Opera Software ASA – Detailed Announcement

Oslo, 18 July 2016

Reference is made to the stock exchange announcement made on 15 March 2016 on the launch of the voluntary cash offer (the “Public Offer”) to acquire 100% of the shares of Opera Software ASA (“Opera”) made by Kunqi (the “Offeror”).

Termination of the Public Offer and agreement on alternative transaction regarding sale of certain parts of Opera’s consumer business

The conditions to close the Public Offer stipulated in the offer document were not met by the drop-dead date of 15 July 2016. As a condition for entering into the alternative transaction described below, the partners of the Offeror requested that Opera agree that the Drop-Dead Date should not be extended. This request was accepted by Opera. The Offer has thus lapsed, and shareholders who have tendered their Shares will be released from their acceptance of the Public Offer.

On 17 July 2016, Opera and Golden Brick Capital Private Equity Fund I L.P., which is backed by the affiliates of the partners of the Offeror (Kunlun Tech Limited, Future Holding L.P., Keeneyes Future Holding Inc, Qifei International Development Co. Limited and Golden Brick Capital Private Equity Fund I L.P.Beijing Kunlun Tech Co. Ltd., Qihoo 360 Software (Beijing) Co. Ltd., and Golden Brick Silk Road Fund Management (Shenzhen) LLP, collectively, the “Consortium”), have entered into a share purchase agreement for an alternative private transaction, in which the Consortium will acquire certain parts of Opera’s consumer business (the “Transaction”). The Transaction has been approved by Opera’s Board of Directors.

The following business units of Opera will be included in the Transaction:

  • Mobile Browser, including Operator Co-brand solutions
  • Desktop Browser
  • Performance and Privacy Apps
  • Opera’s technology licensing business outside of Opera TV
  • Opera’s 29.09% ownership in the Chinese joint venture nHorizon

The Consumer Business will be reorganized into a separate company structure. For clarity, the following businesses are not included in the Consumer Business or the Transaction:

  • Opera Mediaworks
  • Opera Apps & Games (including Bemobi)
  • Opera TV

All related assets, employees, rights, and obligations, as well as support teams such as OEM and online distribution, consumer marketing and PR, as well as certain related legal, finance and HR resources are also included (collectively, the “Consumer Business”).

Opera’s CEO, Lars Boilesen, will serve as CEO for both Opera and the Consumer Business until 31 December 2016. After this date, Lars will no longer hold the role as CEO for the Consumer Business, and will be solely dedicated to Opera.

Transaction highlights

The purchase price for the Consumer Business is USD 600 million on an enterprise value basis, subject to customary adjustments for NIBD and working capital at closing.

Closing of the Transaction is expected to take place during the second half of 3Q 2016. Closing is subject to certain conditions, including but not limited to: (i) finalization of a defined majority of the reorganization of the Consumer Business, (ii) absence of events that separately or together may have a material adverse effect on the Consumer Business prior to completion of step (i) above, (iii) if required, certain consents and approvals from governmental authorities shall have been obtained, and (iv) the Transaction shall have been approved by a general meeting in Beijing Kunlun Tech Co. Ltd.

The Transaction is not subject to any financing conditions or due diligence, beyond verifying the reorganization into a separate company structure.

The payment schedule is agreed as follows:

         i.            USD 100 million is immediately due and payable to an escrow account;

       ii.            USD 200 million will be due and payable to the same escrow account on 15 August, or, if later, at the time of Opera’s completion of certain defined steps of the reorganization; and

      iii.            the final USD 300 million, plus/minus the closing adjustments, is payable at the time of closing.

USD 40 million of the amount held in escrow shall not be released at closing, but in one or more subsequent installments tied to the completion of the reorganization of the Consumer Business.

If the Transaction is terminated by Opera due to the Consortium not being able to meet certain closing obligations, the Consortium shall pay Opera a break fee of USD 100 million. However, if the termination is caused by lack of certain governmental approvals, the break fee is USD 40 million. If the Transaction is terminated by the Consortium due to Opera not being able to meet certain of its closing obligations, Opera shall pay the Consortium a break fee of USD 50 million.

The drop-dead date for the Transaction is 31 October 2016. In certain circumstances, the drop-dead date is automatically extended to 31 December 2016.

Use of deal proceeds

Opera’s Board of Directors will evaluate the appropriate financing structure of Opera’s post-close business composition, including maintaining an appropriate equity ratio and leverage. As of 31 March 2016, Opera’s net debt was USD 160 million, comprised of USD 285 million financial debt less USD 125 million cash and cash equivalents. In addition, Opera estimated its future earn-out obligations at USD 123 million.

Given the speed of the alternative transaction negotiations, the Board of Directors has yet to make a final conclusion on this topic. However, it is expected that the proceeds will be applied to both debt repayment and distribution to shareholders and/or buy-back of shares.

Opera’s remaining business

The remaining businesses of Opera are (as stated above): Opera Mediaworks, Opera Apps & Games (including Bemobi), and Opera TV. In 2015, these business units combined delivered revenues of USD 467 million, and adj. EBITDA of USD 74 million.

Opera estimates that in 2016, the same three remaining business units will deliver revenues of USD 570-605 million (+22% to +30%) and an adj. EBITDA of USD 75-90 million (+2% to +22%). An updated financial outlook for 2016, reflecting also the pre-close Consumer Business financials, will be provided at the 2Q presentation. However, if not for the Transaction, Opera would not alter its existing FY 2016 outlook at this point.

Analyst and investor call

Opera will host an investor call on Monday, 18 July at 8:00 AM CET to provide additional information and answer questions about the Transaction.

Please observe the following dial-in instructions:

  • Dial in 5-10 minutes prior to start time using the Participant Phone Number and Participant Passcode
  • Participant Phone Numbers:
    • Norway: 800 196 67
    • United Kingdom: 0 808 101 1148
    • US/CAN Toll free: 800-967-7149
    • Int'l Toll: 719-386-0001
    • Participant Passcode: 736479

Opera will publish a subsequent Information Memorandum if so required by the Continuing Obligations of the Oslo Stock Exchange.

2Q 2016 reporting

Opera will report second quarter results on August 31, 2016.

For further information, please contact:

Petter Lade, Investor Relations

Tel: +47 2369 2400

About Opera:

Opera Software enables more than 350 million internet consumers worldwide to connect with the content and services that matter most to them. Opera also helps publishers monetize their content through advertising and advertisers reach the audiences that build value for their businesses, capitalizing on a global consumer audience reach that exceeds 1 billion.

About Kunlun:

Kunlun (SZ: 300418) is a public company listed in China. Kunlun is a leading mobile internet company, focusing on mobile gaming R&D and global publishing, as well as app distribution operation and the Fintech P2P lending business. The company has a large user base both in China and internationally. It completed the acquisition of the U.S.-based company Grinder, a leading dating social network, in January 2016.

About Qihoo:

Qihoo (NYSE: QIHU) is a leading Internet company in China. The company is the number one provider of Internet and mobile security products in China as measured by its user base, according to iResearch. The company also provides users with secure access points to the Internet via its market leading web browsers and application stores. It has built one of the largest online open platforms in China and monetizes its extensive user base primarily through online advertising and through Internet value-added services on its open platform.

About Golden Brick:

Golden Brick Silk Road Fund Management (Shenzhen) LLP is an affiliate of Golden Brick Capital Management Limited (“Golden Brick Capital”). Golden Brick Capital is one of the leading private-equity investment institutions in China, with its headquarters in Hong Kong and other offices located in Beijing, Shenzhen and Zhuhai. Golden Brick Capital focuses on investing in the TMT, energy and natural resources sectors. The total assets under the management of Golden Brick Capital are about USD 3 billion.

Appendix

This appendix forms part of the stock exchange announcement of 18 July 2016 and is prepared in accordance with the requirements of the Oslo Stock Exchange Continuing Obligations section 3.4.

Description of the Consumer Business

The Consumer Business comprises of several business units within the Opera Group (see below), and employees about 560 workers. Post reorganization and closing, the Consumer Business will be Headquartered in Oslo and have office locations Norway, Poland, Sweden, China, United States, Canada, India, South Korea, Russia, Ukraine, Singapore and Taiwan. In addition, the company will have employees working from various home office locations.

Business units:

  • Mobile Browser, including Operator Co-brand solutions
  • Desktop Browser
  • Performance and Privacy Apps: VPN service for smartphones, tablets and computer, full-device data compression technology
  • Opera’s technology licensing business outside of Opera TV: licensing technology to third parties that it embeds in its own consumer products and services, and the Rocket Optimizer, network-based compression technology
  • Opera’s 29.09% ownership in the Chinese joint venture nHorizon

It is expected that the Consumer Business will benefit strategically and financially under ownership of the Consortium, and that the Consortium has the capabilities to invest and further develop the Consumer Business.

Consumer Business key financials

The following table summarizes Consumer Business revenue and adjusted EBITDA 2013-2015. Please note that the Consumer Business is in the process of being reorganized and has not reported separate audited financial figures historically, thus the presented figures are unaudited standalone figures prepared by Opera.

(USDm) 2013 2014 2015
Revenue 162 179 149
Adjusted EBITDA 66 47 34

Executive management and Board of Directors of the Consumer Business

The Consumer Business is currently managed as separate business units within the Opera Group. The Consumer Business comprises several legal entities. There is no separate holding company for the standalone Consumer Business as of yet, and thus no Board of Directors applicable as such. The buyer will appoint a new Board of Directors as of closing.

Opera’s CEO, Lars Boilesen, will serve as CEO for both Opera and the Consumer Business until 31 December 2016. After this date, Lars will no longer hold the role as CEO for the Consumer Business, and will be solely dedicated to Opera. Opera’s COO Andreas Thome and CFO Frode Jacobsen will follow the Consumer Business.

Certain customary transaction bonus arrangements for defined senior employees have been entered into.

Agreements and Opera brand rights

There will be a transitional service agreement between Opera and the Consumer Business, with duration of twelve months following closing of the Transaction. The transitional service agreement will cover services such as corporate functions, facilities and relevant shared services.

All rights to the Opera brand and trademarks will follow the Consumer Business. However, Opera will have a right to use the relevant brand and trademarks for a period of 18 months.

About Us

Opera Software ASA is an industry leader in the development of Web browsers for the desktop, device and mobile markets. The Opera browser has received international recognition from end-users and the industry press for being faster, smaller and more standards-compliant than other browsers, and it has gathered a cult following on the net.

Contacts

  • Opera Software ASA
    Waldemar Thranes gate 98 NO-0175 Oslo
    +47 24 16 40 00
    +47 24 16 40 01

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