Navamedic - M&A Activity 2019 | FinancialReports.eu

Proposed demerger of Navamedic ASA with transfer to Observe Medical ASA

Reference is made to the stock exchange announcement of 14 May 2019 regarding

the proposed restructuring of Navamedic ASA (the "Company" or "NAVA" and

together with its direct and indirect subsidiaries, the "NAVA group"), whereby

the Company's Medtech division is demerged from the Company and merged into a

newly incorporated entity, Observe Medical ASA ("OM ASA" and together with its

direct and indirect subsidiaries following the completion of the demerger, the

"OM ASA group"), which will be listed on Oslo Axess upon completion of the

demerger.

The board of directors of NAVA and OM ASA today announce that they have signed a

joint demerger plan and resolved to propose to their respective general meetings

that the shareholders shall approve the demerger of NAVA, whereby all of NAVA's

shares in Observe Medical International AB are transferred to OM ASA together

with an earn-out obligation (a contingent consideration) to the sellers of

Observe Medical International AB related to the Company's acquisition of Observe

Medical International AB in 2015 (the "Contingent Consideration"), while all

other assets, rights and liabilities will remain with NAVA. The Contingent

Consideration is further described in notes 10 and 23 to NAVA's consolidated

annual financial statements for 2018. Upon completion of the demerger, Observe

Medical International AB will be a wholly owned subsidiary of OM ASA and OM ASA

will indirectly be the owner of Observe Medical International AB's direct and

indirect subsidiaries, Observe Medical Aps and Navamedic MedTec AB,

respectively.

The board of directors and management of NAVA have evaluated the most suitable

organisation of NAVA in order to facilitate further growth and enhanced values

for its shareholders. As there are few synergies between commercialising medical

technology on a global market (the Medtech division) and NAVA's core business of

growing a market access platform for pharma companies in Northern Europe, it was

concluded that a demerger would benefit both businesses. The demerger will

create a simpler and clearer corporate structure visualising the existing values

of NAVA, and is therefore expected to provide both NAVA and OM ASA with more

flexibility and a better basis to raise capital for their respective businesses.

The demerger will allow NAVA to focus on developing its core business areas

within distribution, marketing and sale of pharma and healthcare products, while

OM ASA will focus on the commercialisation of Sippi and further development of

the Medtech business. The demerger will as such facilitate further growth for

both companies.

Financial effects of the demerger

Following the entering into of the joint demerger plan, NAVA expects to present

the OM ASA group, including excess values related to the OM ASA group as

reported in the NAVA group and the Contingent Consideration, as held for

distribution and discontinued operations according to IFRS 5 Non-current Assets

Held for Sale and Discontinued Operations.

The table below illustrates the condensed consolidated income statement

information for the NAVA group with the Medtech division (OM ASA group),

including excess values related to the OM ASA group as reported in the NAVA

group and the Contingent Consideration, re-presented as discontinued operations,

for the interim periods ended 31 March 2019 and 2018 and for the year ended 31

December 2018.

In NOK thousands

3 months 3 months

Year

ended ended

ended

31 March 31 March

2019 2018

December

2018

Reported Re Reported Re

Reported Re

-presented

-presented -presented

Revenues......................... 45,459 45,432 42,638 42,606

184,022 183,916

Operating costs excl. Amortisation and -47,458 -44,941 -47,655 -45,558

-182,381 -175,386

depreciation.........................

EBITDA......................... -1,999 490 -5,017 -2,952

1,641 8,529

Amortisation and -1,921 -877 -1,598 -597

-6,212 -2,311

depreciation.........................

Operating -3,919 -387 -6,615 -3,550

-4,571 6,218

result.........................

Change FV contingent -557 0 -1,074 0

14,009 0

consideration.........................

Other net finance -630 -880 62 -503

-2,427 -2,736

costs.........................

Result before income -5,106 -1,267 -7,627 -4,052

7,011 3,482

tax.........................

Income tax......................... -294 -294 321 321

273 273

Net result after income -5,400 -1,561 -7,306 -3,731

7,284 3,755

tax.........................

Results from discontinued N/A -3,839 N/A -3,575

N/A 3,529

operations.........................

Net result continuing N/A -5,400 N/A -7,306

N/A 7,284

operations.........................

The results from discontinued operations differ from the net result after income

tax in the condensed consolidated income statement information for the OM ASA

group including excess values and Contingent Consideration presented in the

section "About OM ASA and the Medtech division" below. The difference is related

to net expenses in OM ASA group towards the rest of the NAVA group, because the

amounts re-presented to discontinued operations only includes the NAVA group's

external income and expenses.

See the "Condensed consolidated statement of financial position information for

OM ASA group (including excess values and contingent consideration)" below for

an indication of the effects on the NAVA group's asset and liabilities of the

demerger. Furthermore, as at 31 March 2019 the rest of the NAVA group had net

receivables on the OM ASA group in the amount of NOK 28.75 million.

Terms of the demerger and timetable

The demerger is proposed to be carried out as a demerger by way of a transfer to

an existing company ("demerger and merger" (Nw: fisjonsfusjon)) in accordance

with Chapter 14 of the Norwegian Public Limited Liability Companies Act.

The boards of NAVA and OM ASA have resolved upon an exchange ratio of 74%/26%,

with 74% of the business to remain in NAVA and 26% of the business being

transferred to OM ASA. The exchange ratio is based on an assessment made by the

boards of NAVA and OM ASA, based on a valuation carried out by an external

party, and founded on principles of discounted cash flow analysis, analysis of

comparable transactions and the implied trading multiples of listed comparable

companies.

The demerger is proposed to be implemented by way of decreasing the share

capital of NAVA through a reduction of the nominal value of the shares. The size

of the share capital decrease in NAVA reflects the allocation of the net values

between the companies in the demerger. The shareholders of NAVA will receive

shares in OM ASA by way of increasing the share capital in this company through

issuance of new shares as demerger consideration. Prior to the share capital

increase NAVA's current shareholding in OM ASA will be redeemed in its entirety,

and the shareholders of NAVA will hence become shareholders of OM ASA in the

same ratio as they own shares in NAVA when the demerger becomes effective.

The completion of the demerger is subject to the satisfaction of a number of

conditions, including (i) that the demerger plan and related resolutions are

approved with the required majority at the general meeting of NAVA, (ii) that

legislation does not prevent registration of the demerger and that the parties

obtain any required permissions/consents from public authorities, contracting

parties and other third parties, (iii) that no decision has been made by the

Oslo Stock Exchange which would prevent the continued listing of NAVA on the

Oslo Stock Exchange/Oslo Axess, (iv) that a resolution has been made by the Oslo

Stock Exchange for the listing of OM ASA on the Oslo Stock Exchange, Oslo Axess

or on another regulated market if agreed by the boards of the two companies, (v)

the entering into of the agreements listed in the demerger plan and (vi) that

the creditor notice period has expired for both parties and the relation to any

creditors having submitted objections have been clarified.

The extraordinary general meetings of NAVA and OM ASA for the approval of the

demerger will be held on or about 5 August 2019, and the demerger is subject to

timely satisfaction of the above mentioned conditions expected to be completed

and become effective in the end of October 2019 or the beginning of November

Governance, management and employees

The current board of directors and management of NAVA will not be affected by

the demerger. Other than for the employees who are employed by Observe Medical

International AB or its direct and indirect subsidiaries (who will be

transferred to the OM ASA group upon completion of the demerger), the demerger

will not have any implications for the employees of the NAVA group. The

employees who are transferred to the OM ASA group as part of the demerger will

continue their existing employment agreements with their current employing

entity.

OM ASA has an interim board of directors comprising Terje Bakken (chairman of

the board), Kathrine Elisabeth Gamborg Andreassen and Kristin Nyberg. Ole Henrik

Eriksen is interim general manager of OM ASA. OM ASA does not have any other

employees at the date hereof, but the OM ASA group will at the time of the

completion of the demerger have 5 employees, who currently are employed in

Observe Medical International AB and its direct and indirect subsidiaries.

No agreements have been, or are expected to be, entered into by NAVA in

connection with the transaction for the benefit of any NAVA board members or

senior employees, or for the benefit of any OM ASA board members or senior

employees.

About OM ASA and the Medtech division

OM ASA is a newly incorporated public limited liability company and is currently

a wholly-owned subsidiary of NAVA. OM ASA will upon completion of the demerger

be owned by the shareholders of NAVA (as registered as such in the VPS at the

date of completion of the demerger) and will own Observe Medical International

AB and its direct and indirect subsidiaries in addition to the Contingent

Consideration. The NAVA group may also use all or a portion of the account

receivable of approximately NOK 28,750,000 it has against Observe Medical

International AB as contribution in kind and thereby acquire new shares in OM

ASA following completion of the demerger. OM ASA will apply for listing on the

Oslo Stock Exchange, Oslo Axess or on another regulated market as part of the

process.

NAVA's Medtech division is operated through Observe Medical International AB and

its direct and indirect subsidiaries. The division is commercialising Sippi®, a

new proprietary system for digital, wireless, urine measurement in global

markets. Sippi® offers a new standard for urine monitoring in hospitals by

enabling automated digital measurement. Safe and accurate monitoring of

patients' urine production is a vital parameter for all intensive care patients

and for selected patients treated in other wards. In addition to this, Sippi®

prevents biofilm build-up via its proprietary technology and alerts healthcare

professionals if biofilm reaches critical levels.

Set out below is certain key financial information for the OM ASA group on a

consolidated basis. The amounts for OM ASA includes excess values related to the

OM ASA group as reported in the NAVA group and the Contingent Consideration, and

are based on the amounts used in NAVA's consolidation schedules for the audited

annual financial statements for the years ended 31 December 2018, 2017 and 2016

and for the unaudited interim periods ended 31 March 2019 and 2018. Eliminations

and adjustments for intercompany income and expenses on a lower level than for

the whole NAVA group are based on information from the accounting systems that

provided input to the consolidation schedules.

Condensed consolidated income statement information for OM ASA group (including

excess values and the Contingent Consideration)

In NOK thousands

3 mont Years

h ended

s ende 31

December

March

2019 2018 2018

2017 2016

Revenues............................................ 27 32 106

198 614

Operating costs excl. amortisation and -2,768 -2,353

-7,929 -11,187 -11,233

depreciation............................................

EBITDA............................................ -2,741 -2,321

-7,823 -10,989 -10,619

Amortisation and -1,043 -1,001

-3,901 -3,981 -4,025

depreciation............................................

Operating -3,784 -3,322

-11,724 -14,970 -14,643

result............................................

Change FV contingent -557 -1,074

14,009 -2,618 4,051

consideration............................................

Other net finance 250 565 -11

219 21

costs............................................

Result before income -4,091 -3,831 2,274

-17,370 -10,571

tax............................................

Income tax............................................ 0 0 0

0 0

Net result after income -4,091 -3,831 2,274

-17,370 -10,571

tax............................................

Condensed consolidated financial position information for OM ASA group

(including excess values and the Contingent Consideration)

In NOK thousands

3 month Years

s ended ended

December

March

2019 2018 2018

2017 2016

Goodwill............................................. 29,842 30,134 31,166

32,113 30,558

Other intangible 21,683 23,578 23,508

25,821 26,611