Cloetta and LEAF to merge - new Cloetta becomes a Nordic confectionery leader

Cloetta and LEAF to merge - new Cloetta becomes a Nordic confectionery leader

This press release may not be published or distributed, in whole or in part,
directly or indirectly, in the United States of America, Canada, Japan, Hong
Kong or Australia 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 Swedish law. This press release is not a prospectus
but an announcement of a proposed merger between Cloetta AB (publ) (“Cloetta”)
and LEAF Holland B.V. (“LEAF”).  For further information, please see “Important
notice” in this press release. This press release has been published in Swedish
and English. In the event of any discrepancy in content between the language
versions, the Swedish version shall prevail.

The Swedish confectionery companies Cloetta (ticker: CLA B) and LEAF today
announced a merger of the two companies (the “Transaction”). The combined
company will take the well established name of Cloetta and become a leading
Swedish confectionery company with a strong base in the Nordic region as well as
in Italy and the Netherlands. The new Cloetta will manage a portfolio of iconic
brands and have pro forma net sales of SEK 5.7 billion and recurring EBITA of
SEK 666 million (note 1).

Highlights of the merger include the following:

  · Strong portfolio of iconic, local, long-established brands including
Kexchoklad, Läkerol, Polly, Ahlgrens bilar, Plopp, Malaco and Cloetta in
Scandinavia, Jenkki in Finland, Sperlari and Saila in Italy and Red Band and
Sportlife in the Netherlands.
  · Highly complementary combination of two strong companies, creating a full
range of confectionery products by combining Cloetta’s strength in the chocolate
segment with LEAF’s leading operations within the sugar confectionary segments.
  · Significant value creation potential through strengthened strategic position
and improved earnings potential. The merger is expected to be accretive to
earnings per share for the shareholders of Cloetta.
  · AB Malfors Promotor (“Malfors Promotor”), Cloetta’s largest shareholder, to
invest SEK 545 million in the Transaction, showing its strong commitment to the
new Cloetta.
  · The remainder of the rights issue connected to the Transaction will be fully
underwritten by Malfors Promotor, CVC and Nordic Capital (note 2) without the
charging of customary underwriting commission.
  · Significant synergy potential in excess of SEK 65 million annually to be
achieved within two years of closing of the Transaction. In addition, LEAF is
currently in the process of finalizing a supply chain restructuring program
expected to yield another SEK 45 million in annual cost savings as of Q1, 2012.
  · Leading position in an attractive industry with stable earnings growth and
strong cash flows.

Press conference - Today at 10.00 AM CET, at Summit Grev Turegatan 30 in
Stockholm.
Call-in: +46 8 506 269 00, pin code: 807681#

It is the intention that Bengt Baron will be CEO and that Lennart Bylock will be
Chairman of the Board of Directors (note 3) of new Cloetta. Bengt Baron is
currently CEO of LEAF and has extensive experience in developing consumer
brands. Lennart Bylock has a long track record of leadership in executive and
board roles. Both Bengt Baron and Lennart Bylock were previously members of
Cloetta Fazer’s Board of Directors.

“Cloetta was founded nearly 150 years ago and has since then been deeply rooted
in both our business values and local society. Our family, through Malfors
Promotor, always has and always will act as a long-term owner in Cloetta. The
proposed merger with LEAF should be seen from that perspective. Together with
LEAF, we now place ourselves in a bigger context and can together build an even
stronger company,” said Olof Svenfelt, Chairman of the Board of Directors of
Cloetta.

“This merger is a perfect match where we will unite iconic, local brands, from
complementary categories with very few overlaps. The new Cloetta will offer a
full range of strong brands, and a very strong route to market in the Nordic
countries as well as in Italy and in the Netherlands. In an industry where the
brand is nearly as important as the taste of the product, this transaction makes
both industrial and strategic sense,” said Bengt Baron, CEO of LEAF.

‘’We are delighted to see Cloetta and LEAF come together through this merger –
the industrial logic is so compelling and we are proud to have contributed to
the creation of a very strong and attractive brands company with exciting
prospects’’ said Hans Eckerström, Partner, Nordic Capital and Peter Törnquist,
Partner, CVC.

LEAF is currently owned by CVC and Nordic Capital and has been since 2005. Since
the acquisition by CVC and Nordic Capital, LEAF has focused on developing and
building brands and improving efficiency. Non-core businesses have also been
divested.

The Transaction, valuing LEAF at SEK 6.8 billion on a cash and debt-free basis,
will be financed through a fully underwritten rights issue, an issue in kind to
LEAF’s shareholders and bank financing. Upon completion of the transaction,
Cloetta shareholders will hold 42.4 per cent (note 4) and LEAF shareholders 57.6
per cent of Cloetta’s enlarged issued share capital. The Board of Directors of
Cloetta believes that the Transaction offers significant value creation
potential for Cloetta’s shareholders and the merger is expected to be accretive
to earnings per share. Shareholders representing 64 per cent of the share
capital and 81 per cent of the votes in Cloetta have stated their support for
the Transaction. Malfors Promotor, with a shareholding representing
approximately 52 per cent of the share capital and 74 per cent of the votes in
Cloetta, has undertaken to subscribe for its pro rata share in the rights issue
and will underwrite the remaining part of the rights issue together with CVC and
Nordic Capital (indirectly through LEAF Holding S.A.) (note 5). The underwriting
commitment by Malfors Promotor, CVC and Nordic Capital is done without the
charging of customary underwriting commission.

As a consequence of the Transaction, the Board of Directors of Cloetta has
decided to withdraw its proposal to the annual general meeting to pay out a
dividend in cash of SEK 0.75 per share plus a bonus dividend of SEK 0.50 per
share for the year 2010/2011.

The Transaction is conditional upon approval by the shareholders of Cloetta at
an extraordinary general meeting (the “EGM”) and approval by the relevant
competition authorities. The EGM is expected to be held on or around February
15, 2012 in order for the shareholders of Cloetta to approve the Transaction, to
resolve on the issue in kind and to authorize the Board of Directors of Cloetta
to resolve on the rights issue.

Transaction summary

Merger of Cloetta and LEAF

  · Cloetta, on the one hand, and the owners of LEAF, CVC and Nordic Capital, on
the other (acting through LEAF Holding S.A.), have today entered into a sale and
purchase agreement to create a confectionery leader in the Nordic region.
  · The Transaction will be effected through a cash payment of SEK 1,500 million
and the issue of C-shares (convertible into B-shares following the record date
for the Rights Issue) equivalent to 57.6 per cent of the enlarged issued share
capital of Cloetta including the Rights Issue to the owners of LEAF (the “Issue
in Kind”) (note 6). The new Cloetta will also assume LEAF’s existing net
interest-bearing debt, which amounted to SEK 2,888 million as of August 31,
2011.
  · The Transaction values LEAF at SEK 6.8 billion on a cash and debt free
(enterprise value) basis implying an EV/EBITDA multiple of 9.0x for the twelve
months ended August 31, 2011 (“2010/2011”) (note 7). The corresponding EV/EBITDA
multiple, pro forma for the synergies arising from the Transaction and the
additional cost savings from LEAF’s supply chain restructuring program of in
total SEK 110 million, is 7.8x.
  · Closing of the Transaction is subject to clearance from the relevant
competition authorities and shareholder approval at the EGM in Cloetta, to be
held on or around February 15, 2012.
  · As part of the Transaction, Malfors Promotor has agreed to convert part of
its holding of A-shares to B-shares so that its share of the total votes in
Cloetta, following the Transaction, will correspond to 39.9 per cent.

Financing of the Transaction

  · The Transaction will be financed through a rights issue of approximately SEK
1,050 million with preferential rights for existing holders of A-shares and
B-shares (the “Rights Issue”), fully underwritten by Malfors Promotor, CVC and
Nordic Capital (indirectly through LEAF Holding S.A.) and through a five year
credit facility of SEK 4.2 billion provided by Svenska Handelsbanken AB (publ).
The credit facility will be used for the refinancing of existing interest
bearing debt in LEAF, for the partial financing of the cash consideration in the
Transaction as well as for general corporate purposes of the combined company.
  · As a consequence of the Transaction, the Board of Directors of Cloetta has
decided to withdraw its proposal to the annual general meeting to pay out a
dividend in cash of SEK 0.75 per share plus a bonus dividend of SEK 0.50 per
share for the year 2010/2011.

Ownership structure

  · Upon completion of the Transaction and the ensuing Issue in Kind and Rights
Issue, Malfors Promotor will hold 22.0 per cent of the share capital and 39.9
per cent of the votes in Cloetta, CVC will hold 33.0 per cent of the share
capital and 25.4 per cent of the votes, Nordic Capital will hold 24.6 per cent
of the share capital and 18.9 per cent of the votes and the minority
shareholders in Cloetta will hold 20.4 per cent of the share capital and 15.7
per cent of the votes (note 8). CVC’s and Nordic Capital’s shares will be held
by newly established holding companies.

Shareholder support

  · Shareholders representing 64 per cent of the share capital and 81 per cent
of the votes in Cloetta, including the company’s largest shareholder Malfors
Promotor, have stated their support for the Transaction.

Exemption from mandatory bid

  · The Securities Council (Sw. Aktiemarknadsnämnden) has granted Malfors
Promotor and the shareholders of LEAF an exemption from the obligation to make a
mandatory bid pursuant to the Swedish Public Takeover Act (Sw. Lagen om
offentliga uppköpserbjudanden)(note 9).

Indicative timetable etc.

  · The following table sets out indicative key dates for the Transaction,
subject to customary competition clearance:
Jan 16   Notice to the EGM in Cloetta
Jan 24   Information material to the EGM including complete terms and conditions
of the Issue in Kind and the Rights Issue available
Feb 15   EGM in Cloetta
Feb 16   Expected closing of the Transaction; Issue in Kind of C-shares to LEAF
shareholders executed
Feb       The Board of Directors resolves on the Rights Issue, making use of the
EGM’s authorization
Mar       Subscription period for new shares in the Rights Issue

  · To ensure full alignment between shareholders and the management team of new
Cloetta, Malfors Promotor, CVC and Nordic Capital have agreed to use part of
their shares to implement a management incentive program in the form of call
options to enable the recruitment, motivation and retention of qualified
managers. By using shares from the three main shareholders, no costs for the
incentive programme will be incurred by the minority shareholders.

Important notice

This press release is not an offer for subscription for shares in Cloetta. A
prospectus relating to the Rights Issue referred to in this press release and
the subsequent listing of new shares at NASDAQ OMX Stockholm will be prepared
and filed with the Swedish Financial Supervisory Authority. After approval and
registration of the prospectus by the Swedish Financial Supervisory Authority,
the prospectus will be published and made available on, inter alia, Cloetta’s
website, subject to certain customary limitations arising from securities laws
and regulations.

The distribution of this press release in certain jurisdictions may be
restricted by law and persons into whose possession it or any part of it comes
should inform themselves about and observe any such restrictions. The
information in this press release shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of any securities
of the company in any jurisdiction.

This press release does not constitute or form part of an offer or solicitation
of an offer to purchase or subscribe for securities in the United States. The
securities referred to herein have not been and will not be registered under the
U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be
offered or sold in the United States absent registration under the Securities
Act or an exemption therefrom. No public offering of the securities referred to
herein is being made in the United States. Copies of this announcement are not
being, and may not be, distributed or sent, in whole or in part, directly or
indirectly, into the United States, Australia, Canada, Hong Kong or Japan.

Handelsbanken Capital Markets is acting for Cloetta and no one else in
connection with the Rights Issue and will not be responsible to anyone other
than the company for providing the protections afforded to their respective
clients or for providing advice in relation to the Rights Issue and/or any other
matter referred to in this announcement.

Handelsbanken Capital Markets accepts no responsibility whatsoever and makes no
representation or warranty, expressed or implied, for the contents of this
announcement, including its accuracy, completeness or verification or for any
other statement made or purported to be made by it, or on its behalf, in
connection with Cloetta and the new shares, or the Rights Issue, and nothing in
this announcement is, or shall be relied upon as, a promise or representation in
this respect, whether as to the past or future. Handelsbanken Capital Markets
accordingly disclaims to the fullest extent permitted by law all and any
responsibility and liability whether arising in tort, contract or otherwise
which they might otherwise have in respect of this announcement or any such
statement.

This press release has not been approved by any regulatory authority. This press
release is not a prospectus and investors should not subscribe for or purchase
any securities referred to in this press release except on the basis of
information provided in the prospectus to be published by Cloetta on its website
in due course.

European Economic Area

Cloetta has not authorized any offer to the public of shares or rights, as
applicable, in any Member State of the European Economic Area other than Sweden.
With respect to each Member State of the European Economic Area other than
Sweden and which has implemented the Prospectus Directive (each, a “Relevant
Member State”), no action has been undertaken to date to make an offer to the
public of shares or rights requiring a publication of a prospectus in any
Relevant Member State. As a result, the shares or rights, as applicable, may
only be offered in Relevant Member States:

(a) to legal entities which are authorized or regulated to operate in the
financial markets or, if not so authorized or regulated, whose corporate purpose
is solely to invest in securities;

(b) to any legal entity meeting two or more of the following criteria: (1) an
average of at least 250 employees during the last financial year; (2) a total
balance sheet of more than EUR 43 million and (3) an annual net turnover of more
than EUR 50 million, as shown in its last annual or consolidated accounts; or

(c) in any other circumstances, not requiring the company to publish a
prospectus as provided under Article 3(2) of the Prospectus Directive.

For the purposes hereof, the expression an “offer to the public of shares or
rights, as applicable” in any Relevant Member State means the communication in
any form and by any means of sufficient information on the terms of the offer
and the shares or rights, as applicable, to be offered so as to enable an
investor to decide to purchase any securities, as the same may be varied in that
Member State by any measure implementing the Prospectus Directive in that Member
State and the expression “Prospectus Directive” means Directive 2003/71/EC and
includes any relevant implementing measure in each Relevant Member State.

United Kingdom

This communication is directed only at (i) persons who are outside the United
Kingdom and (ii) persons who have professional experience in matters relating to
investments falling within Article 19(5) of the Financial Services and Markets
Act 2000 (Financial Promotion) Order 2005 (the “Order”) and (iii) to high net
worth entities falling within Article 49(2) (a) to (d) of the Order (all such
persons together being referred to as “relevant persons”). Any investment
activity to which this communication relates will only be available to and will
only be engaged with, relevant persons. Any person who is not a relevant person
should not act or rely on this document or any of its contents.

Forward-Looking Statements

This press release contains forward-looking statements that reflect management’s
current views with respect to certain future events and potential financial
performance. Although Cloetta believes that the expectations reflected in such
forward-looking statements are reasonable, no assurance can be given that such
expectations will prove to have been correct. Accordingly, results could differ
materially from those set out in the forward-looking statements as a result of
various factors. You are advised to read this announcement and, once available
the prospectus and the information incorporated by reference therein, in their
entirety for a further discussion of the factors that could affect the Cloetta’s
future performance and the industries in which it operates. In light of these
risks, uncertainties and assumptions, the events described in the
forward-looking statements in this announcement may not occur.

The information contained in this press release is such that Cloetta is required
to disclose pursuant to the Swedish Financial Instruments Trading Act and/or the
Swedish Securities Markets Act. The information was submitted for publication on
December 16, 2011 at 08:30 a.m. CET.

This is a summary of the full press release that is attached as a pdf document.

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Notes
1  Pro forma for the twelve months ended August 31, 2011 excluding non-recurring
items.
2  Funds advised by CVC Capital Partners (”CVC”) and Nordic Capital Fund V
Limited (“Nordic Capital”)
3  Lennart Bylock will resign from Cloetta’s Nomination Committee effective from
Cloetta’s annual general meeting on December 19, 2011.
4  Assuming that the rights issue is fully subscribed for and that the
underwriting commitments do not need to be utilized.
5  Subject to customary terms and conditions.
6  The number of C-shares to be issued is dependent on the final terms of the
rights issue.
7  Cloetta shares valued at SEK 30.20, the closing share price on NASDAQ OMX
Stockholm as of December 15, 2011. EV/EBITDA multiple is based on recurring
EBITDA of SEK 760 million.
8  Assuming that the Rights Issue is fully subscribed for and that the
underwriting commitments do not need to be utilized and that Malfors Promotor
converts part of its holding of A-shares to B-shares.
9  AMN 2011:33

 

Media inquiries, please contact:
Christina Björck, Head of Communications, Cloetta, +46 70 544 88 78
Jacob Broberg, Senior Vice President Corporate Communications, LEAF, +46 70 190
00 33