SAF-Holland SE (SFQ) Earnings Call Transcript & Summary

Dear ladies and gentlemen, welcome to the investor and analyst conference call of SAF-Holland SE on the occasion of the recommended cash tender offer to the Haldex shareholders that was announced today. At our customer's request, this conference will be recorded. [Operator Instructions] May I now hand you over to Mr. Schickling, who will lead you through this conference. Please go ahead.

Hello, and good afternoon. On behalf of SAF-Holland, welcome to our call. We appreciate your availability on short notice. Today's call will be hosted by our CEO, Alexander Geis; and our CFO, Wilfried Trepels. Mr. Geis will provide an overview of the proposed transaction as well as the strategic rationale. Mr. Trepels will provide details on the financial side as well as the key terms of the offer. After the presentation, we will be happy to take your questions. Without further ado, over to Alexander Geis.

Good start, and hello, everyone. Also from my side, a warm welcome to today's investors and analysts call. As you are aware, this morning, we announced an anonymously recommended voluntary all-cash offer to acquire all outstanding shares of Haldex. This is not only an exciting opportunity for SAF-Holland, but also for Haldex. In fact, the proposed combination would be transformational as we would combine 2 strong companies with highly complementary activities and create a global champion for chassis-related commercial vehicle systems. Let me start right away with a very brief overview of the proposed transaction. We'll then take you through the strategic rationale for this unique population and conclude the presentation with a look at the key terms and the planned time line of the transaction. We offered SEK 66 in cash per Haldex share, and our price represents an attractive premium of 46.5% to the last closing price prior to the announcement. This is the best and final price. The Board of Directors of Haldex, as of today, SAF-Holland owns approximately 14.1% of the Haldex shares, including 9.2% from Knorr-Bremse. Furthermore, we have secured irrevocable undertakings from other shareholders such as Athanase, Fjarde, Afa, and Nordea to tender their shares for another 22.5% of the share capital. With respect to the strategic rationale, the combination of SAF-Holland and Haldex allows to create a truly global champion for chassis-related commercial vehicle systems. And it represents a unique opportunity to offer our customers integrated mechatronic systems. Together, both companies will also be in a stronger position to address megatrends that are moving our industry. In other words, the proposed combination is transformational and creates value for all stakeholders, shareholders, customers and our employees. It will allow to unlock additional opportunities for profitable growth and expected synergies in the amount of more than EUR 10 million per annum on a run rate basis, and we expect closing in Q3 of this year. But let's speak about Haldex. Haldex is a long-established player in our industry. Many of you are familiar with the company. For those of you who have not followed the company in recent years, let's have a quick look at Haldex today. Haldex is a leading manufacturer of reliable and innovative braking system and air suspension solutions that enhance the safety, dynamics and durability of heavy vehicles. Its customers are mainly large manufacturers of trucks, buses and trailers in North America, Europe and Asia. Customer groups, we at SAF-Holland, are well familiar with. Haldex has a large aftermarket business, representing more than 50% of their sales, offering spare parts and servicing to distributors, workshops and large logistics companies. Like us, Haldex has a long corporate heritage. The company has since then developed into a leading supplier of air disc brakes, trailer electronic braking systems and automated brake adjusters, just to mention some. Across 7 global production sites around 2,000 well-trained employees supply the needs of a global blue-chip customer base. In 2021, the Haldex Group generated sales of around SEK 4.612 billion, this is approximately EUR 455 million; and an adjusted EBIT of SEK 357 million, approximately EUR 35 million. This implies an adjusted EBIT margin of slightly below 8%. Haldex sales are well diversified by customer category, product line and region. And Haldex thus represents a strong match and our activities are very complementary with respect to brands, products, regional presence, customer group focus and expertise of employees. Let us move on to the strategic rational in full detail on the next page. We, SAF-Holland, have been cooperating with Haldex for more than 15 years in different projects and know each other very well. SAF-Holland have always had the impression that Haldex shares the same entrepreneurial mindset, focus on customers, quality and innovation. Some of you might remember that we, therefore, had set out to do this transaction already runs in 2016. The strategic rationale of this combination was clearly there back then and it is still there today. Let me take you through the 5 aspects that are key to us. The product portfolios of SAF-Holland and Haldex are highly complementary, which allows us to create a global champion for chassis-related systems. This will result in significant customer benefits, a more integrated mechatronic offering and greater regional reach. In addition, we can offer a majority of key components from a single source. Joint smart solutions and mechatronic systems will give us the unique ability to enhance the industry transformation and develop solutions for autonomous driving, connectivity and digitalization. By bringing together our respective aftermarket activities, we can establish an aftermarket powerhouse with increased scale, resilience and profitability. And all of these structures will strengthen our financial profile. We expect the transaction to be EPS accretive from year 1 post closing. Let's speak about the product portfolio. This picture speaks for itself and perfectly illustrates the strategic fit of both companies. The product of Haldex highlighted in blue and the ones of SAF-Holand perfectly complement each other. Look at the excellent suspension systems at the very right of the trailer. Our axle and suspension systems, combined with freight products and air control solutions for Haldex perfectly match and provide the basis for product integration. And this is just one example. Together, we can serve customers as a one-stop shop solution provider, a trend that is increasingly important and demanded by the market. Plus, by combining their respective R&D and engineering expertise, Haldex and SAF-Holland are able to further expand the product portfolio and strengthen their market presence. In other words, 1 plus 1 is more than 2. On the next chart, you can see the top 3 positions across our key products. Together, SAF-Holland and Haldex are amongst the leading suppliers in a large number of product categories. Together, we would further enhance our market positions. And in fact, we occupy global top 3 positions in 5 major product categories. Our customers will benefit from a one-stop shop solution and enhance system integration through our combined mechatronic offering. Not only will they have a single contact for all chassis-related products and systems, they will also have one partner for the entire product life cycle. From initial consultation via configuration to delivery and then maintenance. This unique approach gives customers an opportunity to reduce their overall dependence on external suppliers and source from one single source. And on system integration, we see great potential for harmonization and integration of mechatronics and excellent suspensions. System integration will also create opportunities to utilize protective maintenance functions and the combination of telematics and trailer EBS. Through the combination, we will become the only system supplier in the world for all chassis-related products for commercial vehicles. Let us move on to the regional footprint. And based on pro forma sales, the combined group will achieve a more balanced distribution between EMEA and the Americas. This will enhance the resilience of our combined financial profile, and we are convinced that the global reach in combination with the wider product offering will create opportunities, which both businesses would not be able to achieve stand-alone. More specifically, this involves pushing air disc brake technology in North America, China and India as well as bringing electromechanical brake technology to North America and China. Globally, we target the cross-selling of air disc brakes and trailer electronic braking systems, the trailer EBS. On a global scale, we would benefit from optimizing our distribution, sales and aftermarket network while significantly expanding our customer reach. We clearly see 3 megatrends for the global commercial vehicles. First, digitalization. It is driven by the demand for more uptime efficiency and security. We will address this trend with our combined mechatronic know-how and telematics expertise. We will also be ready to offer more remote diagnostics based on data and our mechanical based skills. Secondly, electrification will be key as we move towards a carbon-neutral transport sector. This strength will continue to do the need for CO2 and noise reduction and increased regulation to set tighter standards for both. Electrification will lead to better integrated trade control and recuperation solutions leading to much more intelligent electric recuperation. And we will use our systems know-how to enhance the integration of the electromechanical brakes. And third, automated driving is driven by the need to achieve further CO2 reductions and more efficiency as well as expected driver shortages. We will address this trend by setting an industry standard for truck trailer communications, which will be a key factor in bringing automated driving on the road. On Chart #12, you can see our clearly defined road map towards a more integrated smart system offering, the future of our industry. As I guide you through this road map, you will see we will be the only player combining trailer EBS data and relevant functionality in order to create unique smart solutions for running gears and wear parts. The starting point is data acquisition, which is currently in field testing. Based on data collection, shared analytics and bench tests, we run correlation analysis of trailer electronic brake systems, axles and gear data. As a next step, we create functional integration to offer diagnostics, soft docking, electronic brake performance monitoring systems as well as ride height adjustments. Building on this, it is all about creating common services, new telematics services that provides accurate load status and/or a vehicle immobilizer. With regards to e-mobility, the focus is on our E-axle development, integrating brake, axle and controls. And on the next level, we are planning to launch subsystems that allow for predictive maintenance based on wheel brake and wheel bearing monitoring as well as mechatronic integration of trailer EBS and telematics. And finally, we are looking at highly automated driving where we will have to develop intelligent truck/trailer communication systems and high-speed data interfaces between the truck and trailer EBS. And now let's speak about the aftermarket powerhouse. Another key advantage for the combined group will result from brining together the respective aftermarket businesses. At Haldex, more than half of the group sales are coming from the aftermarket business. Thus, the combined group will have a higher share of aftermarket sales than stand-alone, which again creates a more resilient and profitable business through recurring revenues and higher margins. In addition, the combination of our 2 groups will offer opportunities to leverage Haldex products into SAF-Holland's global network and to generate further profitable growth. And now let me hand over to Wilfried Trepels to take you through the financial highlights of the transaction.

Yes. Good afternoon. So the fifth point of the argumentation was here very clearly that we see an attractive financial profile with expected earnings per share appreciation from the year 1 post closing of the transaction. And if you look to the numbers, you see the sales in 2021 were EUR 1.247 billion on the SAF side and Haldex was EUR 455 million. So combined, it would be a group of around about EUR 1.7 billion sales. When you look to the adjusted EBITDA margin, we have achieved on the SAF-Holland side 10.6% and 1.8 percentage points higher numbers at Haldex, 12.4%, which would lead to a pro forma entity having 11.1%. If you now look to the adjusted EBIT margin, the adjusted EBIT margin is 7.5% on the SAF-Holland side. On the Haldex side, it is 7.7%. So this is just a difference of 0.2% points and this is due to the fact that we see some higher CapEx on the Haldex side because they have more vertical integration in their production. So SAF-Holand has 2% to 3% roundabout per year and Haldex is between 4% and 5%. This would then lead to a pro forma entity adjusted EBIT margin of 7.5%. And pro forma entity means, of course, that this is excluding in the company consolidation effects and transaction cost and synergies. Let me then come to the next slide, we need to talk about the strong synergy potential combining both companies. On the one hand side, we have sales synergies. Of course, Haldex has already elaborated about it. We have improved market access to larger and smaller OEs but also to fleets and a broader offering with cross-selling opportunities, especially when it comes to air disc brakes and trailer EBS and increased aftermarket share will be also a very important point for the further development. We will really create here an aftermarket powerhouse. On the cost synergies and the operational enhancements, we have noted here 5 points. One is obvious, the joint purchasing Together, this gives us more power when it comes to price negotiations and other possibilities where we believe that we can benefit from. The SG&A efficiencies are also seen here. Further, the stronger combined know-how is obvious together with complementary R&D and engineering capabilities. And when we get the 90% and above, we are going for delisting, which also will give us some savings. Then the third point is the integrated system offering and new technologies. This is also key here when we look at the combined companies. We have the excellent development now with an integrated brake control. We can do the integration of the electro-mechanical brake, the EMB, and the development of truck and trailer communication. And last not least, which will come later on in a couple of years, the automated driving program. So in total, we have identified a synergy potential of more than EUR 10 million on a run rate per annum. Coming now to the key terms and the time line. The key terms of the recommended voluntary cash tender offer for Haldex is shown on this slide. On the right-hand side, a few words to the expected time line. As of today, we do the public offer announcement. And then we are starting with the offer and start with the acceptance period around the 4th of July, and this will end around the 16th of August. And so we expect that we have beginning of the settlement around the 24th of August. So coming to a little bit more of details here regarding the transaction structure is a voluntary cash tender offer for all outstanding shares of Haldex. The offer has unanimously been supported and recommended from the Haldex Board of Directors. We have already acquired 14.1%, 4.9% SAF-Holland in the market and today, 9.2% we have acquired from Knorr-Bremse AG. And in addition, we are lucky to say that we have irrevocables here that they will tender their shares. And this is Athanase, Afa, AP Fjarde and Nordea. And together, this amounts to 22.5%. So that means that we would then already speak about a share of 36.6%. The purchase price is SEK 66 per share, corresponding to a total value of approximately SEK 3.2 billion, which is around EUR 309 million. The purchase price presents the best and final offer and will not be increased. And this is important to say that we are not going to increase it. When we look to the premium, the premium is quite attractive with plus 46.5% over Haldex last closing price of yesterday. But also when we look back, it's a plus of 66% over Haldex, 1 month average, which was 39.76% and 64.8%, above the 3-month average. The financing. So what are we going to do, how to finance this acquisition? The offer is fully financed by cash, which is available and credit facilities. They are both securing the transaction. And we would like to state very clearly that we will remain committed to a strong balance sheet and deleveraging post-closing the transaction. Hence SAF intends to also raise equity to support deleveraging. I know that disappoints, of course, but when you read the next dot and the sentence there, you need to imply and read between the lines, we are saying that the equity component may be raised using existing authorizations, which may include an offer without subscription rights subject to market conditions. So that's what we can say of today. The conditions under this offer is clear, the completion of the offer is subject to the customary offer conditions, including the condition that SAF-Holland becomes the owner of shares representing more than 90% of Haldex shares, while 90% because that is quite common and must on the Swedish law that you need 90% to do then the squeeze out. And why do we need to do the squeeze out, because we need to get -- when we look to the financing, we need to get to the cash sources of the company, and therefore, you need 100%. So now I would like to hand over again to Alex for a short summary.

Thank you, Wilfried. Ladies and gentlemen, before we open the call for any questions, I want to thank you for your attention and conclude with the following: the proposed combination of Haldex and SAF-Holland is a transformational move with a compelling strategic rationale. The combined group would have a highly complementary product offering and increased regional reach as well as a unique offer of integrated mechatronic systems and smart solutions for suspensions, axle systems and electronic braking system modules. Our joint one-stop shop offering allows customers to reduce the complexity of supply chains and reduce dependence on many external suppliers. Together, SAF-Holland and Haldex could become a driving force in addressing megatrends and benefit from the increased scale, resilience and profitability supported by higher aftermarket exposure. On the financial side, this leads us to an attractive combined profile, strong synergy potential and expected EPS accretion from year 1 post closing. And with this conclusion, I would like to open the call for your questions. Operator, please open the Q&A session. Thank you very much.

[Operator Instructions] We have the first question. It's from Philippe Lorrain of Berenberg.

Quick couple of questions from my side. So the first one would be, could you confirm that the equity raise would be 8.4%. I was just looking at the authorized capital mentioned that you have in the annual report, so that would help first to understand that. Second question related to that, when you consider other financing sources for the deal, I understand that you intend to raise debt, but would you also look into raising perhaps convertible bonds or other instruments like this? So that's the first side of the question, and then I'm going to come back for the rest.

Okay. Yes. Coming to the first one. We have the possibility to raise 10% equity share without rights. And we also have -- when you dive a little bit deeper, you'll find also that we have around 50% max equity increase, which would be possible with rights. But that's something you can find out when you dive into our numbers and what we have as resolutions from our Board and our shareholders. The second question was regarding alternative. Yes, we are also looking for alternatives. If you remember that we have done a convertible a couple of years ago. So that might be also something which is interesting. But first of all, we wanted to make sure that this transaction is finalized regarding the financing. And that is what we now have in place, and then we will see in the next couple of weeks and months how we can structure it further.

Okay. Perfect. Then the rest of the question was more based on the covenant. So last year, I was calculating that SAF stand-alone had a net debt to reported EBITDA of about 1.58x. If I look at the adjusted EBITDA, that was 1.5x. My back of the envelope calculation, if I combine reported numbers from Haldex would be that we have like a combined entity at roughly 1.57x net debt to EBITDA, and that's before we think about financing the deal. So if you take like the 10% authorized capital and not any further equity raise, the financial leverage would probably go post deal for financing the purchase of the equity of Haldex towards 3x, perhaps slightly above 3x. So how do you think about, first, your target leverage of 2x to 3x with regard to that? And the second thing as well is, if I remember correctly, in 2020 at some point, I noted that you had a covenant of about 3x net debt to EBITDA. So how should we think about this?

Yes, we clearly want to deleverage the company further. Your calculation is more or less right. And we are expecting to bring that quickly down. We have a lot of opportunities in our net working capital, and that is valid for both for SAF and for Haldex. And we are doing, I think, a good job when you look to the sales and the profit development, where we also will generate cash from this side. So from all of this, we are trying to drive our credit metric and our maturity profile down step by step, so that we will be already in '23, significant down. And as you might know, when I was asked, how do you feel regarding the leverage, and I said between 2x, it would be good. So -- and we are going further to optimize that.

Okay. So I understand that the target remains the same, but post deal, it's probably going to overshoot perhaps like these 3x, and you're feeling comfortable with the fact that you've got the covenant test normally that is in February and probably there's going to be a waiver because it's post-deal, no?

It's okay. We are fine with what we have calculated and fine with the covenants, also with respect to the conditions in the financial agreements.

Okay. Fine. And could you tell us roughly what to expect in terms of interest rates and so on for financing the deal, especially after we've seen like the start of interest rate rises in the market?

Yes. I think that we have been lucky. We can't comment in detail on this. But as it is always, it's confirmed with the markets. And it's depending on the leverage, how the interest rate will develop. Sorry to say that. I think you understand this.

The next question is by David Abraham of Olivetree.

Just 2 quick ones. First of all, I know that the offers finally will not be increased. Can you just confirm to us whether or not in the event of a third-party counterbid, that no increase statement would still be binding?

David, this is Alex. Good question. But let's go back to the presentation. We already explained that we pre-purchased 4.9% of the Haldex shares and also purchased the 9% stake of Knorr-Bremse, totaling 14.1%. So basically, if a third bidder wants to come in, there is no chance to get the -- or to reach the 90% threshold, which in our case doesn't make any sense to do so. Of course, this is a free world to do so, but we are very confident since we offered a very fair offer and also have the clear recommendation and a clean recommendation of the Board of Directors of Haldex. So we hope that we are going to achieve the 90% or even higher as we offered the SEK 66 and we will not be increasing anything.

Okay. So even hypothetically, in the event of a third-party offer, you wouldn't be able to increase the offer any further?

You were asking if this is binding, and I understood that under Swedish law, this sentence is binding. So the order is final and will not be increased.

Okay. My second question is just in terms of the regulatory and merger control clearances that are required to completing the offer. Could you give us a little bit more of -- some more color on which jurisdictions in particular would be required? I remember last time around, it was very quick for you. It was under a month, I think you got all the clearances in 2016.

You have excellent memories. Yes, indeed, in 2016, the clearance was very quick in our case because we don't have any products which are overlapping. So all the product portfolios, the single products are complementary. And basically, the transaction requires the approval of merger control authorities in Germany, Poland and the United States. And we, of course, and the company will file the transaction shortly after the announcement, which is done today and relevant clearances are expected to be obtained prior to the end of the acceptance period, okay? And of course, we do not want to pre-attempt the authorities decisions. But however, given the highly complementary product portfolio of both companies, we do not foresee any trust issues.

The next question is by Jorge Gonzalez of Hauck & Aufhauser.

So my first question is regarding the aftermarket business. Alexander, in the last conference call, you have commented that you see that the freight volumes are going to be one driver. The freight volumes growth linked to the growth in e-commerce penetration is going to be potentially a driver for the industry in general and especially in North America. So it would be interesting to have your comments on this. How this acquisition is going to give you even a better position to capture this growth? And how do you think -- how do you see next year if there is some kind of recession in U.S., how this could help you? Could you also give us a feeling of how important is the aftermarket business of Haldex for the EBIT result, could be possible, please?

Yes, of course. Let me give you a little bit more insight in the aftermarket. And as you might remember, I was driving the aftermarket business unit within SAF-Holland for many, many years. So -- and also confirming what you just said with the increase in freight volumes, specifically in North America, but also in Europe due to the online trading and online purchases of every body of ours. So the freight volumes are going up. You need more trucks, you need more trailers. They are running. The running gear needs spare parts and maintenance. So this also drives up both the aftermarket for Haldex, but also our aftermarket within SAF-Holland. Well, as far as I know, and I know a lot of people within Haldex, but also the aftermarket structure, and the organization very well run, competent people doing this on both sides, but I have the strong feeling, and I know if we put those excellent people together to make much more aftermarket business in the future, cross-selling activities, okay? Take a customer buying today spare parts at SAF-Holland somewhere in the world, in the same country, they also buy Haldex aftermarket parts. Now we have one shipment maybe. So if we restock the SAF-Holland parts in the Haldex warehouses and vice versa, then you can offer our customers one single source, onetime freight charges occurring, and this is a big benefit for the customers. And I have to say that, of course, the high share and the resilience of the aftermarket in both Haldex and SAF-Holland is key for our combined group in the future, and this was one of the drivers also of course. And please go back in the second quarter of 2020 when unfortunately COVID hit us, everybody in the world, the aftermarket was really key for all producing companies because that was the main reason that you still earn money. And as you know, the aftermarket is highly profitable. So we would like to further focus on the aftermarket in a combined group, of course.

And Alexander, regarding this trend through the air disc and the air suspension, especially for the North American and Asian markets in the future to improve the security in those markets, how do you think this acquisition is going to help you? Is it positioning your staff in a better place, or it's not necessarily improving your position in this sense?

It will absolutely increase our position in that sense if the share of air disc brake is increasing in the future. So take the market share of disc versus drum, for instance, in Europe, you have about 80% of all trailer axles are equipped with air disc brakes. The rest of 20% is still drum brake. In the U.S., it's the opposite. So 80%, 80-plus percent is drum brakes. And basically, everybody can produce a drum brake shoes, the components you need to repair a drum brake axle. And you have all the pirate producers, knockoff parts and everything. So the competition is huge in this. Whereas in the air disc brake business, of course, the aftermarket is limited to the producer of the air disc brake due to the homologation. So basically, if you have a Haldex air disc brake on the axles, you have to exchange against the Haldex air disc brake. And this is, of course, where we also would like to participate in the future that by increasing airspace share, and this is not only in North America, we now see that also in China, but also in India coming with the air disc brake, that we would like to participate in this and outgrow the market with our aftermarket parts. And we have clearly demonstrated that specifically in Europe over the last couple of years.

Okay. That's interesting. So regarding the employee structure of Haldex, these last 2, 3 years, you have really improved the structure of SAF with a more important or a greater share of temporal employees. How this work with Haldex? Is this a similar structure? Will you be able to be as flexible if the conditions on the market worsen? How is the culture of Haldex structure in comparison with SAF?

Well, as I said before, we have a lot of insight into Haldex due to our long-term relationship over the last 15 or plus 15 years with Haldex, since we are also a big customer of Haldex in terms of air disc brakes and automatic slack adjusters. Basically, what I can share is an excellent run company, good people, knowledgeable. They have the same culture, entrepreneurial push is very important and the thinking is very important. So on both sides, I can see this. We have, as I said, competent people. Of course, we want to keep -- we want to develop and grow the company, and this is clearly a growth case for us to put 1 and 1 together is more than 2. And basically, if I go back into a combined group in the year 2006, you might remember that SAF, the former SAF and the former Holland Group, we combine those big equal companies together, also equal size, roughly EUR 400 million, EUR 500 million at that time. We put that together and have grown significantly over the years. So we also would like them put the SAF-Holland Group and the Haldex Group together and grow the market by offering a much bigger product portfolio. So very confident people on both sides, knowledgeable, forward thinking, same culture. This was one of the main reasons also why we already started beginning of the year to really start the talks. And now we are here with the final offer to the shareholders.

Is this acquisition, Alex, also helping you with the supply chain in the sense that we have seen a lot of constraints and difficulties to get supplies. Is this transaction going to help you to maybe be faster? Or if this is something that is not one of the reasons to buy the company?

This is not one of the reasons. We have many other reasons which are more important, and this is not speaking about securing supply chain. Well, I have to go back to our last update call we gave -- and I also reported that on the SAF-Holland side, specifically the purchasing teams, supply chain teams did and do a great job in getting all the components. We worked 3 shift 6 days a week in all existing plants. We are fully booked until Q3 in Turkey, already in Q4. Here and there, well, it's getting tight. And this is also the reason why our inventory level is higher than expected, of course, but the teams manage those constraints really in a good, good manner. We also can see that within Haldex, because in Haldex, as I said before, one of the key components is the air disc brake and so far, excellent service, excellent supply from the Haldex side to us. And of course, we would like to put those teams together, so the supply chain teams, but also the sourcing teams to get new ideas, fresh ideas and also get better in the future in terms of sourcing and supply chain.

Okay. Very interesting. And very last question. I have seen in Bloomberg that Swedish state has a 6% in Haldex. So I just wanted to confirm with you if they have any kind of golden share or if you have already talked with the Swedish government regarding their stake. Can you give us some feedback on that, please?

Well, what I can tell you is what we published that we have irrevocables of Athanase, Fjarde, Afa, and Nordea, which accounts to roughly 22.5% and the teams are working on contacting, of course, shareholders, convincing them that this is a really good offer and then ultimately explaining that we are putting the companies together and have a great combination of the 2 good companies.

The next question is by Philippe Lorrain of Berenberg.

Just coming back a little bit on Haldex activity and how you want to combine that. So if I remember correctly, when you were basically sourcing brakes from your suppliers, you were using different suppliers such as Haldex, for instance, Knorr-Bremse as well. And especially right now because Knorr-Bremse has accepted to sell the Haldex stake to you, I was wondering whether they would be displaced in terms of sourcing volume or whether you would continue to rely on probably like a dual-sourcing approach?

We always rely and like the dual sourcing or multiple sourcing approach for different reasons. One big reason is, if you are relying on only one source and something happens, I don't know, maybe production might close up or something like this, you put the company at risk. This is really dangerous. So we like the multiple supplier strategy. And in that specific case, air disc brake has a high value within the axle and it's the most important or one of the most important part when it comes to safety. And both are suppliers and manufacturers of really superb products. And also now going to external communication, of course, we would like to keep both Knorr-Bremse and Haldex because we have customers who want to pick and decide whether they want to go on Haldex or Knorr-Bremse, which is for us an advantage in the market. Other axle manufacturers, they only offer one brake and not even a brake of Knorr, Haldex or WABCO. Just to mention the third one, they offer their own ones. And our big benefit is that we give the customer the choice to pick between 2 quality products. And this is one of the reasons why we have such a high market share in axle, specifically in EMEA. And maybe to add to this, because we got another question before in another call, how did you convince Knorr-Bremse to sell shares well. Well, we contacted them. We asked frankly, we explained durational. And obviously, as you can read, we managed to purchase 9.2%. So this is in a very friendly environment. And of course, we want to keep the good relationship also with Knorr-Bremse.

The next question is by [indiscernible] of Kepler Cheuvreux.

Well, 2 questions. First, you mentioned the competition authority -- approval you needed. But -- and just to confirm that China is not a country that you need authorization of the offer?

No.

Good. And then coming back to -- well, 5 years ago when you launched the offer, from the top of my head now, I think you sort of indicated somewhat higher synergies back then on the SG&A side, especially on the top of my head, I think it was some EUR 30 million, maybe I remember wrong there. But it seems a bit lower today. Could you comment somewhat on that.

Well, when we talk synergies, basically, I have to repeat myself, this is a growth case. We want to put both companies together, and then ultimately, 1 plus 1, I said that before, is bigger than 2. We want to grow our product portfolio and our unique offering, if you now take the trailer EBS, our telematics, air disc brake and our axles, our smart axles with predictive maintenance and sensors, this is a unique offering. And this is an offering which will outgrow the market in the future. So when we talk about synergies, we mainly speak about the sales potential, so cross-selling activities I mentioned before in another call, take for instance the trailer EBS kits, you only have 3 suppliers in the market. Haldex is one of them. And we have a really good contact to all big, medium and small trailer manufacturers across the globe. And we think if we offer combined product portfolio, like the axles, suspension, then also the trailer EBS, this gets us a massive cross-selling potential to do so. I already mentioned the sourcing savings. If you put the sourcing volume of Haldex and the sourcing volume of SAF-Holland together, there should be some savings in terms of saving and sourcing and also logistics. And also, last but not least, we can then apply joint marketing activities, take the trade fairs. We put companies on one trade stand, not 2 different ones, so that saves time. We did not make this offer up on SG&A, like we might have done in 2016. So we know on both sides, very experienced and competent people, and we want to keep those people because you need those people to grow the company or the future company. And this is the main reason why we are focusing when we talk synergies, mainly on sales potential, sourcing savings and joint marketing and trade savings, but not so much on SG&A savings.

Okay. Great. Great answer. And then about you source disc brake from Haldex today. And I just wondered if that's included in the sales figure for the 2 companies? I mean, they could -- should be some internal sales to be deducted, I guess.

Yes, the number Wilfried presented with EUR 1.71 billion for the fiscal year 2021 did not include the consolidation, but this is a number which is not big in that whole context of EUR 1.7 billion.

The next question is by Jorge Gonzalez of Hauck & Aufhauser.

A couple of follow-ups from my side. Firstly, regarding the financing, I know that you cannot share many details. But I was wondering if this financing that you have already closed, if it has any sustainability clauses already? And if you can share with us if it's somehow similar to the interest rates that you are paying at this point? And then regarding the aftermarket business of Haldex, the company has similar margins than those of SAF-Holland, maybe a little bit -- slightly above and with a greater share of aftermarket business. So I was wondering if your targets of profitability for Haldex, specifically for Haldex in the future are going to be higher? Or if you think that the profitability of Haldex is going to remain similar to SAF in the future?

Wilfried, are you going to take the financial?

Yes, I can do that. Yes, a little bit more like to the financing. So we have 2 banks who are the underwriter here. And we are talking about EUR 300 million term loan, which is split in 2 tranches, EUR 150 million each with 5, respectively, a 3-year term. Then we have in addition, an RCF, which is another EUR 200 million with a 5-year term plus 1 plus 1 and an option for increasing this by another EUR 100 million. We are starting the syndication next week, and we believe that in the first week of July, we should be through with this. So from this perspective, checkmark on it. Regarding interest, I don't want to talk about too much in detail here about the interest rates. But as I said before, they are depending on the leverage and they are normal market conditions, which were agreed here. Yes, Alex, do you take over the target profitability for Haldex?

Absolutely. Well, I'm not speaking about target profitability in the future, but I would like to share some more insight into the aftermarket share and profitability overall of Haldex, which is available data if you check the quarterly results and the yearly results. So basically, as mentioned before, if you take the total sales of roughly EUR 455 million, a little bit more than 50% comes from the aftermarket, which is very resilient business model, we have to say, of course. The overall profitability, if I speak about profitability in that context, I speak about gross profit, okay, not the EBIT. But the gross profit of the overall Haldex group is much higher than the overall gross profit of SAF-Holland. There is a big difference to this. So basically, with most of us in that industry, the OE margin is not really super good, okay, you earn the money for the group in the aftermarket and services. And you offer to your clients and customers, but I can say that the overall gross profit of Haldex is higher than the one of SAF-Holland. And as I mentioned before, if we put those companies together, so this new combination of Haldex and SAF-Holland with all the competent workforce we have on both sides, then we should be able to outgrow the market and also with the new product portfolio offering into the market not only grow in sales but also grow the profitability then with a combined company.

[Operator Instructions] There are no further questions for the moment. And so I will hand back to Mr. Schickling.

So ladies and gentlemen, this concludes today's call. If you have additional questions, please do not hesitate to contact the Investor Relations team. Thank you for joining us today, and have a good rest of the day. Thank you.

Thank you very much.

Thank you. Bye.