Fras-le (FRAS3) M&A Announcement summary

Deal rationale and strategic fit

• Acquisition of KUO Refacciones in Mexico aligns with international expansion, strengthening leadership in Latin America, especially in Mexico, Argentina, and Brazil, and providing access to the US market through nearshoring opportunities.

• Expands product portfolio, particularly in light vehicle engine parts and friction materials, and increases exposure to the resilient aftermarket segment.

• Kuo Refacciones' strong brands and established channels reinforce leadership and open new OEM opportunities.

• Supports growth in high-consumption, recurring product lines and optimizes future investments in the region.

• Replicates the successful Nakata acquisition model, focusing on replacement parts and leveraging strong brands.

Financial terms and conditions

• Transaction valued at BRL 2.1 billion for 100% equity, with no debt assumed.

• Purchase includes 100% of Dacomsa, 99.9998% of Kuo Motor, and 100% of Fritec, plus related assets.

• Funding structure includes BRL 350 million from a previous follow-on, BRL 750 million in Brazilian debt, and MXN 1 billion in Mexican debt to optimize tax benefits.

• An escrow account of 3% is set for contingencies over the next two years.

• Expected annual revenue increase of BRL 1.4 billion and leverage post-transaction at 1.3x, with a target to reduce it over time.

Synergies and expected cost savings

• Estimated BRL 300 million in synergies over five years, split between revenue and cost improvements.

• Synergies to be realized through new product launches, improved operational efficiency, consolidated sourcing, manufacturing optimization, and logistics.

• Early years focus on raw material and sourcing synergies, with revenue gains and capacity expansion in later years.