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Uutechnic Oy and Vaahto Group Plc Oyj, Together with Their Principal Shareowners, have Signed a Conditional Agreement on a Merger and Financing Arrangement

VAAHTO GROUP PLC OYJ STOCK EXCHANGE RELEASE, SEPTEMBER 3, 2015 at 8:30 am

UUTECHNIC OY AND VAAHTO GROUP PLC OYJ, TOGETHER WITH THEIR PRINCIPAL SHAREOWNERS, HAVE SIGNED A CONDITIONAL AGREEMENT ON A MERGER AND FINANCING ARRANGEMENT, WHICH TRANSFERS A MAJORITY IN VAAHTO GROUP TO THE CURRENT OWNERS OF UUTECHNIC AND MERGES UUTECHNIC’S BUSINESS OPERATIONS WITH VAAHTO GROUP

Uutechnic Oy (“Uutechnic”), Uutechnic’s shareholders, Vaahto Group Plc Oyj (“Vaahto Group”) and Vaahto Group’s principal shareholders, Hannu and Mikko Laakkonen along with HML Finance Oy, have signed a conditional agreement to implement a merger and financing arrangement. According to the proposed arrangement, the business operations of Vaahto Group and Uutechnic Oy will be merged through an exchange of shares and the company’s financial situation and balance sheet will be strengthened significantly by way of share issues and agreements concluded with lenders. The arrangement also includes a change of name from Vaahto Group to Plc Uutechnic Group Oyj. Once the new arrangement is in place, Uutechnic’s current owners will own more than half of the current Vaahto Group’s shares.

 

Proposed arrangement in a nutshell: 

– Once the arrangement has been implemented, Vaahto Group Plc Oyj will change its name to Plc Uutechnic Group Oyj. The company intends to continue to be listed on the NASDAQ OMX Helsinki exchange.

– The entire business company resulting from a demerger of Uutechnic will be transferred, via share exchange, to Vaahto Group. In the share exchange, the Uutechnic business company’s shareholders will acquire 24,000,000 new Vaahto Group shares through a directed share issue. For the purpose of the arrangement, the value of Vaahto Group’s shares is set at 0.25 euros per share, i.e. the value of the Uutechnic business company amounts to 6.0 million euros.

– The arrangement also includes a capitalization of Vaahto Group by way of a preferred stock issue, in which Vaahto Group’s existing shareholders are offered 9,985,850 new Vaahto Group shares at a value of 0.25 euros per share. Eight existing shares will give entitlement to a subscription of five new shares in this issue. Vaahto Group’s principal shareholders, representing 50.6% of the company’s stock, each undertake to subscribe to the shares they are entitled to as well as any shares left unsubscribed to. Furthermore, Uutechnic’s shareholders or entities designated by them are offered 6,000,000 new Vaahto Group shares at 0.25 euros per share in a share issue; an amount which the Uutechnic shareholders undertake to subscribe to as separately specified. These issues are thus expected to provide Vaahto Group with approximately 4.0 million euros.

– The completed arrangement would increase the number of Vaahto Group shares from the current 15,977,360 shares to 55,963,210 shares.

– The loans granted by Mikko and Hannu Laakkonen to Vaahto Group, which total 2.0 million euros, are to be converted to subordinated loans with a reduced fixed annual interest of 4%. It has been agreed that while the debtor may repay these loans free of charge at any time, they will become due on December 31, 2019, and the interest may be capitalized. It has further been agreed that half of the loan amount may be converted into shares at 0.25 euros per share, unless the respective amount has been repaid by December 31, 2017. To the extent that the right to conversion is exercised, the relevant proportion of the loan does not incur interest for the loan term. A conversion of the convertible portion of the subordinated loan may be requested during the period from January 1 to March 31, 2018, and, subject to a positive outcome, Vaahto Group will issue no more than 4,000,000 new shares.

– As part of the arrangement, a financing solution for Vaahto Group will be negotiated to further strengthen the Group’s financial position and balance sheet.

– The contracting parties have agreed that as the arrangement becomes binding, new boards will be appointed for the Group companies based on the decisions of each company’s general meeting. Uutechnic’s shareholders will have authority over decision-making on the new boards based on the forthcoming majority share interest. However, Mikko Laakkonen will have the right to appoint one member to the board of the Group’s parent company.

Business impact of the proposed arrangement: 

The current owners and key people of Uutechnic will play a significant role in the Vaahto Group (future Uutechnic Group).

The arrangement will result in a group with the capability of delivering complete solutions to new and existing customers. Business functions complement each other without any significant duplication.

The business activities of Uutechnic and Vaahto have considerable similarities regarding deliveries to process-based industries. Vaahto Group delivers tanks for companies in process-based industries, while Uutechnic delivers agitators for similar deliveries. The parties anticipate significant business advantages from the merger.

About Uutechnic Oy 

Uutechnic was founded in 1993, with its headquarters in Uusikaupunki. Uutechnic operates worldwide with more than 50% of its delivery volume (in euros) being exported since 2000. Since its inception, the company has operated profitably with an average operating profit percentage of 31.7% in 2008–2014, and sales of 5.25 million euros on average. Due to the revenue recognition method applied as well as the economic situation, the sales figure has varied from year to year.

In its business operations, Uutechnic specializes in demanding mixing technology. Its main products include large and demanding top entry agitator solutions and side entry agitators that are designed and manufactured according to the particular requirements of each client and process. Uutechnic’s client industries range from the hydrometallurgical industry to mining, pulp and paper, fertilizer and other chemical industries.

 

Conditional arrangement 

The entire arrangement is conditional on the approval of each company’s general meeting. Provided that the below terms and conditions are met, the boards of directors of both companies unanimously recommend the approval of the arrangement. Vaahto Group shareholders representing more than two-thirds of the Vaahto Group shares, along with all of Uutechnic Oy’s shareholders, have committed themselves to supporting the approval of the arrangement at the extraordinary general meetings, provided that all conditions are met.

The completion of the proposed arrangement requires that:

  • All necessary due diligence procedures have been carried out and resulted in a statement to the effect that it is reasonable to believe that the arrangement would lead to a profitable operation of the Vaahto Group. The review did not reveal any risks that may affect the viability of the proposed entity;
  • The lenders have, to the extent necessary, committed themselves to the arrangement;
  • Any tax-related uncertainties have been removed;
  • VG’s and Uutechnic’s general meetings have made the necessary decisions;
  • The final wording of the terms and conditions of the contract documentation has been agreed upon.

 

Commitment not to sell shares 

The shareholders of Uutechnic undertake not to sell the shares acquired through the arrangement for a period of 12 months from the completion of the arrangement. Similarly, the principal shareholders of Vaahto Group, Mikko Laakkonen, Hannu Laakkonen and HML Finance Oy, undertake not to sell the shares they owned at the time of signing of the letter of intent, or any shares they subscribed to under the arrangement before the limitation on disposal set for Uutechnic’s shareholders has expired.

 

Timetable for the arrangement: 

Our goal is to have the arrangement approved by the general meetings of both companies and made binding in October 2015 and implemented by January 2016. Vaahto Group undertakes to share information regarding the progress made as it becomes available.

 

Outlook for Vaahto Group Plc Oyj: 

The implementation of the proposed arrangement is crucial for the future of the Group. The arrangement would have a significant, positive impact on the Group’s balance sheet and financial position. The company’s management estimates that the Group’s working capital will suffice to cover the time needed to make the arrangement binding.

 

Mr. Sami Alatalo, Chairman of the Board of Vaahto Group

“Uutechnic is an exceptional Finnish company that has operated very successfully in the competitive international market since its inception. Uutechnic’s business complements Vaahto Group’s operations well, implementing and strengthening the Group’s strategy focused on process technology. The proposed arrangement enables us to achieve notable business advantages, making it possible to offer more complete solutions to our customers. I see the planned merger as a turning point for Vaahto Group, giving us the resources for a significantly improved financial and strategic development. The arrangement will considerably improve our financial situation and enable us to achieve better results in the future. I am convinced that the proposed arrangement will lay a strong foundation for a profitable growth in the domestic and international markets.”

 

Mr. Timo Lindström, Member of the Board of Uutechnic

Mr. Jouko Peräaho, Chairman of the Board of Uutechnic:

“We foresee many advantages from the combination of the forces of Uutechnic and Vaahto Group, and the customers of both companies will benefit directly from these advantages. We are global operators in the agitator industry and will continue to invest in even more demanding and broader solutions, in which tank business operations, among others, will have a significant role to play. The special tank business know-how of Vaahto Group will give us an edge in this area. Vaahto Group’s Japrotek and Stelzer also possess significant agitator expertise, complementing our product selection and giving us an opportunity to create added value for our global customers. We also believe that the AP-Tela operations can contribute to the success of the group.  The employees of all these companies have considerable skills and expertise, which will help us to compete successfully in international markets.

We have carefully studied this opportunity and decided to commit ourselves to the arrangement, provided that all the requirements stated in the signed letter of intent are met. All business arrangements involve certain risks, but we are convinced that this particular arrangement will give us a chance to create an important Finnish player in the global market. We at Uutechnic have always been able to operate successfully by focusing on keeping our promises to customers as well as possible and we will, for our part, make sure that the new entity will operate according to the same principles. We operate in markets where global economic cycles affect our business opportunities, and we expect that the market situation will remain challenging for some time to come.”

 

Helsinki, September 3, 2015

VAAHTO GROUP PLC OYJ

Board of Directors

 

Additional information:
Mr. Sami Alatalo, Chairman of the Board  +358 40 826 2066

 

 

 

 

Appendix 1

 

Uutechnic Oy – Financial information

Income Statement, EUR 1000

2015E

2014

2013

2012

2011

Revenue

3 700

2 294

3 453

7 868

6 053

Gross profit

1 307

2 069

3 723

3 267

EBITDA

1 100

219

893

2 358

2 409

EBIT

125

778

2 249

2 306

Financial income

199

46

134

0

Financial expenses

0

11

5

23

Earnings before taxes

324

813

2 378

2 283

Tax expenses

45

197

581

636

Earnings

279

596

1 668

1 644

Assets, EUR 1000

2014

Intangible assets

11

Tangible assets

693

Long term investments

1

Inventories

219

Current assets

280

Financial investments

4023

Cash & cash equivalents

587

Total assets

5813

Equity & Liabilities, EUR 1000

2014

Total equity

5524

Provisions

23

Long term liabilities

0

Current liabilities

266

Total Liabilities

266

Total equity and liabilities

5813

 

  • Uutechnic Oy will demerge into two companies before the contemplated transaction. Real estate assets and financial investments will be transferred to a separate company than the business operations in matter. The company that owns real estate assets and financial investments after the demerger will not be acquired by Vaahto Group. The equity balance of the company to be acquired by Vaahto Group at the moment of demerger is estimated to be ca EUR 400k and there will be 15 employee.
  • Uutechnic Oy has recognized revenue at delivery instead of percentage of completion method.