intended acquisition of the adhesives and electronic · pdf file1 intended acquisition of the...

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Intended Acquisition of theAdhesives and Electronic Materials

Businesses of National Starch

Presentation to Investors & AnalystsAugust 15, 2007

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This information contains forward-looking statements which are based on current estimates and assumptions made by the corporate management of Henkel KGaA. Statements with respect to the future are characterized by the use of words such as “expect”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, and similar terms. Such statements are not to be understood as in any way guaranteeing that those expectations will turn out to be accurate. Future performance and results actually achieved by Henkel KGaA and its affiliated companies depend on a number of risks and uncertainties and may therefore differ materially from the forward-looking statements. Many of these factors are outside Henkel's control and cannot be accurately estimated in advance, such as the future economic environment and the actions of competitors and others involved in the marketplace. Henkel neither plans nor undertakes to update any forward-looking statements.

Disclaimer

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Agenda

1. Deal Structure

2. Facts on National Starch A&E businesses

3. Strategic Rationale

4. Side by Side Analysis

5. Financial Implications

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Acquisition of National Starch Adhesives and Electronic Materials businesses (in the following: A&E) for £2.7bn(€3.97bn), cash & debt free

Back-to-back agreement with Akzo Nobel as part ofAkzo Nobel’s take-over offer for ICI

Unique opportunity to strengthen market position in industrial adhesives & electronic materials

Highly complementary in terms of markets served, geographic spread and technologies

Significant cost/revenue synergies (€240-260m) expected

Acquisition earnings-enhancing in year one (pre-restr.)

Financing based on commitment to A Rating

Transaction Highlights

Transaction Highlights Acquisition Henkel – National Starch A&E businesses

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Agenda

1. Deal Structure





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Deal Structure &Indicative Timetable

1 Deal Structure Acquisition Henkel – National Starch A&E businesses

Jul. Aug. Sept. Oct. Nov. Dec.2008

Jan. Feb.

Aug. 13, 2007:

Take-over offerby Akzo Nobel for ICI

Back-to-back agreementAkzo Nobel – Henkel(pre-agreed on-saleof A&E businesses)

End of Q4/2007:

Expected closingof Akzo Nobel/ICI(Preconditionfor A&E acquisition)

End of Q1/2008:

Expected closing of Akzo Nobel/Henkel(Transfer of A&E businesses to Henkel)

Mar.

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Agenda

1. Deal Structure





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National Starch Sales Split

2 Facts on National Starch A&E businesses Acquisition Henkel – National Starch A&E businesses

Electronic Materials(Sales 2006: €298m)

Adhesives(Sales 2006: €1,546m)

SpecialityStarchesSpecialityPolymers

38%52%

10%

National Starch business sectors (FY 2006 sales*)

Acquisition Target

* Exchange rate £/€: 0.68

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Adhesives

Sales

CAGR 2003 - 2006

EBITDA

EBITDA margin

EBIT

CAGR 2003 - 2006

EBIT margin

1,546

+8%

165

10.7%

122

+8%

7.9%

Electronic Materials

TotalA&E

298

+11%

84

28.2%

75

+17%

25.2%

1,844

+8%

249

13.5

197

+11%

10.7

Key FinancialsA&E businesses

FY 2006, in €m(Exchange rate £/€: 0.68)

Facts on National Starch A&E businesses Acquisition Henkel – National Starch A&E businesses2

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Regional Split

A&E businesses (1/2)

Facts on National Starch A&E businesses Acquisition Henkel – National Starch A&E businesses

Business

Second largest global producer of industrial adhesives

Non WovensPaper ConvertingWood BondingPackagingTapes and LabelsAthletic FootwearTransportAssembly

Adhesives

Accelerated growth in emerging markets(China, India, Latin America, EE, MEA)

AsiaPacific

EMEA

LatinAmerica

32%

29%NorthAmerica

32%

7%

2

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Regional Split

A&E businesses (2/2)

Facts on National Starch A&E businesses Acquisition Henkel – National Starch A&E businesses

Business

Leading market position in key market niches with advanced technology

Semiconductor packaging (52%)Electronic & component assembly (30%)Circuit materials (15%)Specialty packages (3%)(% of 2006 sales)

Electronic Materials

Established global presence, with recent significant expansion in China and India

AsiaPacific

EMEA

69%

39%

NorthAmerica

15%

16%

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Agenda

1. Deal Structure





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Unique consolidation opportunity

Strengthening market position inIndustrial Adhesives and Electronics

Perfect strategic fit: Attractive and complementary market segments, regions and technologies

Significant cost/revenue synergies (€240-260m) expected

Strategic Rationale:Acquisition of A&E businesses

Transformational acquisition

3 Strategic Rationale Acquisition Henkel – National Starch A&E businesses

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Well-balanced portfolio of HPC & Adhesives

Strengthening presence in Asia Pacific

Additional €500m of EBITDA offers significant margin potential (incl. cost/revenue synergies)

Superior cash flow profile allows rapid debt reduction

Strategic Rationale:A Major Step Forward for Henkel

Strong basis for further profitable growth

3 Strategic Rationale Acquisition Henkel – National Starch A&E businesses

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Agenda

1. Deal Structure





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Side by Side Analysis:A&E - Henkel

4 Side by Side Analysis Acquisition Henkel – National Starch A&E businesses

A&E*

Sales

EBITDA

EBITDA margin (in %)

EBIT

EBIT margin (in %)

1,844

249

13.5

197

10.7

HenkelCombined(pre-synergies)

12,740

1,648

12.9

1,298

10.2

14,584

1,897

13.0

1,495

10.3

FY 2006, in €m


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Side by Side Analysis:Regional Portfolio


A&E Henkel Combined

8%

63%

22%

APCorp.

2%

5%LA

NA

EMEA

12%

58%

APCorp.

2%

23%

5%LA

NA

EMEA

38%

27%

29%

6%AP

LA

NA

EMEA

Further strengthening Asia Pacific

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Side by Side Analysis:Business Portfolio


Laundry & Home Care

Cosmetics/Toiletries

AdhesivesTechnologies

Corp.

32%

22%

44%

2%

84%

16%

Electronics

28%

20%37%

AdhesivesTechnologies (50%)

Well-balanced portfolio of HPC & Adhesives

13%

Nat. Starch businesses

Henkel Adhesives

Adhesives

A&E Henkel Combined

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Side by Side Analysis:A&E - Adhesives Technologies


A&E*

Sales

EBITDA

EBITDA margin (in %)

EBIT

EBIT margin (in %)

1,844

249

13.5

197

10.7

HenkelAdhesives

Techn.

5,510

726

13.2

579

10.5

7,354

975

13.3

776

10.6

FY 2006, in €mCombined(pre-synergies)


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Strong in Asia and North America

Strong in non-wovens, packaging and athletic footwear

Strategic expansion in transdermal (medicine) andengineered wood

Strong position with global key accounts

Excellent technology portfolio

Long-term, margin- and value-oriented management

A&E businesses:Position in Adhesives


Huge potential in growth regions and with key accounts

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Significant market position with selective,high-technology portfolio

Global reach

Strong position with global key accounts

Strong position with suppliers & contract manufacturers

A&E businesses:Position in Electronic Materials

Sustained growth opportunities for broader Henkel portfolio


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Agenda

1. Deal Structure





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Purchase price: €3,970m (£2,700m)

Cost/revenue synergies: €240-260m

One-off charge ~ €250m

IRR clearly exceeds WACC (7%)

Earnings enhancing in year one (pre-restr.)

Financing based on commitment to A Rating

Overview Financial Implications

5 Financial Implications Acquisition Henkel – National Starch A&E businesses

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OverviewExpected Synergies & Charges

2008 2011


...

€m

One-offcharge

Cost synergies

€250m

€70-80m

€170-180m

Revenue synergies

Total:€240-260m

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Expected Cost Synergies: Breakdown

Supply chain (Purchasing & Production)

Sales/Service & R&D

Overhead/Administration

Cost synergies

~30-35%

~30-35%

~30-35%


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Expected Cost Synergies:Overview Combined Entity

Production sites

Employees

Total purchasing volume

Headquarters / Regional offices

Combined Entity*

~160

~28,000

~ €3.5bn

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* pre-synergies

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Revenue synergy potential from:

New market segments

New technologies

Regional exposure

Expected Revenue Synergies


Substantial cross-selling potential

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Henkel

Non Wovens

Paper Converting

Wood Bonding

Packaging

Tapes and Labels

Athletic Footwear

Transport

Assembly

Electronics

A&ERelative Strength inIndustrial Markets:

Revenue Synergies:New Market Segments


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Revenue Synergies:Top Brands & Technologies


Adhesives for pressure sensitive applications(e.g. medical/transdermal drug delivery)

One component adhesive systems for engineered wood

DURO-TAK

Semiconductor packaging: No.1 adhesive supplier for DRAM package assembly

COOL-MELT

Hotmelt Adhesives for Nonwovens, Femcare, Babycare and Incontinence applications

DISPOMELT

Hotmelt Adhesives for packaging applicationsat lower temperatures than traditional hotmelts

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A&E

EMEA

North America

Latin America

Asia Pacific

HenkelRanking by % of sales

Revenue Synergies:Regional Exposure

Further strengthening Asia Pacific & North America


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Transaction Multiples

Multiples A&E(FY 2006)

Sales

EBITDA

EBIT

2.1

15.9

20.1

Multiples transformat.

acquisitions* Multiples A&E

post synergies

2.6

14.9

20.0

2.1

8.0

8.9

* Source: Lehman Brothers; acquisitions in specialty chemicals and FMCG


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Financing


Purchase Price: €3,970m (£2,700m)

Combination of:

Divestment of non-core assets and/or

Debt and/or

Capital increase

Financing discussed with S&P and Moody‘sBased on commitment to maintain A rating

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SuccessfulTransformational Acquisitions


(1995)

(1997)

(2004)

Proven integration track record

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Transformational acquisition

Strengthening market leadership

Penetrating adjacent, highly attractive markets

Adding key technologies

Strengthening growth regions

Significant synergy potential

Strengthening cash flow profile

Acquisition A&E businesses:Summary

Summary Acquisition Henkel – National Starch A&E businesses

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Henkel is a leader with brands and technologies that make people's lives

easier, better and more beautiful.

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