SpareBank 1 Sørøst-Norge

M&A Activity • Oct 26, 2023

SpareBank 1 SR-Bank ASA and SpareBank 1 Sørøst-Norge joins forces and forms SpareBank 1 Sør-Norge ASA

SpareBank 1 SR-Bank ASA and SpareBank 1 Sørøst-Norge joins forces and forms SpareBank 1 Sør-Norge ASA

NOT FOR DISTRIBUTION OR RELEASE, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO AUSTRALIA, CANADA, JAPAN, HONG KONG OR THE UNITED STATES, OR ANY OTHER JURISDICTION IN WHICH THE DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL. THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN OFFER FOR ANY OF THE SECURITIES MENTIONED IN THE ANNOUNCEMENT.

The board of directors of SpareBank 1 SR-Bank ASA ("SpareBank 1 SR-Bank") and SpareBank 1 Sørøst-Norge have today approved a plan for merging the banks (merger plan) and forming SpareBank 1 Sør-Norge ASA ("SpareBank 1 Sør-Norge").

The head office of SpareBank 1 Sør-Norge will be in Stavanger. Strong environments of competence and group functions are continued in both Sandefjord and in Stavanger. The new, powerful financial group will have deep savings bank roots, be on the team with its customers and be present in local communities. SpareBank 1 Sør-Norge will become Norway’s largest savings bank, with around 2,300 employees and will have around NOK 500 billion in total assets, and NOK 375 billion in loans to individuals and businesses.

The merger will result in increased competitiveness, enhanced presence, and the bank will be attractive to customers, employees and owners. As a savings bank and financial group, SpareBank 1 Sør-Norge will be well equipped to expand its overall lending capacity to Norwegian businesses, thanks to greater financial strength, expertise and local networks to support local businesses and workplaces.

The current CEO of SpareBank 1 SR-Bank, Benedicte Schilbred Fasmer, will take on the position as CEO of SpareBank 1 Sør-Norge, while the current CEO of SpareBank 1 Sørøst-Norge, Per Halvorsen, will take the position as Deputy CEO.

The current CFO of SpareBank 1 SR-Bank, Inge Reinertsen, is set to take on the role as CFO of the merged group. The current CFO of SpareBank 1 Sørøst-Norge, Roar Snippen will continue as CFO of SpareBank 1 Sørøst-Norge until the completion date, after which he will join the management team of the merged group within the department of finance and economics.

- We are now consolidating our position as Norway’s by far largest savings bank and the second largest bank in the country. The new bank is set to emerge as a strong competitor among Norwegian and Nordic commercial banks and will be a powerful player with head office outside the capital, says Benedicte Schilbred Fasmer, CEO of SpareBank 1 SR-Bank.

- We will strengthen local employment and contribute to many attractive jobs throughout southern Norway. We therefore invite all employees of both banks to join us going forward. The office locations complement each other geographically, and we will keep the current offices, says Per Halvorsen, CEO of SpareBank 1 Sørøst-Norway.

- Customers will receive an improved offering and gain access to strong centers of competence. Simultaneously, we will benefit from reduced cost of capital and improved economies of scale. Our close collaboration within the SpareBank 1 Alliance, alongside forceful product companies, joint development of new digital solutions and handling of regulatory requirements will play an instrumental role in our success, says Benedicte Schilbred Fasmer.

SpareBank 1 SR-Bank and SpareBank 1 Sørøst-Norge currently operates as solid financial groups offering a wide range of services to customers, physically and digitally, from the banks and their subsidiaries. SpareBank 1 SR-Bank and SpareBank 1 Sørøst-Norge are efficiently managed and profitable, with return on equity targets of 13% and 11% respectively.

- The new financial group will become a powerful player through its collaboration and ownership in the SpareBank 1 Alliance. SpareBank 1 Sør-Norge is committed to actively contribute to the alliance's growth in partnership with other SpareBank 1 banks. SpareBank 1 Sør-Norge will benefit from a stable ownership, with seven local savings bank foundations collectively owning more than 40% of the merged bank, says Finn Haugan, Chairman of the Board of SpareBank 1 Sørøst-Norge.

SpareBank 1 Sør-Norge will be a bank serving southern Norway, and will be a group consisting of a strong bank and strong subsidiaries, offering attractive work opportunities in the local communities. The office network of the banks and subsidiaries, totaling 65 offices, complement each other geographically. The group will collectively have leading positions in the fields of real estate and accounting services, with annual turnover of NOK 640 million and NOK 500 million, respectively.

SpareBank 1 Sør-Norge expects to realize capital synergies by applying SpareBank 1 SR-Bank's IRB model on SpareBank 1 Sørøst-Norge's portfolio, estimated at approx. NOK 2.5 billion. Annual synergies related to operations and funding are estimated at approx. NOK 150 million. The synergy realization will commence at the date of the merger and is expected to reach full effect after approx. 3 years. As a SIFI bank with A-IRB status, the bank is set to become a strong competitor and challenger in the large corporate customer segment. There is also a clear ambition to achieve income synergies over time. The merger is expected to be accretive to the owners of both banks.

- SpareBank 1 Sør-Norge will become a strong, profitable financial group driven by an enhanced and even more efficient access to capital. The merger will make us attractive to customers, employees and owners, says Dag Mejdell, Chairman of the Board of SpareBank 1 SR-Bank.

In order to strengthen core capital due to stricter regulatory requirements, and to be able to continue its current dividend policy while maintaining lending growth, SpareBank 1 SR-Bank will carry out a private placement and issue of new shares of around NOK 1 billion which is planned to be placed after the stock exchange's closing time today (the "Private Placement"). The Privat Placement is guaranteed to be fully subscribed. Further details about the Private Placement below.

Exchange ratio and merger consideration

The exchange ratio and merger consideration were determined after negotiations between the banks and are based on a process that includes a financial and limited legal due diligence of both banks. A review of the balance sheets of the banks as per 30 June 2023 including an assessment of surplus and deficit values of the assets' and liabilities' also been included in the basis for the consideration. Additionally, an updated review as of 30 September 2023, book and value-adjusted equity and expected normalized earnings were emphasized. The contemplated Private Placement of up to NOK 1 billion, which will be completed on market terms, has also been taken into consideration.

As of 30 June 2023, the book value of equity of SpareBank 1 SR-Bank was NOK 27,036 million and of SpareBank 1 Sørøst-Norge NOK 12,475 million (excluding hybrid capital). Based on review of the banks' balance sheets, with assessment of surplus and deficit values, extraordinary dividends, the Private Placement and profit analyses (including adjustments for non-recurring items), the banks agree on an exchange ratio of 68.88% to SpareBank 1 SR-Bank and 31.12% to SpareBank 1 Sørøst-Norge.

SpareBank 1 Sørøst-Norge has a capital structure consisting of both ownerless capital (grunnfondskapital) and equity certificate capital (eierandelskapital). As of 30 June 2023, the ownership ratio is 60.70% and a total of 140,098,561 equity certificates have been issued. SpareBank 1 SR-Bank has a capital structure consisting of share capital, and a total of 255,751,082 shares have been issued. In connection with the merger, the ownerless capital (grunnfondskapital) and equity capital in SpareBank 1 Sørøst-Norge will become share capital and other reserves in SpareBank 1 SR-Bank.

The consideration for the acquisition of operations in SpareBank 1 Sørøst-Norge will be provided in the form of (i) shares in the merged bank issued to the existing equity certificate holders in SpareBank 1 Sørøst-Norge and to the three savings bank foundations that have not received final settlement for the ownerless capital in connection with the previous mergers in SpareBank 1 Sørøst-Norge (SpareBank 1 Stiftelsen BV, Sparebankstiftelsen Telemark and Sparebankstiftelsen SpareBank 1 Modum) and (ii) a cash consideration to the owners of the equity certificates in SpareBank 1 Sørøst-Norge and the three said savings bank foundations, as settlement for the ownerless capital.

The settlement of the ownerless capital in SpareBank 1 Sørøst-Norge shall be distributed between the three savings bank foundations in accordance with the distribution formula set out in section 8-2 of the articles of association of SpareBank 1 Sørøst-Norge, i.e., 48.14% to SpareBank 1 Stiftelsen BV, 36.44% to Sparebankstiftelsen Telemark and 15.42% to Sparebankstiftelsen SpareBank 1 Modum.

Based on the agreed exchange ratio, SpareBank 1 SR-Bank will issue a total of 111,187,338 shares as consideration for the equity capital and ownerless capital in SpareBank 1 Sørøst-Norge, allocated with 67,485,793 shares to the equity certificate holders in SpareBank 1 Sørøst-Norge and 43,701,545 shares to the three savings bank foundations for the ownerless capital in SpareBank 1 Sørøst-Norge. This means that one equity certificate in SpareBank 1 Sørøst-Norge is exchanged for 0.481702 shares in SpareBank 1 SR-Bank.

In addition to consideration in the form of shares in SpareBank 1 SR-Bank, equity certificate holders in SpareBank 1 Sørøst-Norge will receive a cash consideration of NOK 4.33235 per equity certificate, or a total of NOK 606,956,000. Correspondingly, in addition to shares in SpareBank 1 SR-Bank, the three savings bank foundations will receive a total cash consideration of NOK 393,044,263 as consideration for the ownerless capital of SpareBank 1 Sørøst-Norge.

Private Placement in SpareBank 1 SR-Bank

The contemplated Private Placement in SpareBank 1 SR-Bank will be conducted as a book-building process. The book building period will commence today (26 October 2023) at 16:30. SpareBank 1 SR-Bank has engaged Arctic Securities AS, SpareBank 1 Markets AS and SpareBank 1 SR-Bank ASA, Corporate Finance department, jointly to advise on and effect the contemplated Private Placement. The Private Placement will be fully underwritten by an underwriting consortium consisting of among others Sparebankstiftelsen SR-Bank, SpareBank 1-Stiftinga Kvinnherad and Swedbank AB (publ) at a price corresponding to the volume-weighted average price quoted for the shares in SpareBank 1 SR-Bank on the Euronext Oslo Børs on 26 October 2023, less a discount of 2%. The final subscription price in the Private Placement will be determined based on the result of the book-building process, but will not be less than the price set out in the full underwriting guarantee. Participants in the underwriting consortium have a right to receive allocations in the Private Placement corresponding to their respective pro rata ownership in SpareBank 1 SR-Bank prior to the Private Placement or up to an amount equivalent to 50% of the individual guarantor's respective guarantee amount. Since the Private Placement corresponds to a limited part of SpareBank 1 SR-Bank's market value and is guaranteed to be fully subscribed at a low discount, no subsequent repair offering is expected to be carried out. Further information about the Private Placement will be published by SpareBank 1 SR-Bank via newsweb.no after the stock exchange closes today.

Governing bodies

The board

The board of SpareBank 1 Sør-Norge will consist of up to 11 board members, of which up to three members are elected by and amongst employees.

At the initial appointment, the board shall be elected among existing members of the banks' boards as follows:

• Chair of the board and two members from SpareBank 1 Sørøst-Norge

• Deputy chair and four members from SpareBank 1 SR-Bank

• Three employee-elected members, with two members from SpareBank 1 SR-Bank and one from SpareBank 1 Sørøst-Norge

The chairperson of the board shall be Finn Haugan, the current chairperson of SpareBank 1 Sørøst-Norge, who will be appointed with effect from completion of the merger. The deputy chairperson shall be Dag Mejdell, the current chairperson of SpareBank 1 SR-Bank.

Nomination Committee

At the initial appointment, the leader of the nomination committee and three members shall be elected from SpareBank 1 SR-Bank, including one member from Sparebankstiftelsen SpareBank 1 SR-Bank, while two members shall be elected from SpareBank 1 Sørøst-Norge, with one member from one of the savings bank foundations.

Acquiring bank from a legal and accounting perspective

SpareBank 1 SR-Bank will serve as the acquiring entity from both a legal and accounting perspective and will consequently assume all of SpareBank 1 Sørøst-Norges assets, rights and obligations upon completion of the merger.

Timetable and conditions for implementation

The boards of SpareBank 1 SR-Bank and SpareBank 1 Sørøst-Norge will now present the proposed merger to be approved by the general meeting of SpareBank 1 SR-Bank and supervisory board of SpareBank 1 Sørøst-Norge on 5 December 2023. The completion of the merger is among other things conditional on the supervisory board and general meeting making necessary resolutions, that the relevant supervisory authorities grant the required permissions for completion without imposing conditions that significantly alter the assumptions that the banks have made under the merger plan.

The aim is to complete the merger 1 July 2024.

Advisors

SpareBank 1 Markets AS has been engaged as the joint financial advisor of the banks in connection with the merger, while Advokatfirmaet Selmer AS has been engaged as joint legal advisor. In addition, SpareBank 1 SR-Bank has engaged Arctic Securities AS as financial advisor and Advokatfirmaet Thommessen AS as legal advisor.

Contact:

SpareBank 1 SR-Bank ASA

Chair: Dag Mejdell, tel. +47 905 62 970

CEO: Benedicte Schilbred Fasmer, tel. +47 950 60 034

CFO: Inge Reinertsen, tel. +47 909 95 033

SpareBank 1 Sørøst-Norge

Chair: Finn Haugan, tel. +47 900 41 002

CEO: Per Halvorsen, tel. +47 934 07 441

CFO: Roar Snippen, tel. +47 976 10 360

The above information is considered to be inside information pursuant to the Market Abuse Regulation (MAR) and is subject to the requirements of announcement pursuant to the Securities Trading Act section 5-12. This notice is published on behalf of SpareBank 1 SR-Bank ASA by Inge Reinertsen, CFO / SpareBank 1 Sørøst-Norge by Roar Snippen, CFO, at 7:30 (CET), 26 October 2023.