Carraro Drive Tech SpA and Gear World SpA merger plan

The main objective is achieving further focus on core business

Campodarsego (Padua), 28 December 2012 – The Carraro Group has approved a restructuring plan, which will be implemented in the first few months of 2013, with the main objective of achieving further focus on its core business, significant cost savings and efficient synergies.

This plan includes, among other things, alignment of the Group organisation with the changed characteristics of markets which, while maintaining excellent growth prospects, require companies to adopt increasingly agile structures in order to support product competitiveness and at the same time improve efficiency.

In particular, transition is envisaged from the current model based on business units to a model in which the support and industrial policy functions in the broadest sense (production, logistics, purchasing, etc.) are managed across the various product lines, maintaining however specific focus on the various product sectors and different brands.

In the context of this broad restructuring process, the Boards of Directors of Carraro Drive Tech S.p.A. (“Carraro Drive Tech”) and Gear World S.p.A. (“Gear World”), have approved the merger of Gear World S.p.A. in Carraro Drive Tech (the “Merger”), both companies subject to management and coordination by Carraro S.p.A. (“Carraro”), pursuant to art. 2497, as amended and supplemented, of the Civil Code.

Carraro Drive Tech is currently approx. 45.84% owned by Carraro; approx. 44.04% by Carraro International S.A. (“Carraro International”), a wholly owned subsidiary of Carraro, and approx. 10.12% by Carraro Deutschland Gmbh, also a wholly owned subsidiary of Carraro; while Gear World is approx. 45.60% owned by Carraro; approx. 28.22% by Carraro International and approx. 26.18% by GE Capital Interbanca S.p.A. (“GE Capital”).

In particular, the Merger will, as mentioned, lead to aggregation of the two main mechanics business units (hereinafter, each, a Group “BU”) currently distinct from a corporate point of view but with adjacent activities:
- the “Drivelines” BU, which reports to Drive Tech and includes the Group's Italian and foreign activities in the design, manufacture and sale of axles, transmissions and drives for construction equipment, agricultural, material handling and wind energy applications; and
- the “Components” BU, which reports to Gear World and encompasses the Group's activities relating to the development and manufacture of gears for numerous application areas both for internal consumption, being a key component of any driveline (axles, transmissions and drives), as well as for sale to third parties.

The exchange ratio envisaged in the merger plan is 67 Carraro Drive Tech ordinary shares, with a nominal value of 1 Euro, for every 374 Gear World ordinary shares, with a nominal value of 1 Euro. No cash compensation is provided for in the merger plan.

In view of the aforesaid exchange ratio, the shareholders' meeting of Carraro Drive Tech will pass a resolution for an increase in share capital with the exclusion of option rights, for a maximum nominal amount of 6,285,172 Euros, by issue of up to 6,285,172 new ordinary shares to be assigned to Gear World shareholders.

Following the Merger, Carraro will continue to control, also indirectly, by right, pursuant to art. 2359, paragraph 1, no. 1, Carraro Drive Tech and to exercise management and coordination over the same.

The merger plan also envisages that Carraro Drive Tech, on the effective date of the Merger, will take on Articles of Association practically identical to those of Gear World; in consideration of certain changes compared to the current Articles of Association of Carraro Drive Tech, the shareholders of the latter, in accordance with applicable legislation, will have the right of withdrawal, to be exercised within 15 days of registration of the resolutions concerning the Merger.

At the moment the Merger is expected to be completed by the end of April 2013 but the operations of Gear World will be charged to the accounts of Carraro Drive Tech from the first day of the year in which the Merger comes into force and from such date the effects of the Merger will also be valid for tax purposes. The Merger is a related party transaction to which, pursuant to art. 14 of Consob resolution no. 17221 of 12 March 2010, as amended, and the procedure for transactions with related parties adopted by Carraro, the procedures provided for by said Consob regulation do not apply.

Go to Press release 28.12.2012

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