Statement by the board of directors of Elos Medtech regarding the public offer from TA Associates

The board of directors unanimously recommends the shareholders to accept the offer from TA Associates.

This statement is made by the board of directors of Elos Medtech AB (publ) (”Elos Medtech”) pursuant to Rule II.19 of the Nasdaq Stockholm Takeover Rules (the ”Takeover Rules”).

The Offer

On 11 June 2021, TA XIII[1], through EM Intressenter AB, announced a public offer of SEK 215 per share to the shareholders in Elos Medtech (the ”Offer”). The Offer values all shares in Elos Medtech at approximately SEK 1,735 million.

Shareholders with a total of 21.2 per cent of the shares and 37.5 per cent of the votes, including Svolder Aktiebolag and the Nilsson family, have irrevocably undertaken to accept the Offer, irrespective of whether a higher competing offer is made.

The offered consideration per share represents a premium of:

• 8 per cent compared to the closing share price for Elos Medtech’s shares of series B on Nasdaq Stockholm of SEK 200 on 10 June 2021 (the last day of trading day prior to the announcement of the Offer).

• 15 per cent compared to the volume-weighted average trading price for Elos Medtech’s shares of series B of SEK 187 during the period from and including 28 April 2021 (the date of the publication of Elos Medtech’s interim report for 1 January – 31 March 2021) to and including 10 June 2021 (the last day of trading prior to the announcement of the Offer); and

• 28 per cent compared to the volume-weighted average trading price for Elos Medtech’s shares of series B of SEK 168 during the last 90 days prior to the announcement of the Offer.

The acceptance period for the Offer commenced on 14 June 2021 and expires on 5 July 2021. The acceptance period may be extended. Completion of the Offer is conditional upon, among other things, the Offer being accepted to such extent that TA Associates becomes the owner of shares representing more than 80 per cent of the total number of outstanding shares and more than 50 per cent of the total number of outstanding votes in Elos Medtech. TA Associates has reserved the right to waive one or more conditions, including to complete the Offer at a lower level of acceptance.

The process undertaken by the board of directors to evaluate the Offer

In evaluating the Offer, the board of directors has considered a number of factors which the board of directors considers relevant. These factors include, but are not limited to, Elos Medtech’s current strategic and financial position, prevailing market conditions and operational opportunities and challenges, the company’s expected future development and opportunities and risks related thereto, and valuation methods normally used to evaluate public offerings of listed companies, including how the Offer values Elos Medtech in relation to comparable listed companies and comparable transactions, bid premiums in previous public takeover offers on Nasdaq Stockholm, the stock market’s expectations regarding the company and the board’s view of the company’s value based on its expected future dividends and cash flows.

The board of directors, as part of its process to evaluate the Offer and in line with its fiduciary duties, has investigated other opportunities in light of the approach by TA Associates. The offer from TA Associates is the best option.

In its evaluation of the Offer, the board of directors has also taken into account that two of Elos Medtech’s larger shareholders, representing 21.2 per cent of the capital and 37.5 per cent of the votes, have irrevocably undertaken to accept the Offer, irrespective of whether a higher competing offer is made.

Upon written request by TA Associates, the board of directors has permitted TA Associates to review limited information for confirmatory purposes in connection with the preparations for the Offer. No inside information has been provided to TA Associates in connection with the review.

The board of directors has engaged Carnegie Investment Bank as financial advisor and Vinge as legal advisor in relation to the Offer. The board of directors has also engaged Grant Thornton to provide a fairness opinion regarding the Offer. The opinion is attached.

The board of directors’ assessment and recommendation

The board of directors considers that Elos Medtech has demonstrated a good ability to deliver profitable growth and deliver in accordance with the company’s strategy. However, Elos Medtech was negatively affected by the COVID-19 pandemic in 2020 during the second quarter and to some extent during the third quarter, primarily in the Dental business area where there was a total stop during some two months of the second quarter, but also in the Orthopedics business area where many customers chose to postpone planned product launches. The recovery has been rapid in the Dental business area, primarily driven by proprietary products with a growth of 49 per cent in the fourth quarter of 2020 and 8 per cent in the first quarter of 2021 compared with the same period last year.

On 2 November 2020 contracts were announced within the Orthopedics business area regarding products for robot-assisted surgery, where the company is already well established with several strategic global customers. Already in 2021, increased annual sales of approximately SEK 100 million are expected. This requires investments in machinery, personnel and other equipment of approximately SEK 70 million over a three-year period. Within a few years, the company expects that about half of the sales within Orthopedics will be products for robotic surgery.

The board of directors has also specifically analyzed the company’s future investment needs in production capacity and the consolidation that takes place in the market with possible acquisitions, as well as analyzed future financing needs and assessed the possibilities of successfully securing such financing.

The board of directors has a strong belief in the company’s long-term future prospects as well as the current strategy and business plan and sees potential for additional value, primarily in the business areas Dental, proprietary products, and Orthopedics’ products for robotic surgery. However, shareholders must be aware that assumptions about future development are inherently uncertain and associated with risk because they relate to conditions, and are dependent on circumstances, occurring in the future. When the board of directors values the weighted potential in relation to the consideration in the Offer, the board of directors concludes that the shareholders through the Offer will be compensated for the company’s potential, taking into account the time it takes to implement, and the various risks associated with not fully implementing, the company’s business plan.

The board of directors notes that the offered premium of 8 per cent compared to the closing share price for Elos Medtech’s shares of series B the last day of trading day prior to the announcement of the Offer, is low compared to other recent offers on Nasdaq Stockholm. However, the board of directors in its assessment has made an overall valuation of the Offer compared to, among other things, the share’s historical development, trading volumes and valuation in absolute terms.

In its fairness opinion, Grant Thornton considers that the Offer is fair to the shareholders of Elos Medtech from a financial perspective.

The board of directors unanimously recommends the shareholders of Elos Medtech to accept the Offer.

Effects on Elos Medtech and its employees

Under the Takeover Rules, the board of directors is required to present its opinion on the effects the implementation of the Offer may have on Elos Medtech, especially employment, and its view on TA Associates’ strategic plans for Elos Medtech and the impact these could be expected to have on employment and on the locations where Elos Medtech conducts its business. In its offer document announcing the Offer, TA Associates states:

”TA Associates’ plans for the future business and general strategy do not currently include any material changes with regard to Elos Medtech’s operational sites, its management and employees, including their terms of employment.”

The board of directors assumes that the above statement by TA Associates is correct and has no reason to take a different view.

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This statement by the board of directors of Elos Medtech shall be governed by and construed in accordance with substantive Swedish law. Disputes arising from this statement shall be settled exclusively by Swedish courts.

21 June 2021

The board of directors of Elos Medtech AB (publ)

For further information, please contact:

Yvonne Mårtensson, Chairman of the Board, tel. +4670 833 77 82, email: yvonne.martensson@elosmedtech.com

For additional information about the Elos Medtech Group, visit www.elosmedtech.com

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GRANT THORNTON
 

To the board of directors in

Elos Medtech AB
Torsgatan 5b
411 04 Göteborg

Grant Thornton Sweden AB
Sveavägen 20
Box 7623
103 94 Stockholm
T 08-563 070 00
www.grantthornton.se/radgivning/

June 18, 2021

To the board of directors in Elos Medtech AB

As of June 11, 2021, TA Associates through EM Intressenter AB (“TA Associates”) announced a public offer of SEK 215 in cash per share (the ”Offer”) to the shareholders of Elos Medtech AB (”Elos Medtech” or the ”Company”).

We, Grant Thornton Sweden AB (”Grant Thornton” or ”we”), as an independent expert, has been assigned by the board of directors in Elos Medtech to assess the fairness of the Offer from a financial perspective.

Our assessment of the market value has included, inter alia, valuation based on the income approach,
the market approach and analysis of the Company’s historic share price.

As basis for our assessment, we have reviewed, inter alia, the following information:
1. Press releases related to the Offer
2. Publicly available information about Elos Medtech, e.g. annual reports and interim reports
3. Internal financial information, presentations, and projections
4. Information from the Company’s management
5. Price and volume information for the Company’s share
6. Information from the financial database Eikon Workspace
7. Analyst reports regarding Elos Medtech and the medtech market
8. Publicly available information about comparable companies
9. Other analyses and information that we have deemed as relevant for the fairness opinion

We have relied upon the accuracy and the completeness of the information provided and otherwise made available to us by representatives of the Company. Grant Thornton do not assume any responsibility for the accuracy in the received information. Changes in the circumstances mentioned may affect the conditions that have formed the basis of our value assessment.

We have not acted as a financial advisor to Elos Medtech in connection with the proposed transaction. Our fee for this assignment is not dependent on completion of the transaction.

This opinion is addressed to the board of directors in Elos Medtech for the purpose of serving as a basis for its position regarding the Offer and we do not accept any responsibility for its use for other purposes than this.

Subject to the foregoing conditions and limitations, it is Grant Thornton’s opinion that the Offer as of this date, from a financial point of view, is fair to the shareholders of Elos Medtech.

Magnus Sörling
Partner