Altran acquires Aricent and creates the undisputed global leader in Engineering and R&D services

  • New entity to offer outstanding value proposition to its clients and outpace competition with:
    • Unmatched scale: close to €3 billion in revenues, 44,000 employees operating in ~ 30 countries, including 15,000 near and offshore engineers across 5 Global Delivery Centers
    • No. 1 worldwide, no. 1 in Europe, no. 1 in the US
    • Leadership positions in key industries: Aerospace, Automotive, Design & Innovative Product Development, Life sciences, Semiconductors, Software & Internet, Telecoms
    • Superior expertise in key technology domains, design, product & system engineering, digital & software
  • Acquisition price of €1.7 billion ($2.0 billion), all cash
  • Enhanced financial profile; Altran 2020. Ignition plan’s strategic objectives achieved in 2018
  • EPS accretive from year 1 and double digit accretion supported by EBITDA runrate synergies in excess of €50 million
  • Acquisition expected to close in Q1 2018, subject to customary conditions

Altran, a global leader in Engineering and R&D services (ER&D), has entered today, through its subsidiary
Altran US, into a definitive agreement to acquire Aricent, a global digital leader in design and engineering
services, from a group of investors led by KKR, for a total enterprise value of €1.73 billion or $2.0 billion in an all-cash transaction. Based on LTM June 2017 data, this corresponds to 10.6x EBITDA4 pre-synergies, and 8.0×4 post run-rate-synergies (14.4x EBIT pre-synergies and 9.9x EBIT4 post-synergies). The transaction has been unanimously approved by Altran’s Board of Directors and is expected to close in Q1 2018, subject to receipt of antitrust approvals and satisfaction of customary closing conditions. Following the transaction, the combined entity will become the undisputed global leader in ER&D services, a market expected to be worth €220 billion by 2020.

Aricent is a global digital leader in integrated design and engineering services, primarily serving clients of the Communications and Technology, Semiconductor and Software industries. Headquartered in Santa Clara (California), Aricent brings design and engineering capabilities to help its clients get to market faster, transform legacy products to digital, and create new revenue opportunities. Among the company’s assets is the iconic brand frog, which has with world-class design and client experience capabilities, outstanding knowledge and intellectual property for the Telecom, Software and Semiconductors industries. Aricent also has solid experience in shaping large engineering outsourcing deals and key capabilities in key emerging technologies including Artifical Intelligence, Cognitive Systems, Internet of Things and software frameworks. Over the LTM June 2017, Aricent generated revenues of $687m with ca.10,500 employees and operated through 24 engineering centers and design studios, serving ca.360 clients globally.

Through this acquisition, Altran will be uniquely positioned to offer an unmatched value proposition to its clients and outpace
competition. Altran will now have superior scale and scope, and now masters all four critical criteria necessary to lead the industry: a global presence and reach, leadership across most industries, strong expertise in key technology domains and a superior global delivery supply chain. This transaction acts as a catalyst allowing us to achieve Altran 2020. Ignition strategic goals as early as 2018. Current and future shareholders will benefit from this value-enhancing acquisition, delivering EPS accretion immediately while preserving our robust financial profile.
Dominique Cerutti Chairman & CEO of the Altran Group
For 26 years, Aricent has positioned itself as a leading global design and engineering company, helping our clients solve their most complex challenges in today’s ever-changing, connected world. In doing so, we are well-positioned to merge our engineering and design capabilities with those of Altran to create a global leader in R&D engineering services with enormous scale, unparalleled capability, and unique and differentiated innovation. We are excited to join forces with Altran, an organization that seamlessly aligns with our values and core mission. This acquisition is a testament to Aricent’s long-standing and deep relationships with our clients and it recognizes the special talents and strength of our more than 10,500 dedicated Aricent employees. We look forward to working closely with Dominique Cerutti and his leadership team to bring even greater value to our clients. Frank Kern CEO of Aricent

VALUE-ENHANCING TRANSACTION

The acquisition of Aricent is expected to enhance Altran’s financial profile, improve profitability and cash
generation.

Based on LTM June 2017, the combined entity has:

  • pro-forma revenues of ca. €2.9 billion,
  • an EBITDA margin of 14.9% (EBIT margin of 12.7%) and
  • operating cash generation of 10.0%4 of revenues.

With this acquisition, Altran is expected to complete the operational and financial objectives of Altran 2020.Ignition plan as early as 2018 and will be in a position to accelerate and capture emerging demand and new opportunities.

This acquisition is expected to generate €150 million of additional revenues translating into €25 million EBITDA run-rate synergies and €25 million of delivery and cost synergies. These synergies are expected to be delivered progressively within 3 years, with implementation costs representing close to 1 year of cost synergies, to be spread over 2018-2019. The deal is expected to be EPS accretive from year 1, and double digit accretive when taking into account run-rate synergies.

Altran has obtained a full financing package for the transaction, which is intended to be refinanced in part
through a €750 million rights issue, subject to shareholders’ approval and market conditions. Altran
shareholders Apax Partners and the founders, who respectively hold 8.4% and 2.8% of the share capital,
together representing 16.6% of the voting rights, have confirmed their full support of the transaction, their
commitment to vote in favour of the rights issue at the EGM and their intention to participate pro-rata in the rights issue.

Relevant staff representative bodies within Altran and some of its subsidiaries will be informed and/or consulted with respect to the debt financing and/or the rights issue contemplated in the context of the acquisition of Aricent.

Thanks to the strong cash flow generation of the newly created entity, rapid deleveraging is expected while
maintaining shareholder remuneration consistent with past practices. Pro-forma for the transaction, Altran will maintain a strong liquidity profile and targets a rapid deleveraging below 2.5x two years after closing.

Altran and Aricent share a common vision of the drivers fueling accelerated growth in the ER&D market, and through their respective transformations have developed capabilities to match the four strategic criteria that top global clients expect from their ER&D partners. Together, Altran and Aricent will have:

  • Global scale and scope: close to €3 billion in revenues, 44,000 employees operating in ~ 30
    countries,and outstanding client reach. The combined company will be No. 1 worldwide, no. 1 in Europe, no. 1 in the US
  • Leadership positions in key industries: Aerospace, Automotive , Design & Innovative Product
    Development, Life sciences, Semiconductors, Software & Internet, Telecoms
  • Premier global delivery model: the significant build-up of the Indian footprint (ca.8,500 additional engineers) contributed by Aricent will provide Altran with a best-in-class industrialized supply chain, with a unique scale and balanced split through near/offshore locations (with 15,000 FTEs or 35% of total workforce), enabling the combined company to offer seamless end-to-end delivery to clients cost effectively
  • Superior expertise in key technology domains, design, product & system engineering, digital & software

The combination of these strengths will result in an enhanced client footprint: together with Aricent, Altran will consolidate its preferred access and long-term partnerships with top R&D spenders across all industries and leverage first class access to blue-chip US clients.

Since first acquiring Aricent over a decade ago, we have supported the company throughout its evolution and growth. As Aricent now enters its next phase, we believe the combination with Altran creates a broader platform for continued success. We are enthusiastic about the opportunities that lie ahead for the company. Brittany Bagley Member of the Board of Directors of Aricent and a Director on KKR’s Technology investment team

Next steps

The transaction is expected to close during Q1 2018, subject to receipt of necessary antitrust approvals and
satisfaction of other customary conditions.

The launch of the Altran rights issue is subject to an Extraordinary General Meeting’s approval of the relevant authorisations and to market conditions.

Crédit Agricole Corporate and Investment Bank, Goldman Sachs International and Morgan Stanley & Co are acting as financial advisors and have provided a committed financing for the full acquisition amount. Altran has obtained a standby commitment from the banks to underwrite the €750 million rights issue, subject to usual conditions. Sullivan & Cromwell LLP is acting as legal advisor to Altran.

J.P. Morgan Securities LLC acted as financial advisor to Aricent, a KKR & Co. portfolio company, Simpson
Thacher & Bartlett LLP acted as legal advisor to Aricent and KKR & Co.

Altran will announce its 2017 Year results on February 28, 2018 and unveil a new strategic plan during an
Investor Day in mid 2018.

Video

Altran Group acquires Aricent / Interview with Dominique Cerutti, Altran's Chairman and CEO

Altran announced the acquisition of Aricent.
Dominique Cerutti, Chairman and CEO of the Altran Group, comments on this acquisition.

More information: https://www.altran.com/us/en/news_press_release/altran-acquires-aricent-and-creates-the-undisputed-global-leader-in-engineering-and-rd-services/

Investor calls details

Investor meeting & conference call on November 30, 2017 at 8:30 am Paris time (CET) in Altran HQ,
located 96, Avenue Charles de Gaulle, 92200 Neuilly-sur-Seine
Telephone numbers: +33 172727403 or +44 2071943759 or +1 8442860643
Confirmation Code: 57921601#

A conference call dedicated to US investors will be held at 3:30 pm Paris time (CET)
Telephone numbers: +33172727403 or +44 2071943759 or +1 8442860643
Confirmation Code: 93710226#

Press release

Altran Group acquires Aricent and creates the undisputed global leader in Engineering and R&D services

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Acquisition of Aricent by Altran

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