Twintec AG, a global provider of exhaust gas aftertreatment products, has announced the acquisition of Kontec GmbH effective Sept. 30. The binding purchase agreement was signed, and the transaction is expected to be completed early in the fourth quarter of 2015. The economic transfer will take place effective Oct. 1.
The acquisition is a significant strategic and economic milestone for Twintec in connection with its envisioned
growth in the OEM business over the next years. Kontec GmbH is one of Germany’s top providers of OEM development services for engines and exhaust gas aftertreatment. At Twintec, the acquisition will result in a considerable expansion of its OEM business, which the company says is expected to see a surge in growth in the next few years. Twintec expects the acquisition to boost revenue to €55-60 million ($61.95-67.58 million) and push up EBITDA to around €3.5 million ($3.94 million) in the next financial year. Both figures would approximately represent a doubling of these key financials compared with the 2014 financial year. The purchase price for the complete acquisition of Kontec amounts to 7 million shares created by way of a capital increase in return for contributions in kind. Kontec Founder and Managing Director Klaus Bänsch will be appointed to the Management Board of Twintec AG effective Oct. 1 and assume the position of chief technical officer. Armin Rosbach, the current chief financial officer, will resign.
Kontec develops, designs, simulates and validates engines and exhaust gas aftertreatment systems for leading German OEMs. In the past, the company has implemented successful projects for customers together with Twintec. After joining forces with Twintec, Kontec is now in the position to market complete exhaust gas aftertreatment systems, such as Twintec’s BNOx system for reducing nitrogen oxide emissions in the low temperature range, to OEM customers.
With more than 450 highly qualified employees in Europe, the company says it now has the critical mass for long-term success in the OEM business. In 2014, Kontec GmbH generated revenue of €34 million ($38.3 million) and EBITDA of €1.7 million ($1.91 million). The acquisition puts Twintec in the right position to benefit from the expected surge in growth in the OEM business stemming from the stricter laws taking effect starting in 2018, according to the company. Twintec has already signed agreements with several renowned manufacturers that are expected to boost revenue substantially in the coming years. In addition, the Twintec technology is currently in the development phase at several manufacturers prior to a release for series production.
Besides strategic synergies, the acquisition unlocks considerable potential on the cost side as well. From 2016 onward, costs are expected to be reduced by around €1.5 million ($1.69 million) per year. Combining R&D efforts will result in capital expenditure savings of some €0.5 million ($.56 million) per year. Taken together, this is expected to increase free cash flow by €2.0 million ($2.25 million). Starting in 2017, the additional business opportunities provided by the acquisition will also generate further momentum for growth. In addition to achieving organic growth, Twintec also plans to expand further by making acquisitions.
