Techstep ASA — M&A Activity 2016

Jul 4, 2016

TECHSTEP ASA: ACQUISITION OF ZONO AS AND AGREEMENT TO ACQUIRE A MAJORITY STAKE IN TEKI SOLUTIONS AS

TECHSTEP ASA: ACQUISITION OF ZONO AS AND AGREEMENT TO ACQUIRE A MAJORITY STAKE IN TEKI SOLUTIONS AS

Summary

On 1 July 2016, Techstep ASA ("TECH") (former Birdstep Technology ASA) entered into

an agreement with Zono Holding AS ("Zono Holding"), a company controlled by

Middelborg AS, of a transaction whereby TECH will acquire 100% of the shares in Zono

AS ("Zono") in exchange for shares to be issued in TECH (the "Zono Transaction"). The

assets of Zono will comprise 24.22% of the shares in Teki Solutions AS ("Teki Solutions"),

5.12% of the shares in Kjedehuset AS ("Kjedehuset") and approximately NOK 55 million in

net cash balance.

Further, on 1 July 2016, TECH entered into an agreement in principle with Teki Gruppen

AS ("Teki Gruppen") to acquire an additional 53.94% of the shares in Teki Solutions, also

this in exchange for shares to be issued in TECH (the "Teki Gruppen Transaction").

Both the Zono Transaction and the Teki Gruppen Transaction are subject to fulfillment of

certain terms and conditions.

The contemplated acquisitions support TECH's strategy to build on its knowledge and

background in mobile technology to establish TECH as a driver of consolidation within

the mobility and communications sector. The mobility and communications market is

undergoing disruptive shifts where work is increasingly mobile and the value proposition

is changing from telecoms' infrastructure towards a fragmented ecosystem of software

and digital solutions.

The competitive landscape of this market in Norway is still fragmented. The changes in

market dynamics require larger, but agile players that both have the ability to deliver

innovative services and solutions at pace with technology development, and the security

and performance needed to move business critical process and sensitive data out on

handheld devices. TECH aims to be an attractive driver of consolidation, innovation and

product development within the mobility and communications segment.

Teki Solutions provides B2B mobility and communications products and services in

Norway. Its mobile device product offering is branded as Nordialog, and its solutions and

service offering as SmartWorks. With a customer base of 3,600 companies with 220,000

end users, Teki Solutions has an extensive reach within the Norwegian business

segment.

Kjedehuset, in which Zono AS owns 5.12%, is Telenor's Norwegian B2B sales and

distribution organisation.Teki Solutions' Nordialog business has a franchise agreement

with Kjedehuset and has together with SmartWorks a close relationship with Telenor. The

contemplated transactions are expected to strengthen the combined distribution power

and thereby strengthen the alliance with Kjedehuset and Telenor through a more rapid

development of value adding services towards their joint extensive customer base.

Zono has a net cash position of approximately NOK 55 million that will be part of the

Zono Transaction. The strengthened cash position will be important in financing TECH's

further organic and structural growth. The combined competence, network, assets and

financial resources of TECH, Teki Solutions, Middelborg and Teki Gruppen is expected to

catalyse growth.

Key drivers in the continued growth of the combined entities

- Growth will be targeted along two main axes having multiplicative effects on revenue

and profitability:

- Service current end user base with a larger range of services to increase average

revenue per user ("ARPU"):

- Assist customers in mobility transformation by rolling out existing suite of

solutions to a larger share of customers.

- Continue to be a leading solutions innovator in close collaboration with customers

- Address M&A and/or partnership opportunities of further value-added services

- Increase base of end users:

- Target M&A opportunities

- Organic growth, increase share of wallet (today less than 50%)

About Teki Solutions

Teki Solutions is a leading Norwegian B2B provider of mobility and communication

solutions. Headquartered in Oslo, Teki Solutions has 10 offices and business centers

across Oslo and eastern Norway. Teki Solutions was formed in 2013 through mergers of

independent mobility and communication providers. The Nordialog Oslo part has a

history going back approximately 20 years. Teki Solutions has a customer base of 3,600

companies and 220,000 end users.

Teki Solutions has two main business areas. The first is sale of mobile solutions, mobile

devices and related hardware and mobile subscription packages for business customers

through the Nordialog brand in eastern Norway. The second is development of

customized solutions and products through the in-house advisor and solution architect

SmartWorks, a wholly owned subsidiary of Teki Solutions.

.

Please find Key figures of Teki Solutions Group in the PDF attached to this filing

Teki Solutions experienced strong revenue growth from 2013 to 2015 driven by both

increased hardware sales and ramp-up of the service offering. The reduction in EBITDA

is mainly due to lower margins on hardware and decreased hardware related

commissions and bonuses at a faster pace than the growth in sale of services. The

strong growth within services is expected to continue in 2016 while sale of handheld

devices and subscription sale is expected to decline from 2015 to 2016 due to an overall

market dampening. Going forward income growth will come from increase in ARPU,

increased number of end-users and the combination thereof, as well as new "as a

service" business models. Margins will be driven by share of services (which on average

has a substantially higher gross margin than hardware).

About the Zono Transaction

In the Zono Transaction, Zono is valued at NOK 128 million, which will be settled by

issuance of 58,181,818 TECH shares at a subscription price of NOK 2.20 per TECH share.

The Zono Transaction is expected to be completed ultimo August 2016, subject to the

approval by an extraordinary general meeting of TECH expected to take place medio

August 2016, and subject to fulfillment of certain customary terms and conditions.

The agreement and the Zono Transaction is a result of further efforts and negotiations

based on the letter of intent entered into on 8 March 2016 between Middelborg and

TECH for a potential merger (cf. stock exchange announcement on 9 March 2016).

Zono is a company wholly owned by Zono Holding, owned by Middelborg and certain

other financial investors, including Datum AS, Cipriano AS and Tigerstaden AS. At

completion of the Zono Transaction, Zono is estimated to have a net cash balance of

approximately NOK 55 million.

After completion of the Zono Transaction, Zono Holding will hold 81.10% of the shares

and votes in TECH (before the contemplated repair issue previously announced, of which

further information will be provided shortly, and completion of the Teki Gruppen

Transaction). Together with shares and votes currently held directly by Middelborg,

Middelborg will control 87.38% of the shares and votes in TECH.

If completed, the Zono Transaction will trigger an obligation for Zono Holding to make a

mandatory offer for all of the outstanding shares in TECH. Zono Holding have notified

TECH of its intention to offer a price of NOK 2.20 per share. The mandatory offer is

expected to be made during September 2016.

Zono Holding have also notified TECH that the purpose of the mandatory offer will be to

comply with the mandatory offer obligations in the securities trading act, not to increase

its stake in TECH. The intention of Zono Holding is that TECH shall remain a listed

company on Oslo Børs with a large and diversified shareholder base.

Please find Key figures of Zono AS in the PDF attached to this filing.

About the Teki Gruppen Transaction

The Teki Gruppen Transaction, whereby TECH will acquire a further 53.94% of the shares

in Teki Solutions involves a price on the same general terms on valuation of Teki

Solutions as implied in the Zono Transaction. The transaction is to be settled in full with

TECH shares to be issued at a subscription price based on the volume weighted average

share price at Oslo Børs over 15 trading days following completion of the Zono

Transaction. However, the subscription price shall not be below NOK 2.5 and not above

NOK 4.3.

The Teki Gruppen Transaction is, inter alia, conditioned upon the successful outcome of

a financial and legal due diligence and approval at an extraordinary general meeting in

TECH. If all conditions are satisfied the transaction is expected to be completed during

Q3 2016.

Management and board of directors

In connection with completion of the contemplated transactions, TECH will establish a

new management team to execute and further develop the new group's revised strategy

and growth ambitions. TECH's nomination committee will together with the largest

shareholders also seek for suitable candidates to strengthen the board of directors.

Update on the partner/cooperation agreements with Smith Micro and Teki Solutions

On 8 March 2016, in connection with TECH's sale of Birdstep Technology AB, TECH,

Smith Micro and Teki Solutions entered into a letter of intent regarding exploration of

Smith Micro's and Birdstep Technology AB's technology towards the customer base of

Teki Solutions. Subsequently, the letter of intent has been replaced with a process

agreement. This process agreement includes access to certain products as well as

technical training for Teki Solutions for a certain test period. The aim is to establish a

long-term partnership between Teki Solutions and Smith Micro, where Teki Solutions'

subsidiary SmartWorks will be heavily involved, covering the Nordic region.

Statements

Ian Jenks, Chairman of the board of TECH comments: "We are very satisfied that we now

have taken the first step in a new growth story for TECH. We believe the combination of

TECH, Zono and potentially the remaining shares in Teki Solutions to be a solid

foundation for growth and further consolidation with the sector. "

"Given completion of the planned transactions, the combination of TECH and Teki

Solutions will provide a solid platform for creating a leading solution provider within the

Nordic communication and mobility sector." says Svein Ove Brekke, CEO of Teki

Gruppen.

Kristian Lundkvist, Chairman of Middelborg AS comments: "Our strategy as a combined

company will both focus on organic and M&A driven growth, and we see a strong

potential within both. We are at the start of a very exiting journey for our stakeholders,

including customers, partners, employees and shareholders."

For further information, please contact:

Fredrik Johansson, COO of Techstep ASA, mobile: +46 70 352 91 90