Hexagon Composites — M&A Activity 2016

Jun 14, 2016

Agility Fuel Systems and Hexagon Composites announce merger to create Agility Fuel Solutions

Agility Fuel Systems and Hexagon Composites announce merger to create Agility Fuel Solutions

Hexagon Composites, the global leader in composite cylinders for natural gas

vehicles (NGVs), and Agility Fuel Systems, the leader in natural gas fuel system

solutions for commercial vehicles, announced today that the companies will merge

Hexagon Composites' CNG Automotive Products Division, which includes medium- and

heavy-duty vehicle composite cylinder manufacturing operations and its bus

systems business unit, with Agility to form Agility Fuel Solutions. The new

entity will be owned equally by Hexagon Composites and Agility's current

investors. Agility Fuel Solutions will continue to transform the global medium-

and heavy-duty vehicle industry with clean fuel technologies.

The merger is uniquely positioned to drive innovation in the industry, while

better serving the global market and expanding its product offerings worldwide.

The strategic integration of fuel systems and cylinders will provide value by

reducing up-front costs for clean technology, accelerating commercialization of

new product ideas, and driving faster returns on investments. The combined

company will have production sites in the US, Norway, and Brazil, with technical

centers located in Lincoln, Nebraska and Kelowna, British Columbia. Agility Fuel

Solutions will manufacture cylinders for use in its systems, as well as for

direct sale with offices in the US, Canada, Latin America, Norway, India, and

Southeast Asia.

"This merger combines two market leaders with strong backgrounds in engineering

creativity, profitable growth and operational excellence" said Kathleen Ligocki,

named CEO of the newly merged company, Agility Fuel Solutions. "Agility is proud

of our successful relationship with Hexagon, and together we will target driving

adoption of clean natural gas systems in commercial vehicle markets around the

world."

"This transaction is a natural progression of our existing joint venture

arrangement and will expand our ability to create unique value for our customers

by deepening our technical capabilities and expanding our reach globally."

stated Sam Gabbita, General Partner at Element Partners, the lead investor for

Agility Fuel Systems. "Natural gas is a key component of the global green shift,

and we remain committed to providing the industry with the highest quality

products to optimize its use." said Jon Erik Engeset, President and CEO of

Hexagon Composites ASA.

Natural gas is an economical and environmentally attractive fuel for medium- and

heavy-duty vehicles, addressing the world's environmental health with

significantly lower emissions of greenhouse gases, NOx and particulate matter.

It is a game changer for the global economy, especially when combined with

renewable sources and pricing stability relative to conventional liquid fuels.

Hexagon's Mobile Pipeline®, Hydrogen Products and Light-Duty Vehicles divisions

will continue to operate as Hexagon Composites. The transaction is expected to

close in the 3rd quarter of 2016.

The following additional information is provided in accordance with Continuing

Obligations of listed companies section 3.4.2:

1.)   Transaction and parties: The transaction described above is subject to

final board approvals and completion.

2.)   Consideration: The total consideration for the 50% interest in the newly

formed Agility Fuel Solutions entity, in addition to the contribution of the CNG

Automotive Products Division, is a cash payment of USD 17.5 million (approx. NOK

140 million) from available funds. The implicit transaction value of the new

entity is USD 318 million of which Hexagon Composites group's 50% share is then

USD 159 million (approx. NOK 1.3 billion)

3.)   Further description of the companies and transaction: Please refer to the

Attachment to this notice which gives the Financial Year 2015 proforma financial

statements on a carve out basis for Hexagon Composites ASA's contributed CNG

Automotive heavy and medium duty business. This includes assets held by the

wholly owned Hexagon Lincoln Inc subsidiary, as well as 100% of the shares of

Hexagon Bus Systems AS. The recently acquired Hexagon Composites Brazil Ltda

follows this transaction. The Net Assets contributed, on this reference basis,

is USD 50 million (approx. NOK 400 million). Total Operating Income on this

reference basis is USD 87 million (approx. NOK 700 million). The net profit on

this reference basis, restated on an "as previously reported" basis, is

approximately USD 2.5 million (NOK 20 million) after group financial costs,

royalties and charges. The total number of employees in this business is 200. As

the transaction is primarily a carve-out, information around board of directors

etc. is not considered applicable. The new entity is expected to be self-

financed. The new entity on a combined basis using Financial Year 2015 proforma

financial statements of both contributed businesses is estimated to have Net

Assets and total Operating Income (Revenue) of USD 115 million (approx. NOK 925

million) and USD 209 million (approx. NOK 1.7 billion) respectively.

4.)   Consequences of the transaction: In addition to the strengthened strategic

impacts disclosed above, the transaction will trigger a move from the current

consolidation accounting for the contributed business, to equity accounting for

this new jointly controlled entity. This will mean that profit and loss items

previously reported in gross terms will, going forward, be reported in net terms

as share of profit or loss from joint ventures and associates, in the Income

Statement. As a result of the transaction, excess value over book value

(including Goodwill) of the magnitude of NOK 370 million is expected to be

recognized on the Statement of Financial Position. A corresponding one-time

extraordinary profit will be realized in the Income statement. Aside from these

one-off entries, the initial impact to the consolidated group net income or

total assets is not considered significant. Final quantification of impacts and

accounting classification will only be available post-closing and so these may

vary from the estimates given. An updated statement, together with proforma

financial statements of the new entity, will be prepared after final completion

of the transaction.

5.)   Agreements with directors or senior executives in relation to the

transaction: No such agreements have been entered into in relation to this

transaction.

Agility Fuel Systems, headquartered in Santa Ana, California, is the leading

developer and manufacturer of natural gas fuel systems for medium and heavy-duty

vehicles in North America. Agility's highly engineered, proprietary natural gas

fuel systems store, manage and deliver natural gas to the engine and enable the

safe and effective use of natural gas as a vehicle fuel for local, regional and

long-haul applications.

Hexagon Composites is a publicly listed company with its headquarters in

Aalesund, Norway.It operates one of the world's most advanced facilities for

designing, testing and manufacturing all-composite cylinders for gas

applications. It is a globally leading supplier in the industry and sets the

standard for excellence in efficiency, safety and durability.

Both companies have been leaders in the natural gas industry for over two

decades.

For more information:

Jon Erik Engeset, CEO, Hexagon Composites ASA

Telephone: +47 916 30 550 | jon.erik.engeset@hexagon.no

David Bandele, CFO, Hexagon Composites ASA

Telephone: +47 920 91 483 | david.bandele@hexagon.no

Solveig D. Saether, Communication Manager, Hexagon Composites ASA

Telephone: +47 906 34 977 | solveig.saether@hexagon.no

For more information, visit the Agility website at agilityfs.com and Hexagon

Composites website hexagon.no.

This information is subject to the disclosure requirements pursuant to section

5-12 of the Norwegian Securities Trading Act.

[HUG#2020644]