Incap Corporation                      
Stock Exchange Release       16 January 2015 at 10 am (EET)                                                           

STATEMENT OF INCAP CORPORATION'S BOARD OF DIRECTORS REGARDING INISSION AB'S MANDATORY PUBLIC TENDER OFFER

Not to be published or distributed, directly or indirectly, in United States, Canada, Australia, New Zealand, South Africa, China, Hong Kong, Singapore or Japan or in any other state where distribution or publishing would be prohibited by applicable law.

1. Background information

Incap Corporation ("Incap" or "Company") announced on 12 December 2014 that Inission AB's ("Inission" or "Offeror") holding in Incap had exceeded 30 per cent of the Company's shares and related voting rights. Inission acquired on 11 December 2014 4,522,948 shares of the Company. As a result, the holding of Inission in Incap increased from 28,500,000 shares to 33,022,948 shares, representing approximately 30.27 per cent of all Incap shares and related voting rights. Following the acquisition of shares, Inission became obligated in accordance with Chapter 11, Section 19 of the Finnish Securities Market Act to make a mandatory public tender offer for all Incap shares and securities entitling to the shares. After having on 22 December 2014 acquired 7,684,615 Incap shares owned by Varma Mutual Pension Insurance Company Inission owns altogether 40,707,564 Incap shares corresponding approximately 37.31 per cent of all shares and related voting rights of the Company.

Inission published on 23 December 2014 a release ("Release") concerning their mandatory public tender offer ("Tender Offer") for all Incap shares. Based on the Release Incap published its own Stock Exchange Release on the same day.

According to the Tender Offer the price offered is EUR 0.03 in cash for each Incap share validly tendered ("Offer Price"). The acceptance period of the Tender Offer started on 7 January 2015 at 9.30 am and ends on 30 January 2015 at 4 pm, unless the offer period is prolonged in accordance with the terms and conditions of the Tender Offer. Detailed conditions of the Tender Offer are available in the offer document ("Offer Document"), which the Offeror has published on 2 January 2015.  

With reference to the Release Incap's Board of Directors is giving its statement on the Tender Offer pursuant to the Finnish Securities Market Act (746/2012, incl. amendments) ("SMA") Chapter 11, Section 13. This statement is considering the Tender Offer from the perspective of Incap and Incap's shareholders.

2.  Statement of the Board of Directors

2.1 Recommendation of the Board of Directors

The opinion of the Board of Directors on the date of this statement is that the price offered in the Tender Offer, i.e. EUR 0.03, is too low when taking into account the current share price of the Company, the outlook for future of Incap and the enclosed Fairness Opinion by UB Capital Oy ("United Bankers"), and therefore, the Tender Offer is not fair from the perspective of the shareholders of the Company.

Based on the evaluations and facts given below, the members of the Board of Directors of Incap who have participated in the decision-making recommend the refusal of the Tender Offer. The members of the Board are unanimous in their view.

2.2 Background to the Statement

The Board of Directors of Incap has formed a task force for the evaluation of the Tender Offer consisting of the independent members of the Board as follows: Lassi Noponen, Chairman of the Board, Susanna Miekk-oja, member of the Board and Raimo Helasmäki, member of the Board. The Board of Directors constitutes a quorum with these named independent members of the Board. Only independent members of the Board have participated in the assessment of the Tender Offer and the decision-making and preparations required for it. The Board members in question own Incap shares as follows: Chairman of the Board Lassi Noponen directly and together with interest parties 306,484 shares, Susanna Miekk-oja directly and with interest parties 233,021 shares and Raimo Helasmäki 89,944 shares.  

Other members of the Board, Fredrik Berghel and Olle Hulteberg, are the only shareholders of the Offeror and therefore non-independent of the Offeror. Berghel and Hulteberg have not participated in the preparation of this statement.

To support the assessment of the Tender Offer the Board of Directors has engaged United Bankers to draft and submit a Fairness Opinion on the Offer Price. The Fairness Opinion in its entity is attached to this statement and according to it, the Offer Price is not fair from a financial point of view.

As to the Tender Offer, Incap is committed to comply with the recommendation given in Chapter 11, Section 28 of the SMA (Takeover Code).

2.3 Assessment of the Tender Offer from the point of view of Incap and its shareholders  

The closing price of Incap on NASDAQ OMX Helsinki on 10 December 2014, i.e. on the last trading day preceding the date when Inission became obligated to make the public Tender Offer was EUR 0.06. The volume-weighted average trading price of the share on NASDAQ OMX Helsinki during the three-month period preceding the date when Inission became obligated to make the public Tender Offer, i.e. from 11 September 2014 to 10 December 2014 was EUR 0.06. Accordingly, the volume-weighted average trading price of the share during the 12-month period preceding the date when Inission became obligated to make the public Tender Offer, i.e. from 11 December 2013 to 10 December 2014 was EUR 0.06, during the nine-month period, i.e. from 11 March 2014 to 10 December 2014 was EUR 0.05 and during the six-month period, i.e. from 11 June 2014 to 10 December 2014 was EUR 0.06.

The Offer Price of EUR 0.03 is approximately 50 per cent lower than the volume-weighted average trading price of Incap share on NASDAQ OMX Helsinki during the 12-month period preceding the date when Inission became obligated to make a public Tender Offer and approximately 50 per cent lower than the closing price on NASDAQ OMX Helsinki on 10 December 2014, i.e. on the last trading day prior to the obligation of make the public Tender Offer. The Offer Price is approximately 45 per cent lower than the volume-weighted average trading price during the nine-month period prior to the obligation to make the public Tender Offer and 49 per cent lower than the volume-weighted average trading prices during the six- and three-month periods.

According to the Offer Document the Offeror believes in the Company's business and wants through increased ownership to commit itself more closely to the development of the Company, and the primary purpose of the Offeror is not to delist the Company from NASDAQ OMX Helsinki. The Offeror has announced that it is, as a part of the financing arrangement in connection with the Tender Offer, committed to aim at receiving a holding of 42.0 per cent in the Company in any outcome of the Tender Offer. The Board of Directors notes that in regard to the present shareholder base such a significant minority share of holdings may enable the majority in general meeting. The Board of Directors further notes that the trading with the Company's share can in future be weaker than today and the price formation in the Stock Exchange can be more insecure.

The Board of Directors notes that the Offeror is the Company's biggest shareholder and a direct competitor. The Offeror has in the Tender Offer referred to the weakened financial position of the Company during the past years. It is the opinion of the Board of Directors that the Offer Price does not take into consideration the latest development in the Company's business. The Company continued during 2014 the actions to improve efficiency in line with the Turnaround program, which was launched in 2013. After the end of the actual Turnaround program the Company has focused on stabilizing its operations and financial position. The Company has further negotiated with the financing partners on the volumes and schedule of debt instalments as well as on other financing arrangements. The systematic work which has been carried out during the past six months in the leadership of the new CEO is now bearing fruit and is reflecting positively in the profitability of the Company. The divestment of the Vaasa mechanics factory to the local management enables Incap's strategic focus on contract manufacturing of electronics only, so that the Company has factories concentrating on electronics and related assembly in Kuressaare, Estonia and in Tumkur, India. Volumes of electronics manufacturing in the factory in Kuressaare are growing. The development in India continues to be strong. The new government in India has announced that its target is to improve the local business environment, and this is estimated to support Incap's growth targets especially in local markets. Incap has also received positive feedback from its customers and believes that their trust in the company has recovered and strengthens further. The Board of Directors also notes that especially with regard to the low level of the Offer Price, the Board has carefully assessed and followed the Company's obligation to disclose all such decisions and other factors concerning the Company that are likely to affect the value of the Company's share.

The Board of Directors notes that according to the Fairness Opinion given by United Bankers, the Offer Price is not fair from a financial point of view.

The Board of Directors has also assessed eventual alternative arrangements to the Tender Offer as follows:

The Offeror has been the Company's biggest shareholder since 2013. The Offeror and the Company agreed in July 2013 on a conditional transaction, according to which the Offeror and the Company would be merged so that the Company would buy the shares and business operations of the Offeror's subsidiaries. The Extraordinary General Meeting of the Company approved the transaction in August 2013. The realization of the transaction was however conditional to the fact that the Offeror would decide to use its option for merger in line with the conditions of the agreement by the end of the year 2013. The merger option was based on the market price of Incap at the time concerned. Even though the Offeror did not use its option to merge the operations of the Company and the Offeror, it announced in January 2014 its continued interest in the merger. After that the Offeror has given to the Company proposals on the implementation of the merger essentially in the same way as described above to a price which is lower than the market price. The Board of Directors has rejected these proposals because they were unfavorable to the shareholders.

The Company has, in line with the decision published on 23 January 2014, evaluated during the year 2014 the strategic options and eventual alliances to develop the Company's business further. Thereby the Company has discussed both with the Offeror and third parties, and there has been preliminary interest concerning the consolidation with the Company. The Board of Directors considers consolidation to be one potential alternative for the development of the Company. However, its strategy has been to strengthen the Company before entering any consolidation, and these efforts have continued also after the publication of the Tender Offer. Because of the Offeror's holding of approximately 37 per cent and the tight schedule of the Tender Offer, as well as having taken into consideration the previous assessments by the Board, the Board of Directors has not specifically searched for alternative or competing offers after the publication of the Tender Offer.

2.4 Evaluation concerning strategy, operations and employees

According to the Offer Document the Offeror does not expect the execution of the Tender Offer to have any imminent effect on Incap's business or assets or its management's or other employees' position. The Offeror believes that the increased commitment of the Company's biggest shareholder to the ownership of the Company has a positive influence both on the Company's business and its possibilities to improve the financing position. According to the Offer Document the target of the Offeror is, despite the grade of the execution of the Tender Offer, to support more than previously the possibilities of Incap to develop its business and the efforts to improve the financials of the Company, so that the management and the personnel can focus on the Company's business and its development.

According to the Offer Document the Offeror does not expect the Tender Offer to have any imminent effect on the Company's business activities or locations or the number of employees. Because the customer segments of the Offeror and the Company are complementing each other well, the Offeror intends in medium-term to investigate the possibilities for cooperation between it and the Company among others in relation to sales and purchasing.

Incap has not received any separate statement from the representatives of its personnel on the effects of the Tender Offer to the employments at Incap.

According to the Offer Document the Offeror has negotiated with two Finnish financial institutions an agreement, in which these institutions agree that the annual repayments of Incap under its financing arrangements with these institutions would not exceed EUR 0.5 million in 2015-2017, if so decided by the Company and subject to a detailed agreement with the Company and these institutions. However, should Incap not raise a minimum amount of EUR 1 million new capital in a share issue prior to 31 August 2015, the annual repayments of the Company under the financing arrangements would again become payable as prior to agreeing on the above-mentioned amendment. The financing arrangement has been described more in detail in the Offer Document.

The Board of Directors notes that the Company has not authorized the Offeror or their owners to enter into negotiations described above or to give any information on the Company to financial institutions, and therefore, the independent members of the Board of Directors or the management of the Company are not aware, which financial institutions have been involved in negotiations. The Board of Directors notes that the management of Incap has despite the Tender Offer negotiated on amendments in the repayment programs in order to better allocate the cash enabling the business growth. Despite the Tender Offer the Board of Directors will study the financing solutions presented by the Offeror more in detail after having received more specific information on them.

The Board of Directors further notes that the share issue as proposed by the Offeror in the first half of the year 2015 is evaluated to be a potential alternative to finance the growth of Incap. The Board of Directors notes that it has with all Board members involved, already prior to the publication of the Tender Offer, decided to evaluate the possibilities of arranging a share issue as one alternative. The Company disclosed the decision in connection with the Interim Management Statement on 13 November 2014.

Based on the information given in the Offeror's Offer Document the Board of Directors estimates that the result of the Tender Offer does not have any imminent and/or direct effect on Incap's current business operations or the employments in the Company.

The Board of Directors is of the opinion that the information given in the Offer Document on the longer-term plans of the Offeror concerning Incap is rather limited and of general nature. Because of the lack of detailed information the Board of Directors cannot form a more specific opinion on the strategic plans of the Offeror after the Tender Offer and their likely effect on the Company's business and the position of its employees. The Board of Directors, however, is aware of the consolidation strategy, which was published by the Offeror in connection with the arrangements made in 2013. The Offeror has announced in the Offer Document its intention to investigate the possibilities of cooperation among others in sales and purchasing. The advantages and disadvantages of the eventual cooperation in sales and purchasing are in the opinion of the Board of Directors totally dependent on the terms and conditions of the cooperation, and therefore the Board of Directors cannot give any specific opinion on the issue in this connection.  

3. Information concerning this statement

This statement of the Board of Directors shall by its nature constitute no investment or taxation advice to shareholders or any other parties, and it cannot be expected that the Board of Directors specifically evaluates the general share price development or risks relating to investments in general. The shareholders shall independently by themselves consider and decide on the acceptance or the refusal of the Tender Offer taking into consideration all the available information, including the Offer Document and the views and information given in this statement of the Board of Directors. The Board of Directors cannot guarantee that the Company's shareholders would in future receive a better price than the price offered.

United Bankers has acted as the financial advisor of the Board of Directors in the evaluation of the fairness of the Offer Price. Fondia Oy has acted as the legal advisor of Incap concerning this statement.

In Helsinki, 16 January 2015

INCAP CORPORATION
Board of Directors

Further information:
Lassi Noponen, Chairman of the Board of Directors, tel. +358 40 501 5127

Appendix:
Fairness Opinion by United Bankers concerning the fairness of the Tender Offer

Distribution
NASDAQ OMX Helsinki Ltd
Financial Supervisory Authority
Inission AB
Principal media

INCAP IN BRIEF
Incap Corporation is an international contract manufacturer whose comprehensive services cover the entire life-cycle of electromechanical products from design and sourcing to actual manufacture and further to maintenance services. Incap's customers are leading suppliers of high-technology equipment in their own business segments, and Incap increases their competitiveness as a strategic partner. Incap has operations in Finland, Estonia, India and China. The Group's revenue in 2013 amounted to approximately EUR 36.8 million, and the company currently employs approximately 500 people. Incap's share has been listed on the NASDAQ OMX Helsinki Ltd since 1997. Additional information: www.incap.fi.

APPENDIX
Fairness Opinion by United Bankers concerning the fairness of the Tender Offer

Board of Directors
Incap Oyj
Keilaranta 4
02150 Espoo
Finland

Helsinki, January 15, 2015

Members of the Board of Directors:
Inission AB ("Inission") has on December 12, 2014 disclosed its duty to make a mandatory public Tender Offer ("Transaction") in accordance with Chapter 11, Section 19 of the Finnish Securities Market Act for all the shares and securities entitling to the shares of Incap Oyj ("Incap" or the "Company"). Today Inission owns altogether 40,707,563 shares in Incap, corresponding to approximately 37.71 per cent of the shares and related voting rights in the Company.

The price to be offered in the mandatory public Tender Offer for each Incap share validly tendered in accordance with the Terms and Conditions of the Tender Offer will be EUR 0.03 in cash (the "Offer Price"). Incap has no other securities, such as option rights or convertible loans with existing conversion rights, entitling to the shares. On December 10, 2014, i.e. on the last trading day preceding the date when Inission was obligated to make the public Tender Offer, the closing price of Incap share on NASDAQ OMX Helsinki was EUR 0.06.

Incap's Board of Directors has engaged UB Capital Oy ("UB Capital") to submit an opinion as to the fairness, from a financial point of view, of the consideration to be received by the Incap shareholders in the proposed Transaction.

In arriving at its Fairness Opinion, UB Capital has, among other things:

  • Reviewed publicly available financial information regarding Incap and the industry in which it operates
  • Reviewed certain forecasts and analyses prepared by Incap relating to its business and financial performance
  • Compared the financial and operating performance of Incap with publicly available information regarding other selected companies
  • Performed other analyses and financial studies UB Capital considered as relevant for the purpose of this opinion
  • In giving its opinion, UB Capital has relied upon and assumed the completeness and accuracy of all information that was publicly available or was provided to or discussed with UB Capital by Incap or otherwise reviewed by or for UB Capital. Further, UB Capital did neither independently verify nor assume any responsibility or liability of independently verifying any such information or its completeness or accuracy. In relying on any financial analyses or forecasts prepared by Incap, UB Capital assumed that they were prepared based on assumptions reflecting the best available estimates and judgments as to the expected future financial prospects.

    The Fairness Opinion is based on prevailing economic, market and other conditions and the information made available to UB Capital as of the date hereof. Further, it should be understood that subsequent developments may have an effect on this opinion and that UB Capital assumes no obligation to update, reaffirm or revise its opinion. The opinion is limited to the fairness, from a financial point of view, of the consideration received by Incap shareholders in the proposed Transaction.

    Based on the valuation of the peer group, previous transactions and estimates given to us by the management, our final conclusion is that the Offer Price of EUR 0.03 per share is not fair from a financial point of view.

    This letter is intended exclusively to the Board of Directors of Incap for the purposes of its evaluation of the Transaction. The opinion does not constitute a recommendation to any shareholder of Incap with respect to the Tender Offer or any other matter. Furthermore, this opinion may not be disclosed, referred to, or communicated to any third party without the prior written consent of UB Capital.

    Sincerely,

    UB Capital Oy


    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: Incap Oyj via Globenewswire

    HUG#1887633