Sandvik makes bid to acquire Tamrock

Thereafter, Sandvik's holding in Tamrock is 76.0% of the shares and votes. After full conversion of Sandvik's convertible debentures, ownership would amount to 80.2%.

Sandvik intends to acquire all shares in Tamrock in order to be able to further develop the cooperation and to strengthen the companies' market leading positions in tools and machinery for mining and civil engineering.

A public offer will be made to all shareholders in Tamrock Oy to tender their shares for sale to Sandvik at a price of FIM 18 per share. The value of the offer is approximately FIM 575 million.

• The offer to Tamrock shareholders represents a premium of 28% compared with the average price during the past 12 months. The premium is 29% compared with the price paid 7 November 1997. Compared with the average price during the past two weeks, the offer corresponds to a premium of 23%.
• The acquisition will initially result in a marginal dilution of earnings per share for Sandvik. However, the transaction is expected to generate an increased earnings per share as early as 1999.

Background and reasons for the transaction

Sandvik has been cooperating with Tamrock since 1989, initially through part-ownership in Tamrock, at the time a subsidiary of Tampella Oy. After the ownership change during 1996, Sandvik has been the principal shareholder with 48.9% of the capital and votes. Both parties have concluded that the cooperation is developing favourably and leads to benefits for both companies. However, the managements of Sandvik and Tamrock assess that more intensified cooperation is required to fully realize the potential revenue and cost synergies.

Effects for Sandvik

After completion of the transaction, Sandvik will have annual sales of about SEK 40 billion. Equity/assets ratio will decline from 51% to 45% and net debt rises to about SEK 8,500 million. The transaction is expected to have a marginally adverse effect on earnings per share, due mainly to the planned restructuring as a result of the merger. However, it is estimated that earnings per share will be affected positively already in 1999. Within two to three years, it is expected that it will be possible to generate direct integration gains of about SEK 200 million annually.

Commenting on the offer, Clas Åke Hedström, President and CEO of Sandvik, says:

"Since mid-1996, when Sandvik increased its ownership in Tamrock an intensified cooperation has been under way between Sandvik and Tamrock. We have now arrived at a point where a wholly-owned Tamrock is a requirement in order to proceed and jointly strenghten our market positions. In our opinon, there are substantial potential revenue and cost synergies to be realized, between Tamrock and Sandvik Rock Tools as well as with the entire Sandvik Group.

"With Sandvik as sole owner, the conditions for Tamrock's continued development would be strongly enhanced. The combination will also strenghten Sandvik Rock Tools' position as one of the leading suppliers of rock drilling tools."

Timeplan for the offer

• Prospectus to be forwarded to Tamrock shareholders on or about 8 December 1997.
• Acceptance period is from 10 December 1997 through 12 January 1998.
• Accounting for payment will be on a current basis during the acceptance period.

Sandvik reserves the right to extend the acceptance period and, consequently, the payment date.

Handelsbanken Markets is advisor to Sandvik.

Sandviken, 10 November 1997

Sandvik AB; (publ)

Sandvik Group

Sandvik is a high-technology materials engineering enterprise with 250 subsidiaries and representation in 130 countries. The Group has annual sales of more than SEK 32 billion and 33,000 employees. Sandvik is the world-leading manufacturer of cemented-carbide products, such as tools for chip-forming metalworking, rock-drilling tools and cemented-carbide blanks. The Group is also a leading manufacturer of stainless and high-alloy special steels and special metals, heating materials, high-speed steel tools, saws and other hand tools as well as conveyor and process systems.

Tamrock Oy

Tamrock is an international engineering company and a world-leading supplier of drilling machinery, loaders and equipment for rock excavation in mines, civil engineering projects and related areas. Annual sales amount to about SEK 7,000 million, with 5,200 employees, of whom 1,500 in Finland. Tamrock's global organization comprises 50 subsidiaries in 24 countries and a large number of local distributors.