Demant — M&A Activity 2010

Nov 30, 2010

Company announcement No 2010-20 30 November 2010

William Demant Holding announces the closing of the merger with Otix Global, Inc.

William Demant Holding and Otix Global have received antitrust clearance from US Federal Trade Commission (FTC) for the planned merger. Consequently, all conditions in the binding, conditional merger agreement between a wholly-owned legal entity in the William Demant Holding Group and Otix Global, Inc. are met, and the closing of the transaction is completed today.

With the acquisition of Otix Global and thereby the Sonic brand, a third brand has been added to the two existing hearing aid brands of William Demant Holding. Hence, William Demant Holding will to an even greater extent be capable of addressing various customer needs in the market. The Group expects that the Sonic brand will play an important part in relation to selected customer segments particularly in the US, which already constitutes the main market for the Sonic products.

In connection with the transaction we have agreed on a termination plan covering Otix' current senior management team, under which each member will step back over the coming four months. The responsibilities of the individual Otix managers will be transferred to a new group mainly recruited from existing management teams in the William Demant Holding Group. To manage the Sonic business going forward and to deliver on the Group's ambitious promise to further expand the market share of the Sonic brand, Joseph A. Lugara has been appointed President of Sonic in the US. Mr. Lugara benefits from more than 25 years of experience in the hearing aid industry, the last three years with the William Demant Holding Group.

The takeover of Otix Global is expected to generate substantial synergies to be harvested over the coming 12-18 months as the Sonic brand will benefit from William Demant Holding's competitive infrastructure and industry-leading R&D capabilities. Part of the plan is to integrate Otix with William Demant Holding's current administrative infrastructure, including areas such as finance and IT. Also, the transaction is seen as an opportunity to strengthen Sonic's product portfolio by utilising William Demant Holding's underlying technological capabilities, thereby leveraging the Group's significant R&D efforts. As part of the restructuring process, all future R&D activities will be concentrated at William Demant Holding's existing R&D centres. The Sonic US operations and the future brand headquarters will be relocated to New Jersey. As a consequence of these changes the Otix' head office in Salt Lake City, Utah will be discontinued.

With regard to manufacturing, Otix' production site in Eagan, Minnesota will continue without changes in order for the Group to fulfil the growth ambitions for the Sonic brand. However, with the aim of optimizing the future manufacturing setup William Demant Holding has initiated a production review process in connection with the transaction.

In connection with the takeover, Otix Global's hearing instrument distribution activities under the Hearing Life brand will be added to William Demant Holding's existing distribution activities. Hearing Life's current distribution activities are expected to continue without major changes and will benefit from William Demant Holding's local infrastructure.

As part of the Sonic acquisition William Demant Holding has acquired German-based Sanomed who has hearing aid retail as its core business. As a result of recent changes in the German legislation Sanomed has stopped the distribution of hearing aids, but the need to provide after sales service to the existing custom-

ers remains. William Demant Holding being determined to concentrate its German hearing aid activities on wholesale will therefore seek one or more partners capable of and motivated for ensuring that the responsibilities linked to the Sanomed business are well taken care of. Until then, William Demant Holding will assume the responsibilities by keeping the relevant activities going.

Financial impact of the Otix transaction

The stockholders of Otix Global will receive a total settlement of USD 64.2 million equivalent to approx. DKK 370 million, with cash flow impact in 2010.

The non-recurring costs associated with the restructuring and integration of Otix Global are expected to amount to approx. USD 12-15 million corresponding to approx. DKK 70-85 million, to be incurred before year-end 2011. However, at this point in time William Demant Holding is unable to assess how these nonrecurring costs will be distributed between the financial years 2010 and 2011, respectively.

The takeover of Otix Global is expected to impact the Group's consolidated revenue positively in 2011 by an estimated USD 60 million equivalent to approx. DKK 345 million. A successful integration process and a fruitful execution of the Group's growth ambitions for the Sonic brand should deliver significant growth in the following years.

The earnings impact of the Otix transaction in 2011 cannot at present be estimated due to the uncertainty arising from the fact that the timing of the various steps in the restructuring and integration process has not yet been detailed. However, when the integration plan is fully executed it is expected that the acquired activities will produce an EBIT margin in 2012 slightly below Group level (excluding Otix Global).

William Demant Holding's Annual Report 2010 will provide an updated status on the integration process, including more details about the financial impact of the transaction.

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Further information:

President & CEO Niels Jacobsen, phone +45 39 13 81 55 Senior Vice President, Finance Stefan Ingildsen, mobile +45 29 22 02 70 Vice President, Investor Relations Søren B. Andersson, mobile +45 51 17 66 57

www.demant.com