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Mohawk Industries to Acquire the Marazzi Group

December 20, 2012

Mohawk Industries, Inc. today announced it has entered into a definitive agreement to acquire the Marazzi Group, which will make Mohawk the worldwide leader in ceramic tile.

The Marazzi Group is a leading manufacturer and marketer of ceramic tile in all its major geographies, including Russia, the United States, Italy, France and Spain. Marazzi’s 2011 revenues were about €833 million, or $1.16 billion, with EBITDA of approximately 15.5 percent under historical IFRS accounting. The company is held by the Marazzi family and two private equity funds—Permira and Private Equity Partners.

Mohawk is acquiring Marazzi for €1.17 billion, or approximately $1.5 billion, with a combination of cash and equity. Marazzi’s estimated 2012 EBITDA of €145 million represents a purchase multiple of about eight times. The company expects to compete the transaction during the first quarter of 2013 pending customary closing conditions and regulatory approvals. Mohawk anticipates that the transaction will be accretive in 2013.

Ceramic tile remains the world’s most widely utilized flooring product with an estimated worldwide consumption of more than 110 billion square feet and annual growth of 5 to 6 percent. Marazzi distributes ceramic tile in more than 100 countries through a strong international sales force, which will increase Mohawk’s worldwide growth.

Founded and managed by Filippo Marazzi, Sr. and his family, the Marazzi Group has become a global leader in ceramic tile with worldwide brand recognition. Its product line features glazed ceramic, glazed porcelain, technical tile and color body porcelain. Marazzi introduced the single-fire process that revolutionized the industry, making ceramic more accessible to a wider market. Technological innovations continue today with new introductions such as crystalized porcelain and single-fired thin tiles. Marazzi operates manufacturing facilities in Russia, the United States and Western Europe and employs around 6,300 people.

“This acquisition represents the next step in the expansion of Mohawk’s global business and will make Mohawk a stronger company,” said Jeff Lorberbaum, Mohawk’s chairman and CEO. “We found Marrazi attractive because of its solid management team and leadership positions in the U.S., Russia and Europe. Marazzi’s differentiated products, leading-edge design, efficient manufacturing and exemplary service have created one of the most valued brands in the industry. We have many opportunities to improve results by leveraging best practices, operational expertise, product innovation and manufacturing assets.”

Marazzi has the number one position in the Russian ceramic market, which is similar in size to the United States. Employing a model that optimizes the total supply chain from manufacturing to distribution to retail, Marazzi operates two manufacturing sites and 21 regional distribution centers. In addition, it owns and franchises more than 300 retail stores that carry Marazzi products exclusively. About 50 percent of the company’s Russian business is sold directly to end users, and the retail advertising done by the stores has created a strong consumer brand. In the United States, Marazzi’s products are sold through independent distributors, home centers and a few company service centers.

Lorberbaum said, “The combination of Mohawk and Marazzi creates opportunities to expand U.S. distribution through service centers and other channels, source ceramic from our worldwide assets, utilize our relationships to expand all product categories and deploy leading innovation and design trends to all of our ceramic businesses around the globe. Mohawk and Marazzi’s strong management and solid financial position combined with process and material knowledge, distribution expertise, and synergies with other products will deliver additional value to our shareholders.”

Mohawk is a leading supplier of flooring for both residential and commercial applications. The company provides a vast selection for all markets of carpet, ceramic tile, laminate, wood, stone, vinyl and rugs. These products are marketed under the brands Mohawk, Karastan, Lees, Bigelow, Durkan, Mohawk Home, Daltile (First Snow Elegant Marble shown), American Olean, Unilin and Quick-Step. Mohawk’s international presence includes operations in Australia, Brazil, China, Europe, Malaysia, Mexico and Russia.

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