EQS-News: RENK Holding GmbH: RENK Group plans initial public offering

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RENK Group plans initial public offering

• Globally leading manufacturer of mission-critical drive solutions across diverse civil and military end markets
• Well-invested global footprint with 14 production and maintenance, repair and overhaul sites plus five international sales, services and R&D subsidiaries
• Well-positioned in high-growth markets, driven by the global megatrends of higher need for security and the energy transition with a total addressable market CAGR of 10% estimated for 2022 to 2027
• Successful transformation and repositioning under Tritons ownership
• Fixed order backlog[1] of EUR 1.7 billion as per 30 June 2023 at all-time high
• Driven by strong momentum in the segment Vehicle Mobility Solutions (VMS), expected Group revenues of EUR 900 million to 1,000 million for full year 2023 (2022: EUR 849 million), targeting a ~10% p.a. revenue growth in the medium-term
• Adjusted Group EBIT margin[2] at 17% in 2022, expected to be in the range of 16-17% for the full year 2023 and within the range of ~19-20% in the medium-term
• Committed to sustainability, with products facilitating customers energy transition and in own operations, aiming to become net climate neutral (Scope 1 and 2) in Europe by 2030 and globally by 2040
• Meaningful free float to create a liquid market for RENK Groups shares, offering of existing shares expected to be completed by end of 2023, subject to market conditions
• Triton to remain committed shareholder
• Intended listing and admission to trading on the regulated market (Prime Standard) of the Frankfurt Stock Exchange

Augsburg, 12 September 2023 RENK Group, together with its shareholder Rebecca BidCo S.à r.l., a holding company majority owned by the Triton V fund belonging to the investment firm Triton, is preparing for an initial public offering (IPO) and intends to apply for admission of its shares to trading on the regulated market of the Frankfurt Stock Exchange (Prime Standard). The planned IPO is intended to lay the foundation for RENK Groups continued profitable growth and value creation as it provides the company with greater international visibility in line with expansion of the international footprint and enhanced financing options. The planned offering would comprise a public offer in Germany and private placements to institutional investors elsewhere and is anticipated to consist of an offering of existing shares owned by Triton. Following the completion of the IPO, Triton will continue to hold a majority interest in RENK Group. The offer aims for a meaningful free float to create a liquid market for RENK Groups shares. The IPO is expected to be completed by the end of 2023, subject to market conditions.

Susanne Wiegand, CEO of RENK Group, said: Driven by our highly motivated team and supported by our investor Triton, RENK Group has become a global leader in mission-critical drive solutions and a successful stand-alone business with an international footprint, a well-established global brand and a well-invested growth platform. The planned IPO is the next logical step for us on our growth path. As a trusted partner to our clients and business partners, we will use our leading market positions to capture the strong and sustainable growth momentum in the global defense industry and our civil end markets, driven by the global megatrends of higher needs for security and the energy transition.

Christian Schulz, CFO of RENK Group, said: The intended IPO will provide access to additional financing instruments and will support RENK Groups strategy to deliver high and sustainable multi-decade growth, capitalizing on our global reach, increasing our technology leadership, and focusing on sustainable solutions for our clients that facilitate the energy transition. Our continued organic revenue growth, the success of our disciplined acquisition approach, our fast-growing order backlog and strong operating cash flow demonstrate that we are on track with that strategy.

Claus von Hermann, Chairman of the Supervisory Board of RENK Group and Member of the Investment Advisory Committee at Triton, said: RENK Group has gone through a successful transformation. Triton has supported RENK Group with its industry expertise and with substantial investments in the companys international and product expansion, its research & development and operational excellence. RENK Group is now ready to take the next steps for further growth as a publicly listed company, while Triton is delighted to remain a loyal partner as a committed shareholder.

Market leader for mission-critical drive solutions across defense and diverse civil end markets

Headquartered in Augsburg, Germany, RENK Group is a globally leading manufacturer of mission-critical drive solutions across diverse civil and military end markets. RENK Groups product portfolio includes gear units, transmissions, power-packs, hybrid propulsion systems, suspension systems, slide bearings, couplings & clutches as well as test systems. RENK Group particularly serves customers active in industries for military vehicles, naval and civil marine, cement and plastics production, oil & gas, as well as customers in hydrogen, CCUS (carbon capture, utilization and storage) and industrial heat pump applications.

RENK Groups technology leadership is supported by engineering excellence and innovation. The companys offering comprises design, engineering, production, testing and long-lasting services of and for flexible, customized drive systems. RENK Group operates its business through the three segments Vehicle Mobility Solutions (VMS), Marine & Industry (M&I) and Slide Bearings (SB).

RENK Group is one of the global innovation and technology leaders for transmissions for tracked military vehicles mainly comprising main battle tanks, infantry fighting vehicles, self-propelled howitzers, military personnel carriers, and specialized support vehicles with an estimated global market share of over 30%^[3]. Apart from transmissions for tracked military vehicles, RENK Groups product portfolio in this segment comprises engines, suspensions, electric drives, final drives, and power-packs for military vehicles. In addition, the company is a leading manufacturer of test systems (e.g., for load, torque, and durability tests) for various industrial and defense markets.

For navy and civil marine as well as industrial applications, RENK Group provides technology leading gear units and coupling & clutches solutions. At sea, RENK Groups products are used in naval surface combatants, such as frigates and destroyers, as well as in commercial ships, such as LNG carriers, ferries, dredgers, cargo ships and super yachts. In the industrial sector, RENK Group serves customers in the areas of plastic, steel, and cement production in addition to those active in the sectors oil & gas, hydrogen, CCUS and industrial heat pumps and in the power generation industry.

Moreover, RENK Group is the global leader in standardized slide bearings (e-bearings) for electrical machines and hydro-dynamically lubricated slide bearings^[4]. RENK Groups slide bearings are used in wind and water turbines, electric motors, generators, pumps, blowers, and conveyors.

Successful development during Tritons ownership

Triton acquired RENK Group in 2020 to support the companys global growth path and to enable access to additional market segments and regions. Key to this development was a focus on RENK Groups core competencies, such as technology leadership and innovation, and a consistent alignment of the companys product portfolio with market trends and emerging customer requirements.

Under Tritons ownership, RENK Group has achieved a successful, accelerated transformation with further margin expansion potential and developed into a well-positioned independent company with a clear growth with investments of more than EUR 500 million in Capex, Research & Development and M&A since 2020.

Resilient business model with high revenue visibility and well-invested global operations

In the fiscal year 2022, approximately 70% of RENK Groups revenue was generated from the defense market and approximately 30% of revenue was generated from the civil market, both based on the end-market application of RENK Group products. The company is a trusted partner to its customers and is involved in critical stages of their value chain from engineering and commissioning to delivery and aftermarket services. The product and service offering is complemented by RENK Groups digital solutions.

RENK Group technology is platform-agnostic and the company benefits from locked-in business models that secure high recurring revenue. Long product lifetimes and corresponding long-term service relationships provide RENK Group with a high degree of revenue visibility as well as stability in recurring revenue. Defense platforms typically have long lifecycles with an estimated average product lifecycle for land and naval defense platforms of 40 years or more. As defense platforms are also highly complex, critical components and suppliers are usually not replaced during the lifetime of a platform. In 2022, around 61% of the European and North American tracked vehicle platform types have been supplied by RENK Group.

RENK Group has a well-invested asset base, supported by a proven management team and highly skilled employees. Particularly during the past three years, RENK Group has accelerated its internationalization, supported by a clear and disciplined M&A approach leading to successful acquisitions with a focus on portfolio expansion, and now benefits from a global footprint including 14 production and MRO (maintenance, repair, and overhaul) sites across nine countries and five additional international sales, services and R&D subsidiaries, which are located in close proximity to their customers in order to allow for short lead times. Production facilities are well-invested with modern machinery setups and fully integrated engineering and production capabilities.

Growth platform ready to capture strong momentum stemming from defense super-cycle and energy transition

With its well-invested global asset base, RENK Group is well-positioned to capture the potential in its high-growth markets driven by the megatrends defense super-cycle and energy transition. Its total addressable market is expected to have a CAGR (compound annual growth rate) of approximately 10% between 2022 and 2027.

In response to geopolitical tensions, the Global Defense Budget^[5] is estimated to grow at a CAGR of 5% between 2022 and 2027 due to higher demand for defense applications and need for technology improvements and upgrades. As a result, RENK Groups Total Defense Addressable Market[6] is estimated to grow even faster at a CAGR of approximately 13% during the same period, driven by the companys strong footprint in land and naval applications. RENK Groups Total Civil Addressable Market^[7] is estimated to grow at a CAGR of 5% between 2022 and 2027, which also includes gear units used for new energy. This new energy market is relatively small today but expected to grow at a CAGR of 81% between 2022 and 2027.

Solid balance sheet and strong cash flow generation support growth trajectory

RENK Group has a strong financial profile built on high visibility, growth, profitability, and cash generation. The company benefits from a high revenue visibility with promising growth prospects due to its fixed order backlog, significant business opportunities and the long-term revenue potential from its aftermarket business.

In the fiscal year 2022, RENK Group generated revenue of EUR 849 million and Adjusted EBIT of EUR 144.3 million (17.0% margin). In the first half of 2023, revenues grew by 7.9% year-on-year to EUR 410 million (H1-2022: EUR 380 million) and Adjusted EBIT increased by 5.5%. For the full year 2023, revenues are expected to reach EUR 900-1,000 million and Adjusted EBIT margin to be in the range of 16-17%. In the medium term, RENK Group expects to deliver a ~10% p.a. revenue growth and an Adjusted EBIT margin of ~19-20%.

On the back of a strong pipeline of large projects, the fixed order backlog stands at EUR 1.7 billion as of 30 June 2023, with a strong 21% increase in the first half of the year (FY 2022: EUR 1.4 billion). Based on significant product demand, profitable growth and operational efficiency, RENK Group generates a strong operating cashflow and has been able to decrease its leverage ratio^[8] further to 2.1x (FY 2022: 2.2x). For the full year 2023, the company is aiming for a leverage ratio of 2.0x.

Products facilitate customers energy transition while RENK Group increases sustainability in own operations

Environmental, Social and Governance (ESG) topics are of critical importance to RENK Group. The company aims to support its customers in achieving carbon net neutrality, strives to facilitate customers energy transition needs with its products and provide them with new energy technologies to scale. RENK Group products are used in traditional energy industries to increase energy efficiency as well as in new energy industries, such as hydrogen, CCUS and industrial heat pumps. The company continues to develop its products, services, processes and capabilities, including in the areas of hybridization and electrification, in order to increase energy efficiency.

Sustainability is therefore one of the foundations of RENK Groups business. In order to address ESG topics across the various functions and segments and to establish a strong governance and compliance function, the company has established a dedicated ESG team in 2022. RENK Group is committed to the ten principles of the UN Global Compact, signed the Diversity Charter, and is committed to pursuing a verification of its decarbonization targets by the Science Based Target Initiative. RENK Group aims to become net climate neutral (Scope 1 and 2) in Europe by 2030 and globally by 2040, including via the use of compensation measures from offsets, such as CO2 certificates. The company also uses the sustainable development goals (SDGs), defined by the United Nations as part of the UN Agenda 2030, as strategic guidelines for its business. In spring 2023, RENK Group commissioned an ESG risk rating with Sustainalytics, achieving a medium risk rating of 22.6, placing RENK Group within the top 15 percent of the Sustainalytics machinery universe peer group.

Citigroup, Deutsche Bank and J.P. Morgan will act as Joint Global Coordinators in connection with the planned transaction. Commerzbank, Goldman Sachs, Landesbank Baden-Württemberg and UniCredit will support the transaction as Joint Bookrunners. Crédit Agricole CIB, Mizuho and SEB will be appointed as Co-Lead Managers.

About RENK Group

Headquartered in Augsburg, Germany, RENK Group is a globally leading manufacturer of mission-critical drive solutions across diverse civil and military end markets. Our product portfolio includes gear units, transmissions, power-packs, hybrid propulsion systems, suspension systems, slide bearings, couplings & clutches and test systems. RENK Group particularly serves customers active in industries for military vehicles, naval and civil marine, cement and plastics production, oil & gas, as well as customers in hydrogen, CCUS and industrial heat pump applications. In the fiscal year 2022, RENK Group generated revenue of EUR 849 million.

For further information, please visit: www.renk.com

About Triton

Founded in 1997 and owned by its partners, Triton is a leading European mid-market sector-specialist investor. Triton focuses on businesses that provide important goods and services in the Business Services, Industrial Tech, Healthcare, and Consumer sectors.

Triton has over 200 investment professionals across 11 offices and invests through three complementary All Weather strategies: Mid-Market Private Equity, Smaller Mid-Cap Private Equity, and Opportunistic Credit.

For further information: www.triton-partners.com

Contacts

RENK Group: Günther Hörbst, guenther.hoerbst@renk.com

Triton: Anja Schlenstedt, media@triton-partners.com

IMPORTANT NOTICE

This announcement is an advertisement for the purposes of the prospectus regulation EU 2017/1129 (Prospectus Regulation). It does not constitute an offer to purchase any shares in RENK Holding GmbH (RENK) and does not replace the securities prospectus which will be available free of charge, together with the relevant translation(s) of the summary, at www.ir.renk.com. The approval of the securities prospectus by the German Federal Financial Supervisory Authority (BaFin) should not be understood as an endorsement of the investment in any shares in RENK. Investors should purchase shares solely on the basis of the prospectus (including any supplements thereto, if any) relating to the shares and should read the prospectus which is yet to be published (including any supplements thereto, if any) before making an investment decision in order to fully understand the potential risks and rewards associated with the decision to invest in the shares. Investment in shares entails numerous risks, including a total loss of the initial investment. The information contained herein does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities referred to herein in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, exemption from registration or qualification under the securities laws of any jurisdiction. This announcement is not for distribution, directly or indirectly, in or into the United States (including its territories and possessions, any State of the United States and the District of Columbia), Australia, Canada, Japan or South Africa or any other jurisdiction in which the distribution or announcement would be unlawful. This announcement does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States, Australia, Canada, Japan or South Africa or any other jurisdictions where to do so would constitute a violation of the laws of such jurisdiction. The securities mentioned herein have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the Securities Act).

The securities may be offered in the United States to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and outside the United States in offshore transactions in reliance on Regulation S under the Securities Act. There currently is, and there will be no public offer of securities in the United States. The securities may not be offered or sold in Australia, Canada, Japan or South Africa, subject to certain exceptions.

In any member state of the European Economic Area, other than Germany, this communication is only addressed to and is only directed at qualified investors in that Member State within the meaning of Article 2(e) of Regulation (EU) 2017/1129 (the Prospectus Regulation).

In the United Kingdom, this publication is being distributed only to and is directed only at persons who are qualified investors within the meaning of Article 2 of the Prospectus Regulation as it forms part of retained EU law in the United Kingdom as defined in the European Union (Withdrawal) Act 2018 (as amended) (i) who have professional experience in matters relating to investments falling within the definition of investment professionals in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the Order), or (ii) are persons who are high net worth bodies corporate, unincorporated associations and partnerships and the trustees of high-value trusts, as described in Article 49(2)(a) to (d) of the Order or (iii) persons to whom this communication may otherwise be lawfully communicated (all such persons together being referred to as Relevant Persons). The securities are available only to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be available only to or will be engaged in only with, Relevant Persons. Any person who is not a Relevant Person should not act or rely on this document or any of its contents.

Forward-looking Statements

This announcement contains forward-looking statements.

Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as will, anticipates, aims, could, may, should, expects, believes, intends, plans, prepares or targets (including in their negative form or other variations). By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future.

There are a number of factors that could cause actual results, performance and developments to differ materially from those expressed or implied by these forward-looking statements. All subsequent written or oral forward-looking statements attributable to RENK or their respective affiliates, or any persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. No assurances can be given that the forward-looking statements in this document will be realized. Any forward-looking statements are made of the date of this announcement.

Subject to compliance with applicable law and regulations, neither RENK, nor Citigroup Global Markets Europe AG, Deutsche Bank Aktiengesellschaft, J.P. Morgan SE, COMMERZBANK Aktiengesellschaft, Goldman Sachs Bank Europe SE, Landesbank Baden-Württemberg, UniCredit Bank AG, Crédit Agricole Corporate and Investment Bank, Mizuho Securities Europe GmbH and Skandinaviska Enskilda Banken AB (publ) (together, the Underwriters) nor their respective affiliates intend to update, review, revise or conform any forward-looking statement contained in this announcement to actual events or developments whether as a result of new information, future developments or otherwise, and do not undertake any obligation to do so.

The financial information for the six months ended June 30, 2023 contained in this press release is, as of the date of publication, preliminary in nature. The respective review process has not yet been finalized. Accordingly, such information presented herein is subject to change.

This announcement contains certain financial measures that are not recognized under International Financial Reporting Standards (IFRS). These non-IFRS measures are presented because RENK believes that they and similar measures are widely used in the markets in which it operates as a means of evaluating a companys operating performance and financing structure. They may not be comparable to other similarly titled measures of other companies and are not measurements under IFRS or other generally accepted accounting principles.

This announcement does not purport to contain all information required to evaluate RENK and/or its financial position. Financial information (including percentages) has been rounded according to established commercial standards. Certain market positioning data about RENK included in this announcement is sourced from third-party sources. Third-party industry publications, studies and surveys generally state that the data contained therein have been obtained from sources believed to be reliable, but that there is no guarantee of the fairness, quality, accuracy, relevance, completeness or sufficiency of such data. Such research and estimates, and their underlying methodology and assumptions, have not been verified by any independent source for accuracy or completeness and are subject to change without notice. Accordingly, RENK expressly disclaims any responsibility for, or liability in respect of, such information and undue reliance should not be placed on such data.

The Underwriters are acting exclusively for RENK and the selling shareholder and no one else in connection with the planned offering of the shares of RENK (the Offering). They will not regard any other person as their respective clients in relation to the Offering and will not be responsible to anyone other than RENK and the selling shareholder for providing the protections afforded to its clients, nor for providing advice in relation to the Offering, the contents of this announcement or any transaction, arrangement or other matter referred to herein.

In connection with the Offering, the Underwriters and their respective affiliates may take up a portion of the shares offered in the Offering as a principal position and in that capacity may retain, purchase, sell, offer to sell for their own accounts such shares and other securities of RENK or related investments in connection with the Offering or otherwise. Accordingly, references in the securities prospectus, once published, to the shares being offered, acquired, placed or otherwise dealt in should be read as including any issue or offer to, or acquisition, placing or dealing by, the Underwriters and their respective affiliates acting in such capacity.

In addition, the Underwriters and their respective affiliates may enter into financing arrangements (including swaps or contracts for differences) with investors in connection with which the Underwriters and their respective affiliates may from time to time acquire, hold or dispose of shares of RENK. The Underwriters do not intend to disclose the extent of any such investment or transactions, other than in accordance with any legal or regulatory obligations to do so.

None of the Underwriters or any of their respective directors, officers, employees, advisers, agents or respective affiliates accepts any responsibility or liability whatsoever for or makes any representation or warranty, express or implied, as to the truth, accuracy or completeness of the information in this release (or whether any information has been omitted from the release) or any other information relating to RENK, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available, or for any loss howsoever arising from any use of this release or its contents or otherwise arising in connection therewith.

The information contained in this release is for background purposes only and does not purport to be full or complete. No reliance may be placed by any person for any purpose on the information contained in this release or its accuracy, fairness or completeness.

The date of the admission to trading of shares of RENK on the regulated market segment (regulierter Markt) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) with simultaneous admission to the sub-segment of the regulated market with additional post-admission obligations (Prime Standard) of the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse) (together, the "Admission") may be influenced by things such as market conditions. There is no guarantee that Admission will occur and no financial decision should be based on the intentions of RENK in relation to Admission at this stage. Acquiring investments to which this release relates may expose an investor to a significant risk of losing all of the amount invested. Persons considering making such investments should consult an authorized person specializing in advising on such investments. This release does not constitute a recommendation concerning the Offering. The value of shares can decrease as well as increase. Potential investors should consult a professional advisor as to the suitability of the Offering for the person concerned.

^[1] Fixed Order Backlog represents, with respect to binding customer contracts and purchase orders concluded and/or received, the portion of the associated transaction price for which the amount of revenue has not yet been recognized in accordance with IFRS.

^[2] Adjusted EBIT is defined as operating profit before the effects from purchase price allocations and adjusted for certain items which management considers to be exceptional or non-recurring in nature. Adjusted EBIT Margin is defined as Adjusted EBIT divided by revenue.

^[3] Renaissance Strategic Advisors Ltd., June 30, 2023

^[4] Based on 2022 market share for our total addressable market by value in standardized slides bearings (e-bearings) globally.

^[5] Defense budgets in Europe, North America, Asia Pacific, Middle East and North Africa (including Algeria, Bahrain, Egypt, Iraq, Israel, Jordan, Kuwait, Lebanon, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Tunisia, Turkey and United Arab Emirates), South America and other African countries (excluding Afghanistan, Belarus, China, the Central African Republic, Cuba, the Democratic Republic of Congo, Iran, Libya, Myanmar, North Korea, Sudan, Syria, Russia, Venezuela, Yemen and Zimbabwe, together the Embargo Countries).

^[6] Land and naval defense addressable market, defined as the global new build, upgrade and overhaul market for gear units and engines, that are critical for the mechanical operation of vehicles or naval platforms, excluding the market in Embargo Countries.

^[7] The global market for commercial marine and industrial applications (including gear units, couplings & clutches, slide bearings, electric/hybrid systems and test systems) including new build and aftermarket, excluding Embargo Countries.

^[8] Net debt divided by Adjusted EBITDA. Net debt includes senior secured notes, and lease liabilities less cash and cash equivalents based on the carrying amounts in the IFRS financial statements. Adjusted EBITDA is defined as operating profit before depreciation, amortization and impairment losses on intangible assets and property, plant and equipment and adjusted for certain items which management considers to be exceptional or non-recurring in nature.