Consumables
CENCORP AND AVERY DENNISON CORPORATION HAVE SIGNED A MEMORANDUM OF UNDERSTANDING
Tuesday 21. August 2012 - CENCORP AND AVERY DENNISON CORPORATION HAVE SIGNED A MEMORANDUM OF UNDERSTANDING ON CONDUCTIVE BACKSHEET BUSINESS ACQUISITION, CENCORP DECREASES ITS EBITDA ESTIMATE AND ANNOUCES NO LONGER FINANCIAL GUIDANCE
Cencorp Corporation (Cencorp) and Avery Dennison Corporation (Avery Dennison), a US based company, have signed a Memorandum of Understanding (MOU) according to which Cencorp acquires Avery Dennison’s Conductive Back Sheet business (CBS) and related intellectual property rights. The MOU is non-binding. The purchase price stated in the MOU is USD 500,000 cash and 6,711,409 Cencorp shares at the time of the acquisition, where the number of shares will be adjusted for the difference in the EU/Dollar exchange rate at the time of issuance to the EU/Dollar exchange rate on August 7, 2012.
Avery Dennison agrees not to sell its Cencorp shares received as purchase price payment within 12 months from the effective date of the definitive purchase agreement. It is also expected that Cencorp will separately enter into agreements with the key persons that were involved with the business being acquired to join Cencorp team.
As stated in Cencorp’s new strategy published in the spring 2012 one of the company’s core businesses is to develop Cleantech applications in cooperation with the customers. The acquisition, in accordance with the MOU, will provide Cencorp with a strong market position as manufacturer of conductor technology used in new generation photovoltaic (PV) modules, says Iikka Savisalo, Cencorp’s CEO. Since the spring 2011 Cencorp has developed CBS technology used in efficient new generation PV modules together with Avery Dennison. In January 2012 Cencorp announced that it has signed a significant frame agreement with Avery Dennison on delivering CBS technology to Avery Dennison. That time Cencorp announced that the value of the agreement may exceed EUR 50 million over the course of three years.
In the MOU published today Cencorp and Avery Dennison agree on transferring ownership of certain of the intellectual property rights and technology platform to Cencorp, and Avery Dennison getting a shareholding at Cencorp. The final terms of the transaction are still under negotiations and realization of the acquisition is not yet certain. Additionally, the transaction is still subject to several issues such as due diligence and especially to Cencorp’s short and long term financing required to run the business being acquired. Thus, Cencorp is not yet able to estimate possible realization, effective date, acquisition’s influence in Cencorp nor risks relating to the transaction. Cencorp will announce further information as soon as the negotiations have been finished, which is expected to take place before the end of 2012.
Cencorp has emphasized in its strategy that the company’s growth drivers will be new Cleantech solutions and especially applications for new energies. Provided the transaction will be realized it will change the company’s cost structure and targets for the near future. As Cencorp is now in a strong breaking point which is essential for following the new strategy, Cencorp cannot assess how the Avery Dennison transaction and change in company’s business focus will impact the company, due to which Cencorp has decided it will not announce financial guidance for the time being. Flexible circuit deliveries pursuant to the frame agreement signed with Avery Dennison in January will be delayed due to the aforesaid transaction with Avery Dennison and the targets set for the financial year 2012 will not be reached. Decrease in the the EBITDA results partly from Cencorp redirecting its business focus and human resources into new targets pursuant to the company’s new strategy and into Cleantech applications development. Cencorp stimates that this year’s net sales of its former continuing businesses i.e. Laser and Automation Applications segment and Special Components segment will be smaller than EUR 21.6 million as announced earlier, provided that no essential change takes place in the operating environment or in the current economic outlook. However, increased costs will turn EBITDA negative in the financial year 2012. Cencorp’s previous estimate was as follows: The company estimates the full-year net sales of its continuing operations to be smaller than last year’s corresponding sales that were EUR 21.6 million and the full-year EBITDA is estimated to be positive provided that no essential change takes place in the operating environment or in the current economic outlook.
Cencorp’s future outlook will be highly dependent on the company’s ability to reach the targeted market position in the global photovoltaic module market. However, the company’s goal is to to reach strong market position as provider of locally produced high-quality photovoltaic modules.
Cencorp’s Board of Directors has published long-term financial and other objectives, relating to the company’s new strategy, for Managing Director as follows:
In January 2012 Cencorp announced it had signed a remarkable frame agreement on delivering flexible circuits for renewable energy solutions for Avery Dennison. At that time the company estimated that the value of the frame agreement may exceed EUR 50 million in the course of three years. Based on this evaluation, company’s new strategy published in the spring 2012 and on the fact that the Avery Dennison transaction, if realized, enables Cencorp providing its customers with wider and multiple times of value offering related to the photovoltaic modules and other renewable energy solutions, the Board of Directors has set the following long-term objectives for the company’s Managing Director:
– Thorough but fast transition from a company manufacturing only production automation applications and special components into a company that develops and provides Cleantech applications, with a strong market position as provider of high-quality photovoltaic modules, with automation and laser technology, that are locally produced in various market areas.
– Cencorp’s goal is to increase its shareholder value with growth and
profitability. Cencorp aims for growth in Cleantech business where the company has good opportunity to achieve a strong global position and grow fast.
– Laser and Automation Applications segment has its main focus on the life cycle management of systems and equipments with clear growth expectations for service business.
– In long-term Cencorp is aiming for remarkable growth in its net sales with net sales target of more than EUR 200 million for 2016, provided that the company has required sufficient capital, the growth coming mainly from Cleantech operations and fuel cell applications.
The long term objectives set for the Managing Director involves also risks and the long term objective should not be considered as the company’s financial guidance. Even though the objectives are based on market knowledge and technical surveys, the risk are significant and it is not certain if the Managing Director reaches all or part of the targets set for him.
In order to secure the financing required to strengthen Cencorp’s capital structure the company issues convertible bond with the maximum amount of EUR 1,500,000 and simultaneously issues stock options with maximum amount of 21,428,571 free of charge. One (1) stock option is issued per each subscribed loan capital amount of EUR 0.07. The convertible bond is issued in deviation from the shareholders’ pre-emptive subscription rights to those current Cencorp shareholders who directly on the record day of 31 June 2012 own at least one million (1,000,000) Cencorp’s shares or who otherwise are approved by the Board of Directors. Convertible bond can also be subscribed against a loan receivable from Cencorp, undisbuted on the record day, by converting the loan’s capital or interest into convertible bond according to the terms of the convertible bond. Loan period starts as of the payment of a loan to the company and ends on 7 September 2014 when the convertible bond will be due in its entirety pursuant to the loan terms. The shareholders’ pre-emptive subscription rights are being deviated from as the stock options are issued to secure financing required to strengthen Cencorp’s capital structure cost effectively and considering the size of the financing. Thus, there is, from the company’s point of view, a weighty financial reason to issue the stock options.
An annual interest of eight (8) % will be paid on the convertible bond from the withdrawal of the bond. A holder of the bond has a right to subscribe an amount of shares, equivalent to the bondholders shareholding percentage at the time, in Cencorp’s possible future share issues with subscription period ending latest by 7 September 2014, at a subscription price that is 10 % lower than the subscription price in the share issue in question.
The holder of the bond is entitled to converse the promissory note into the shares of the Company. One (1) stock option pursuant to the promissory note entitles the bond holder to subscribe for one (1) new share of the company.
Based on the subscriptions made pursuant to the stock options, the Company shall issue in maximum of 21.428.571 new company shares. The Company has one (1) class of shares.
Cencorp also starts preparing a share issue. The target of the issue is to collect capital to realize the photovoltaic business plan. The share issue is expected to be carried out by the end of this year. Cencorp will inform separately on the terms and schedule of the share issue. Realization of a convertible bond and a share issue involve risks. It is not secured that the company will be able to collect EUR 1.5 million with the convertible bond to strengthen its capital structure or with the share issue to finance the establishing of photovoltaic module business plan.