Verdane Intressenter announces a recommended cash offer to the shareholders and the holders of convertibles in Capilon

17 Feb, 2012

This is a unofficial translation of the Swedish original text. In case of any differences
between the English translation and the Swedish text, the Swedish text will prevail.


The Offer is not being made, and this press release may not be distributed, directly or indirectly, in or into, nor will any tender of shares be accepted from or on behalf of holders in, Australia, Canada, Hong Kong, Japan, New Zealand, South Africa, Switzerland or USA or any other jurisdiction in which the making of the Offer, the distribution of this press release or the acceptance of the Offer would contravene applicable laws or regulations or require further offer documents, filings or other actions in addition to those required under Swedish law.

Press release 17 February 2012

Verdane Intressenter announces a recommended cash offer to the shareholders and the holders of convertibles in Capilon

Goldcup 7468 AB, under name change to Verdane Capital VII Intressenter AB (”Verdane Intressenter”), a wholly-owned subsidiary to Verdane Capital VII K/S (”Verdane Capital VII”), announces a recommended cash offer (the “Offer”) to the shareholders and the holders of convertibles in Capilon AB (”Capilon”) to tender all their outstanding shares and convertibles to Verdane Intressenter for SEK 29 per share and SEK 29 per convertible together with accrued interest on the convertible until Verdane Intressenter announces that it completes the Offer. The shares and convertible debentures of Capilon are traded on NASDAQ OMX First North (”First North”).

The Offer in Brief

  • Verdane Intressenter offers SEK 29 for each share in Capilon and SEK 29 for each convertible together with accrued interest on the convertible debenture until Verdane Intressenter announces that it completes the Offer.

  • The Offer represents a premium of

  • 26 per cent compared to the volume-weighted average price of SEK 23.0 for the Capilon shares traded on First North during the last 30 trading days prior to announcement of the Offer,

  • 16 per cent compared to the closing price of SEK 24.9 for the Capilon shares traded on First North on 16 February 2012, i.e. the last trading day prior to the announcement of the Offer,

  • 68 per cent compared to the volume-weighted average price of SEK 17.3 for the Capilon shares traded on First North during the last 30 trading days prior to 13 January 2012 (the date Capilon announced information on discussions regarding a potential public tender offer), and

  • 67 per cent compared to the volume-weighted average price of SEK 17.4 for the Capilon shares traded on First North during the last 90 trading days prior to 13 January 2012 (the date Capilon announced information on discussions regarding a potential public tender offer).

  • Capilon's Board of Directors has unanimously1 decided to recommend the shareholders and convertible debenture holders in Capilon to accept the Offer.

  • Shareholders and holders of convertibles with holdings equivalent to app 34 per cent of the capital and votes, after full dilution, have undertaken on certain conditions to accept the Offer.

  • The Offer is, inter alia, conditional upon the Offer being accepted to such an extent that Capilon becomes the owner of more than 90 per cent of the total amount of shares and convertible debentures in Capilon, on a fully-diluted basis.

  • The Offer is not conditional on financing.

  • The acceptance period for the Offer is expected to commence on or about 29 February 2012 and end on or about 21 March 2012. The payment of the settlement is expected to commence on or about 30 March 2012.

Background and Reason for the Offer

Capilon is a private equity firm that invests in industrial companies. Capilon’s business strategy is to acquire and develop small and medium-sized industrial companies by being an active and responsible owner. Capilon contributes with capital, an active involvement in and a responsible long term commitment to increase the value of its investments.

Capilon consists of seven divisions in three subsidiaries. The subsidiary Scanacon is an environmental technology company in the metal industry. The subsidiary Österby Marine is a group consisting of three companies: MJP Waterjets, Österby Gjuteri and Alcopropeller. MJP Waterjets is one of the leading suppliers of water jets in the world. Österby Gjuteri produces and markets stainless steel casted goods. Alcopropeller produces propeller blades in bronze and stainless steel. The subsidiary TermoRegulator is a group consisting of three lines of business: TermoRegulator, Kvarnmon Hydraulics and eC ErgoTronic. TermoRegulator is a supplier of sheet metal work. Kvarnmon Hydraulics manufactures hydraulic tanks for mobile hydraulic applications. eC ErgoTronic develops equipment for industrial automation.

The Verdane sphere has, through Verdane Capital VII and former investment funds, had ownership in over 200 companies, of which many have been industrial companies. This has created a wealth of experience and knowledge with regards to building industrial networks. Verdane Capital VII has followed Capilon for some time and believes that several of its subsidiaries have good growth potential. A long-term strategy and significant investments in product development, organisation and international expansion is however required to realize the potential of some of the subsidiaries. Verdane Intressenter is of the opinion that an investment heavy and long-term strategy for Capilon is best executed with a financially strong private owner of the company capable of having a long term perspective.

Verdane Capital VII has used considerable resources to evaluate Capilon and considers, based on this evaluation, that the Offers is attractive for share holders and holders of convertibles in the company. Verdane Capital VII appreciates the management and employees of Capilon and anticipates that the Offer strengthens the prospect for growth and positive effects for Capilon’s subsidiaries, employees, customers and other stakeholders. The purpose with an acquisition is to continue the development work of each respective subsidiary by working with the existing management, and, when necessary, by investing additional capital in product development and other areas.

Verdane Intressenter is aware that Capilon has initiated a process to divest the subsidiary TermoRegulator and Verdane Intressenter believes that this process should be continued and completed as soon as possible after the completion of the Offer.

The Offer

Verdane Intressenter offers SEK 29 in cash for each share in Capilon and SEK 29 in cash for each convertible together with accrued interest on the convertible debenture until Verdane Intressenter announce that it completes the Offer. If Capilon pays dividends or makes any other value transfer, which occurs prior to the settlement of the Offer, the consideration paid in the Offer as described above will decrease accordingly.

Commission will not be charged in connection with the Offer.

The Offer represents a premium of

  • 26 per cent compared to the volume-weighted average price of SEK 23.0 for the Capilon shares traded on First North during the last 30 trading days prior to announcement of the Offer,

  • 16 per cent compared to the closing price of SEK 24.9 for the Capilon shares traded on First North on 16 February 2012, i.e. the last trading day prior to the announcement of the Offer,

  • 68 per cent compared to the volume-weighted average price of SEK 17.3 for the Capilon shares traded on First North during the last 30 trading days prior to 13 January 2012 (the date Capilon announced information on discussions regarding a potential public tender offer), and

  • 67 per cent compared to the volume-weighted average price of SEK 17.4 for the Capilon shares traded on First North during the last 90 trading days prior to 13 January 2012 (the date Capilon announced information on discussions regarding a potential public tender offer).

The Offer values the shares in Capilon to SEK 126 679 366 based on a total of 4 368 254 Capilon shares currently outstanding. Including the issued convertibles2, the total value offered amounts to SEK 182 884 788 plus accrued interest on the convertible debenture until Verdane Intressenter announce that it completes the Offer, giving an approximate combined bid value of SEK 184.4 million.

Conditions for the Offer

Completion of the Offer is conditional upon:

(i) that Capilon’s shareholders and holders of convertibles accept the Offer to such an extent that Verdane Intressenter becomes the owner of shares and convertibles in Capilon representing more than 90 per cent of the total number of shares of Capilon on a fully diluted basis;

(ii) that all necessary permits, approvals, decisions and other measures, from public authorities or similar, which are necessary for the Offer, are obtained on terms acceptable to Verdane Intressenter;

(iii) that any third party does not publish an offer to acquire shares or convertible debentures in Capilon on terms more favourable to shareholders or convertible debenture holders of Capilon than the Offer;

(iv) that no event or circumstance occurs which would affect or could reasonably be expected to materially adversely affect Capilon's result, liquidity, profit, assets or overall financial position;

(v) that the Offer is not wholly or partly prevented or materially adversely affected or otherwise materially affected adversely by legislation, court decision, public authority decision or other circumstances, that exist or may reasonably be expected, beyond Verdane Intressenter’s control;

(vi) that Capilon’s Board of Directors does not take any action typically intended to impair the prerequisites for the completion of the Offer; and

(vii) that Verdane Intressenter does not become aware that information published by Capilon or provided by Capilon to Verdane Intressenter and/or Verdane Capital VII, in any material respect is incorrect or misleading, or that any material information that Capilon has been required to disclose has not been published by Capilon.

Verdane Intressenter reserves the right to withdraw the Offer in the event it becomes clear that the above conditions are not fulfilled or cannot be fulfilled. With regard to conditions (ii) - (vii), however, such withdrawal will only be made if the non-fulfilment is of material importance to Verdane Intressenter's acquisition of shares and convertible s in Capilon.

Verdane Intressenter reserves the right to waive, in whole or in part, one or more of the conditions above, including with respect to condition (i) above, to complete the Offer at a lower level of acceptance.

Financing

Verdane Intressenter has received a binding undertaking from Verdane Capital VII enabling Verdane Intressenter to complete the Offer by cash payment. Verdane Capital VII has a total of SEK 1 500 million to invest of which SEK 1 000 million has not been used as per 1 January 2012, and is not dependent on a third party to complete the Offer. The offer is hence not subject to any financing condition.


 

Recommendation from the Board of Directors in Capilon

Capilon's Board of Directors has unanimously3 decided to recommend the shareholders and holders of convertibles in the Capilon to accept the Offer. The recommendation is supported by a fairness opinion from Navigo Partners. The Board of Directors’ recommendation and the fairness opinion will today be published by Capilon in a separate press release.

Irrevocable Undertakings from Shareholders and Convertible Debenture Holders in Capilon

Tibia Konsult AB, LMK Ventures AB, Raging Bull Invest AB, and Anders Ahlqvist with family and companies, holding 1 118 738 shares and 1 024 316 convertible debentures, equivalent to 34 per cent4 of the capital and votes in Capilon, has irrevocably undertaken to accept the Offer (as regards 99 248 shares – undertaken to ensure that capital insurances accept the Offer). These undertakings are conditional upon no other party announcing a competing offer to acquire all shares and convertibles in Capilon for a price at least 20 per cent higher than the price in the Offer or Verdane Intressenter withdrawing the Offer.

The Verdane Sphere’s Ownership in Capilon

Verdane Capital VII, Verdane Intressenter or any other company within the Verdane Sphere does not currently own any shares or convertibles issued by Capilon and have not acquired or agreed to acquire shares or convertibles issued by Capilon during the last six months prior to the announcement of the Offer.

Due Diligence

The Board of Directors of Capilon has permitted Verdane Capital VII to conduct a due diligence investigation of Capilon prior to the announcement of the Offer, which among other things included access to a virtual data room and meetings with the management of Capilon and the management of the subsidiaries Scanacon AB, Österby Gjuteri AB and MJP Waterjets AB. Verdane Capital VII has during this investigation received information about MJP Waterjets AB and TermoRegulator AB that will be published by Capilon in a separate press release. In addition to this information that will be published separately, Capilon has informed Verdane Intressenter that no unpublished price sensitive information has been provided to Verdane Capital VII or Verdane Intressenter within the frame of the due diligence investigation.

Indicative Timetable

Estimated date of the announcement of the Offer document 27 February 2012

Estimated accept period 29 February 2012 - 21 March 2012

Estimated date for the commencement of payment of the 30 March 2012

settlement

Verdane Intressenter reserves the right to extend the acceptance period for the Offer and to postpone the date of settlement. Verdane Intressenter will publish any extension of the acceptance period for the Offer and/or postponement of the settlement by a press release in accordance with applicable laws and regulations.


Compulsory acquisition and delisting

If Verdane Intressenter becomes owner of more than 90 per cent of the shares in Capilon, Verdane Intressenter intends to initiate compulsory acquisition of the remaining shares and convertible debentures in Capilon in accordance with the Swedish Companies Act. In connection therewith, Verdane Intressenter will promote a delisting of the shares of Capilon from First North.

Verdane Intressenter and Verdane Capital VII

The Offer is made by Verdane Intressenter, reg no 556883-7115, a wholly-owned subsidiary of Verdane Capital VII. Verdane Intressenter has been acquired by Verdane Capital VII in order to make the Offer. Verdane Intressenter was registered with the Swedish Companies Registration Office on 9 February 2012 and has not previously conducted any business.

Verdane Capital VII is a fund founded in 2009 with the address H C Andersen Boulevard 12, 1553 Copenhagen, Denmark.

The Verdane Sphere has extensive experience of the venture capital market from servicing as advisors and managing companies. The Verdane sphere was established in 1985, and has since been advisors for and/or managers of seven funds and is currently managing SEK 5 billions.

20 people currently work in the Verdane sphere and have experience from a number of industries and several have been engaged in industrial companies. The Verdane sphere has offices in Stockholm, Oslo and Helsinki. There are currently a total of more than 100 holdings in the funds managed by the Verdane sphere. The following investments in the industrial sector can be mentioned as examples of holdings by the Verdane sphere: Åkerströms (Swe), Industri Verktöy (Nor), Lahti Precision (Fin), Klippan (Swe), NIMO Verken (Swe), Högfors Valves (Fin), Styrochem (Fin) and TeamTec (Nor).

Applicable Law and Disputes

The Offer, and any accept of the offer from a shareholder and/or holder of a convertible, is governed by the Swedish Industry and Commerce Stock Exchange Committee (Sw. Näringslivets Börskommitté) rules on public offer for shares in Swedish limited companies whose shares are traded on certain trading platforms.

The Offer is governed by Swedish law. Any disputes regarding the Offer shall be resolved by the Stockholm district court as first instance.

Advisors

Verdane Intressenter has engaged Redeye AB as financial advisor and Andulf Advokat and Advokatfirman Westermark Anjou as legal advisors.

Stockholm 17 February 2012

Goldcup 7468 AB, under name change to Verdane Capital VII Intressenter AB
The Board of Directors

_________________________

The information in this press release was submitted for publication 12:30 PM 17 February 2012.

For further information regarding the Offer please contact Per Nordlander, director of the board of Verdane Intressenter and partner at Verdane Capital Advisor, acting as advisors for Verdane Capital VII and Verdane Intressenter.

Mobile: + 46 (0)708 214 692
E-mail: per.nordlander@verdanecapital.com

1Director Peder Zetterberg has not participated in the Board of Directors’ evaluation of the Offer or decisions concerning the Offer, as he has expressed interest in acquiring all shares in TermoRegulator AB.

2 A general meeting of the shareholders in Capilon on 10 September 2009 resolved to issue the convertibles. A total of 1 941 116 convertibles were issued, each with a nominal value of SEK 22, representing a total nominal amount of SEK 42 704 552. Each convertible has a conversion price of SEK 22. 2 998 convertibles have been converted to shares and remaining convertibles can be converted to 1 938 118 shares in Capilon, equivalent to a dilution of approximately 31 per cent. If all remaining convertibles are converted to shares Capilon will have a total of 6 306 372 outstanding shares. The convertible debentures carry an annual interest rate of 9 per cent, from 1 November 2009 to 31 October 2012, due and payable, to the extent conversion has not taken place, on 31 October each calendar year. Neither Capilon nor the convertible debenture holders has the right to request conversion solely because of the Offer.

3 Director Peder Zetterberg has not participated in the Board of Directors’ evaluation of the Offer or decisions concerning the Offer, as he has expressed interest in acquiring all shares in TermoRegulator AB.

4 Calculated after full dilution.