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Hexagon Composites Acquires xperion and Strengthens Its Position in the Composite Pressure Cylinder Market

11 October 2016

Hexagon Composites has entered into an agreement with AVANCO to acquire its wholly owned subsidiary, xperion Energy & Environment, a market leader in Type 4 high pressure cylinders.

According to Hexagon, the acquisition will enable it to strengthen its global market presence and further broaden its product and technology portfolio. By securing manufacturing capacity in Germany, Hexagon Composites is expanding its position in Europe considerably. The integrated Group will now have modern and specialised production units in Germany, US and Norway.

"This acquisition represents another significant step in our growth strategy," says Jon Erik Engeset, President & CEO of Hexagon Composites. "We are impressed with how xperion has developed a highly competent international organisation. We are confident that the acquisition will increase our competitiveness, market penetration and shareholder value and is well-timed given the current industry conditions."

"Hexagon Composites is one of the leading players in the composite pressure cylinder market, and the transaction will give xperion and its employees a strong industrial owner," comments Holger Garbrecht, CEO of AVANCO Group. "This is a future-oriented step, and we are convinced that both organisations will complement each other, enabling an optimal position in terms of markets and products."

The environmental value proposition of CNG, biogas and hydrogen continues to stimulate demand in markets world-wide. The two companies are well positioned in the hydrogen value chain with recent orders received for car, bus and railroad applications. With this acquisition, Hexagon Composites has further strengthened its strong commitment to the alternative energy space.

The xperion group includes high-pressure composite cylinder operations for light-duty vehicles, heavy-duty trucks, transit buses and gas transportation solutions at its modern production plants in Kassel, Germany and Ohio, US. In 2015, the group recognised net sales of EUR 39 million and EBITDA of EUR 5.2 million on an adjusted basis. The two operations have 140 employees.

The acquisition of xperion's Ohio facility is pending and subject to an option clause allowing Hexagon Composites until the end of year to exercise.

Hexagon explains that the enterprise value of xperion is EUR 43.5 million (approx. NOK 390 million) on a cash and debt free basis. Additionally, an earn-out payment of up to EUR 11.5 million (approx. NOK 104 million) may become payable in 2019.

The following additional information is provided in accordance with Continuing Obligations of listed companies section 3.4.2:

  1. Transaction and parties: Hexagon Composites, through a wholly owned subsidiary Hexagon Composites Germany, has acquired 100% of the share capital of xperion Energy & Environment and its subsidiary companies from the selling company xperion Holding, a wholly owned subsidiary of AVANCO. The Intellectual Property Rights enjoyed by xperion Energy & Environment have also been acquired as a part of this transaction. The transaction is not subject to any further material closing conditions, as closing occurred simultaneous with signing.

  2. Consideration: The total net cash consideration for the transaction is approximately EUR 40.0 million, of which purchased internal debt amounts to EUR 9.4 million. Hexagon Group will also subsequently assume EUR 1.6 million in external debt. This will be financed through the Group's available financing facilities. The current financing facility has been modified to a bilateral facility with DNB Bank, incorporating certain beneficial changes to the facility particularly in relation to higher leverage covenants. The modifications will allow more flexibility for the Group overall going forward. The overall size of the facility remains at NOK 1 billion, comprising a main revolving credit with overdraft facility of NOK 600 million and an optional ancillary facility of NOK 400 million.

  3. Further description of the companies and transaction: xperion Energy & Environment has activities primarily in the Mobile Pipeline, Light Duty Vehicles and Hydrogen segments and was previously part of a private group of companies under AVANCO. Please refer to the attachment to this notice which gives the xperion Energy & Environment proforma audited financial statements for the year 2015 and proforma unaudited financial statements for year to date June 2016. The Net Assets acquired, as at end of year 2015 reference basis, is EUR -0.4 million (approx. NOK -3.6 million). Total reported Operating Income on the full year 2015 basis is EUR 39.0 million (approx. NOK 350 million). The net profit on this reference basis is approximately EUR 0.6 million (NOK 5.4 million). The total number of employees in this business is 140. xperion Energy & Environment , consistent with German practices, does not have a board of directors. The acquired entity is expected to be self-financed to the extent that is possible. Off-balance sheet items are restricted to leases of buildings and equipment, deferred tax assets and guarantees in the ordinary course of business. Detailed information will be available from the consolidated financial statements of the Hexagon Composites ASA Group as compiled for 2016.

  4. Consequences of the transaction: In addition to the strengthened strategic impacts disclosed above, the transaction will result in recognition of excess value over book value (including Goodwill) estimated to the magnitude of NOK 285 million in the Statement of Financial Position. 100% of the acquisition target's results will be consolidated into the financial statements of Hexagon Composites ASA from effectively 1 October 2016.

  5. Agreements with directors or senior executives in relation to the transaction: No such agreements have been entered into in relation to this transaction.

SEB Corporate Finance acted as financial advisor to Hexagon Composites in connection with the transaction referred to above. Advokatfirmaet Schjødt and CMS acted as legal advisors to Hexagon Composites.

 






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