition of Hermes Transportes Blindados. My name is Aritz Larrea, and I'm the President and CEO of Loomis. And with me here today, I have our CFO, Johan Wilsby; and our Head of Investor Relations and Sustainability, Jenny Bostrom. It's great to see so many of you joining on short notice to hear us present our largest acquisition to date. Yesterday, we announced that we had entered a share tender agreement with, among others, CVC Capital for their shares in Hermes, marking our entry into Peru. The transaction will be conducted through a public offer tender. But before I go into details of Hermes and the transaction itself, let me spend some time explaining why Peru is an attractive market for us. For many years, Loomis has operated in Argentina and Chile, and we have long explored different opportunities to expand our business in Latin America. As you know, this is one of the strategic priorities we presented at our Capital Markets Day in 2024. Among the countries we have been closely monitoring is Peru. I assume most of you are familiar with Peru, but let me provide some context. As shown on the map, Peru is located on the West Coast of the continent and has a population of approximately 32 million people. It stands out as an attractive market due to its high and resilient level of cash usage, where cash continues to account for a majority of transactions, particularly when including the informal economy. Furthermore, the country has a solid macroeconomic environment and maintains an independent central bank. Peru is one of the faster-growing economies in Latin America, supported by investment, exports and prudent fiscal policy. It has a stable macroeconomic framework characterized by low public debt and a conservative fiscal management across multiple governments. In addition, Peru is one of the world's largest producers of silver and a major gold producer. It also ranks among the largest global exporters of copper. Finally, banking penetration remains relatively low, which has historically supported a high reliance on cash despite the growth of digital payments. Given these factors and favorable market conditions, Peru is an attractive country for a company such as Loomis, looking to expand in Latin America. Let's turn on to the next Slide to take a closer look at the company. We have now initiated the process to acquire Hermes, a company founded in 1985 and listed on the Lima Stock Exchange. The company brings more than 40 years of experience in secure logistics and risk management within Peru's financial system. It operates under the supervision of the superintendency of banking, insurance and pension fund administrators. Hermes has built a leading market position with an estimated 50% market share and a diversified client base of approximately 1,000 customers across the country. It serves key sectors, including financial institutions, retail, mining, utilities and government entities, acting as a critical partner to both private and public banks. Hermes is at the center of Peru's cash circulation system and plays a fundamental role in society. So what does Hermes offer? In many ways, Hermes operates similarly to Loomis. The company provides secure transport, processing and custody of cash and valuables. Its services also include ATM operations, cash collection and smart cash handling solutions that help automate processes and reduce risk. Beyond cash, Hermes delivers specialized secure logistics for industries such as mining, including the high-security transport of precious metals and other high-value minerals. Hermes operates a well-established nationwide platform of 19 branches with presence in most parts of the country. The company employs more than 3,200 professionals delivering its services every day and operates a stable fleet of purpose-built armored vehicles. In addition, it has begun expanding into automated solutions with an installed base of around 1,000 smart safes. Turning to the numbers in 2025, the company reported revenues of approximately SEK 1.2 billion, further highlighting the strength, resilience and maturity of the business. Overall, Hermes stands out as a trusted and strategically important partner to many of Peru's most significant organizations. I'm truly impressed by Hermes and its strong track record of growth, profitability and innovation. And I look forward to continuing this journey together. Turning on to the next slide. Hermes operates across 5 business units, each focused on risk management solutions. These services support the financial, retail, government services and mining sectors and align closely with our own business lines and areas of expertise. The first is valuable logistics. Here, Hermes provides secure transportation of banknotes, coins, precious metals, jewelry and other high-value assets. This also includes cash management services as well as ATM supply and maintenance with more than 3,200 ATMs nationwide in 2025. CIT [ lite, ] also known as Smart Security, serves small and medium-sized retail businesses. It focuses on the collection, transport, processing and storage of cash and variables. Hermes has built a strong position among SMEs, an area that is also a key strategic growth priority for us at Loomis. Hermes [indiscernible] is comparable to our automated solutions offering. It automates cash validation and accounting, enables real-time monitoring and produces detailed reports to support operational control and financial close. Hermes also offers customized seller services and branch administration outsourcing, including the operation of bank branches and payment locations for, among others, financial institutions and utility companies. Finally, through specialized logistics, Hermes delivers tailored solutions such as national and local courier services, document processing, mailroom management and digital storage services. Let's move on to the next slide where I will dive into the strategic rationale for this acquisition. This transaction marks a key milestone in our ambition to expand Loomis' presence in Latin America. With this acquisition, we increased our footprint in the region from 2 to 3 countries by entering Peru to a market-leading player where we see both strong strategic fit and continued growth potential. Hermes' strong position among small- and medium-sized businesses provides a solid platform to expand our automated solutions offering in Peru. The company already has an installed base of around 1,000 smart safes giving us an excellent foundation to build on and to introduce Loomis' own cash handling automated solutions under [ Tina ] brand. This creates clear opportunities for both organic growth and cross-selling. In addition, we see meaningful opportunities to drive operational efficiencies over time. This includes areas such as procurement, where we can leverage our global scale in vehicles, equipment and insurance as well as implementation of best practices in routing, fleet utilization and security protocols. These are proven numbers within Loomis, and we see good potential to gradually enhance margins. We also see strong potential to grow within the mining sector. Hermes is already the dominant player in domestic secure transport of Minerals across Peru. By combining this position with Loomis' international cross-border logistics and storage capabilities, we unlock opportunities to extend the offering beyond national borders and capture additional value in the supply chain. Another important opportunity lies in further digitalization. By introducing more advanced data analytics and cash flow visibility tools, we can enhance the value proposition to customers, improving efficiency, transparency and integration with the broader financial operations. Finally, the acquisition supports Loomis' financial targets contributing to both revenue growth and margin accretion. Hermes also demonstrates strong governance and is at the forefront of sustainability in its market, aligning well with Loomis' sustainability priorities and targets. Overall, this is a transaction where we combine a strong local platform with Loomis' global capabilities, creating a clear path for long-term value creation. Let's turn on to the next slide, where I would like to share a few personal reflections on why this is such a good fit between Loomis and Hermes. First, there's a strong cultural alignment. Both companies operate in environments where trust security and reliability are absolutely critical. In my discussions with the Hermes team, it is clear that they share our uncompromising focus on safety, operational excellence and customer trust. That is not something you can easily replicate. It has to be embedded in the culture. Second, we see a high degree of similarity in the business model. Hermes has developed a platform that, in many ways, mirrors our own combining cash in transit, cash management and value-added services. This makes the integration more straightforward and allows us to accelerate value creation by sharing best practices across operations, technology and commercial execution. Third, I have been particularly impressed by the quality of the local management team. They have built a market-leading position in a complex environment, which speaks to the capabilities and discipline. Our intention is very clear. We want to support and empower this team, combining the deep local expertise with Loomis' global scale and experience. Another important factor is our shared approach to governance and sustainability. Hermes operates with strong standards in both areas, which aligns well with Loomis' priorities and expectations as a global listed company. Finally, there's a strong alignment in how we view the future of the industry. Both companies recognize that while cash remains critical infrastructure, the market is evolving towards more technology-enabled and integrated solutions, and this is an area where we see significant potential to grow together. And with that, I would also like to say that I'm very pleased to welcome more than 3,200 Hermes employees to the Loomis family. Their expertise and dedication will be a key part of our continued success going forward. Turning on to the next slide and going through the transaction details. We have entered into a shared tender agreement with CVC Capital Partners and other minority shareholders representing 99.49% of the outstanding shares of Hermes. As part of these agreements, we intend to launch a public tender offer to acquire up to 100% of the company. While we aim to acquire all outstanding shares, the transaction is not contingent upon achieving full acceptance. The transaction values the business at an enterprise value of PEN 1,450 million corresponding to an EV to adjusted EBITDA multiple of approximately 6.6x based on 2025 financials. The acquisition will be fully financed through debt with a committed bridge facility in place from our core banking group. From a financial perspective, net debt to EBITDA is expected to temporarily exceed 2x following the acquisition. However, this increase is short term and leverage is expected to normalize within 6 months. We remain fully committed to maintaining our investment grade credit rating. Importantly, the transaction is expected to be immediately accretive to both operating profit and earnings per share. Moving on to the next slide, I want to show you the steps that are involved in this process. Here, you can see a high-level time line of the key steps involved in this transaction. As mentioned, Hermes is listed on the Lima Stock Exchange. To date, we have entered into a share tender offer agreement with shareholders representing 99.49% of the outstanding shares. The tender offer will be launched once certain customary conditions have been fulfilled, including change of control clauses. We expect the offer to commence during the second or third quarter of 2026. Once launched, the acceptance period will be around 30 days. Following completion of the tender offer, the business will be reported within our Europe and Latin America segment and consolidated into the group as of closing. Closing is expected to take place during the third quarter of 2026, shortly after the completion of the tender offer. No regulatory approvals are expected to be required to complete the transaction, and a potential delisting will be managed through a separate process following the successful completion of the acquisition. To sum up, this transaction represents a strategic milestone in the history of Loomis. With the acquisition of Hermes, we are entering Peru, one of the most attractive markets in Latin America, characterized by solid macroeconomic fundamentals, a growing economy and a high and resilient level of cash usage. Hermes is the clear market leader with a strong track record of growth, profitability and innovation and a business model that aligns closely with our own. This acquisition strengthens our position in Latin America, spans our platform for future growth and supports our long-term financial targets. And last, but certainly not least, I'm very pleased to welcome more than 3,200 new colleagues to Loomis. Their expertise and dedication will be an important part of our continued success going forward. With that, I would like to open the call for questions.

[Operator Instructions] Our first question comes from Dan Hammer with SEB.

Yes. Interesting acquisition. A couple of questions from my side. Maybe starting a little bit on the mining exposure here. Is it possible to give any sense on how big it is in terms of sales? Also a little bit on how your international business can complement Hermes local mining logistics? I mean does it -- do you think you can take over some of the transport -- international transport or precious metals that I guess, Hermes currently hands off to other partners?

Thank you for your question, Dan. To start off, I would say that the mining services represent around 15% to 20% of Hermes' revenue. And as you know, as we're saying, what they take care of today is the domestic business going from the mining areas to the airport. We can fulfill that second leg, the international leg and offer a door-to-door solution to the customer. So there's a great potential there, as you see.

Very interesting. And maybe a little bit on the EBITDA margin of Hermes. It already looks quite robust. I mean, usually, you target margin expansion through adding technology, move up the value chain. But how much can you do here in terms of the margin? Is the infrastructure already at peak efficiency, so to say, and the potential is more towards, I guess, growth synergies? Or do you think there's cost synergies as well here?

I would say that we have cost synergies as well, but we need to look at the business. As we already talked about international part of the mining services but you also need to consider the great opportunity we have with automated solutions coming from our [ Tina ] brand, and that is a huge opportunity in Peru as well.

Perfect. And the final one from my side. I mean it seems to look quite similar to your own operation. But in terms of CapEx, et cetera, is it also similar on that line, given the EBITDA margin is quite high, but -- is it the same sort of bridge down to operating profit? Or is this one more capital intensive compared to your operations?

No, very similar to ours.

The next question comes from Simon Jonsson with ABG.

Congratulations on the transaction. Just first, a follow-up on the sales mix here. You said 15%, 20% on mining. You also highlighted some exposure to automotive solution services. Can you maybe share a bit more what that share is currently of the group?

Sorry?

Share for automated solutions.

I don't have the details now with me. What we've said is that they already have 1,000 machines. And there's a lot to explore in that sense in the Peruvian market. But I don't have all the details that you're asking for.

All right. But do you have any understanding on sort of the penetration in this market for automated solutions? Is it significantly less mature compared to Europe and North America, you would say?

Yes, it's as mature for sure. Yes. .

All right. Then on your market position. And maybe it's a bit difficult to answer, but around 50% market share, do you -- do you also see that there is more potential for bolt-ons in this country? Or do you think now you're sort of taking what you can and will try to take market shares or -- or do you think that there is also bolt on acquisition potential here? .

Not in this country, Simon.

All right. And in terms of your general presence here in Latin America now, do you think that with this, it makes even more sense to be more aggressive in the other countries in Latin America?

We already explained at our Capital Markets Day that this was going to be one of our main focuses when growing the business in emerging markets. So we keep exploring, as we've been doing for the past years in adding new countries to this Latin America business line.

All right. And just a final one on margins, and you talked a little bit about that you see even further margin potential here. But it is very high margins, of course. Can you just maybe explain a bit the reason behind that? Is it any specific category here where margins are very high? Or is it just that margins in general are much higher? Or is there anything for us to keep in mind here on the sales exposure and margin for different segments?

When you look at Latin America, you see that margins are higher, but obviously, the risk is higher as well. So that's a normal thing in our business. But I would say that aside from that, there's nothing else especially in the Peruvian market.

[Operator Instructions] Our next question comes from Viktor Lindeberg with DNB.

Starting to look a bit in the rearview mirror, to my understanding, CVC has been their main owner in the past 5, 6 years and curious to understand the business development under the control of CVC, what -- any transformation initiatives or business initiatives that have been taken here? And also, I noticed that the head count is quite a bit lower today than it was when CVC acquired the company. So it would be interesting to understand the business mix change or if the company is sort of shrinking to find better and strong position or is that information was incorrect? So starting on that and then a few more.

Viktor, I don't have all the details on what CVC has done with the company. But I can tell you that more or less when you see the past years, it has remained that. So I haven't seen any big transformation being done by CVC. Probably they have been working on efficiency as we are, and that means reducing headcount while you keep growing the business, but no other specifics there.

All right. I noticed Peru has a bit higher corruption index when looking at this world map. And I know you have been very much investing in compliance on group level and also locally. And just to see what do you see in terms of business counterpart risks here? And if that's something you need to review given your strict focus on compliance and this being a new market for you further out on the risk curve?

So in that sense, we are aware of the general corruption risks in Peru as well as in other South American countries. We obviously have done full due diligence and it indicated that the company has strict protocols in place. Yes, we have had an extensive due diligence process, including legal, compliance, labor, payroll, finance tax, IT operations and insurance. But what we see is that Hermes is committed to ensuring compliance with the regulations governing these operations, and has a strong regulatory compliance program in place.

There are no business areas within Hermes that you foresee that you might leave behind or focus less on going forward?

Not at all.

That's good. And final housekeeping question, transaction cost, assuming this approval and tendering will follow through, what kind of integration cost, transaction cost should be expected on the back of this?

No material costs are expected for that part of the process. Obviously, we've been working for a number of months of that already but those kind of M&A-related costs, we're already assuming in the P&L.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Mr. Larrea for any closing remarks.

So thank you all for listening in such short notice, and please reach out if you have any questions. We're very excited with the time ahead with this acquisition. Thank you very much. Bye-bye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.