2016-12-16 11:00:16 CET
2016-12-16 11:00:16 CET
REGULATED INFORMATION
Ahlstrom - Prospectus/Announcement of Prospectus
Prospectus and certain other information published in relation to the merger of Ahlstrom and Munksjö
This stock exchange release may not be published or distributed, in whole or in
part, directly or indirectly, in or into Canada, Australia, Hong Kong, South
Africa, Japan or any other country where such publication or distribution would
violate applicable laws or rules or would require additional documents to be
completed or registered or require any measure to be undertaken, in addition to
the requirements under Finnish law. For further information, see "Important
notice" below.
Ahlstrom Corporation STOCK EXCHANGE RELEASE December 16, 2016 at 12:00 noon
Prospectus and certain other information published in relation to the merger of
Ahlstrom and Munksjö
* Merger prospectus, including unaudited pro forma financial information,
published today
* Management team, effective as of the completion of the merger, appointed and
other governance topics related to the combined company published
* Certain other information published by Munksjö today
Overview
As announced on November 7, 2016, the Boards of Directors of Ahlstrom
Corporation ("Ahlstrom") and Munksjö Oyj ("Munksjö") have agreed on combining
the two companies through a statutory absorption merger whereby Ahlstrom would
be merged into Munksjö in such a manner that all assets and liabilities of
Ahlstrom would be transferred without a liquidation procedure to Munksjö (the
"Merger"). The shareholders of Ahlstrom would receive new shares in Munksjö as
merger consideration in proportion to their existing shareholdings. Further, as
announced on November 14, 2016, the Boards of Directors of Munksjö and Ahlstrom
have proposed that the extraordinary general meetings of shareholders of Munksjö
and Ahlstrom, both scheduled to be held on January 11, 2017, resolve on the
Merger.
Publication of the merger prospectus
The Finnish Financial Supervisory Authority has today approved the Finnish
language version of the prospectus prepared in relation to the Merger and for
the listing of the new shares in Munksjö to be issued as merger consideration.
The Finnish language prospectus will be available on the internet at
www.ahlstrom.com/fi/Sijoittajat/ahlstromin-ja-munksjon-yhdistyminen/ and
www.munksjo.com/ahlstrommunksjo/fin on or about December 16, 2016, as well as at
the reception of Nasdaq Helsinki Ltd at Fabianinkatu 14, FI-00100 Helsinki,
Finland, at the registered office of Ahlstrom at Alvar Aallon katu 3 C, FI-
00100 Helsinki, Finland and at the registered office of Munksjö at
Eteläesplanadi 14, FI-00130 Helsinki, Finland. The English language prospectus,
together with the Swedish language summary, will be available on the internet at
www.ahlstrom.com/en/Investors/ahlstrommunksjo-combination/ and
www.munksjo.com/ahlstrommunksjo starting on or about December 16, 2016.
The prospectus contains the following previously unpublished information in
relation to the Merger and Munksjö:
Management team and other governance topics related to the combined company
As previously communicated, Munksjö's current CEO, Jan Åström, will continue to
serve as the CEO of the combined company.
The business areas of the combined company will be led by an experienced team
combining the talent of both companies:
* The Decor business area will be led by Norbert Mix
* The Filtration and Performance business area will be led by Fulvio
Capussotti
* The Industrial Solutions business area will be led by Daniele Borlatto
* The Specialties business area will be led by Omar Hoek
The management of the combined company will also include an experienced team of
functional managers:
* Sakari Ahdekivi will serve as Deputy CEO and Executive Vice President
Corporate Development
* Pia Aaltonen-Forsell will serve as Chief Financial Officer
* Andreas Elving will serve as General Counsel
* Åsa Jackson will serve as Senior Vice President Human Resources
* Anna Selberg will serve as Senior Vice President Communications
The new management team of the combined company will become effective as of the
completion of the Merger.
It is currently proposed that, following the completion of the Merger, the
combined company will continue to have its administrative head office in
Stockholm, Sweden and supporting administrative functions in Helsinki, Finland.
Final decisions regarding the location of the administrative head office
functions will be taken as part of the integration process related to the
Merger. Munksjö and Ahlstrom will consult and negotiate with relevant employees,
their representatives and/or employee organisations regarding the consequences
of such decision in accordance with the applicable legal requirements.
Unaudited pro forma financial information
The unaudited pro forma financial information included in the prospectus is
attached as Annex 1 to this stock exchange release (any capitalized terms used
in unaudited pro forma financial information and not defined therein shall have
the meanings assigned to them in the prospectus).
Changes to Munksjö's long-term share-value based incentive program approved in
June 2016
Munksjö has today as part of its stock exchange release announcing the
publication of the prospectus published that the Board of Directors of Munksjö
has decided to terminate Munksjö's long-term share-value-based incentive program
for the members of the Management Team and other key personnel of Munksjö
approved in June 2016. The release is available at www.munksjo.com.
Munksjö will book items affecting comparability related to the Merger
Munksjö has today as part of its stock exchange release announcing the
publication of the prospectus published that it will book items affecting
comparability related to the Merger. The release is available at
www.munksjo.com.
For further information, please contact:
Sakari Ahdekivi
Interim President & CEO
Tel: + 358 10 888 4768
Satu Perälampi
Vice President, Communications
Tel. +358 10 888 4738
Juho Erkheikki
Investor Relations & Financial Communications Manager
Tel. +358 10 888 4731
Ahlstrom in brief
Ahlstrom provides innovative fiber-based materials with a function in everyday
life. We are committed to growing and creating stakeholder value by proving the
best performing sustainable fiber-based materials. Our products are used in
everyday applications such as filters, medical fabrics, life science and
diagnostics, wallcoverings, tapes, and food and beverage packaging. In 2015,
Ahlstrom's net sales amounted to EUR 1.1 billion. Our 3,300 employees serve
customers in 22 countries. Ahlstrom's share is quoted on the Nasdaq Helsinki.
More information is available at www.ahlstrom.com.
IMPORTANT NOTICE
The distribution of this release may be restricted by law and persons into whose
possession any document or other information referred to herein comes should
inform themselves about and observe any such restrictions. The information
contained herein is not for publication or distribution, directly or indirectly,
in or into Canada, Australia, Hong Kong, South Africa or Japan. Any failure to
comply with these restrictions may constitute a violation of the securities laws
of any such jurisdiction. This release is not directed to, and is not intended
for distribution to or use by, any person or entity that is a citizen or
resident or located in any locality, state, country or other jurisdiction where
such distribution, publication, availability or use would be contrary to law or
regulation or which would require any registration or licensing within such
jurisdiction.
This release does not constitute a notice to an EGM or a merger prospectus and
as such, does not constitute or form part of and should not be construed as, an
offer to sell, or the solicitation or invitation of any offer to buy, acquire or
subscribe for, any securities or an inducement to enter into investment
activity. Any decision with respect to the proposed statutory absorption merger
of Ahlstrom into Munksjö should be made solely on the basis of information
contained in the actual notices to the EGM of Munksjö and Ahlstrom, as
applicable, and the merger prospectus related to the Merger as well as on an
independent analysis of the information contained therein. You should consult
the merger prospectus for more complete information about Munksjö, Ahlstrom,
their respective subsidiaries, their respective securities and the Merger.
No part of this release, nor the fact of its distribution, should form the basis
of, or be relied on in connection with, any contract or commitment or investment
decision whatsoever. The information contained in this release has not been
independently verified. No representation, warranty or undertaking, expressed or
implied, is made as to, and no reliance should be placed on, the fairness,
accuracy, completeness or correctness of the information or the opinions
contained herein. Neither Munksjö nor Ahlstrom, nor any of their respective
affiliates, advisors or representatives or any other person, shall have any
liability whatsoever (in negligence or otherwise) for any loss however arising
from any use of this release or its contents or otherwise arising in connection
with this release. Each person must rely on their own examination and analysis
of Munksjö, Ahlstrom, their respective subsidiaries, their respective securities
and the Merger, including the merits and risks involved.
This release includes "forward-looking statements." These statements may not be
based on historical facts, but are statements about future expectations. When
used in this release, the words "aims," "anticipates," "assumes," "believes,"
"could," "estimates," "expects," "intends," "may," "plans," "should," "will,"
"would" and similar expressions as they relate to Munksjö, Ahlstrom, the Merger
or the combination of the business operations of Munksjö and Ahlstrom identify
certain of these forward-looking statements. Other forward-looking statements
can be identified in the context in which the statements are made. Forward-
looking statements are set forth in a number of places in this release,
including wherever this release include information on the future results, plans
and expectations with regard to the combined company's business, including its
strategic plans and plans on growth and profitability, and the general economic
conditions. These forward-looking statements are based on present plans,
estimates, projections and expectations and are not guarantees of future
performance. They are based on certain expectations, which, even though they
seem to be reasonable at present, may turn out to be incorrect. Such forward-
looking statements are based on assumptions and are subject to various risks and
uncertainties. Shareholders should not rely on these forward-looking statements.
Numerous factors may cause the actual results of operations or financial
condition of the combined company to differ materially from those expressed or
implied in the forward-looking statements. Neither Munksjö nor Ahlstrom, nor any
of their respective affiliates, advisors or representatives or any other person
undertakes any obligation to review or confirm or to release publicly any
revisions to any forward-looking statements to reflect events that occur or
circumstances that arise after the date of this release.
This release includes estimates relating to the cost synergy benefits expected
to arise from the Merger and the combination of the business operations of
Munksjö and Ahlstrom as well as the related integration costs, which have been
prepared by Munksjö and Ahlstrom and are based on a number of assumptions and
judgments. Such estimates present the expected future impact of the Merger and
the combination of the business operations of Munksjö and Ahlstrom on the
combined company's business, financial condition and results of operations. The
assumptions relating to the estimated cost synergy benefits and related
integration costs are inherently uncertain and are subject to a wide variety of
significant business, economic, and competitive risks and uncertainties that
could cause the actual cost synergy benefits from the Merger and the combination
of the business operations of Munksjö and Ahlstrom, if any, and related
integration costs to differ materially from the estimates in this release.
Further, there can be no certainty that the Merger will be completed in the
manner and timeframe described in this release, or at all.
Notice to Shareholders in the United States
The new shares in Munksjö have not been and will not be registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act") or under any of
the applicable securities laws of any state or other jurisdiction of the United
States. The new shares in Munksjö may not be offered or sold, directly or
indirectly, in or into the United States (as defined in Regulation S under the
Securities Act), unless registered under the Securities Act or pursuant to an
exemption from the registration requirements of the Securities Act and in
compliance with any applicable state securities laws of the United States. The
new shares in Munksjö have not been, and will not be, registered under the
Securities Act or under any of the applicable securities laws of any state or
other jurisdiction of the United States. The new shares in Munksjö will be
offered in the United States in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 802 thereunder.
Munksjö and Ahlstrom are Finnish companies. Information distributed in
connection with the Merger and the related shareholder votes is subject to
disclosure requirements of Finland, which are different from those of the United
States. The financial information included in this release has been prepared in
accordance with accounting standards in Finland, which may not be comparable to
the financial statements or financial information of United States companies.
It may be difficult for Ahlstrom's shareholders to enforce their rights and any
claim they may have arising under the U.S. federal securities laws in respect of
the Merger, since Munksjö and Ahlstrom are located in non-U.S. jurisdictions,
and all of their officers and directors are residents of non-U.S. jurisdictions.
Ahlstrom's shareholders may not be able to sue Munksjö or Ahlstrom or their
officers or directors in a court in Finland for violations of the U.S.
securities laws. It may be difficult to compel Munksjö and Ahlstrom and their
affiliates to subject themselves to a U.S. court's judgment.
ANNEX 1
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined financial information (the "Unaudited
Pro Forma Financial Information") is presented for illustrative purposes only to
give effect to the Merger and refinancing the existing indebtedness of Munksjö
(whether originally incurred by Munksjö or assumed by Munksjö as a result of the
Merger) under the New Financing Agreements (as defined below) on Munksjö's
financial information. The Unaudited Pro Forma Financial Information is prepared
on the basis of the historical results of Munksjö and Ahlstrom presented in
accordance with IFRS. For additional information on the historical results of
Munksjö or Ahlstrom, see the audited historical consolidated financial
information and the unaudited interim consolidated financial information of
Munksjö and Ahlstrom incorporated by reference into the Prospectus.
Merger of Munksjö and Ahlstrom
The Boards of Directors of Munksjö and Ahlstrom have, on November 14, 2016,
proposed that the EGMs of Munksjö and Ahlstrom scheduled to be held on
January 11, 2017 resolve on the Merger in accordance with the Merger Plan and
approve the Merger Plan. The completion of the Merger is subject to, inter alia,
approval by the respective EGMs of Munksjö and Ahlstrom, merger control
approvals from relevant competition authorities, the satisfaction or waiver of
the other conditions precedent in the Combination Agreement and the Merger Plan,
the Combination Agreement not having been terminated in accordance with its
terms and the registration of the completion of the Merger with the Finnish
Trade Register. For information on the conditions to the completion of the
Merger in the Combination Agreement and the Merger Plan, see "Merger of Munksjö
and Ahlstrom-Combination Agreement-Conditions to the Completion of the Merger"
in the Prospectus as well as the Merger Plan, which is attached to the
Prospectus as Annex E. On the Effective Date, Ahlstrom will automatically
dissolve.
The completion of the Merger is, among other things, conditional upon the sale
by Ahlstrom of its entire interest in the plant located at Osnabrück, Germany.
Ahlstrom announced on November 7, 2016 that it has signed an agreement to sell
its German subsidiary with operations in Osnabrück. Ahlstrom produces base
papers for wallcovers, poster papers as well as release liners for self-adhesive
labels at the Osnabrück plant, which is part of the Filtration & Performance
business area. The transaction will also include Ahlstrom's 50 percent stake in
AK Energie GmbH (a joint venture with Kämmerer Paper Holding GmbH ("Kämmerer")),
which is the site's utility providing power and water treatment services.
The completion of the Merger is expected to be registered with the Finnish Trade
Register on or about April 1, 2017 (i.e., the Effective Date), provided that the
conditions to the completion of the Merger have been fulfilled.
New Financing Agreements
On November 7, 2016, Munksjö and Ahlstrom agreed on financing commitments for
the Merger and the Combined Company with Nordea and SEB as mandated lead
arrangers. In accordance with these commitments, Munksjö entered into a
facilities agreement with Nordea and SEB as mandated lead arrangers and
underwriters and Nordea as agent on November 10, 2016 (the "Term and Revolving
Facilities Agreement"), pursuant to which a term loan facility of
EUR 80 million, a term loan facility of EUR 40 million, a term loan facility of
EUR 150 million, a term loan facility of SEK 600 million and a term loan
facility of USD 35 million (together, the "Term Loan Facilities") as well as a
multicurrency revolving credit facility of EUR 200 million (the "Revolving
Credit Facility," and together with the Term Loan Facilities, the "Term and
Revolving Facilities") will be made available to Munksjö.
On the same date, Ahlstrom entered into a EUR 200 million bridge facility
agreement with Nordea and SEB as mandated lead arrangers and underwriters and
Nordea as agent (the "Bridge Facility Agreement"). Assuming that the Merger is
completed, the Bridge Facility Agreement will be assumed by Munksjö on the
Effective Date pursuant to an amended and restated bridge facility agreement
(the "Amended and Restated Bridge Facility Agreement," and together with the
Term and Revolving Facilities Agreement, the "New Financing Agreements") with
amended and restated terms and the commitments reduced to EUR 100 million (the
"Amended and Restated Bridge Facility," and together with the Term Loan
Facilities and the Revolving Credit Facility, the "Facilities"). The Term and
Revolving Facilities Agreement and the Amended and Restated Bridge Facility
Agreement provide that the Facilities will be available to the Combined Company
on a certain funds basis subject to the completion of the Merger and certain
other customary conditions precedent.
The existing indebtedness that is expected to be refinanced under the Facilities
include, among others, indebtedness under Munksjö's EUR 345 million and
SEK 570 million term and revolving facilities agreement (as discussed under
"Information about Munksjö-Operating and Financial Review and Prospects of
Munksjö-Liquidity and Capital Resources-Borrowings" in the Prospectus),
Ahlstrom's EUR 180 million multicurrency revolving credit facility agreement (as
discussed under "Information about Ahlstrom-Operating and Financial Review and
Prospects of Ahlstrom-Liquidity and Capital Resources-Liquidity" in the
Prospectus) and certain bilateral financing arrangements of Ahlstrom.
Basis of Presentation
The Merger will be accounted for as a business combination at consolidation
using the acquisition method of accounting under the provisions of IFRS 3 with
Munksjö determined as the acquirer of Ahlstrom. The acquisition method of
accounting in accordance with IFRS 3 applies the fair value concepts defined in
"IFRS 13 - Fair Value Measurement," and requires, among other things, that the
identifiable assets acquired and liabilities assumed in a business combination
are recognized at their fair values as of the acquisition date, with any excess
of the purchase consideration over the fair value of identifiable net assets
acquired recognized as goodwill. The purchase price calculation presented herein
has been made solely for the purpose of preparing this Unaudited Pro Forma
Financial Information. The Unaudited Pro Forma Financial Information has been
prepared in accordance with the Annex II to the Commission Regulation (EU) N:o
809/2004, as amended, and on a basis consistent with IFRS as adopted by the EU
and with the accounting principles applied in Munksjö's audited consolidated
financial statements as at and for the year ended December 31, 2015. The
Unaudited Pro Forma Financial Information has not been compiled in accordance
with Article 11 of Regulation S-X under the Securities Act or the guidelines
established by the American Institute of Certified Public Accountants.
The Unaudited Pro Forma Financial Information has been derived from
(a) Munksjö's audited consolidated financial statements as at and for the year
ended December 31, 2015, (b) Munksjö's unaudited consolidated financial
information as at and for the nine months ended September 30, 2016,
(c) Ahlstrom's audited consolidated financial statements as at and for the year
ended December 31, 2015 and (d) Ahlstrom's unaudited consolidated financial
information as at and for the nine months ended September 30, 2016.
The unaudited pro forma combined statement of financial position as at
September 30, 2016 gives effect to the Merger and the refinancing under the New
Financing Agreements as if they had occurred on that date. The unaudited pro
forma combined income statements for the nine months ended September 30, 2016
and for the year ended December 31, 2015 give effect to the Merger and the
refinancing under the New Financing Agreements as if they had occurred on
January 1, 2015.
The Unaudited Pro Forma Financial Information reflects adjustments to historical
financial information to give pro forma effect to events that are directly
attributable to the Merger and to the refinancing under the New Financing
Agreements and which are factually supportable. The Unaudited Pro Forma
Financial Information and explanatory notes present how Munksjö's financial
statements may have appeared had the businesses actually been combined and had
Munksjö's capital structure reflected the Merger and the refinancing under the
New Financing Agreements on the dates noted above.
Munksjö has performed a preliminary review of Ahlstrom's IFRS accounting
policies, based primarily on publicly available information, to determine
whether any adjustments were necessary to ensure comparability in the Unaudited
Pro Forma Financial Information. At this time, Munksjö has identified two
differences which are further described in Note 1 to the Unaudited Pro Forma
Financial Information below. Upon the completion of the Merger, Munksjö will
conduct a detailed review of Ahlstrom's accounting policies. Further, certain
reclassifications were made to amounts in Ahlstrom's financial statements to
align with Munksjö's presentation as described further in Note 1 to the
Unaudited Pro Forma Financial Information below.
The Unaudited Pro Forma Financial Information assumes that all shares in
Ahlstrom will be exchanged to shares in Munksjö applying the Merger
Consideration (excluding treasury shares held by Ahlstrom) and that none of
Ahlstrom's shareholders have demanded their shares in Ahlstrom to be redeemed in
cash.
The Unaudited Pro Forma Financial Information reflects the application of pro
forma adjustments that are preliminary and are based upon available information
and certain assumptions described in the accompanying notes to the Unaudited Pro
Forma Financial Information below and that Munksjö believes are reasonable under
the circumstances. Actual results of the Merger may materially differ from the
assumptions used in the Unaudited Pro Forma Financial Information. The Unaudited
Pro Forma Financial Information has been prepared by Munksjö for illustrative
purposes only and it reflects the assumed circumstances, and is not necessarily
indicative of the actual financial position or results of operations of Munksjö
that would have been realized had the Merger and the refinancing under the New
Financing Agreements occurred as at the dates indicated, nor is it meant to be
indicative of any anticipated financial position or future results of operations
that Munksjö will experience going forward. In addition, the unaudited pro forma
combined income statements do not reflect any expected cost savings or synergy
benefits that are expected to be generated or incurred.
All amounts presented are in millions of euros unless otherwise noted. The
Unaudited Pro Forma Financial Information set forth herein has been rounded.
Accordingly, in certain instances, the sum of the numbers in a column or row may
not conform exactly to the total amount given for that column or row.
Unaudited Pro Forma Combined Statement of Financial Position as at
September 30, 2016
The following table sets forth the unaudited pro forma combined statement of
financial position as at September 30, 2016:
As at September 30, 2016
New Combined
Munksjö Ahlstrom Financing Company
historical reclassified Merger Agreements pro forma
(Note 1) (Note 2) (Note 3)
(EUR in millions)
Assets
Non-current
assets
Tangible assets 416.1 312.7 130.5 - 859.3
Goodwill 225.5 72.2 275.5 - 573.2
Other 43.5 10.7 221.3 - 275.5
intangible
assets
Equity 2.2 15.7 (15.7) - 2.2
accounted
investments
Other non- 3.2 8.1 (0.5) 1.9 12.7
current assets
Deferred tax 48.3 66.6 (9.1) - 105.8
assets
Total non- 738.8 486.0 601.9 1.9 1,828.6
current assets
Current assets
Inventory 156.0 123.2 (8.3) - 270.9
Accounts 115.9 111.7 (7.1) - 220.6
receivable
Other current 30.4 31.7 (3.0) - 59.0
assets
Current tax 1.2 1.3 - - 2.5
asset
Cash and cash 116.2 54.5 (62.6) 19.0 127.0
equivalents
Total current 419.7 322.4 (81.1) 19.0 680.0
assets
Total assets 1,158.5 808.4 520.8 21.0 2,508.6
Equity and
liabilities
Equity
Attributable to
parent
company's
shareholders
Share capital 15.0 70.0 - - 85.0
Reserve for 254.1 - 428.6 - 682.7
unrestricted
equity
Other reserves 370.9 41.2 (41.2) - 370.9
Retained (219.1) 91.8 55.9 (3.5) (74.9)
earnings
Hybrid bond - 100.0 (100.0) - -
Total equity
attributable to
parent
company's
shareholders 420.9 303.0 343.3 (3.5) 1,063.7
Non-controlling 4.0 4.6 - - 8.7
interests
Total equity 424.9 307.6 343.3 (3.5) 1,072.4
Non-current
liabilities
Non-current 293.6 100.3 109.9 67.2 571.0
borrowings
Other non- 3.1 0.0 - - 3.1
current
liabilities
Pension 51.7 99.5 (33.3) - 117.8
obligations
Deferred tax 74.4 2.1 94.0 - 170.6
liabilities
Provisions 17.7 0.4 - - 18.2
Total non- 440.5 202.4 170.6 67.2 880.6
current
liabilities
Current
liabilities
Current 22.4 84.6 (0.2) (43.7) 63.1
borrowings
Accounts 141.2 139.8 0.3 1.0 282.3
payable
Liabilities to 5.9 - - - 5.9
equity
accounted
investments
Accrued 103.6 44.1 7.0 - 154.8
expenses and
deferred income
Current tax 8.0 7.2 0.0 - 15.2
liabilities
Other current 12.0 22.7 (0.4) - 34.4
liabilities
Total current 293.1 298.4 6.9 (42.7) 555.6
liabilities
Total 733.6 500.8 177.5 24.5 1,436.2
liabilities
Total equity 1,158.5 808.4 520.8 21.0 2,508.6
and liabilities
Refer to accompanying notes to the Unaudited Pro Forma Financial Information
Unaudited Pro Forma Combined Income Statement for the Nine Months Ended
September 30, 2016
The following table sets forth the unaudited pro forma combined income statement
for the nine months ended September 30, 2016:
For the nine months ended September 30, 2016
New Combined
Munksjö Ahlstrom Financing Company pro
historical reclassified Merger Agreements forma
(Note 1) (Note 2) (Note 3)
(EUR in millions, unless otherwise indicated)
Net sales 860.5 819.8 (59.9) - 1,620.4
Other operating 5.5 (0.1) - 10.7
income 5.3
Total income 865.8 825.3 (60.0) - 1,631.1
Changes in 1.9 0.1 - 4.0
inventories 2.1
Materials and (368.1) 33.4 - (746.2)
supplies (411.5)
Other external (194.3) 26.5 - (367.2)
costs (199.5)
Personnel costs (156.3) (163.6) 3.4 - (316.5)
Depreciation (38.3) (23.1) - (103.5)
and
amortization (42.1)
Share of profit 0.2 (0.2) - -
in equity
accounted
investments -
Operating 63.0 (19.9) - 101.7
result 58.5
Financial 0.3 (0.1) - 4.3
income 4.0
Financial costs (18.2) (11.9) 0.7 (0.9) (30.3)
Net financial (11.6) 0.7 (0.9) (26.0)
items (14.2)
Profit/(loss) 51.4 (19.2) (0.9) 75.7
before tax 44.3
Taxes (12.8) (18.0) 6.2 0.2 (24.4)
Net result for 33.5 (13.0) (0.7) 51.2
the period 31.5
Net result
attributable
to:
Parent 33.4 (13.0) (0.7) 51.0
company's
shareholders 31.3
Non-controlling 0.0 - - 0.3
interests 0.2
Earnings per
share
(attributable
to parent
company's
shareholders)
Basic earnings 0.53
per share, EUR 0.62
Diluted 0.53
earnings per
share, EUR 0.62
Average number
of shares
Basic 50,761,581 96,138,573
Diluted 50,878,354 96,255,346
Refer to accompanying notes to the Unaudited Pro Forma Financial Information
Unaudited Pro Forma Combined Income Statement for the Year Ended
December 31, 2015
The following table sets forth the unaudited pro forma combined income statement
for the year ended December 31, 2015:
For the year ended December 31, 2015
New Combined
Munksjö Ahlstrom Financing Company pro
historical reclassified Merger Agreements forma
(Note 1) (Note 2) (Note 3)
(EUR in millions, unless otherwise indicated)
Net sales 1,130.7 1,074.7 (80.8) - 2,124.6
Other operating 11.6 4.4 3.8 - 19.8
income
Total income 1,142.3 1,079.1 (76.9) - 2,144.4
Changes in 1.0 5.2 (4.3) - 2.0
inventories
Materials and (573.9) (495.2) 48.2 - (1,020.8)
supplies
Other external (283.6) (276.0) 21.1 - (538.6)
costs
Personnel costs (199.5) (216.6) 4.4 - (411.8)
Depreciation (53.6) (74.6) (22.5) - (150.6)
and
amortization
Share of profit 0.0 0.2 (0.2) - 0.0
in equity
accounted
investments
Operating 32.7 22.1 (30.1) - 24.6
result
Financial 10.5 0.5 (0.0) - 11.0
income
Financial costs (15.2) 0.1 0.9 (5.2) (19.4)
Net financial (4.7) 0.6 0.9 (5.2) (8.5)
items
Profit/(loss) 28.0 22.6 (29.3) (5.2) 16.2
before tax
Taxes (5.2) (14.1) 4.4 1.0 (13.8)
Net result for 22.8 8.6 (24.8) (4.2) 2.4
the period
Net result
attributable
to:
Parent 22.4 9.2 (24.8) (4.2) 2.6
company's
shareholders
Non-controlling 0.4 (0.7) - - (0.2)
interests
Earnings per
share
(attributable
to parent
company's
shareholders)
Basic earnings 0.44 0.03
per share, EUR
Diluted 0.44 0.03
earnings per
share, EUR
Average number
of shares
Basic 50,818,260 96,195,252
Diluted 50,918,311 96,295,303
Refer to accompanying notes to the Unaudited Pro Forma Financial Information
Notes to the Unaudited Pro Forma Financial Information
(1) Alignment of Ahlstrom's Financial Information with Munksjö's
Accounting Principles and Presentation
Accounting Policy Alignment
Munksjö has performed a preliminary review of Ahlstrom's accounting policies,
based primarily on publicly available information, to determine whether any
adjustments were necessary to ensure comparability in the Unaudited Pro Forma
Financial Information. Munksjö has identified two differences, one relating to
the accounting for government grants and another relating to the accounting for
emission rights.
According to Munksjö's accounting policies, grants related to expense items are
recognized in the consolidated statement of comprehensive income to adjust those
expenses that the grants are intended to offset. According to Ahlstrom's
accounting policies, grants received as reimbursement of expenses are recognized
in other operating income. Thus, in the Unaudited Pro Forma Financial
Information, the government grants have been adjusted in accordance with
Munksjö's accounting policies as presented in "-Reclassification of Ahlstrom's
Historical Financial Information" below.
According to Munksjö's accounting policies, emission rights are initially
recorded at fair value when the group obtains control and are subsequently
measured at cost on a FIFO (first-in-first-out) basis. According to Ahlstrom's
accounting policies, the allocated emission allowances received free of charge
and the liability based on the actual emissions are netted. No intangible asset
is recognized for the excess of allowances. Thus, Ahlstrom's net assets as at
September 30, 2016 have been adjusted with the fair value of the emission
allowances in excess in Note 2 below.
Upon the completion of the Merger, Munksjö will conduct a detailed review of
Ahlstrom's accounting policies. As a result of that review, Munksjö may identify
additional accounting policy differences between the two companies that, when
conformed, could have further impact on the combined financial statements. Based
on the information available at this time, Munksjö is not aware of any other
accounting policy differences that could have a material impact on the Unaudited
Pro Forma Financial Information.
Reclassification of Ahlstrom's Historical Financial Information
Certain reclassifications were made to align Ahlstrom's historical financial
information with Munksjö's financial statement presentation. Upon the completion
of the Merger, Munksjö will conduct a detailed review of Ahlstrom's financial
statement presentation. As a result of that review, Munksjö may identify
additional presentation differences between the two companies that, when
conformed, could have further impact on the presentation of the combined
financial statements. Based on the information available at this time, Munksjö
is not aware of any other presentation differences that could have a material
impact on the Unaudited Pro Forma Financial Information.
The following table sets forth the reclassifications that were made to align
Ahlstrom's historical statement of financial position as at September 30, 2016
with Munksjö's financial statement presentation:
As at September 30, 2016
Historical Reclassi- Ahlstrom
Ahlstrom fications Note reclassified
(EUR in millions)
Non-current
assets
Other non-current - 8.1 (i), (ii) 8.1
assets
Other receivables 7.8 (7.8) (i) -
Other investments 0.3 (0.3) (ii) -
Current assets
Accounts - 111.7 (iii) 111.7
receivable
Other current - 31.7 (iii) 31.7
assets
Trade and other 143.4 (143.4) (iii) -
receivables
Current
liabilities
Accounts payable - 139.8 (iv) 139.8
Accrued expenses - 44.1 (iv) 44.1
and deferred
income
Other current - 22.7 (iv), (v) 22.7
liabilities
Trade and other 201.4 (201.4) (iv) -
payables
Provisions 5.1 (5.1) (v) -
___________
(i) Reclassification of EUR 7.8 million from other receivables to
other non-current assets.
(ii) Reclassification of EUR 0.3 million from other investments to
other non-current assets.
(iii) Reclassification of EUR 143.4 million from trade and other
receivables to accounts receivable (EUR 111.7 million) and other current assets
(EUR 31.7 million).
(iv) Reclassification of EUR 201.4 million from trade and other
payables to accounts payable (EUR 139.8 million), accrued expenses and deferred
income (EUR 44.1 million) and other current liabilities (EUR 17.5 million).
(v) Reclassification of EUR 5.1 million from provisions to other
current liabilities.
The following table sets forth the accounting policy alignments and
reclassifications that were made to align Ahlstrom's historical income statement
presentation with expense classification based on function for the nine months
ended September 30, 2016 with Munksjö's financial statement presentation with
expense classification based on nature:
For the nine months ended September 30, 2016
Accounting
Historical Reclassi- policy Ahlstrom
Ahlstrom fications alignment Note reclassified
(EUR in millions)
Other operating
income 7.4 - (1.9) (i) 5.5
Changes in
inventories - 1.9 - (ii) 1.9
Materials and
supplies - (368.1) - (ii) (368.1)
Other external - (196.1) 1.9 (i), (194.3)
costs (ii),
(iii),
(iv),
(v),
(vi)
Personnel costs - (163.6) - (ii), (163.6)
(iii),
(iv),
(v)
Depreciation and - (38.3) - (ii), (38.3)
amortization (iii),
(iv),
(v),
(vi)
Cost of goods
sold (663.3) 663.3 - (ii) -
Sales and
marketing
expenses (28.8) 28.8 - (iii) -
R&D expenses (12.4) 12.4 - (iv) -
Administrative
expenses (55.8) 55.8 - (v) -
Other operating
expenses (3.9) 3.9 - (vi) -
___________
(i) Adjustment of income relating to government grants received of
EUR 1.9 million from other operating income to a deduction of other external
costs to align Ahlstrom's accounting policy with Munksjö's accounting policy.
(ii) Reclassification of EUR 663.3 million from cost of goods sold to
materials and supplies (EUR 368.1 million), other external costs
(EUR 153.6 million), personnel costs (EUR 108.7 million), depreciation and
amortization (EUR 34.6 million) and changes in inventories (EUR 1.9 million).
(iii) Reclassification of EUR 28.8 million from sales and marketing
expenses to personnel costs (EUR 21.1 million), other external costs
(EUR 7.7 million) and depreciation and amortization (EUR 0.1 million).
(iv) Reclassification of EUR 12.4 million from R&D expenses to
personnel costs (EUR 8.3 million), other external costs (EUR 2.9 million) and
depreciation and amortization (EUR 1.1 million).
(v) Reclassification of EUR 55.8 million from administrative expenses
to other external costs (EUR 28.4 million), personnel costs (EUR 25.4 million)
and depreciation and amortization (EUR 1.9 million).
(vi) Reclassification of EUR 3.9 million from other operating expenses
to other external costs (EUR 3.5 million) and depreciation and amortization
(EUR 0.5 million).
The following table sets forth the reclassifications that were made to align
Ahlstrom's historical income statement presentation with expense classification
based on function for the year ended December 31, 2015 with Munksjö's financial
statement presentation with expense classification based on nature:
For the year ended December 31, 2015
Accounting
Historical Reclassi- policy Ahlstrom
Ahlstrom fications alignment Note reclassified
(EUR in millions)
Other operating 7.0 - (2.6) (i) 4.4
income
Changes in - 5.2 - (ii) 5.2
inventories
Materials and - (495.2) - (ii) (495.2)
supplies
Other external - (278.6) 2.6 (i), (276.0)
costs (ii),
(iii),
(iv),
(v),
(vi)
Personnel costs - (216.6) - (ii), (216.6)
(iii),
(iv),
(v)
Depreciation and - (74.6) - (ii), (74.6)
amortization (iii),
(iv),
(v),
(vi)
Cost of goods (910.0) 910.0 - (ii) -
sold
Sales and (40.2) 40.2 - (iii) -
marketing
expenses
R&D expenses (20.9) 20.9 - (iv) -
Administrative (76.4) 76.4 - (v) -
expenses
Other operating (12.4) 12.4 - (vi) -
expenses
____________
(i) Adjustment of income relating to government grants received of
EUR 2.6 million from other operating income to a deduction of other external
costs to align Ahlstrom's accounting policy with Munksjö's accounting policy.
(ii) Reclassification of EUR 910.0 million from cost of goods sold to
materials and supplies (EUR 495.2 million), other external costs
(EUR 214.0 million), personnel costs (EUR 144.0 million), depreciation and
amortization (EUR 61.9 million) and changes in inventories (EUR 5.2 million).
(iii) Reclassification of EUR 40.2 million from sales and marketing
expenses to personnel costs (EUR 28.1 million), other external costs
(EUR 11.6 million) and depreciation and amortization (EUR 0.4 million).
(iv) Reclassification of EUR 20.9 million from R&D expenses to
personnel costs (EUR 11.8 million), other external costs (EUR 7.5 million) and
depreciation and amortization (EUR 1.5 million).
(v) Reclassification of EUR 76.4 million from administrative expenses
to other external costs (EUR 40.6 million), personnel costs (EUR 32.7 million)
and depreciation and amortization (EUR 3.2 million).
(vi) Reclassification of EUR 12.4 million from other operating expenses
to depreciation and amortization (EUR 7.5 million) and other external costs
(EUR 4.9 million).
In addition to the accounting policy alignments and reclassifications presented
above for both the nine months ended September 30, 2016 and for the year ended
December 31, 2015, it should be noted that Ahlstrom has historically presented
share of profits of equity accounted investments below operating result
(EUR 0.2 million for the nine months ended September 30, 2016 and for the year
ended December 31, 2015), whereas Munksjö includes share of profits in equity
accounted investments within operating result. Ahlstrom's presentation has been
aligned with Munksjö's presentation in this regard.
(2) Merger
The following table sets forth the pro forma adjustments that give effect to the
Merger on the unaudited pro forma combined statement of financial position as at
September 30, 2016 (the adjustments have been separated into different sections
based on the nature of the adjustment as described below under each section in
the respective notes):
As at September 30, 2016
Acquisition -
Purchase
price
allocation to Merger
acquired impact to
assets and parent The
Fund assumed company Transaction Merger
distributions liabilities equity costs in total
(Notes 2a and (Note 2c) (Note 2d) (Note 2)
(Note 2a) 2b)
(EUR in millions)
Assets
Non-current
assets
Tangible - 130.5 - - 130.5
assets
Goodwill - 275.5 - - 275.5
Other - 221.3 - - 221.3
intangible
assets
Equity - (15.7) - - (15.7)
accounted
investments
Other non- - (0.5) - - (0.5)
current assets
Deferred tax - (9.4) - 0.3 (9.1)
assets
Total non- - 601.6 - 0.3 601.9
current assets
Current assets
Inventory - (8.3) - - (8.3)
Accounts - (7.1) - - (7.1)
receivable
Other current - (2.7) - (0.3) (3.0)
assets
Current tax - - - - -
asset
Cash and cash (22.8) (39.8) - - (62.6)
equivalents
Total current (22.8) (57.9) - (0.3) (81.1)
assets
Total assets (22.8) 543.7 - (0.1) 520.8
Equity and
liabilities
Equity
Attributable
to parent
company's
shareholders
Share capital - (70.0) 70.0 - -
Reserve for (22.8) 684.7 (232.2) (1.1) 428.6
unrestricted
equity
Other reserves - (41.2) - - (41.2)
Retained - (91.8) 162.2 (14.5) 55.9
earnings
Hybrid bond - (100.0) - - (100.0)
Total equity
attributable
to parent
company's
shareholders (22.8) 381.8 - (15.6) 343.3
Non- - - - - -
controlling
interests
Total equity (22.8) 381.8 - (15.6) 343.3
Non-current
liabilities
Non-current - 109.9 - - 109.9
borrowings
Other non- - - - - -
current
liabilities
Pension - (33.3) - - (33.3)
obligations
Deferred tax - 94.0 - - 94.0
liabilities
Provisions - - - - -
Total non- - 170.6 - - 170.6
current
liabilities
Current
liabilities
Current - (0.2) - - (0.2)
borrowings
Accounts - (15.2) - 15.5 0.3
payable
Accrued
expenses and
deferred
income - 7.0 - - 7.0
Current tax - 0.0 - - 0.0
liabilities
Other current - (0.4) - - (0.4)
liabilities
Total current - (8.7) - 15.5 6.9
liabilities
Total - 161.9 - 15.5 177.5
liabilities
Total equity (22.8) 543.7 - (0.1) 520.8
and
liabilities
__________
(2a) Fund Distributions
The Boards of Directors of Munksjö and Ahlstrom have proposed to their
respective EGMs the authorization of the respective Board of Directors to
resolve upon the distribution of funds in the total amount of approximately
EUR 23 million each, corresponding to EUR 0.45 per share in Munksjö and EUR 0.49
per share in Ahlstrom, to their respective shareholders before the completion of
the Merger in lieu of the companies' ordinary annual distribution. Munksjö would
implement such distribution as a return of equity from the reserve for invested
unrestricted equity and Ahlstrom would implement such distribution as a dividend
payment.
This distribution of funds for Munksjö has been reflected in the unaudited pro
forma combined statement of financial position by deducting EUR 22.8 million
from the reserve for unrestricted equity and EUR 22.8 million from cash and cash
equivalents. Ahlstrom's dividend payment will take place prior to the Effective
Date and as such, will decrease the acquired assets of Ahlstrom at the
acquisition date and is reflected in the adjustment 2b below for the assets
acquired and liabilities assumed in the acquisition.
(2b) Acquisition - Purchase Price Allocation to Acquired Assets and
Assumed Liabilities
The Merger will be accounted using the acquisition method of accounting where
Munksjö acquires Ahlstrom. Under the acquisition method of accounting, purchase
consideration is allocated to assets acquired and liabilities assumed based on
their estimated fair values as of the acquisition date. The excess of the
estimated preliminary purchase consideration over the estimated fair value of
the identifiable net assets acquired has been allocated to goodwill in this
Unaudited Pro Forma Financial Information.
Preliminary Estimate of the Fair Value of the Purchase Consideration
The purchase consideration is determined based on the fair value of the Merger
Consideration Shares. The aggregate number of the Merger Consideration Shares is
expected to be 45,376,992 shares (excluding treasury shares held by Ahlstrom and
assuming that none of Ahlstrom's shareholders demand at the EGM of Ahlstrom
resolving on the Merger that their shares in Ahlstrom be redeemed) with an
aggregate fair value of EUR 684.7 million based on the November 10, 2016 closing
price of EUR 15.09 of the Munksjö share on Nasdaq Helsinki, corresponding to the
preliminary estimate of the purchase consideration as if the acquisition
occurred on September 30, 2016. Ahlstrom's shareholders will receive as Merger
Consideration 0.9738 Merger Consideration Shares for each share in Ahlstrom
owned by them.
The preliminary estimate of the purchase consideration reflected in the
Unaudited Pro Forma Financial Information does not purport to represent the
actual consideration to be transferred upon the completion of the Merger. In
accordance with IFRS, the fair value of the Merger Consideration Shares to be
issued by Munksjö corresponding to the purchase consideration transferred in the
acquisition will be measured on the Effective Date at the then-current market
price (fair value) of the Munksjö share. This requirement will likely result in
a purchase consideration different from the amount used in the Unaudited Pro
Forma Financial Information and that difference may be material. A change of
5 percent per share in the Munksjö share price would increase or decrease the
consideration expected to be transferred by approximately EUR 34.2 million,
which would be reflected in the Unaudited Pro Forma Financial Information as an
increase or decrease to goodwill.
Assets Acquired and Liabilities Assumed in Connection with the Merger
Munksjö has made a preliminary allocation of the aggregate estimated purchase
consideration, which is based upon estimates that are believed to be reasonable.
As at the date of this Prospectus, Munksjö has not completed all of the detailed
valuation studies necessary to arrive at the required estimates of fair value
for all of Ahlstrom's assets to be acquired and liabilities to be assumed. Upon
the completion of the Merger, Munksjö will conduct a detailed valuation of all
assets and liabilities as of the acquisition date at which point the fair value
of acquired assets and assumed liabilities may materially differ from the
amounts presented herein. Ahlstrom's consolidated balance sheet information as
at September 30, 2016 was used in the preliminary purchase price allocation
presented below and accordingly, the final fair values will be determined on the
basis of assets acquired and liabilities assumed at the Effective Date.
The following table sets forth the net assets acquired and the preliminary
purchase price allocation:
Pro forma adjustment
Acquisi-
tion of Total
Sale the 50 adjust-
Fair of percent ment
valuation Ahlst- interest without
Ahlst- of assets rom in AM additi-
rom re- and Funds Osna- Real onal
classi- liabili- distri- brück Estate good-
fied ties Note bution GmbH S.r.l will Total
(Notes
2a and (Note (Note (Note
(Note 1) 2b) 2a) 2b) 2b)
(EUR in millions)
Tangible
assets 312.7 120.0 (i) - - 10.5 130.5 443.3
Goodwill 72.2 (72.2) (ii) - - - (72.2) -
Other
intangible (ii),
assets 10.7 221.3 (iii) - (0.1) - 221.3 232.0
Equity
accounted
investments 15.7 - - (3.2) (12.5) (15.7) (0.0)
Other non-
current assets 8.1 - - (0.5) - (0.5) 7.5
Deferred tax
assets 66.6 (10.1) (v) - - 0.7 (9.4) 57.2
Total non-
current assets 486.0 259.0 - (3.8) (1.2) 254.0 739.9
Inventory 123.2 4.4 (iv) - (12.7) - (8.3) 114.8
Accounts
receivable 111.7 - (ix) - (6.9) (0.2) (7.1) 104.6
Other current
assets 31.7 - - (3.0) 0.3 (2.7) 28.9
Current tax
asset 1.3 - - - - - 1.3
Cash and cash
equivalents 54.5 - (22.8) (17.8) 0.8 (39.8) 14.7
Total current
assets 322.4 4.4 (22.8) (40.4) 0.9 (57.9) 264.5
Non-current
borrowings 100.3 110.6 (vi) - - (0.7) 109.9 210.2
Other non-
current
liabilities 0.0 - - - - - 0.0
Pension
obligations 99.5 - - (33.3) - (33.3) 66.2
Deferred tax
liabilities 2.1 93.0 (vii) - - 1.1 94.0 96.1
Provisions 0.4 - - - - - 0.4
Total non-
current
liabilities 202.4 203.6 - (33.3) 0.3 170.6 373.0
Current
borrowings 84.6 0.4 (vi) - - (0.5) (0.2) 84.4
Accounts
payable 139.8 - (ix) - (15.1) (0.1) (15.2) 124.6
Accrued
expenses and
deferred
income 44.1 8.1 (viii) - (1.0) (0.0) 7.0 51.2
Current tax
liabilities 7.2 - - - 0.0 0.0 7.2
Other current
liabilities 22.7 - - (0.4) (0.0) (0.4) 22.3
Total current
liabilities 298.4 8.5 - (16.5) (0.6) (8.7) 289.7
Net assets
acquired 341.7
Non-
controlling
interests (4.6)
Goodwill (ii) 347.6
Estimated
purchase
consideration (2b) 684.7
Fair valuation of assets and liabilities
i. A preliminary fair value adjustment of EUR 120.0 million has been recorded
to tangible assets in the pro forma combined statement of financial position
as at September 30, 2016 to reflect the preliminary fair value of acquired
property, plant and equipment ("PPE") of EUR 443.3 million after taking
consideration also the impact of the acquisition of the 50 percent in AM
Real Estate S.r.l as described in "-Acquisition of the 50 Percent Interest
of AM Real Estate S.r.l" below.
Based on the preliminary valuation, additional depreciation expense of
EUR 7.5 million has been recorded to the unaudited pro forma combined income
statement for the nine months ended September 30, 2016 and EUR 10.0 million for
the year ended December 31, 2015. The remaining depreciation period for the
acquired PPE is estimated to be 12 years.
(ii) These adjustments reflect the elimination of the historical
goodwill totaling EUR 72.2 million and book value of existing intangible assets
totaling EUR 3.3 million, which are fair valued as part of the preliminary
purchase price allocation. Correspondingly, amortization of EUR 1.1 million has
been eliminated from the unaudited pro forma combined income statement for the
nine months period ended September 30, 2016 and EUR 3.0 million from the
unaudited pro forma combined income statement for the year ended December
31, 2015.
The goodwill recognized in the unaudited pro forma combined statement of
financial position as at September 30, 2016 represents the excess of the
preliminary purchase consideration transferred over the preliminary fair value
of identifiable net assets acquired. The goodwill of EUR 347.6 million arising
from the acquisition is attributable to synergies and assembled workforce.
Munksjö expects that the goodwill will not be deductible for tax purposes.
For pro forma presentation purposes, the difference between Ahlstrom's existing
goodwill of EUR 72.2 million and the preliminary goodwill amount arising in the
transaction of EUR 347.6 million of EUR 275.5 million is adjusted in the
unaudited pro forma combined statement of financial position.
(iii) The preliminary fair values of intangible assets have been
determined primarily through the use of the "income approach," which requires an
estimate or forecast of expected future cash flows. Either the multi-period
excess earnings method or the relief-from-royalty method has been used as the
income based valuation method.
The following table sets forth the preliminary fair value estimates of the
identifiable intangible assets and result for the period estimated average
useful lives representing the amortization periods:
Estimated Amortization
For the nine For the year
Estimated months ended ended
preliminary September December
fair value Useful life 30, 2016 31, 2015
(EUR in millions)
Customer 167.0 10 years (12.5) (16.7)
relationships
Trademark 45.7 15 years (2.3) (3.0)
Technology 9.4 10 years (0.7) (0.9)
Contract based 2.5 1 year - (2.5)
intangibles
Other intangibles 7.4 (0.5) (0.6)
Total 232.0 (16.0) (23.8)
Customer relationships represent the fair value of the customer agreements and
underlying relationships with Ahlstrom's customers. Order backlog is included in
the fair value of customer relationships. Based on the preliminary valuation,
amortization expense of EUR 12.5 million has been recorded to the unaudited pro
forma combined income statement for the nine months ended September 30, 2016 and
EUR 16.7 million for the year ended December 31, 2015.
Trademarks represent the fair value of the Ahlstrom trademark and other
substantial trademarks owned by Ahlstrom. Based on the preliminary valuation,
amortization expense of EUR 2.3 million has been recorded to the unaudited pro
forma combined income statement for the nine months ended September 30, 2016 and
EUR 3.0 million for the year ended December 31, 2015.
Ahlstrom has acquired and internally developed patents that are estimated to
provide future economic benefits. Technology represents the fair value of
Ahlstrom's products that have reached technological feasibility and are part of
Ahlstrom's product lines at the time of acquisition. Based on the preliminary
valuation, amortization expense of EUR 0.7 million has been recorded to the
unaudited pro forma combined income statement for the nine months ended
September 30, 2016 and EUR 0.9 million for the year ended December 31, 2015.
Contract based intangibles represent emission rights that Ahlstrom owns. The
total fair value of emission rights has been expensed in the pro forma income
statement during 2015 assuming that these rights would be consumed within one
year. Thus, amortization expense of EUR 2.5 million has been recorded to the
unaudited pro forma combined income statement for the year ended
December 31, 2015.
Other intangibles represent computer software and other licenses used by
Ahlstrom. For pro forma purposes it has been concluded that the carrying value
of EUR 7.4 million represents the fair value and the useful lives are not
impacted by the acquisition. Based on the preliminary valuation, amortization
expense of EUR 0.5 million has already been recorded to Ahlstrom's income
statement for the nine months ended September 30, 2016 and EUR 0.6 million for
the year ended December 31, 2015.
(iv) A preliminary fair value adjustment of EUR 4.4 million has been
recorded to inventories in the unaudited pro forma combined statement of
financial position as at September 30, 2016 to reflect the preliminary fair
value of acquired inventories of EUR 114.8 million. Munksjö expects that the
acquired inventory would turn over within a year and accordingly, the
preliminary fair value adjustment of EUR 4.4 million has been recorded to the
unaudited pro forma combined income statement as an expense for the year ended
December 31, 2015. This adjustment is not expected to have a continuing impact
on the Combined Company's results or financial position.
(v) This adjustment reflects the write-down of the deferred tax asset
recognized on the tax loss carryforwards in Germany amounting to
EUR 10.1 million. The tax loss carryforwards will not be available under
currently enacted tax laws applying to the change of control.
(vi) Munksjö assumes in the acquisition Ahlstrom's hybrid bond of
EUR 100.0 million which Ahlstrom has classified as equity at consolidation. The
assumed liability has been reclassified from equity to debt and is included in
the acquired net assets. Further, it is fair valued at the make whole price of
EUR 105.5 million, as defined in the terms and conditions of the hybrid bond,
representing the settlement price for the bond by a market participant as at
September 30, 2016.
A fair value adjustment of EUR 5.1 million has been recognized for the Notes (as
defined under "Information about the Combined Company-Certain Other Financing
Arrangements" in the Prospectus) included in Ahlstrom's non-current borrowings.
The carrying value of the Notes amounts to EUR 104.8 million after the
adjustment representing the ask price of the bond as at September 30, 2016.
A fair value adjustment of EUR 0.4 million has been recorded in current
borrowings held at amortized cost. After the adjustment, the current borrowings
are valued at fair value (exit price) as at September 30, 2016.
(vii) Represents the estimated non-current deferred tax liability
related to the fair value adjustments reflected in the unaudited pro forma
combined statement of financial position (excluding adjustments related to
goodwill, which is assumed to be non-deductible). The resulting impact increases
deferred tax liabilities by EUR 93.0 million. Deferred income tax impacts for
non-financial assets were calculated based on an assumed blended tax rate of
28.0 percent and for assumed financial liabilities based on nominal tax rate of
20.0 percent representing the tax rate in Finland. The tax rates are based on
preliminary assumptions related to the underlying jurisdictions that the income
or expense will be recorded. The effective tax rate of the Combined Company
could be significantly different depending on the post-acquisition activities,
including cash needs, geographical mix of net income and tax planning
strategies.
(viii) Pursuant to the terms and conditions of Ahlstrom's long-term
incentive plan 2014-2018, the plan will be settled in cash if Ahlstrom decides
on a merger. Accordingly, the assumed liabilities have been adjusted to account
for the estimated settlement liability assuming that the maximum reward of
276,500 shares would be settled in full applying Ahlstrom's share price as at
November 10, 2016 of EUR 14.95 (the pro forma share price date) including the
tax and social cost impact. The value of this liability will be measured based
on Ahlstrom's share price at each reporting date.
(ix) This adjustment reflects the elimination of balances between
Munksjö and Ahlstrom amounting to EUR 0.0 million as at September 30, 2016. The
net sales of EUR 0.2 million and corresponding materials and supplies have been
eliminated from the unaudited pro forma combined income statement for the nine
months ended September 30, 2016 and, respectively, EUR 0.3 million from the
unaudited pro forma combined income statement for the year ended
December 31, 2015.
The following tables set forth the impact of the acquisition and the preliminary
purchase price allocation that has been reflected to the unaudited pro forma
combined income statement for the nine months ended September 30, 2016 and for
the year ended December 31, 2015:
For the nine months ended September 30, 2016
Elimi-
nation
Elimi- of
nation of trans-
amorti- Additional actions
Additional zation of amorti- Inventory between
depreciation existing zation of fair value Munksjö
of tangible intangible intangible adjust- and
assets assets assets ment Ahlstrom Total
(EUR in millions)
Net sales - - - - (0.2) (0.2)
Changes in
inventories - - - - - -
Materials and
supplies - - - - 0.2 0.2
Depreciation
and
amortization (7.5) 1.1 (15.5) - - (21.9)
Operating
result (7.5) 1.1 (15.5) - - (21.9)
Taxes 2.1 (0.3) 4.3 - - 6.1
Net result
for the
period (5.4) 0.8 (11.2) - - (15.8)
For the year ended December 31, 2015
Elimi-
nation
of
Elimination trans-
of amorti- Additional Inventory actions
Additional zation of amorti- fair between
depreciation existing zation of value Munksjö
of tangible intangible intangible adjust- and
assets assets assets ment Ahlstrom Total
(EUR in millions)
Net sales - - - - (0.3) (0.3)
Changes in
inventories - - - (4.4) - (4.4)
Materials and
supplies - - - - 0.3 0.3
Depreciation
and
amortization (10.0) 3.0 (23.2) - - (30.2)
Operating
result (10.0) 3.0 (23.2) (4.4) - (34.6)
Taxes 2.8 (0.8) 6.5 1.2 - 9.7
Net result
for the
period (7.2) 2.2 (16.7) (3.2) - (24.9)
Sale of Ahlstrom Osnabrück GmbH
On November 7, 2016, Ahlstrom announced that it has signed an agreement to sell
its shares in a German subsidiary Ahlstrom Osnabrück GmbH, including Ahlstrom's
50 percent stake in AK Energie GmbH (a joint venture with Kämmerer).
The unaudited pro forma combined statement of financial position and the
unaudited pro forma combined income statements for all periods presented were
adjusted to fully eliminate all of the assets, liabilities and historical
results of Ahlstrom Osnabrück GmbH. In addition, the unaudited pro forma
combined statement of financial position as at September 30, 2016 reflects
adjustments for the transaction, including the estimated net cash outflow of
approximately EUR 17.8 million due to settlement of Ahlstrom's intercompany
balances prior to the transaction and cash proceeds from the sale. The unaudited
pro forma combined income statement for the year ended December 31, 2015
reflects adjustments of the estimated EUR 5.6 million gain on the sale and tax
impact of approximately EUR 1.2 million related to the sale of certain
intellectual property rights as part of the transaction.
The following table sets forth the impact of the sale of Ahlstrom Osnabrück GmbH
for the nine months ended September 30, 2016 and for the year ended
December 31, 2015 in the unaudited pro forma combined income statements:
For the nine months ended
September For the year ended
30, 2016 December 31, 2015
(EUR in millions)
Net sales (59.7) (80.4)
Other operating income (0.0) 5.5
Change in inventories 0.1 0.1
Materials and supplies 33.2 47.9
Other external costs 23.8 33.1
Personnel costs 3.4 4.4
Depreciation and 0.5 9.0
amortization
Operating result 1.3 19.5
Financial income (0.1) (0.0)
Financial costs 0.7 0.8
Profit before tax 1.9 20.3
Taxes 0.2 (5.2)
Net result for the period 2.0 15.1
Acquisition of the 50 percent interest in AM Real Estate S.r.l
As a result of the business combination in 2013 in which Munksjö AB was combined
with LP Europe and Coated Specialties to form a new company, Munksjö Oyj,
certain assets in Turin, Italy, were shared by Munksjo Italia S.p.A. and
Ahlstrom business remaining at the Turin site. The shared assets were
transferred to AM Real Estate S.r.l, which is 50 percent owned by Munksjö Oyj
and 50 percent owned by an Ahlstrom group company.
As a result of the Merger, the 50 percent interest in AM Real Estate S.r.l is
acquired by Munksjö and Munksjö will consolidate AM Real Estate S.r.l as a
subsidiary. The pro forma adjustment reflects the elimination of the respective
joint arrangement consolidations by both Munksjö and Ahlstrom, including the
elimination of the proportionate consolidation applied by Munksjö and the equity
accounting applied by Ahlstrom. Further, the pro forma adjustment reflects the
consolidation of AM Real Estate S.r.l as a wholly-owned subsidiary including
elimination of group internal transactions and balances assuming that the Merger
has taken place.
The following table sets forth the impact of the acquisition of the 50 percent
share of AM Real Estate S.r.l for the nine months ended September 30, 2016 and
for the year ended December 31, 2015 in the unaudited pro forma combined income
statements:
For the nine months ended
September For the year ended
30, 2016 December 31, 2015
(EUR in millions)
Other operating income (0.1) (1.6)
Other external costs 2.2 3.1
Depreciation and (1.7) (1.3)
amortization
Share of profit in equity (0.2) (0.2)
accounted investments
Operating result 0.2 0.0
Financial income 0.0 0.0
Financial costs 0.1 0.1
Profit before tax 0.3 0.1
Taxes (0.1) (0.0)
Net result for the period 0.2 0.1
(2c) Merger Impact to Parent Company's Equity Structure
At the Effective Date, Munksjö Oyj, the parent company, will record the
transferring assets and liabilities to its balance sheet based on the book
values of Ahlstrom Corporation in accordance with the provisions of the Finnish
Accounting Act and the Finnish Accounting Standards Board Statement 1964/2016.
The equity of Munksjö's parent company will be formed in the Merger applying
merger accounting so that the amount recorded to the share capital of Munksjö's
parent company will equal the amount of share capital of Ahlstrom's parent
company, the amount entered to the retained earnings will equal the amount of
the retained earnings of Ahlstrom's parent company and the amount entered to the
reserve for invested unrestricted equity of Munksjö's parent company will equal
the reserve for invested unrestricted equity of Ahlstrom's parent company and
the merger result determined as the difference between net assets of Ahlstrom's
parent company and the value of the Merger Consideration will be recorded to the
unrestricted equity of Munksjö's parent company.
As a result of the difference in the merger accounting method between the parent
company financial statements and consolidated financial statements prepared in
accordance with IFRS, the equity at consolidation in the Combined Company's
statement of financial position will reflect the impact of the merger accounting
with respect to Munksjö Oyj's share capital and unrestricted equity.
Accordingly, the unaudited pro forma combined statement of financial position
has been adjusted to reflect the equity structure of the parent following the
Merger by initially recording the estimated Merger Consideration of
EUR 684.7 million to reserve for invested unrestricted equity (representing the
value of the purchase consideration transferred under IFRS) and then by
transferring EUR 70.0 million from reserve for invested unrestricted equity to
share capital and EUR 162.2 million to retained earnings calculated on the basis
of Ahlstrom's parent company balance sheet as at September 30, 2016 and assuming
that the dividend has been distributed. The difference between the Merger
Consideration used for consolidation and for parent company purposes will be
reflected in the consolidated reserve for invested unrestricted equity. Merger
Consideration representing the transferred purchase consideration will be valued
under IFRS using the closing price of the Munksjö share at the Effective Date,
whereas for parent company purposes, the Merger Consideration will be valued
using a share price reflecting the Merger announcement date valuation.
(2d) Transaction Costs
The total costs expected to be incurred by Munksjö and Ahlstrom in connection
with the Merger primarily comprise financial, legal and advisory costs and
amount to approximately EUR 16.4 million (excluding estimated transaction costs
for refinancing) of which EUR 15.1 million has been recorded in other external
costs in the unaudited pro forma combined income statement for the year ended
December 31, 2015. Transaction costs of EUR 0.6 million have already been
recorded in Ahlstrom's income statement for the nine months ended
September 30, 2016, and have been eliminated from other external costs. This
adjustment is not expected to have a continuing impact on the Combined Company's
results or financial position.
The estimated costs for issuance of Merger Consideration Shares amount to
EUR 1.1 million (net of taxes) and have been deducted from the reserve for
invested unrestricted equity in the unaudited pro forma combined statement of
financial position as at September 30, 2016. The tax effect for the adjustment
of EUR 0.3 million is included in the deferred tax assets in the unaudited pro
forma combined statement of financial position.
In the unaudited pro forma combined statement of financial position, the unpaid
portion of the transaction costs amounting to EUR 15.5 million has been recorded
as accounts payable. Transaction costs already paid by Munksjö of
EUR 0.3 million have been deducted from other current assets and the amount of
transaction costs to be expensed after September 30, 2016 of EUR 14.5 million
has been deducted from the retained earnings.
(3) New Financing Agreements
In connection with the Merger, Munksjö and Ahlstrom agreed on financing
commitments for the Merger and the Combined Company with Nordea and SEB as
mandated lead arrangers. In accordance with these commitments, Munksjö entered
on November 10, 2016 into the Term and Revolving Facilities Agreement, pursuant
to which the Term Loan Facilities (i.e., a term loan facility of EUR 80 million,
a term loan facility of EUR 40 million, a term loan facility of EUR 150 million,
a term loan facility of SEK 600 million and a term loan facility of USD
35 million) as well as the Revolving Credit Facility of EUR 200 million will be
made available to Munksjö.
For pro forma purposes, it has been assumed that new borrowings amounting to
EUR 363.7 million would be required to enable Munksjö to refinance the
borrowings transferred from Ahlstrom and certain existing loans of Munksjö as
well as to finance the transaction costs related to the new loan facilities. In
the unaudited pro forma combined statement of financial position as at
September 30, 2016 the Term Loan Facilities are recognized initially at fair
value, net of transaction costs incurred.
The following table sets forth the impact of the refinancing under the New
Financing Agreements to the pro forma combined statement of financial position
as at September 30, 2016:
As at September 30, 2016
The Term
Loan Transaction Consent
Repayment Repayment Facilities costs fee
of of of related to from
borrowings borrowings Combined the the Total
in Munksjö in Ahlstrom Company Facilities Notes adjustment
(EUR in millions)
Other non-
current
assets - - - 1.9((1)) - 1.9
Cash and
cash
equivalents (302.2) (35.3) 363.7 (7.1) - 19.0
Total assets (302.2) (35.3) 363.7 (5.2) - 21.0
Retained
earnings (2.5) - - - (1.0) (3.5)
Non-current
borrowings (283.8) (0.0) 355.7 (4.8) - 67.2
Current
borrowings (16.0) (35.3) 8.0 (0.4) - (43.7)
Accounts
payable - - - - 1.0 1.0
Total equity
and
liabilities (302.2) (35.3) 363.7 (5.2) 0.0 21.0
__________
(1) Consists of the Revolving Credit Facility fee of EUR 1.9 million
which has been capitalized as a prepayment and amortized on a straight line
basis over the commitment period. It has been assumed that the Revolving Credit
Facility will not be drawn down in connection with the Merger and it will be
kept for liquidity needs.
With this pro forma adjustment, new borrowings (net of transaction costs)
amounting to EUR 350.9 million have been recorded to the non-current borrowings
and EUR 7.6 million to the current borrowings in the unaudited pro forma
combined statement of financial position. For information on pro forma net debt
of the Combined Company as at September 30, 2016, see "-Additional Pro Forma
Information" below.
The following table sets forth the impact of the refinancing under the New
Financing Agreements to financial costs in the unaudited pro forma combined
income statement for the nine months ended September 30, 2016 and for the year
ended December 31, 2015:
For the nine months ended September 30, 2016
Munksjö Ahlstrom Consent
financial financial and Interest
costs costs Interest Revolving adjustment
related to related to expense of Credit of hybrid
repaid repaid Term Loan Facility bond and Total
borrowings borrowings Facilities fees the Notes adjustment
(EUR in millions)
Financial 6.0((1)) 1.3((1)) (5.6)((2)) (0.3) (2.3) (0.9)
costs
__________
(1) Reflects the elimination of interest costs including the
transaction costs recorded as an expense related to the existing term loan
facilities of Munksjö and Ahlstrom. This adjustment does not have a continuing
impact on the Combined Company's financial costs.
(2) Reflects the interest costs of EUR 4.6 million and the transaction
costs of EUR 1.0 million recorded as an expense related to the Term Loan
Facilities, which have a continuing impact on the Combined Company's financial
costs.
For the year ended December 31, 2015
Munksjö Ahlstrom Consent
financial financial and Interest
costs costs Interest Revolving adjustment
related to related to expense of Credit of hybrid
repaid repaid Term Loan Facility bond and Total
borrowings borrowings Facilities fees the Notes adjustment
(EUR in millions)
Financial 5.0((1)) 2.0((2)) (7.7)((3)) (1.4) (3.2) (5.2)
costs
__________
(1) Reflects the elimination of interest costs of EUR 7.5 million
including the transaction costs recorded as an expense related to the existing
term loan facilities of Munksjö. In addition, EUR 2.5 million of capitalized
transaction costs for Munksjö's term loan facility has been expensed due to the
refinancing. These adjustments do not have a continuing impact on the Combined
Company's financial costs.
(2) Reflects the elimination of interest costs of EUR 2.7 million
including the transaction costs recorded as an expense related to the existing
term loan facilities of Ahlstrom. In addition, EUR 0.6 million of capitalized
transaction costs for Ahlstrom's term loan facility has been expensed due to the
refinancing. These adjustments do not have a continuing impact on the Combined
Company's financial costs.
(3) Reflects the interest costs of EUR 6.3 million and the transaction
costs of EUR 1.4 million recorded as an expense related to the Term Loan
Facilities, which have a continuing impact on the Combined Company's financial
costs.
The income statement adjustment reflects the elimination of the financial costs
historically recorded on the borrowings subject to refinancing for both Munksjö
and Ahlstrom and the effective interest cost accrued over the respective income
statement periods on the New Financing Agreements for the Combined Company. For
pro forma purposes, the interest expense of the hybrid bond recorded by Ahlstrom
has been transferred from equity to financial costs, and the impact of this
adjustment is EUR -5.9 million to the unaudited pro forma combined income
statement for the nine months ended September 30, 2016 and EUR -7.9 million for
the year ended December 31, 2015. In addition, the financial costs have been
adjusted by EUR 3.6 million for the nine months ended September 30, 2016 and
EUR 4.7 million for the year ended December 31, 2015 to reflect the amortization
of the fair value adjustments recorded on the assumed liabilities of Ahlstrom,
including the hybrid bond and the Notes, to the respective periods. As a
result, the pro forma income statements reflect the effective interest cost on
the assumed liabilities calculated on their acquisition date fair values over
the estimated life of the borrowings. The effective interest rates used for pro
forma purposes vary from 2.13 percent to 4.55 percent depending on the
underlying loan.
Further, the total adjustment includes the estimated costs for the Revolving
Credit Facility fee and consent fee for the Notes that will not have a
continuing impact on the Combined Company's results.
Additional Pro Forma Information
Earnings per Share
Pro forma basic earnings per share is calculated by dividing the pro forma net
result attributable to equity holders of the parent by the pro forma weighted
average number of shares outstanding as adjusted for the Merger.
Pro forma diluted earnings per share is calculated by adding the historical
dilution effect to the calculated pro forma weighted average number of shares.
The Merger is assumed to have no dilution effect.
The following table sets forth the pro forma earnings per share attributable to
parent company's shareholders for the periods indicated:
For the nine months ended For the year ended
September December
30, 2016 31, 2015
(EUR in millions, unless otherwise indicated)
Pro forma net result 51.0 2.6
attributable to parent
company's shareholders
Number of shares
Weighted average number of 50,761,581 50,818,260
shares in issue -
historical
Merger Consideration Shares 45,376,992 45,376,992
to be issued to Ahlstrom
shareholders
Pro Forma weighted average 96,138 573 96,195,252
number of shares in issue -
basic
Dilution effect - 116,773 100,051
historical
Pro Forma weighted average 96,255,346 96,295,303
number of shares - diluted
Pro forma earnings per
share attributable to
parent company's
shareholders - basic, EUR 0.53 0.03
Pro forma earnings per
share attributable to
parent company's
shareholders - diluted, EUR 0.53 0.03
Alternative Performance Measures
The following tables set forth a reconciliation of the Combined Company's pro
forma adjusted EBITDA and pro forma adjusted operating result to pro forma
reported operating result for the nine months ended September 30, 2016 and for
the year ended December 31, 2015:
For the nine months ended September 30, 2016
New Combined
Munksjö Ahlstrom Financing Company
historical reclassified Merger Agreements pro forma
(Note 1) (Note (Note 3)
2)
(EUR in millions)
Adjusted 100.6 104.7 2.7 - 208.0
EBITDA((1)(2)(3))
Depreciation and (42.1) (38.3) (23.1) - (103.5)
amortization
Adjusted operating 58.5 66.4 (20.5) - 104.5
result((2)(3)(4))
Items affecting
comparability
Items affecting
comparability reported
historically((5)) - (3.4) - - (3.4)
Transaction costs - - 0.6 - 0.6
incurred((3))
Total items affecting - (3.4) 0.6 - (2.8)
comparability((3)(5))
Operating result 58.5 63.0 (19.9) - 101.7
(IFRS)
Depreciation,
amortization and
impairment charges 42.1 38.3 23.1 - 103.5
EBITDA((2)(6)) 100.6 101.3 3.2 - 205.2
For the year ended December 31, 2015
New Combined
Munksjö Ahlstrom Financing Company
historical reclassified Merger Agreements pro forma
(Note 1) (Note (Note 3)
2)
(EUR in millions)
Adjusted
EBITDA((1)(2)(3)) 93.6 105.0 6.2 - 204.7
Depreciation and
amortization (53.6) (57.3) (22.5) - (133.3)
Adjusted operating
result((2)(3)(4)) 40.0 47.7 (16.3) - 71.4
Items affecting
comparability
Items affecting
comparability reported
historically((5)) (7.3) (25.6) - - (32.9)
Estimated transaction
costs( (3)) - - (15.1) - (15.1)
Estimated inventory
fair value
adjustment((3)) - - (4.4) - (4.4)
Pro forma gain on
business disposal((3)) - - 5.6 - 5.6
Total items affecting
comparability((3)(5)) (7.3) (25.6) (13.9) - (46.8)
Operating result
(IFRS) 32.7 22.1 (30.1) - 24.6
Depreciation,
amortization and
impairment charges 53.6 74.6 22.5 - 150.6
EBITDA((2)(6)) 86.3 96.6 (7.7) - 175.2
____________
(1) Munksjö defines pro forma adjusted EBITDA as pro forma EBITDA
excluding items affecting comparability.
(2) Munksjö believes that pro forma EBITDA, pro forma adjusted EBITDA
and pro forma adjusted operating result measures provide meaningful supplemental
information to the financial measures presented in the consolidated income
statement prepared in accordance with IFRS to Munksjö's management and the
readers of its financial statements by excluding items outside ordinary course
of business which reduce comparability from period to period. EBITDA, adjusted
EBITDA and adjusted operating result are not accounting measures defined or
specified in IFRSs in accordance with the "Alternative Performance Measures"
guidance issued by ESMA and are, therefore, considered non-IFRS financial
measures, which should not be viewed in isolation or as a substitute to the IFRS
financial measures. Companies do not calculate alternative performance measures
in a uniform way, and, therefore, the alternative performance measures presented
in this Prospectus may not be comparable with similarly named measures presented
by other companies. To ensure comparability in the Unaudited Pro Forma Financial
Information, Munksjö has performed a preliminary review of Ahlstrom's IFRS
accounting policies and made certain adjustments to Ahlstrom's historical
financial information related to accounting policy alignments and
reclassifications. These adjustments are described further in Note 1 to the
Unaudited Pro Forma Financial Information.
(3) Pro forma comparable performance measures exclude pro forma
adjustments that do not have a continuing impact on the Combined Company's
results and which are deemed to be material items outside ordinary course of
business comprising transaction costs related to the Merger, fair value
adjustment on acquired inventory as well as the estimated net gain arising on
the sale of Ahlstrom Osnabrück GmbH.
(4) Munksjö defines pro forma adjusted operating result, as pro forma
operating result excluding items affecting comparability.
(5) Represents items affecting comparability historically reported by
Munksjö and Ahlstrom based on their definitions of the items affecting
comparability. Munksjö defines items affecting comparability as material items
outside ordinary course of business such as direct transaction costs related to
business acquisitions, costs for closure of business operations and
restructurings, one-off items arising from purchase price allocation and
compensation related to environmental damages arising from unexpected or rare
events. Other items includes fines (such as VAT tax audit fines) or other
similar stipulated payments. Ahlstrom defines items affecting comparability as
material items outside ordinary course of business such as costs for closure of
business operations, restructurings and rightsizing, net gains or losses from
business disposals including direct transaction costs as well as goodwill
impairment charges and write-down of non-current assets. The following table
sets forth the items affecting comparability historically reported by Munksjö
and Ahlstrom:
For the nine months For the year ended
ended September 30, 2016 December 31, 2015
(unaudited)
(EUR in millions)
Munksjö's items affecting
comparability
Transaction costs related to - (0.4)
business acquisitions
Restructuring expenses - (4.5)
Inventory adjustment - -
Environmental provision - (2.4)
Other - -
Total items affecting - (7.3)
comparability
Ahlstrom's items affecting
comparability
Restructuring expenses (4.5) (7.2)
Net gains or losses from 1.1 (1.1)
business disposals
Impairment charges and write- - (17.3)
down of non-current assets
Total items affecting (3.4) (25.6)
comparability
(6) Munksjö defines pro forma EBITDA as pro forma operating result
before pro forma depreciation, amortization and impairment charges.
Pro Forma Net Debt and Gearing
The following tables set forth the pro forma net debt and gearing ratio of the
Combined Company as at September 30, 2016, including all the pro forma
adjustments impacting the net interest-bearing liabilities and the equity of the
Combined Company:
Pro forma net debt of the Combined Company as at
September 30, 2016
Combined
Munksjö Ahlstrom New Financing Company
historical reclassified Merger Agreements pro forma
(Note 1) (Note 2) (Note 3)
(EUR in millions)
Assets
Cash and cash 116.2 54.5 (62.6) 19.0 127.0
equivalents
Liabilities
Non-current 293.6 100.3 109.9 67.2 571.0
borrowings
Current 22.4 84.6 (0.2) (43.7) 63.1
borrowings
Pro forma net 199.8 130.5 172.4 4.4 507.0
debt
Pro forma gearing ratio of the Combined Company as at
September 30, 2016
New Combined
Munksjö Ahlstrom Financing Company
historical reclassified Merger Agreements pro forma
(Note 1) (Note 2) (Note 3)
(EUR in millions, unless otherwise indicated)
Pro forma net debt 199.8 130.5 172.4 4.4 507.0
Total equity 424.9 307.6 343.3 (3.5) 1,072.4
Pro forma 47.0 42.4 - - 47.3
gearing, percent
ANNEX 2
Details on Financing
As previously communicated, on November 7, 2016, Munksjö and Ahlstrom agreed on
financing commitments for the Merger and the combined company with Nordea and
SEB as mandated lead arrangers. In accordance with these commitments, Munksjö
entered into a facilities agreement with Nordea and SEB as mandated lead
arrangers and underwriters and Nordea as agent on November 10, 2016 (the "Term
and Revolving Facilities Agreement"), pursuant to which a term loan facility of
EUR 80 million, a term loan facility of EUR 40 million, a term loan facility of
EUR 150 million, a term loan facility of SEK 600 million and a term loan
facility of USD 35 million (together, the "Term Loan Facilities") as well as a
multicurrency revolving credit facility of EUR 200 million (the "Revolving
Credit Facility," and together with the Term Loan Facilities, the "Term and
Revolving Facilities") will be made available to the combined company. Nordea
and SEB have started the syndication process for the Term and Revolving
Facilities. On the same date, Ahlstrom entered into the EUR 200 million bridge
facility agreement with Nordea and SEB as mandated lead arrangers and
underwriters and Nordea as agent (the "Bridge Facility Agreement"). Assuming
that the Merger is completed, the Bridge Facility Agreement will be assumed by
Munksjö on the completion date of the Merger pursuant to an amended and restated
bridge facility agreement (the "Amended and Restated Bridge Facility Agreement,"
and together with the Term and Revolving Facilities Agreement, the "New
Financing Agreements") with amended and restated terms and the commitments
reduced to EUR 100 million (the "Amended and Restated Bridge Facility," and
together with the Term Loan Facilities and the Revolving Credit Facility, the
"Facilities"). The Term and Revolving Facilities Agreement and the Amended and
Restated Bridge Facility Agreement provide that the Facilities will be available
to the combined company on a certain funds basis subject to the completion of
the Merger and certain other customary conditions precedent.
Each of the Term Loan Facilities may be utilized by way of loans for the purpose
of (directly or indirectly) refinancing the existing indebtedness of Munksjö
(whether originally incurred by Munksjö or assumed by the combined company as a
result of the Merger) and financing the Merger-related costs. The Revolving
Credit Facility may be utilized by way of loans for the purpose of (directly or
indirectly) refinancing the existing indebtedness of Munksjö (whether originally
incurred by Munksjö or assumed by the combined company as a result of the
Merger), financing the Merger-related costs and financing the general corporate
requirements of the Munksjö group (including acquisitions). Munksjö is entitled
to request that its subsidiaries accede to the Term and Revolving Facilities
Agreement as additional borrowers under the Revolving Credit Facility. The
Amended and Restated Bridge Facility, which will be effective as of the
completion date of the Merger, may be utilized by way of loans for the purpose
of refinancing Ahlstrom's EUR 100,000,000 senior unsecured callable fixed rate
notes due 2019 and Ahlstrom's EUR 100 million capital notes callable in October
2017, in each case, that are assumed by Munksjö on the completion date of the
Merger (unless repaid prior to such date).
The existing indebtedness that is expected to be refinanced under the Facilities
include, among others, indebtedness under Munksjö's EUR 345 million and
SEK 570 million term and revolving facilities agreement, Ahlstrom's
EUR 180 million multicurrency revolving credit facility agreement and certain
bilateral financing arrangements of Ahlstrom.
Each of the Term and Revolving Facilities have a maturity of five years from the
earlier of (i) April 1, 2017 and (ii) the completion date of the Merger, except
for the EUR 150 million term loan facility, which matures on the third
anniversary the earlier of (i) April 1, 2017 and (ii) the completion date of the
Merger. The EUR 80 million term loan facility will be amortized through semi-
annual repayments of EUR 8 million each. Subject to the completion of the
Merger, the Amended and Restated Bridge Facility will mature on the date falling
18 months from the earlier of (i) April 1, 2017 and (ii) the completion date of
the Merger. If the Merger is not completed by August 1, 2017, the Facilities
will be immediately cancelled in full. The structure of the Facilities may be
adjusted by reallocating EUR 100 million (or its equivalent in other currencies)
from a non-amortizing facility to an amortizing facility, provided, however,
that the maximum annual amortization does not exceed EUR 20 million.
The rate of interest payable on loans made under the Facilities is the aggregate
of the applicable margin plus Euribor (or Stibor in relation to any loan
denominated in Swedish kronor or Libor in relation to any loan denominated in
any other currency). The interest margin payable on amounts drawn on the Term
and Revolving Facilities depends on the ratio of the consolidated senior net
debt to consolidated EBITDA for the combined company and the interest margin
payable on amounts drawn on the Amended and Restated Bridge Facility increases
with time elapsed from the completion date of the Merger.
The Term Loan Facilities will be available from and including the completion
date of the Merger to and including dates falling five business days or two
months from the completion date of the Merger, and the Revolving Credit Facility
will be available from and including the completion date of the Merger to and
including the date falling one month prior to the applicable termination date of
five years from the earlier of (i) April 1, 2017 and (ii) the completion date of
the Merger, in each case, subject to satisfaction of certain customary
conditions precedent (which will be limited on a customary certain funds basis).
The Amended and Restated Bridge Facility will be available subject to
satisfaction of certain customary conditions precedent (which will be limited on
a customary certain funds basis) from and including the completion date of the
Merger to and including September 30, 2017. As of the completion date of the
Merger, (and if such date is not a business day, on the first following business
day), the bridge facility made available under the Bridge Facility Agreement
will be automatically reduced to EUR 100 million, and any amount exceeding
EUR 100 million will be automatically cancelled and any such amount exceeding
EUR 100 million outstanding under the facility will become immediately due and
payable by the combined company.
The Term and Revolving Facilities Agreement and the Amended and Restated Bridge
Facility Agreement contain customary prepayment and cancellation provisions,
including a requirement for the combined company to use any proceeds received
from any debt capital markets issue to prepay the Amended and Restated Bridge
Facility (and to the extent such proceeds exceed the amount required to repay
the Amended and Restated Bridge Facility in full, to prepay the EUR 150 million
term loan facility under the Term and Revolving Facilities Agreement). In
addition, as long as any amount is outstanding under the Amended and Restated
Bridge Facility, the combined company is required to use any cash proceeds
received from any equity capital markets issue to prepay the Amended and
Restated Bridge Facility. The Term and Revolving Facilities Agreement and the
Amended and Restated Bridge Facility Agreement contain customary financial
covenants, operational covenants, representations and warranties and events of
default (subject to certain exceptions and qualifications). The Facilities will
be unsecured and unguaranteed.
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