Statement by the board of directors of Teleca AB (publ) in relation to the offer from CayTel 1 L.P.
The board concludes that the offer from CayTel is not unfair
Background
This statement is made by the board of directors of Teleca AB (publ) (“Teleca”) pursuant to section II.14 of the OMX Nordic Exchange Stockholm Takeover Rules.
On 31 October 2008, CayTel 1 L.P. (“CayTel”), a wholly owned subsidiary of Symphony Technology Group LLC (“STG”), announced a cash offer for Teleca pursuant to the mandatory bid rules (the “Offer”). CayTel offers SEK 3.25 in cash per share in Teleca.
The Offer values Teleca at approximately SEK 250 million. It represents a premium of (i) 23.6 per cent to the closing price of SEK 2.63 per Teleca share on 30 October 2008, (ii) 45.7 per cent to the volume weighted average price of the Teleca share over the last ten trading days up to and including 30 October 2008, and (iii) 44.4 per cent to the volume weighted average price of the Teleca share over the last three months up to and including 30 October 2008.
Further, according to CayTel’s offer document regarding the Offer, the following applies:
“The purchase agreements under which CayTel purchased Teleca shares immediately prior to this announcement provide that the sellers of these shares will in certain circumstances be compensated if CayTel sells the shares to a competing bidder. Teleca shareholders who accept the Offer are therefore given the same right to compensation. As a result, Teleca shareholders who accept the Offer will be compensated if a competing public offer for Teleca is announced prior to completion of the Offer and CayTel:
1. accepts such competing offer in respect of shares tendered in the Offer, or
2. sells shares tendered in the Offer to the competing bidder on or prior to 30 April 2009.
As with the purchase agreements above, any compensation that CayTel will pay to the Teleca shareholders is conditional on a transaction set out in item 1 and 2 above being completed and will in such case amount to 80 % of the difference between the price per share received by CayTel and the price paid in the Offer.”
On 14 September 2008, the Swedish Securities Council issued a statement (2008:33), confirming that the consideration in the Offer does not need to be adjusted to the price paid by CayTel in connection with acquisitions of Teleca shares in the spring 2008 and that the consideration in the Offer therefore shall be the highest price paid by CayTel in connection with purchases of Teleca shares made thereafter. According to CayTel’s offer document regarding the Offer, CayTel has acquired additional shares in Teleca on 22 October 2008 at a price lower than the price paid in respect of the purchases immediately prior to the announcement of the Offer. According to CayTel, the price paid in respect of the purchases of Teleca shares immediately prior to the announcement of the Offer is equal to the offer price of SEK 3.25.
The Offer, being a mandatory bid, is conditional only on receipt of necessary regulatory clearances, in each case on terms that in CayTel’s opinion are acceptable. Clearances from relevant competition authorities are required in connection with the Offer.
CayTel has not requested the board of directors’ participation in the preparation of the Teleca section of the offer document regarding the Offer. CayTel has, however, requested the board’s assistance in connection with such filings with relevant competition authorities as are necessary to satisfy to above-mentioned condition to the Offer. The board of directors provides such assistance to the extent deemed appropriate.
CayTel’s offer document regarding the Offer contains the following statement:
“STG places great value in the work carried out by Teleca's management and employees and intends to continue to protect Teleca’s strong relationship with its employees and customers. STG considers itself as a partner in Teleca’s development process. STG’s intention is to remain a long term main owner in the Company and on a continuous basis be involved in Teleca’s restructuring process in order for Teleca to become a company with strong growth and high profitability.
The Offer itself will not have a significant impact on employment terms or employment at the locations where Teleca carries on its business. However, after completion of the Offer CayTel intends to continue Teleca’s transformation process. This process may have an impact on employment terms and employment at the locations where Teleca carries on its business. If redundancies are necessary, STG will comply with the local laws and regulations and seek to transfer employees as well as be in contact with the trade unions and other employee representatives.”
The board of directors assumes that the above is correct and has no reason to take a different view in the aforesaid respects.
The board of directors’ view regarding the Offer
The board of directors has made an evaluation of factors and considerations that the board has deemed relevant in relation to the Offer. These include, but are not limited to, Teleca’s current and estimated forward operating and financial performance in a highly competitive environment, Teleca’s position in a rapidly changing and consolidating industry, other strategic alternatives available to Teleca and its potential to make the necessary investments to increase its scale and generate enhanced shareholder value on a stand-alone basis. The board has also taken into account the risk of reduced liquidity in the Teleca share following completion of the Offer.
Handelsbanken Corporate Finance has issued a fairness opinion to the board with the opinion that, subject to the qualifications and assumptions therein, the consideration offered by CayTel is fair from a financial point of view to the shareholders in Teleca. The fairness opinion, which is attached hereto, should be read in full to understand the limitations set out therein. Handelsbanken Corporate Finance will receive a fee for its services, which is not contingent on whether or not the Offer is consummated.
The last eighteen months, Teleca’s strategy has been focused on transitioning resources from on-shore locations (close to the customer and often in high cost countries) to near-shore and off-shore capabilities. Teleca’s strategy is to offer world-leading design and development services to the major players of the mobile device industry. Customers in this category include Nokia, Samsung, LG, Sony Ericsson, Kyocera, Motorola, Adobe and Google.
The results over the last eighteen months have been restrained by this transition. The current market developments and economic circumstances will lead to increased price competition in the market and the board expects the recent transition to low-cost development capability to have positive effects over the coming years. However, the timing of the full effect of the changes is difficult to predict.
The board of directors believes that the company, in a long-term perspective, has significant potential that motivates a higher value than the price currently offered by CayTel implies. In a price perspective, it is however crucial how quickly the company succeeds with its program of change.
In a shorter time perspective, the Offer should be assessed relative to the currently existing alternatives. The price offered by CayTel is significantly higher than the Teleca share price during the time period immediately preceding the Offer.
Based on the above, the board of directors of Teleca has concluded that the Offer is not unfair from a financial point of view to the shareholders of Teleca.
The chairman of the board, Chet Kamat, and the board member John Treadwell, who are both acting for STG in the Offer and thus have a conflict of interest, have not participated in the board’s handling of or resolutions regarding the Offer.
This statement shall be governed by and construed in accordance with the laws of Sweden. Any dispute, controversy or claim arising out of, or in connection with, this statement shall be settled exclusively by Swedish courts.
Malmö, 2 December 2008
Teleca AB (publ)
The Board of Directors
For further information please contact:
Johan Vunderink, Board Member, +31 653 789 981
Teleca is required under the Securities Markets Act to make the information in this press release public. The information was submitted for publication at 8:45 CET on 2 December 2008.