Hafslund - The Board of Directors recommends not to accept the announced offer from the City of Oslo
The Board of Directors of Hafslund ASA has in a preliminary statement advised the shareholders not to accept the announced offer from the City of Oslo. The estimated value in the independent valuation from SpareBank 1 Markets is significantly higher than the offer price of NOK 96.75 per share.
On 26 April 2017, it was announced that the City of Oslo and Fortum had entered into a transaction agreement whereby the City of Oslo would put forward a voluntary offer to purchase all of the shares in Hafslund ASA, subject to certain conditions, including the approval of Oslo City Council. On 14 June 2017, Oslo City Council approved the transaction agreement between the City of Oslo and Fortum, and all significant public permits have been given. It is expected that the final offer will be put forward in the beginning of July, with an acceptance period of approximately four weeks.
In connection with the expected offer, the Board of Directors of Hafslund ASA, in conformity with the Norwegian Code of Practice for Corporate Governance (the NUES recommendation) and the company's own Principles of Corporate Governance, has obtained an independent valuation from SpareBank 1 Markets.
SpareBank 1 Markets has concluded that the company's underlying value per share is NOK 139 based on today's expected transaction values, and NOK 168 based on the discounted expected future cash flows. SpareBank 1 Markets' valuation is significantly higher than the offer price of NOK 96.75 per share, and even higher compared to historical share prices. However, the Board of Directors does not consider the stock exchange prices representative of the underlying values due to the company's concentrated ownership situation with a controlling shareholder with an ownership interest of 53.7%, three main shareholders with aggregate ownership interests of 92.6% and limited liquidity in the remaining shares.
- The Board of Directors considers SpareBank 1 Markets' valuations to be in line with the company’s own considerations, and the underlying value to be significantly higher than the expected offer price, the Chairman of the Board of Hafslund, Birger Magnus says.
As the City of Oslo and Fortum jointly own more than 90% of the voting shares in Hafslund, following completion of the offer, the offeror would be able to proceed to a compulsory acquisition of the other shareholders, regardless of the level of acceptance of the offer among the other shareholders. As a result, the minority shareholders have no realistic possibility of remaining shareholders in the company. However, the shareholders will have the choice between accepting the offer price and receive cash payment within the settlement deadline, which will be set out in the offer document, and waiting for the compulsory acquisition and get the compensation for the shares determined by judicial valuation.
In assessing the offer, in addition to the difference between the offer price and SpareBank 1 Markets' valuation of the underlying values, the shareholders will have to take into account that the outcome of a judicial valuation is associated with significant uncertainty, and that the settlement will be substantially delayed if the price is determined by judicial valuation.
Given the significant discrepancy between SpareBank 1 Markets' valuation and the offer price, the Board of Directors' opinion is that the possibility of obtaining a higher price per share through a judicial valuation clearly outweighs for the risk attached to the outcome of a legal process.
- Despite the uncertainty associated with the outcome of a legal process, and the delay it will cause for the shareholders' settlement, the Board of Directors' overall assessment at the present time is that it will be in the shareholders' financial interest not to accept the offer, but instead let the price be determined by a judicial valuation, the Chairman of the Board of Hafslund ASA, Birger Magnus, says.
The Board of Directors' final statement regarding the offer pursuant to the Securities Trading Act will be announced after release of a complete offer document and no later than one week prior to the expiry of the offer period.
The complete preliminary statement from the Board of Directors of Hafslund ASA and the valuation from SpareBank 1 Markets are attached and available at www.hafslund.no
Hafslund ASA
Oslo, 20 June 2017
For further information, please contact:
Chairman of the Board of Hafslund ASA, Birger Magnus, Tel.: +47 900 30 093, E-mail: birger.magnus@kov5.no