FILED PURSUANT TO RULE 425
Filed by Axalto Holding N.V.
Pursuant to Rule 165 and Rule 425(a) under the
United States Securities Act of 1933,
as amended
Subject Company: Gemplus International S.A.
Commission File No. 333-103508
Date: December 8, 2005
On
December 8, 2005, Axalto Holding N.V. first disseminated the following communications materials
to its employees.
Important information
Investors and security holders are strongly advised to read, when they become available, the
prospectus/offer to exchange and related exchange offer materials regarding the business
combination transaction referenced in this press release, as well as any amendments and supplements
to those documents because they will contain important information. When available, the
prospectus/offer to exchange and the other documents may also be obtained from Axalto Investor
Relations. If required, the prospectus/offer to exchange will be filed with the Securities and
Exchange Commission (SEC) by Axalto. To the extent the prospectus/offer to exchange is filed with the
SEC, security holders may obtain a free copy of the
prospectus/offer to exchange (when available) and other related documents filed by Axalto at the
SECs website at www.sec.gov.
Employees Frequently Asked Questions
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1. |
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Why the merger between Axalto and Gemplus? |
This is a
merger of equals between Axalto and Gemplus. The combination will
create a global leader in
digital security.
We believe
the current state of the market creates favorable conditions for such
a step. The combined
organization will seek to exploit synergies that are expected to be created by volume effect, supply chain efficiencies
and the sharing of best practices. We believe that such synergies
will free corporate resources, allowing us to address anticipated industry
growth, increased demand and ever accelerating innovation.
This
ambitious project is built around the competencies and expertise of
the employees of our companies. Gemalto expects be able to accelerate the development of future technologies, making interactions with the digital world easier and more secure.
We believe
this new position creates great potential for the combined group
beyond its traditional market and opportunities, allowing it to become a highly visible player in
the digital security market, creating new technologies, applications
and market standards.
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2. |
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Who will benefit from the merger? |
We believe
that the merger will afford important benefits for the companys
various stakeholders.
Clients will benefit from Gemaltos many strengths: expanded industrial
capabilities, improved service proximity, and greater scale.
Employees will be part of a larger international group offering more career opportunities. With 21
production sites, 32 personalization centers, 9 technology centers and 120 sales and marketing
offices, Gemalto will create a very dynamic and diverse working environment.
The
industry at large, including Gemaltos competitors, may benefit
from greater innovation and acceleration in the development of new applications.
We believe
our shareholders will have the opportunity to benefit from the
anticipated growth and enhanced profitability potential of the new
entity as well as its greater capital markets visibility.
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3. |
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What will be the combined group strategy? |
The
combined group will have a strategy built on 3 major axes with the
core objective being profitable
growth:
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Accelerate the technological and geographical development of promising product
lines such as mobile communications, identity, ePassport,
healthcare, IT and corporate security and payments. |
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Leverage economies of scale of the combined group to achieve purchasing and
productivity gains |
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Provide superior service to its clients and better address their specific
needs |
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4. |
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Will the antitrust regulatory authorities approve this merger? |
We have had early contacts with certain competition authorities to work on the process. While at
this stage, they have not expressed any opinion on the substance of
the transaction, we cannot rule out that approval of the combination
may require some time.
We are however confident this transaction should not raise any significant issue from a competitive
view. There are many competitors in our industry. Barriers to entry and expansion are low, and
there are a number of important new low-cost entrants in traditional application segments such as
mobile communications. In the new high growth applications, competition is even more intense, as Gemalto will
be competing not only with existing card manufacturers but also with players in other parts of the
card value chain and in some cases with companies in completely different industries, such as
information technology and security printing. In all of our segments, customers have significant
countervailing power and use competitive tenders and the ability to shift suppliers to obtain
competitive pricing.
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5. |
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What reactions do you expect from the competition? |
We believe
our competitors will benefit from the accelerated adoption of cards in new applications,
which will create new opportunities for the entire industry to address.
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6. |
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How will we manage this new situation and what should we tell our clients? |
Until the
merger is approved, Axalto and Gemplus will remain two independent companies, managed and
operated separately.
Once all
regulatory approvals have been obtained, steps will be taken to
combine the operations of Axalto and Gemplus creating what we intend to be a partner of choice for our clients thanks to its innovation capabilities, its
superior services and proximity.
Further, the combined groups new product development cycle will be shortened, its product
portfolio expanded and its global coverage, wider. We believe our
clients will benefit greatly from
the combination.
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7. |
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What is the combined group nationality? Will the combined
group maintain a French presence? |
Gemalto
will be an international company, registered in the Netherlands, active in more than 100
countries and employing staff of 65 nationalities. It will have major operational centers in the Paris
and Marseille areas.
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8. |
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How much will this transaction cost? |
This
transaction is a merger of equals.
Technically, Axalto will issue new shares which will be exchanged for Gemplus shares. Upon
completion of the transaction, the current shareholders of both Axalto and Gemplus will become
shareholders of Gemalto, the combined company.
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9. |
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Will the current shareholders of the companies be diluted? Gemplus has two important
shareholders, Texas Pacific Group (TPG) and the Quandt family entities: what will be their
share in the merged company? |
Upon the
completion of the transaction, assuming full acceptances by Gemplus
shareholders, the shareholders of Gemplus will own approximately 55.4% of the combined
group, whereas the shareholders of Axalto will own 44.6%. TPG and the
Quandt family entities would have respectively approximately 14% and
10% of Gemalto, respectively.
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10. |
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How will the merger be executed? |
The transaction will be executed in two steps. The two largest shareholders of Gemplus, TPG and the
Quandt family entities have agreed to contribute their shares to
Axalto subject to antitrust approval, other regulatory approvals, the approval of the shareholders
of both companies and other contractual conditions. Following the TPG
and Quandt contributions, Axalto will begin a voluntary public
exchange offer to exchange Axalto shares for the remaining Gemplus
shares.
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11. |
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What synergies are anticipated? |
Management of both companies expects to realize jointly annualized net operational synergies of
approximately
85 million
(US$100 million) by the third year after closing on a fully phased basis.
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12. |
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Does that translate into 85 million of cost reduction? |
Some cost
savings are obvious: for example we will not have costs related to
two HQs.
Most of
these synergies are expected to accrue from volume effects, supply chain and purchasing
efficiencies and sharing of best practices. The anticipated IT, relocation and other restructuring
costs necessary to realize these synergies are expected to total 43 million (US$50 million) spread
over the first two years.
The
proposed overall integration strategy has been jointly formulated by
the two companies management
teams. As part of this process, appropriate information and consultation, as the case may be, will
be provided to staff and employee representative bodies in the relevant jurisdictions in accordance
with local legal requirements. Implementation is expected to commence following shareholder and
regulatory approvals.
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13. |
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As an employee of either Gemplus or Axalto, can I contact my future colleagues? |
No, until
the merger has received all regulatory approvals, Gemplus and Axalto
will remain two separate
companies and will continue to operate independently. Employees are not allowed to contact their
counterparts.
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14. |
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Where will the new group be listed? |
The combined group will be listed on Euronext in Paris.
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15. |
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Who will be the shareholders of the combined group? |
The two largest Gemplus
shareholders, TPG and the Quandt family entities, will contribute their shares to
Gemalto.
This contribution in kind is subject to antitrust approval, other
regulatory approvals, the approval of the shareholders, and other contractual conditions. Following this contribution, Gemalto will then launch a
voluntary public exchange offer to exchange Axalto shares for the remaining Gemplus shares.
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16. |
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Where will be the Headquarters of the combined group? |
Gemalto will be registered in Amsterdam, in the Netherlands.
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17. |
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When will both companies begin to operate as a combined group? |
We
anticipate that this will
require several months, but we hope the integration process will
commence in the course of summer 2006, once all
antitrust and other regulatory approvals have been obtained and the
contribution in kind has been completed. In the meantime, Gemplus and Axalto
will remain two separate and independent companies.
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18. |
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What will be the size of the combined group? |
The
combined group will be a global leader in digital security. As an
indication of the size of the combined group, in 2005
(on a pro forma basis), the combined revenue is
expected to amount to 1.8 billion and the volume of microprocessor cards shipped to be close to 1
billion units. As a basis for comparison, a total 200 million computers and 700 million mobile
phones are sold per year.
Gemalto
will be present in over 50 countries with 11,000 employees of 65 nationalities.
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19. |
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Who will head the combined group? |
The
combined groups Board of Directors will be composed principally
of Directors coming from the current Axalto and Gemplus
Boards of Directors.
Alex Mandl of Gemplus will assume the position of Executive Chairman and Olivier Piou will be the Chief
Executive Officer. Alex and Olivier will be jointly responsible for strategy, budgeting and
management of the top executives.
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20. |
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What will be the combined group organization? |
The
detailed organization of the combined group will be determined at a
later date.
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21. |
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Will there be lay-offs? |
Gemalto anticipates limited job reduction and the combined group will need the recognized and
unrivalled expertise of its employees to respond to anticipated high
growth in the combined groups market.
It is
essential for Gemalto to retain the production, R&D and sales
and marketing workforces. A certain amount of natural rationalization
and optimization will occur.
Outsourced services for administrative and support functions as well as temporary work contracts
may also be reduced.
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22. |
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Will any manufacturing facilities be shut down? |
No. As
long as our customers continue to rely on us and as long as market
growth is sustained, Gemalto will need all its existing manufacturing capacities.
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23. |
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If there are Axalto and Gemplus offices in the same country, will they merge? |
The
combined group has the objective of improving its geographical footprint to be closer to its
clients. Office mergers and similar functions regrouping will be encouraged when it makes sense,
especially within the same geographical area.
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24. |
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What will be the name of the combined group? |
The name
of the combined group will be Gemalto. This name will be effective only after the approval of
the merger process by the antitrust authorities. Having a new name demonstrates the will to gather
all Axalto and Gemplus employees around a common project.
Gemalto is composed of Gem and Alto reflecting the merger of equals between Gemplus and Axalto
and balancing the name of the two companies
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25. |
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How will the products be branded? |
The
objective is to keep the best of the two companies.
Brands from both companies may coexist.
This will be decided when the integration process is completed. This process will start after the
approval of the merger by the antitrust and regulatory authorities.
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26. |
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Will the product lines be rationalized? |
Product lines will be rationalized when it makes sense while taking into account customers
investments in each company technologies. This rationalization will
enable the combined entity to redeploy marketing
and R&D workforces to new product and market initiatives, it
will enable the combined entity to pursue high growth opportunities
and will enhance its ability to support client-dedicated projects.
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27. |
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What about my Axalto shares? |
As a shareholder employee of Axalto, you keep your shares.
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28. |
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What about my Gemplus shares? |
As a shareholder employee of Gemplus, you will receive an offer to participate in a voluntary public
exchange offer on the same terms and conditions as every other Gemplus shareholder.
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29. |
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How can we efficiently integrate two companies that have been fiercely competing for
the last 15 years? |
Although our teams have been fiercely competing for years, they respect each other as they both
have contributed to the industry growth and progress. Integration will be based on individual
competencies in the spirit of the merger of equals.
All the employees of the combined group will share a common project and the combination of their
skills will be a major asset. Developing the market beyond todays applications will be the real
challenge of the future.
Important information
Investors and security holders are strongly advised to read, when they become available, the
prospectus/offer to exchange and related exchange offer materials regarding the business
combination transaction referenced in this press release, as well as any amendments and supplements
to those documents because they will contain important information. When available, the
prospectus/offer to exchange and the other documents may also be obtained from Axalto Investor
Relations. If required, the prospectus/offer to exchange will be filed with the Securities and
Exchange Commission (SEC) by Axalto. To the extent the prospectus/offer to exchange is filed with
the SEC, security holders may obtain a free copy of the prospectus/offer to exchange (when
available) and other related documents filed by Axalto at the SECs website at www.sec.gov.
Investors and security holders who are US persons or who are located in the United States should
also read any solicitation/recommendation statement of Gemplus on Schedule 14D-9 when and if filed
by Gemplus with the SEC because it will contain important information. The
solicitation/recommendation statement and other public filings made from time to time by Gemplus
with the SEC are available without charge from the SECs website at www.sec.gov. This
document, if issued, will also be available for inspection and copying at the public reference room
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, United States. For further
information about the public reference room, call the SEC at +1 800 732 0330.
In France, holders of Gemplus securities are requested, with respect to the offer, to refer, when
filed by Axalto, to the prospectus (note dinformation) that will be available on the website of
the AMF (www.amf-france.org).
This communication does not constitute an offer to purchase or exchange or the solicitation of an
offer to sell or exchange any securities of Axalto or an offer to sell or exchange or the
solicitation of an offer to buy or exchange any securities of Gemplus, nor shall there be any sale
or exchange of securities in any jurisdiction in which such offer, solicitation, sale or exchange
would be unlawful prior to the registration or qualification form the laws of such jurisdiction.
Accordingly, persons who come into possession of this document should inform themselves of and
observe these restrictions. The solicitation of offers to buy any Gemplus ordinary shares
(including Gemplus shares represented by Gemplus American Depositary Shares) in the United States
will only be made pursuant to a prospectus/offer to exchange and related offer materials that
Axalto expects to send to holders of Gemplus securities, in accordance with or pursuant to an
exemption from the U.S. securities laws.
Unless otherwise determined by Axalto, it is not intended that any offer will be made, directly or
indirectly, in or into Australia, Canada or Japan and in such circumstances it will not be capable
of acceptance in or from Australia, Canada or Japan. Accordingly, copies of this announcement are
not being, and must not be, mailed or otherwise distributed or sent in or into Australia, Canada or
Japan. Custodians, nominees and trustees should observe these restrictions and should not send or
distribute this announcement in or into Australia, Canada or Japan.
Forward-Looking Statements
This communication contains certain statements that are neither reported financial results nor
other historical information and other statements concerning Axalto, Gemplus and their combined
businesses after completion of the proposed combination. These statements include financial
projections and estimates and their underlying assumptions, statements
regarding plans, objectives and expectations with respect to future operations, events, products
and services and future performance. Forward-looking statements are generally identified by the
words expects, anticipates, believes, intends, estimates and similar expressions. These
and other information and statements contained in this communication constitute forward-looking
statements within the safe harbor provisions of U.S. federal securities laws. Although management
of the companies believe that the expectations reflected in the forward-looking statements are
reasonable, investors and security holders are cautioned that forward-looking information and
statements are subject to various risks and uncertainties, many of which are difficult to predict
and generally beyond the control of the companies, that could cause actual results and developments
to differ materially from those expressed in, or implied or projected by, the forward-looking
information and statements, and the companies cannot guarantee future results, levels of activity,
performance or achievements. Factors that could cause actual results to differ materially from
those estimated by the forward-looking statements contained in this communication include, but are
not limited to: the ability of the companies to integrate according to expectations; the ability of
the companies to achieve the expected synergies from the transaction; trends in wireless
communication and mobile commerce markets; the companies ability to develop new technology and the
effects of competing technologies developed and expected intense competition generally in the
companies main markets; profitability of expansion strategy; challenges to or loss of intellectual
property rights; ability to establish and maintain strategic relationships in their major
businesses; ability to develop and take advantage of new software and services; the effect of the
transaction and any future acquisitions and investments on the companies share prices; changes in
global, political, economic, business, competitive, market and regulatory forces; and those
discussed by Gemplus in its filings with the SEC, including under the headings Cautionary
Statement Concerning Forward-Looking Statements and Risk Factors. Moreover, neither the
companies nor any other person assumes responsibility for the accuracy and completeness of such
forward-looking statements. The forward-looking statements contained in this communication speak
only as of this communication and the companies are under no duty to update any of the
forward-looking statements after this date to conform such statements to actual results or to
reflect the occurrence of anticipated results or otherwise.