Introduction of a single SAS share

Introduction of a single SAS share SAS AB makes offerings for the outstanding shares in SAS Danmark, SAS Norge and SAS Sverige The Boards of Directors in these companies recommend the offers The Board of Directors of a Swedish limited liability company in the process of changing its name to SAS AB (publ) ("SAS AB") today decided to make three parallel public offers to the shareholders in SAS Danmark A/S, SAS Norge ASA and SAS Sverige AB, (together, the "Parent Companies"). For each share in the Parent Companies one newly issued share in SAS AB is being offered ("the Offers"). Brokerage fees will not be charged. The exchange ratio 1:1 is based on detailed analyses of historical differences in the market values of the Parent Companies as well as the underlying differences in value among the Parent Companies, in which present differences in liquid assets and expected future tax payments were considered. The Boards of Directors of the Parent Companies unanimously recommend that the shareholders in the Parent Companies accept the Offers. The Boards' assessment is supported by opinions from UBS Warburg Ltd. and Morgan Stanley & Co. Limited. On April 19, 2001, a new Board of Directors of SAS AB was appointed, with Harald Norvik as Chairman. In addition, the Board comprises Bo Berggren (Vice Chairman), Erik Sørensen (Vice Chairman), Bjørn Eidem, Anders Eldrup and Urban Jansson. It is intended that Ulla Gröntvedt, Ingvar Lilletun and Helmuth Jacobsen are elected to the Board of Directors as employee representatives. Jørgen Lindegaard has been named the President and CEO of SAS AB. Today, Jørgen Lindegaard has also been named the President of each of the Parent Companies. SAS AB currently neither owns nor controls any of the shares in the Parent Companies. The Offers in brief * For each share in SAS Danmark A/S ("SAS Danmark"), SAS Norge ASA ("SAS Norge") and SAS Sverige AB ("SAS Sverige") one newly issued share in SAS AB is being offered. SAS AB is a newly created Swedish limited liability company that is currently owned by the Parent Companies. * The Offers are inter alia conditional upon SAS AB implementing each of the Offers to the shareholders in SAS Danmark, SAS Norge and SAS Sverige and the customary 90 percent reservation. * The Boards of Directors of the Parent Companies have unanimously agreed to recommend that the shareholders accept the Offers. * The acceptance period is expected to run from May 28 until June 25, 2001. * The plan is to list the single SAS share on the Copenhagen Stock Exchange, the Main List on the Oslo Stock Exchange as well as the A-list on the Stockholm Stock Exchange. A prospectus containing complete information on the Offers as well as an acceptance form is expected to be distributed at the end of May 2001. Background and Rationale Since 1996 the activities of the Parent Companies consist only in managing their respective shares of the SAS Consortium. However, the legal structure comprises three different companies in the three countries. The companies are listed separately on each its own stock exchange and are each subject to different tax and accounting rules. In 1999 SAS initiated a discussion with the three states as shareholders in SAS on the need to change SAS's legal structure for the purpose of creating a single SAS share. On April 20, 2001, the Danish, Norwegian and Swedish governments made proposals to their respective legislatures for permission to participate in implementing a change in SAS's share structure. The introduction of a single SAS share is motivated by a number of advantages for SAS and thus for its shareholders: Better access to the capital market The adoption of a single share will offer the equity markets one SAS share instead of the three shares listed on three different stock exchanges today. This is expected to create preconditions for higher liquidity and thus more efficient pricing of the share, which better meets the requirements of large institutional investors. In addition, better access to capital markets makes possible a capital structure that can be adapted more easily to SAS's business activities. Greater opportunities to participate in structural transactions With the current structure, an acquisition of other companies using own shares as payment requires the coordinated resolutions of the Parent Companies' general meetings of shareholders and Boards of Directors, resulting in the seller receiving three different shares as payment. The introduction of a single SAS share will represent a more attractive means of payment and increase the opportunities for SAS to take part in structural transactions. Better preconditions for introducing incentive programs The introduction of a single SAS share should facilitate, technically as well as from a cost standpoint, the introduction by SAS of equity based incentive programs, which is viewed as an effective instrument for promoting the participation and involvement of employees in SAS's business. More efficient decision-making Under the current share structure, the Parent Companies constitute independent companies vis-à-vis one another, charged inter alia with the task of protecting their own interests in the SAS Consortium. Important shareholder decisions and SAS business affairs are divided among three general meetings of shareholders and three Parent Company Boards as well as an Assembly of Representatives and SAS Consortium Board of Directors. Under the new structure decisions affecting the new Group as a whole will be made by one general meeting common to all shareholders and one Board of Directors. The decision-making structure would thus become more efficient through its homogeneity and transparency. The Chairman of the Board of SAS AB, Harald Norvik, says: "SAS will have a simpler decision-making structure, which will strengthen its ability to act quickly in a competitive market. Liquidity in the SAS share will increase, with more efficient pricing as a consequence." "A single share will be a key component in SAS's expansion. We will gain better access to the capital markets, be able to take part in business transactions and improve motivation through introducing incentive programs," says Jørgen Lindegaard, the President and CEO of SAS AB. The terms and conditions for the Offers The Offers are conditioned inter alia on SAS AB implementing each of the Offers to the shareholders in SAS Danmark, SAS Norge and SAS Sverige. For each of the Offers, the customary 90 percent reservation applies. Further, the Offers are conditional upon the acceptances of the Offers of the Danish, Norwegian and Swedish States respectively. SAS AB reserves the right to declare each of the Offers unconditional in the event of lower acceptances than 90 percent. Effects of the Offers The creation of a single SAS share through the Offers primarily involves changes in SAS's legal structure. Through the Offers, the current shareholders in the Parent Companies will become shareholders in SAS AB. SAS's operations, which will continue to be run in their entirety within the SAS Group, will not be affected by the implementation of the Offers. SAS AB will become the parent company in the new Group. This means that SAS AB will be responsible for Group-wide tasks. The functions to be performed by the Parent Companies mainly consist of tasks related to their ownership of the SAS Consortium. The operations and affairs of the SAS Consortium will also continue to be managed by the Consortium's Board of Directors and President. The membership of the Boards, the posts of Chairman of the Board and of President of the Parent Companies and of the SAS Consortium will coincide with the corresponding positions in SAS AB. Listing SAS AB has applied to list the company's shares on the Copenhagen Stock Exchange, the Oslo Stock Exchange's Main List and the Stockholm Stock Exchange's A-list. Listing is expected to take place on all the exchanges on about July 6, 2001. Ownership structure On the assumption that the Offers are accepted in their entirety and implemented, the Danish, Norwegian and Swedish States will own 14.3 percent, 14.3 percent and 21.4 percent, respectively, of SAS AB. The remaining 50 percent will be owned by private interests. The accounts of the new SAS Group (pro forma) Consolidated accounts for the new Group have been prepared through a consolidation of all assets and liabilities, revenues and expenses in the new Group at the same value at which they have been included in their respective units. For pro forma accounts and appurtenant commentary, see Appendix. Preliminary timetable A prospectus containing complete information on the Offers as well as a notification form for participants is expected to be distributed to the shareholders in the Parent Companies at the end of May 2001. The notification period for the Offers is expected to run from May 28 until June 25, 2001. Settlement day for the Offers will occur after SAS AB has announced that the terms for the Offers have been fulfilled or that SAS AB has declared the Offers unconditional. This is expected to take place on or about June 28, 2001. SAS AB is expected to be listed on all the Scandinavian stock exchanges on July 6, 2001. SAS AB reserves the right to extend the notification period for the Offers as well as to postpone the date of payment. Oslo, May 8, 2001 The Board of Directors of SAS AB Nordea Securities is the advisor to SAS in connection with the Offers. For further information, please contact: Jørgen Lindegaard, President and CEO, SAS, tel. +46 8 797 11 23 Gunnar Reitan, Executive Vice President and CFO, SAS, tel. +46 8 797 28 44 Benny Zakrisson, Vice President, Corporate Advisory, SAS, tel. +46 8 797 43 97 Through this document no offer is made in countries where it is in contravention of any law or regulation to make such an offer. This Offer is therefore not directed at persons whose participation requires prospectuses, registration or measures other than are required by Danish, Norwegian and Swedish law. The Offers described in this document are not made, directly or indirectly, in Canada, Australia or Japan, and the aforementioned documents may not be distributed in or sent to Canada, Australia or Japan. Appendix Accounting principles SAS AB's and the new Group's financial statements will be prepared according to generally accepted accounting practices in Sweden, which are based on the Swedish Annual Accounts Act as well as recommendations from the Swedish Accounting Standards Board, the Swedish Financial Accounting Council and the Föreningen Auktoriserade Revisorer (Swedish Federation of Authorized Public Accountants - FAR). The SAS Group's accounts are prepared in accordance with International Accounting Standards ("IAS"). The difference between applying IAS and generally accepted accounting practices in Sweden has till now not been of material importance for the income and financial position of the SAS Group. To the extent that the recommendations of the IASC do not conflict with generally accepted accounting practices in Sweden, the IAS will also be applied to the SAS AB and the new Group. Consolidated accounts (pro forma) for the new Group have been prepared through a consolidation of all assets and liabilities, revenues and expenses in the new Group at the value at which they are recorded in their respective units (pooling method). Comments to the pro forma accounts The new Group's accounts differ from those of the current SAS Group only in a few points of major importance. The figures below, which are used to illustrate the effects, have been taken from the financial statements for 2000. Effects on the balance sheet The items on the asset side and net assets are changed only marginally from the accounts of the current SAS Group. More significant reshuffling is taking place on the liability side. 1. The Parent Companies' deferred taxes increase the new Group's deferred taxes by MSEK 3,552 to MSEK 3,961. However, these taxes emanate from the SAS Consortium's operations and do not imply any new burden on the business. 2. In the new Group, SAS's liabilities to the Parent Companies will become only an internal item. The new Group's external liabilities thereby become MSEK 1,563 lower than for the current SAS Group. 3. The net effect of these and other marginal changes to the balance sheet is that the new Group's recorded shareholders' equity becomes MSEK 2,017 lower than for the current SAS Group. The main reason is that the current SAS Group paid out to the Parent Companies only as much as was needed to cover dividends and taxes payable (as well as the Companies' current minor expenses). Thus, in principle, the SAS Group's shareholders' equity might also be seen as also including the SAS Consortium operation's deferred taxes. But since payment from the Consortium to the Parent Companies always takes place at a ratio of 2-2- 3 - and the Parent Company with the greatest need for liquidity has been in charge - a higher total has been paid out than was needed for actual taxes payable and dividends. This has meant that the Parent Company with the greatest opportunity to defer tax payments has built up its liquidity (which was later invested in the SAS Consortium), thus becoming the SAS Group's liability to the Parent Companies. SAS AB will have share capital of MSEK 1,645 MSEK, which will also be the new Group's recorded share capital. Other restricted and unrestricted equity respectively will remain in the new Group. The new Group's shareholders' equity as of December 31, 2000 amounts to MSEK 17,520, compared with the current SAS Group's shareholder's equity of MSEK 19, 537 and consists of share capital of MSEK 1,645 MSEK, restricted reserves of MSEK 6,717 and unrestricted reserves of MSEK 9,158. Effects on the statement of income 1. Although revenues are not affected, operating expenses increase by the Parent Companies' administration costs (MSEK 13). 2. Net financial items will improve by MSEK 69 since the new Group's external liabilities will be MSEK 1,563 lower than for the current SAS Group. 3. Taxes on the Parent Companies will lower the income by MSEK 393. The current SAS Group shows its income before taxes. These include taxes on the SAS Consortium's income and on the Parent Companies' own operations (interest income and administration costs). 4. The net effect is that recorded net income is MSEK 337 lower for the new Group than for the old SAS Group. (MSEK 2,135 as opposed to MSEK 2,472). However, from a shareholder's perspective there has been no change in this respect. Effects on the cash flow statement There is a certain regrouping (reclassification). Payments to the Parent Companies are replaced with dividend to shareholders, payment of taxes as well as change in external liabilities (previously transactions related to the Parent Companies' excess liquidity). In addition there will be marginal effects from the Parent Companies' own operations. Effects on key ratios For the most part, key ratios show only marginal changes for the new Group compared with the current SAS Group. For some of the key ratios, however, the change is worth commenting on. 1. For return on equity, the return is now higher, for two reasons: income after taxes is now higher in the new Group than the income after standard tax in the current SAS Group, and shareholders' equity in the new Group is now MSEK 2,017 lower. This means that return on equity can now be calculated at 2-3 percentage points higher than before. 2. The equity/assets ratio (shareholders' equity plus minority interests as a percentage of total assets) is lowered by approximately 4 percentage points to 36 percent. With the definition that has applied to the SAS Group till now (where the term "shareholders' equity" includes deferred taxes - although of less importance in the SAS Group), the equity/assets ratio ("share of risk-bearing equity") rises by just over 3 percentage points to 44 percent (shareholders' equity falls by MSEK 2,017 while deferred taxes increase by MSEK 3,552, which together with a number of other minor items yields a net increase of "risk-bearing equity" of MSEK 1,535). Differences in accounting between Swedish and Danish and Norwegian accounting standards respectively The shareholding in the Parent Companies will, in principal, be recorded year by year by the holding company SAS AB at acquisition value (1,645 MSEK). In a corresponding hypothetical Norwegian or Danish company, the shares would be recorded according to "equity accounting." This would mean that any profits in subsidiaries (the Parent Companies and their subsidiaries and affiliated companies) would be reflected in the accounts of the new holding company in the form of an ever-higher recorded value of the shares in the subsidiaries. If a dividend is received, the recorded value of the shares is reduced correspondingly. This means that in Norwegian and Danish accounting, the profits for the year (and thereby the shareholders' equity in the new holding company) would in principle be the same as in the new Group. The difference above should not be important, since the new Group normally will be the determining unit for the external judgment of the new Group's financial situation. ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/05/08/20010508BIT00770/bit0001.doc http://www.bit.se/bitonline/2001/05/08/20010508BIT00770/bit0002.pdf