Harvia strengthens its position in professional and premium sauna solutions by acquiring a majority stake in the EOS Group Helsinki Stock Exchange: HARVIA

Harvia Oyj, stock exchange release, March 18, 2020, 8.30 a.m. EET

Harvia Plc (“Harvia”) has signed an agreement to acquire the majority of the German EOS Group (“EOS”), a technology leader in professional and premium sauna and spa products. The acquisition complements Harvia’s professional and premium sauna offering and strengthens Harvia’s leading position as a professional global sauna and spa experience brand. Annual synergies of at least EUR 2.2 million are expected from the acquisition.

EOS is a leading brand in the premium and professional sector and the company has more than 75 years of experience in the sauna industry. The company’s broad product portfolio includes professional and premium sauna heaters, gas-powered heaters, control devices, steam generators, infrared hardware and accessories for all of these products. Thanks to its own control unit manufacturer Spatronic, EOS has extensive know-how in electronics. In 2019, EOS achieved sales of EUR 17.3 million, an adjusted EBITDA of EUR 3.2 million and an adjusted EBIT of EUR 2.8 million. The company employs around 150 people.

The purchase price is EUR 19.7 million and is based on the debt-free valuation of EUR 25.5 million for the entire EOS Group at the time the contract was signed. The purchase price will continue to be determined after the conclusion. Upon completion of the transaction, Harvia will own 78.6% of the Group’s German and 80.0% of the Group’s Russian operations and have the option to acquire minority interests in the future (see the “Transaction Structure” section for more information). Harvia will fund the acquisition with interest bearing debt and its own cash.

The acquisition is expected to create annual synergies of at least EUR 2.2 million, which are expected to be fully realized by 2024. The main sources identified for synergies are cross-selling opportunities, streamlining of the product range and economies of scale in procurement. In addition, cost savings are to be achieved through the optimization of warehouse and logistics as well as the optimization of sales. The one-time integration and post-graduation costs are estimated at a total of EUR 1.4 million in 2020 and 2021.

Harvia does not publish its short-term outlook. The transaction will have no impact on Harvia’s long-term goals for growth, profitability and leverage.

“Harvia is proud to announce the acquisition of a majority stake in EOS Group, the world’s leading manufacturer of professional and premium sauna and spa solutions. The acquisition fits in perfectly with our strategy and supports our goal of increasing the value of average purchases, geographic expansion and improving our productivity. It is also a natural step for Harvia to become the leading one-stop shop in the global sauna markets and, in particular, to strengthen our spa offering, ”says Tapio Pajuharju, CEO of Harvia Plc.

“Harvia’s balance sheet and financial position are strong. After a thorough financial and risk analysis, we came to the conclusion that, despite the global coronavirus situation, now is the right time for this transaction, ”continues Pajuharju. “The acquisition of EOS Group offers a great opportunity to increase Harvia’s market share, particularly in professional and premium sauna and spa solutions. In addition, the acquisition supports our profitability. We see clear synergy effects in the acquisition, as the Harvia and EOS product portfolios complement each other well. Both brands will be continued as independent brands. With our current distribution network, we see good opportunities to expand the distribution of EOS products to new markets, ”concludes Pajuharju.

“I am very happy with this transaction. Both Harvia and the EOS Group are strong companies in their own segments, and our professional and premium offers for sauna and spa solutions complement each other well, ”says Rainer Kunz, Managing Director of the EOS Group. “EOS is financially strong and we are debt free. Over the past few years we have worked hard to develop our manufacturing, sourcing and delivery processes. At an unprecedented time that we are now living with the coronavirus, this work will benefit both us and Harvia. Together with Harvia we are even more robust and stronger, ”concludes Kunz.

Strategic justification for the clearly synergistic acquisition

The acquisition of a majority stake in EOS is a logical step in implementing Harvia’s strategy and clearly complements Harvia’s range of professional and premium sauna and spa solutions. The acquisition will also increase Harvia’s market share in the global sauna heaters and components market from an estimated 11% to 14%.

EOS products are generally used in luxury spas, wellness hotels, fitness clubs and in sauna and spa projects by private individuals in the premium price range. The company has a strong sales network and its loyal customer base consists of renowned European sauna and steam bath manufacturers. The EOS sales network covers more than 80 countries and the group is a leader in Germany, Austria, Russia and the CIS countries.

The most important brands of EOS include EOS sauna heaters and steam generators, gas-powered Kusatek sauna heaters as well as Spatronic control devices and electronics. All EOS products are developed and manufactured in the company’s modern production facility in Driedorf.

Key financial information EOS Group

The key financial figures for the EOS Group are shown below (in EUR million):

	2019	2018	2017
Pro forma revenue	17.3	17.5	17.2
Sales growth	-1.5%	+ 2.1%
Pro forma adjusted EBITDA	3.2	3.0	2.4
Pro forma adjusted EBITDA margin	18.5%	17.3%	13.8%
Pro forma adjusted EBIT	2.8	2.7	2.0
Pro forma adjusted EBIT margin	16.5%	15.5%	12.1%

The EOS Group consists of two companies, Kunz & Meis Holding GmbH (holding company for German companies) and OOO EOS-Premium Spa (Russian operating company), which have been consolidated to present pro forma figures. In addition, selected one-time effects were adjusted to show the adjusted EBITDA and EBIT figures. The reported unadjusted figures for 2019 are: EBITDA EUR 2.9 million (16.7%) and EBIT EUR 2.5 million (14.7%).

The EOS Group’s total assets amounted to EUR 10.8 million at the end of 2019. The net debt amounted to EUR 1.3 million.

As a result of the transaction, Harvia’s net debt will increase from EUR 28.3 million at the end of 2019 to EUR 49.6 million and long-term liabilities from EUR 38.7 million to EUR 61.1 million. After the transaction, Harvia’s equity ratio is expected to be 46.0% (56.6% at the end of 2019).

The illustrative combined sales of Harvia for the 2019 financial year after the acquisition of the EOS Group is EUR 91.6 million and the adjusted EBITDA is EUR 20.2 million.

Transaction structure

The acquisition concerns Kunz & Meis Holding GmbH and its operating subsidiaries EOS Saunatechnik GmbH, Kusatek GmbH and Spatronic GmbH as well as OOO EOS-Premium Spa, which is active in Russia. The transaction also includes a property that will be acquired by M. & K. Immobilien GbR and used by the EOS Group.

The sellers of the transaction are the managing directors Rainer Kunz and Michael Meis, who currently own 100% of Kunz & Meis Holding GmbH, 50% of OOO EOS-Premium Spa and 100% of M. & K. Immobilien GbR and currently Vasilij Sosenkov owns 50 % of the OOO EOS-Premium Spa.

At the end of the transaction, Harvia will own 78.6% of Kunz & Meis Holding GmbH and 80.0% of OOO EOS-Premium Spa. Rainer Kunz remains as a minority shareholder of Kunz & Meis Holding GmbH with 21.4% and Vasilij Sosenkov as minority shareholder of OOO EOS-Premium Spa with 20.0%. The sellers have suspended options to sell the remainder of their shares after certain conditions are met. Harvia has the option to acquire the minority interests within the next eight years.

The purchase price of the shares and properties under consideration amounts to EUR 19.7 million and is further specified on the basis of net debt and net current assets at the time the transaction is completed. The purchase price will be financed with new long-term financing of EUR 20.0 million. The value of the minority interests is recorded on Harvia’s balance sheet as a long-term liability and the values ​​are reviewed annually.

As part of the transaction, Mr. Rainer Kunz will become a shareholder and member of the Harvia management team and will continue to assume a leadership role in the EOS Group after the transaction. Vasilij Sosenkov will continue to hold a management position at EOS Russia.

The transaction is subject to customary closing conditions and is expected to close in March through April 2020.

Harvia is advised by Aventum Partners Oy as financial advisor, Borenius Attorneys Ltd and Noerr LLP as legal advisor, and by Hill + Knowlton Strategies as communications advisor.

Webcast for analysts, investors and the media

Harvia will host a webcast in English for analysts, investors and the media on March 18, 2020 at 11:00 a.m. EET. Tapio Pajuharju, CEO of Harvia Plc, and Ari Vesterinen, CFO, will moderate the event.

A live webcast of the conference is available at: https://harvia.videosync.fi/2020-03-18-press-conference

The dial-in details are:

PIN: 38822842 #
FI: +358 9 8171 0310
UK: +44 333 300 0804

A replay of the webcast will be available on the Harvia website https://harviagroup.com/ after the event.

Additional Information:

Tapio Pajuharju, managing director
Tel .: +358 50 577 4200
tapio.pajuharju@harvia.fi

Ari Vesterinen, CFO
Tel .: +358 40 505 0440
ari.vesterinen@harvia.fi

About Harvia

Harvia is one of the world’s leading companies in the sauna and spa market in terms of sales. Harvia’s brand and product portfolio is well known in the market, and the company’s comprehensive product portfolio strives to meet the demands of the international sauna and spa market from both private and professional customers.

Harvia sales in 2019 amounted to EUR 74.1 million, the operating profit to EUR 13.3 million and the adjusted operating profit for the same period to EUR 13.9 million. The company employs around 400 people in Finland, China and Hong Kong, Romania, Austria, the USA, Germany and Estonia. The company is headquartered in Muurame, Finland, next to its largest sauna and sauna component manufacturing facility.