ACQUISITION OF ZONO AS AND AGREEMENT TO ACQUIRE A MAJORITY STAKE IN TEKI SOLUTIONS AS

Summary

On 1 July 2016, Techstep ASA (“TECH”) (former Birdstep Technology ASA) entered into an agreement with Zono Holding AS (“Zono Holding”), a company controlled by Middelborg AS, of a transaction whereby TECH will acquire 100% of the shares in Zono AS (“Zono”) in exchange for shares to be issued in TECH (the “Zono Transaction”). The assets of Zono will comprise 24.22% of the shares in Teki Solutions AS (“Teki Solutions”), 5.12% of the shares in Kjedehuset AS (“Kjedehuset”) and approximately NOK 55 million in net cash balance.

Further, on 1 July 2016, TECH entered into an agreement in principle with Teki Gruppen AS (“Teki Gruppen”) to acquire an additional 53.94% of the shares in Teki Solutions, also this in exchange for shares to be issued in TECH (the “Teki Gruppen Transaction”).

Both the Zono Transaction and the Teki Gruppen Transaction are subject to fulfillment of certain terms and conditions.

The contemplated acquisitions support TECH’s strategy to build on its knowledge and background in mobile technology to establish TECH as a driver of consolidation within the mobility and communications sector. The mobility and communications market is undergoing disruptive shifts where work is increasingly mobile and the value proposition is changing from telecoms’ infrastructure towards a fragmented ecosystem of software and digital solutions.

The competitive landscape of this market in Norway is still fragmented. The changes in market dynamics require larger, but agile players that both have the ability to deliver innovative services and solutions at pace with technology development, and the security and performance needed to move business critical process and sensitive data out on handheld devices. TECH aims to be an attractive driver of consolidation, innovation and product development within the mobility and communications segment.

Teki Solutions provides B2B mobility and communications products and services in Norway. Its mobile device product offering is branded as Nordialog, and its solutions and service offering as SmartWorks. With a customer base of 3,600 companies with 220,000 end users, Teki Solutions has an extensive reach within the Norwegian business segment.

Kjedehuset, in which Zono AS owns 5.12%, is Telenor’s Norwegian B2B sales and distribution organisation.Teki Solutions’ Nordialog business has a franchise agreement with Kjedehuset and has together with SmartWorks a close relationship with Telenor. The contemplated transactions are expected to strengthen the combined distribution power and thereby strengthen the alliance with Kjedehuset and Telenor through a more rapid development of value adding services towards their joint extensive customer base.

Zono has a net cash position of approximately NOK 55 million that will be part of the Zono Transaction. The strengthened cash position will be important in financing TECH’s further organic and structural growth. The combined competence, network, assets and financial resources of TECH, Teki Solutions, Middelborg and Teki Gruppen is expected to catalyse growth.

Key drivers in the continued growth of the combined entities

Growth will be targeted along two main axes having multiplicative effects on revenue and profitability:

• Service current end user base with a larger range of services to increase average revenue per user (“ARPU”):
  • Assist customers in mobility transformation by rolling out existing suite of solutions to a larger share of customers.
  • Continue to be a leading solutions innovator in close collaboration with customers
  • Address M&A and/or partnership opportunities of further value-added services
• Increase base of end users:
  • Target M&A opportunities
  • Organic growth, increase share of wallet (today less than 50%)

About Teki Solutions

Teki Solutions is a leading Norwegian B2B provider of mobility and communication solutions. Headquartered in Oslo, Teki Solutions has 10 offices and business centers across Oslo and eastern Norway. Teki Solutions was formed in 2013 through mergers of independent mobility and communication providers. The Nordialog Oslo part has a history going back approximately 20 years. Teki Solutions has a customer base of 3,600 companies and 220,000 end users.

Teki Solutions has two main business areas. The first is sale of mobile solutions, mobile devices and related hardware and mobile subscription packages for business customers through the Nordialog brand in eastern Norway. The second is development of customized solutions and products through the in-house advisor and solution architect SmartWorks, a wholly owned subsidiary of Teki Solutions.

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Key figures of Teki Solutions Group

Teki Solutions experienced strong revenue growth from 2013 to 2015 driven by both increased hardware sales and ramp-up of the service offering. The reduction in EBITDA is mainly due to lower margins on hardware and decreased hardware related commissions and bonuses at a faster pace than the growth in sale of services. The strong growth within services is expected to continue in 2016 while sale of handheld devices and subscription sale is expected to decline from 2015 to 2016 due to an overall market dampening. Going forward income growth will come from increase in ARPU, increased number of end-users and the combination thereof, as well as new “as a service” business models. Margins will be driven by share of services (which on average has a substantially higher gross margin than hardware).

About the Zono Transaction

In the Zono Transaction, Zono is valued at NOK 128 million, which will be settled by issuance of 58,181,818 TECH shares at a subscription price of NOK 2.20 per TECH share.

The Zono Transaction is expected to be completed ultimo August 2016, subject to the approval by an extraordinary general meeting of TECH expected to take place medio August 2016, and subject to fulfillment of certain customary terms and conditions.

The agreement and the Zono Transaction is a result of further efforts and negotiations based on the letter of intent entered into on 8 March 2016 between Middelborg and TECH for a potential merger (cf. stock exchange announcement on 9 March 2016).

Zono is a company wholly owned by Zono Holding, owned by Middelborg and certain other financial investors, including Datum AS, Cipriano AS and Tigerstaden AS. At completion of the Zono Transaction, Zono is estimated to have a net cash balance of approximately NOK 55 million.

After completion of the Zono Transaction, Zono Holding will hold 81.10% of the shares and votes in TECH (before the contemplated repair issue previously announced, of which further information will be provided shortly, and completion of the Teki Gruppen Transaction). Together with shares and votes currently held directly by Middelborg, Middelborg will control 87.38% of the shares and votes in TECH.

If completed, the Zono Transaction will trigger an obligation for Zono Holding to make a mandatory offer for all of the outstanding shares in TECH. Zono Holding have notified TECH of its intention to offer a price of NOK 2.20 per share. The mandatory offer is expected to be made during September 2016.

Zono Holding have also notified TECH that the purpose of the mandatory offer will be to comply with the mandatory offer obligations in the securities trading act, not to increase its stake in TECH. The intention of Zono Holding is that TECH shall remain a listed company on Oslo Børs with a large and diversified shareholder base.

Key figures of Zono AS

About the Teki Gruppen Transaction

The Teki Gruppen Transaction, whereby TECH will acquire a further 53.94% of the shares in Teki Solutions involves a price on the same general terms on valuation of Teki Solutions as implied in the Zono Transaction. The transaction is to be settled in full with TECH shares to be issued at a subscription price based on the volume weighted average share price at Oslo Børs over 15 trading days following completion of the Zono Transaction. However, the subscription price shall not be below NOK 2.5 and not above NOK 4.3.

The Teki Gruppen Transaction is, inter alia, conditioned upon the successful outcome of a financial and legal due diligence and approval at an extraordinary general meeting in TECH. If all conditions are satisfied the transaction is expected to be completed during Q3 2016.

Management and board of directors

In connection with completion of the contemplated transactions, TECH will establish a new management team to execute and further develop the new group’s revised strategy and growth ambitions. TECH’s nomination committee will together with the largest shareholders also seek for suitable candidates to strengthen the board of directors.

Update on the partner/cooperation agreements with Smith Micro and Teki Solutions

On 8 March 2016, in connection with TECH’s sale of Birdstep Technology AB, TECH, Smith Micro and Teki Solutions entered into a letter of intent regarding exploration of Smith Micro’s and Birdstep Technology AB’s technology towards the customer base of Teki Solutions. Subsequently, the letter of intent has been replaced with a process agreement. This process agreement includes access to certain products as well as technical training for Teki Solutions for a certain test period. The aim is to establish a long-term partnership between Teki Solutions and Smith Micro, where Teki Solutions’ subsidiary SmartWorks will be heavily involved, covering the Nordic region.

Statements

Ian Jenks, Chairman of the board of TECH comments: “We are very satisfied that we now have taken the first step in a new growth story for TECH. We believe the combination of TECH, Zono and potentially the remaining shares in Teki Solutions to be a solid foundation for growth and further consolidation with the sector. “

“Given completion of the planned transactions, the combination of TECH and Teki Solutions will provide a solid platform for creating a leading solution provider within the Nordic communication and mobility sector.” says Svein Ove Brekke, CEO of Teki Gruppen.

Kristian Lundkvist, Chairman of Middelborg AS comments: “Our strategy as a combined company will both focus on organic and M&A driven growth, and we see a strong potential within both. We are at the start of a very exiting journey for our stakeholders, including customers, partners, employees and shareholders.“

For further information, please contact:

Fredrik Johansson, COO of Techstep ASA, mobile: +46 70 352 91 90