Proposed demerger of Navamedic ASA with transfer to Observe Medical ASA

Reference is made to the stock exchange announcement of 14 May 2019 regarding the proposed restructuring of Navamedic ASA (the "Company" or "NAVA" and together with its direct and indirect subsidiaries, the "NAVA group"), whereby the Company's Medtech division is demerged from the Company and merged into a newly incorporated entity, Observe Medical ASA ("OM ASA" and together with its direct and indirect subsidiaries following the completion of the demerger, the "OM ASA group"), which will be listed on Oslo Axess upon completion of the demerger.

The board of directors of NAVA and OM ASA today announce that they have signed a joint demerger plan and resolved to propose to their respective general meetings that the shareholders shall approve the demerger of NAVA, whereby all of NAVA's shares in Observe Medical International AB are transferred to OM ASA together with an earn-out obligation (a contingent consideration) to the sellers of Observe Medical International AB related to the Company's acquisition of Observe Medical International AB in 2015 (the "Contingent Consideration"), while all other assets, rights and liabilities will remain with NAVA. The Contingent Consideration is further described in notes 10 and 23 to NAVA's consolidated annual financial statements for 2018. Upon completion of the demerger, Observe Medical International AB will be a wholly owned subsidiary of OM ASA and OM ASA will indirectly be the owner of Observe Medical International AB's direct and indirect subsidiaries, Observe Medical Aps and Navamedic MedTec AB, respectively.

The board of directors and management of NAVA have evaluated the most suitable organisation of NAVA in order to facilitate further growth and enhanced values for its shareholders. As there are few synergies between commercialising medical technology on a global market (the Medtech division) and NAVA's core business of growing a market access platform for pharma companies in Northern Europe, it was concluded that a demerger would benefit both businesses. The demerger will create a simpler and clearer corporate structure visualising the existing values of NAVA, and is therefore expected to provide both NAVA and OM ASA with more flexibility and a better basis to raise capital for their respective businesses. The demerger will allow NAVA to focus on developing its core business areas within distribution, marketing and sale of pharma and healthcare products, while OM ASA will focus on the commercialisation of Sippi and further development of the Medtech business. The demerger will as such facilitate further growth for both companies.

Financial effects of the demerger

Following the entering into of the joint demerger plan, NAVA expects to present the OM ASA group, including excess values related to the OM ASA group as reported in the NAVA group and the Contingent Consideration, as held for distribution and discontinued operations according to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

The table below illustrates the condensed consolidated income statement information for the NAVA group with the Medtech division (OM ASA group), including excess values related to the OM ASA group as reported in the NAVA group and the Contingent Consideration, re-presented as discontinued operations, for the interim periods ended 31 March 2019 and 2018 and for the year ended 31 December 2018.

The results from discontinued operations differ from the net result after income tax in the condensed consolidated income statement information for the OM ASA group including excess values and Contingent Consideration presented in the section "About OM ASA and the Medtech division" below. The difference is related to net expenses in OM ASA group towards the rest of the NAVA group, because the amounts re-presented to discontinued operations only includes the NAVA group's external income and expenses.

See the "Condensed consolidated statement of financial position information for OM ASA group (including excess values and contingent consideration)" below for an indication of the effects on the NAVA group's asset and liabilities of the demerger. Furthermore, as at 31 March 2019 the rest of the NAVA group had net receivables on the OM ASA group in the amount of NOK 28.75 million.

Terms of the demerger and timetable

The demerger is proposed to be carried out as a demerger by way of a transfer to an existing company ("demerger and merger" (Nw: fisjonsfusjon)) in accordance with Chapter 14 of the Norwegian Public Limited Liability Companies Act.

The boards of NAVA and OM ASA have resolved upon an exchange ratio of 74%/26%, with 74% of the business to remain in NAVA and 26% of the business being transferred to OM ASA. The exchange ratio is based on an assessment made by the boards of NAVA and OM ASA, based on a valuation carried out by an external party, and founded on principles of discounted cash flow analysis, analysis of comparable transactions and the implied trading multiples of listed comparable companies.

The demerger is proposed to be implemented by way of decreasing the share capital of NAVA through a reduction of the nominal value of the shares. The size of the share capital decrease in NAVA reflects the allocation of the net values between the companies in the demerger. The shareholders of NAVA will receive shares in OM ASA by way of increasing the share capital in this company through issuance of new shares as demerger consideration. Prior to the share capital increase NAVA's current shareholding in OM ASA will be redeemed in its entirety, and the shareholders of NAVA will hence become shareholders of OM ASA in the same ratio as they own shares in NAVA when the demerger becomes effective.

The completion of the demerger is subject to the satisfaction of a number of conditions, including (i) that the demerger plan and related resolutions are approved with the required majority at the general meeting of NAVA, (ii) that legislation does not prevent registration of the demerger and that the parties obtain any required permissions/consents from public authorities, contracting parties and other third parties, (iii) that no decision has been made by the Oslo Stock Exchange which would prevent the continued listing of NAVA on the Oslo Stock Exchange/Oslo Axess, (iv) that a resolution has been made by the Oslo Stock Exchange for the listing of OM ASA on the Oslo Stock Exchange, Oslo Axess or on another regulated market if agreed by the boards of the two companies, (v) the entering into of the agreements listed in the demerger plan and (vi) that the creditor notice period has expired for both parties and the relation to any creditors having submitted objections have been clarified.  

The extraordinary general meetings of NAVA and OM ASA for the approval of the demerger will be held on or about 5 August 2019, and the demerger is subject to timely satisfaction of the above mentioned conditions expected to be completed and become effective in the end of October 2019 or the beginning of November 2019.

Governance, management and employees

The current board of directors and management of NAVA will not be affected by the demerger. Other than for the employees who are employed by Observe Medical International AB or its direct and indirect subsidiaries (who will be transferred to the OM ASA group upon completion of the demerger), the demerger will not have any implications for the employees of the NAVA group. The employees who are transferred to the OM ASA group as part of the demerger will continue their existing employment agreements with their current employing entity.

OM ASA has an interim board of directors comprising Terje Bakken (chairman of the board), Kathrine Elisabeth Gamborg Andreassen and Kristin Nyberg. Ole Henrik Eriksen is interim general manager of OM ASA. OM ASA does not have any other employees at the date hereof, but the OM ASA group will at the time of the completion of the demerger have 5 employees, who currently are employed in Observe Medical International AB and its direct and indirect subsidiaries.

No agreements have been, or are expected to be, entered into by NAVA in connection with the transaction for the benefit of any NAVA board members or senior employees, or for the benefit of any OM ASA board members or senior employees.

About OM ASA and the Medtech division

OM ASA is a newly incorporated public limited liability company and is currently a wholly-owned subsidiary of NAVA. OM ASA will upon completion of the demerger be owned by the shareholders of NAVA (as registered as such in the VPS at the date of completion of the demerger) and will own Observe Medical International AB and its direct and indirect subsidiaries in addition to the Contingent Consideration. The NAVA group may also use all or a portion of the account receivable of approximately NOK 28,750,000 it has against Observe Medical International AB as contribution in kind and thereby acquire new shares in OM ASA following completion of the demerger. OM ASA will apply for listing on the Oslo Stock Exchange, Oslo Axess or on another regulated market as part of the process.

NAVA's Medtech division is operated through Observe Medical International AB and its direct and indirect subsidiaries. The division is commercialising Sippi®, a new proprietary system for digital, wireless, urine measurement in global markets. Sippi® offers a new standard for urine monitoring in hospitals by enabling automated digital measurement. Safe and accurate monitoring of patients' urine production is a vital parameter for all intensive care patients and for selected patients treated in other wards. In addition to this, Sippi® prevents biofilm build-up via its proprietary technology and alerts healthcare professionals if biofilm reaches critical levels.

Set out below is certain key financial information for the OM ASA group on a consolidated basis. The amounts for OM ASA includes excess values related to the OM ASA group as reported in the NAVA group and the Contingent Consideration, and are based on the amounts used in NAVA's consolidation schedules for the audited annual financial statements for the years ended 31 December 2018, 2017 and 2016 and for the unaudited interim periods ended 31 March 2019 and 2018. Eliminations and adjustments for intercompany income and expenses on a lower level than for the whole NAVA group are based on information from the accounting systems that provided input to the consolidation schedules.

Condensed consolidated income statement information for OM ASA group (including excess values and the Contingent Consideration)

Condensed consolidated financial position information for OM ASA group (including excess values and the Contingent Consideration)

For further information, please contact:

Kathrine Gamborg Andreassen, CEO, Navamedic
Mobile: +47 951 78 860
E-mail: kathrine@navamedic.com

Toril Ås, CFO, Navamedic
Mobile: +47 957 01 071
E-mail: toril.as@navamedic.com

Navamedic ASA, established in 2002, provides a state-of-the-art market access platform for delivering pharmaceutical products to patients, hospitals and pharmacies in the Nordics. The company is also introducing Sippi®, a new system for digital urine measurement, to the global markets. Navamedic is headquartered in Oslo, Norway, and listed on the Oslo Stock Exchange (ticker: NAVA).