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Inside information

Sievi Capital Plc and Boreo Plc Consider Combination

SIEVI CAPITAL PLC INSIDE INFORMATION 18 AUGUST 2021 AT 9:30 A.M. EEST

NOT FOR DISTRIBUTION IN OR INTO THE UNITED STATES, OR IN ANY OTHER JURISDICTION IN WHICH SUCH DISTRIBUTION WOULD BE PROHIBITED BY APPLICABLE LAW

SIEVI CAPITAL PLC AND BOREO PLC CONSIDER COMBINATION

Today, the Boards of Directors of Sievi Capital Plc (“Sievi”) and Boreo Plc (“Boreo”) signed a letter of intent (“Letter of Intent”), pursuant to which the parties are looking into a potential combination between Boreo and Sievi (“Contemplated Combination”).

The Contemplated Combination would result in creation of one of the leading growth platforms for small and medium sized companies in Helsinki Stock Exchange (the “Future Company”). For 2020, initial estimates of the combined turnover (IFRS) of Sievi, including Sievi’s portfolio companies, and Boreo is approximately MEUR 474 and EBITDA approximately MEUR 62. The companies employ close to 1,700 people. More detailed bases for the combined numbers are presented in section “Initial Financial Information” below. As a result of the potential combination, the Future Company would be well placed for growth in Northern Europe by virtue of its strong financial position and its independent, strong businesses.

The purpose of the signed letter of intent is to allow the parties to assess the possible combination and its specific conditions. The letter of intent does not obligate the parties to complete the Contemplated Combination or any other arrangement.

The Contemplated Combination is being negotiated based on the following grounds:

• In the Contemplated Combination, the shareholders of Sievi would receive a total of 40% of the Future Company’s shares and votes and the shareholders of Boreo would receive a total of 60% of the Future Company’s shares and votes.
• This conversion rate would include a 42.1% premium for Sievi’s shareholders compared to the closing price of Sievi’s share on 17 August 2021. The premium with using the one (1) month volume-weighted average price of the companies up to 17 August 2021 is 24.0% and with three (3) month volume-weighted average prices up to 17 August 2021 the premium is 16.8%.
• The parties will agree on the legal procedure of completing the Contemplated Combination prior to signing the combination agreement.
• The largest shareholder of Sievi and Boreo, Preato Capital AB, and the members of the Boards of Directors independent of the largest shareholder have stated that they preliminarily support the Contemplated Combination.
• The Future Company’s name would be Boreo Plc and it would continue its business in accordance with the current operating model as a group. This would mean changing Sievi’s investment company operating model and consolidating its portfolio companies into the Future Company in reporting.
• The Future Company’s strategy would be based on Boreo’s current strategy acknowledging the businesses and strengths of the new combined entity.
• It is planned that Kari Nerg, the current CEO of Boreo, be elected as the CEO of the Future Company.
• The completion of the Contemplated Combination requires, among other things, that mutual due diligence reviews are conducted and accepted and the parties reach an agreement on the legal procedure of completing the Contemplated Combination and the related combination agreement and other transaction agreements. Provided that the companies reach an agreement on the conditions of the combination, the shareholders of both companies would decide on the combination.
• To enable an improvement of operative efficiencies and to ensure the commitment of and incentives for key persons, the parties intend, in connection with the Contemplated Combination, to assess the possibility of harmonising the ownership structures of Sievi’s portfolio companies.
• The parties aim to sign the combination agreement and other transaction agreements in September 2021.

Rationale of the Contemplated Combination

The Contemplated Combination would create

• one of the leading growth platforms for small and medium-sized companies in Helsinki Stock Exchange: the business operations of the Future Company would be well diversified among various industries areas and its dependency on individual client or customer relationships would be less important. Geographically, the Future Company would also be more strongly diversified in Northern Europe;
• a strong financial position and excellent conditions for the Future Company’s growth: a strong financial position would create a basis for the implementation of an acquisition-driven strategy and significant growth;
• scale and critical mass: the combination of Sievi and Boreo would significantly increase the size of the Future Company and enable more opportunities to increase operative efficiencies;
• even better and stronger conditions for the growth and development of independent businesses: the Future Company would create even better conditions for the utilisation of best practices, synergies between the businesses and a stronger offering to its customers, clients and other stakeholders.

Contemplated Strategy of the Combined Company

• The Future Company’s strategy would be based on Boreo’s current strategy taken into account the businesses and strengths of the new combination. The Future Company would serve as a growth platform for its companies and employees, create growth through acquisitions and focus on creating operative efficiencies and shareholder value in the long term.
• In Boreo’s operational model, new businesses would be acquired without an intent for divesting them. To enable an improvement of operative efficiencies and to ensure the commitment of and incentives for key persons, the parties intend to assess the possibility of harmonising the ownership structures of Sievi’s portfolio companies in connection with the Contemplated Combination. To capture financing synergies the aim is to organise financing required by the businesses on the group level.

Lennart Simonsen, Chairman of the Board of Directors of Sievi: “The Future Company would be better equipped to grow and create value for its shareholders than as separate companies. The Future Company would have a sound financial profile with strong businesses in their respective fields of operation and with a considerably improved ability to generate significant growth in the future. It would be great to see Sievi’s independent businesses to continue to develop as part of the growth platform provided by the Future Company”.

Jouni Grönroos, member of the Board of Directors of Boreo and chairman of the committee that is independent of the main owner: “In the Contemplated Combination, Boreo and Sievi would together establish one of the leading growth platforms for small and medium-sized companies in Finland. The transaction would be a logical next step on Boreo’s strategy path, which started in 2019 with the change of the main owner and has progressed with determination and strength until to date. The Contemplated Combination would create strong financial conditions for growth and for increasing the Future Company’s shareholder value.”

Päivi Marttila, CEO of Sievi: “Combining Boreo and Sievi would significantly increase the size of the company. The combination would support businesses and give tools for their development and further growth. This would be beneficial for the owners of Sievi Capital and for the personnel and customers of its portfolio companies”.

Kari Nerg, CEO of Boreo: “The Future Company would be well placed to create growth and the Contemplated Combination would strengthen the value proposition of being a best-in-class home for its companies and people. The Future Company would be an even more competitive partner for its customers and clients, and the company’s ability to attract talented experts would be further increased”.

The members of the Board of Directors who are responsible for preparing the Contemplated Combination and who are independent of Preato Capital AB, the largest shareholder of Sievi and Boreo, have stated that they preliminarily support the Contemplated Combination. The Boards of Directors of the Companies will acquire Fairness Opinions in line with general market practice to support their views before signing the binding combination and transaction agreements.

Preato Capital AB, the largest shareholder of Sievi and Boreo, has stated that it preliminarily supports the Contemplated Combination. Preato Capital AB owns 73.3% of the shares and votes in Boreo and 23.23% of the shares and votes in Sievi. The representatives of Preato Capital AB have not participated in the decisions concerning the combination in the Boards of Directors of Sievi and Boreo.

Initial Financial Information

The financial information presented here is based on initial estimates and it should not be considered as pro forma financial information. Not all portfolio companies of Sievi have prepared financial information in accordance with IFRS, and the IFRS information may therefore materially deviate from the information presented here.

The companies will publish pro forma financial information, in line with the prospectus regulation, in a prospectus that is estimated to be published in the last quarter of 2021. The pro forma financial information will include Sievi’s profit and loss statement, and balance sheet information prepared in accordance with IFRS.

¹ Boreo’s published unaudited pro forma turnover for 2020. EBITDA (IFRS) has been calculated by adjusting depreciation and amortization to unaudited pro forma operating profit (EBIT) for 2020. Pro forma figures do not include Muottikolmio Oy for January-September 2020 and PM Nordic & Sany Nordic AB, Etelä-Suomen Kuriiripalvelu & Teitteam Oy and Milcon Oy, which were acquired in 2021, nor Floby Nya Bilverkstad AB, acquisition of which was signed in June 2021.

² Pro forma figures that include only the target companies in Sievi Capital Group at the end of 2020 as if they were owned for the full year. For the part of Logistikas Oy sub-group figures are unaudited pro forma figures, which have been combined from the figures of the acquired companies Logistikas Palvelut Oy and Logistikas Hankinta Oy and from the consolidated figures of Logistikas group. For the part of the Nordic Rescue Group Oy sub-group the figures are unaudited pro forma figures, which have been combined from the figures of the acquired companies Saurus Oy and Vema Lift Oy and from the consolidated figures of Nordic Rescue Group. The figures do not include Suvanto Trucks Oy that was divested in 2020 and the companies that were acquired in 2021. Sievi Capital Plc’s and its portfolio companies’ IFRS figures are at this stage estimates and the combined company’s more accurate consolidated IFRS figures will be presented at a later stage.

³ Estimated number of employees 30 June 2021.

Advisors

Handelsbanken Capital Markets is acting as the financial adviser of Sievi and Hannes Snellman Attorneys Ltd is acting as the legal adviser of Sievi. MCF Corporate Finance Oy is acting as the financial adviser of Boreo and Castrén & Snellman Attorneys Ltd is acting as the legal adviser of Boreo.

SIEVI CAPITAL PLC
Board of Directors

DISTRIBUTION:
Nasdaq Helsinki
Major media

Further information:

CEO Päivi Marttila, Sievi Capital Plc, tel. +358 400 285 358

CEO Kari Nerg, Boreo Plc, tel. +358 44 341 8514

Sievi and Boreo in brief

Sievi Capital is a partner for Finnish entrepreneurs. We support the growth, performance and value creation of small and medium-sized companies and concurrently build national competitiveness. We believe that we succeed together as co-entrepreneurs. Sievi Capital’s share is listed on Nasdaq Helsinki.

Boreo, a company listed on the Helsinki Stock Exchange, creates value by owning, acquiring and developing B2B businesses in Northern Europe. Boreo’s operations are organised into three Business Areas: Electronics, Technical Trade and Heavy Machines. Boreo’s main objective is to create shareholder value in the long-term by growing via acquisitions, creating optimal conditions for its businesses to grow sales and earnings sustainably and by being a best-in-class home for its companies and people.

In 2020, Boreo’s pro forma sales amounted to EUR 103.6 million and the group employs over 350 persons in Finland, Sweden, Russia and the Baltics. The headquarters of Boreo are located in Vantaa, Finland.

Important Notice

This release is not an offer of shares in the United States and it is not intended for distribution in or into the United States or in any other jurisdiction in which such distribution would be prohibited by applicable law. If the Contemplated Combination is completed, the shares in the Future Company will not be registered under the U.S. Securities Act of 1933 (the “Securities Act”), and may not be offered, sold or delivered within or into the United States, except pursuant to an applicable exemption of, or in a transaction not subject to, the Securities Act.

This release does not constitute an offer of or an invitation by or on behalf of, Boreo or Sievi, or any other person, to purchase any securities.

This release includes ‘forward-looking statements’ that are based on present plans, estimates, projections and expectations and are not guarantees of future performance. They are based on certain expectations and assumptions, which, even though they seem to be reasonable at present, may turn out to be incorrect. Shareholders should not rely on these forward-looking statements. Numerous factors may cause the actual results of operations or financial condition of the Future Company to differ materially from those expressed or implied in the forward-looking statements. Neither Boreo nor Sievi, nor any of their respective affiliates, advisors or representatives or any other person undertakes any 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 benefits expected to arise from the potential combination of the business operations of Boreo and Sievi as well as the related integration costs, which have been prepared by Boreo and Sievi and are based on a number of assumptions and judgments. Such estimates present the expected future impact of the potential combination of the business operations of Boreo and Sievi on the combined company’s business, financial condition and results of operations. The assumptions relating to the estimated 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 benefits from the potential combination of the business operations of Boreo and Sievi, if any, and related integration costs to differ materially from the estimates in this release.

Further, there can be no certainty that the Contemplated Combination will be completed in the manner and timeframe described in this release, or at all.