Ahlstrom-Munksjö’s acquisition of paper producer Expera will triple its net sales in the U.S.

Transaction almost triples Ahlstrom-Munksjö’s net sales in the U.S. and provides platform for growth.

AHLSTROM-MUNKSJÖ OYJ, STOCK EXCHANGE RELEASE July 23, 2018 at 22:30 EEST

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HELSINKI, 24-Jul-2018 — /EuropaWire/ — Ahlstrom-Munksjö, a global leader in fiber based materials, has agreed on July 23, 2018 with Specialty Papers Holding, L.P. to acquire Expera Specialty Solutions (“Expera”), a U.S. based specialty paper producer, to expand its presence in North America and further strengthen its offering of advanced custom-made fiber based materials. The acquisition will almost triple Ahlstrom-Munksjö’s net sales in the U.S. and provide a platform for growth. Together Ahlstrom-Munksjö and Expera, combined with the Caieiras acquisition announced in April, generated illustrative combined annual net sales of EUR 2,921 million in 2017. Ahlstrom-Munksjö has secured fully committed financing for the transaction.

The acquisition supports Ahlstrom-Munksjö’s ambition to strengthen its position in selected high-end, value adding areas of the global fiber-based materials market that offer positive growth outlook and are supported by market drivers for more sustainable products and solutions. The acquisition will be earnings enhancing.

The Expera acquisition:

• Transformative acquisition with annual net sales of USD 721 million (EUR 616 million) for 2017
• Significant expansion of North American presence, including new product segments
• Strong platform in the U.S. that provides Ahlstrom-Munksjö with attractive growth opportunities and additional U.S. production capacity
• Pure specialty paper producer in value-added product categories
• Four paper mills with two integrated pulp mills
• Experienced management with a profit improvement track-record
• The purchase price payable is USD 615 million (EUR 526 million) on a cash and debt free basis, subject to a post completion adjustment based upon the level of net working capital and cash and debt in the acquired business on the closing date
• Comparable EBITDA of USD 71 million (EUR 61 million) for 2017. Comparable EBITDA includes USD 3 million (EUR 3 million) of items which will not have a continuous impact on EBITDA such as start-up cost of investment and current management fees.
• Estimated near term annual synergy benefits of approximately USD 10 million (EUR 8 million) with additional potential from planned annual run rate EBITDA of recently finalized investment of approximately USD 11 million (EUR 9 million)
• Dynamic synergies relating to product development and best practice sharing

Expera is highly complementary to Ahlstrom-Munksjö and will provide opportunities for cross-selling and best practice sharing as well as preliminary cost synergies of approximately EUR 8 million (USD 10 million) by year end 2019. In addition, value will be created from joint product development and sharing of best practices. One-time costs related to the achievement of synergies are estimated at EUR 7 million (USD 8 million). Strength in product development will help the company to serve its customers better.

Hans Sohlström, President and CEO of Ahlstrom-Munksjö comments: “We are excited to welcome Expera and their highly talented leadership team led by Russ Wanke to Ahlstrom-Munksjö. Together, our combined, complementary capabilities and expertise will further strengthen our position in fiber-based materials and will enable us to offer even more solutions, value and efficiencies to our customers in North America and around the world. Expera contributes to our global platform with their competences, a high quality offering and a team that drives customer value, innovations and sustainability.”

“As a larger company with a strong balance sheet and greater earnings generation this transaction paves the way for further profitable growth to be carried out both organically and through acquisitions. While the transaction will temporarily increase our debt, over time we see an optimal leverage of around 2x net debt to EBITDA, which gives us sufficient maneuvering space for further development of the company. I appreciate also our continued strong ability to create cash flow as a combined company. We look forward to bringing this transaction to completion and working with the competent Expera team”.

Russ Wanke, the President and CEO of Expera, will become a member of Ahlstrom-Munksjö’s Executive Management Team following the closing. He will be responsible for the acquired operations, which will form a fifth business area and reporting segment in Ahlstrom-Munksjö. Furthermore, Russ Wanke and certain other members of the management team will invest in Ahlstrom-Munksjö shares in connection with the closing.

Russ Wanke, Expera’s Chief Executive Officer, said, “This is the beginning of an exciting new era for Expera’s team and customers. Joining Ahlstrom-Munksjö, a global leader in fiber-based materials, strengthens Expera’s platform and allows for growth in the future. This is an important development for our customers, employees and communities, as we continue to capitalize on the strength of the specialty paper industry worldwide, and provide innovative products with a superior level of service.” Wanke continued, “Our entire team is very excited about Ahlstrom-Munksjö’s commitment to manufacturing excellence and to supporting our innovative business.”

Closing of the acquisition is subject to regulatory approvals and other customary closing conditions. Closing of the acquisition is expected during the second half of 2018.

Financing of the transaction:

Debt financing

Ahlstrom-Munksjö has secured fully committed financing for the transaction. Ahlstrom-Munksjö has secured USD 615 million in bank financing for the acquisition from Nordea Bank AB (“Nordea”) and Skandinaviska Enskilda Banken AB (“SEB”), together acting as Mandated Lead Arrangers, Underwriters and Bookrunners. The acquisition financing consists of (i) an USD 180 million bridge-to-equity facility with termination date 30 June 2019, (ii) an USD 185 million bridge facility with 12 month maturity from the earlier of the closing and 3 months from signing and (iii) an USD 250 million term loan facility with 5 years maturity from the earlier of the closing and 3 months from signing.

In addition, Nordea and SEB have agreed to provide certain back-stop/refinancing facilities in relation to existing financing arrangements.

Rights offering

To finance part of the transaction, Ahlstrom-Munksjö plans to conduct a rights offering of approximately EUR 150 million, which is expected to be launched during the fourth quarter of 2018.

The Company will separately convene an extraordinary general meeting of shareholders (EGM) to authorize the Board of Directors to resolve on the share issue. Shareholders holding in aggregate approximately 35.9% (June 30, 2018) of the shares and votes in the Company, AC Invest Five B.V., a company belonging to Ahlström Capital group, Viknum AB, Belgrano Inversiones Oy, Ilmarinen Mutual Pension Insurance Company, Varma Mutual Pension Insurance Company and Baltiska Handels A.B. have irrevocably undertaken to attend the EGM and vote in favor of the share issue authorization. AC Invest Five B.V., a company belonging to Ahlström Capital group, Viknum AB, Belgrano Inversiones Oy and Baltiska Handels A.B. have further expressed their support and intention to subscribe for their respective pro rata allocation in the rights offering. The remainder of the rights offering will be underwritten by Nordea and SEB, subject to customary terms and conditions.

The proceeds from the rights offering will be used for the financing of the transaction or repayment of outstanding bridge facilities related to the transaction.

About Expera

Expera is among the leading North American suppliers in attractive and high growth specialty paper segments. The company provides highly specialized materials that protect and enhance the performance of a wide range of industrial and consumer applications. The materials are predominately designed to the customers’ needs rather than generic industry standards. The company’s customer relationships are long-standing, and focused on quality and service. The product portfolio is less exposed to economic cycles given its high share of sales to more cycle-resistant end-markets such as food and retail.

Expera’s key product categories:

Industrial & Technical

• Backings and barriers for technical material used in residential and commercial construction, tape applications and metal and glass manufacturing

Food Processing & Packaging

• Specialty papers to wrap and package processed foods and quick service restaurants-prepared foods

Pressure-Sensitive Release Liner

• Variety of uses in which specialty paper enables customers’ products to retain adhesive properties prior to final application

Expera’s manufacturing platform is comprised of four paper mills, of which two are integrated into pulp production in the U.S. state of Wisconsin: Rhinelander, De Pere, Mosinee and Kaukauna. In 2017 Expera finalized the investment in a new state of the art silicone coater and started production ramp-up for a key customer based on long term volume commitment, which is expected to generate growth opportunities for the Expera business.

In 2013, KPS created Expera from the combination of the specialty paper businesses of Thilmany, LLC and Wausau Paper, Corp., with deep roots in the Wisconsin paper industry dating back more than 135 years. Through its stewardship and capital investment in state of the art production and coating assets KPS created one of the few pure play specialty paper businesses in North America. Under KPS’s ownership, Expera successfully integrated the two businesses and created significant value with no customer loss and interruption. The team that KPS brought together in the transaction is highly experienced in complex acquisition and mill integration processes.

Selected financial information

Basis of preparation

The selected financial information presented below is based on Ahlstrom-Munksjö’s unaudited pro forma financial information for the financial year 2017 prepared in accordance with IFRS, Expera’s audited financial statements for the financial year 2017 prepared in accordance with US GAAP and Caieiras’s unaudited special purpose carve-out management reporting information for the financial year 2017 prepared in accordance with Brazilian GAAP. The figures have been rounded to the nearest million.

The combined financial information is for illustrative purposes only. The combined financial information gives an indication of the combined company’s net sales assuming the activities were included in the same company from the beginning of the last financial year. The combined financial information is based on a hypothetical situation and should not be viewed as pro forma financial information as differences in accounting principles have not been taken into account. Ahlstrom-Munksjö will in connection with the rights offering publish unaudited pro forma financial information to illustrate the impact of the acquisitions of Expera and Caieiras and the related financing transactions to Ahlstrom-Munksjö’s financial information prepared in accordance with IFRS.

Expera’s financial information below and all other financial figures in USD in this release have been converted into EUR using the EUR/USD exchange rate 1.17. Caieiras’ financial information below and all other financial figures in BRL in this release have been converted into EUR using the EUR/BRL exchange rate 4.49.

Key figures

Expera (US GAAP)

* Expera EBITDA includes expense item of EUR 3.8 million (USD 4.5 million) relating to a change in contingent consideration payable pursuant to a purchase agreement and other items that are, based on management’s preliminary assessment, considered to be outside ordinary course of business of EUR 0.9 million (USD 1.0 million), net expense which are considered as adjusting items in accordance with Ahlstrom-Munksjö principles. In addition, Expera EBITDA includes EUR 1.5 million (USD 1.7 million) of current management fees as well as EUR 0.9 million (USD 1.1 million) of start-up costs related to investments which will not have a continuous impact on EBITDA.

Caieiras (Brazilian GAAP) On April 24 2018, Ahlstrom-Munksjö agreed to acquire the Caieiras paper mill in Brazil. Expected closing during Q3 2018. Annual synergies are estimated to be up to EUR 6 million.

* Caieiras EBITDA includes net income of EUR 0.1 million for energy resale and restructuring expenses of EUR 0.8 million.

Ahlstrom-Munksjö

Illustrative unaudited combined net sales 2017 of Ahlstrom-Munksjö, after Expera and Caieiras acquisitions

Illustrative unaudited net debt impact of the planned transactions

Ahlstrom-Munksjö’s net debt amounted to EUR 395 million as at March 31, 2018. The impact of the planned acquisitions of Expera and Caieiras to Ahlstrom-Munksjö’s net debt is estimated to be an increase of approximately EUR 475 million, assuming the debt-free purchase price of USD 615 million (EUR 526 million) for Expera and the rights offering of EUR 150 million as well as the debt free purchase price of approximately EUR 100 million for Caieiras. The actual net debt impact of these acquisitions will depend on the final purchase considerations taking into account purchase price adjustments at closing and prevailing exchange rates, and accordingly may differ from this estimate.

Ahlstrom-Munksjö is being advised by BDT & Company International, LLP; and PwC as financial advisors, while Hannes Snellman and Cleary Gottlieb Steen & Hamilton LLP act as legal advisors.

For further information, please contact:

Hans Sohlström, President and CEO, tel. +358 10 888 2520
Johan Lindh, Head of Investor Relations, + 46 (0)70 588 10 38,
johan.lindh@ahlstrom-munksjo.com

IMPORTANT NOTICE

These materials are not an offer for sale of securities in the United States. Securities may not be sold in the United States absent registration with the United States Securities and Exchange Commission or an exemption from registration under the U.S. Securities Act of 1933, as amended. Ahlstrom-Munksjö does not intend to register any part of the rights offering in the United States or to conduct a public offering of securities in the United States.

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This release does not constitute a prospectus as defined in the Prospectus Directive (EC/71/2003, as amended) and as such, does not constitute or form part of and should not be construed as, an offer to sell, or the solicitation or invitation of any offer to buy, acquire or subscribe for, any securities or an inducement to enter into investment activity.

No part of this release, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. The information contained in this release has not been independently verified. No representation, warranty or undertaking, expressed or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. Ahlstrom-Munksjö or any of its respective affiliates, advisors or representatives or any other person, shall have no liability whatsoever (in negligence or otherwise) for any loss however arising from any use of this release or its contents or otherwise arising in connection with this release. Each person must rely on their own examination and analysis of Ahlstrom-Munksjö, its subsidiaries, its securities and the transaction, including the merits and risks involved.

This release includes “forward-looking statements.” These statements may not be based on historical facts, but are statements about future expectations. When used in this release, the words “aims,” “anticipates,” “assumes,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “should,” “will,” “would” and similar expressions as they relate to Ahlstrom-Munksjö, Expera and the transaction identify certain of these forward-looking statements. Other forward-looking statements can be identified in the context in which the statements are made. Forward-looking statements are set forth in a number of places in this release, including wherever this release include information on the future results, plans and expectations with regard to the combined company’s business, including its strategic plans and plans on growth and profitability, and the general economic conditions. These forward-looking statements are based on present plans, estimates, projections and expectations and are not guarantees of future performance. They are based on certain expectations, which, even though they seem to be reasonable at present, may turn out to be incorrect. Such forward-looking statements are based on assumptions and are subject to various risks and uncertainties. Shareholders should not rely on these forward-looking statements. Numerous factors may cause the actual results of operations or financial condition of the combined company to differ materially from those expressed or implied in the forward-looking statements. Ahlstrom-Munksjö or any of its affiliates, advisors or representatives or any other person undertakes no obligation to review or confirm or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise after the date of this release.

This release includes estimates relating to the synergy benefits expected to arise from the transaction and the combination of the business operations of Ahlstrom-Munksjö and Expera as well as the related integration costs, which have been prepared by Ahlstrom-Munksjö and are based on a number of assumptions and judgments. Such estimates present the expected future impact of the transaction and the combination of the business operations of Ahlstrom-Munksjö and Expera on the combined company’s business, financial condition and results of operations. The assumptions relating to the estimated synergy benefits and related integration costs are inherently uncertain and are subject to a wide variety of significant business, economic, and competitive risks and uncertainties that could cause the actual synergy benefits from the transaction and the combination of the business operations of Ahlstrom-Munksjö and Expera, if any, and related integration costs to differ materially from the estimates in this release. Further, there can be no certainty that the transaction will be completed in the manner and timeframe described in this release, or at all.

Ahlstrom-Munksjö in brief
Ahlstrom-Munksjö is a global leader in fiber-based materials, supplying innovative and sustainable solutions to customers worldwide. Our offerings include decor paper, filter media, release liners, abrasive backings, nonwovens, electrotechnical paper, glass fiber materials, food packaging and labeling, tape, medical fiber materials and solutions for diagnostics. Combined annual net sales are about EUR 2.2 billion and we employ 6,000 people. The Ahlstrom-Munksjö share is listed on the Nasdaq Helsinki and Stockholm. Read more at www.ahlstrom-munksjo.com.

SOURCE: Ahlstrom-Munksjö