Klövern AB (publ) : Klövern is making an offer for Dagon and is issuing preference shares to existing shareholders in Klövern

The board of directors of Klövern AB (publ) has decided to make a public offer for all shares in Dagon AB (publ). The acquisition entails that Klövern would grow substantially and become established in new growth markets as well as increasing Klövern’s potential both in letting and projects. After the acquisition, Klövern will have a property portfolio of 380 properties with a value of just over SEK 20 billion and a total assessed rental value of around SEK 2.2 billion.

Klövern’s offer is valued at SEK 1,474 million, equivalent to SEK 62.50 per share in Dagon. The purchase price consists of 30 per cent in cash and 70 per cent in newly issued preference shares in Klövern.

The consideration preference shares are a new class of shares for Klövern. With a view to creating the conditions for good liquidity in the preference share, Klövern’s board is proposing that the extraordinary shareholders’ meeting which is to make the requisite decisions to issue preference shares in conjunction with the offer also make a decision on a bonus issue of preference shares in which existing shareholders of Klövern receive one preference share per holding of forty common shares. Klövern will make an application for trading of the preference shares on NASDAQ OMX Stockholm.

THE PUBLIC OFFER

Background and reasons
Through the acquisition, Klövern will become established in a number of new markets in southern Sweden, including the strongly expanding and attractive Öresund region. Dagon’s property portfolio, valued at SEK 5.6 billion, has potential in the form of projects, building rights and vacancies, which Klövern has good experience of handling.

Klövern is a growth-oriented real estate company with the vision of “creating tomorrow’s communities”. The business concept is, with availability and commitment, to meet the customer’s needs of premises and services in Swedish growth regions. The growth ambition entails a goal of a net growth of the property portfolio of at least SEK 1 billion per year and, in the course of time, a property value of at least SEK 25 billion, as a larger equity and higher liquidity in the share broadens the number of possible institutional investors.

Klövern is now focused on being a market leader in ten different cities in Central Sweden, with a business unit in every city. To optimize this activity, the ten business units work together in three geographic market areas – South (Borås, Linköping, Norrköping and Nyköping), West (Karlstad, Västerås and Örebro) and East (Kista, Täby and Uppsala). Klövern’s property portfolio mainly consists of commercial premises within the framework of Business and Science Parks, small business parks and city properties. As at 30 September 2011, the property portfolio consisted of 255 properties with a fair value of SEK 14,559 million and an assessed rental value of SEK 1,565 million. The economic occupancy rate amounted to 89 per cent.

Dagon is a property company with its main focus on commercial properties and project properties with a broad geographic base in Sweden. As at 30 September 2011, the property portfolio consisted of 125 properties with a fair value of SEK 5 623 million and an assessed rental value of SEK 648 million. Greater Stockholm and Öresund are Dagon’s largest geographic areas in terms of value, accounting for 26 and 25 per cent respectively of the property value as at 30 September 2011. The rental value consisted of 75 per cent investment properties and 25 per cent improvement and project properties. The economic occupancy rate was 84 per cent.

After acquisition, Klövern will have a property portfolio of 380 properties at a fair value of just over SEK 20 billion, a total assessed rental value of around SEK 2.2 billion and an economic occupancy rate of 87 per cent. The property portfolio will be focused on commercial properties and distributed over a number of growth locations in southern and central Sweden.

The acquisition makes possible synergy gains in central administration, IT, financial reporting and listing costs. Benefits of scale are expected in property management savings and efficiency improvements. Klövern estimates the annual synergy effects at around SEK 25 million with full impact from 2013 onwards.

The offer
Klövern is offering every shareholder in Dagon the following:

• For 30 per cent of the number of shares transferred by the shareholder, SEK 62.50 in cash per share in Dagon (“The cash consideration”).
• For 70 per cent of the number of shares in Dagon transferred by the shareholder: approximately 0.4699 new preference shares in Klövern per share in Dagon (“The preference share consideration”).^[1] The preference share consideration is equivalent to a value of SEK 62.50 per share in Dagon.^[2] For information about Klövern’s preference shares, which is a new class of share for Klövern, see below under the heading Klövern’s preference shares.

For every 100 shares in Dagon transferred, each shareholder thus receives SEK 1,875 in cash and around 32.9 new preference shares in Klövern.

As an alternative, the shareholders in Dagon owning 500 or fewer Dagon shares may opt to receive a guaranteed cash consideration of SEK 62.50 per share in Dagon (the “Guaranteed Cash alternative”).

The offer values Dagon at around SEK 1,474 million.^[3] The offer entails an offer premium of 24 per cent compared with the closing price of SEK 50.25 for the Dagon share on 5 December 2011, the last trading day prior to announcement of the offer. Compared with the volume-weighted average price of around SEK 50.20 for the Dagon share during the past 30 calendar days up until 5 December 2011 inclusive, the final trading day prior to announcement of the offer, the offer entails a premium of 25 per cent.

Given full acceptance of the offer and that no entitled small shareholder opts for the Guaranteed Cash alternative, SEK 442 million will be paid in cash and around 7,756,907 new preference shares in Klövern will be issued in the offer. Given full acceptance of the offer and that all entitled small shareholders choose the Guaranteed Cash alternative and based on Dagon’s shareowner structure as at 30 September 2011, SEK 445 million will be paid in cash and 7,736,583 new preference shares in Klövern will be issued in the offer.

Of the total number of shares in Dagon surrendered by a shareholder, 70 per cent (rounded upwards to the nearest full number when relevant) shall be multiplied by 0.4699.1
The figure thus calculated shall be rounded off downwards to the nearest full number and constitute the Preference Share consideration, i.e. the total number of preference shares in Klövern which the Dagon shareholder in question receives. The shareholder in question will receive Cash consideration, SEK 62.50 per share, for the remaining part of the shares surrendered, i.e. 30 per cent (rounded down, when relevant, to the nearest whole number). In the event of a shareholder owning 500 shares or fewer in Dagon, the shareholder in question may instead choose the Guaranteed Cash alternative, which entails that the shareholder will receive SEK 62.50 per share for all of its shares in Dagon.

According to the above, the Preference Share consideration is calculated after rounding off downwards. The excess part of the preference shares issued, which, due to the said rounding off, will not form part of the Preference Share consideration, shall be sold on NASDAQ OMX Stockholm. The net income from the sale will be distributed proportionally among the Dagon shareholders affected by the rounding-off in question.

Brokerage will not be charged in connection with implementation of the offer.

Klövern does not own any shares of other securities in Dagon.

Completion conditions for the offer
Completion of the offer is conditional on:

1. acceptance of the offer to such an extent that Klövern becomes owner of shares corresponding to more than 70 per cent of the shares in Dagon,
    
2. an extraordinary shareholders’ meeting of Klövern making the requisite decisions to issue preference shares in conjunction with the offer,
    
3. all the permits, approvals, decisions and other measures from authorities or similar, including competition authorities, requisite for the offer and acquisition of Dagon, being obtained on acceptable terms for Klövern,
    
4. no one else announcing an offer to acquire shares in Dagon on terms which are more favourable for the shareholders of Dagon than the terms applicable according to the offer,
    
5. neither the offer nor the acquisition of Dagon being wholly or partly made impossible or made significantly more difficult due to legislation or other regulation, a court decision, decision by a public authority or corresponding circumstance, which exists or may be anticipated, and which Klövern could not reasonably have foreseen at the time of publication of the offer,
    
6. no circumstances that Klövern had no knowledge of at the time of publication of the offer, taking place, which have an important negative effect, or can be expected to have an important negative effect on Dagon’s sales, earnings, liquidity, equity or assets;
   
   
7. no information which has been published by Dagon being significantly incorrect, incomplete or misleading, and that Dagon has published all information which shall be published, and
    
8. Dagon not undertaking any measures intended to worsen the conditions for making or implementation of the offer.

Klövern reserves the right to withdraw the offer in the event of it being clear that one or some of the above conditions are not complied with or cannot be complied with. With regard to conditions 3-8, the offer may only be withdrawn if the insufficient compliance is important for Klövern’s acquisition of Dagon.

Klövern reserves the right, to wholly or partly, depart from one, more or all of the above conditions, including with regard to condition 1, completing the offer at a lower level  of acceptance.
Undertakings by shareholders in Dagon
A number of large shareholders in Dagon, consisting of Cormac Förvaltning AB, Arvid Svensson Invest AB, L & P Länsberg & Partner AB, Lars Rosvall (through company), Kent Svensson and Göran Malmgren, which together represent 67 per cent of all outstanding shares in Dagon, have undertaken to accept the order unconditionally.

Financing of the offer
The offer will be financed by a combination of cash and newly issued preference shares in Klövern. Acceptance is conditional on an extraordinary shareholders’ meeting in Klövern making the requisite decisions to make possible issue of preference shares as consideration in the offer.

Klövern has received binding undertakings for acquisition financing of SEK 400 million from Swedbank, which, together with existing liquidity and credit facilities covers the cash part of the offer. Payment in accordance with the loan agreement with Swedbank is conditional on the completion conditions for the offer being complied with or departed from (such departure requires in certain circumstances the approval of the lender). Apart from this, the loan agreement does not contain any conditions for disbursement of the loan over which Klövern has no control.

Klövern intends to refinance the acquisition finance by issuing one or more bond loans, which diversify Klövern’s debt structure and complement current bank financing.

Financial effects for Klövern
Pro forma financial information for Klövern on full acceptance of the offer is presented briefly below. This information is based on no entitled small shareholder opting for the Guaranteed Cash alternative, an issue price for the newly issued preference shares of SEK 133 and on information from Klövern’s and Dagon’s interim reports for the period January to September 2011.

On full acceptance of the offer, Klövern’s property portfolio will increase in value from SEK 14.6 billion to SEK 20.2 billion and the rental value increase from SEK 1.6 billion to SEK 2.2 billion. Furthermore, the equity ratio will decrease from 30.6 per cent to 26.5 per cent.

Further description of the financial effects for Klövern will be included in the offer documentation.

Certain information on related parties
Fredrik Svensson is chairman of the board and a related party to major shareholders in Klövern as well as being a board member and a related party to major shareholders in Dagon. According to NASDAQ OMX Stockholm’s rules concerning takeover bids on the stock market (the “Takeover rules”), Fredrik Svensson is considered as participating in the offer on Klövern’s side. In the light of this, Klövern applies section III of the Takeover rules to the offer and assumes that the independent board members of Dagon, in accordance with the Takeover rules, will obtain and publish a valuation statement for the shares in Dagon from independent expertise at the latest two weeks before the end of the acceptance period. Fredrik Svensson has not participated in nor will participate, in Klövern’s or Dagon’s handling of the offer.

Due diligence
Klövern has carried out a limited company valuation of confirmatory character in connection with the preparations for the offer. Dagon has notified Klövern that, during this process, no information which has not been previously published and which could reasonably be expected to affect the price of the shares in Dagon has been submitted to Klövern.

Extraordinary shareholders’ meeting
Klövern’s board has decided to announce an extraordinary shareholders’ meeting to make the requisite decisions to issue the consideration shares in the offer, including decisions on amending the articles of association so as to make it possible to issue two classes of shares, common shares and preference shares. The shareholders’ meeting will be held on 12 January 2012.

A number of major shareholders in Klövern, consisting of Corem Property Group AB (publ), Arvid Svensson Invest AB and Rutger Arnhult (through company), which together represent 42 per cent of the total number of outstanding shares in Klövern, have undertaken to vote for the proposal at the extraordinary shareholders’ meeting.

The decision of the extraordinary shareholders’ meeting on amendment of the articles of association will only be valid if the decision has the support of shareholders with at least two-thirds of the votes cast and the shares represented at the meeting.

Further information about the extraordinary shareholders’ meeting will be available in the separate notice, which will be published on 6 December 2011. Complete proposals for decisions with appurtenant documentation for the extraordinary shareholders’ meeting is available on Klövern’s website at least 21 days prior to the meeting.

Preliminary timetable
Extraordinary shareholders’ meeting                                    12 January 2012
Offer documents are expected to be published                   13 January 2012
First day for acceptance of the offer                                   16 January 2012
Final day for acceptance of the offer                                  13 February 2012

Payment of the consideration in the Offer will start without delay after Klövern has announced that the terms and conditions for the Offer have been complied with or otherwise decided to complete the Offer. Klövern reserves the right to extend the acceptance period and to refer the date of payment of the consideration.

Applicable jurisdiction
Swedish law applies to the offer. The Takeover rules apply to the offer and the Swedish Securities Council’s decision on interpretation and application of the Takeover rules. Klövern has, in accordance with the Stock Market (Takeover Bids) Act, undertaken in relation to NASDAQ OMX Stockholm to comply with the Takeover rules and to abide by the sanctions that NASDAQ OMX Stockholm may decide upon in the event of breach of the Takeover rules. Disputes concerning, or which arise in connection with, the offer shall be determined exclusively by a Swedish court, with Stockholm District Court as the first instance.

Redemption and delisting
In the event of Klövern, in connection with the offer or otherwise, becoming owner of more than 90 per cent of the shares in Dagon, Klövern intends to demand redemption in accordance with the Companies Act with a view to acquiring all outstanding shares in Dagon. In this connection, Klövern intends to work for a delisting of the shares in Dagon from NASDAQ OMX Stockholm.

Bonus issue of preference shares to Klövern’s existing shareholders

Klövern’s board has decided to propose to the extraordinary shareholders’ meeting in Klövern on 12 January 2012 to decide on a bonus issue of preference shares to Klövern’s existing shareholders. (“The Bonus Issue”) entailing a right to one (1) preference share per holding of forty (40) common shares.

The Bonus Issue is being carried out to create the requisite spread of ownership among the owners of preference shares. This is a prerequisite to be able to list the share for trading on NASDAQ OMX Stockholm, which Klövern will apply for in connection with the Bonus Issue. By issuing preference shares, Klövern can reach investor categories which value a high continuous dividend.

The shareholders who are registered in the share register on the record day receive without needing to take action one (1) preference share per forty (40) common shares. The preference shares will be available in the shareholders’ VP accounts on or around 30 January 2012. Euroclear Sweden AB will then send an advice with information on the number of preference shares registered in the recipient’s VP account. Excess bonus share rights will be sold through Klövern after which the sales payment will be reported to the shareholders concerned.

The record day to receive preference shares in the Bonus Issue will be five bank days after the day on which the Swedish Companies Registration Office registered the Bonus Issue[which is expected to take place five bank days after Klövern’s extraordinary shareholders’ meeting. Shares in Klövern are traded excluding the right to participate in the Bonus Issue from two bank days inclusive before the record date. The final date for trading with shares in Klövern with entitlement to participate in the Bonus Issue is thus the third day before the record day.

The preference shares in the Bonus Issue confer a right to dividend from the first quarter of 2012 inclusive.

Klövern’s preference shares

According to the proposed new articles of association, the preference shares have a right of priority over the common shares to an annual dividend of SEK 10 per preference share. A quarterly dividend of SEK 2.50 per preference share is paid on the last weekday of the quarter. The preference shares do not otherwise confer any right to dividend.

In the event of the shareholders’ meeting of Klövern deciding not to pay dividend or to pay a dividend which is less than SEK 2.50 per preference share during a quarter, the part which is less than SEK 2.50 shall be added to the Retained Amount (as defined in the articles of association), which shall be adjusted upwards by an annual interest rate of 8 per cent until full dividend has been paid. No dividend may be paid to common shareholders until the preference shareholders have received full dividend including Retained Amounts.

In the event of liquidation, the preference shares take priority over the common shares corresponding to an amount of SEK 150 with a supplement for any Retained Amount (as defined in the articles of association) per preference share. After a decision by the shareholders’ meeting, the preference shares can be redeemed at Klövern’s request for an amount of SEK 175 with a supplement for any Retained Amount per preference share.

OTHER MATTERS

Advisors
Swedbank Corporate Finance is financial adviser and MAQS Law Firm Advokatbyrå AB is legal advisors to Klövern in connection with the offer.

Press conference
Klövern’s public offer for the shares in Dagon as well as the bonus issue of preference shares to shareholders in Klövern will be presented at a press conference at 2 pm today at MAQS Law Firm, Norrmalmstorg 1 in Stockholm.

Nyköping, 6 December 2011

Klövern AB (publ)
Board of Directors


For further information, please contact:
Gustaf Hermelin, CEO, +46 155-44 33 10/+46 70-560 00 00, gustaf.hermelin@klovern.se
Britt-Marie Einar, Finance and IR Manager, Deputy CEO, +46 155-44 33 12/+46 70-224 29 35, britt‑marie.einar@klovern.se
Rutger Arnhult, Board Member, +46 72-301 53 31, rutger@corem.se

Klövern is a real estate company committed to working closely with customers to meet their needs of premises and services in Swedish growth regions. Klövern has business units in ten cities: Borås, Karlstad, Kista, Linköping, Norrköping, Nyköping, Täby, Uppsala, Västerås and Örebro. As at 30 September 2011 the value of the properties totalled approximately SEK 14.6 billion and the rental income on an annual basis was around SEK 1.6 billion. The Klövern share is listed on NASDAQ OMX Stockholm Mid Cap.

Klövern AB (publ), Box 1024, SE-611 29 Nyköping, Sweden. Phone +46 155-44 33 00, Fax +46 155-44 33 22. Corporate registration no. 556482-5833. Registered office: Nyköping. Website: kelly.corem.se

This information is such that Klövern AB (publ) is obliged to disclose under the Securities Market Act and/or the Financial Instruments Trading Act. The information was made available for publication on 6 December 2011.

Important information
This notice contains future-oriented information. Future-oriented information by its nature entails risks and uncertainties as it relates to events and depends on circumstances that may or may not take place. Klövern draws the reader’s attention to the fact that future-oriented statements shall not be understood as guarantees regarding future development, and that the Group’s actual earnings, financial position, liquidity and development in the industry in which the group operates may differ substantially from the goals and expectations shown by the future-oriented information contained in this press release. These future-oriented statements only apply on the date of publication of this notice. Klövern gives no undertakings to publish updates or revisions of the future-oriented statements, neither due to new information, future events or the like, and explicitly disclaims any obligations and undertakings to publish any updates or revisions of the future-oriented statements contained in this press release due to any change in Klövern’s expectations in connection with or change of events, conditions or circumstances on which such statements are based.

This notice may not be distributed or reproduced, directly or indirectly, in or to the United States, Canada, Australia, Japan, New Zealand or South Africa and does not constitute, and is not a part of, any offer to acquire, subscribe to, sell or exchange, and not either a request for an offer to purchase, subscribe to, sell or exchange any securities to any person in the United States, Canada, Australia, Japan, New Zealand or South Africa, or a request for anyone to vote in a particular way in any such jurisdiction, and neither may any sale, issuance or transfer of the securities referred to in this press release take place in any jurisdiction in conflict with applicable legislation (“Limited Jurisdictions”). The offer is not made, directly or indirectly, in or to the United States or any other Limited Jurisdiction, or by post or other national or international means of communication (including, inter alia, fax, telephone and Internet) or through an establishment belonging to a stock exchange or another trading location in the United States or in any other of the Limited Jurisdictions and the offer cannot be accepted in any such way, by such means of communication or through such establishment or from the United States or any other Limited Jurisdiction. Shares in Klövern have not been registered, and will not be registered, in accordance with the US Securities Act 1933, with subsequent amendments (“Securities Act”), and may not be transferred or offered for sale in the United States unless such registration takes place in accordance with the Securities Act or an exemption from such registration is applicable. No offer concerning shares in Klövern is being made in the United States.