Kid ASA

M&A Activity • May 14, 2019

KID ASA - Acquiring 100% of the shares in Hemtex AB from ICA-Gruppen AB

KID ASA - Acquiring 100% of the shares in Hemtex AB from ICA-Gruppen AB

Lier, 14 May 2019: Kid ASA (OSE: KID), has today entered into a binding share

purchase agreement with ICA Gruppen AB for 100% of the shares in Hemtex AB. The

agreed share purchase price is MSEK 37.6, based on an Enterprise Value of MSEK

226. In connection with the transaction, Kid ASA has secured a financing

structure with Nordea for the new group. All closing events related to the share

purchase agreement have been completed.

Hemtex AB operates 141 home textile and interior stores across Sweden, Finland

and Estonia. The Hemtex group had total sales of MSEK 1.013 in 2018, of which

89% in the Swedish market. Hemtex has a product offering and store concept

similar to Kid, with 90% of the assortment being own brands. Hemtex is

considered a strong retail concept with high brand awareness in the Swedish

market, and operates a customer club consisting of 960.000 individual members.

The strategic rationale behind the transaction is to:

· Create a pan-Nordic home textile and interior chain based on private label

assortment with total sales of BNOK 2.4, by combining the undisputable market

leaders in Norway and Sweden

· Substantially increase profitability in Hemtex over the next years based on

identified potential and operational excellence

· Maintain Kid and Hemtex as separate brands in existing geographical markets,

utilizing the high brand awareness and strong brand associations, as well as

best practise from both companies

· Transfer Kids successful concept elements to Hemtex based on proven track

record in Norway, aiming to secure revenue and profit growth through integration

of assortment, introducing existing categories from Kid into the other markets,

optimizing price, marketing and campaign strategy as well as expanding,

relocating and refurbishing Hemtex stores.

· Transfer Hemtex categories and online capabilities into the Kid concept

· Identified synergies will be achieved through joint sourcing and

optimisation of organisational structure

The full potential of the group will be reached by a step-by-step approach where

assortment, systems and the organisation will be fully integrated in 2022.

Strong management teams in both companies, with market insight and attention to

operations in their respective markets, will secure the success of the

transition phase, which will be initiated immediately. The transition and

integration phase will be supported by senior business development resources in

Kid.

«After the Hemtex turnaround under ICA's ownership, the management team and

myself truly believe that Kid ASA will be the right owner for us in order to

reach our full potential in the Swedish, Finish and Estonian markets. We are

highly motivated for the cooperation with Kid and excited about the journey for

Hemtex ahead» says Anders Lorentzson, CEO Hemtex AB.

"We believe this is the right growth strategy for Kid ASA, both in terms of

sales and profits. This is an exciting opportunity to further develop a strong

and well-known interior brand in the Swedish, Finnish and Estonian markets,

based on the same proven methodology that has made Kid the largest and most

profitable home textile concept in Norway", says Anders Fjeld, CEO in Kid ASA

FINANCIAL AND OPERATIONAL TARGETS

Increased profitability in Hemtex

· EBITDA target of MNOK 100 in 2021 and MNOK 150 in 2023, driven by increased

sales and synergies related to gross margin and OPEX

· 3-5 new store openings per year from 2020. Hemtex will close 13 unprofitable

stores in 2019 with a positive EBITDA effect of MNOK 1.7

· CAPEX estimate of MNOK 40 from 2020 related to concept implementation,

relocation and expansion of stores, with an additional MNOK 1.8 per new store

opening on average

· Increased inventory level of MNOK 50 in 2020 to support category

implementation and increased sales

Maintaining current targets for Kid

· Like-for-like growth of 3-4 percent, stable gross margins in line with the

past 10 years, and OPEX-to-sales below 45%

· Increase store portfolio to approximately 150 Kid stores in Norway

· Maintenance CAPEX of MNOK 40 in 2019, thereafter MNOK 30 on an annual basis,

with an additional CAPEX of MNOK 1.8 per new store opening on average

Continue to target high dividends and a moderate leverage ratio for the group

· 60-80% pay-out ratio with semi-annual payments, based on adjusted net profit

- in line with current target of 80-100% pay-out-ratio for Kid ASA standalone

· The distribution policy is dynamic, and excess capital will be returned to

shareholders

· Maintaining a moderate leverage and an efficient balance sheet

FINANCING

In connection with the transaction, Kid ASA has secured a new financing

structure with Nordea for the combined Kid and Hemtex group (numbers in brackets

are pre-transaction):

· Total debt facilities of MNOK 922, based on long-term debt of MNOK 545, long

term flexible facility of MNOK 130 and overdraft facility of 247. In addition,

Kid ASA has secured a MNOK 115 L/C- and guarantee facility

· Annual instalments of MNOK 50 from 2020

· Interest rate based on NIBOR / STIBOR + 110-130 bp

· Covenants related to LTM EBITDA of MNOK 150 measured quarterly, annual

gearing ratio below 2.50 (2019) - 2.25 (2021), and annual CAPEX below MNOK 100.

In accordance with continuing obligations for listed companies at Oslo Børs, Kid

ASA will prepare and publish an information memorandum before 28 June 2019.

ENQUIRIES

Anders Fjeld, CEO, Kid, +47 996 32 121

Henrik Frisell, CFO, Kid, +47 480 48 800