Statement of the Board of Directors of Vacon Plc regarding Danfoss' voluntary public tender offer for the shares in Vacon Plc

Vacon Plc stock exchange release 19 September 2014 at 8:30 am EET

NOT TO BE RELEASED OR DISTRIBUTED, DIRECTLY OR INDIRECTLY, IN OR INTO CANADA, JAPAN, AUSTRALIA, SOUTH AFRICA, HONG KONG OR IN ANY OTHER STATE IN WHICH THE TENDER OFFER WOULD BE PROHIBITED BY APPLICABLE LAW.

Statement of the Board of Directors of Vacon Plc regarding Danfoss' voluntary public tender offer for the shares in Vacon Plc

The Board of Directors of Vacon Plc ("Vacon") has on 18 September 2014 decided to issue the below statement concerning the voluntary public tender offer ("Tender Offer") made by Danfoss A/S ("Danfoss") through its subsidiary Oy Danfoss Ab ("Bidder").

Vacon, Danfoss and the Bidder have, after the announcement of the Tender Offer, learned that due to the laws and regulations of the United States of America the offer period will need to be extended by one week from its initially estimated duration and the offer period is thus expected to commence on or about 29 September 2014 and initially extend until 28 October 2014. Vacon and the Bidder have on 18 September 2014 amended the combination agreement signed on 11 September 2014 ("Combination Agreement") correspondingly. The Board of Directors of Vacon has taken this amendment into account when deciding upon the below statement.

With reference to the stock exchange release of Vacon and Danfoss on 12 September 2014 regarding the combination of Vacon and Danfoss through the Bidder making the Tender Offer to purchase all the issued and outstanding shares in Vacon that are not held by Vacon, its subsidiaries or the Bidder (hereinafter the "Shares" and each separately a "Share"), the Board of Directors of Vacon issues the following statement referred to in Chapter 11, Section 13 of the Finnish Securities Market Act (746/2012, as amended) regarding the Tender Offer.

THE TENDER OFFER IN BRIEF

Vacon and Danfoss have on 11 September 2014 entered into the Combination Agreement under which they have agreed to combine the operations of Vacon and Danfoss. Danfoss has transferred its rights and obligations under the Combination Agreement to the Bidder, and has agreed to guarantee as for its own debt to Vacon and Vacon's shareholders all the obligations of the Bidder towards Vacon and Vacon's shareholders under the Combination Agreement and the Tender Offer, including specific performance of the Combination Agreement and the Tender Offer.

As provided under the Combination Agreement, Danfoss has announced the Tender Offer pursuant to Chapter 11 of the Finnish Securities Markets Act.

The Tender Offer will be made in accordance with the terms and conditions of the offer document expected to be published by Danfoss and the Bidder by 24 September 2014 (hereinafter referred to as the "Offer Document").

It is the intention of the Bidder to acquire all of the Shares. The Completion of Tender Offer is conditional on e.g. approvals by the relevant authorities, such as competition authorities and the Finnish Ministry of Employment and Economy, and the Bidder gaining control of more than 90 percent of the Shares as determined in the terms and conditions of the Tender Offer.

The consideration offered in the Tender Offer is EUR 34.00 in cash for each Share (the "Offer Consideration"). The Offer Consideration represents a premium of 13.1 percent to the closing price of Vacon on the Nasdaq OMX Helsinki on 11 September 2014, i.e. the last day of trading before the announcement of the Tender Offer; a premium of approximately 19.0 percent to the volume weighted average price on the NASDAQ OMX Helsinki during the three (3) months preceding the date of the announcement of the Tender Offer; and a premium of approximately 20.3 percent to the volume weighted average price on the NASDAQ OMX Helsinki during the last twelve (12) months preceding the date of the announcement of the Tender Offer.

Any dividend or other distribution of funds by Vacon decided after the date of the announcement of the Tender Offer, which a shareholder who has accepted the Tender Offer is entitled to, will be deducted from the Offer Consideration, unless otherwise agreed between the parties to the Combination Agreement.

According to the terms and conditions of the Tender Offer, the acceptance period under the Tender Offer is expected to commence on or about 29 September 2014 and initially expected to run until 28 October 2014. According to the terms and conditions of the Tender Offer it is uncertain whether all necessary authority approvals can be obtained by the end of the offer period and in case all necessary approvals have not been obtained by the end of the offer period, the Bidder will extend the offer period in order to receive the necessary approvals to be able to complete the Tender Offer. It is estimated that the competition clearances could be obtained in November 2014.

Should such amount of Shares be tendered in the Tender Offer that the Bidder obtains more than 90 per cent of all shares and voting rights in Vacon, the Bidder intends to initiate compulsory redemption proceedings for the remaining Shares and thereafter apply for delisting of the shares of Vacon from the NASDAQ OMX Helsinki.

Danfoss has secured the necessary financing for the Bidder to complete the Tender Offer, including mandatory redemption proceedings, and plans to use a combination of cash positions, unutilized committed credit facilities and further credit approved financing from its financing institutions. According to Danfoss, such financing is not subject to or conditional upon any conditions or circumstances beyond the control of Danfoss or the Bidder, save for certain limited exceptions set out in the Combination Agreement or a force majeure event.

On 11 September 2014, the Bidder acquired Vacon shares corresponding to 9.98 percent of all the shares in Vacon from AC Invest Three B.V. ("AC Invest"). In addition to such shares, the Bidder or Danfoss did not hold any Vacon shares on the date of the announcement of the Tender Offer. Further, the Bidder has agreed to acquire and AC Invest has agreed to sell the remaining Shares held by AC Invest, corresponding to 0.58 percent of all shares of Vacon, subject to the approval by the Finnish Ministry of Employment and the Economy required under the Finnish Act on Monitoring Foreign Acquisitions.

Certain large shareholders, together representing approximately 14.32 percent of the shares in Vacon, have subject to certain customary conditions undertaken to accept the Tender Offer.

The terms and conditions of the Tender Offer as well as background and reasons for the Tender Offer will be included in more detail in the Offer Document which the Bidder expects to publish around 24 September 2014.

STATEMENT OF THE BOARD OF DIRECTORS

1. Background for the statement

Pursuant to the Finnish Securities Market Act, the Board of Directors of Vacon shall prepare a public statement regarding the Tender Offer.

The statement shall include a well-founded assessment of the Tender Offer from the perspective of Vacon and its shareholders as well as of the strategic plans and their likely effects on the operations and employment of Vacon presented by the Bidder in the Offer Document.

For the purposes of issuing this statement, the Bidder has submitted to the Board of Directors of Vacon the draft version of the Finnish language Offer Document in the form in which the Bidder has filed it with the Finnish Financial Supervisory Authority for approval on 17 September 2014.

In preparing its statement, the Board of Directors of Vacon has relied on information provided in the draft Offer Document by the Bidder and has not independently verified this information.

2. Assessment regarding strategic plans presented by the Bidder and their likely effects on the operations and employment of Vacon

Information given by Danfoss and the Bidder in the Offer Document

The Board of Directors of Vacon has assessed the Bidder's strategic plans based on the statements in the draft Offer Document.

According to such statements, the background for the Tender Offer is Danfoss' strategic focus on creating profitable growth with a clear target to be a leading global player in the core business areas it operates. It is Danfoss' clear view, that the best way to meet the future AC Drives market challenges is to combine the AC Drives businesses of Vacon and Danfoss, a combination that will secure a strong and significant product oriented player in the AC Drives market with unique capabilities, best in class offering and complementary market positions that will secure continued profitable growth and innovation.

Further, according to the Offer Document, Danfoss foresees Vaasa (FI) and Graasten (DK) as strategic competence centres for the new entity playing a major role in, amongst others, management, manufacturing and product development of the combined entity and that the business will remain deeply rooted in local Nordic communities and cultures but will have a strong global presence, extracting significant value by maintaining close relationships with regional institutions.

Based on the information given by the Bidder in the Offer Document, the Tender Offer is not expected to have any immediate effect on the operation and business locations or on the number of employments at Vacon. According to the Tender Offer Document the businesses of Vacon and Danfoss will be combined after closing based on a joint integration plan between Vacon and Danfoss with deep involvement of top leadership from both sides.

Board assessment

The Board of Directors of Vacon shares the view of the key global AC Drives market trends, as presented in the Offer Document, of a growing market which is shifting towards Asia Pacific and further consolidation. This underlines the effect of scale advantages to support growth and profitability as well as ensuring research and development resources. The Board of Directors of Vacon believes that the combination of Vacon and Danfoss AC Drives businesses creates a strong and significant player in the AC Drives market and forms a foundation for profitable growth and innovation.

The Board of Directors of Vacon foresees the combination to become a strong alternative to competitors in the market and to be able to give customers a wider and more innovative offering of drives. Together the entities will also get a base for enhancing growth from gaining scale which provides the critical mass in mature and emerging markets and enables further investments in both R&D and sales force, which are key success factors in the drives business. In addition to these benefits to Vacon and its customers, the employees of the company will join a platform rich with opportunities for personal and professional development.

On the date of this statement the Board of Directors of Vacon has not received any formal statement as to the effects of the Tender Offer to the employments at Vacon from Vacon's employees.

3. Assessment of the Board of Directors from the perspective of Vacon and its shareholders

Introduction

In evaluating the Tender Offer, analyzing alternative opportunities available to Vacon and concluding on its statement, the Board of Directors has considered several factors, such as Vacon's recent financial performance, current position and future prospects, and the historical trading price of Vacon's share.

The Board of Directors' assessment of continuing the business operations of Vacon as an independent company has been based on reasonable future-oriented estimates which include uncertainties, whereas the Offer Consideration and the premium included therein is not subject to any uncertainty other than the fulfillment of the conditions to completion of the Tender Offer.

In order to support its assessment of the Tender Offer, the Board of Directors of Vacon has received a fairness opinion regarding the Tender Offer (the "Fairness Opinion") from Vacon's financial advisor, Aventum Partners. The Fairness Opinion, subject to the assumptions and qualifications set out therein and dated 11 September 2014, states that the Offer Consideration, from a financial point of view, is believed to be fair. The Fairness Opinion is attached as Appendix 1 to this statement.

Board assessment

The Board of Directors of Vacon has carefully evaluated the Tender Offer and its terms and conditions based on the draft Offer Document, the Fairness Opinion and other available information.

The Board of Directors of Vacon believes that the Offer Consideration offered by the Bidder for the Shares is fair to Vacon's shareholders based on an assessment of the issues and factors which the Board of Directors has concluded to be material in evaluating the Tender Offer. These include, amongst other factors:

the premium being offered;the information and assumptions on the business operations and finances of Vacon at the date of this statement and their expected future development;the valuation multiples of Vacon shares before the announcement of the Tender Offer;the support for the Tender Offer by certain large shareholders of Vacon as referred to above;valuations and analysis made and commissioned by the Board of Directors; andAventum Partners' Fairness Opinion.

The Board of Directors has concluded that Vacon would also have viable opportunities to develop its business as an independent company for the benefit of Vacon and its shareholders. However, taking into consideration the risks and uncertainties associated with such stand-alone approach, the Board of Directors has concluded that the Tender Offer is a favorable alternative for the shareholders.

The Board of Directors of Vacon has further concluded that the Tender Offer is in the best interests of Vacon's shareholders and a more favorable alternative for the shareholders of Vacon compared to continuing the business operations of Vacon as an independent company, and other potential strategic alternatives reviewed by the Board of Directors.

4. Recommendation of the Board of Directors

Based on the foregoing, the Board of Directors unanimously recommends that the shareholders of Vacon accept the Tender Offer.

All members of the Board of Directors have participated in the decision making concerning the statement. The evaluation of independence of the members of the Board of Directors is available on the website of Vacon. The Chairman of the Board of Directors of Vacon Mr. Panu Routila is the CEO of Ahlström Capital Oy which controls AC Invest. Mr. Routila has not participated and does not participate in the decision making of Ahlström Capital Oy or AC Invest concerning their shares in Vacon.

This statement shall not be considered to constitute investment or tax advice. The Board of Directors is not evaluating or expressing its view on the general price development of the Shares or risks relating to investments in general. Vacon's shareholders shall independently make their decision on whether to accept the Tender Offer by taking into account all information to be presented in the Offer Document, this statement of the Board of Directors, as well as other information that may impact the price of the Shares.

The Board of Directors of Vacon notes that the combination of Vacon's and Danfoss' operations will, in addition to synergy benefits, pose challenges to both parties, and the combination may, as is common in such processes, involve unforeseeable risks.

The Board of Directors of Vacon notes that the shareholders of Vacon should also take into account the risks related to non-acceptance of the Tender Offer.

Provided that Danfoss waives the acceptance condition of 90 per cent of the shares and votes, the completion of the Tender Offer would reduce the number of Vacon shareholders and the number of Shares, which would otherwise be publicly traded. Depending on the number of Shares validly tendered in the Tender Offer, this could have an adverse effect on the liquidity and value of the Shares.

Pursuant to Chapter 18 of the Finnish Companies Act (624/2006, as amended), a shareholder with more than 90 per cent of all shares and votes in a company shall have the right to acquire, and subject to a demand by the other shareholders also be obligated to redeem, the shares owned by the other shareholders. The Shares held by Vacon's shareholders who have not accepted the Tender Offer may be redeemed through compulsory redemption proceedings under the Finnish Companies Act under the conditions set out therein. The value of the potential cash consideration received through such redemption proceedings may deviate from the Offer Consideration offered by the Bidder in the Tender Offer.

In the Combination Agreement, the Bidder has agreed either to pay or cause Vacon to pay the Board of Directors of Vacon the remuneration for the full terms of office they were originally elected for regardless of whether they are replaced before the end of their term.

Vacon has undertaken to comply with the Helsinki Takeover Code referred to in Chapter 11 Section 28 of the Finnish Securities Markets Act. Vacon has in the Combination Agreement agreed to a standard non-solicitation clause whereby Vacon has undertaken not to solicit any competing proposals or, subject to the fiduciary duties of the Board of Directors of Vacon, promote the progress of such proposals. Having carefully assessed the terms and conditions of the Tender Offer, including the preconditions set by Danfoss for launching the Tender Offer, the Board of Directors of Vacon has concluded that entering into the Combination Agreement, including said non-solicitation clause, is in the interest of Vacon's shareholders.

Vacon is being advised by Aventum Partners as financial advisor and Roschier, Attorneys Ltd. as legal advisor.

THE BOARD OF DIRECTORS OF VACON PLC

Further information

Sebastian Linko, Director, Corporate Communications and Investor Relations, Vacon Plc, phone +358 (0)40 8371 634, sebastian.linko(at)vacon.com

Vacon in brief:

Vacon is driven by a passion to develop, manufacture and sell the best AC drives and inverters in the world - and provide customers with efficient product lifecycle services. Our AC drives offer optimum process control and energy efficiency for electric motors. Vacon inverters play a key role when energy is produced from renewable sources. Vacon has production and R&D facilities in Europe, Asia and North America, and sales offices in 30 countries. Further, Vacon has sales representatives and service partners in nearly 90 countries. In 2013, Vacon's revenues amounted to EUR 403.0 million, and the company employed globally approximately 1,600 people. The shares of Vacon Plc (VAC1V) are quoted on the main list of the Helsinki stock exchange (NASDAQ OMX Helsinki).

Driven by Drives, www.vacon.com

DISTRIBUTION:

NASDAQ OMX Helsinki
Main media
www.vacon.com

THIS RELEASE IS NOT A TENDER OFFER DOCUMENT AND AS SUCH DOES NOT CONSTITUTE AN OFFER OR AN INVITATION TO MAKE A SALES OFFER. INVESTORS SHALL ACCEPT THE TENDER OFFER FOR THE SHARES ONLY ON THE BASIS OF THE INFORMATION PROVIDED IN THE TENDER OFFER DOCUMENT. THE TENDER OFFER WILL NOT BE MADE DIRECTLY OR INDIRECTLY IN ANY JURISDICTION WHERE EITHER THE OFFER OR PARTICIPATION THEREIN IS PROHIBITED BY APPLICABLE LAW OR WHERE THE TENDER OFFER DOCUMENT WOULD HAVE TO BE PUBLISHED OR REGISTERED OR THE OFFER WOULD BE SUBJECT TO OTHER REQUIREMENTS IN ADDITION TO THOSE UNDERTAKEN IN FINLAND. WHEN PUBLISHED, THE TENDER OFFER DOCUMENT AND RELATED ACCEPTANCE FORMS WILL NOT AND MAY NOT BE DISTRIBUTED, FORWARDED OR TRANSMITTED INTO OR FROM ANY JURISDICTION WHERE PROHIBITED BY APPLICABLE LAW. IN PARTICULAR, THE TENDER OFFER IS NOT BEING MADE, DIRECTLY OR INDIRECTLY, IN OR INTO, OR BY USE OF THE POSTAL SERVICE OF, OR BY ANY MEANS OR INSTRUMENTALITY (INCLUDING, WITHOUT LIMITATION, FACSIMILE TRANSMISSION, TELEX, TELEPHONE OR THE INTERNET) OR THROUGH A NATIONAL SECURITIES EXCHANGE OF CANADA, JAPAN, AUSTRALIA, SOUTH AFRICA OR HONG KONG. THE TENDER OFFER CANNOT BE ACCEPTED BY ANY SUCH USE, MEANS OR INSTRUMENTALITY OR FROM WITHIN CANADA, JAPAN, AUSTRALIA, SOUTH AFRICA OR HONG KONG OR ANY OTHER JURISDICTION WHERE PROHIBITED BY LAW, OR ON BEHALF OF ANY PERSON RESIDING OR LOCATED IN SUCH JURISDICTION.

Special notice to securityholders in the United States

The Tender Offer described in this release is subject to the laws of Finland. It is important for US securities holders to be aware that this release and all Tender Offer documentation are subject to disclosure and takeover laws and regulations in Finland that are different from those in the United States. As applicable, the Bidder and Danfoss will comply with Regulation 14E under the US Securities Exchange Act of 1934, as amended, in connection with the Offer. Any extension of the tender offer into, or any separate tender offer in the United States will be made solely under the accompaniment of a dealer-manager that is a broker-dealer registered under the US Securities Exchange Act of 1934, as amended.

Securityholders in the United States should read the Tender Offer documents prepared by the Bidder and Danfoss when they become available for instructions on how to tender their shares.

NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY U.S. STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED OF THIS OFFER, PASSED UPON THE FAIRNESS OR MERITS OF THIS ANNOUNCEMENT OR DETERMINED WHETHER THIS ANNOUNCEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE IN THE UNITED STATES.

 

Appendix 1 Fairness Opinion

Vacon Oyj
Board of Directors
Runsorintie 7
65380 Vaasa
Finland

Helsinki, 11 September 2014

Fairness Opinion

The Board of Directors of Vacon Oyj ("Vacon" or the "Company") has requested Aventum Partners Ltd ("Aventum") to provide an opinion as to the fairness ("Opinion"), from a financial point of view, of the terms of the public tender offer as defined below.

Danfoss A/S ("Danfoss" or the "Offeror) has intention to announce a public tender offer pursuant to the Finnish Securities Markets Act and other applicable laws and regulations, including the Helsinki Takeover Code ("Offer"). The Offer will be made to acquire all outstanding shares in Vacon that are not held by the Company ("the Shares", "Share"). Pursuant to the Offer the shareholders of Vacon will be offered EUR 34.00 for each share (the "Consideration") in Vacon (the "Transaction") terms and conditions of which are more fully described in the combination agreement to be dated September 11, 2014 (the "Combination Agreement").

Consideration is approximately 13.4 per cent higher than the Share's closing price of EUR 29.99 on the stock exchange list of NASDAQ OMX Helsinki Oy ("the Helsinki Stock Exchange") on September 10, 2014, i.e. the day before Combination Agreement was entered into, approximately 18 per cent higher than the volume-weighted average trading price of the Shares on Helsinki Helsinki Stock Exchange during the one-month (1) period preceding the date Combination Agreement was entered into, approximately 19 per cent higher than the volume-weighted average trading price of the Shares on Helsinki Stock Exchange during the three-month (3) period preceding the date Combination Agreement was entered into, and approximately 16 per cent higher than the volume-weighted average trading price of the Shares on Helsinki Stock Exchange during the six-month (6) period preceding the date Combination Agreement was entered into.

On the date of this Opinion, Vacon has no securities entitling to Shares and Vacon has not announced an issue of such securities.

Aventum has, as a basis for this Opinion, reviewed and considered, among other things:

(i) draft Combination Agreement dated September 11, 2014

(ii) certain publicly available information concerning Vacon and the industries in which it operates as Aventum has deemed appropriate;

(iii) the discussions held with the senior management of Vacon regarding the historical and current business operations and financial situation of Vacon;

(iv) the discussions held with the senior management of Vacon regarding the strategy, future outlook and investment requirements of Vacon;

(v) the financial performance of Vacon in comparison with those of certain comparable companies;

(vi) the prices and trading activity of the Shares on Helsinki Stock Exchange since the listing of the Shares in 2000;

(vii) the valuation analysis of Vacon based on certain generally accepted valuation methods which Aventum has deemed appropriate;

(viii) the shareholder structure of Vacon;

(ix) certain reports, analyses and forecasts prepared by third party equity analysts; and

(x) such other documents, analyses, discussions and studies as Aventum has deemed appropriate.

In rendering this Opinion, Aventum has assumed and relied upon, without separate verification thereof, the accuracy and completeness of the information which was publicly available or furnished to Aventum for purposes of this Opinion. Aventum has not conducted any physical inspections of any of the assets of the Company and has not made any independent evaluation, due diligence review or appraisal of the assets of Vacon or any of its subsidiaries or affiliates.

Aventum has relied on the reasonableness and accuracy of the financial and operating forecasts of Vacon prepared or presented by the management of Vacon and that such forecasts are diligently prepared and they represent the best currently available estimations and judgement of the management of Vacon. In rendering this Opinion, Aventum does not express any Opinion as to the reasonableness and accuracy of such forecasts and estimations.

Aventum has assumed that Vacon has fulfilled all its disclosure obligations applicable to listed companies in accordance with legislation and the rules of NASDAQ OMX Helsinki.

Aventum's Opinion is based on financial, regulatory, market and other conditions prevailing at the date hereof. It should be taken into account that the circumstances on which this Opinion is based may change. Any developments subsequent to the date hereof may affect Aventum's views but Aventum has no obligation to update or revise this Opinion.

Aventum has assumed that Transaction as completed will not differ in any material respect from that described in the draft Combination Agreement, which we have reviewed, without any adverse waiver or amendment of any material term or condition thereof, and that the Company and the Offeror will each comply with all material terms of the Combination Agreement.

Aventum's advisory services are rendered and this Opinion is given only for Vacon's Board of Directors to assist it in connection with its consideration and assessment of the Consideration. This Opinion does not address the merits or disadvantages of the Offer as compared to any alternative offers for the Shares in the Company or its assets or any other alternative business strategy that might be available to Vacon. This Opinion does not express any views as to the price at which Vacon's Shares will trade at any future time. This Opinion does not address or evaluate terms and conditions, other than the Consideration in the Combination Agreement or the form of the Transaction. Aventum does not hereby express any recommendation as to whether the shareholders of Vacon should accept the Offer.

Aventum has acted as financial adviser to the Company in connection with the Transaction and will receive a fee for its services, which is partially contingent upon the consummation of the Transaction. From time to time Aventum may have provided investment banking services to the Company or its shareholders unrelated to the proposed Transaction and received customary compensation for the rendering of such services. Aventum is paid a fee for its services in connection with giving this Opinion.

This letter and the Opinion may not without prior consent from Aventum, be invoked or used for any other purpose and, pursuant to such consent, only be used or invoked in its entirety. This Opinion is governed by Finnish law and any dispute relating thereto shall be settled exclusively by Finnish courts. We accept no responsibility to any person other than the Board of Directors of the Company in relation to the contents of this letter, even if it has been disclosed with our consent.

Based upon and subject to the foregoing, it is Aventum's Opinion, as the date hereof, that the Consideration is fair, from a financial point of view, for Vacon's shareholders.

Yours sincerely,

AVENTUM PARTNERS LTD

This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Vacon Oyj via Globenewswire
HUG#1856999