SAS enters into agreement to acquire Braathens ASA for NOK 1.1 billion

SAS enters into agreement to acquire Braathens ASA for NOK 1.1 billion · · SAS enters into agreement with the principal shareholders of Braathens to acquire their shares for NOK35 per share · Braathens' Swedish operations will not be part of the transaction · SAS will make a cash offer at the agreed terms for 100% of the shares · The offer values 100% of the Braathens equity at NOK 1,127 million (excluding the Swedish operations) · The agreement is conditional on, inter alia, satisfactory confirmatory due diligence; 90% acceptances; divestiture of the Swedish operations and anti-trust approval Transaction SAS has today reached an agreement with Braathens' principal shareholders, Braganza, Bramora and KLM, to acquire their shares, representing 68.8% of the share capital, for NOK35 in cash per share. The principal shareholders agreed to sell their shares in an offer under the terms agreed. The minority shareholders of Braathens will receive at least the same offer. SAS will finance the transaction using its cash position. The Swedish operations of Braathens are not part of the agreement and are soon to be divested. The guarantees that Braathens has given in relation to NOK1.6 billion in lease commitments of the Swedish operations, will after the acquisition be covered by a guarantee from Braganza and Bramora. The price per Braathens share of NOK35 is after the divestiture of, and therefore excluding, the Swedish operations. It values the equity capital of Braathens at NOK 1,127 million. Background Norway has an atypical market structure with two large players in a market of limited size. In this market with overcapacity and related fierce competition, Braathens has made losses of several billion NOK (approximately NOK2 billion in the period 1998 to 2000). Currently Braathens is in a difficult financial position. Braganza, Bramora, KLM and Braathens are of the opinion that Braathens is not a viable entity on a standalone basis. Therefore Braathens approached SAS to discuss the possibility of an acquisition by SAS. Rationale SAS agrees with Braathens that a partnership is in the best interest of both companies, their employees and their customers. The route network will be improved and expanded, whilst the overcapacity will be reduced. This will result in a more robust Norwegian domestic traffic system with better fleet utilization. Synergies will mainly come from capacity and cost reductions and the ambition is to manage all reductions in headcount through natural attrition. Braathens is an airline with a strong brand name and identity in the Norwegian market and SAS has decided to continue to run Braathens as an independent entity with its own brand name. Status Today Braganza, Bramora, KLM and SAS have signed an agreement that irrevocably commits the principal shareholders of Braathens to sell their shares to SAS under terms as agreed. The Boards of Braganza, Bramora and SAS and the Supervisory Board of KLM have approved the agreement. The Braathens Board of Directors has decided to recommend the acquisition by SAS to their shareholders. Regulatory approvals The parties have agreed to use all reasonable efforts and to cooperate in order to obtain the relevant regulatory approvals. Terms and conditions The acquisition of Braathens by SAS is conditional on, inter alia satisfactory confirmatory due diligence by SAS, completion of the divestiture of the Swedish operations, 90% acceptances in the tender offer and obtaining anti trust and other regulatory approvals and clearances. Impact on SAS The acquisition of Braathens will improve the home market position of SAS and create substantial synergies benefiting both its customers and shareholders. To compete effectively in the international airline sector today, an airline needs to have a strong home market position and be part of an international alliance. In Europe, national carriers often have market shares of between 60 and 95% in their home markets. The price levels in those countries are often not substantially different from the ones in Norway, but the strong home market positions give these national carriers a strong platform to compete internationally. The Norwegian market is relatively limited and has difficulties sustaining two major airlines with parallel routes on many destinations with satisfying profitability. Combining the activities will help reduce overcapacity and inefficiencies and create a viable Norwegian airline offering better and more flight connections. The partnership between Braathens and SAS will create attractive synergies mainly through capacity and cost reductions. Annual pre-tax synergies are substantial and estimated to amount to approximately NOK 600 million in the year 2002 and subsequently to rise to a level of in excess of NOK 900 million after three to four years. Specific synergy areas include aircraft rental expenses, non-aircraft capital expenditure (capital), traffic and production variable costs, overhead, sales & marketing, crew costs, station costs (costs) and international traffic feed (revenues). The above synergy estimates are net of implementation costs and reflect that SAS will not close any domestic routes and that fares will not be increased by more than inflation. The acquisition is to have an immediate positive effect on SAS' earnings in 2002. Preliminary timetable Braathens has its first quarter results announcement and annual general meeting, Tuesday 22 May 2001. SAS intends to launch the tender offer for Braathens in August 2001. Completion is expected in the fourth quarter of 2001. Information about Braathens Group (excluding Swedish operations) As of December 31, 2000 Braathens operated 32 aircraft - all of which are Boeing 737s with seating capacity for 120-150 passengers. Of those aircraft, 6 were owned by Braathens and 26 were leased. In the first quarter, 2001 two aircraft were transferred from leases to owned resulting in a total of 8 owned aircraft at the end of March, 2001. In 2000 Braathens Norway carried more than 6.3 million passengers and had operating revenues of NOK more than 5.7 billion. EBITDAR amounted to NOK 319 million. Norwegian domestic routes It is the largest Norwegian airline with a 50% market share in 2000 based on number of passengers. In 2000, the total domestic market comprised of 10.6 million passengers. Braathens Norway passenger load factor was 55.5%. Swedish routes These will soon be divested and will not be part of the transaction. International routes The number of passengers was 759,000 in 2000. Braathens operates 13 international routes. The route between Oslo and Stockholm was discontinued in June, 2000 due to poor profitability. Cargo Braathens Cargo is the part of the Braathens airline which handles cargo transport and related services. Braathens Cargo is represented by cargo departments or agents at all the destinations to which Braathens has scheduled flights. Financial overview of Braathens Norway (Excluding the Swedish operations) Braathens Norway Profit and loss account NOK MM 2000 1999 Operating revenue 5,785 5,192 Operating revenue from transactions with 22 49 other segments Operating expenses (5,488) (5,485) Operating expenses from other segments 0 0 Gross operating profit/(loss) 319 (244) Depreciation (189) (278) Other items 353 0 Gain/(loss) on sales of fixed assets 523 668 Leased out aircraft 24 27 Leased in aircraft (704) (401) Operating profit/(loss) 326 (228) Net financial items (74) (82) Profit/loss) before taxes 252 (310) Taxes (68) 88 Profit/(loss) for the year 184 (222) Gross operating margin 5.5% (4.7%) Braathens Norway Balance sheet items NOK MM 2000 1999 Total assets 4,340 4,081 Total liabilities 3,625 3,381 Net interest bearing debt 385 1,015 Investments in tangible and intangible fixed 661 612 assets May 21, 2001 For further information, contact President & CEO, SAS Group, Jørgen Lindegaard Executive Vice President & CFO, Gunnar Reitan Executive Vice President, Vagn Sørensen ------------------------------------------------------------ This information was brought to you by BIT http://www.bit.se The following files are available for download: http://www.bit.se/bitonline/2001/05/21/20010521BIT00820/bit0002.doc http://www.bit.se/bitonline/2001/05/21/20010521BIT00820/bit0002.pdf