VOLVO AND PROCORDIA TO MERGE
VOLVO AND PROCORDIA TO MERGE STOCKHOLM, Jan. 25 /PRNewswire/ -- A proposal whereby AB Volvo
(OTC: VOLVY) and Procordia AB are to merge has been approved at meetings of the board of directors of each of the two companies. The merger is intended to be effected through a public offer by Procordia to Volvo's shareholders to tender their Volvo shares and convertible debentures in exchange for Procordia shares and convertible debentures. Volvo today has approximately 170,000 shareholders.
The two companies are active in fields that are undergoing structural changes on large scale. Combined, Volvo and Procordia will constitute a group of considerable size and with considerable freedom of action, even in an international perspective. A unit is being created that is well on the level of Europe's largest enterprises, and which can accordingly participate actively in the structuring process and further strengthen Sweden's presence in Europe. Volvo contributed actively to the formation of the "new Procordia" in 1990 through the sale of its substantial food operations and its large shareholding in Pharmacia. At the time Volvo became the principal industrial owner of Procordia and since then has aimed at becoming the majority owner. The Swedish Government is currently the second principal owner of Procordia, after Volvo. The Swedish Parliament has earlier announced its intention to dispose of the Government's holding in Procordia, which, following the merger of Procordia and Volvo, will amount to 25.6 percent. The new group, which will have the Volvo name, will have total pro forma assets of approximately SEK 130 billion (USD 22.3 bn). It will have sales of approximately SEK 115 billion (USD 19.7 bn), with about 105,000 employees. Total shareholders' equity will be approximately SEK 43 billion (USD 7.4 bn). The new group is combining Procordia's strong cash-generating food operations and an expanding pharmaceutical company - both with low sensitivity to economic cycles - with a very substantial automotive operation. Volvo, which as a worldwide network of contracts and long experience in international marketing, also has one of the world's strongest trademarks. The new group will have a very strong capital base, the financial resources, strong market positions and experience in structural projects mean that Swedish industry will have an enterprise with resources enabling it to participate in the current process of industrial change in Europe. The aggressive plans established for the food and pharmaceutical sectors will be fulfilled. Volvo's strategically import alliance with Renault will be developed forcefull in accordance with the intentions of the two parties. It is proposed that Dr. Pehr G. Gyllenhammar serve as chairman of the merged company. Soren Gyll, currently president and chief executive officer of Procordia, will be proposed as president and chief executive officer of the new group. Chister Zetterberg, currently president and chief executive officer of Volvo, will be proposed as Deputy chief executive officer, responsible for the new group's transport vehicle operations. It is proposed that the company have its legal domicile in Goteborg, with head office functions in both Stockholm and Goteborg. PROCORDIA: Pharmaceuticals and Food currently dominate Procordia's operations. Major Procordia companies include Kabi Pharmacia, Pripps, Svenska Tobaks AB, ABBA and Felix. The group has approximately 42,000 employees. The pharmaceutical and food industries are both in a period of sharp change in terms of the competitive situation, notably in international markets. The pharmaceutical industry is undergoing a restructuring process characterized by increased cost-consciousness in the fields of health and medical services, as well as by rising costs for research and development of new drugs. The ongoing concentration of operations in larger units with large development resources and marketing organizations is creating conditions for necessary cost-rationalization and more effective utilization of "patent time" for original drugs. Accordingly, Procordia's active program in the pharmaceutical sector will involve further expansion and the acquisition of international companies. The food companies, for their part, will be strongly affected by developments in the European Community. Competitive conditions are changing dramatically. Adaption of costs to European levels is necessary to defend the companies' domestic market position against large international competitors and take advantage of the opportunities offered by the Common market. The latter objective will be pursued through selective acquisitions and expansion in Europe. VOLVO: Volvo, the largest industrial group in the Nordic region, has broad- based operations in the transport vehicle industry, with its cars and trucks and buses units as its largest operating sectors. The group also includes the marine and industrial engines sector and aerospace (Volvo Flygmotor). The Volvo Group has a worldwide marketing and service organization. Approximately 80 percent of its sales are in markets outside Sweden, primarily in Western Europe and North America. The alliance with Renault of France involves cooperation in procurement and the development of cars and trucks, as well as the coordination of investment planning. This is resulting in benefits of large-scale operations and greater competitiveness. Volvo's substantial industrial operations are supplemented by major shareholdings in associated companies in Sweden and other countries. Along with its automotive operations and its two wholly owned subsidiaries, Volvo Penta and Volvo Flygmotor, Volvo has a strong finance sector, as well as large holdings in such companies as Catena, Custos, Cardo and Protorp. During 1990 Volvo began an action program designed to improve efficiency and reduce costs. These measures are expected to reduce the annual level of costs by more than five billion Swedish kronor (USD 0.86 bn) by the end of 1992. PRESENT OWNERSHIP STRUCTURE: Procordia today does not own any Volvo shares. Volvo currently owns 39.5 percent of Procordia's shares and has 42.7
percent of the voting rights in the company. The Swedish Government owns 34.2 percent of Procordia's share capital, equal to 42.7 percent of the voting rights. A share-ownership agreement governs the relationship between Volvo and the Government.
THE OFFERING: Under terms of the offering, holders of each four Volvo Series A and Series B shares are being offered nine Procordia shares of a corresponding class. Based on the market price of Procordia shares at the close of trading on the Stockholm Stock Exchange on Jan. 24, 1992, the offer is valued at SEK 38.7 billion (USD 6.62 bn) after full conversion, representing an average premium of 22 percent. Holders of convertible debenture certificates in a nominal amount of SEK 385 pertaining to Volvo 1987/95 convertible debenture loan are being offered on convertible debenture certificate in a nominal amount of SEK 385 issued by Procordia, plus SEK 43 in cash, interest accrued to the date of payment will also be paid. Each debenture certificate may be exchanged for Procordia Series B shares at a conversion price of SEK 190. In other respects, terms of the new Procordia convertible debenture loan are the same as those applying to Volvo's 1987/95 convertible debenture loan. Holders of each convertible debenture certificate in a nominal amount of SEK 450 pertaining to Volvo's 1990/95 convertible debenture loan are being offered one convertible debenture certificate in a nominal amount of SEK 450 issued by Procordia, plus SEK 45 in cash. Interest accrued to date of payment will also be paid. Each debenture certificate may be exchanged for Procordia Series B shares at a conversion price of SEK 220. In other respects, terms of the new Procordia convertible debenture loan are the same as those applying to Volvo's 1990/95 convertible debenture loan. Implementation of the offering is subject to acceptance of the offer by Volvo shareholders to the degree that Procordia thereby becomes the owner of more then 90 percent of both the share capital and total voting rights in Volvo, calculated after conversion of all convertible debentures issued, with Procordia reserving the right to implement the offering even if it is accepted by a smaller percentage of Volvo shareholders. The offering is also subject to the required approval of a general meeting of Procordia's shareholders, to the receipt of necessary permits from the authorities, and to the merger not being hindered or seriously obstructed by other circumstances beyond Procordia's control. it is planned to undertake negotiations with the Government with respect to conversion of its holding of Series A shares to Series B shares, with a view to reducing the percentage of the Governments voting rights, and with respect to a change in the share-ownership agreement between Volvo and the Government. The Government has not yet reached a decision on the position it will take at the meeting of Procordia shareholders. After full conversion, the offering comprises 183.7 million Procordia shares. No commission will be paid. The stamp tax on the new shares to be issued will be paid by Procordia. The new shares will carry rights to dividends beginning with dividends for the 1992 fiscal year. Dividends on Volvo shares for the fiscal year 1991 will accrue to shareholders who tender their shares in accordance with Procordia's offer. It is planned to eliminate Volvo's holdin in Procordia by reducing the share capital. The number of shares in the new company would thereby become 338.7 million. If the offer is accepted on the terms described above, the Swedish Governments holding of Procordia shares, currently 34.2 percent, would be reduced to 25.6 percent. The intention is to list the shares of the new company on one or more stock exchanges outside Sweden. PROCORDIA AND VOLVO Pro forma financial data Procordia Volvo Procordia- Volvo Income statements: (SEK billion) Twelve months ended Sept. 30, 1991 Sales 39.4 76.3 115.7 Operating income before restructuring costs (1) 3.9 -0.5 2.2 Financial items +0.2 +1.6(2) +1.8 Income after financial items 4.1 1.1 4.0 Extraordinary items -0.8 -0.7 -1.5 Minority interests --- +0.3 +0.3 Pre-tax income 3.3 0.7 2.8 Balance sheets (SEK billions) (3) Liquid assets 6 18 24 Other current assets 13 36 49 Shares and participations 2 29 21 Other fixed assets 13 24 37 Total 34 107 131 Liabilities 16 67 83 Minority interests -- 5 5 Shareholders' equity 18 35 43(4) Total 34 107 131 Key data Number of shares (millions) (5) 255.0 81.7 338.7 Equity/assets, percent 53 37 37 Earnings per share (before extraordinary items) SEK 11.3 12.7(5) 8.9 Shareholders' equity per share SEK 71 428(6) 127 (1) -- Includes share of earnings in associated companies. (2) -- Including capital gains of SEK 2.1 billion on ales of shares. (3) -- Current estimate for Procordia. Data for Volvo is as of June 30, 1991. (4) -- After deduction of Volvo's ownership interest in Procordia, booked at approximately SEK 10 billion. (5) -- After full conversion. (6) -- Equal to earnings of SEK 20 per share and shareholders' equity of SEK 286 per share following the merger. PROSPECTUS: The prospectus by means of which the ofering is being made will be bvased on Procordia's and Volvo's audited accounts. The prospectus is expected to be published in April, in accordance with the schedule below. SCHEDULE: Prospectus available April 20 (May 4 in U.S.) Subscription period May 4 - June 1 Shareholders' meeting May 12 Accounting and registration at VPC (Swedish Securities Register Center) June 12 -0- 01/25/92 /CONTACT: Krister Goranson, 46-31-28-84-81, home, 46-70-09-47-14, Knut Leman, 46-31-28-43-92, home, 46-70-09-53-58, Per Lojdquist, 46-31-59-10-90, home, 46-302-146-89, in North America, Thomas Ericson, 212-418-7430, home, 203-661-2818 and Tom Clifford, 212-418-7431, home, 914-735-6920, all of AB Volvo or Rune Borg, 46-8-624-5130, home, 46-760-544-31, Soren Densjo, 46-8-624-51-34, home, 46-18-38-03-38, Jan Isoz, 46-8-624-52-11, home 46-8-653-34-56 and Klas Rasater, 46-8-624-51-36, home, 46-8-656-97-17, all of Procordia AB/ (Volvy) CO: AB Volvo; Procordia AB ST: IN: AUT, MTC SU:
JP -- NYSA003 -- 3464 01/25/92 10:45 EST
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|Date:||Jan 25, 1992|
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