Detailed Stock Exchange Document

This Detailed Stock Exchange Announcement has today been published through OSE:

This is an announcement under section 3.4 of the “Continuing obligations of stock exchange listed companies”/Oslo Børs, January, 2016.

Reference is made to stock exchange announcement by Techstep ASA (“TECH” or the “Company”) on 4 July 2016.

TECH has on 1 July 2016 entered into a Share Exchange Agreement with Zono Holding AS for the acquisition of all the issued shares in Zono AS (the “Zono Transaction”), which, upon completion, will represent an increase of more than 5% in the total revenue and assets of TECH.

Further, on 1 July 2016, TECH entered into an agreement in principle with Teki Gruppen AS (“Teki Gruppen”) for the acquisition of Teki-Gruppen’s shareholding in Teki Solutions AS (the “Teki-Gruppen Transaction”), which, upon completion, also will represent an increase of more than 5% in the total revenue and assets of TECH.  

Due to the size of the transactions an Information Document will, in accordance with section 3.5 of the “Continuing obligations of stock exchange listed companies”, be published within the stipulated timeframe.

1. The Transactions

1.1 The Zono Transaction

1.1.1 Zono AS (“Zono”)

Zono AS (“Zono”), formerly Klekkerud AS, is a company wholly owned by Zono Holding AS, which, in turn, is owned by Middelborg and certain other financial investors, including Datum AS. The assets of Zono will comprise 24.22% of the shares in Teki Solutions AS, 5.12% of the shares in Kjedehuset AS and approximately NOK 55 million in net cash balance.

1.1.2 The Agreement

TECH and Zono Holding AS, (“Zono Holding”), a subsidiary of Middelborg AS, entered into a Share Exchange Agreement on 1 July, 2016, for the acquisition of 100% of the shares (the “Shares”) in Zono, under which acquisition the consideration for the Shares takes the form of Techstep consideration shares.

After completion of the Zono Transaction, Zono Holding will hold 81.10% of the shares and votes in TECH (before the contemplated repair issue announced on 5 July 2016, 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 has 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 has 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.

1.1.3 Special conditions

It is a condition for the closing of the Agreement that Zono AS will comprise the following assets:

* 24.22% of the shares in Teki Solutions AS;

* 5.12% of the shares in Kjedehuset AS; and

* a net cash balance of NOK 55 million in cash.

The Closing is further subject to separate approval by the shareholders of Techstep, to be held at an extraordinary general meeting to take place medio August 2016.

1.1.4 The consideration

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

The exchange of the shares shall take place at the closing (the “Closing”) to be held ultimo August 2016, after the last of the conditions to Closing have been satisfied, or at such other time or on such other date as Techstep and Zono Holding may mutually agree upon in writing (the day on which the Closing takes place being the “Closing Date”).

1.2 The Teki Gruppen Transaction

1.2.1 The Agreement

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.

1.2.2 Special conditions

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.

1.2.3 The Consideration

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.

2. Description of the business to which the Transaction applies

2.1 The business to which the Transaction applies

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. 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. 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 Nordialog Oslo part has a history going back approximately 20 years. 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.  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 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.

2.2 Board of directors, executive management and employees

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.

Board of Directors as of the date of this document

Executive Management as of the date of this document

* The CEO, Lonnie Schilling, is under six (6) months notice of termination,

which notice period commenced as of 1 April 2016.

Number of employees

As of the date of this document, the total number of employees within TECH is 3.

2.3 Key figures

2.3.1 Key figures of Zono (NOK million):

2.3.2 Key Figures of Teki Solutions Group

2.4 Any significant assets or liabilities that are not shown in the balance sheet

At the date of this announcement there are no significant assets or liabilities that are not shown in the balance sheet.

3. The significance of the Transactions to the Company

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”):

o          Assist customers in mobility transformation by rolling out existing suite of solutions to a larger share of customers.

o          Continue to be a leading solutions innovator in close collaboration with customers

o          Address M&A and/or partnership opportunities of further value-added services

• Increase base of end users:

o          Target M&A opportunities

o          Organic growth, increase share of wallet (today less than 50%)

4. Agreements for the benefit of executive management or board members in connection with the Transaction

There are no agreements, existing or contemplated, in connection with the Transaction that involve extraordinary benefits for senior employees or members of the board of directors in TECH.

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