Cencorp Oyj Stock Exchange Release 21 August 2012 at 09.25 Finnish time
CENCORP AND AVERY DENNISON CORPORATION HAVE SIGNED A MEMORANDUM OF UNDERSTANDING ON CONDUCTIVE BACKSHEET BUSINESS ACQUISITION, – CENCORP DECREASES ITS EBITDA ESTIMATE AND ANNOUCES NO LONGER FINANCIAL GUIDANCE, – CENCORP ANNOUCED LONG-TERM OBJECTIVES FOR MANAGING DIRECTOR, - CENCORP ISSUES A CONVERTIBLE BOND AND COMMENCES PREPARING A SHARE ISSUE
1. CENCORP AND AVERY DENNISON CORPORATION HAVE SIGNED A MEMORANDUM OF UNDERSTANDING ON CONDUCTIVE BACKSHEET BUSINESS ACQUISITION
Cencorp Corporation (”Cencorp”) and Avery Dennison Corporation (”Avery Dennison”), a US based company, have signed a Memorandum of Understanding (“MOU”) according to which Cencorp acquires Avery Dennison’s Conductive Back Sheet business (“CBS”) and related intellectual property rights. The MOU is non-binding. The purchase price stated in the MOU is USD 500,000 cash and 6,711,409 Cencorp shares at the time of the acquisition, where the number of shares will be adjusted for the difference in the EU/Dollar exchange rate at the time of issuance to the EU/Dollar exchange rate on August 7, 2012.
Avery Dennison agrees not to sell its Cencorp shares received as purchase price payment within 12 months from the effective date of the definitive purchase agreement. It is also expected that Cencorp will separately enter into agreements with the key persons that were involved with the business being acquired to join Cencorp team.
“As stated in Cencorp’s new strategy published in the spring 2012 one of the company’s core businesses is to develop Cleantech applications in cooperation with the customers. The acquisition, in accordance with the MOU, will provide Cencorp with a strong market position as manufacturer of conductor technology used in new generation photovoltaic (PV) modules”, says Iikka Savisalo, Cencorp’s CEO.
Since the spring 2011 Cencorp has developed CBS technology used in efficient new generation PV modules together with Avery Dennison. In January 2012 Cencorp announced that it has signed a significant frame agreement with Avery Dennison on delivering CBS technology to Avery Dennison. That time Cencorp announced that the value of the agreement may exceed EUR 50 million over the course of three years.
In the MOU published today Cencorp and Avery Dennison agree on transferring ownership of certain of the intellectual property rights and technology platform to Cencorp, and Avery Dennison getting a shareholding at Cencorp.
The final terms of the transaction are still under negotiations and realization of the acquisition is not yet certain. Additionally, the transaction is still subject to several issues such as due diligence and especially to Cencorp’s short and long term financing required to run the business being acquired. Thus, Cencorp is not yet able to estimate possible realization, effective date, acquisition’s influence in Cencorp nor risks relating to the transaction. Cencorp will announce further information as soon as the negotiations have been finished, which is expected to take place before the end of 2012.
2. CENCORP DECREASES ITS EBITDA ESTIMATE AND ANNOUCES NO LONGER FINANCIAL GUIDANCE
Cencorp has emphasized in its strategy that the company’s growth drivers will be new Cleantech solutions and especially applications for new energies. Provided the transaction will be realized it will change the company’s cost structure and targets for the near future. As Cencorp is now in a strong breaking point which is essential for following the new strategy, Cencorp cannot assess how the Avery Dennison transaction and change in company’s business focus will impact the company, due to which Cencorp has decided it will not announce financial guidance for the time being.
Flexible circuit deliveries pursuant to the frame agreement signed with Avery Dennison in January will be delayed due to the aforesaid transaction with Avery Dennison and the targets set for the financial year 2012 will not be reached. Decrease in the the EBITDA results partly from Cencorp redirecting its business focus and human resources into new targets pursuant to the company’s new strategy and into Cleantech applications development. Cencorp estimates that this year’s net sales of its former continuing businesses i.e. Laser and Automation Applications segment and Special Components segment will be smaller than EUR 21.6 million as announced earlier, provided that no essential change takes place in the operating environment or in the current economic outlook. However, increased costs will turn EBITDA negative in the financial year 2012.
Cencorp’s previous estimate was as follows: “The company estimates the full-year net sales of its continuing operations to be smaller than last year's corresponding sales that were EUR 21.6 million and the full-year EBITDA is estimated to be positive provided that no essential change takes place in the operating environment or in the current economic outlook.”
Cencorp’s future outlook will be highly dependent on the company’s ability to reach the targeted market position in the global photovoltaic module market. However, the company’s goal is to to reach strong market position as provider of locally produced high-quality photovoltaic modules.
3. LONG-TERM OBJECTIVES FOR MANAGING DIRECTOR
Cencorp’s Board of Directors has published long-term financial and other objectives, relating to the company’s new strategy, for Managing Director as follows:
In January 2012 Cencorp announced it had signed a remarkable frame agreement on delivering flexible circuits for renewable energy solutions for Avery Dennison. At that time the company estimated that the value of the frame agreement may exceed EUR 50 million in the course of three years. Based on this evaluation, company’s new strategy published in the spring 2012 and on the fact that the Avery Dennison transaction, if realized, enables Cencorp providing its customers with wider and multiple times of value offering related to the photovoltaic modules and other renewable energy solutions, the Board of Directors has set the following long-term objectives for the company’s Managing Director:
- Thorough but fast transition from a company manufacturing only production automation applications and special components into a company that develops and provides Cleantech applications, with a strong market position as provider of high-quality photovoltaic modules, with automation and laser technology, that are locally produced in various market areas.
- Cencorp’s goal is to increase its shareholder value with growth and profitability. Cencorp aims for growth in Cleantech business where the company has good opportunity to achieve a strong global position and grow fast.
- Laser and Automation Applications segment has its main focus on the life cycle management of systems and equipments with clear growth expectations for service business.
- In long-term Cencorp is aiming for remarkable growth in its net sales with net sales target of more than EUR 200 million for 2016, provided that the company has required sufficient capital, the growth coming mainly from Cleantech operations and fuel cell applications.
The long term objectives set for the Managing Director involves also risks and the long term objective should not be considered as the company’s financial guidance. Even though the objectives are based on market knowledge and technical surveys, the risk are significant and it is not certain if the Managing Director reaches all or part of the targets set for him.
4. CENCORP ISSUES A CONVERTIBLE BOND AND STARTS PREPARING A SHARE ISSUE
In order to secure the financing required to strengthen Cencorp’s capital structure the company issues convertible bond with the maximum amount of EUR 1,500,000 and simultaneously issues stock options with maximum amount of 21,428,571 free of charge. One (1) stock option is issued per each subscribed loan capital amount of EUR 0.07. The convertible bond is issued in deviation from the shareholders' pre-emptive subscription rights to those current Cencorp shareholders who directly on the record day of 31 June 2012 own at least one million (1,000,000) Cencorp’s shares or who otherwise are approved by the Board of Directors. Convertible bond can also be subscribed against a loan receivable from Cencorp, undisbuted on the record day, by converting the loan’s capital or interest into convertible bond according to the terms of the convertible bond. Loan period starts as of the payment of a loan to the company and ends on 7 September 2014 when the convertible bond will be due in its entirety pursuant to the loan terms. The shareholders'
pre-emptive subscription rights are being deviated from as the stock options are issued to secure financing required to strengthen Cencorp’s capital structure cost effectively and considering the size of the financing. Thus, there is, from the company’s point of view, a weighty financial reason to issue the stock options.
An annual interest of eight (8) % will be paid on the convertible bond from the withdrawal of the bond. A holder of the bond has a right to subscribe an amount of shares, equivalent to the bondholders shareholding percentage at the time, in Cencorp’s possible future share issues with subscription period ending latest by 7 September 2014, at a subscription price that is 10 % lower than the subscription price in the share issue in question.
The holder of the bond is entitled to converse the promissory note into the shares of the Company. One (1) stock option pursuant to the promissory note entitles the bond holder to subscribe for one (1) new share of the company. Based on the subscriptions made pursuant to the stock options, the Company shall issue in maximum of 21.428.571 new company shares. The Company has one (1) class of shares.
The terms of the convertible bond are, without the technical appendices, attached to this release as Attachment 1.
Cencorp also starts preparing a share issue. The target of the issue is to collect capital to realize the photovoltaic business plan. The share issue is expected to be carried out by the end of this year. Cencorp will inform separately on the terms and schedule of the share issue.
Realization of a convertible bond and a share issue involve risks. It is not secured that the company will be able to collect EUR 1.5 million with the convertible bond to strengthen its capital structure or with the share issue to finance the establishing of photovoltaic module business plan.
In Mikkeli, 21 August 2012
CENCORP OYJ
BOARD OF DIRECTORS
For more information, please contact:
Cencorp: Iikka Savisalo, President and CEO, tel. +358 40 521 6082, iikka.savisalo@savcor.com
Distribution:
NASDAQ OMX, Helsinki
Main media
www.cencorp.com
Cencorp Corporation is a leading provider of industrial automation solutions. The equipment included in the product portfolio designed for depaneling, odd-form assembly, testing and laser materials processing substantially improves the efficiency of customers' production. The product range also includes EMI shielding solutions, flexible circuits and RFID antennas. Cencorp's customers are automotive electronics manufacturers andmanufacturers operating in telecommunications, industrial automation and EMS.Cencorp's head office is located in Mikkeli, Finland. The company is part of the Finnish Savcor Group.
Attachment 1.
The Board of Directors of Cencorp Corporation (hereinafter the ”Company”) has, based on the authorization granted to it on January 30, 2012, resolved to take loan from its certain current shareholders (Convertible Bond I/2012) so that the Company issues stock options to the lenders of the loan so that the lenders shall have the right to subscribe for the Company’s shares based on the respective stock options and that the lenders shall have the right to pay the subscription price of the shares by setting it off against the loan receivable referred to in this document (hereinafter ”Convertible Bond”) in accordance with the following terms:
I TERMS OF THE CONVERTIBLE BOND
- Principal of the Convertible Bond
The total principal amount of the Convertible Bond is one million five hundred thousand euro (EUR 1,500,000.00) (the “Convertible Bond”).
- Subscription Right for the Convertible Bond and Stock Options
The Company shall take the loan referred to in this Convertible Bond and shall issue simultaneously against the loan with maximum amount of 21.428.571 stock options free of charge. The number of stock options to be issued shall be one (1) stock option against each subscribed loan capital amount of 0,07 euro.
The Convertible Bond is issued for subscription, in deviation from the shareholders’ pre-emptive subscription rights, to such shareholders who on July 31, 2102 (hereinafter the “Record Date of the Convertible Bond”) own directly at least one million (1.000.000) Company shares or to other parties separately approved by the Board of Directors. The Convertible Bond can also be subscribed against the undisbuted loan receivable from the Company as per the Record Date of the Convertible Bond by converting the loan capital or interest receivable into the Convertible Bond in accordance with the terms of this Convertible Bond.
The minimum subscription of the Convertible Bond shall be ten thousand (10.000,00) euro.
The shareholders’ pre-emptive subscription rights are deviated from as the stock options are issued to secure financing required to strengthen the capital structure of the Company cost effectively and considering the size of the financing. Thus, there is from the Company’s point of view a weighty financial reason to issue the stock options.
- Subscription Period and Venue for Subscription of the Convertible Bond
Such shareholders who are interested in to subscribe for the Convertible Bond and who meet the conditions mentioned above in Section I.2 on the Record Date of the Convertible Bond are asked to sign and submit the subscription form attached as Appendix 1 to this Convertible Bond by August 31, 2012 to the Company in accordance with the instructions included in the form. The subscription shall take place when the Company receives the above mentioned form by 6:00 p.m. on September 7, 2012.
In the event the Convdertible Bond and the related stock options shall be over subscribed, the Board of Directors of the Company shall resolve on the allocation between the subscribers so that for each subscriber a minimum of a percentual share of the Convertible Bond and related stock options shall be allocated corresponding to the share ownership amount of the subscriber on the Record Date of the Convertible Bond.
- Loan Period of the Convertible Bond and Repayment
The Convertible Bond shall be paid to the Company’s bank account Nordea Bank Finland Plc IBAN: FI21 2185 1800 1271 11, BIC: NDEAFIHH at the latest on September 7, 2012. The loan period shall commence on the payment date and expire on September 7, 2014 (hereinafter the “Maturity Date”) on which date the Convertible Bond shall expire to be repayable in its entirety in accordance with these terms of the loan.
The Company shall be entitled pursuant to the resolution of the Board of Directors of the Company to repay the Convertible Loan or a part of it to the holder of the Promissory Note signed in accordance with Section I.6 below also any time prior to the Maturity Date.
The Company shall inform the holder of the Promissory Note on the repayment 30 (thirty) days prior to the contemplated repayment. The holder of the Promissory Note shall then have the possibility to inform the Board of Directors of the Company within that 30 (thirty) days time period whether the holder uses his/her/its right to subscribe for the Company’s shares in accordance with Section II prior to the repayment provided that the subscription shall take place within the subscription period of the shares defined under Section II.2.
The repayment of the Convertible Bond shall take place against the assignment of the Promissory Note and in the event of a partly repayment, against a note to be entered to the Promissory Note.
- Interest of the Convertible Bond
As of the date of withdrawal an annual interest of eight (8) percent shall be paid to the capital of the Convertible Bond. The interest shall be paid annually afterwards on June 30.
The last interest period shall end on the date on which the Convertible Bond shall be repaid in its entirety. The interest shall be calculated based on the real interest days divided with 365 days.
Upon the due date of the Convertible Bond on September 7, 2014, all the unpaid interests from the loan period shall also due fall on September 7, 2014.
In the event the date of interest payment is not a banking day, the interest shall be paid on the following banking day.
- Promissory Note of the Convertible Bond
The Company shall issue to the subscriber of the Convertible Bond (hereinafter “Promissory Note Holder”) a promissory note referred to in the Appendix 2, which simultaneously serves as the stock option certificate of the stock options referred to in Section I.2. The Promissory Noted shall not, however, be issued prior to the date when the stock options related to the Convertible Bond have been registered with the Companies Register.
The Company commits to notify the Companies Register on the issue of the stock options related to the Convertible Bond within one month from the date on which the Company has resolved on the issue of the stock options related to the Convertible Bond.
7. Transferability of the Promissory Note and Stock Options
The Promissory Note and related stock options and other rights and responsibilities cannot be transferred without consent of the Company. The stock options related to the Convertible Bond are not transferable unless the loan based on the Promissory Note is also transferred simultaneously.
- Right to Participate in the Forthcoming Share Issues by Reduced Subscription Price
A Promissory Note Holder shall be entitled to participate, by at least the amount corresponding the percentual shareholding of the Company’s shares at that time, in potential future share issues arranged by the Company in which the subscription period shall terminate at the latest on September 7, 2014 by subscribing the shares at the subscription price that is 10 per cent lower compared to the subscription price offered in the respective share issues.
- Other
For the delivery of the notifications based on this Convertible Bond, the Promissory Note Holder shall inform the Company his/her/its postal address as from time to time.
The Promissory Note Holder shall, as per request of the Company, submit to the Company all necessary information with regard to the Promissory Note and its administration.
II TERMS FOR SHARE SUBSCRIPTION AND CONVERSION RIGHT
- Conversion Right and Conversion Ratio
The Promissory Note Holder is entitled to convert the Promissory Note into the shares of the Company in accordance with the terms described below. One (1) stock option pursuant to the Promissory Note entitles the Promissory Note Holder to subscribe for one (1) new share of the Company. Based on the subscriptions made pursuant to the stock options the Company shall issue a maximum amount of 21.428.571 new Company shares. The Company has one (1) class of shares.
The subscription price of one (1) new share of the Company shall be 0,07 euro per share.
Upon using the conversion right a portion corresponding to the subscription price of a share shall be set off against the unpaid capital of the Convertible Bond and, subject to the consideration of the Board of Directors, against the unpaid interest of the Convertible Bond. The subscription price of the shares shall be entered in entirety into the reserve for invested unrestricted equity.
- Conversion Period and Process Regarding Use of the Conversion Right
The Promissory Note Holder shall have the right to converse the Promissory Note into the Company’s shares during the conversion period (subscription period of the shares) which commences on January 1, 2013 and which terminates on September 7, 2014.
The conversion of the Promissory Note into the shares shall take place pursuant to the subscription rules in accordance with the Finnish Companies Act. The Promissory Note Holder shall present to the Board of Directors of the Company the written conversion request as attached in the Appendix 3 which shall constitute the subscription of new shares. The Convertible Bond may be converted into shares only in its entirety.
When the Board of Directors has received the conversion request and the Promissory Note Holder has assigned the Promissory Note to the Company, the Board of Directors shall approve the subscription of new shares in accordance with the Convertible Bond. Within 30 (thirty) days from the presentation of the conversion request the Company shall file the Companies Register notification with regard to entering the new shares to the Companies Register. In addition, the Company commits to take care that the new shares entered into the Companies Register shall be entered into public trading within 30 (thirty) days from entering them to the Companies Register.
- Shareholder Rights
The new shares of the Company, which have been subscribed for by using the conversion right of the Convertible Bond, shall have the similar rights with the Company’s shares issued previously from the moment the new shares have been entered into the Companies Register.
- The Rights of the Promissory Note Holder in Certain Special Cases
If the Company during the loan period issues new shares in the share issue against the payment or issues new stock options or other special rights entitling to the shares referred to in Chapter 10 of the Finnish Companies Act so that the shareholders shall have the pre-emptive subscription right, the Promissory Note Holder shall have the same or equal right as a shareholder. Equality is reached by the mean resolved by the Board of Directors of the Company by giving to the Promissory Note Holder the same priority for the subscription of share and/or convertible bond and/or stock option, and/or the exchange ratio of the Convertible Bond will be adjusted and/or the Promissory Note Holder is given right to convert the Promissory Note to the shares during the other time period than referred to in Section II.2 or by combining manners of proceeding referred to above.
If the Company during the loan period issues new shares free of charge, the exchange ratio of the Convertible Bond shall be adjusted so that the percentual share of the shares to be converted by the Convertible Bond compared to all shares shall remain unaltered except for the part that the new number of shares to be converted by the Promissory Note would be a fraction. In the event that the above mentioned division would not be even, the highest round figure that will fulfill the division to the whole shares will be applied.
If the Company during the loan period resolves to acquire or redeem its own shares or stock options or other special rights entitling to the shares pursuant to the Chapter 10 of the Finnish Companies Act through an offer directed to all shareholders or holders of the above mentioned rights, an equal offer shall be made to the holder of the Promissory Note. The redemption or acquisition of the shares and stock options or other special rights entitling to the shares referred to in Chapter 10 of the Finnish Companies Act shall thus be directed to the conversion rights of the Promissory Note pursuant to the resolution of the Board of Directors. Otherwise acquisition or redemption of own shares and stock options and other special rights entitling to the shares referred to under Chapter 10 of the Finnish Companies Act shall not require any actions from the Company with regard to the Promissory Note.
If the Company during the loan period distributes its funds in other means than what has been referred to in the previous section, the Promissory Note Holder shall not be entitled to participate in the distribution of the funds and the distribution of the funds shall not require any actions from the Company with regard to the Promissory Note.
If the Company is placed into liquidation during the loan period, the Convertible Bond shall fall due for payment at the moment when placing the liquidation has been entered into the Companies Register.
If the Company during the loan period resolves on the merger or division, the Promissory Note Holders shall be reserved a right, during the time period set by the Board of Directors of the Company prior to resolution on the merger or division, to convert the Promissory Note into shares. Alternatively the Promissory Note Holders shall be given the right to subscribe for the convertible bond issued by similar terms by the receiving company so that the subscription can be made on equal rights compared to the shares of the receiving company which have been issued to the shareholders pursuant to what has been resolved on the matter in the merger plan or division plan. After the above-mentioned time period reserved for the use of the conversion right or after the end of the subscription period of the new convertible bond, no conversion right shall exist anymore.
If a redemption right or redemption obligation of the minority shareholders referred to under Chapter 18 of the Finnish Companies Act arises, after Company has received notification on the origin of the redemption right or redemption obligation, the right to convert the Promissory Note into shares during the time period resolved by the Board of Directors shall without undue delay be reserved for the Promissory Note Holders. After the above-mentioned time period reserved for the use of the conversion right, no conversion right shall exist anymore.
- Disputes
Disputes arising out of this Convertible Bond shall be settled by arbitration consisting of one arbitrator in accordance with the Rules of the Arbitration Institute of the Finland Chamber of Commerce. In the event the parties to the dispute cannot agree on the arbitrator, the Finland Chamber of Commerce shall appoint the arbitrator. The place of the arbitration shall be Helsinki, Finland.
- Other Issues
The Board of Directors shall be entitled to resolve on any other matter related to the Convertible Bond and the use of the conversion right. Notifications to the Promissory Note Holders shall be submitted by letters to the postal addresses notified to the Company by each of the Promissory Note Holder. A notification is deemed to have been delivered on the working day following the date of sending the notification.
III OTHER MATTERS
- Other Issues
These terms and conditions have been drafted in Finnish and in English. In the case of any discrepancy between the Finnish and English terms and conditions, the Finnish terms and conditions shall prevail.