Press Conference

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Press Conference

• Zurich SWX Swiss Exchange
• 15 August, 2005

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Disclaimer
The information contained in this document is
subject to change without notice and it may be
incomplete, condensed or may not contain all
material information. In particular, this
document contains forward-looking statements
which involve risks and uncertainties. Various
factors, such as market developments, product and
technology innovations, competitive challenges
and others could cause actual future results,
performance or events to differ materially from
those described in this document. We do not
assume any obligation to update any
forward-looking statements.   This document does
not constitute, or form part of, any offer to
purchase any shares and neither it nor any part
of it shall form the basis of, or be relied upon
in connection with any contract or commitment
whatsoever. Any decision to tender shares must be
based on the official offer document.   The
tender offer is neither made in the United States
nor to U.S. Persons in any other jurisdiction
where the tender offer would be illegal or would
require any regulatory approval. Neither this
document nor any copy of it may be taken or
transmitted into the United States or
distributed, directly or indirectly, in the
United States or to any U.S. Person. In addition,
the distribution of this document in other
jurisdictions, e.g. the United Kingdom, may be
restricted by law and persons into whose
possession this document comes, should inform
themselves about, and observe, any such
restrictions.
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Agenda
Proposed Transaction Rationale for a Combination
Combined Financial Data Perspectives for Value
Creation Conclusions Questions Answers
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Proposed Transaction
5
Background

• On 13 June 2005, Hexagon announced a CHF 440 per
  share takeover bid for Leica Geosystems
• The offer was based on FY2004/05 results and
  guidance up to FY2006/07
• Guidance was confirmed by Leica Geosystems during
  the Capital Markets Day on 9 June
• Hexagon had no access to Due Diligence or any
  other privileged information
• 100 cash offer aiming at fair and equal
  treatment of all shareholders
• Hexagon purchased no shares below offer price
• Following a dividend payment of CHF 4 per share
  on 11 July, Hexagons offer was mechanically
  reduced to CHF 436 per Leica Geosystems share on
  21 July

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Background

• Feed-back from Leica Geosystems shareholders
  since June
• Strong interest to remain investors in the
  Measurement Technology industry
• Attractive industrial case for a combination of
  Leica Geosystems and Hexagon
• Strong upside potential of shares of combined
  entity
• On 26 July, the Danaher Group announced a CHF 500
  per share cash offer with a 2/3 acceptance
  threshold
• The Danaher Group had performed a due diligence
  prior to the announcement

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Rationale for the Improved Offer

• Subsequent limited Due Diligence review enabled
  Hexagon to
• Confirm Leica Geosystems managements extended
  financial plan and revise its projections
• Growth in SE and Consumer products divisions
• Opportunities in HDS and Metrology
• Potential for expansion in GIS Mapping
• Verify significant synergy potential between
  Hexagon and Leica Geosystems
• Metrology
• HDS
• GIS Software
• Services
• Sensor technologies

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The Improved Offer

• Hexagon has consequently decided to improve its
  previous offer to
• CHF 440 per Leica Geosystems share in cash
• I.e. an improvement of CHF 4 per share
• 5 Hexagon B-Shares
• Our mixed-offer allows long-term investors to
  participate in future value creation going
  forward
• The Improved Offer represents CHF 573 based on
  Hexagons closing price last friday
• A total value of CHF 562 per Leica Geosystems
  share based on one month weighted average share
  prices of Hexagons B-Shares to 12 August
• A premium of 47.9 over the closing price of
  Leica Geosystems of CHF 380 on 10 June, the
  latest trading day preceding Hexagons
  preannouncement on 13 June
• A premium of 28.9 over Hexagons previous offer
  of CHF 436 per Leica Geosystems share
• A premium of 12.4 over Danahers offer of CHF
  500 per Leica Geosystems share

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Key terms of Hexagons Improved Offer

• Main conditions of the Improved Offer
• Approval of share issue to Leica Geosystems
  shareholders and passing of relevant resolutions
  by the EGM of Hexagon on 15 September
• The previous anti-trust condition has been
  fulfilled as Hexagon has obtained all necessary
  authorisations
• With the exception of the above, the Improved
  Offer is subject to the same conditions as set
  out in the Original Offer published on 27 June
• The transaction is fully supported by Hexagons
  two main shareholders
• Together Mr. Schörling and Mr. Sundqvist control
  62.3 of votes
• Approval of the extension of the offer period
  beyond the Hexagon EGM by the Swiss Takeover
  Board is a pre-condition for the Improved Offer

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Tentative time schedule

• Tentative time schedule subject to approval by
  the Swiss Takeover Board
• 18 August Publication of Improved Offer
  documentation
• 23 August Beginning of Improved Offer Period
• 15 September Hexagon EGM
• 23 September End of the Improved Offer Period
• 29 September Start of the Additional Acceptance
  Period
• 12 October End of the Additional Acceptance
  Period
• 18 October Publication of the final results
• As from 17 October Settlement of the Improved
  Offer
• Hexagon intends to seek a secondary listing at
  the SWX

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Rationale for a Combination
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In the 80s, Leica Geosystems and Hexagon used
different technologies
Surveying Engineering (SE)
Metrology
1985
1D to 2D 0 No Optics
Applications Software content Services
needed Sensor technologies
3D 5 Yes Tactile
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However, technology and new applications drive
convergence of the Measurement Technology market
SE GIS Mapping HDS Metrology
Metrology
2005
to 3D 20 Growing Optics Light Cloud of
points
Applications Software content Services
needed Sensor technologies
3D 70 Integrated Tactile Light Optics Cloud
of points
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Today, Leica Geosystems and Hexagon offer highly
complementary business models
SE GIS Mapping HDS Metrology
Metrology
Non contact technology
3D Software Services

• Significant product and technology synergies to
  the benefit of both Leica Geosystems and Hexagon
• Complementary technology skills
• Strengths of the respective brands in their
  markets
• Quality of Leica Geosystems RD teams in the
  macro segment
• Highly qualified and motivated teams in both
  organisations
• Complementary sales organisations and customer
  bases

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Hexagon and Leica Geosystems are leaders in their
market segments
Players

• Trimble
• Leica Geosystems
• Topcon
• Sokkia
• Intergraph

• Faro
• Hexagon
• Leica Geosystems
• Perceptron
• API
• Arc Second
• Metris
• NDI

• Hexagon
• Mitutoyo
• Zeiss
• Metrologic
• Renishaw

• Veeco
• Leica MS
• Topcon
• Zeiss
• Nikon
• Zygo
• KLA Tencor

lt 10.000 km
lt 10 Meters
lt 100 µm
lt 20 µm
lt 0,3 µm
Space
Macro
Micro
Nano
Technology

• GPS
• Laser Scan
• Laser Track
• Laser Radar
• Optics
• Photogram

• Laser Scan
• Laser Track
• Laser Radar
• Photogram
• Optics
• Tactile
• PS

• 3D Tactile
• 2.5D Vision

• Light
• Micro Optics

(27 18, 22 261015) 17, 10 0 gt 14
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..enabling the combined entity to leverage joint
technical skills in a converging market
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Synergies taken into account in financial plan
Comments
Annual Impact on EBIT
Synergies
SEK m
CHF m
Metrology
75
12
Use of common software, rationalisation of
distribution and after-sales functions,
incremental sales due to cross-selling potential
Scanners
50
8
Use of Leica Geosystems scanners in Hexagon
Metrology cloud of points applications
Angular Encoders
35
6
Use of Leica Geosystems angular encoders in
Hexagons measuring machines
Sub-contractors
70
12
Sourcing of Leica Geosystems components from
Hexagons preferred suppliers
Corporate Costs / SGA
40
7
Elimination of common group costs Improvement of
overhead cost structure of combined entity
Total
270
45
To be realised over 3-4 years
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Evolution of synergies taken into account in
financial plan
(SEK m)
(CHF m)

• FYE 31/12

• Synergies of around SEK 270m p.a. (CHF 45m) to be
  realised over 3-4 years
• Excluding other joint development opportunities
  as outlined on the following page

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Development opportunities not taken into account
in financial plan
Automotive Car Body Welding Project (CBW)
250
40
Patent applications filed by Hexagon Joint
project groups Hexagon Leica Geosystems Commerci
alisation within 2-3 years
Hexagon software at Leica Geosystems' HDS and GIS
divisions
60
10
Matching of measurement data to theoretical
model Filtering of data from pictures Generation
of data from and to CAD-systems Project management
Optimisation of service centres
60
10
Leica Geosystems access to 50 Hexagon service
centres world-wide Hexagon access to Leica's
service centres world-wide
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Future Group structure
Listed in Sweden and Switzerland
Core
Non-Core
Measurement Technology
Engineering
Polymers
Leica Geosystems
Hexagon Metrology
SE
GIS Mapping
Laser Trackers
HDS
Consumer Products
Special Products
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Combined Financial Data Post Merger
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Targeted sales growth of 9 -10 p.a. in FY2005-07
Combined Sales
(SEK m)
(CHF m)
CAGR
Target FY2005-07
Measurement Technology
gt11
Polymers
gt9
Measurement Technology gt 70
Engineering
gt1
Total incl. Engineering
9-10
Total excl. Engineering
10-11

• Hexagon medium-term guidance
• SEK/CHF rate of 6.0 applied
• FYE 31/12

• Measurement Technology will represent more than
  70 of sales by 2007
• More than 80 of sales post disposal of Hexagon
  Engineering

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Cliquez pour modifier le style du titre du masque
Combined EBITA margin expanding to above 15 in
FY2007
Combined EBITA
(SEK m)
(CHF m)
EBIT Margin Target
FY2007
Measurement Technology
16-17
Measurement Technology 75-80
Hexagon Polymers
gt14
Hexagon Engineering
gt7
Total
gt 15

• Hexagon medium-term guidance
• SEK/CHF rate of 6.0 applied
• FYE 31/12

• Measurement Technology will represent 75-80 of
  EBITA by 2007
• More than 80-85 of EBITA post disposal of
  Hexagon Engineering

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Refinancing of acquisition debt by a Rights Issue
Targeted Net Debt / EBITDA (x)
Uses
(SEK bn)
(CHF m)
8.5 0.1 8.6
Equity Consideration (100)(1) Net Debt
assumed(2) Total
1.42 0.02 1.44
Sources
(SEK bn)
(CHF m)
Shares issued as consideration(1) Rights
Issue(3) Debt Total
1.9 6.7 8.6
0.32 1.12 1.44

• Based on fully diluted number of shares of around
  2.5m Leica Geosystems shares (excl. Treasury
  shares)
• Estimated Net Debt as of 31 December 2005 less
  proceeds from exercise of options
• Size of Rights Issue depending on acceptance
  ratio. For 100 of Leica Geosystems, the
  indicative size of the Rights Issue is estimated
  at SEK 2.5-3.0 bn (CHF 0.4-0.5 bn)
• FYE 31/12

• Net Debt lt 2.5x EBITDA in FY 2006 on the back of
  strong cash-flow

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Attractive accretive features
Increase in Hexagon EPS post Leica Geosystems
acquisition vs. latest analyst estimates for
Hexagon of SEK 10.0 for 2006 and SEK 10.7 for
2007 (1)
EPS of combined Hexagon-Leica entity vs.
consensus of latest analyst EPS estimates for
Hexagon on a stand-alone basis (2) (3)

• On 10 August 2005, Hexagon announced Q205
  figures. Consensus of EPS estimates for 2006 and
  2007 made by analysts after the Q205
  announcement amounted to SEK 10.0 and 10.7 per
  share respectively (Source Swedbank Markets,
  Handelsbanken Capital Markets and Kaupthing)
• EPS for the combined Hexagon-Leica Geosystems
  entity based on Hexagon medium-term guidance,
  issuance of around 12.5m Hexagon shares as
  consideration to Leica Geosystems shareholders
  and an illustrative Rights Issue in the range of
  SEK 2.5 3.0 bn (CHF 0.4 0.5 bn)
• Impact adjusted for any potential Rights Issue
  discount

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Return on Capital Employed
Pre-tax Return on Capital Employed
Acquisition of Leica Geosystems (including
synergies)(2)
Hexagon post acquisition of Leica Geosystems(3)

• Pre-tax RoCE EBITA / Avg. Capital Employed
• Leica Geosystems pre-tax RoCE EBITA incl.
  Synergies / Avg. Capital Employed (4). For
  assessment of after-tax RoCE, Leicas tax rate
  estimated at 26
• Hexagon post acquisition pre-tax RoCE Combined
  EBITA incl. synergies / Avg. Hexagon Capital
  Employed Avg. Leica Geosystems Capital Employed
  (4)
• Leica Geosystems Capital Employed Purchase EV
  cumulative increase in Working Capital and Net
  Fixed Assets post 31/12/2005

• After-tax RoCE on the Leica Geosystems
  acquisition exceeding Hexagons estimated Cost of
  Capital from FY 2007 onwards

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Perspectives for Value Creation
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We have continuously delivered on our promises
1999
2004
Vision 2008
Objective
Net sales (SEK bn) Net sales (CHF bn) EBITA
margin () of strategic businesses Breakdo
wn of sales by businesses line
4.6 0.8 4 24
8.3 1.4 8.4 4
gt 15 gt 2.5 gt 15 2
Sales x 2 Margin x 2 Reduce scope

• Since 2000, fulfilment of objective to become a
  global leader in Metrology
• Hexagon is now prepared for its next phase of
  development to become a focused world-leader in
  Measurement Technology

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Our strategy has been rewarded by the stock market
Hexagon (Share Price)
Hexagon (Volumes)
AFGX (rebased to Hexagons share price)
Source Datastream
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Strong perspectives for Hexagon confirmed by
H105 figures
H105 vs. H104

• Metrology division driving strong performance of
  Hexagon Group in H105
• Sales 17 Y-o-Y
• EBIT 52 Y-o-Y
• Software and services driving growth of the
  Metrology division

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The Leica Geosystems acquisition will transform
Hexagon into a pure play

• Re-rating potential of combined entity towards
  peer group multiples

EV/EBIT Trading Multiples
P/E Trading Multiples

• Projections for the combined Hexagon-Leica
  Geosystems entity based on Hexagon medium-term
  guidance. Projections for Trimble (Geomatics) and
  Faro (Metrology) based on latest broker estimates
• Market capitalisations based on 1 month weighted
  average share prices to 12/08/05 (Datastream)

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The Leica Geosystems acquisition will enhance
value creation potential
Potential share price of the combined
Hexagon-Leica Geosystems entity in 2006 and 2007
based on prospective future multiples
Hexagon share price (SEK m)
147 (3)
147 (3)
EV/EBIT 16x
EV/EBIT 14x

• Based on the acquisition of 100 of Leica
  Geosystems, issuance of around 2.5m Hexagon
  shares to Leica Geosystems shareholders and an
  illustrative Rights Issue of SEK 2.5-3.0 bn (CHF
  0.4-0.5 bn)
• Adjusted for any potential Rights Issue discount
• Hexagon reference share price is based on one
  month weighted average share prices to 12/08/05

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Our Offer represents superior value for Leica
Geosystems shareholders
Illustrative upside potential of proposed
consideration based on prospective future trading
multiples
(CHF)
(CHF)
Current Offer (1)(2) 562
Current Offer (1)(2) 562
EV/EBIT 16x
P/E 16x
P/E 18x
EV/EBIT 14x

• Value to Leica Geosystems shareholders CHF 440
  5 Hexagon shares Dividend paid by Hexagon
• Current offer price based on one month weighted
  average share prices of Hexagon B-Shares to
  1208/05
• Based on the acquisition of 100 of Leica
  Geosystems, issuance of around 2.5m Hexagon
  shares to Leica Geosystems shareholders and an
  illustrative Rights Issue of SEK 2.5-3.0 bn (CHF
  0.4-0.5 bn).FYE 31/12
• Adjusted for any potential Rights Issue discount

• Future share price potential of the combined
  Hexagon-Leica Geosystems entity makes the
  Improved Offer even more attractive in a
  medium-term perspective

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Conclusions
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Conclusion

• Hexagons Offer represents an attractive
  proposition to Leica Geosystems shareholders
• CHF 562 per share based on Hexagons 30 day
  average share price to 12 August
• CHF 573 per share based on Hexagons closing
  share price on 12 August
• Future upside potential makes the Improved Offer
  with its equity component even more attractive in
  a medium-term perspective
• A combination will be beneficial to all
  stakeholders in Leica Geosystems due to the
  strong industrial case driving the transaction
• The combined entity will become the world-leader
  in Measurement Technology, able to pursue an
  ambitious growth strategy
• Cross-fertilisation of technological capabilities
  between Hexagon and Leica Geosystems
• Strengthening of joint RD capabilities

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Conclusion

• Accelerated value creation potential for
  Hexagons shareholders
• Excellent growth perspectives for both Hexagon
  and Leica Geosystems
• Strong synergy potential
• Re-rating of combined entity towards peer group
  multiples

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Questions Answers