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Aker Solutions Merges with Kvaerner

Source: 7/17/2020, Location: Europe

Aker Solutions is launching a series of structural and strategic changes to transform the company and enhance shareholder value by spinning off the wind and carbon capture businesses to shareholders and merging Aker Solutions ASA (Aker Solutions) with Kværner ASA (Kvaerner) to create an optimized supplier company. Kjetel Digre has been appointed Chief Executive Officer of Aker Solutions, effective August 1, 2020, and will lead the combined company.

Merger with Kvaerner
Kvaerner and Aker Solutions have entered into a merger plan, whereby the two entities will join forces to create a new supplier company with a stronger position as a solid execution partner, enabling sustainable, low-carbon oil and gas production, and accelerating growth in renewable energy industries. Aker Solutions and Kvaerner have agreed to merge the companies based on the principle of equal parties. The name of the new company will be Aker Solutions ASA.

Kvaerner and Aker Solutions have for many years been successful suppliers to customers operating energy production facilities, especially to oil companies with oil and gas fields. Customers in this market are increasingly asking for solutions with reduced environmental footprint, and new customers ask for renewable energy solutions.

"By combining the two companies and their complementary resources, we will be able to deliver a more complete offering to a global energy industry," says Leif-Arne Langøy, current chairman of Kvaerner and also proposed new chairman of Aker Solutions.

The merger will create an organization with the required size and financial strength to compete and succeed in the growing market for renewable and sustainable energy, and generate value for shareholders, customers and society. The consolidation will take the form of a statutory merger whereby Aker Solutions ASA will absorb Kværner ASA, in accordance with the Norwegian Public Limited Liability Companies Act (the "Merger").

A Dedicated Supplier
The combined company will leverage industrial software and digital technology to optimize output and improve efficiencies in customer projects and operations. The combined company will be a dedicated supplier that adds value by offering early front-end customer engagement, concept and system solutions for renewables and decarbonization projects in offshore wind, carbon capture, utilization and storage, electrification and emerging energy segments such as hydrogen. The combined company will utilize its global footprint in brownfield services and subsea to enter international renewables markets.

Furthermore, the combined company will do fabrication at own facilities or in cooperation with partners around the world. The combination of the two companies’ solutions and technologies provides a stronger offering of renewable energy solutions.

"The combined company will be a dedicated execution partner for delivery of complete projects for new energy production facilities, for example oil and gas production platforms or subsea systems, or offshore wind power installations," says Kjetel Digre.

"The company will continue to finetune and improve our internal capacities, to ensure that we always have a sound capacity utilisation. In addition to our own capabilities, we will continue to collaborate closely with partners," Digre adds.

The merged company will drive improvement and change by early adoption of new industrial software and automation provided by world-class third-party suppliers.

Aker Solutions had at the start of 2020 approximately 16,000 employees, and Kvaerner had about 2,800. As an adaption to changing markets, both companies have prior to the merger commenced necessary reductions of capacities and cost. Most of the ongoing staff reductions will be completed before the merger is implemented. The combined cost-cutting initiatives aim to reduce the fixed cost-level by about NOK 1.5 billion on an annualized basis, from 2019 to 2021.

About the Combined Company
The combined company will have about 15,000 employees in more than 50 locations around the world, including about 8,000 employees in Norway. Combined 2019 revenues for the companies were about NOK 38 billion, with an EBITDA of NOK 2.7 billion.

The combined company will have operations in about 25 countries. This includes offices for concept development, engineering and project execution, as well as effective fabrication yards and facilities for manufacturing of advanced equipment.

In the planned merger process, a new organisation model will be established. Kjetel Digre will take the role as CEO and Ivar Eikrem will take the role of CFO of Aker Solutions. Other key management positions will be concluded during the coming weeks.

Key Terms of the Merger
As merger consideration the shareholders of Kværner ASA will receive a number of shares in Aker Solutions ASA based on a volume weighted average price for the shares in Aker Solutions and Kvaerner on the Oslo Stock Exchange during a period of 30 days (incl. both trading days and non-trading days) commencing two trading days after the Aker Solutions shares trades ex the dividend proposed to be distributed in relation to the Offshore Wind Company and the CCUS Company (see details below). One share in Kvaerner shall however always give right to at least 0.7629 shares and maximum 1.1404 shares in Aker Solutions, which in total provides the shareholders in Kvaerner with an ownership interest in the range between 43% to 53% in the combined company. The exact exchange-ratio will be published as soon as it is ready. Fractions of shares will not be allotted, and for each shareholder the shares will be rounded down to the nearest whole number. Excess shares, which as a result of this round down will not be allotted, will be issued to and sold by Skandinaviska Enskilda Banken AB (publ) (Oslo Branch).

Completion of the merger is subject to approval by the shareholders of each of Aker Solutions and Kvaerner through extraordinary general meetings, expected to be held in September 2020 (the “EGMs”). Aker and Aker Kværner Holding AS have undertaken to attend the respective EGMs and, subject to final documentation, vote in favour of the Merger. Completion of the merger is also subject to obtaining certain third-party approvals as well as other customary closing conditions, but is not subject to any conditions with respect to financing, due diligence or material adverse change.

Further information about the merger and the combined company will be made available in a prospectus exempted document (the "Exempted Document") to be published by Aker Solutions on or about 1 September 2020. The companies will also publish notices for their respective EGMs through separate stock exchange announcements in August 2020.

In preparation for the merger, Aker Solutions and Kvaerner have conducted limited, customary due diligence reviews of certain business, financial, commercial and legal information related to their respective businesses.

Following completion of the Merger, the shares in the combined company will continue to be listed on Oslo Bors.

Advokatfirmaet BAHR AS has acted as legal counsel in connection with the merger.

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