THE BOARD OF DIRECTORS OF KARO PHARMA HAS RESOLVED ON A FULLY GUARANTEED RIGHTS ISSUE SUBJECT TO APPROVAL BY THE ANNUAL GENERAL MEETING

On 1 March 2018, Karo Pharma AB (”Karo Pharma” or the “Company”) announced the agreement to acquire a product portfolio from the Danish pharmaceutical company LEO Pharma A/S (the ”Acquisition”). The Acquisition is financed by a combination of new loans and a rights issue On 4 April 2018, the Board of Directors resolved on a rights issue of shares with preferential right to the shareholders and resolved to authorize the Board of Directors to decide the final terms of the rights issue (the “Rights Issue”). The Rights Issue is subject to the approval by the Annual General Meeting on 3 May 2018. The Rights Issue is fully guaranteed by subscription and guarantee undertakings from current shareholders. Karo Pharma is expected to receive issue proceeds amounting to approximately SEK 1.3 billion before transaction costs.

The Right Issue in brief

· Chairman of the Board Anders Lönner and members of the Board Per-Anders Johansson and Håkan Åström as well as nomination committee member and shareholder Leif Edlund, which together hold approximately 17.8 percent of the share capital and the votes in the Company, have committed to subscribe for their respective pro rata-shares in the Rights Issue. The remaining part of the Rights Issue is guaranteed by Anders Lönner, Leif Edlund and Håkan Åström which will receive a compensation of 2.5 percent of each guaranteed amount
· Complete terms and conditions of the Rights Issue, including subscription price, are expected to be announced on 30 April 2018
· The Rights Issue is subject to the approval by the Annual General Meeting on 3 May 2018. Provided that the Rights Issue is approved by the Annual General Meeting, the subscription period is expected to run from 14 May up to and including 29 May 2018

Background and rationale
On 1 March 2018, Karo Pharma announced that the Company acquired a product portfolio of well-established and profitable products from the Danish pharmaceutical company LEO Pharma A/S, for a purchase price amounting to approximately EUR 260 million. The portfolio consists of ten prescription and non-prescription medicines, including Selexid®, Burinex® and Locobase®. During 2017 the product portfolio generated EUR 70 million of revenues, whereof 50 percent within the Nordics, approximately 38 percent in other parts of Europe[1] and 12 percent in other parts of the world[2]. Karo Pharma completed the Acquisition on 4 April 2018.
The strategy of Karo Pharma is to grow organically and through acquisitions within Speciality Pharma. The acquisition of the product portfolio from LEO Pharma A/S suits this strategy well. Through the acquisition Karo Pharma reaches a position as one of the leading Speciality Pharma companies in the Nordics.
The Acquisition is a pure asset deal and only comprises of products and no underlying organization nor production unit. This means that Karo Pharma can realize accumulated tax losses from the time as a research company and thereby lower the Company´s tax burden. Synergy effects are also expected to materialize and improve profitability.
Through the Acquisition, Karo Pharma´s position and organization within the pharmaceutical area as well as geographically in the Nordics are strengthened as the Company intends to develop and establish operations in Denmark as well as in Finland. The acquisition also positions Karo Pharma for further expansion in other important markets.
The acquisition will have a positive effect on sales and earnings from the second quarter of 2018.The process of transferring and integrating the product portfolio to Karo Pharma has been initiated. Karo Pharma will be supported by LEO Pharma A/S within production and sales until the integration is completed, on market terms.
The Rights Issue proceeds are expected to amount to SEK 1.3bn before transaction costs. The issue proceeds will be used to amortize parts of the loan funding the Acquisition.
“The Company reaches a very important milestone through the Acquisition. We are building a Speciality Pharma company for the future.” Says Anders Lönner, Chairman of the Board
The Rights Issue
The Board of Directors of Karo Pharma has resolved on the Rights Issue, subject to the approval by the Annual General Meeting on 3 May 2018, including an authorization of the Board of Directors to decide the final terms (which are expected to be announced on 30 April 2018). The Rights Issue is expected to amount to approximately SEK 1.3 billion before transaction costs. The issue proceeds will be used to amortize parts of the loan funding the Acquisition.
Persons registered as shareholders on the record date will have preferential rights to subscribe for new shares. Every shareholder will have the preferential right to subscribe for new shares in proportion to the number of shares held on the record date. Subscription will also be possible without the exercise of subscription rights.
The final terms and conditions of the Rights Issue, i.e. the increase of share capital, number of shares to be issued and subscription price, are expected to be announced on 30 April 2018.
Chairman of the Board Anders Lönner and members of the Board Per-Anders Johansson and Håkan Åström as well as nomination committee member and shareholder Leif Edlund, which together represent approximately 17.8 percent of the share capital and the votes in the Company, have committed to subscribe for their respective pro rata-share of the Rights Issue and also committed to support the Rights Issue at the Annual General Meeting.
As to the amount not covered by the subscription undertakings from Anders Lönner, Per-Anders Johansson, Håkan Åström and Leif Edlund, the Company has entered into guarantee agreements on customary terms with Anders Lönner, Leif Edlund and Håkan Åström (the “Guarantors”), according to which the Guarantors have committed to subscribe for the shares that are not subscribed nor paid for in the Rights Issue, up to the maximum amount of the Rights Issue, with deductions of the amounts that is covered by the subscription undertakings. For the Guarantors’ guarantee of in total approximately 82.2 percent of the Rights Issue, of which Leif Edlund guarantees SEK 350m, Håkan Åström guarantees SEK 50m and Anders Lönner guarantees remaining part of the Rights issue that is not subject to subscription undertakings, the Guarantors will receive a compensation of 2.5 percent of each Guarantor’s guaranteed amount. Accordingly, the Rights Issue in full is subject to subscription undertakings or guarantees.
The Board of Directors’ decision of the Rights Issue is subject to the approval by the Annual General Meeting on 3 May 2018. Summons to the Annual General Meeting are planned to be published through a press release on 4 April 2018.

Indicative timetable

30 April 2018 Announcement of complete terms and conditions, including
subscription price and subscription ratio
3 May 2018 Annual General Meeting to approve the Rights Issue
resolved by the Board of Directors
7 May 2018 Last day of trading in the shares including right to
participate in the Rights Issue
8 May 2018  First day of trading in the shares excluding right to
participate in the Rights Issue
9 May 2018 Record date for participation in the Rights Issue, i.e.
holders of ordinary shares who are registered in the share
register as of this day will receive subscription rights
for participation in the Rights Issue
11 May 2018   Estimated date for the publication of the prospectus
14 May – 25 May Trading in subscription rights
2018              
14 May – 29 May Subscription period
2018 
1 June 2018    Announcement of the outcome in the Rights Issue

IMPORTANT INFORMATION ON LEI AND NID
As a result of MiFID II/MIFIR, all legal entities and natural persons need a LEI (Legal Entity Identifier) number or NID (National ID or National Client Identifier) code respectively in order to participate in financial transactions from 3 January 2018. A LEI number is a global identification code for legal entities and a NID number is a global identification code for natural persons.
Investors wishing to apply for subscription without rights needs to obtain a LEI in the case of legal entities or find out their NID in the case of natural persons.
Swedbank has the right to disregard the application, without any liability towards the applicant, if a LEI or a NID number (as applicable) is not provided upon application.
A legal entity in need of obtaining a LEI can turn to www.gleif.org/en/about- lei/how-to-get-an-lei-find-lei-issuing-organizations and any one of the LEI suppliers listed there in order to obtain a LEI, and should do so in good time before applying to subscribe without rights, as there is an administrative turnaround time with the LEI supplier.
Financial and legal advisors
SEB Corporate Finance and Swedbank Corporate Finance are Joint Global Coordinators and Hamilton Advokatbyrå is legal advisor to Karo Pharma in relation to the Rights Issue.
FOR ADDITIONAL INFORMATION, PLEASE CONTACT:
Peter Blom, CEO, +46 (0) 70-655 56 98 or peter.blom@karopharma.se  
The information was submitted for publication, through the above contact person´s agency, at 12:30 CET on 4 April 2018. This press release is also available at www.karopharma.se and www.newsroom.cision.com.

ABOUT KARO PHARMA

Karo Pharma is a Specialty Pharmaceutical company, which develops and markets products for pharmacies as well as directly to the healthcare sector. Karo Pharma is listed on Nasdaq Stockholm Mid Cap.                

IMPORTANT INFORMATION

The information in this press release does not contain or constitute an offer to acquire, subscribe or otherwise trade in shares, subscription rights or other securities in Karo Pharma AB. Any invitation to the persons entitled to subscribe for shares in Karo Pharma AB is made solely through the prospectus which Karo Pharma AB estimates to publish on or around 11 May 2018.

This press release may not be released, published or distributed, directly or indirectly, in or into Australia, Hong Kong, Japan, Canada, Singapore, the United States or any other jurisdiction where such action is wholly or partially subject to legal restrictions or where such action would require additional prospectuses, registrations or other actions in addition to what follows from Swedish law. Nor may the information in this press release be forwarded, reproduced or disclosed in a manner that contravenes such restrictions or would entail such requirements. Failure to comply with this instruction may result in a violation of applicable securities laws.

No subscription rights, BTAs (interim shares) or new shares have or will be registered under the United States Securities Act of 1933 (“Securities Act”) or securities legislation in any state or other jurisdiction in the United States and may not be offered, subscribed, used, pledged, sold, resold, allotted, delivered or transferred, directly or indirectly, into or within the United States, other than pursuant to an exemption from, or in a transaction that is subject to, the registration requirements of the Securities Act. The offering is not aimed for individuals with residence in Australia, Hong Kong, Switzerland, and Singapore nor in any other jurisdiction where participation would require additional prospectus, registration or other arrangements aside of the Swedish law system.

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[1] Refers among others to the countries France, Belgium, UK, Germany, Ireland and Austria, which represented approximately 33 percent of total sales in 2017
[2] Refers among others to the countries Saudi Arabia, South Africa, Vietnam and United Arab Emirates, which represented approximately 5 percent of total sales in 2017

Belonging documents

Press release (PDF)