2016-12-16 11:00:03 CET
2016-12-16 11:00:03 CET
Munksjö Oyj - Prospectus/Announcement of Prospectus
Munksjö Oyj: Prospectus and certain other information published in relation to the merger of Munksjö and Ahlstrom
Helsinki, Finland, 2016-12-16 11:00 CET (GLOBE NEWSWIRE) --
MUNKSJÖ OYJ, STOCK EXCHANGE RELEASE 16 December 2016 at 11:00 a.m. CET
This stock exchange release may not be published or distributed, in whole or in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.
Prospectus and certain other information published in relation to the merger of
Munksjö and Ahlstrom
● 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
● Changes to Munksjö’s long-term share-value based incentive program approved
in June 2016
● Munksjö will record costs in connection to the merger of approximately EUR 6
million as items affecting comparability in the fourth quarter of 2016
Overview
As announced on November 7, 2016, the Boards of Directors of Munksjö Oyj
(“Munksjö”) and Ahlstrom Corporation (“Ahlstrom”) 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.munksjo.com/ahlstrommunksjo/fin and
www.ahlstrom.com/fi/Sijoittajat/ahlstromin-ja-munksjon-yhdistyminen/ 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
Munksjö at Eteläesplanadi 14, FI-00130 Helsinki, Finland, and at the registered
office of Ahlstrom at Alvar Aallon katu 3 C, FI-00100 Helsinki, Finland. The
English language prospectus, together with the Swedish language summary, will
be available on the internet at www.munksjo.com/ahlstrommunksjo and
www.ahlstrom.com/en/Investors/ahlstrommunksjo-combination/ starting on or about
December 16, 2016.
The prospectus contains the following previously unpublished information in
relation to the Merger and the incentive program of 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.
Changes to Munksjö’s long-term share-value based incentive program approved in
June 2016
On December 16, 2016, 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 incentive program will terminate on a pro rata basis as of the
completion of the Merger, thereby cancelling 7/12 of the program (the original
award period would have terminated at the end of 2018 and the award would have
been payable in the spring of 2019). The participants in the program will
receive shares and cash pursuant to the terms of the program following the
completion of the Merger and, in any case, no later than the date of the 2017
annual general meeting of Munksjö.
Munksjö will book items affecting comparability related to the Merger
Out of the costs related to the transaction, amounting to approximately EUR 8
million for Munksjö and recorded in other external costs in the income
statement, approximately EUR 4 million will be recorded in the fourth quarter
of 2016 and will be reported as items affecting comparability. The rest of the
costs related to the transaction are expected to be booked at the time of the
completion of the Merger.
Furthermore, Munksjö will in the fourth quarter of 2016 record approximately
EUR 2 million of costs related to the long-term share-value-based incentive
program, which is terminated as described above. These costs are also reported
as items affecting comparability.
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).
Additional details on financing
Additional details on financing included in the prospectus are attached as
Annex 2 to this stock exchange release.
Munksjö Oyj
For further information, please contact
Jan Åström, President and CEO, tel. +46 10 250 1001
Anna Selberg, SVP Communications, tel. +46 703 23 10 32
Laura Lindholm, Head of Investor Relations, tel. +46 72 703 63 36
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
Munksjö Ahlstrom Merger New Combined
historica reclassifi Financing Company pro
l ed Agreements forma
(Note 1) (Note (Note 3)
2)
(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 intangible assets 43.5 10.7 221.3 – 275.5
Equity accounted 2.2 15.7 (15.7) – 2.2
investments
Other non-current 3.2 8.1 (0.5) 1.9 12.7
assets
Deferred tax assets 48.3 66.6 (9.1) – 105.8
Total non-current 738.8 486.0 601.9 1.9 1,828.6
assets
Current assets
Inventory 156.0 123.2 (8.3) – 270.9
Accounts receivable 115.9 111.7 (7.1) – 220.6
Other current assets 30.4 31.7 (3.0) – 59.0
Current tax asset 1.2 1.3 – – 2.5
Cash and cash 116.2 54.5 (62.6) 19.0 127.0
equivalents
Total current assets 419.7 322.4 (81.1) 19.0 680.0
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 earnings (219.1) 91.8 55.9 (3.5) (74.9)
Hybrid bond – 100.0 (100.0) – –
Total equity 420.9 303.0 343.3 (3.5) 1,063.7
attributable to parent
company’s shareholders
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 borrowings 293.6 100.3 109.9 67.2 571.0
Other non-current 3.1 0.0 – – 3.1
liabilities
Pension obligations 51.7 99.5 (33.3) – 117.8
Deferred tax 74.4 2.1 94.0 – 170.6
liabilities
Provisions 17.7 0.4 – – 18.2
Total non-current 440.5 202.4 170.6 67.2 880.6
liabilities
Current liabilities
Current borrowings 22.4 84.6 (0.2) (43.7) 63.1
Accounts payable 141.2 139.8 0.3 1.0 282.3
Liabilities to equity 5.9 – – – 5.9
accounted investments
Accrued expenses and 103.6 44.1 7.0 – 154.8
deferred income
Current tax liabilities 8.0 7.2 0.0 – 15.2
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 liabilities 733.6 500.8 177.5 24.5 1,436.2
Total equity and 1,158.5 808.4 520.8 21.0 2,508.6
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
Munksjö Ahlstrom Merger New Combined
historica reclassi Financing Company
l fied Agreement pro forma
s
(Note 1) (Note (Note 3)
2)
(EUR in millions, unless otherwise indicated)
Net sales 860.5 819.8 (59.9) – 1,620.4
Other operating income 5.3 5.5 (0.1) – 10.7
Total income 865.8 825.3 (60.0) – 1,631.1
Changes in inventories 2.1 1.9 0.1 – 4.0
Materials and supplies (411.5) (368.1) 33.4 – (746.2)
Other external costs (199.5) (194.3) 26.5 – (367.2)
Personnel costs (156.3) (163.6) 3.4 – (316.5)
Depreciation and (42.1) (38.3) (23.1) – (103.5)
amortization
Share of profit in equity – 0.2 (0.2) – –
accounted investments
Operating result 58.5 63.0 (19.9) – 101.7
Financial income 4.0 0.3 (0.1) – 4.3
Financial costs (18.2) (11.9) 0.7 (0.9) (30.3)
Net financial items (14.2) (11.6) 0.7 (0.9) (26.0)
Profit/(loss) before tax 44.3 51.4 (19.2) (0.9) 75.7
Taxes (12.8) (18.0) 6.2 0.2 (24.4)
Net result for the period 31.5 33.5 (13.0) (0.7) 51.2
Net result attributable
to:
Parent company’s 31.3 33.4 (13.0) (0.7) 51.0
shareholders
Non-controlling interests 0.2 0.0 – – 0.3
Earnings per share
(attributable to parent
company’s shareholders)
Basic earnings per share, 0.62 0.53
EUR
Diluted earnings per 0.62 0.53
share, EUR
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
Munksjö Ahlstrom Merger New Combined
historical reclassif Financing Company
ied Agreements pro forma
(Note 1) (Note (Note 3)
2)
(EUR in millions, unless otherwise indicated)
Net sales 1,130.7 1,074.7 (80.8) – 2,124.6
Other operating income 11.6 4.4 3.8 – 19.8
Total income 1,142.3 1,079.1 (76.9) – 2,144.4
Changes in inventories 1.0 5.2 (4.3) – 2.0
Materials and supplies (573.9) (495.2) 48.2 – (1,020.8)
Other external costs (283.6) (276.0) 21.1 – (538.6)
Personnel costs (199.5) (216.6) 4.4 – (411.8)
Depreciation and (53.6) (74.6) (22.5) – (150.6)
amortization
Share of profit in equity 0.0 0.2 (0.2) – 0.0
accounted investments
Operating result 32.7 22.1 (30.1) – 24.6
Financial income 10.5 0.5 (0.0) – 11.0
Financial costs (15.2) 0.1 0.9 (5.2) (19.4)
Net financial items (4.7) 0.6 0.9 (5.2) (8.5)
Profit/(loss) before tax 28.0 22.6 (29.3) (5.2) 16.2
Taxes (5.2) (14.1) 4.4 1.0 (13.8)
Net result for the period 22.8 8.6 (24.8) (4.2) 2.4
Net result attributable
to:
Parent company’s 22.4 9.2 (24.8) (4.2) 2.6
shareholders
Non-controlling interests 0.4 (0.7) – – (0.2)
Earnings per share
(attributable to parent
company’s shareholders)
Basic earnings per share, 0.44 0.03
EUR
Diluted earnings per 0.44 0.03
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 Reclass Note Ahlstrom
Ahlstrom i- reclassified
ficatio
ns
(EUR in millions)
Non-current assets
Other non-current assets – 8.1 (i), 8.1
(ii)
Other receivables 7.8 (7.8) (i) –
Other investments 0.3 (0.3) (ii) –
Current assets
Accounts receivable – 111.7 (iii) 111.7
Other current assets – 31.7 (iii) 31.7
Trade and other receivables 143.4 (143.4) (iii) –
Current liabilities
Accounts payable – 139.8 (iv) 139.8
Accrued expenses and – 44.1 (iv) 44.1
deferred income
Other current liabilities – 22.7 (iv), 22.7
(v)
Trade and other payables 201.4 (201.4) (iv) –
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
Historical Reclass Accounting Note Ahlstrom
Ahlstrom i- policy reclassifie
ficatio alignment d
ns
(EUR in millions)
Other 7.4 – (1.9) (i) 5.5
operating
income
Changes in – 1.9 – (ii) 1.9
inventories
Materials and – (368.1) – (ii) (368.1)
supplies
Other external – (196.1) 1.9 (i), (ii), (194.3)
costs (iii), (iv),
(v), (vi)
Personnel – (163.6) – (ii), (iii), (163.6)
costs (iv), (v)
Depreciation – (38.3) – (ii), (iii), (38.3)
and (iv), (v), (vi)
amortization
Cost of goods (663.3) 663.3 – (ii) –
sold
Sales and (28.8) 28.8 – (iii) –
marketing
expenses
R&D expenses (12.4) 12.4 – (iv) –
Administrative (55.8) 55.8 – (v) –
expenses
Other (3.9) 3.9 – (vi) –
operating
expenses
___________
(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
Historical Reclass Accounting Note Ahlstrom
Ahlstrom i- policy reclassifie
ficatio alignment d
ns
(EUR in millions)
Other 7.0 – (2.6) (i) 4.4
operating
income
Changes in – 5.2 – (ii) 5.2
inventories
Materials and – (495.2) – (ii) (495.2)
supplies
Other external – (278.6) 2.6 (i), (ii), (276.0)
costs (iii), (iv),
(v), (vi)
Personnel – (216.6) – (ii), (iii), (216.6)
costs (iv), (v)
Depreciation – (74.6) – (ii), (iii), (74.6)
and (iv), (v), (vi)
amortization
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 (12.4) 12.4 – (vi) –
operating
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
Fund Acquisition - Purchase Merger Transa The
distri price allocation to impact to ction Merger
bution acquired assets and parent costs in
s assumed liabilities company total
equity
(Note (Notes 2a and 2b) (Note 2c) (Note (Note
2a) 2d) 2)
(EUR in millions)
Assets
Non-current
assets
Tangible assets – 130.5 – – 130.5
Goodwill – 275.5 – – 275.5
Other intangible – 221.3 – – 221.3
assets
Equity accounted – (15.7) – – (15.7)
investments
Other non-current – (0.5) – – (0.5)
assets
Deferred tax – (9.4) – 0.3 (9.1)
assets
Total non-current – 601.6 – 0.3 601.9
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 earnings – (91.8) 162.2 (14.5) 55.9
Hybrid bond – (100.0) – – (100.0)
Total equity (22.8) 381.8 – (15.6) 343.3
attributable to
parent company’s
shareholders
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-current – 170.6 – – 170.6
liabilities
Current
liabilities
Current – (0.2) – – (0.2)
borrowings
Accounts payable – (15.2) – 15.5 0.3
Accrued expenses – 7.0 – – 7.0
and deferred
income
Current tax – 0.0 – – 0.0
liabilities
Other current – (0.4) – – (0.4)
liabilities
Total current – (8.7) – 15.5 6.9
liabilities
Total liabilities – 161.9 – 15.5 177.5
Total equity and (22.8) 543.7 – (0.1) 520.8
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
Ahlstr Fair Note Funds Sale of Acquisition Total Total
om valuatio distri Ahlst-r of the 50 adjust-m
reclas n of -butio om percent ent
sified assets n Osna-br interest in without
and ück AM Real addition
liabilit GmbH Estate al
ies S.r.l goodwill
(Note (Notes (Note (Note (Note 2b)
1) 2a and 2a) 2b)
2b)
(EUR in millions)
Tangibl 312.7 120.0 (i) – – 10.5 130.5 443.3
e
assets
Goodwil 72.2 (72.2) (ii) – – – (72.2) –
l
Other 10.7 221.3 (ii), – (0.1) – 221.3 232.0
intang (iii)
ible
assets
Equity 15.7 – – (3.2) (12.5) (15.7) (0.0)
accoun
ted
invest
ments
Other 8.1 – – (0.5) – (0.5) 7.5
non-cu
rrent
assets
Deferre 66.6 (10.1) (v) – – 0.7 (9.4) 57.2
d tax
assets
Total 486.0 259.0 – (3.8) (1.2) 254.0 739.9
non-cu
rrent
assets
Invento 123.2 4.4 (iv) – (12.7) – (8.3) 114.8
ry
Account 111.7 – (ix) – (6.9) (0.2) (7.1) 104.6
s
receiv
able
Other 31.7 – – (3.0) 0.3 (2.7) 28.9
curren
t
assets
Current 1.3 – – – – – 1.3
tax
asset
Cash 54.5 – (22.8) (17.8) 0.8 (39.8) 14.7
and
cash
equiva
lents
Total 322.4 4.4 (22.8) (40.4) 0.9 (57.9) 264.5
curren
t
assets
Non-cur 100.3 110.6 (vi) – – (0.7) 109.9 210.2
rent
borrow
ings
Other 0.0 – – – – – 0.0
non-cu
rrent
liabil
ities
Pension 99.5 – – (33.3) – (33.3) 66.2
obliga
tions
Deferre 2.1 93.0 (vii) – – 1.1 94.0 96.1
d tax
liabil
ities
Provisi 0.4 – – – – – 0.4
ons
Total 202.4 203.6 – (33.3) 0.3 170.6 373.0
non-cu
rrent
liabil
ities
Current 84.6 0.4 (vi) – – (0.5) (0.2) 84.4
borrow
ings
Account 139.8 – (ix) – (15.1) (0.1) (15.2) 124.6
s
payabl
e
Accrued 44.1 8.1 (viii) – (1.0) (0.0) 7.0 51.2
expens
es and
deferr
ed
income
Current 7.2 – – – 0.0 0.0 7.2
tax
liabil
ities
Other 22.7 – – (0.4) (0.0) (0.4) 22.3
curren
t
liabil
ities
Total 298.4 8.5 – (16.5) (0.6) (8.7) 289.7
curren
t
liabil
ities
Net 341.7
assets
acquir
ed
Non-con (4.6)
trollin
g
intere
sts
Goodwil (ii) 347.6
l
Estimat (2b) 684.7
ed
purcha
se
consid
eration
Fair valuation of assets and liabilities
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
Estimated Useful For the nine months For the year ended
preliminary life ended September December 31, 2015
fair value 30, 2016
(EUR in millions)
Customer 167.0 10 (12.5) (16.7)
relationships years
Trademark 45.7 15 (2.3) (3.0)
years
Technology 9.4 10 (0.7) (0.9)
years
Contract based 2.5 1 year – (2.5)
intangibles
Other 7.4 (0.5) (0.6)
intangibles
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 combined pro forma unaudited income statement for
the nine months ended September 30, 2016 and, respectively, EUR 0.3 million
from the combined pro forma unaudited 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
Additional Elimination Additional Inventor Elimination Total
depreciatio of amortizati y fair of
n of amortization on of value transactions
tangible of existing intangible adjustme between
assets intangible assets nt Munksjö and
assets Ahlstrom
(EUR in millions)
Net – – – – (0.2) (0.2)
sales
Changes – – – – – –
in
invent
ories
Materia – – – – 0.2 0.2
ls and
suppli
es
Depreci (7.5) 1.1 (15.5) – – (21.9)
ation
and
amorti
zation
Operati (7.5) 1.1 (15.5) – – (21.9)
ng
result
Taxes 2.1 (0.3) 4.3 – – 6.1
Net (5.4) 0.8 (11.2) – – (15.8)
result
for
the
period
For the year ended December 31, 2015
Additional Elimination Additional Inventor Elimination Total
depreciatio of amortizati y fair of
n of amortization on of value transactions
tangible of existing intangible adjustme between
assets intangible assets nt Munksjö and
assets Ahlstrom
(EUR in millions)
Net – – – – (0.3) (0.3)
sales
Changes – – – (4.4) – (4.4)
in
invent
ories
Materia – – – – 0.3 0.3
ls and
suppli
es
Depreci (10.0) 3.0 (23.2) – – (30.2)
ation
and
amorti
zation
Operati (10.0) 3.0 (23.2) (4.4) – (34.6)
ng
result
Taxes 2.8 (0.8) 6.5 1.2 – 9.7
Net (7.2) 2.2 (16.7) (3.2) – (24.9)
result
for
the
period
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 For the year ended December
September 31, 2015
30, 2016
(EUR in millions)
Net sales (59.7) (80.4)
Other operating income (0.0) 5.5
Changes 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 2.0 15.1
period
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 For the year ended
ended September December 31, 2015
30, 2016
(EUR in millions)
Other operating income (0.1) (1.6)
Other external costs 2.2 3.1
Depreciation and amortization (1.7) (1.3)
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
Repayment Repayment The Term Loan Transaction Consent Total
of of Facilities of costs fee from adjust
borrowings borrowings Combined related to the ment
in Munksjö in Company the Notes
Ahlstrom Facilities
(EUR in millions)
Other – – – 1.9(1) – 1.9
non-curr
ent
assets
Cash and (302.2) (35.3) 363.7 (7.1) – 19.0
cash
equivale
nts
Total (302.2) (35.3) 363.7 (5.2) – 21.0
assets
Retained (2.5) – – – (1.0) (3.5)
earnings
Non-curre (283.8) (0.0) 355.7 (4.8) – 67.2
nt
borrowin
gs
Current (16.0) (35.3) 8.0 (0.4) – (43.7)
borrowin
gs
Accounts – – – – 1.0 1.0
payable
Total (302.2) (35.3) 363.7 (5.2) 0.0 21.0
equity
and
liabilit
ies
__________
(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 Interest Consent Interest Total
financial financial expense of and adjustment adjust
costs costs Term Loan Revolving of hybrid ment
related to related to Facilities Credit bond and the
repaid repaid Facility Notes
borrowings borrowings fees
(EUR in millions)
Financ 6.0(1) 1.3(1) (5.6)(2) (0.3) (2.3) (0.9)
ial
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 Interest Consent Interest Total
financial financial expense of and adjustment adjust
costs costs Term Loan Revolving of hybrid ment
related to related to Facilities Credit bond and the
repaid repaid Facility Notes
borrowings borrowings fees
(EUR in millions)
Financ 5.0(1) 2.0(2) (7.7)(3) (1.4) (3.2) (5.2)
ial
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 shareholders for the periods indicated:
For the nine For the year
months ended ended December
September 31, 2015
30, 2016
(EUR in millions, unless otherwise
indicated)
Pro forma net result attributable to parent 51.0 2.6
company's shareholders
Number of shares
Weighted average number of shares in issue – 50,761,581 50,818,260
historical
Merger Consideration Shares to be issued to 45,376,992 45,376,992
Ahlstrom shareholders
Pro Forma weighted average number of shares 96,138 573 96,195,252
in issue – basic
Dilution effect – historical 116,773 100,051
Pro Forma weighted average number of shares 96,255,346 96,295,303
– diluted
Pro forma earnings per share attributable to 0.53 0.03
parent company's shareholders – basic, EUR
Pro forma earnings per share attributable to 0.53 0.03
parent company's shareholders – diluted,
EUR
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
Munksjö Ahlstrom Merger New Combined
historica reclassifi Financing Company pro
l ed Agreements 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 – (3.4) – – (3.4)
comparability reported
historically(5)
Transaction costs – – 0.6 – 0.6
incurred(3)
Total items affecting – (3.4) 0.6 – (2.8)
comparability(3)(5)
Operating result (IFRS) 58.5 63.0 (19.9) – 101.7
Depreciation, 42.1 38.3 23.1 – 103.5
amortization and
impairment charges
EBITDA(2)(6) 100.6 101.3 3.2 – 205.2
For the year ended December 31, 2015
Munksjö Ahlstrom Merger New Combined
historica reclassifi Financing Company pro
l ed Agreements forma
(Note 1) (Note (Note 3)
2)
(EUR in millions)
Adjusted 93.6 105.0 6.2 – 204.7
EBITDA(1)(2)(3)
Depreciation and (53.6) (57.3) (22.5) – (133.3)
amortization
Adjusted operating 40.0 47.7 (16.3) – 71.4
result(2)(3)(4)
Items affecting
comparability
Items affecting (7.3) (25.6) – – (32.9)
comparability reported
historically(5)
Estimated transaction – – (15.1) – (15.1)
costs (3)
Estimated inventory – – (4.4) – (4.4)
fair value
adjustment(3)
Pro forma gain on – – 5.6 – 5.6
business disposal(3)
Total items affecting (7.3) (25.6) (13.9) – (46.8)
comparability(3)(5)
Operating result (IFRS) 32.7 22.1 (30.1) – 24.6
Depreciation, 53.6 74.6 22.5 – 150.6
amortization and
impairment charges
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 ended For the year 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 – (17.3)
write-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
Munksjö Ahlstrom Merger New Financing Combined
historical reclassified Agreements Company pro
forma
(Note 1) (Note (Note 3)
2)
(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
Munksjö Ahlstrom Merger New Financing Combined
historical reclassified Agreements Company pro
forma
(Note 1) (Note (Note 3)
2)
(EUR in millions, unless otherwise indicated)
Pro forma net 199.8 130.5 172.4 4.4 507.0
debt
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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