Ontex Group NV — Share Issue/Capital Change 2017

Mar 29, 2017

ONTEX GROUP

Limited Liability Company (Naamloze Vennootschap) Korte Keppestraat 21 9320 Erembodegem (Aalst) VAT BE 0550.880.915 RPR Ghent, division Dendermonde

(the "Company")

SPECIAL REPORT OF THE BOARD OF DIRECTORS IN ACCORDANCE WITH ARTICLE 596 OF THE BELGIAN COMPANY CODE

1. PURPOSE OF THIS REPORT

This special report is prepared in accordance with Article 596 of the Belgian Company Code and has been adopted by the board of directors of the Company (the "Board of Directors") on March 17, 2017, in the context of a proposed capital increase by the issuance of up to 7,486,110 new ordinary shares of the Company, to be decided by the Board of Directors on that same date, within the framework of the authorized capital under the terms and subject to the conditions described in section 3 below (the "Capital Increase").

This special report describes the Capital Increase, sets forth the reasons for the disapplication of the preferential subscription right of existing shareholders of the Company, and details the issue price and the financial consequences of the Capital Increase for the existing shareholders, as required by Article 596 of the Belgian Company Code.

The Board of Directors notes at the outset that the preferential subscription right is not disapplied in favor of identified persons, within the meaning of Article 598 of the Belgian Company Code and that the New Shares (as defined below) will be placed with institutional investors to be identified as part of a bookbuilding process.

$2.$ CONTEXT

On March 7, 2017, the Company acquired, through one of its subsidiaries, Hygienic Disposables Brazil Participações Ltda, a Brazilian sociedade empresaria limitada, organized and existing under the laws of Brazil enrolled with the Brazilian Corporate Taxpayers' Registry of the Ministry of Finance (CNPJ) under no. 25.186.120/0001-56 ("Ontex Brazil"), 100% of the shares of Active Indústria de Cosméticos S.A. a Brazilian sociedade anônima, organized and existing under the laws of Brazil, enrolled with the Brazilian Corporate Taxpayers' Registry of the Ministry of Finance (CNPJ) under no. 22.010.816/0001-39 ("Active") and Falcon Distribuidora, Armazenamento e Transporte S.A., a Brazilian sociedade anônima, organized and existing under the laws of Brazil, enrolled with the Brazilian Corporate Taxpayers' Registry of the Ministry of Finance (CNPJ) under no. 23.191.831/0001-93 ("Falcon", and together with Active, the "Target Companies"). To that end, Ontex Brazil entered into a share purchase agreement for the shares of the Target Companies dated December 22, 2016 (the "Share Purchase Agreement"), for a total enterprise value of approximately one billion Brazilian Reais (R\$1,000,000,000) (the "Transaction"), subject to the terms and conditions described in the Share Purchase Agreement including post-closing adjustments.

The Transaction allowed the Companytoindirectly acquirealeading Brazilianbusinessthat isanexcellentfitforthe Company, consistent with its stated strategic objectivesforexternal growth.Inparticular, the Companyisconvinced both by the fundamentalsandpotential of Target Companies'operahonsand businesspertainingtoinfant andadult diapers, feminine care productsandother relatedpersonalhygiene products including its solid positionina largemarket.

Inordertoconsummate the Transaction, the Company used available liquidity (cashand existing revolving credit facility)andobtaineda bridgedebt financing facilityforan amount of EUR125,000,000,pursuanttoan additional facility notice under itsseniorfacilities agreement originally datedNovember 10, 2014,asamendedandrestated fromtime to time.

TheBoardof Directors now proposes the Capital Increasetouse the proceeds of the placement of theNewSharestorefinance thebusinessfurthertothe Transaction. The Capital Increase will also enable the Companytoremain committedtoactively manage itsbalance sheet soas tomaintain an efficient, flexibleandresilient capital structuretosupportcontinued investmentinthebusiness.

3. DESCRIPTION0FTHE CAPITAL INCREASE

(a) Decisiontoincrease the share capital

The Capital Increase will be effected within the framework of the Company's authorized capital. PursuanttoArticle7of the articles of association of the Company (the "Articles of Association"), theBoardof Directorsisauthorized(i)toincrease the Company's share capital,inone or severaltimes,uptoan aggregate amount (before issue premium) equalto50%of the registered share capitalasit stood after the closing of the initialpublicoffering of the Company, i.e. EUR680,650,828; and (ii)tolimitor disapply the preferential subscription right of the existing shareholders inthe interest of the Company, subjecttothe limitationsand inaccordance with the conditions providedforby the Belgian CompanyCode.

The Company's share capital will increase through the issuance of upto7,486,110 new ordinary shares of the Company (the"NewShares") (i.e. less than10%of the number of outstanding ordinary shares of the Company) against an issue pricetobe determined throughabookbuilding process but which maynotbe less than10% below the closing price of the Company's ordinary share on Euronext Brussels on the trading day preceding the announcement of theABB,under the condition precedent, andtothe extent, of the effective subscription of theNewShares. TheNewShares will be placed with institutional investors only, through an accelerated bookbuilt offering (the"ABB"),forwhich the order book will beheldby UвS Limitedand BNPParibas Fortis NV/SA (together the "Bookrunners"). TheABBisexpectedto be launched on Wednesday March22, 2017.There will benopublicofferingin Belgium or elsewhere.

TheBoardof Directors will grant any two directors, acting jointly, with power of substitution, the powerto:

(i) decidetheeffective launchof theABB;and

(ii) determine,attheendof the bookbuilding process, the issue pricefortheNew Shares (including issue premium), taking into account theminimumissue priceasdescribed above.

TheBoardof Directors will grant any director, acting alone, with power of substitution, the powertorecordthe effective realization of the Capital Increasein accordance with Article589of the Belgian CompanyCode.

(b) Characteristics of theNewShares

TheNewShares will be paidup infullatthetimeof their issuanceandwillhavethe samerightsandcharacteristicsas,andbe fully fungible with, the existing ordinary shares of the Company, including with respecttothe righttoreceive dividends.

Upon subscription, thefinalissue pricepershare must be bookedascapitalforthe partcorrespondingtothe fractional value (fractiewaarde/ paircomptable) of each share. The remainder of the issue price must be booked onablocked "Issue Premium" account, which shall constitute, like the capital, the guaranteeforthird partiesandmay only be reduced or cancelled byadecision of thegeneralmeeting, in accordance with Article612of the CompanyCode.

The Company will applyforthe admission of theNewSharestotrading on the regulated market of Euronext Brussels.

(c) Accelerated bookbuilt offeringandrole of the Bookrunners

The Bookrunners will contact investorsand,following receipt of offerstherefrom, recommend the allocation of theNewShares. Thefinalallocation of theNewShares will be determined by the Company on thebasisof the Bookrunners' recommendation.Noinvestorshavereceivednorwill receive any commitment or undertaking from the Company or the Bookrunnersasregards allocation of theNew Shares.

NoProspectus (d)

• (1) Offering. Inaccordance with Article3, §2,subparagraph1,a),of the law of June16, 2006on thepublicoffering of financial instrumentsandthe admission of financial instrumentstotrading onaregulated market (the "Prospectus Law"), the offering of theNewSharestoqualified investorsis notapublicofferingandthereforedoesnotrequire the publication of a prospectus.
• (ii) Admissionto trading. Inaccordance with Article18, §2,a)of the Prospectus Law,noprospectusisrequiredforthe admissiontotrading of theNew Sharesas aresult of the Capital Increase, considering that theNewShares will represent,overaperiod of 12months, less than10%of the number of shares of thesameclass of the Company already admittedtotrading.

4. JUSTIFICATION OF THE DISAPPLICATION OF THE PREFERENTIAL SUBSCRIPTION RIGHT

TheBoardof Directors considers that anABBwith disapplication of the preferential subscription rightis moreappropriate than other alternatives suchas apublicofferingto existing shareholders, considering that:

• (a) it involvesashorter execution period, thereby reducing the risk associated with market volatilityandmarket liquidity;
• (b) itis asuitableapproachfortransactions with limited size,as isthecasehere, where institutional investorshavethe capacity quicklytoabsorb the Capital Increase, allowing theABBtobe carriedout inasingleday;
• (С) it allowsfor agreater flexibilitytoadapt the Capital Increasetomarket conditions;
• (d) the issue price can be maximized, with lower discounts than what would usually prevailincapital increases with preferential subscription right;
• (e) issue costsarereduced, since the costs of theABBarelimitedtothe placement processandtherefore represent lower operational,marketing andlegalcost, which leadstolower costsoverallthanacapital increase with preferential subscription right orapublicofferingtothe marketas awhole;and
• (t) it allowsfor agreater flexibilityinterms of allocation of theNewShares, so that they can be distributed optimally, whichin turnreduces speculativeandflowback risk.

Given the purpose of the Capital Increase(asdescribedinsection2above),andtaking into account the benefits of an accelerated bookbuilding process, the costs,timing andburden of a placement with preferential subscription right,andthe limited dilution resulting from the Capital Increase, theBoardof Directors considers that the Capital IncreaseviaanABB, which necessarily implies the disapplication of the preferential subscription right,isinthe Company's corporate interest.

5. DETERMINATION OF THE PRICEFORTHE NEW SHARES

The proposed placement with institutional investors implies the use of abookbuilding process, pursuanttowhich investors indicate their interestfor acertainvolumeof subscriptionsatdifferent price levels. This process allows the determination of the subscription priceatan equilibrium between the maximization of the amount of equityfor which each shareissubscribed on the one handandamaximization of the success of the placementandthe number of subscribed shares on the other hand.

Asmentionedinsectіon3(a)above, thefinalissue price shall be determinedattheendof the bookbuilding process, taking into account theminimumpriceasset out insection3(a)above, by any two directors (acting jointly), pursuanttothe powers granted by theBoardof Directors.

6. DESCRIPTION OF THE IMPACT OF THE CAPITAL INCREASE ON THE POSITION OF EXISTING SHAREHOLDERS

The price determination methodset out insection5 abovedoesnotallowfor apreciseand finalcalculation of the financial consequences of the Capital Increase given that thefinal issue price is not yet known at the date of this report. As a consequence, the analysis of the impact of the Capital Increase on the position of existing shareholders, as set out below, is based on the hypothesis of an issue price of EUR 28.03, i.e. the minimum issue price if the closing share price on the trading day preceding the announcement of the ABB was the same as the closing share price on the trading day preceding the date of this report (EUR 31.14 less $10\%$ ).

$(a)$ Consequences in terms of participation in the share capital and voting rights

If, in the abovementioned hypothesis, the maximum number of shares is issued, i.e. 7,486,110 New Shares, the New Shares will represent 9.99% (rounded down) of the aggregate amount of the currently outstanding ordinary shares of the Company. Assuming that none of the existing shareholders subscribe for the New Shares, the Capital Increase will therefore lead, based on the abovementioned assumptions, to a dilution of existing shareholders from 100 to $90.91\%$ (rounded up).

$(b)$ Financial consequences

Taking into account the abovementioned hypothetical issue price (EUR 28.03) and the maximum number of New Shares $(7,486,110)$ , and assuming that no current shareholder subscribes for the New Shares, the financial dilution ("FD") of the existing shareholders, expressed in percentage of the value of one share, would be $0.91\%$ .

This percentage is calculated based on the following formula:

$$
FD = \frac{(CP - IP)}{CP} * \frac{NS}{(OS + NS)} * 100
$$

where:

• CP is the closing price of the share of the Company on Euronext Brussels on $\bullet$ March 16, 2017, i.e. EUR 31.14;
• OS is the number of outstanding shares of the Company before the Capital $\bullet$ Increase, i.e. 74,861,108;
• NS is the hypothetical number of New Shares issued pursuant to the Capital Increase, i.e. 7,486,110;
• IP is the hypothetical issue price of the New Shares, which, for the purpose of the above, is assumed to be equal to EUR 28.03.

The hypothetical issue price mentioned above is given for illustrative purposes only, and the final issue price will be determined at the end of the bookbuilding process, taking into account the minimum price determined in accordance with the board resolution in relation to the Capital Increase.

$\overline{7}$ . CONCLUSION

In light of the considerations mentioned above, the Board of Directors is of the opinion that the Capital Increase and the disapplication of the preferential subscription right of existing shareholders are in the corporate interest of the Company.

(Signature page to follow)

Brussels,March17, 2017

On behalf of theboardof directors of Ontex GroupNV,

ArtipaBVBA,represented by itspermanent representative,ThierryNavarre Chief Operating Officer, special proxyholder