Probi to acquire Nutraceutix, strongly expanding its North American presence and capabilities, and announces rights issue of ca SEK 600 million

The information in this press release is not intended for distribution,
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distribution of this press release may be unlawful.
Probi AB (publ) (“Probi”) today announces that its US subsidiary Probi USA, Inc.
has signed an asset purchase agreement under which Probi will acquire the
operations of the US probiotic company TNTGamble, Inc., doing business as
Nutraceutix (“Nutraceutix”), for a preliminary cash purchase price of USD 105
million (corresponding to SEK 873 million[1]) on a cash and debt free basis (the
“Acquisition”). With this Acquisition, Probi will increase its market share in
North America – the largest and fastest growing probiotic dietary supplements
market in the world – more than three-fold, add important new technologies,
manufacturing capabilities and customers, and create a strong platform for
further acquisitions. The cash purchase price will be financed through available
cash reserves, a credit facility and a bridge facility. The bridge facility will
be repaid by proceeds from a proposed new share issue with preferential rights
for existing shareholders of approximately SEK 600 million (the “Rights Issue”).

TRANSACTION HIGHLIGHTS

  · Probi to acquire Nutraceutix for a preliminary cash purchase price of USD
105 million (corresponding to SEK 873 million[1]) on a cash and debt free basis.
  · A transforming transaction that makes Probi a top tier integrated probiotics
player[2] with dramatically enhanced scale, geographic footprint, capability
base and value chain presence:
o    Results in preliminary combined 2015 net sales of approximately SEK 506
million[3], more than double Probi’s current size;
o    More than triples Probi’s net sales in the large, fast-growing North
American probiotics market to approximately SEK 418 million[3] based on
preliminary combined 2015 figures;
o    Combines proven, proprietary and patented delivery technology from
Nutraceutix with Probi’s well documented strain portfolio, enabling novel,
differentiated probiotics products;
o    Secures access to established, GMP-compliant and versatile manufacturing
capabilities with important strategic and financial benefits;
o    Adds an attractive and highly complementary base of approximately 200 US
customers and partners;
o    Propels Probi into the top tier of integrated players[4] in the global
probiotics sector and creates a platform for further acquisitions.
  · The cash purchase price will be financed through available cash reserves, a
credit facility of approximately USD 35 million and a bridge facility of
approximately USD 63 million. Handelsbanken has committed to provide the credit
facility and the bridge facility. The bridge facility will be repaid by proceeds
from the Rights Issue of approximately SEK 600 million. After completion of the
Acquisition and the Rights Issue and the repayment of the bridge facility, Probi
expects to have a leverage ratio (Net Debt/EBITDA) of approximately 1x on a
preliminary combined basis.
  · Symrise AG and Fjärde AP-fonden, controlling approximately 51.4 per cent and
5.9 per cent respectively of the outstanding share capital and votes in Probi,
have committed to, subject to customary conditions, vote in favour of the Rights
Issue at the Extraordinary General Meeting on June 29, 2016 (the “EGM”), and
subscribe for their pro rata shares in the Rights Issue. In addition, Swedbank
Robur Fonder and Handelsbanken Fonder, together controlling approximately 11.8
per cent of the outstanding share capital and votes in Probi, have indicated
their intention to vote in favour of the Rights Issue at the EGM and to
subscribe for their pro rata shares in the Rights Issue. Consequently, in
aggregate, commitments and indications of intent to vote in favour of the Rights
Issue at the EGM and to subscribe for pro rata shares in the Rights Issue have
been obtained from current Probi shareholders controlling approximately 69.1 per
cent of the outstanding share capital and votes in Probi.[5]
  · The Acquisition is expected to close within four months and the Rights Issue
is expected to be completed during the second half of 2016.

Statement by Peter Nählstedt, CEO, Probi

”I am very excited about this transforming acquisition. Nutraceutix is an
excellent match for us. Probi and Nutraceutix have complementary business
models, limited customer overlap and share strong entrepreneurial values. The
acquision creates a strong platform to continue the growth story in the US and
in the global market.”

Statement by Tim Gamble, CEO, Nutraceutix

“I cannot imagine a better combination of two well-respected organizations. With
highly complementary expertise, assets, product offerings, and a shared
strategic focus on quality-conscious growth, I envision an outstanding future
for the new entity. The transaction will result in the creation of a global
leader in the probiotics and probiotic dietary supplement space, and will open
up a wealth of new opportunities for the company, its employees and its
customers.”

BRIEF DESCRIPTION OF NUTRACEUTIX

Nutraceutix is a leading, highly regarded and customer service focused US
manufacturer and supplier of probiotics with net sales of approximately USD 34
million (SEK 290 million[6],[7]) and EBITDA of approximately USD 8 million (SEK
70 million[6]) in 2015. Over recent years the business has shown double digit
percentage sales growth.

Nutraceutix was established in 1983 and is today among the top five probiotic
producers in North America. The company was awarded the North American Probiotic
Company of the Year Award in 2015 by Frost and Sullivan. Nutraceutix has its
headquarters and fermentation plant in Redmond, near Seattle in the State of
Washington, and operates a packaging facility in Lafayette, near Denver in
Colorado. Both manufacturing sites are audited and registered as GMP-compliant.
The company produces around 340 million tablets and 4.3 million bottles of
products a year for its customers and in 2015 had 460 active Stock Keeping Units
(SKUs) in production. Nutraceutix has more than 30 different industrialized
probiotic strains.

Nutraceutix manufactures its products as bottled products (finished products; 57
per cent of sales in 2014), bulk and blended powder (20 per cent and seven per
cent respectively) and tablets and capsules (16 per cent). Nutraceutix’
proprietary delivery technology BIO-tract® is a key differentiator and loyalty
creating product feature and is patent protected in more than 30 countries.
Nutraceutix also has a collection of expertise and patented manufacturing
processes known as LiveBac®-processing that enables the expert manufacture of
tablets containing sensitive ingredients like probiotics.

Nutraceutix’ customer base is composed of US and global brand distribution
companies, retailers and direct-sellers as well as other contract manufacturers,
mainly in the dietary supplement area. As of 2015, Nutraceutix maintains 173
active customer relationships (up from 141 customer relationships in 2013). A
strong portfolio of e-commerce based clients has contributed to significant
growth in recent years. The company employs 145 people including an experienced
sales and marketing team of five individuals.

TRANSACTION RATIONALE

From a strong base in research and development, Probi has grown its well
documented and differentiated product platforms to become a significant player
in the global probiotics market. Probi’s objective is to generate growth that
exceeds the market average. To achieve this, Probi pursues the following
strategic priorities: 1) secure and enhance the existing product offering and
customer relationships, 2) enter new markets with focus on the fast-growing
markets in Asia and North and South America, 3) launch new products and
platforms and 4) enter new product areas and indications.

The Acquisition of Nutraceutix is highly aligned with these strategic priorities
as it will strongly enhance Probi’s presence in the attractive North American
probiotics market, add important new technologies, manufacturing capabilities
and customers, and creates a platform for further acquisitions. The key
attractions of the Acquisition are:

Strengthened presence in North America

  · The North American market is the largest and fastest growing probiotic
dietary supplements market in the world with strong double digit growth of 13
per cent in 2015 (vs. approximately nine per cent growth for the global
probiotics market)[8]
  · By establishing a direct presence in North America, customer relationships
will be developed further. Nutraceutix more than triples Probi’s net sales in
North America to approximately SEK 418 million[9] in preliminary combined 2015
net sales
  · Nutraceutix is a unique opportunity to acquire a fully integrated and
profitable probiotic company with strong growth prospects in this market

Broadened capability to enhance the product offering

  · Nutraceutix brings the proprietaryBIO-tract® delivery technology that can be
applied to Probi’s patented, well documented strains to develop novel,
differentiated product offerings
  · Probi's patented and documented strains can strengthen the competitiveness
of Nutraceutix' offering
  · Probi gains access to production and packaging capacity and end-to-end
probiotic manufacturing knowledge

Strengthened position in the value chain

  · Nutraceutix offers a flexible and quality driven turn-key solution for
business-to-business customers in the probiotic area
  · Enables delivery of improved customer value
  · Significantly expanded, highly complementary US customer/partner base with
approximately 200 new customers and partners and dedicated sales team of five
people
  · Complementary positioning of product portfolios broadens coverage of
relevant price range and enhances offering for existing customers

Significant synergy opportunities

  · Complementary customer footprint and the broadened product portfolio creates
significant cross-selling and up-selling opportunities
  · Novel product offerings from combined strength and expertise in strains,
development and formulations
  · Cost reduction potential from increased utilization of production capacity
as well as purchasing and sourcing synergies

Platform for further probiotics acquisitions

  · The Acquisition establishes Probi as one of the top-tier integrated
probiotics players[10] and secures presence in the entire value chain, creating
a platform for future acquisitions to bring additional market presence, growth
opportunities and potential synergies
  · Priority areas for future potential acquisitions include building further
market presence in North America, APAC and Europe and adding new capabilities
and intellectual property

The combined company will retain the current Probi name and stock market listing
and continue to promote each company’s brand. The head office will remain in
Lund, Sweden. The main manufacturing location will be in the US while R&D and
global marketing will be based in Lund.

Highly complementary businesses are expected to facilitate integration, which
will be driven by an integration team with work stream leaders from both
organisations and entail relocation of key executive positions to the US. The
current Nutraceutix CEO is expected to remain employed as head of the North
American entity during a transition period.

Together, Probi and Nutraceutix will have approximately 180 employees. Probi’s
management estimates that no significant staff changes will be made as a result
of the Acquisition and that the bolstered operational and financial resources of
the combined company will enable further commercial investments and expansion.

Probi expects integration costs of approximately SEK 10 million to affect 2016.

FINANCIAL EFFECTS FOR PROBI

The Acquisition of Nutraceutix will add net sales of approximately SEK 290
million[11] and EBITDA of approximately SEK 70 million[11]. Sales growth for
Nutraceutix is expected to support Probi’s financial objective to generate
growth that exceeds the market average.

The preliminary combined net sales for Probi and Nutraceutix will be
approximately SEK 506 million[11] and the preliminary combined EBITDA will
amount to approximately SEK 139 million[11], representing a preliminary combined
EBITDA margin of 27 per cent.

The acquisition multiple (Enterprise Value/EBITDA 2015) is approximately 12.7x.

After completion of the Acquisition and the Rights Issue and the repayment of
the bridge facility, Probi expects to have outstanding bank loans of
approximately SEK 291 million[12] and a leverage ratio (Net debt/EBITDA) of
approximately 1x on a preliminary combined basis.

Key financials 2015[11]:

SEKm                     Probi      Nutraceutix    Preliminary
                                                       Combined
Net sales                  216              290             506
Gross profit               153               96             249
Gross margin               71%              33%             49%
EBITDA                      69               70             139
EBITDA margin              32%              24%             27%

The above figures are for illustrative purposes and do not include any impact
from synergies, integration costs, transaction costs and amortization of surplus
values resulting from the purchase price allocation. The presented financial
information has not been reviewed or audited by Probi’s auditors, should be
regarded as hypothetical and should not be seen as pro forma accounts.

TRANSACTION TERMS AND FINANCING

On June 6, 2016, Probi signed an asset purchase agreement under which Probi will
acquire the operations of Nutraceutix for a preliminary cash purchase price of
USD 105 million (SEK 873 million[12]) on a cash and debt free basis.

The Acquisition is subject to approval by the US competition authorities and
customary third party consents and confirmations that the Nutraceutix assets
have been assigned to Probi and is expected to close within four months.

The cash purchase price will be financed through available cash reserves, a
credit facility of approximately USD 35 million, and a bridge facility of
approximately USD 63 million. Handelsbanken has committed to provide the credit
facility and the bridge facility. The bridge facility will be repaid by proceeds
from the Rights Issue of approximately SEK 600 million.

RIGHTS ISSUE

The Board of Directors of Probi proposes that the EGM on June 29, 2016
authorises the Board of Directors, during the period until the next Annual
General Meeting, to issue new shares through the Rights Issue. The proceeds from
the Rights Issue shall amount to approximately SEK 600 million before issue
costs. The net proceeds from the Rights Issue will primarily be used to repay
the bridge facility and to further support future financial flexibility.

The Rights Issue is expected to be completed during the second half of 2016.

Commitments and indications of intent

The largest shareholder in Probi, Symrise AG controlling approximately 51.4 per
cent of the outstanding share capital and votes, and Fjärde AP-fonden
controlling approximately 5.9 per cent of the outstanding share capital and
votes, have entered into agreements with Probi under which they have committed
to, subject to customary conditions, vote in favour of the Rights Issue at the
EGM and subscribe for their pro rata shares in the Rights Issue.[13]

In addition, Swedbank Robur Fonder and Handelsbanken Fonder, together
controlling approximately 11.8 per cent of the outstanding share capital and
votes in Probi, have indicated their intention to vote in favour of the Rights
Issue at the EGM and to subscribe for their pro rata shares in the Rights
Issue.[13]

Consequently, in aggregate, commitments and indications of intent to vote in
favour of the Rights Issue at the EGM and to subscribe for pro rata shares in
the Rights Issue have been obtained from current Probi shareholders controlling
approximately 69.1 per cent of the outstanding share capital and votes in
Probi.[13]

ADVISORS

Handelsbanken Capital Markets is acting as financial advisor and Mannheimer
Swartling Advokatbyrå AB is acting as legal advisor to Probi in relation to the
Rights Issue. Hjalmarsson & Partners Corporate Finance AB is acting as financial
advisor and Wiggin and Dana LLP is acting as legal advisor to Probi in relation
to the Acquisition. Cascadia Capital is acting as financial advisor and Perkins
Coie LLP is acting as legal advisor to Nutraceutix in relation to the
Acquisition.

INVITATION TO TELECONFERENCE (ENGLISH):

Time: June 7 at 10:00 a.m.. Participants from Probi: Peter Nählstedt, CEO and
Niklas Brandt, CFO. The presentation will be made available at www.probi.se.

To participate in the teleconference, please use the following link and
telephone numbers:

http://cloud.magneetto.com/wonderland/2016_0607_Financial_Hearing_Probi/view

From Sweden: +46 8 566 426 90

From the UK: +44 203 008 98 04

From the US: +1 855 753 22 35

The information is such that Probi AB must disclose in accordance with the
Swedish Securities Market Act and/or the Financial Instruments Trading Act.

FOR FURTHER INFORMATION, CONTACT:

Peter Nählstedt, CEO, Probi, tel +46 46 286 89 23 or mobile +46 723 86 99 83, e
-mail: peter.nahlstedt@probi.se

Niklas Brandt, CFO, Probi, tel +46 46 286 89 26 or mobile +46 706 62 98 83, e
-mail: niklas.brandt@probi.se

ABOUT PROBI

Probi AB is a Swedish publicly traded bioengineering company that develops
effective and well-documented probiotics. Through its world-leading research,
Probi has created a strong product portfolio in the gastrointestinal health and
immune system niches. Probi’s products are available to consumers in more than
30 countries worldwide. Probi’s customers are leading food, health-product and
pharmaceutical companies in the Functional Food and Consumer Healthcare
segments. In 2015 Probi had sales of MSEK 216. The Probi share is listed on
Nasdaq Stockholm, Small Cap. Probi has about 4,000 shareholders. Read more at
www.probi.se.

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 Probi. Any invitation to the persons concerned to subscribe for
shares in Probi will only be made through the prospectus to be published in
connection with the Rights Issue.

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.

No subscription rights, paid subscribed shares or shares in Probi have 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, sold, resold,
delivered or otherwise transferred, directly or indirectly, in or into the
United States except under an available exemption from, or 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 is no intention to register any
securities referred to herein in the United States or to make a public offering
of the securities in the United States.

This press release contains certain forward-looking information that reflects
Probi’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.

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[1] Converted at an exchange rate of USD/SEK 8.3169, the exchange rate as of
June 3, 2016.

[2] Probi estimates that this group of companies also includes Chr. Hansen,
Lallemand and DuPont.

[3] Converted at an exchange rate of USD/SEK 8.4350, corresponding to the period
average of Jan 1 – Dec 31 2015. Nutraceutix and the preliminary combined figures
are for illustrative purposes. The presented financial information has not been
reviewed or audited by Probi’s auditors and should be regarded as hypothetical
and should not be seen as pro forma financial information. Nutraceutix figures
are preliminary and according to US GAAP.

[4] Probi estimates that this group of companies also includes Chr. Hansen,
Lallemand and DuPont.

[5] The stated holdings are calculated as of June 3, 2016.

[6] Converted at an exchange rate of USD/SEK 8.4350, corresponding to the period
average of Jan 1 – Dec 31 2015. Nutraceutix and the preliminary combined figures
are for illustrative purposes. The presented financial information has not been
reviewed or audited by Probi’s auditors and should be regarded as hypothetical
and should not be seen as pro forma financial information. Nutraceutix figures
are preliminary and according to US GAAP.

[7] In 2015 ca USD 7 million sales were lost due to a withdrawn product with one
customer. Over recent years the business has shown double digit percentage sales
growth.

[8] Euromonitor and Probi’s estimates.

[9] Converted at an exchange rate of USD/SEK 8.4350, corresponding to the period
average of Jan 1 – Dec 31 2015. Nutraceutix and the preliminary combined figures
are for illustrative purposes. The presented financial information has not been
reviewed or audited by Probi’s auditors and should be regarded as hypothetical
and should not be seen as pro forma financial information. Nutraceutix figures
are preliminary and according to US GAAP.

[10] Probi estimates that this group of companies also includes Chr. Hansen,
Lallemand and DuPont.

[11] Converted at an exchange rate of USD/SEK 8.4350, corresponding to the
period average of Jan 1 – Dec 31 2015. Nutraceutix and the preliminary combined
figures are for illustrative purposes. The presented financial information has
not been reviewed or audited by Probi’s auditors and should be regarded as
hypothetical and should not be seen as pro forma financial information.
Nutraceutix figures are preliminary and according to US GAAP.

[12] Converted at an exchange rate of USD/SEK 8.3169, the exchange rate as of
June 3, 2016.

[13] The stated holdings are calculated as of June 3, 2016.