Otello Corporation ASA

M&A Activity • Jul 18, 2016

Opera Software ASA - Detailed Announcement

Opera Software ASA - Detailed Announcement

Oslo, 18 July 2016

Reference is made to the stock exchange announcement made on 15 March 2016 on

the launch of the voluntary cash offer (the "Public Offer") to acquire 100% of

the shares of Opera Software ASA ("Opera") made by Kunqi (the "Offeror").

Termination of the Public Offer and agreement on alternative transaction

regarding sale of certain parts of Opera's consumer business

The conditions to close the Public Offer stipulated in the offer document were

not met by the drop-dead date of 15 July 2016. As a condition for entering into

the alternative transaction described below, the partners of the Offeror

requested that Opera agree that the Drop-Dead Date should not be extended. This

request was accepted by Opera. The Offer has thus lapsed, and shareholders who

have tendered their Shares will be released from their acceptance of the Public

Offer.

On 17 July 2016, Opera and Golden Brick Capital Private Equity Fund I L.P.,

which is backed by the affiliates of the partners of the Offeror (Kunlun Tech

Limited, Future Holding L.P., Keeneyes Future Holding Inc, Qifei International

Development Co. Limited and Golden Brick Capital Private Equity Fund I

L.P.Beijing Kunlun Tech Co. Ltd., Qihoo 360 Software (Beijing) Co. Ltd., and

Golden Brick Silk Road Fund Management (Shenzhen) LLP, collectively, the

"Consortium"), have entered into a share purchase agreement for an alternative

private transaction, in which the Consortium will acquire certain parts of

Opera's consumer business (the "Transaction"). The Transaction has been approved

by Opera's Board of Directors.

The following business units of Opera will be included in the Transaction:

· Mobile Browser, including Operator Co-brand solutions

· Desktop Browser

· Performance and Privacy Apps

· Opera's technology licensing business outside of Opera TV

· Opera's 29.09% ownership in the Chinese joint venture nHorizon

The Consumer Business will be reorganized into a separate company structure. For

clarity, the following businesses are not included in the Consumer Business or

the Transaction:

· Opera Mediaworks

· Opera Apps & Games (including Bemobi)

· Opera TV

All related assets, employees, rights, and obligations, as well as support teams

such as OEM and online distribution, consumer marketing and PR, as well as

certain related legal, finance and HR resources are also included (collectively,

the "Consumer Business").

Opera's CEO, Lars Boilesen, will serve as CEO for both Opera and the Consumer

Business until 31 December 2016. After this date, Lars will no longer hold the

role as CEO for the Consumer Business, and will be solely dedicated to Opera.

Transaction highlights

The purchase price for the Consumer Business is USD 600 million on an enterprise

value basis, subject to customary adjustments for NIBD and working capital at

closing.

Closing of the Transaction is expected to take place during the second half of

3Q 2016. Closing is subject to certain conditions, including but not limited to:

(i) finalization of a defined majority of the reorganization of the Consumer

Business, (ii) absence of events that separately or together may have a material

adverse effect on the Consumer Business prior to completion of step (i) above,

(iii) if required, certain consents and approvals from governmental authorities

shall have been obtained, and (iv) the Transaction shall have been approved by a

general meeting in Beijing Kunlun Tech Co. Ltd.

The Transaction is not subject to any financing conditions or due diligence,

beyond verifying the reorganization into a separate company structure.

The payment schedule is agreed as follows:

i.            USD 100 million is immediately due and payable to an

escrow account;

ii.            USD 200 million will be due and payable to the same escrow

account on 15 August, or, if later, at the time of Opera's completion of certain

defined steps of the reorganization; and

iii.            the final USD 300 million, plus/minus the closing

adjustments, is payable at the time of closing.

USD 40 million of the amount held in escrow shall not be released at closing,

but in one or more subsequent installments tied to the completion of the

reorganization of the Consumer Business.

If the Transaction is terminated by Opera due to the Consortium not being able

to meet certain closing obligations, the Consortium shall pay Opera a break fee

of USD 100 million. However, if the termination is caused by lack of certain

governmental approvals, the break fee is USD 40 million. If the Transaction is

terminated by the Consortium due to Opera not being able to meet certain of its

closing obligations, Opera shall pay the Consortium a break fee of USD 50

million.

The drop-dead date for the Transaction is 31 October 2016. In certain

circumstances, the drop-dead date is automatically extended to 31 December 2016.

Use of deal proceeds

Opera's Board of Directors will evaluate the appropriate financing structure of

Opera's post-close business composition, including maintaining an appropriate

equity ratio and leverage. As of 31 March 2016, Opera's net debt was USD 160

million, comprised of USD 285 million financial debt less USD 125 million cash

and cash equivalents. In addition, Opera estimated its future earn-out

obligations at USD 123 million.

Given the speed of the alternative transaction negotiations, the Board of

Directors has yet to make a final conclusion on this topic. However, it is

expected that the proceeds will be applied to both debt repayment and

distribution to shareholders and/or buy-back of shares.

Opera's remaining business

The remaining businesses of Opera are (as stated above): Opera Mediaworks, Opera

Apps & Games (including Bemobi), and Opera TV. In 2015, these business units

combined delivered revenues of USD 467 million, and adj. EBITDA of USD 74

million.

Opera estimates that in 2016, the same three remaining business units will

deliver revenues of USD 570-605 million (+22% to +30%) and an adj. EBITDA of USD

75-90 million (+2% to +22%). An updated financial outlook for 2016, reflecting

also the pre-close Consumer Business financials, will be provided at the 2Q

presentation. However, if not for the Transaction, Opera would not alter its

existing FY 2016 outlook at this point.

Analyst and investor call

Opera will host an investor call on Monday, 18 July at 8:00 AM CET to provide

additional information and answer questions about the Transaction.

Please observe the following dial-in instructions:

· Dial in 5-10 minutes prior to start time using the Participant Phone Number

and Participant Passcode

· Participant Phone Numbers:

· Norway: 800 196 67

· United Kingdom: 0 808 101 1148

· US/CAN Toll free: 800-967-7149

· Int'l Toll: 719-386-0001

· Participant Passcode: 736479

Opera will publish a subsequent Information Memorandum if so required by the

Continuing Obligations of the Oslo Stock Exchange.

2Q 2016 reporting

Opera will report second quarter results on August 31, 2016.

For further information, please contact:

Petter Lade, Investor Relations

Tel: +47 2369 2400

About Opera:

Opera Software enables more than 350 million internet consumers worldwide to

connect with the content and services that matter most to them. Opera also helps

publishers monetize their content through advertising and advertisers reach the

audiences that build value for their businesses, capitalizing on a global

consumer audience reach that exceeds 1 billion.

About Kunlun:

Kunlun (SZ: 300418) is a public company listed in China. Kunlun is a leading

mobile internet company, focusing on mobile gaming R&D and global publishing, as

well as app distribution operation and the Fintech P2P lending business. The

company has a large user base both in China and internationally. It completed

the acquisition of the U.S.-based company Grinder, a leading dating social

network, in January 2016.

About Qihoo:

Qihoo (NYSE: QIHU) is a leading Internet company in China. The company is the

number one provider of Internet and mobile security products in China as

measured by its user base, according to iResearch. The company also provides

users with secure access points to the Internet via its market leading web

browsers and application stores. It has built one of the largest online open

platforms in China and monetizes its extensive user base primarily through

online advertising and through Internet value-added services on its open

platform.

About Golden Brick:

Golden Brick Silk Road Fund Management (Shenzhen) LLP is an affiliate of Golden

Brick Capital Management Limited ("Golden Brick Capital"). Golden Brick Capital

is one of the leading private-equity investment institutions in China, with its

headquarters in Hong Kong and other offices located in Beijing, Shenzhen and

Zhuhai. Golden Brick Capital focuses on investing in the TMT, energy and natural

resources sectors. The total assets under the management of Golden Brick Capital

are about USD 3 billion.

Appendix

This appendix forms part of the stock exchange announcement of 18 July 2016 and

is prepared in accordance with the requirements of the Oslo Stock Exchange

Continuing Obligations section 3.4.

Description of the Consumer Business

The Consumer Business comprises of several business units within the Opera Group

(see below), and employees about 560 workers. Post reorganization and closing,

the Consumer Business will be Headquartered in Oslo and have office locations

Norway, Poland, Sweden, China, United States, Canada, India, South Korea,

Russia, Ukraine, Singapore and Taiwan. In addition, the company will have

employees working from various home office locations.

Business units:

· Mobile Browser, including Operator Co-brand solutions

· Desktop Browser

· Performance and Privacy Apps: VPN service for smartphones, tablets and

computer, full-device data compression technology

· Opera's technology licensing business outside of Opera TV: licensing

technology to third parties that it embeds in its own consumer products and

services, and the Rocket Optimizer, network-based compression technology

· Opera's 29.09% ownership in the Chinese joint venture nHorizon

It is expected that the Consumer Business will benefit strategically and

financially under ownership of the Consortium, and that the Consortium has the

capabilities to invest and further develop the Consumer Business.

Consumer Business key financials

The following table summarizes Consumer Business revenue and adjusted EBITDA

2013-2015. Please note that the Consumer Business is in the process of being

reorganized and has not reported separate audited financial figures

historically, thus the presented figures are unaudited standalone figures

prepared by Opera.

+---------------+----+----+----+

|(USDm) |2013|2014|2015|

+---------------+----+----+----+

|Revenue |162 |179 |149 |

+---------------+----+----+----+

|Adjusted EBITDA|66 |47 |34 |

+---------------+----+----+----+

Executive management and Board of Directors of the Consumer Business

The Consumer Business is currently managed as separate business units within the

Opera Group. The Consumer Business comprises several legal entities. There is no

separate holding company for the standalone Consumer Business as of yet, and

thus no Board of Directors applicable as such. The buyer will appoint a new

Board of Directors as of closing.

Opera's CEO, Lars Boilesen, will serve as CEO for both Opera and the Consumer

Business until 31 December 2016. After this date, Lars will no longer hold the

role as CEO for the Consumer Business, and will be solely dedicated to Opera.

Opera's COO Andreas Thome and CFO Frode Jacobsen will follow the Consumer

Business.

Certain customary transaction bonus arrangements for defined senior employees

have been entered into.

Agreements and Opera brand rights

There will be a transitional service agreement between Opera and the Consumer

Business, with duration of twelve months following closing of the Transaction.

The transitional service agreement will cover services such as corporate

functions, facilities and relevant shared services.

All rights to the Opera brand and trademarks will follow the Consumer Business.

However, Opera will have a right to use the relevant brand and trademarks for a

period of 18 months.