SYSOPEN PLC AND DIGIA INC. ENTER INTO A COMBINATION AGREEMENT
Sysopen Plc STOCK EXCHANGE RELEASE 11 February 2005 at 1:20 pm
SYSOPEN PLC AND DIGIA INC. ENTER INTO A COMBINATION AGREEMENT
- Sysopen Plc ('SysOpen') and Digia Inc. ('Digia') have today agreed on combining
their operations and entered into a combination agreement ('Combination
Agreement'). The Combined company will continue operations under the name SysOpen
Digia Plc ('Combined company').
- The combination of SysOpen and Digia will be effected by means of a share
exchange offer by SysOpen to the holders of Series A shares of Digia ('Share
Exchange Offer'). SysOpen shareholders will hold 51.3 per cent of the Combined
company and Digia Series A shareholders will hold 48.7 per cent, if the Share
Exchange Offer is accepted in its entirety.
- The combination is supported by the Boards of Directors of both companies. In
addition, over 90 per cent of the share capital and voting rights conferred by
Digia shares have in advance agreed to accept the Share Exchange Offer or
otherwise support the combination. Major shareholders of SysOpen, who hold an
aggregate of 50.1 per cent of the share capital and voting rights conferred by
the shares of SysOpen have in advance agreed to vote in favour of the
combination.
- The Chief Executive Officer of the Combined company will be Digia's current
CEO, Jari Mielonen. SysOpen's current Managing Director, Arto Sahla, will be the
Executive Vice President.
- The pro forma turnover of the Combined company was 47.2 million euros and pro
forma EBITA 5.4 million euros in 2004. The Combined company had 545 employees on
December 31, 2004.
- In addition, SysOpen has agreed, no later than upon completion of the Share
Exchange Offer, to buy Eomer Holding Oy, which has agreed to acquire all the
Series B shares in Digia.
Combined company
The combination will create the third largest ICT service provider on the
Helsinki Stock Exchange in terms of turnover and one of the first listed end-to-
end Symbian integrators in the world.
Initially, the Combined company's business idea is to offer its customers
software, technology and integration services for smartphone development as well
as information system services and software that increase the efficiency of
companies and public organisations. Centrally important is the development of
wireless solutions and operational information systems into seamless integrated
systems.
The Combined company's initial long-term vision is to be a trusted systems
integrator for the leading smartphone manufacturers, operators, enterprises and
public organisations. The business priorities according to the vision are global
smartphone integration as well as customer solutions in selected industries,
whilst increasing its market share within customer segments.
Initially, SysOpen Digia's strategy is to focus in Finland on business areas that
are estimated to grow and be profitable. In addition to organic growth, the
business will be expanded by means of targeted acquisitions that support the
chosen business strategy and by participating actively in international
consolidation within the industry in the Combined company's main growth markets.
Background of combination
The growth in the speed and capacity of data communications, the decrease of
telecommunications costs and the increasing processing capacity of mobile
handsets are creating a new way of utilising operational information systems
within enterprises. In particular, the very rapid development of mobile devices
in recent years will open up possibilities for employees on the move to access
information any time, anywhere, and it will be a boon for customers who use the
company's services. In order to get the most out of mobile handsets and fast
wireless connections, information systems and equipment must be linked together
seamlessly to mobile devices as well. Building this combination calls for a
specialist with a mastery of all the technical domains related to information
systems and mobile handsets.
Based on both companies' present market position and business strategy, SysOpen
and Digia estimate that the combination will strengthen the ability to meet the
above-mentioned growing service needs and to increase their offerings to
customers, especially within software and technology for smartphones. It will
furthermore enhance the Combined company's ability to integrate them into
solutions that support the customer's business. By combining SysOpen's
integration, architecture and software development services for customer-specific
information systems with the training, consulting, contract engineering services
and technology solutions which Digia offers to smartphone manufacturers, a strong
and broad-based player will be created in the internationalising wireless
technology integration market that is estimated to see fast growth.
The most significant benefits of the combination
- End-to-end Symbian integrator. The business combination of SysOpen and Digia
will create an end-to-end Symbian integrator that focuses on covering
enterprise's service needs comprehensively from operational information systems
to mobile handsets. By concentrating on the dominant technology platforms for the
smartphone market and on integration solutions and operational information
systems based on them, it is estimated that significant added value will be
created for the Combined company's customers. Complete solution and service
offering allows SysOpen Digia to seek for new growth opportunities within the
business domain.
- Additional sales potential through increasing and mutually complementary
resources and services. By combining the resources of SysOpen and Digia, an
integrator of major size will be formed as a player in the market for both
conventional information systems and ones employing wireless connections. Due to
its increased resources, the Combined company will be able to assume overall
responsibility for larger customer projects. The present customer bases of the
combining companies complement each other well. The companies do not have
overlapping product offerings, and the know-how and resources, which the
combining companies have in service provision are mutually complementary. Due to
increased resources, a broader clientele and comprehensive service offerings, it
is estimated that the Combined company will increase its sales to its present
customers, and an improved basis will be created for acquiring new customer
accounts.
- A strong player in the growing and internationalising mobile technology
markets. The Combined company will be a recognised and well-established player in
smartphone integration internationally. Increased resources, a larger size and a
comprehensive service offering will enable the Combined company to expand its
operations in the international wireless technology markets, which are estimated
to see rapid growth, through existing and new customers, acquisitions and
alliances. This is estimated to create significant growth potential for the
Combined company.
- Efficiency brings cost savings. By streamlining the Combined company's
administrative structures, unifying and making more efficient use of premises,
implementing best practices and cutting overlapping operating expenses, it is
expected that annual cost savings of about EUR 0.8 million fully realised from
2006 onwards will be reached. Due to the increase in the Combined company's size
class, relative technology development costs will fall and the company will be
able to offer combined expertise to broader group of customers.
Management and Board of Directors of the Combined company
The Chief Executive Officer of the Combined company will be Digia's current CEO,
Jari Mielonen, who has extensive experience in all the business areas of the
Combined company. SysOpen's current Managing Director, Arto Sahla, will be the
Executive Vice President.
The other management and employees of SysOpen and Digia will likewise occupy
important positions in the new organisation of the Combined company. The
reorganisation will be carried out as soon as the Share Exchange Offer has been
completed and any necessary additional updates to the organisation will be
implemented by the end of 2005.
The following six persons, who have accepted their nominations, will be elected
as members of the Board of Directors of the Combined company in accordance with
the Combination Agreement:
- Pekka Sivonen, Chairman of the current Board of Directors of Digia;
- Kari Karvinen, Chairman of the current Board of Directors of SysOpen;
- Pekka Eloholma, President and CEO of Setec Oy;
- Pertti Kyttälä, Managing Director of Peranit Oy;
- Matti Mujunen, CEO of Secgo Software Oy; and
- Mikko Terho, Senior Vice President, Nokia Corporation.
Pekka Sivonen is proposed to serve as a full-time chairman of the Combined
company's Board of Directors and Kari Karvinen will be the vice chairman.
Ownership structure of the Combined company
If the Share Exchange Offer is accepted in its entirety, SysOpen shareholders
will hold approximately 51.3 per cent of the Combined company and Digia
shareholders will hold approximately 48.7 per cent, excluding the stock options
issued by SysOpen and Digia. The exchange ratio for the new shares of SysOpen has
been defined based on agreement by the parties on the values of the companies.
SysOpen has used external advisors for valuations and has obtained a Fairness
Opinion on the share consideration from Mandatum & Co Oy.
Based on the shareholder lists of SysOpen and Digia as per February 4, 2005, the
10 largest shareholders of the Combined company will be:
1. Sivonen Pekka 21.2%
2. Karvinen Kari 8.8%
3. Savolainen Matti 8.7%
4. Kylätie Jorma 8.2%
5. TeliaSonera Finland Oyj 7.2%
6. Eqvitec Teknologiarahasto I 7.2%
Ky
7. Malin Mika 4.2%
8. Virtanen Jarkko 2.8%
9. Polvi Jere 1.2%
10. Ahonen Olli 1.0%
Ten largest shareholders 70.4%
Other shareholders 29.6%
Total 100.0%
Comments
Kari Karvinen, Chairman of the Board of Directors, SysOpen Plc:
The information technology markets are facing the beginning of a great
breakthrough. As a result of the major development of mobile handsets the
operational information systems of companies and public-sector organisations will
at an exceeding rate be implemented also into smartphones. The phenomenon is
rather identical with shift from mainframe computers to PC's. SysOpen wants to
lead this development. We believe that this combination with Digia is a positive
opportunity for the customers and personnel. We also sincerely believe that the
combination will be beneficial to the shareholders of both companies.
Pekka Sivonen, Chairman of the Board of Directors, Digia Inc.:
Digia has a broad knowledge in utilising Symbian OS and Series 60 Platform in
developing smartphones to the handset manufacturers. The growth in the capacity
of information communication connections and the growth of processing capacity of
handsets are creating a new way to utilise the operative information systems of
companies. We see this as an opportunity in improving our knowhow with SysOpen.
We will strengthen our current operations and at the same time, form Digia and
SysOpen together into a specialist prepared to assume responsibility for larger
projects in the internationalising mobile and communication technology markets
that are expected to grow rapidly.
Statements of the Boards of Directors of SysOpen and Digia
The Board of Directors of SysOpen will recommend to SysOpen's shareholders that
they vote in favour of accepting the proposed resolutions that are necessary for
the combination at SysOpen's Annual General Meeting, which is to be held on 1
March 2005 that be convened separately. At the Annual General Meeting of SysOpen
a proposal will be made, among other things, to carry out a directed share issue
to the shareholders of Digia as well as to change the Articles of Association
with respect to minimum and maximum capital as well as company's business name
and to change the composition of the company's Board of Directors in accordance
with the Combination Agreement.
The Board of Directors of Digia recommends to Digia's Series A shareholders that
they exchange their Series A shares in Digia for new shares in SysOpen. In
addition, the Board of Directors of Digia recommends to Digia's shareholders that
they vote in favour of amending Digia's Articles of Association as necessary for
the combination.
Support of major shareholders
The major shareholders of SysOpen, Kari Karvinen, Jorma Kylätie and Matti
Savolainen, who hold an aggregate of 50.1 per cent of the share capital and
voting rights conferred by all the shares, have in advance given their commitment
to support the proposed combination.
Of Digia's major shareholders, Pekka Sivonen, Mika Malin, Jarkko Virtanen,
TeliaSonera Finland Oyj and Eqvitec Teknologiarahasto I Ky, who together own a
total of 62.0 per cent of Digia's share capital and the votes conferred by all
the shares, have in advance given their commitment to accept the Share Exchange
Offer in respect of the Digia shares they own and administer. In addition,
SysOpen and the owners of Eomer Holding Oy have agreed that SysOpen will purchase
100 per cent of the shares in Eomer Holding Oy no later than upon completion of
the Share Exchange Offer. Eomer Holding Oy in turn has agreed with Digia's Series
B shareholders on acquiring 100 per cent of Digia's Series B shares no later than
upon completion of the Share Exchange Offer. Digia's Series B shares represent a
total of 30.1 per cent of Digia's share capital and the votes conferred by all
the shares. As a consequence of the above, a total of 92.0 per cent of Digia's
share capital and the votes conferred by all the shares is in advance committed
to accepting the proposed combination.
Summary of the Share Exchange Offer and combination
A holder of Digia's Series A shares, who has accepted the Share Exchange Offer
will receive for each one (1) Series A share in Digia 0.36 new SysOpen shares
('Share Consideration'). SysOpen shares to be issued as Share Consideration will
carry the same dividend rights as the other currently outstanding shares of
SysOpen from the date of their registration to the trade register.
SysOpen will announce the preliminary results of the Share Exchange Offer on or
about March 3, 2005. This announcement will also be published on SysOpen's
website at www.sysopen.fi and on Digia's website at www.digia.com. Such
announcement will confirm whether the condition (a) to completion of the Share
Exchange Offer set forth above has been satisfied or whether the Share Exchange
Offer period will be extended. The final result of the Share Exchange Offer will
be announced on or about March 4, 2005. The announcement will confirm (i) the
amount of outstanding Digia shares that have been validly tendered in the Share
Exchange Offer, (ii) if the conditions to completion of the Share Exchange Offer
set forth above have been satisfied and (iii) whether the Share Exchange Offer
will be completed or not.
The new shares do not entitle to dividend for year 2004 proposed by Board of
Directors of SysOpen on 27 January 2005 for the General Meeting of Shareholders
to be summoned on 1 March 2005.
The Share Exchange Offer will commence on 15 February 2005 at 10:00 a.m. (Finnish
time) and will expire on 2 March 2005 at 4:00 p.m. (Finnish time), unless the
offer period is extended. SysOpen will prepare a Finnish language listing
prospectus in order to list the new SysOpen shares to be issued in connection
with the Share Exchange Offer. The Finnish language listing prospectus will be
published on or around 25 February 2005 on the Internet web sites www.sysopen.fi
and www.digia.com. The new SysOpen shares to be issued are expected to start
trading as similar series with the existing SysOpen shares on the main list of
the Helsinki Stock Exchange on or around 7 March 2005.
The official closing price of SysOpen shares on the Helsinki Stock Exchange on 10
February 2005 was 3.72 euros. The implied value of the Share Consideration per
Series A share in Digia on the same day was 1.34 euros.
According to the Combination Agreement the Share Exchange Offer is subject to the
satisfaction of the following conditions:
a) The Share Exchange Offer shall have been accepted to such an extent that
SysOpen would, upon the completion of the Share Exchange Offer, hold no less
than 21,344,700 Series A shares of Digia, corresponding approximately to
88.6 percent Series A shares and the voting rights of Digia attached to such
shares;
b) The annual general meeting of SysOpen shall have approved the resolution
proposals necessary for the combination and the Share Exchange Offer
(increase of share capital, amend the minimum and maximum share capital,
number of members of Board of Directors, persons to be elected to the Board
of Directors and the change of company name);
c) The combination agreement between SysOpen and Digia shall not have been
terminated and it is still in effect;
d) Eomer Holding Oy shall have acquired all the issued Series B shares of
Digia;
e) SysOpen shall have acquired all the issued shares of Eomer Holding Oy;
f) The annual general meeting of Digia shall have decided to amend Digia's
Articles of Association as required by the Combination Agreement; and
g) Each party to the shareholders agreement of Digia, dated December 8, 2000,
shall have announced that they waive any and all claims towards Digia,
SysOpen and Eomer Holding Oy.
The waiver of the conditions above is subject to approval of both Parties.
Subject to the completion of the Share Exchange Offer SysOpen will present a
redemption demand in accordance with the Finnish Companies Act to all Series A
shares in Digia for which the Share Exchange Offer was not approved. After
completion of the combination it is the intention of SysOpen to offer all current
holders of Digia stock options an opportunity to convert the stock options in
Digia to new stock options of the Combined company on equal or for the relevant
part similar terms.
In addition to the Share Exchange Offer, SysOpen has agreed to buy Eomer Holding
Oy. Enterprise value (cash consideration added by the net debt of Eomer Holding
Oy) of Eomer Holding Oy acquisition is 40 million euros. The pro forma net debt
of the Combined company is 7.0 million euros.
SysOpen's and Digia's financial advisor in connection with the combination and
arranger of the Share Exchange Offer is Nordea Corporate Finance.
Of Digia's major shareholders, Pekka Sivonen, Mika Malin, Jarkko Virtanen,
TeliaSonera Finland Oyj and Eqviteq Teknologiarahasto I Ky as well as Digia's
Series B shareholders, all of whom have agreed to sell all their Digia Series B
shares to Eomer Holding Oy no later than upon completion of the Share Exchange
Offer, have agreed upon an arrangement whereby the above-mentioned major
shareholders in Digia will grant Digia's Series B shareholders the right, within
12 months as of 4 March 2005, to purchase from said major shareholders a total of
approximately 8.5 per cent of the Combined company's shares at a certain pre-
determined price.
Unaudited pro forma consolidated financial statement information of the Combined
company (FAS)
Pro forma income statement information, MEUR 1.1.-31.12.2004
SysOpen Digia Adjustments Combined
company
Turnover 26.2 21.1 - 47.2
EBITA 2.3 3.1 - 5.4
Operating 2.0 3.1 -2.3 2.8
profit
Pro forma balance sheet information, MEUR 31.12.2004
SysOpen Digia Adjustments Combined
company
Goodwill 45.5 45.5
arising from
the
combination
Cash and cash 5.6 29.8 -0.1 35.2
equivalents
Shareholders' 10.5 29.7 3.5 43.7
equity
Total assets 19.3 33.3 45.3 97.9
Pro forma key figures 31.12.2004
SysOpen Digia Adjustments Combined
company
Net gearing -52% -100% 16%
Equity ratio 70% 89% 47%
Interest-bea -5.6 -29.6 42.1 7.0
ring net
debt, MEUR
Further information
A press conference on the combination for analysts, investors and media will be
held today on Friday 11 February 2005 starting at 2:30 p.m. at the Mirror Room in
Hotel Kämp, address: Pohjoisesplanadi 29, Helsinki. All are welcome.
Helsinki 11 February 2005
SYSOPEN PLC
Board of Directors
For further information, please contact:
Kari Karvinen, Chairman of the Board of Directors, SysOpen Plc, tel.
+358 424 202 0304
Pekka Sivonen, Chairman of the Board of Directors, Digia Inc., tel. +358 40
7593601
Arto Sahla, Managing Director, SysOpen Plc, tel. +358 400 442 986
Jari Mielonen, CEO, Digia Inc., tel. +358 40 7038383
ATTACHMENTS
Information on the combining companies
SysOpen Group
SysOpen is a provider of information technology expert services and software, its
mission being to integrate information, people and processes. SysOpen offers
services and solutions for flexible process distribution and the development of
real-time functions in a manner that streamlines the organisational performance
of customers. The focus is on the development of customers' operational
information systems as part of the new mobile and Internet-based solutions.
SysOpen is one of the leading providers of integrated electronic business
solutions in Finland.
SysOpen's consolidated turnover in 2004 was EUR 26.2 million and operating profit
before goodwill amortisation amounted to EUR 2.3 million, or 8.7 per cent of
turnover. Operating profit after goodwill amortisation was EUR 2.0 million, or
7.5 per cent of turnover in 2004.
SysOpen's offerings by business areas are: Enterprise Application Solutions (87.8
per cent of turnover in 2004), Solutions Based on Software Products (11.1 per
cent of turnover in 2004) and Executive ICT Consulting (1.1 per cent of turnover
in 2004). International operations accounted for 3.2 per cent of turnover in
2004.
SysOpen has business locations in Helsinki, Kuopio, Jyväskylä and Tampere,
Finland, as well as a subsidiary in the Greater London area in the United
Kingdom. At the end of 2004, SysOpen Group employed 288 people. Sysopen Plc is a
public limited company registered in Finland, and its shares are publicly traded
on the Main List of the Helsinki Stock Exchange.
Digia Group
Digia is a mobile systems integrator providing complete solution offerings for
smartphone manufacturers internationally. The company is devoting significant
resources to extensive expertise in the development of smartphones and is
involved in smartphone projects all the way from technical specifications
definition and systems integration to the individual tailoring of user interfaces
and software maintenance. This enables the company to assume overall
responsibility in contract engineering of smartphone projects. In addition to
contract engineering services, Digia offers its customers training, Digia
technology components as well as programming tools and applications, all tailored
to the customers' requirements.
The Digia Group's consolidated turnover in 2004 was EUR 21.1 million and
operating profit before goodwill amortisation amounted to EUR 3.1 million, or
14.8 per cent of turnover. The Digia Group does not have any goodwill
amortisation.
Digia's business areas are contract engineering services (94 per cent of turnover
in 2004) and Symbian training services and consulting (6 per cent of turnover in
2004). The breakdown of Digia's turnover is 93 per cent from the EU area and 7
per cent from outside the EU.
Digia has locations in Helsinki, Lappeenranta, Pori, Oulu and Tampere in Finland.
At the end of 2004, the Digia Group employed 257 people. Digia Inc. is a limited
company registered in Finland.
CV of CEO Jari Mielonen
Jari Mielonen, born 1960, M.Sc. (Econ.), CEO of Digia Inc. from 2001. Responsible
for operative business and reports to the Board of Directors of Digia. Previously
he has acted among others as Chief Technology Officer of Sonera Plc (1998-2001);
as Director, Software Technology at ICL Data Oy (1996-1998); as Sales Director in
the Software Operations Division of Tieto Oyj(1995-1996) and as a Sales Manager
of Tieto Oyj (1990-1995) as well as in software development duties at Tietotehdas
Oy in 1987-1989.
This stock exchange release may not be published or distributed in Australia,
Canada, Hong Kong, Japan, South Africa or the United States.
The information contained in this release is not to be published in,
or distributed to, the United States. This stock exchange release is not an offer
to sell securities in the United States or to, or for the account or benefit of,
U.S. persons, and the securities referred to in the stock exchange release may
not be offered or sold in the United States, except pursuant to an exemption from
the registration requirements of the Securities Act of 1933. The Share Exchange
Offer or the new shares of SysOpen Plc will not be registered or offered to
public in the United States.
This stock exchange release is neither an offer to purchase nor a solicitation
for an offer to sell, and the shares of SysOpen Plc may not be subscribed for in
any country in which such offer, solicitation or subscription would be unlawful
prior to registration, an exemption from registration obligation or other
acceptance in accordance with the securities laws of such country.
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