Smile Henkilöstöpalvelut and VMP unite to become the front-runner of the HR services industry

NoHo Partners Plc

STOCK EXCHANGE RELEASE 5 JULY 2019 at 8:30 a.m.

Smile Henkilöstöpalvelut and VMP unite to become the front-runner of the HR services industry

NoHo Partners Plc (“NoHo Partners”) signed a share purchase agreement with VMP Plc (“VMP”) on 5 July 2019 on the sale of the share capital of NoHo Partners’ subsidiary Smile Henkilöstöpalvelut Oyj (“Smile”) to VMP (the “Transaction” or “Combination”) in exchange for shares. Smile’s minority shareholders have also committed to the Transaction. If the Transaction is completed, the merged VMP and Smile (the “Combined Company”) will become an affiliate of NoHo Partners and NoHo Partners will become the Combined Company’s largest shareholder with a 30.27% stake. Correspondingly, Smile will become a subsidiary of VMP. The Transaction will be executed as a share exchange, in which Smile’s shareholders will receive 0.8087 new shares in VMP as share consideration for each share in Smile owned by them, corresponding to a debt-free purchase price of approximately EUR 82 million (based on the closing price EUR 4.92 of VMP as at 4 July, 2019)

The completion of the Transaction is conditional on a resolution of VMP’s general meeting and on obtaining the necessary consents and undertakings from the financier banks. VMP's largest shareholders, the funds managed by Sentica Partners Oy, as well as Meissa-Capital Oy, which represent approximately 58.1% of the votes borne by the shares in the company, have stated that they support the Transaction and have committed in advance to vote for the Transaction in VMP’s extraordinary general meeting.

The Transaction will merge two of Finland’s leading personnel services companies, creating a major player with a stronger market position. The Combination is expected to significantly improve NoHo Partners’ shareholder value and bring significant benefits and added value to the shareholders of the new company, including NoHo Partners, to customers and to the employees of the Combined Company through the company’s stronger position and the sought synergy benefits.

The potential effect of the Combination on NoHo Partners’ guidance and prospects will be announced later after the completion of the Transaction.

“If completed, this transaction will represent a strategic development step for us. The Transaction will strengthen our balance sheet and allow us to focus even more strongly on our core business – the restaurant business and growing it both domestically and internationally. By focusing on our core business, we believe we can significantly increase the shareholder value of our group,” said NoHo Partners’ Chairman of the Board Timo Laine.

“Sentica joined VMP’s growth story in the autumn of 2017. At the time, we announced that VMP will race towards growth and new opportunities. This has really been the case and we are happy to have the opportunity to take such a significant step in the consolidation of the HR services industry. We believe in our common future and we will remain as one of the largest shareholders,” said Sentica’s Investment Director and VMP’s Chairperson Liisa Harjula.

“We have been building the exceptional Smile growth story on this market since 2014, when the company became a part of our group. Back then, Smile’s turnover was under MEUR 7, whereas it had grown to MEUR 127 in 2018. The new company to be formed with one of the other top companies in the business, VMP, will reshape the labour market and personnel services business in general. As the company's largest shareholder, we are privileged to be in pole position in building the future of the entire business”, said Laine.

“It has been great to be a part of Smile’s growth during the last five years. We have a great growth story behind us and now in line with our strategy we will take the next step, when we combine two successful players and form a new player in HR services in Finland. It is amazing to get the opportunity to lead the combination of two winning firms”, says Smile CEO Sami Asikainen.

VMP’s and Smile’s aggregate turnover based on preliminary indicative combined financial data for 2018 was MEUR 253,5, the adjusted operating margin, MEUR 21.8 and the adjusted EBITA, MEUR 20.6 (according to FAS). (See Financial data of the Combined Company.) VMP employed approximately 19,400 leased employees in 2018 either directly or through chain companies and Smile, in turn, approximately 10,000 leased employees, so the Combined Company has a significant pool of employees at its disposal.

Key information of the Transaction

• The Transaction will be executed as a share exchange, in which Smile’s shareholders will receive 0.8087 new shares in VMP as share consideration for each share in Smile owned by them, corresponding to a debt-free purchase price of approximately EUR 82 million (based on the closing price EUR 4.92 of VMP as at 4 July, 2019)
• As part of the terms of the Transaction, the Board of Directors of VMP will propose to the Extraordinary General Meeting (the “EGM”) a dividend and capital repayment amounting to EUR 3.5 million in total to be paid to its shareholders before the closing of the Transaction
• The largest shareholders of VMP, Sentica Buyout V Ky and Sentica Buyout V Co-investment Ky (together ”Sentica”) and Meissa-Capital Oy (”Meissa-Capital”), who together hold approximately 58.1% of VMP’s shares, support the Combination and have committed in advance to vote in favour of the Transaction in the EGM of VMP
• The current shareholders of VMP and Smile will hold approximately 59.6% and 40.4%, respectively, of the shares in VMP after the Transaction
• The completion of the Transaction is subject to approval of the Transaction by VMP's shareholders in the EGM of VMP by a majority of two-thirds of votes cast and shares represented at the EGM and the approvals and commitments from the financing banks
• Sami Asikainen will act as the CEO of the Combined Company and Hannu Nyman as the CFO
• The board of the Combined Company will include board members from both companies. It is proposed that the Chairman will be Mr. Tapio Pajuharju.
• The EGM of VMP is expected to be held in August 2019, and the Transaction is expected to be completed during the third quarter of 2019
• The Combined Company intends to release further information on strategy and the integration plan during the autumn after the completion of the Transaction

Smile in brief

Smile is one of Finland’s leading personnel services providers measured by turnover and one of Finland’s fastest-growing personnel services companies. Smile offers personnel services nationwide for the following industries: hotel, restaurant and catering (HoReCa), events and promotions, healthcare as well as manufacturing, construction and logistics (MCL). Smile is known for its positive and human-oriented corporate culture. NoHo Partners is Smile’s parent company.

Smile's turnover was MEUR 128.6, adjusted operating margin MEUR 11.5 and EBITA MEUR 11.3 in 2018 (adjusted from IFRS to resemble FAS for illustrative purposes) (see section Financial information of the Combined Company). Smile provided employees to over 1,000 customers in 2018 and approximately 10,000 people received pay from the company in 2018.

VMP in brief

VMP is a Finnish HR services company with a comprehensive offering of staffing, recruiting and organisational development, and self-employment services. VMP’s mission is to help companies and individuals in succeeding in the changing working life. VMP serves its customers in Finland and Sweden and it has a recruitment hub for staffed employees in Romania. VMP Group provides services under the brands of VMP Varamiespalvelu, Voima, Enjoy, Extraajat, Personnel, Corporate Spirit and Eezy.

VMP has grown rapidly through organic growth and acquisitions. In 2018, VMP recorded a revenue of EUR 124.9 million and in the first quarter of 2019, a revenue EUR 38.2 million.

Main benefits of the Transaction

• The Transaction brings together two industry leading HR services companies, creating a significant player with a stronger market position and increased competitiveness
• The Combined company has a nationwide network in Finland through its own group companies and the franchising chain, and a larger number of staffed employees to serve the changing customer needs
• The company’s comprehensive service offering from staffing to recruiting, organisational development and self-employment can be offered to a larger clientele
• For employees, the company can offer a wider range of work opportunities and more options, thus being a more attractive employer
• The Combined Company will have stronger resources and capabilities to invest in digitalisation and in the development of new services, with which the company can respond even better to the changing needs of the labour market
• The new company is the front-runner in its field with a mission to actively reform working life in Finland

The Combination of VMP and Smile is expected to strengthen the Combined Company’s market position considerably and to create added value both to NoHo Partner’s and to Combined Company’s shareholders through synergies arising from unifying operations and the increasing amount of business opportunities. Operative strategic synergies are expected to be achieved, for example, by providing a comprehensive service offering for a larger clientele, by utilising a combined pool of staffed employees in filling vacancies, and by utilising both companies’ know-how, resources and data in developing new services. The Transaction is expected to create cost savings especially through combining organisations, enhancing operational efficiency and sharing best practices.

Financial information of the Combined Company

Basis of preparation

The illustrative, combined, unaudited financial information presented below is based on VMP’s and Smile’s audited consolidated financial statements for the year ended December 31, 2018, and on the unaudited interim reports for the first quarter of 2019 ended March 31, 2019.

The combined financial information is presented for illustrative purposes only. The combined financial information gives an indication of the combined revenue and earnings, assuming the activities were included in the same group of companies from the beginning of each period, and assuming that the financial information was reported according to FAS. The aggregated combined financial information is based on a hypothetical situation and should not be viewed as pro forma financial information, as no purchase price allocation, transaction costs or differences in accounting principles have been taken into account. The illustrative, combined financial information presented below does not necessarily predict the future results of the combined operations or VMP’s and Smile’s financial position, and the financial information published by the Combined Company or VMP and Smile in the future might significantly differ from the illustrative information presented below.

Smile reports its financial information according to IFRS; therefore, Smile’s IFRS figures have been adjusted to correspond to FAS. However, the adjustments are preliminary and should not be considered as final. See Appendix 1 for the adjustments.

Illustrative combined income statement information

1) The adjustments made to the adjusted EBITDA and the adjusted EBITA of VMP are based on VMP published annual and interim reports. Smile adjusted EBITDA and adjusted EBITA for 2018 include an adjustment for IPO expenses (EUR 818 thousand).

Key terms in brief

VMP will purchase the entire share capital of Smile according to the terms of the share purchase agreement. The Transaction will be executed as a share exchange, in which Smile’s shareholders will receive 0.8087  new shares in VMP as share consideration for each share in Smile owned by them, corresponding to a debt-free purchase price of approximately EUR 82 million (based on the closing price EUR 4.92 of VMP share as at 4 July, 2019). The number of new VMP shares to be issued is expected to be 10,050,177 shares.

The share consideration to be paid as the purchase price is not agreed to include adjustments. The number of shares to be paid as the purchase price is agreed to be fixed, and will not be adjusted for any changes in the share price.

The completion of the Transaction is subject to, among other things, the approval of the Transaction by the EGM of VMP by a majority of two-thirds of votes cast and shares represented at the EGM and approvals and commitments by the financing banks.

As part of the terms of the Transaction, the Board of Directors of VMP will propose to the EGM a dividend and capital repayment amounting to EUR 3.5 million in total to be paid before the closing of the Transaction to its shareholders.

Smile and NoHo Partners reorganize their internal receivables so that the net amount of receivables arising from their mutual staffing agreement will remain as interest-free unsecured loan amounting to approximately EUR 1.7 million, which is intended to be paid back to NoHo Partners by 31 December 2020.

The share purchase agreement includes certain typical representations and warranties from both Smile and VMP related to both companies’ organisation and businesses. If an event that leads to the breach of the representations and warranties given by Smile’s sellers or VMP (or to material breach for certain warranties and representations) takes place or becomes known between the signing and closing of the Transaction, and such breach has not been remedied in accordance with the terms and conditions of the share purchase agreement (to the extent such breach is remediable), the party suffering of the breach has a right to terminate the share purchase agreement in accordance with its terms. The share purchase agreement also includes undertakings from Smile and VMP, which are typical in similar transactions, such as the undertaking that both Smile and VMP will continue to conduct their business in the ordinary course before the Transaction takes place. Smile has granted an indemnity to VMP, and VMP has granted an indemnity to Smile as regards certain qualified breaches of the above-mentioned representations, warranties and undertakings.

The share purchase agreement lapses automatically, if the EGM of VMP does not approve the Transaction. In addition, the share purchase agreement can be terminated on certain conditions. Termination is justified, for example, if approvals and commitments by the financing banks or the approval of VMP's shareholders are not obtained within the time limit prescribed in the share purchase agreement.

In connection with the Transaction, NoHo Partners and certain minority shareholders of Smile have entered into a lock-up undertaking, under which, subject to certain customary exceptions, they have agreed not to sell the shares acquired through the Transaction for a period of 180 days after the completion of the Transaction subject to certain customary terms. The lock-up commitments concern approximately 89.1 % of the new shares in VMP issued in connection with the Transaction.

The EGM of VMP is expected to be held in August 2019, and the Transaction is expected to be completed during the third quarter of 2019. The Combined Company intends to release further information about its strategy and integration plan in autumn after the closing of the Transaction

Governance

After the completion of the transaction, Sami Asikainen will become the CEO of the Combined Company and Hannu Nyman the CFO.

Following the Transaction, the current shareholders of VMP and Smile will hold approximately 59.6% and 40.4%, respectively, of the shares in the Combined Company. As a consequence of the completion of the Transaction, the largest shareholder of Smile, NoHo Partners, will become the largest shareholder of the Combined Company with approximately 30.3% shareholding. The largest shareholders of VMP, Sentica and Meissa-Capital, will hold approximately 23.1% and 11.5%, respectively.

Sentica and Meissa-Capital propose to the extraordinary general meeting of VMP that Tapio Pajuharju, Kati Hagros, Liisa Harjula, Paul-Petteri Savolainen and Mika Uotila from the VMP Board of Directors continue as members of the Board of Directors, whereas Joni Aaltonen, Heimo Hakkarainen and Timur Kärki will resign from the Board of Directors of the Combined Company with effect from completion of the Transaction. It is also proposed that Smile’s board members Timo Laine, Jarno Suominen and Timo Mänty become the Combined Company’s board members upon the completion of the Transaction. It is proposed that Tapio Pajuharju will become the Chairman of the Board.

Largest shareholders of the Combined Company

Based on the latest available information assuming that all the current shareholders of VMP and Smile are shareholders also at the date of the completion of the Transaction, the 15 largest shareholders of the Combined Company would be the following (VMP as at 30 June, 2019). Calculations are based on the actual information of VMP and Smile and are for illustrative purposes only. The calculations do not necessarily illustrate the actual ownership structure at the time of the completion of the Transaction or after it.

Shareholder support

Sentica and Meissa-Capital, who together hold approximately 58.1 % of shares and votes in VMP, have committed with certain typical terms to participate in the EGM of VMP and to vote in favour of the Transaction.

Advisors

Carnegie Investment Bank AB, Finland Branch, is acting as the financial advisor and Castrén & Snellman Attorneys Ltd as the legal advisor to NoHo Partners and Smile. Danske Bank A/S Finland Branch is acting as the financial advisor and Roschier, Attorneys Ltd as the legal advisor to VMP.

Press conference and analyst meeting

A joint press conference will be held today on 5 July 2019 at 11:30 Finnish time at Kasarmin Salit at the address Kasarmikatu 21, Helsinki, Finland in Finnish.

The presentation material for the event will be made available on the websites of NoHo Partners, Smile and VMP during the course of today.

The press conference can be viewed as a direct webcast at https://noho.videosync.fi/tiedotustilaisuus-040719. A recording of the webcast will be available at the same address later today.

Additional information:

Timo Laine, Chairman of the Board, NoHo Partners Plc, tel. +358 400 626 064
Jarno Suominen, CFO, NoHo Partners Plc, tel. +358 40 721 5655
Sami Asikainen, CEO, Smile Henkilöstöpalvelut Oyj, puh. +358 40 700 9915

Distribution:
Nasdaq Helsinki
Principal media
www.noho.fi

NoHo Partners Plc is a Finnish group established in 1996, specialising in restaurant services and labour hire. The company, which was listed on NASDAQ Helsinki in 2013 and became the first Finnish listed restaurant company, has continued to grow strongly throughout its history. The Group companies include some 220 restaurants in Finland, Denmark and Norway. Well-known restaurant concepts of the company include Elite, Savoy, Teatteri, Yes Yes Yes, Stefan’s Steakhouse, Palace, Löyly, Hanko Sushi and Cock’s & Cows. In 2018, NoHo Partners Plc’s turnover was MEUR 323.2 and EBITDA MEUR 28.4. Depending on the season, the Group employs approximately 4,500 people converted into full-time workers. NoHo Partners Plc’s subsidiary Smile Henkilöstöpalvelut Oyj employed approximately 10,000 people during the 2018 financial period.

NoHo Partners corporate website: www.noho.fi
NoHo Partners consumer websites: www.ravintola.fi and www.royalravintolat.fi
Smile Henkilöstöpalvelut: www.smilepalvelut.fi
                                                                                                               

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

This stock exchange release includes forward-looking statements regarding future events, including the statements concerning NoHo Partners, Smile and VMP, the Transaction described in this stock exchange release and the expected benefits from such Transaction and Smile's and VMP’s future financial performance based on current expectations on Smile's and VMP’s combined businesses. Such forward-looking statements are subject to numerous risks and uncertainties that can cause the actual outcomes and results to be materially different from those projected. When used in this release, the words "may", "expects", "intends", "anticipates", "plans", "wants", "will", "predicts" and "estimates" as well as the negatives of these words and other analogous or corresponding expressions are intended to identify forward-looking statements. However, the absence of these expressions does not mean that the statement is not forward-looking. These forward-looking statements are based on NoHo Partners’, Smile’s and VMP’s current expectations and forecasts on future events. These statements are not guarantees of future performance.

Because forward-looking statements are subject to various risks and uncertainties, the actual results may be materially different from those projected. Such risks and uncertainties, many of which are outside the influence of VMP, are, inter alia: VMP's ability to get approval for Transaction from its shareholders; at the time of Transaction, the total consideration to be paid by VMP to the owners of Smile; the possibility that the time needed to execute the Transaction is longer than expected; achieving expected synergies and benefits from the Transaction; risks related to the integration of Smile’s business to VMP; the ability of VMP and Smile to terminate the Share and business purchase agreement in certain situations; NoHo Partners’ business suffering due to uncertainties related to the Transaction; the financial position of NoHo Partners after the Transaction; and other factors, risks and uncertainties, which are disclosed in NoHo Partners’ annual reports and quarter reports. Several factors might cause the combined group of companies' result and financial position to differ materially from the express or implied information on the result and financial position included in the forward-looking statements. NoHo Partners or any of its related parties, advisors or representatives or any other party is not liable to check or confirm or publish changes to any of the forward-looking statements, so that those forward-looking statements would take into account any events or circumstances that have taken place or occurred after the date of this release.

This release includes estimates of cost synergy benefits expected to arise from the combined group of companies, as well as estimates of costs caused by the combination prepared by Smile and VMP which are based on a number of assumptions and conclusions. Such estimates represent the expected future impact of the combination on the Combined Company’s business, financial position and result. The assumptions relating to the estimated cost synergy benefits and combination costs are inherently uncertain and subject to various significant business, economic, and competitive risks and uncertainties that can cause the possible actual cost synergy benefits and combination costs to differ materially from the estimates presented in this release.

Appendix 1: Reconciliation of Smile's profit and loss account information

Smile reports its financial information according to IFRS; therefore, Smile’s IFRS figures have been adjusted to correspond to FAS according to the table below. In addition, adjustments for non-recurring items have been presented in the table. Smile’s financials according to FAS are unaudited.

Reconciliation of revenue

Reconciliation of EBITDA ja EBITA