Karo Intressenter AB announces a public cash offer to the shareholders in Karo Pharma Aktiebolag

The Offer is not being made, and this press release may not be distributed, directly or indirectly, in or into, nor will any tender of shares be accepted from or on behalf of shareholders in Australia, Hong Kong, Japan, Canada, New Zealand or South Africa, or any other jurisdiction in which the making of the Offer, the distribution of this press release or the acceptance of any tender of shares would contravene applicable laws or regulations or require further offer documents, filings or other measures in addition to those required under Swedish law or otherwise contemplated in connection with the Offer. Shareholders should refer to the offer restrictions included in the section titled “Important information” at the end of this press release and in the offer document which will be published before the beginning of the acceptance period for the Offer. Shareholders in the United States should also refer to the section titled “Important information to shareholders in the United States” at the end of this press release.

Karo Intressenter AB[1] (“Karo Intressenter” or the “Offeror”) hereby announces a public cash offer to the shareholders in Karo Pharma Aktiebolag (“Karo Pharma” or the “Company”) to acquire the shares in Karo Pharma not already held by Karo Intressenter at a price of SEK 60 per share (the “Offer”). The shares in Karo Pharma are listed on Nasdaq First North Growth Market under the ticker “KARO”.

The Offer in brief

• The shareholders in Karo Pharma are offered SEK 60 in cash per share in the Company.
• The Offer values the total number of shares in Karo Pharma to approximately SEK 16,395 million. The total value of the Offer, based on the 37,231,505 shares in Karo Pharma not held by Karo Intressenter, is approximately SEK 2,234 million.
• As of the date of this press release, Karo Intressenter holds 236,023,099 shares in Karo Pharma, corresponding to 86.4 percent of the share capital and votes in Karo Pharma.
• The price per share in the Offer represents a premium of:

• 17.0 percent for the shares in relation to the closing price of SEK 51.30 for the shares on Nasdaq First North Growth Market on 15 August 2022, which was the last day of trading prior to the announcement of the Offer;
• 17.7 percent for the shares in relation to the volume weighted average price of SEK 50.96 for the shares on Nasdaq First North Growth Market during a period of 10 trading days prior to the announcement of the Offer; and
• 16.8 percent for the shares in relation to the volume weighted average price of SEK 51.37 for the shares on Nasdaq First North Growth Market during a period of 30 trading days prior to the announcement of the Offer.

• The acceptance period of the Offer is expected to commence on 18 August 2022 and expire on 15 September 2022.
• Karo Intressenter is controlled by EQT VIII.^[2] The consideration payable in respect of the Offer is financed in full by funds available to Karo Intressenter by way of an equity commitment letter issued by EQT VIII.
• Completion of the Offer is conditional upon the Offer being accepted to such extent that Karo Intressenter becomes the owner of shares representing more than 90 percent of the total number of outstanding shares in Karo Pharma.

Background to and reasons for the Offer

In 2018, EQT VIII, through Karo Intressenter, announced an offer to the shareholders of Karo Pharma to acquire all outstanding shares in the Company. With an ownership level of approximately 66.5 percent after an extended acceptance period, Karo Intressenter closed the offer in February 2019.

Under the ownership of Karo Intressenter, Karo Pharma has undergone a significant transformation and has accelerated its journey to becoming a pan-European leader in everyday healthcare. EQT[3] has actively supported the Company in a listed setting through significant investments and by providing resources and support to the Company’s management in its efforts to expand and develop Karo Pharma’s business via acquisitions and organic growth initiatives. Since the initial investment, Karo Intressenter has over time increased its shareholding in Karo Pharma.

As Karo Pharma’s largest shareholder, EQT, via Karo Intressenter, is committed to supporting the Company’s continued growth trajectory, both organically and through M&A. Organically, investments will be directed into Karo Pharma’s brand portfolio and commercial organization, including the scaling up of new geographies, while further sophisticating the Company’s digital sales channels, leveraging EQT’s in-house digitalization capabilities.

EQT is convinced that a private environment provides better conditions for Karo Pharma’s continued value creation journey and for the Company to reach its full potential. A private setting allows EQT to fully implement its governance model, which will provide closer and more efficient support to Karo Pharma’s management team, especially in light of the current uncertain macroeconomic environment, including high inflation and rising interest rates. A private setting will also allow for greater flexibility in terms of funding and capital structure, while freeing up time and resources for the management team to focus fully on developing the business.

“Having worked closely with Karo Pharma’s management, board of directors, and employees for the past three years, we believe that the Company today is in a good position to enter its next phase of development. Looking ahead, we see great potential in continuing to develop Karo Pharma’s product portfolio and commercial capabilities, expanding into new markets, channels and categories and increasing investments into the platform and via M&A. However, for Karo Pharma to reach its full potential we are convinced that its continued value creation journey is best suited to a private environment”, says Erika Henriksson, Partner at EQT Partners, Investment Advisor to EQT VIII, and member of Karo Pharma’s Board of Directors.

Further, as the average daily trading volume in Karo Pharma’s share has been low since the completion of Karo Intressenter’s initial investment, the Offer provides a liquidity opportunity for all shareholders in Karo Pharma in an otherwise illiquid share. The Offer represents an attractive valuation in comparison to (i) Karo Pharma’s equity research coverage including target price[4], (ii) valuation of comparable companies, and (iii) precedent comparable transactions in the consumer healthcare sector. Karo Pharma’s share price has held up well compared to the overall stock market development the last twelve months, and as such, the price per share in the Offer represents a healthy premium.

Karo Intressenter places great value on Karo Pharma’s management and employees. Given Karo Intressenter’s current knowledge of Karo Pharma, Karo Intressenter does not intend to implement any material changes that may impact Karo Pharma’s employees and management, nor to its existing organization and operations, including the terms of employment and the locations where Karo Pharma conducts its business.

The Offer and total Offer value

The shareholders in Karo Pharma are offered SEK 60 in cash per share in the Company. No commission will be charged in connection with the Offer.

The Offer values the total number of shares in Karo Pharma to approximately SEK 16,395 million. The total value of the Offer, based on the 37,231,505 shares in Karo Pharma not held by Karo Intressenter, is approximately SEK 2,234 million.[5]

Bid premium

The price per share in the Offer represents a premium of:

• 17.0 percent for the shares in relation to the closing price of SEK 51.30 for the shares on Nasdaq First North Growth Market on 15 August 2022, which was the last day of trading prior to the announcement of the Offer;
• 17.7 percent for the shares in relation to the volume weighted average price of SEK 50.96 for the shares on Nasdaq First North Growth Market during a period of 10 trading days prior to the announcement of the Offer; and
• 16.8 percent for the shares in relation to the volume weighted average price of SEK 51.37 for the shares on Nasdaq First North Growth Market during a period of 30 trading days prior to the announcement of the Offer.

Conditions for the completion of the Offer

Completion of the Offer is conditional upon the Offer being accepted to such extent that Karo Intressenter becomes the owner of shares representing more than 90 percent of the total number of outstanding shares in Karo Pharma.

Karo Intressenter reserves the right to withdraw the Offer in the event that it is clear that the above condition is not satisfied or cannot be satisfied. Karo Intressenter reserves the right to complete the Offer at a lower level of acceptance.

The Offeror’s shareholding in Karo Pharma

As of the date of this press release, Karo Intressenter holds 236,023,099 shares in Karo Pharma, corresponding to 86.4 percent of the share capital and votes in Karo Pharma.

During a period of six months prior to the announcement of the Offer, Karo Intressenter has acquired a total of 11,175,340 shares in Karo Pharma. The shares have been acquired in the six-month period prior to announcement of the Offer at prices not exceeding the price in the Offer.

During the acceptance period of the Offer, Karo Intressenter may increase its ownership in Karo Pharma through acquiring, or entering into arrangements to acquire, shares in Karo Pharma. All such purchases or arrangements will be in accordance with the Takeover rules for certain trading platforms issued by the Swedish Corporate Governance Board (the “Takeover Rules”) and Swedish law and be disclosed in accordance with applicable rules.

Matters concerning closely related parties and conflicts of interests, etc.

As of the date of this press release, Karo Intressenter holds 236,023,099 shares in Karo Pharma, corresponding to 86.4 percent of the share capital and votes in Karo Pharma. Hence, Karo Intressenter is the parent company of Karo Pharma.

Furthermore, one of the directors of Karo Pharma’s Board of Directors, Erika Henriksson, is a Partner at EQT Partners and therefore not independent in relation to Karo Intressenter. In accordance with the Takeover Rules, Erika Henriksson has not and will not participate in Karo Pharma’s Board of Directors’ handling of or decisions regarding the Offer.

As a consequence of the above, Section IV of the Takeover Rules is applicable to the Offer. This means, inter alia, that the acceptance period of the Offer shall comprise at least four weeks and that Karo Pharma shall obtain and publish a fairness opinion, i.e. an opinion regarding the financial reasonableness of the Offer for the shareholders of Karo Pharma from an independent expert, no later than two weeks prior to the expiry of the acceptance period.

As previously communicated by Karo Pharma, the following members of Karo Pharma’s Board of Directors hold (directly or indirectly) shares in Karo Intressenter Holding AB (corporate registration number 559180-2052) (“Karo Intressenter Holding”), which in turn owns the shares in Karo Intressenter: Mark Keatley, Uta Kemmerich-Keil, Patrick Smallcombe, Kristofer Tonström and Flemming Ørnskov. Karo Intressenter Holding and Karo Intressenter are controlled by EQT VIII. Further, Claire Hennah has committed to invest in shares in Karo Intressenter Holding.

Description of Karo Intressenter and the financing of the Offer

Karo Intressenter AB is a Swedish private limited liability company (Sw. privat aktiebolag) controlled by EQT VIII, with corporate registration number 559160-9416. Karo Intressenter is domiciled in Stockholm with registered address c/o Citco (Sweden) AB, Strandvägen 7A, SE-114 56 Stockholm, Sweden.

Karo Intressenter was founded on 22 May 2018 and registered with the Swedish Companies Registration Office (Sw. Bolagsverket) on 31 May 2018. Karo Intressenter’s sole business purpose is to hold the shares in Karo Pharma.

The consideration payable in respect of the Offer is financed in full by funds available to Karo Intressenter by way of an equity commitment letter issued by EQT VIII.

With this transaction EQT VIII is expected to be 85–90 percent invested.

Preliminary timetable

• Publication of the offer document: 17 August 2022
• Acceptance period: 18 August 2022 – 15 September 2022
• Commencement of settlement: on or about 22 September 2022

The Offeror reserves the right to extend the acceptance period as well as the right to defer the date for settlement.

Compulsory redemption proceedings and delisting of Karo Pharma

In the event that Karo Intressenter obtains more than 90 percent of the outstanding shares in Karo Pharma, Karo Intressenter intends to initiate compulsory redemption proceedings under the Swedish Companies Act (Sw. aktiebolagslagen (2005:551)) to acquire all remaining shares in Karo Pharma.

In connection therewith, Karo Intressenter intends to promote a delisting of the Karo Pharma shares from Nasdaq First North Growth Market.

Applicable law and disputes

The Offer, and the agreements entered into between Karo Intressenter and Karo Pharma’s shareholders as a result of the Offer, shall be governed by and construed in accordance with the laws of Sweden. The courts of Sweden shall have exclusive jurisdiction over any dispute arising out of or in connection with the Offer and the Stockholm District Court (Sw. Stockholms tingsrätt) shall be the court of first instance.

For the Offer, the Takeover Rules and the Swedish Securities Council’s rulings regarding the interpretation and application of the Takeover Rules apply.

Advisors

SEB Corporate Finance, Skandinaviska Enskilda Banken AB (“SEB”) is financial advisor and White & Case is legal advisor to EQT VIII and to Karo Intressenter in connection with the Offer.

Stockholm, 16 August 2022

Karo Intressenter AB

The Board of Directors

The information in this press release has been published by Karo Intressenter in accordance with the Takeover Rules. The press release was submitted for publication on 16 August 2022 at 07:30 (CEST).

For additional information, please contact:

For more information about the Offer, please see: www.healthcare-offer.com

For media enquiries, please contact EQT Press office: +46 8 506 55 334, press@eqtpartners.com

For practical or technical enquiries related to the Offer, please contact SEB Issue Department: +46 8 639 2750, or respective nominee.

About EQT

EQT is a purpose-driven global investment organization with EUR 77 billion in assets under management across 36 active funds. EQT funds have portfolio companies in Europe, Asia-Pacific and the Americas with total sales of approximately EUR 29 billion and more than 280,000 employees. EQT works with portfolio companies to achieve sustainable growth, operational excellence and market leadership.

More information: www.eqtgroup.com

About Karo Pharma

Karo Pharma offers “Smart choices for everyday healthcare”. Karo Pharma own and commercialize reliable original brands within prescription drugs and over-the-counter consumer products. Karo Pharma’s products are available in over 90 countries with the core in Europe and the Nordic region. The headquarter of Karo Pharma is in Stockholm and the Company is listed on Nasdaq First North Growth Market.

More information: www.karopharma.se

Important information

The Offer, pursuant to the terms and conditions presented in this press release, is not being made to persons whose participation in the Offer requires that an additional offer document is prepared or registration effected or that any other measures are taken in addition to those required under Swedish law and regulations or otherwise contemplated in connection with the Offer.

This press release and any other documentation related to the Offer are not being distributed and must not be mailed or otherwise distributed or sent in or into any country in which the distribution or offering would require any such additional measures to be taken or would be in conflict with any law or regulation in such country – any such action will not be permitted or sanctioned by Karo Intressenter. Any purported acceptance of the Offer resulting directly or indirectly from a violation of these restrictions may be disregarded.

The Offer is not being and will not be made, directly or indirectly, in or into, by use of mail or any other means or instrumentality of interstate or foreign commerce of, or any facilities of a national securities exchange of Australia, Hong Kong, Japan, Canada, New Zealand or South Africa. This includes, but is not limited to facsimile transmission, electronic mail, telex, telephone, the internet and other forms of electronic transmission. The Offer cannot be accepted and shares may not be tendered in the Offer by any such use, means, instrumentality or facility of, or from within Australia, Hong Kong, Japan, Canada, New Zealand or South Africa or by persons located or resident in Australia, Hong Kong, Japan, Canada, New Zealand or South Africa. Accordingly, this press release or any other documentation related to the Offer are not being and should not be mailed or otherwise transmitted, distributed, forwarded or sent in or into Australia, Hong Kong, Japan, Canada, New Zealand or South Africa or to any Australian, Hong Kong, Japanese, Canadian, New Zealand or South African persons or any persons located or resident in Australia, Hong Kong, Japan, Canada, New Zealand or South Africa.

Any purported tender of shares in the Offer resulting directly or indirectly from a violation of these restrictions will be invalid and any purported tender of shares made by a person located in Australia, Hong Kong, Japan, Canada, New Zealand or South Africa or any agent, fiduciary or other intermediary acting on a non-discretionary basis for a principal giving instructions from or within Australia, Hong Kong, Japan, Canada, New Zealand or South Africa will be invalid and will not be accepted. Each person who holds shares and participates in the Offer will certify to not being an Australian, Hong Kong, Japanese, Canadian, New Zealand or South African person, not being located or participating in the Offer from Australia, Hong Kong, Japan, Canada, New Zealand or South Africa and not acting on a non-discretionary basis for a principal that is an Australian, Hong Kong, Japanese, Canadian, New Zealand or South African person, or that is located in or giving order to participate in the Offer from Australia, Hong Kong, Japan, Canada, New Zealand or South Africa. Karo Intressenter will not deliver any consideration relating to the Offer to Australia, Hong Kong, Japan, Canada, New Zealand or South Africa.

This press release is not being, and must not be, sent to shareholders with registered addresses in Australia, Hong Kong, Japan, Canada, New Zealand or South Africa. Banks, brokers, dealers and other nominees holding shares for persons in Australia, Hong Kong, Japan, Canada, New Zealand or South Africa must not forward this press release or any other document related to the Offer to such persons.

The Offer, the information and documents contained in this press release are not being made, and have not been approved, by an authorised person for the purposes of section 21 of the Financial Services and Markets Act 2000, as amended (the “FSMA”). The communication of the information and documents contained in this press release to persons in the United Kingdom is exempt from the restrictions on financial promotions in section 21 of the FSMA on the basis that it is a communication by or on behalf of a body corporate which relates to a transaction to acquire shares in a body corporate and the object of the transaction may reasonably be regarded as being the acquisition of day to day control of the affairs of that body corporate within article 62 (Sale of body corporate) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.

This press release has been published in Swedish and English. In the event of any discrepancy in content between the two language versions, the Swedish version shall prevail.

Forward-looking information

Information in this press release relating to future events or circumstances, including information regarding future results, growth and other projections as well as benefits of the Offer, are forward-looking information. Such information may generally, but not always, be identified by the use of words such as “anticipates”, “expects”, “believes”, or similar expressions. By its nature, forward-looking information involves risk and uncertainty, because it relates to events which depend on circumstances that may occur in the future. Due to several factors, of which a number of them are outside Karo Intressenter’s control, there are no guarantees to that actual results will not materially differ from the results expressed or implied by the forward-looking information. Any such forward-looking information only applies as per the date it was given and Karo Intressenter do not have any obligation (and undertake no such obligation) to update or revise it, whether as a result of new information, future events or otherwise, except as required by applicable laws and regulations.

Important information to shareholders in the United States

Shareholders in the United States are advised that Karo Pharma’s shares are not listed on a U.S. securities exchange and that Karo Pharma is not subject to the periodic reporting requirements of the U.S. Securities Exchange Act of 1934, as amended (the “U.S. Exchange Act”), and Karo Pharma is not required to, and does not, file any reports with the U.S. Securities and Exchange Commission (the “SEC”) thereunder.

The Offer described in this press release will be made for the issued and outstanding shares in Karo Pharma, a company incorporated under Swedish law and domiciled in Sweden, and is subject to Swedish disclosure and procedural requirements, which are different from those of the United States. The Offer will be made in the United States in compliance with Section 14(e) of the U.S. Exchange Act and the applicable rules and regulations promulgated thereunder, including Regulation 14E (in each case, subject to any exemptions or relief therefrom, if applicable) and otherwise in accordance with the disclosure and procedural requirements of Swedish law, including with respect to the Offer timetable, settlement procedures, withdrawal, waiver of conditions and timing of payments, which are different from those of the United States.

 The Offer is made to Karo Pharma’s shareholders resident in the United States on the same terms and conditions as those made to all other shareholders of Karo Pharma to whom an offer is made. Any information documents, including this press release, are being disseminated to U.S. shareholders on a basis comparable to the method that such documents are provided to Karo Pharma’s other shareholders. Financial statements and financial information included in the information documents are prepared in accordance with IFRS that may not be comparable to the financial statements or financial information of U.S. companies.

To the extent permissible under applicable law or regulations, including Rule 14e-5 under the U.S. Exchange Act, Karo Intressenter and its affiliates or its brokers and its broker’s affiliates (acting as agents for Karo Intressenter or its affiliates, as applicable) may from time to time after the date of this press release and during the pendency of the Offer, and other than pursuant to the Offer, directly or indirectly, purchase, or arrange to purchase, outside the United States, shares in Karo Pharma that are the subject of the Offer or any securities that are convertible into, exchangeable for or exercisable for such shares before or during the period in which the Offer remains open for acceptance. These purchases may occur either in the open market at prevailing prices or in private transactions at negotiated prices. To the extent information about such purchases or arrangements to purchase is made public in Sweden, such information will be disclosed by means of a press release or other means reasonably calculated to inform U.S. shareholders of Karo Pharma of such information. In addition, the financial advisors to Karo Intressenter may also engage in ordinary course trading activities in securities of Karo Pharma, which may include purchases or arrangements to purchase such securities.

To the extent required in Sweden, any information about such purchases will be made public in Sweden in the manner required by Swedish law.

Neither the SEC nor any U.S. state securities commission has approved or disapproved the Offer, passed upon the merits or fairness of the Offer, or passed any comment upon the adequacy, accuracy or completeness of the disclosure in this press release. Any representation to the contrary is a criminal offence in the United States.

The receipt of cash pursuant to the Offer by a U.S. holder of shares in Karo Pharma may be a taxable transaction for U.S. federal income tax purposes and under applicable U.S. state and local, as well as foreign and other, tax laws. Each holder of shares in Karo Pharma is urged to consult its independent professional advisor regarding the tax consequences of accepting the Offer.

It may be difficult for Karo Pharma’s shareholders to enforce their rights and any claims they may have arising under U.S. federal securities laws since Karo Intressenter and Karo Pharma are located in non-U.S. jurisdictions, and some or all of their respective officers and directors may be residents of non-U.S. jurisdictions. Karo Pharma’s shareholders may not be able to sue Karo Intressenter or Karo Pharma or their respective officers or directors in a non-U.S. court for violations of the U.S. securities laws. It may be difficult to compel Karo Intressenter and Karo Pharma and their respective affiliates to subject themselves to a U.S. court’s judgment.