April 30, 2015 / 8:21 AM / in 4 years

UPDATE 1-Swiss-based Kaba to merge with Germany's Dorma

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ZURICH, April 30 (Reuters) - Swiss firm Kaba and Germany’s Dorma Holding said on Thursday they plan to merge to form a top-three player in the building security and “access products” market, a category including door locks and keys.

“This will allow us to better and more quickly take advantage of opportunities that arise through megatrends such as urbanisation and digitalisation,” Dorma Chief Executive Thomas Wagner said in a statement.

Kaba and Dorma generated total sales of more than 2 billion Swiss francs ($2.1 billion) in the 2013/14 financial year. The pair expects the merged company to manage sales growth of between 6 and 7 percent in local currencies over the next four years.

Under the terms of the deal, Kaba plans an issue of share worth 178.4 million francs which will be bought by Dorma, which will emerge holding 47.5 percent of the combined entity. A large chunk of the proceeds will be passed on to Kaba shareholders as a special dividend of 50 francs per share.

Shares in Ruemlang, Switzerland-based Kaba jumped to a record 670 francs and were trading up 8.2 percent at 611.5 francs by 0806 GMT.

The deal is subject to approval from a meeting of Kaba shareholders on May 22. The two companies expect to complete the combination in the third quarter.

Kaba and Ennepetal, Germany-based Dorma are aiming for EBITDA (earnings before interest, taxation, depreciation and amortisation) margin of 18 percent once the new company has hit its full potential. They also project cost benefits of between 60 million francs and 70 million from the merger.

The two companies are targeting a payout ratio of at least 50 percent of consolidated net profit after minority interests.

The merged company will be listed on Switzerland’s SIX stock exchange.

Current Kaba CEO Riet Cadonau has been nominated to head the merged company while Kaba Chairman Ulrich Graf will chair the new firm’s board of directors.

The family shareholders of Dorma and Kaba will jointly hold 27.3 percent of the new dorma+kaba Holding.

Reporting by Joshua Franklin; Editing by David Holmes

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