Kendrion sells automotive division and chooses to focus on industrial activities

Kendrion today announced the sale of its automotive-related activities in America and Europe. These activities will be sold for an enterprise value of €65 million to Solero Technologies LLC, a portfolio company of US private equity firm Atar Capital. Kendrion will use the proceeds in full to strengthen its balance sheet and invest in opportunities within its industrial division. The sale of its automotive market activities repositions Kendrion as a fully industrial company, active in the production of actuators for various end markets. We strongly support this split and the resulting greater focus. We therefore back management and the Supervisory Board in this strategic choice. After the transaction, the remaining company will have a more attractive growth and margin profile, which we expect will reduce the significant undervaluation on the stock market.

Kendrion produces and sells electromagnetic and mechatronic components and systems. Until recently, the company sold these products across four different segments: Automotive Core, Automotive E, Industrial Brakes ('IB') and Industrial Actuators & Controls ('IAC'). The first two divisions are Kendrion's automotive-related activities, while IB and IAC are its industrial segments. Although the technology behind the products sold within these segments is similar, there are hardly any operational synergies. Each segment has specific customers, its own product development, and a different financial profile. Within the automotive division, for example, achieving economies of scale was essential to reach a reasonable gross margin. The industrial divisions have higher product margins and make a large share of products to customer specification.

More than 70% of automotive revenue is generated by products for combustion engines. The European Union's ambitious 'net zero' targets and those of other major world powers, the competitive nature of this market, and its lower profitability make this segment, in our view, less attractive. We are therefore pleased that, with this sale, Kendrion can focus on its industrial activities, which are supported by megatrends such as electrification and sustainable energy. Within its industrial end markets, Kendrion has built strong market positions through high product quality and long-standing customer relationships. These segments are also more profitable and growing faster, and are therefore expected to make the company's profile more attractive.

We expect Kendrion's financial results to improve significantly in the coming years as a result of this sharpened focus. The new factory in China, which became operational last year and remains fully owned by Kendrion, is expected — based on orders already won — to make a strong contribution to this growth this year and in the years ahead.