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Axalto and Gemplus to Combine to Create a Global Leader in Digital Security

Amsterdam, The Netherlands and Luxembourg (ots/PRNewswire)

-	Merger of Equals is Expected to Create a World-Class Leader in
Digital  Security
-	Gemalto: Anticipated Pro-Forma 2005 Revenues of Approximately
EUR 1.8 Billion (US$ 2.1 Billion) and 11,000 Employees
-	Gemalto to Deliver Approximately EUR 85 Million (US$ 100
Million)  in Net Annual Expected Synergies to be Fully Realized in
the Third Year  Post-Closing
- Major Operational Centers in the Paris and Marseille Areas
The boards of Axalto N.V. ("Axalto" - Euronext: NL0000400653 -
AXL) and  Gemplus International S.A.  ("Gemplus" - Euronext:
LU0121706294 - GEM ; NASDAQ: GEMP), both leading  digital security
providers, have unanimously approved the terms of a  recommended
merger of equals to create Gemalto.
The transaction will be structured as an exchange offer by Axalto
for Gemplus, with an exchange ratio of 2 Axalto shares for every 25
Gemplus shares and a distribution of EUR 0.26 per share to be made
pre-offer by Gemplus to its shareholders.
The distribution represents an amount of approximately EUR 163
million based on current Gemplus shares outstanding. Texas Pacific
Group and the Quandt family entities, Gemplus' largest shareholders
representing in aggregate 43.7% of Gemplus' share capital, have
agreed to contribute their shares to Axalto prior to the launch of
the offer at the same exchange ratio.
With expected combined 2005 pro-forma revenues of EUR 1.8 billion
(US$ 2.1 billion), the combination will create a world-class leader
in digital security. The combined companies will have operations in
over 50 countries, will have large operational centers in the Paris
and Marseille areas and employ approximately eleven thousand people.
Gemalto will be registered in the Netherlands.
Transaction Highlights
    -	Merger of equals to create a world class leader in digital
      security
    -	Combined entity in a strong position to address growth in core markets
      and new applications
    -	Broader client base
    -	Combination of intellectual capital and focusing of R&D and Sales &
      Marketing resources on new application development and superior
      customer service
    -	Strong and shared governance, shared and strengthened management team
    - Significant identified synergies, estimated to have a net impact on
      operating income of approximately EUR 85 million (US$ 100 million)
      per annum by the third year after closing on a fully phased basis
Business Rationale
Gemalto believes it will be in a strong position to capture future
industry growth. In particular, the combined R&D and Sales &
Marketing efforts should create a compelling platform to develop new
markets and pursue high growth opportunities, such as Identity,
ePassport, Healthcare, IT and corporate security, and payments.
Furthermore, in its largest product lines of mobile communication and
banking, the combination is expected to allow faster development and
commercialization of high-end products. Gemalto anticipates
benefiting from enhanced scale, translating into improved
manufacturing processes, efficiencies in the supply chain, and
greater ability to support client-dedicated projects. Gemalto
believes that following the combination, it will be in a better
position to service its broader portfolio of clients with an enhanced
local presence and an expanded product range. In addition, the
combined company should benefit from higher visibility in the capital
markets.
Alex Mandl, Gemplus' President and CEO said: "This transaction is
an important development for Gemplus, Axalto and the digital security
industry as a whole. This merger, with a sound industrial logic, is a
win-win that will create value not only for our respective
shareholders but also for our clients and employees. We are confident
in our ability to deliver significant value to our shareholders."
Terms of the Transaction and Transaction Process
The transaction will be executed in two steps. Texas Pacific Group
and the Quandt family entities, Gemplus' largest shareholders, have
agreed to contribute their shares to Axalto at an exchange ratio of 2
Axalto shares for every 25 Gemplus shares. Immediately prior to this
contribution in kind, Gemplus will distribute EUR 0.26 per share to
all its shareholders including Texas Pacific Group and the Quandt
family entities. The contribution in kind and distribution are
subject to anti-trust and other regulatory approvals, the approval of
shareholders and certain other customary contractual conditions.
Following the completion of the contribution in kind, Axalto will
launch a voluntary public exchange offer for the remaining Gemplus
shares at the same exchange ratio of 2 Axalto shares for every 25
Gemplus shares. Gemplus shareholders will receive in total, assuming
full acceptances, approximately 50.2 million newly issued Axalto
shares, representing 55.4% of the outstanding capital of the combined
group, with Axalto shareholders representing 44.6% of the share
capital.[1]
The exchange ratio, taking into account the distribution payable
to Gemplus shareholders, represents a nil-premium transaction when
measured on a 30-day trailing basis.
The transaction has been unanimously recommended by both
Axalto's and Gemplus' Boards of Directors.
Synergies, Financial Benefits and Integration Planning
Management of the companies expect to realize joint annualized net
operational synergies of approximately EUR 85 million (US$ 100
million) by the third year after closing on a fully phased basis.
Most of these synergies will accrue from volume effects, supply chain
efficiencies and sharing of best practices. Gemalto anticipates
limited job reductions in its R&D and manufacturing base due to
current high capacity utilization and the need for further human
capital to service the anticipated industry growth. The anticipated
one-time IT, relocation and other restructuring costs necessary to
realize these synergies are expected to total approximately EUR 43
million (US$ 50 million).
The proposed overall integration strategy has been jointly
formulated by the two management teams. As part of this process,
appropriate information or consultation, as the case may be, will be
provided to staff and employee representative bodies in the relevant
jurisdictions in accordance with local legal requirements.
Implementation is expected to commence following shareholder and
regulatory approvals and the completion of the contribution in kind.
In light of the strong financial position of the combined group,
it is the current intention of both CEOs to recommend to the Board of
Gemalto that a share buyback program covering up to 10% of Gemalto
shares be instituted post-closing.
Olivier Piou, Axalto's CEO said: "This merger is wholeheartedly
supported by both management groups. Once shareholder, regulatory and
other approvals have been obtained, the combined management team will
rapidly implement the combination and integrate Sales, Marketing, R&D
and Manufacturing on a global basis. A major priority of the Board
and management of Gemalto will be to achieve a successful and
expeditious integration of Axalto and Gemplus that preserves the key
strengths of the culture, management and business practices of each
group and allows the efficient realization of the expected
synergies."
Balanced Merger of Equals
Alex Mandl, the President & CEO of Gemplus, will assume the
position of Executive Chairman and Olivier Piou, the CEO of Axalto,
will be the CEO of Gemalto. Mr. Mandl and Mr. Piou will jointly
constitute the Office of Chairman that will be responsible for
Integration, M&A, Strategy, Budgeting and the top 30 managers. Frans
Spaargaren will assume the position of Chief Administrative Officer
with responsibility for integration, procurement, supply chain and
IT, and Charles Desmartis will be the Chief Financial Officer of
Gemalto, with both reporting to Olivier Piou. The Board of Directors
of the combined entity will be comprised of 11 members, 5 proposed
from the current Axalto Board, 5 proposed from the current Board of
Gemplus and 1 other independent member will be jointly nominated.
Trading Update
Each of Axalto and Gemplus has stated that, for the financial year
2005, they expect to report revenues close to US$ 1 billion, and EUR
0.95 billion respectively, and operating margins of approximately 8%
each.
Other
Deutsche Bank acted as financial advisor to Axalto, and Morgan
Stanley as financial advisor to Gemplus.
Willkie Farr & Gallagher LLP acted as legal advisors to Axalto
and Hogan & Hartson MNP acted as legal advisors to Gemplus.
Executives of both Axalto and Gemplus will host a joint press
conference at 11:00 AM Paris time.
Venue:
    Hotel Le Bristol (Rooms Elysées and Malmaison-Marly)
    112 rue du Faubourg Saint-Honoré
    75008 Paris
    Callers may participate in the live conference by dialing:
    Dial-in:
    In French:  		+33-(0)-1-56-38-35-70
    In English: 		+44-(0)-20-7190-1596
    Passwords:  Please state either Axalto or Gemplus
    A second conference call will take place at 3:00 PM Paris time
    (2:00 PM GMT and 9:00 AM New York time) in English only:
    Dial-in:
    UK:  +44-(0)-20-7190-1596
    US:   +1-480-629-9562
    Password:  Please state either Axalto or Gemplus
    For further information
    Axalto:
    Press Relations
    Emmanuelle SABY	             T.:  +33-(0)-1-46-00-71-04
                                     M:   +33-(0)-6-09-10-76-10
	                               esaby@axalto.com
    TBWA  CORPORATE
    Emlyn KORENGOLD	             T.:  +33-(0)-1-49-09-66-51
                                     M:   +33-(0)-6-08-21-93-74
	                               emlyn.korengold@tbwa-corporate.com
    Investor Relations
    Stéphane BISSEUIL	             T.:  +33-(0)-1-46-00-70-70
                                     M.:  +33-(0)-6-86-08-64-13
	                               sbisseuil@axalto.com
    Gemplus:
    Rémi CALVET	                   M.:  +33-(0)-6-22-72-81-58
    Senior Vice President, 	       remi.calvet@gemplus.com
    Corporate Communications
    Edelman Paris
    Frédéric BOULLARD	             T.:  +33-(0)-1-56-69-73-95
	                               frederic.boullard@edelman.com
    Investor Relations
    Celine BERTHIER	             T.:  +41-22-544-50-54
	                               celine.berthier@gemplus.com
    For more information, please visit www.gemalto.com
Important information
Investors and security holders are strongly advised to read, when
they become available, the prospectus/offer to exchange and related
exchange offer materials regarding the business combination
transaction referenced in this press release, as well as any
amendments and supplements to those documents because they will
contain important information. When available, the prospectus/offer
to exchange and the other documents may also be obtained from Axalto
Investor Relations. If required, the prospectus/offer to exchange
will be filed with the Securities and Exchange Commission by Axalto.
To the extent the prospectus/offer to exchange is filed with the
Securities and Exchange Commission ("SEC"), security holders may
obtain a free copy of the prospectus/offer to exchange (when
available) and other related documents filed by Axalto at the
Commission's website at www.sec.gov.
Investors and security holders who are US persons or who are
located in the United States should also read any
solicitation/recommendation statement of Gemplus on Schedule 14D-9
when and if filed by Gemplus with the SEC because it will contain
important information. The solicitation/recommendation statement and
other public filings made from time to time by Gemplus with the SEC
are available without charge from the SEC's website at www.sec.gov.
This document, if issued, will also be available for inspection and
copying at the public reference room maintained by the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, United States. For
further information about the public reference room, call the SEC at
+1 800 732 0330.
In France, holders of Gemplus securities are requested, with
respect to the offer, to refer, when filed by Axalto, to the
prospectus (note d'information) that will be available on the website
of the AMF (www.amf-france.org).
This communication does not constitute an offer to purchase or
exchange or the solicitation of an offer to sell or exchange any
securities of Axalto or an offer to sell or exchange or the
solicitation of an offer to buy or exchange any securities of
Gemplus, nor shall there be any sale or exchange of securities in any
jurisdiction in which such offer, solicitation, sale or exchange
would be unlawful prior to the registration or qualification form the
laws of such jurisdiction. Accordingly, persons who come into
possession of this document should inform themselves of and observe
these restrictions. The solicitation of offers to buy any Gemplus
ordinary shares (including Gemplus shares represented by Gemplus
American Depositary Shares) in the United States will only be made
pursuant to a prospectus/offer to exchange and related offer
materials that Axalto expects to send to holders of Gemplus
securities, in accordance with or pursuant to an exemption from the
U.S. securities laws.
Unless otherwise determined by Axalto, it is not intended that any
offer will be made, directly or indirectly, in or into Australia,
Canada or Japan and in such circumstances it will not be capable of
acceptance in or from Australia, Canada or Japan. Accordingly, copies
of this announcement are not being, and must not be, mailed or
otherwise distributed or sent in or into Australia, Canada or Japan.
Custodians, nominees and trustees should observe these restrictions
and should not send or distribute this announcement in or into
Australia, Canada or Japan.
Forward-Looking Statements
This communication contains certain statements that are neither
reported financial results nor other historical information and other
statements concerning Axalto, Gemplus and their combined businesses
after completion of the proposed combination. These statements
include financial projections and estimates and their underlying
assumptions, statements regarding plans, objectives and expectations
with respect to future operations, events, products and services and
future performance. Forward-looking statements are generally
identified by the words "expects", "anticipates", "believes",
"intends", "estimates" and similar expressions. These and other
information and statements contained in this communication constitute
forward-looking statements within the safe harbor provisions of U.S.
federal securities laws. Although management of the companies believe
that the expectations reflected in the forward-looking statements are
reasonable, investors and security holders are cautioned that
forward-looking information and statements are subject to various
risks and uncertainties, many of which are difficult to predict and
generally beyond the control of the companies, that could cause
actual results and developments to differ materially from those
expressed in, or implied or projected by, the forward-looking
information and statements, and the companies cannot guarantee future
results, levels of activity, performance or achievements. Factors
that could cause actual results to differ materially from those
estimated by the forward-looking statements contained in this
communication include, but are not limited to: the ability of the
companies to integrate according to expectations; the ability of the
companies to achieve the expected synergies from the transaction;
trends in wireless communication and mobile commerce markets; the
companies' ability to develop new technology and the effects of
competing technologies developed and expected intense competition
generally in the companies' main markets; profitability of expansion
strategy; challenges to or loss of intellectual property rights;
ability to establish and maintain strategic relationships in their
major businesses; ability to develop and take advantage of new
software and services; the effect of the transaction and any future
acquisitions and investments on the companies' share prices; changes
in global, political, economic, business, competitive, market and
regulatory forces; and those discussed by Gemplus in its filings with
the SEC, including under the headings "Cautionary Statement
Concerning Forward-Looking Statements" and "Risk Factors". Moreover,
neither the companies nor any other person assumes responsibility for
the accuracy and completeness of such forward-looking statements. The
forward-looking statements contained in this communication speak only
as of this communication and the companies are under no duty to
update any of the forward-looking statements after this date to
conform such statements to actual results or to reflect the
occurrence of anticipated results or otherwise.
    (1) Figures based on 627.8 million Gemplus shares outstanding
        (excluding 1.3 million of treasury shares), 40.4 million Axalto
        shares (excluding 0.2 million of treasury shares), and assuming
        full acceptances in the offer.

Contact:

For further information: Axalto: Press Relations, Emmanuelle SABY,
T.: +33-(0)-1-46-00-71-04,
M: +33-(0)-6-09-10-76-10, esaby@axalto.com, TBWA CORPORATE: Emlyn
KORENGOLD,
T.: +33-(0)-1-49-09-66-51, M: +33-(0)-6-08-21-93-74,
emlyn.korengold@tbwa-corporate.com, Investor Relations: Stéphane
BISSEUIL, T.: +33-(0)-1-46-00-70-70, M.: +33-(0)-6-86-08-64-13,
sbisseuil@axalto.com; Gemplus: Rémi CALVET, Senior Vice President,
Corporate Communications, M.: +33-(0)-6-22-72-81-58,
remi.calvet@gemplus.com, Edelman Paris,
Frédéric BOULLARD, T.: +33-(0)-1-56-69-73-95,
frederic.boullard@edelman.com, Investor Relations, Celine BERTHIER,
T.: +41-22-544-50-54, celine.berthier@gemplus.com

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