Elos Medtech AB: Elos Medtech acquires Klingel Medical through a guaranteed rights issue

Creating a leading European MedTech CDMO with the combination of Elos Medtech and Klingel

Elos Medtech AB (publ) ("Elos Medtech"), a leading development and manufacturing partner for medical devices, today entered into an agreement to acquire Klingel Holding GmbH ("Klingel Medical Group" or "Klingel") from IK Partners and management. Klingel, a leading contract development and manufacturing organization (CDMO) headquartered in Germany, will strengthen Elos Medtech's position with extraordinary R&D capabilities and new technology expertise. Further, the acquisition will broaden the product offering and add new high profile global customers, contributing to a strong footprint in the DACH region. The purchase price corresponds to an enterprise value of EUR 370 million. The completion of the transaction is subject to customary regulatory approvals, acceptance at the extraordinary general meeting and successful completion of a rights issue to finance the acquisition. The rights issue will be guaranteed through the subscription and guarantee undertaking of TA Associates, through EM Intressenter AB, ElosMedtech's principal shareholder. Closing is expected to take place during the fourth quarter of 2023.

The acquisition marks a significant milestone for both companies and demonstrates their continued commitment to key customers and markets. With this acquisition, Elos Medtech will gain eight production facilities in Germany and Switzerland, along with R&D capabilities, technological expertise, and an extensive global customer base. Klingel has approximately 900 employees with similar beliefs and culture to the Elos Medtech team. These characteristics make Klingel and Elos Medtech an ideal fit for each other. Together, they will form one of the market-leading MedTech CDMOs, with strategically located sites across the U.S., Europe, and Asia, providing reach and support to its global customers. The acquisition shows Elos Medtech's strong commitment to enhancing its share in its core markets and the ambition to expand in U.S.A., unlocking opportunities to drive future growth. With Klingel's expertise, Elos Medtech will also be equipped to leverage R&D capabilities across various business units and proprietary products, enabling it to better cater to the unique needs of international OEM customers.

"We firmly believe that this acquisition strengthens our position in the CDMO landscape. It marks a significant step forward in our commitment to offering an extensive array of services to our customers through the hard work of a talented combined workforce. The acquisition will reinforce our well-established reputation for excellence and our ability to cultivate enduring partnerships, aligning seamlessly with Klingel's similar ethos. It is important that we build on the heritage of these businesses and, as per the last 100 years, remain dedicated to investing in our teams; all of whom are paramount to our success and a real point of differentiation. We are also committed to acquiring and developing cutting-edge technologies to provide our customers with additional capacity and capability. I would like to take this opportunity to thank each and every member of the Klingel and Elos Medtech teams for all their hard work and dedication to date. We strive to be the expert our customers can rely on, so that they can focus on growing their businesses." says Stefano Alfonsi CEO and President of Elos Medtech.

"We are thrilled about this strategic move as we see a remarkable alignment of values and culture between our two companies, paving the way for a highly-advantageous and successful collaboration. We are excited at the prospect of having increased visibility in the U.S. as part of this agreement." says, Ralf Petrawitz Co-CEO of Klingel.

"This acquisition is an opportunity for our existing customers, who will benefit from an expanded offering, as well as for our dedicated employees, who will be part of a global longstanding organization. It will allow us to showcase our technologies and expertise to the US market far more efficiently than before." says, Christoph Ruetschi Co-CEO of Klingel.

As of June 2023, Klingel[1] reported net sales of EUR 141 million[2] and EBITDA of EUR 27 million[3] for the last 12 months. The preliminary combined pro forma[4] net sales for the same period for Elos Medtech and Klingel amounts to SEK 2,583 million[5] and SEK 500 million[6] pro forma EBITDA. Pro forma financials will be included in the prospectus to be prepared in connection with the rights issue to finance the acquisition, please refer to the section "Financing through rights issue" below.

In relation to the acquisition, Elos Medtech sees opportunities to realize synergies in terms of accelerated growth through the cross-selling of Klingel products and Elos Medtech products/services, in addition to leveraging a combined global footprint of the group to make operational improvements.

Closing of the acquisition is expected to take place during Q4 2023 and is conditional on merger clearance and FDI approval required under applicable merger control and trade laws, and the approval by the extraordinary general meeting and successful completion of the rights issue.

Transaction costs

Transaction costs amount to approximately SEK 55.5 million of which approximately SEK 7 million was recognized as an item affecting comparability during Q2 2023 and SEK 4.5 million will be recognized as an item affecting comparability during Q3 2023. The remaining costs will be recognized as an item affecting comparability during Q4 2023. Costs in relation to coming rights issue are not included in the above-mentioned transaction costs.

Financing through rights issue

The acquisition will be financed through a rights issue in the amount of approximately EUR 370 million. The rights issue will be fully guaranteed through a subscription and guarantee undertaking from Elos Medtech's principal shareholder TA Associates through EM Intressenter AB. The terms and conditions of the rights issue as well as a notice convening an extraordinary general meeting to resolve on the rights issue will be announced at a later date. TA Associates has undertaken to vote in favor of the proposed rights issue at the forthcoming extraordinary general meeting. TA Associates, through EM Intressenter AB, own 6,550,966 shares in Elos Medtech, representing 81.2 per cent of the total number of shares and 65.8 per cent of the total number of votes.

[1] Preliminary IFRS numbers based on Klingel's adjusted EBITDA pursuant to German GAAP. These figures have not been subjected to review by the auditors.
[2] Amounting to approximately SEK 1,621.1 million based on a EUR/SEK exchange rate of 11.4923 as of 27 July 2023.
[3] Amounting to approximately SEK 311.6 million based on a EUR/SEK exchange rate of 11.4923 as of 27 July 2023.
[4] Preliminary IFRS proforma numbers based on the combination of Elos' reported numbers pursuant to IFRS and Klingel's adjusted EBITDA pursuant to German GAAP and adjusted to treatment of leasing costs. These figures have not been subjected to review by the auditors.
[5] Amounting to approximately EUR 224.7 million based on a EUR/SEK exchange rate of 11.4923 as of 27 July 2023.
[6] Amounting to approximately EUR 43.5 million based on a EUR/SEK exchange rate of 11.4923 as of 27 July 2023.

For further information, please contact:

Elos Medtech

Stefano Alfonsi, President and CEO, +44 772 04 98 342, e-mail: stefano.alfonsi@elosmedtech.com
Ewa Linsäter, Group CFO, +46 76 633 32 33, e-mail: ewa.linsater@elosmedtech.com

This is information that Elos Medtech AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 10:30  (CEST), on 28 July, 2023.

About Elos Medtech
Elos Medtech is a leading development and production partner for medical devices and components, with a focus on dental and orthopedic implants and instruments. The company operates from facilities in Sweden, Denmark, China, and the U.S. The customer base comprises international medical technology companies.

Elos Medtech has more than 650 employees and a turnover of approximately SEK 950 million. Elos Medtech has been listed on NASDAQ Stockholm AB since 1989. Elos Medtech's B share is categorized as a Health Care company on the Mid Cap list.

About Klingel Medical Group
Klingel Medical Group is one of the leading manufacturers of metal products for medical technology. As a specialist for the precision processing of high-strength materials, we have been growing continuously and maintaining long and very close relations with our customers. Klingel employs roughly 900 employees across its headquarters in Pforzheim and partner companies Josef Ganter Feinmechanik in Dauchingen, puracon in Rosenheim, Bächler Feintech in Hölstein and Matzingen as well as Ruetschi in Renquishausen (Southern Germany), Muntelier and Yverdon-les-Bains (both in Switzerland).

About IK Partners
IK Partners ("IK") is a European private equity firm focused on investments in the Benelux, DACH, France, Nordics and the UK. Since 1989, IK has raised more than €14 billion of capital and invested in 180 European companies. IK supports companies with strong underlying potential, partnering with management teams and investors to create robust, well-positioned businesses with excellent long-term prospects. For more information, visit ikpartners.com

Forward-looking statements
This press release contains forward-looking statements that reflect Elos Medtech AB (publ)'s current view of future events as well as financial and operational development. Words such as "intend", "assess", "expect", "may", "plan", "estimate" and other expressions involving indications or predictions regarding future development or trends, not based on historical facts, identify forward-looking statements and reflect Elos Medtech AB (publ)'s beliefs and expectations and involve a number of risks, uncertainties and assumptions which could cause actual events and performance to differ materially from any expected future events or performance expressed or implied by the forward-looking statement. The information contained in this press release is subject to change without notice and, except as required by applicable law, Elos Medtech AB (publ) does not assume any responsibility or obligation to update publicly or review any of the forward-looking statements contained in it and nor does it intend to. You should not place undue reliance on forward-looking statements, which speak only as of the date of this press release. As a result of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements as a prediction of actual future events or otherwise.