NRC Group — M&A Activity 2019

Aug 12, 2019

NRC Group ASA enters into agreement to divests its Finnish and Swedish design business

NRC Group ASA enters into agreement to divests its Finnish and Swedish design business

The transaction

NRC Group Holding AS, a wholly owned subsidiary of NRC Group ASA ("NRC Group" or

the "Company"), has on 12 August 2019 entered into a Share Purchase Agreement

("SPA") with Sweco AB ("Sweco") for the sale of all issued and outstanding

shares in NRC Holding Design Oy ("NRC Design" or the "Design Business"), an

entity to be formed prior to closing resulting from a planned demerger of NRC

Holding Finland Oy and NRC Group Finland Oy (the "Demerger"), for an enterprise

value of EUR 42.5 million on a cash and debt free basis with normalised working

capital (the "Transaction").

The divestment is a strategic step towards focusing on NRC's core business, and

releases resources to drive growth in other business areas. The net proceeds

from the Transaction will be used to repay parts of the Company's bank debt,

which increases the flexibility both financially and strategically. The net gain

to be recognised is estimated to be approximately EUR 9 million and will be

reported as part of discontinued operations at closing.

Completion of the Transaction is subject to certain customary conditions being

satisfied or waived, such as inter alia the required competition clearance(s)

being obtained, and the Demerger being duly completed.

In order to ensure a successful completion of the Transaction and subsequently a

successful integration, the parties have simultaneously entered into: i) a

transitional services agreement whereby Sweco will receive certain transitional

services from subsidiaries of NRC Group during a specified integration period

with effect from closing of the Transaction, and ii) a cooperation and

subcontracting agreement regarding treatment of certain joint agreements of NRC

Group and NRC Design (and their respective group companies) and the commercial

relationship of such parties following the completion of the Transaction.

The parties expect that completion of the Transaction will occur on or around 1

November 2019.

Description of the business

The Design Business is the market leader in railway and light rail related

design and consultancy work in Finland with a growing presence in Sweden. The

Design Business has comprehensive railway and light rail competences covering

the entire transport infrastructure value chain, and strong experience from

transport infrastructure alliance projects in Finland. The Design Business had

315 employees as of December 2018. NRC Group has owned the Design Business since

its acquisition of VR Track Oy in January 2019.

Key financials

The table below set out selected key figures from the income statement for the

years ended 31 December 2017 and 2018, in addition to Q1 2018 and 2019. All

numbers for 2017 and 2018 are based on the management accounts for VR Track Oy

according to Finnish GAAP. 2019 numbers are based on the segment reporting of

NRC Group. No significant differences between Finnish GAAP and IFRS are

identified.

Income Statement (EURm)   Q1-19  Q1-18  2018    2017    2016

Net sales                                 10        9          40

34        35

EBITDA                                               1          1

4          5          6

EBITA                                      1          1          4

5          6

Significance of Transaction and rationale

The Design Business represents less than 10% of NRC Group's pro forma revenue

for 2018 and will not affect the overall strategy of NRC Group. The Design

Business operates in the Nordic countries in a different part of the value chain

than the core construction and maintenance operations of NRC Group. The

synergies between design and the remaining core business of NRC Group are

limited, and in some cases even negative due to customer purchasing behaviour.

The design market is consolidating driven by large focused businesses. By being

part of an independent engineering consultancy business, the Design Business

will be in a better position to invest in and successfully develop its business.

NRC Group's construction and maintenance business will not be affected by the

Transaction.

"The infrastructure market is growing rapidly in all the Nordic countries. NRC

Group concentrates on developing our maintenance, construction and environmental

activity to strengthen our core business. We see significant synergies between

maintenance and construction and want to have enough management and financial

capacity to grow both of these businesses, to reach our goal of becoming a

leading entrepreneur in the infrastructure segment in the Nordics", says Henning

Olsen, CEO of NRC Group.

"We continue to deliver on our growth strategy with the ambition to become

market leader in all of our key markets. With the acquisition Sweco strengthens

its offering in a segment with large investment needs and a strong market. We

become the leading, full service railway design expert in Finland, while at the

same time reinforcing the position in Sweden," says Åsa Bergman, President and

CEO of Sweco.

Management and Board of Directors

The Design Business' executive management team consist of the following persons:

.           Mirka Nevala (Acting Managing Director, Finland)

.           Curt Johansson-Holmertz (Interim Managing Director, Sweden)

The Design Business' Board of Directors consist of the following persons:

.           Henning Olsen

.           Dag Fladby

.           Alfred Beck

There are no existing or contemplated agreements in connection with the

Transaction that involve extraordinary benefits for senior employees or members

of the Board of Directors of NRC Group or NRC Design.

***

Carnegie AS acts as financial adviser and Advokatfirmaet Schjødt AS acts as lead

legal adviser to NRC Group in connection with the Transaction.

For further information, please contact:

Henning Olsen, CEO of NRC Group, Tel: + 47 91 74 15 92.

Dag Fladby, CFO of NRC Group, Tel: +47 90 89 19 35.

About NRC Group ASA

NRC Group is the largest rail infrastructure entrepreneur in the Nordic

region. NRC Group has experienced significant growth since its inception in 2011

and has regional offices throughout Norway, Sweden and Finland. The company is

headquartered at Lysaker, nearby Oslo, in Norway. NRC Group is listed on the

Oslo Stock Exchange under ticker "NRC". The company's chief executive officer is

Henning Olsen.

About Sweco AB

Sweco plans and designs tomorrow's communities and cities. Our work produces

sustainable buildings, efficient infrastructure and access to electricity and

clean water. With 16,000 employees in Europe, we offer our customers the right

expertise for every situation. We carry out projects in 70 countries annually

throughout the world. Sweco is Europe's leading engineering and architecture

consultancy. The company is listed on Nasdaq Stockholm.

This information is subject of the disclosure requirements according to section

5-12 of the Norwegian Securities Trading Act.