Source: Deutsche Börse
Deutsche Börse on Monday decided to implement an efficiency program targeting EUR 100 million cost savings per annum.
The program is focused on optimizing operational costs while retaining planned investments in future growth. The program is expected to have a significant positive impact of EUR 50 million on operational costs already in 2008. The full potential of the program will be realized from 2010 onwards. Total restructuring charges to achieve these cost savings will amount to EUR 50 million which will be fully provisioned in 2007.
As a result, Deutsche Börse has set a guidance for total costs in 2008 of EUR 1,130 million. The cost guidance for 2008 compares to an estimated total cost base for 2007 of EUR 1,200 million, before the above mentioned restructuring charges for the efficiency program of EUR 50 million. All costs are excluding consolidation of the International Securities Exchange (ISE). Closing of the ISE transaction is expected in Q4/2007.
Deutsche Börse also decided on a revised financing concept for the ISE acquisition with a view to further optimizing its capital structure and resuming its share buyback program with immediate effect. Based on this revised financing concept, Deutsche Börse plans to issue some EUR 1.5 billion in long-term debt and hybrid bonds, compared to EUR 1.3 billion under the initial structure. The revised financing concept is based on a management announcement of the credit metrics stated below, but not contingent on a change of Deutsche Börse's legal and organizational structure as foreseen by the original concept.
Given the higher amount of long-term debt/hybrid financing for ISE under the revised financing concept, a significant amount of the accumulated earnings in the current year are no longer necessary to finance the ISE acquisition. This in combination with the very strong operational performance of the company enables Deutsche Börse to resume its share buyback program immediately. For the remainder of financial year 2007, Deutsche Börse plans a share buyback volume of around EUR 300 million.
Deutsche Börse continues to explore formats to further improve its capital structure and plans to give further guidance on its midterm capital structure and earnings distribution goals at its Annual Results Conference on 20 February 2008.
Targeted credit metrics
In the context of the revised financing concept for the ISE acquisition, while recognizing that ratings are based on a variety of factors Deutsche Börse has decided to support Clearstream's current "AA" rating credentials through the targeting of a "consolidated EBITDA to Interest Expense ratio", so called interest coverage ratio, of at least 16 times. In calculating the Group's interest coverage ratio, the Company will include 50 percent of any coupons on hybrid debt with an equity credit from the rating agencies of 50 percent or higher. Furthermore, in view of Clearstream's "AA" rating objective, Deutsche Börse believes it is important to maintain certain minimum levels of tangible equity (currently EUR 700 million at Clearstream International S.A. and EUR 250 million at Clearstream Banking S.A. with subordinated profit participation rights issued by Clearstream Banking S.A. to Deutsche Börse AG of EUR 150 million also in place). The management of the Company, therefore, dedicates its efforts to keeping the interest coverage, the tangible equity and subordinated profit participation rights of its controlled subsidiaries Clearstream International S.A. and Clearstream Banking S.A. at these levels in order to maintain key metrics that the Company understands are consistent with a "AA" rating on Clearstream.
Deutsche Börse will resume its share repurchase program on 20 September 2007. The company will use the current authorization by its shareholders to repurchase up to 10 percent of its share capital amounting to nominal 200 million euros while taking into account shares owned by the company.
Currently, the company holds 5,682,738 own shares in treasury. Furthermore, the buyback up until 31 December 2007 is limited to a number of shares equivalent to an overall purchase price of up to 300 million EUR. It is anticipated to cancel the repurchased shares and to reduce the share capital of the company accordingly, to use the repurchased shares for employee share programs and/ or for obligations eventually arising from debt financial instruments exchangeable into equity instruments.
The shares will be repurchased exclusively on the exchange. The purchase price for the shares to be repurchased may neither exceed nor fall short of the volume-weighted average share price for the five trading days prior to the purchase commitment by more than 10 percent. The relevant prices for determining the volume-weighted average are the closing auction prices for Deutsche Börse shares in electronic Xetra trading at the Frankfurt Stock Exchange (FWB).
Deutsche Börse will instruct its agent to use its best efforts to buy back no more than 25 percent of the daily trading volume on any one day.
Additionally, the agent will be bound by agreement to uphold the trading rules set forth in Article 5 of Commission Regulation (EC) No. 2273/2003 of December 22, 2003. In particular, no more than 25 percent of the average daily trading volume of the shares in the month prior to publication of the repurchase program may be repurchased in any one day.