Eltel announces rights issue

Transcription

1 The information in this press release is not intended for distribution, publication or public release, directly or indirectly, in or into, Australia, Canada, Japan, the United States or any other jurisdiction where the publication or distribution of this press release may be unlawful. Please see the important notice at the end of this announcement. Eltel announces rights issue Rights issue of approximately 150 MEUR, with preferential rights for Eltel s shareholders Agreement on new long-term financing, conditional upon completion of the rights issue The rights issue is carried out in order to create a strong balance sheet providing financial opportunities to enable Eltel s new strategy The rights issue requires approval at the Annual General Meeting on 1 June 2017 The terms of the rights issue, including subscription price, will be determined and communicated on 29 May 2017 The Board of Directors of Eltel AB (publ) ( Eltel or the Company ) has on 2 May 2017 resolved, subject to approval by the annual general meeting, on a rights issue of approximately 150 MEUR with preferential rights for the Company s shareholders. Eltel s largest shareholders, Zeres Capital, The Fourth Swedish National Pension Fund (AP4), The First Swedish National Pension Fund (AP1), Solero Luxco S.á.r.l. (a company controlled by Triton Funds) and Swedbank Robur Funds, support the rights issue and have provided subscription undertakings and declarations of intent respectively, corresponding to approximately 52% in total of the rights issue. Danske Bank A/S, Helsinki Branch, OP Corporate Bank plc and Skandinaviska Enskilda Banken AB, acting as joint lead underwriters in connection with the rights issue, have confirmed their expectation to no later than when the detailed terms of the rights issue are finally determined, subject to certain given conditions enter into an underwriting agreement in respect of the remaining 48% of the shares to be issued in the rights issue that is conditional upon inter alia that the above mentioned shareholders subscribe for shares corresponding to a total of at least 52% of the rights issue. Eltel has reached an agreement with the Company s creditors regarding a renegotiation of the existing credit facility that provides the Company with a long term financing, provided that the rights issue is completed. The purpose of the rights issue is to create a capital structure that enables financing of Eltel s new strategy. Ulf Lundahl, Eltel s Chairman, comments: Eltel s management has, supported by the Board, established a strategy that aims at transforming Eltel to a company with solid profitability and growth. Eltel s main competence is found within Power and Communication at Eltel s markets in the Nordics, Poland and Germany. In 2016, these businesses corresponded to approximately 85% of Eltel s sales in markets where Eltel has a leading position and where the business model is repetitive and shows stable growth. Other businesses will, as previously communicated, be divested or wound down. Our assessment is that these changes are the foundation of a stable and successful business for Eltel and its shareholders. In order to carry out the necessary measures, combined with investments in growth at our core markets, a stronger balance sheet is necessary. Eltel AB POB , SE Stockholm, SWEDEN Adolfsbergsvägen 13, Bromma Tel VAT ID SE Copyright Eltel AB

2 Background and reasons Background Eltel was listed on the stock exchange in The development of the Company has, however, not met the expectations. Håkan Kirstein was appointed new CEO in September 2016 and shortly thereafter Eltel s management initiated a comprehensive review, mainly of the project delivery business. In addition, a review was introduced covering operational processes and support systems. The business review revealed a need for reducing the level of risk and to establish a stricter model for governance. As of the end of 2016, the project delivery business represented approximately 24% of Group net sales. Based on the above, a Group Project Function was established to execute certain operational improvement actions within the project delivery business, including project governance, risk assessment, and reporting. Decision was also made to implement an indepth investigation, led by external auditors, of projects with an identified high-risk profile and with a focus mainly on projects in Africa. The investigation revealed a number of insufficiencies resulting in significant write-downs and provisions during the fall of 2016 and spring of The write-downs were mainly due to historically too optimistic revenue recognition in some projects. In parallel, Eltel has continued to evaluate the remaining business to develop a strategy in which Eltel concentrates on business areas with lower risk and where the Company has market leading positions and competence as well as a repetitive business model. The conclusions following the assessment were that Eltel s core competence is in Power and Communication in the Company's more stable domestic markets in the Nordics and in Poland. Furthermore, the Company has identified opportunities to strengthen its market position within selected segments in Germany. Evidently, the expansion in other markets has been costly and unprofitable, or in segments in which Eltel is not competitive. Future strategy Based on the abovementioned strategic analysis, Eltel declared a new strategy and action plan, which was communicated to the market in February According to the action plan, Eltel should focus on stable and profitable business within Power and Communication in the Nordics and Poland as well as evaluate the possibilities to continue its selective growth in Germany. According to the Company, these markets offer attractive market potential, stable customers, and an interesting development in for example fibre roll-out and implementation of smart meters. In 2016, the Power and Communication business in the Nordics, Poland, and Germany had net sales of approximately EUR 1.2 billion, corresponding to 85% of Group net sales. Selective acquisitions in Power and Communication could further strengthen and consolidate Eltel's position in these markets. Furthermore, a work has been initiated to strengthen Eltel's operational processes and competitiveness in the long run. As part of this work, the fixed and mobile communication businesses have been merged into one business unit. The merger is expected to improve customer orientation and to create possibilities to offer integrated solutions adapted to market demand. Moreover, the transmission and distribution businesses will be integrated in the Power segment. These mergers are expected to generate economies of scale, improved optimisation of local resources and with positive financial impact from The Company intends to make investments to improve the operational efficiency in areas such as processes, system support, customer offerings, and competencies. Following the revised strategy, decisions have been made to divest or wind down businesses considered as non-core in order to de-risk and to relocate resources to the Company s core

3 business. The non-core business includes the power transmission business outside of Europe, the rail business, the power distribution business in the Baltics, and areas of Aviation & Security. In 2016, net sales of these operations amounted to approximately EUR 220 million. As a consequence, the project delivery business within Eltel is expected to be reduced from 24% to 18% of Group sales at the same time as the risk level of the remaining project portfolio will decrease. The remaining project delivery business is within Eltel's core competencies and compared to Group sales, the size of individual projects is small. The Board of Directors and the executive management of Eltel believe that the revised strategy will serve as a basis for a more stable and repetitive business model, in markets where Eltel has leading positions, and in areas where Eltel has competitive competence. The implementation of the revised strategy will result in significant restructuring and wind down costs. The Company estimates the wind down cost of the power transmission business outside of Europe to approximately EUR 40 million. The majority of the costs is expected to be realised in 2017 and the remaining in The implementation of the revised strategy will also result in additional restructuring costs within Power and Communication, as well as proceeds from divested businesses, mainly from divested Rail and Aviation & Security businesses. The total effects of these actions are expected to be more limited. Financial information Financial overview The new organisational structure The table below shows an overview of the financial information according to Eltel s new reporting structure as of Q1 2017, which reflects the future strategy of Eltel. The Power and Communication segments are Eltel s core business. Eltel plans to divest or wind down the businesses within the Other segment. Eltel intends to divest the power distribution business in the Baltics, which is included in the Power segment. For more details regarding the organisational structure, refer to Eltel s Annual Report 2016 and the Interim Q report.

4 Net sales by segment* Jan-Mar Jan-Mar Jan-Dec Jan-Dec Jan-Dec EUR million Power Communication Other Total ,400 1,255 1,242 * Relates to external sales Segment results Jan-Mar Jan-Mar Jan-Dec Jan-Dec Jan-Dec EUR million Power Communication Other Items not allocated to operating segments** Operative EBITA, Group Items affecting comparability in EBITA*** EBITA, Group ** Consist of group management function and other group level expenses *** Items which management does not consider to form part of the ongoing operative business The Rights Issue In light of the above, Eltel s Board of Directors, on 2 May 2017, resolved on a rights issue of approximately EUR 150 million (corresponding to approximately SEK million), before rights issue costs, with preferential rights for Eltel s shareholders, subject to approval from the annual general meeting on 1 June The proceeds from the rights issue will primarily be used to strengthen the Company s balance sheet and to enable the change of the business that the Company s management and Board of Directors have resolved upon, including managing the costs and risks in the power transmission business outside of Europe. It is the Company s view that the rights issue results in a capital structure that enables further development of the Company s core business, including selective acquisitions. Eltel s largest shareholders support the rights issue. Zeres Capital, The Fourth Swedish National Pension Fund (AP4) and The First Swedish National Pension Fund (AP1), together representing approximately 28% of Eltel s share capital 1, have expressed their support for the rights issue and have undertaken to subscribe for their respective pro rata share of the rights issue, as well as to vote in favour of the right issue at the AGM. Furthermore, Solero Luxco S.á.r.l. and Swedbank Robur Funds have expressed their intention to subscribe for their respective pro rata share of the rights issue and to vote in favour of the right issue at the AGM. The main shareholders have a total ownership representing 52% of Eltel s share capital 2. Danske Bank A/S, Helsinki Branch, OP Corporate Bank plc and Skandinaviska Enskilda Banken AB are acting as joint lead underwriters in connection with the rights issue and have confirmed their expectation to no later than when the detailed terms of the rights issue are finally determined, subject to certain given conditions enter into an underwriting agreement in respect of the remaining 48% of the shares to be issued in the rights issue that 1 Based on the total number of shares in the Company, excluding the 537,000 C-shares held by the Company. 2 Based on the total number of shares in the Company, excluding the 537,000 C-shares held by the Company.

5 is conditional upon inter alia that the above mentioned shareholders subscribe for shares corresponding to a total of at least 52% of the rights issue. The detailed terms of the rights issue will be determined and announced on 29 May The record date at Euroclear Sweden AB for the right to obtain subscription rights is 5 June The subscription period runs as from 8 June 2017 up until and including 22 June 2017, or such later date as determined by the Board of Directors. Trading in subscription rights at Nasdaq Stockholm is expected to take place as from 8 June 2017 up until and including 20 June Preliminary timetable for the rights issue 29 May 2017: Subscription price and subscription ratio determined and announced through a press release 1 June 2017: Annual general meeting in Eltel in order to, inter alia, approve the Board s resolution on the rights issue 2 June 2017: First day of trading in the share without right to participate in the rights issue 5 June 2017: Record date, shareholders who are registered in the share register this day will obtain subscription rights that entitle to participation in the rights issue 7 June 2017: Estimated day for publication of the prospectus 8 20 June 2017: Trading in subscription rights. Shareholders who do not want to subscribe for shares in the rights issue can sell their subscription rights during this period in order to realise their value 8 22 June 2017: Subscription period Agreement on long term financing with existing creditors Eltel has reached an agreement with its existing creditors on long-term financing. The agreement is conditional upon completion of the rights issue and implies a change of the terms in the existing loan agreement, including new covenants. The revised agreement enters into force upon completion of the rights issue. Annual general meeting on 1 June 2017 The Board of Directors has today, through a separate press release, announced a notice to the annual general meeting on 1 June The AGM is, inter alia, proposed to resolve to approve the Board s resolution on the rights issue and certain proposals related thereto regarding reduction of the share capital, bonus issue, and changes of the limits in the Articles of Association regarding share capital and number of shares. Telephone conference on 3 May 2017, at 08:00 am (CET) Analysts and media are invited to participate in a telephone conference on 3 May 2017 at 08:00 am CET where Eltel s President and CEO Håkan Kirstein and interim CFO Lars Nilsson will comment on the Company s interim report. At the telephone conference, Chairman of the Board Ulf Lundahl will also participate and reply to questions regarding the rights issue. A live audiocast as well as a presentation will be available at The interim report, Eltel s annual report 2016, notice to AGM and other information related to the rights issue is available at Eltel s webpage Financial and legal advisors Danske Bank A/S, Danmark, Sverige Filial, OP Corporate Bank plc and Skandinaviska Enskilda Banken AB are financial advisors and Hannes Snellman Attorneys is legal advisor to Eltel in connection with the rights issue.

6 For further information, please contact: Ingela Ulfves, VP - IR and Group Communications tel , ingela.ulfves@eltelnetworks.com This information is information that Eltel AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at CET on 2 May Eltel in Brief Eltel is a leading Northern European provider of technical services for critical infrastructure networks Infranets in the segments of Power, Communication and Other, with operations throughout the Nordics, Poland and Germany. Eltel provides a broad and integrated range of services, spanning from maintenance and upgrade services to project deliveries. Eltel has a diverse contract portfolio and a loyal and growing customer base of large network owners. In 2016, Eltel net sales amounted to EUR 1.4 billion. The current number of employees is approximately 9,500. Since February 2015, Eltel AB is listed on Nasdaq Stockholm. Important notice The information in this press release does not contain or constitute an offer to acquire, subscribe or otherwise trade in shares, subscription rights or other securities in Eltel. Any invitation to the persons concerned to subscribe for shares in Eltel will only be made through the prospectus which Eltel expects to publish around 7 June This press release may not be released, published or distributed, directly or indirectly, in or into Australia, Japan, Canada, the United States or any other jurisdiction where participation would require additional prospectuses, registration or measures besides those required by Swedish law. Nor may this press release be distributed in or into such countries or any other country or jurisdiction in which distribution requires such measures or otherwise would be in conflict with applicable regulations. Any failure to comply with the restrictions described may result in a violation of applicable securities regulations. The subscription rights, paid subscribed shares and shares in Eltel have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act ) or the securities legislation of any state or other jurisdiction in the United States and no subscription rights, paid subscribed shares or shares may be offered, subscribed for, exercised, pledged, sold, resold, granted, delivered or otherwise transferred, directly or indirectly, in or into the United States except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements under the Securities Act and in compliance with the securities legislation in the relevant state or any other jurisdiction of the United States. There will be no public offering of such securities in the United States. The securities referred to herein have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission or other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of the rights issue or the accuracy or adequacy of this announcement. Any representation to the contrary is a criminal offence in the United States. This press release contains certain forward-looking information that reflects Eltel s present view of future events as well as financial and operational development. Words such as intend, assess, expect, may, plan, believe, estimate and other expressions entailing indications or predictions of future development or trends, not based on historical facts, constitute forward-looking information. Forward-looking information is inherently associated with both known and unknown risks and uncertainties as it depends on future events and circumstances. Forward-looking information is not a guarantee of future results or development and actual outcomes may differ materially from the statements set forth in the forward-looking information.