Inside information : Raute plans directed share issue, rights issue and junior loan to support targeted growth and strengthening of capital structure and proposes combination of share classes

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RAUTE CORPORATION INSIDE INFORMATION 9 March 2023 at 8:55 EET

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INSIDE INFORMATION: Raute plans directed share issue, rights issue and junior loan to support targeted growth and strengthening of capital structure and proposes combination of share classes

The Board of Directors of Raute Corporation (“Raute” or the “company“) has today decided to initiate measures, which aim to support the company’s targeted growth and strengthen the company’s capital structure. The measures consist of strengthening of the company’s capital structure through a directed share issue and a rights issue and, as supplementary to the share issues, possibly a junior loan. The aggregate amount of these measures is estimated to be approximately EUR 13-16 million. In addition to organic growth opportunities, the company is actively reviewing possible inorganic growth opportunities, and for which the net proceeds received may also be used if a suitable target is found.

The contemplated share issues thereunder, the Board of Directors of the company has decided to propose to the Annual General Meeting of the company to be held on 30 March 2023 (the “Annual General Meeting“) that also the company’s share classes be combined. The notice of the Annual General Meeting will be published separately. In addition, the company has already taken measures to rearrange its financing by agreeing with its key lenders on a new secured revolving credit facility to replace certain previous revolving credit facilities and guarantee arrangements.

The strategic focus of the company has shifted more strongly than before to North America, Latin America and the EMEA region. When Russia started the war in Ukraine in February 2022, over half of the company’s order book for 2022 consisted of projects in Russia. Since the end of February 2022, the company has not made any new agreements with Russian operators and its Russian business is being gradually scaled down. The withdrawal from the Russian market, combined with the increased prices and limited availability of components and logistics, had a negative impact on the company’s result in 2022.

The company has previously announced a development programme to improve competitiveness and profitability. Overall, the programme is expected to reduce the company’s annual cost base by some EUR 4-5 million and improve margins. The company was able to show positive comparable EBITDA in all its new business units already in the third and fourth quarter of 2022.

The company has two well advanced material customer projects concerning new factory scale deliveries, which are geographically in the company’s strategic focus areas. There are still a number of uncertainties relating to the materialisation of the projects. For the first project, an agreement of EUR 50 million has already been entered into with the client, the entry into force of which is still subject to the client’s advance payment to Raute, as is customary in the industry. The second project, which is preliminary assessed to be slightly smaller in size, has progressed to the negotiation phase of a letter of intent.
Laura Raitio, Chair of the Board of Directors of Raute, commented on the contemplated measures as follows: “The financial measures now presented is the next concrete step in the well-progressing change of the company aiming to ensure sufficient financial resources for the long-term development of the company. The competitive position of Raute is strong and our diverse technological offering helps our customers to success. I believe that a developing Raute is even more interesting investment.”
Mika Saariaho, President and CEO of Raute, commented on the contemplated measures as follows: “We are currently crystallising our growth strategy and future development path, strongly built around the theme of responsibility. The planned financial measures support our work to achieve growth goals and strengthens our financial position. The most important priority in Raute in the short term is to improve our profitability. We progressed well in the second half of 2022 and the work continues strongly in 2023.”

Combination of the share classes

Currently, Raute has two share classes. Pursuant to the company’s Articles of Association, the company’s shares are divided into ordinary shares and series A shares. The ordinary shares are entered in the K series and the A shares are entered in the A series. The ordinary shares and the A shares differ from one another, so that every ordinary share entitles in the General Meeting to twenty (20) votes and a share of the A series to one (1) vote. Both share classes carry equal rights to distribution of funds by the company. As at the date of this release, the company has a total of 4,236,194 shares, of which 991,161 are ordinary shares and 3,272,033 are series A shares. The series A shares are subject to trading on the official list of Nasdaq Helsinki Ltd (the “Official List“). The ordinary shares are not subject to trading.

In relation to the contemplated share issues the Board of Directors of the company proposes to the Annual General Meeting that the company’s share classes be combined by amending the Articles of Association of the company to the effect that after the combination, all shares are of the same class and carry equal rights in the company, including one (1) vote in the General Meeting (the “Combination of the Share Classes“). The Board of Directors estimates that the Combination of the Share Classes is likely to increase interest in the company as an investment as well as improves the liquidity of the company’s shares.

In connection with the Combination of the Share Classes, the existing ordinary shares, which have not been subject to trading on the Official List, would be converted to the effect that they be equal to series A shares and are in the only share class in the company after the Combination of the Share Classes (the “Conversion Shares“) at the conversion rate of 1:1 so that one ordinary share is converted to one Conversion Share. The company intends to apply for the admission of the Conversion Shares to trading on the Official List, whereby the trading in the shares begins as soon as possible after the publication of the prospectus drawn up for the rights issue discussed below. The Conversion Shares would entitle to a subscription in the rights issue described below.

Both the existing series A shares in the company and the single class of shares in the company after the Combination of the Share Classes are hereinafter referred to as “series A shares”.

The Board of Directors requested a fairness opinion from Evli Plc, attached hereto as an appendix. In accordance with the fairness opinion, the proposed combination of the share classes at a conversion ratio of 1:1 is fair from a financial viewpoint to the holders of ordinary shares and to the holders of the existing series A shares in the company. The Combination of the Share Classes is expected to have positive impact on the company’s ability to implement the targeted growth in accordance with its strategy and to strengthen its capital structure. The company has received binding commitments from holders of ordinary shares to vote in favour of the Combination of the Share Classes at the Annual General Meeting. The commitments correspond to a total of approximately 79.3 percent of the votes at the Annual General Meeting carried by all the ordinary shares in the company and a total of approximately 70.0 percent of the votes at the Annual General Meeting carried by all the shares in the company.

Planned share issues and a possible junior loan

Raute’s Board of Directors has today decided to pursue two share issues and, as a possible supplementary financing instrument, a junior loan, the aggregate amount whereof would be approximately EUR 13-16 million.

Directed Share Issue

In the first share issue, to be carried out as a directed issue, new series A shares in the company would be offered for subscription to certain selected investors that have given an advance commitment (the “Directed Share Issue“). The amount of the Directed Share Issue is expected to be approximately EUR 6.4 million in total. The Board of Directors of the company will propose to the Annual General Meeting to resolve on the Directed Share Issue in a manner described in more detail in the notice of the Annual General Meeting.

Raute has received binding advance commitments to subscribe for all the series A shares in the company offered in the Directed Share Issue from certain of its existing series K and series A shareholders as well as from institutional investors and private individuals. The advance subscription commitments are conditional upon certain decisions of the Annual General Meeting and certain customary terms and conditions.

The subscription price of the shares offered in the Directed Share Issue is at maximum EUR 7.68 per series A share, which is 15.1 percent below the volume-weighted average trading price of the company’s series A share during the ten (10) trading day period from 23 February 2023 to 8 March 2023 and 12.5 % below the closing price of series A share on 8 March 2023. The subscription price has been formed in the book building process with institutional investors. The final subscription price in the Directed Share issue is however at maximum the same as the volume-weighted average trading price of the company’s series A share on the trading day preceding the completion date of the Directed Share Issue. The Board of Directors proposes that the Annual General Meeting authorise the Board of Directors to decide on the payment period and the subscription period of the Directed Share Issue.

If the subscription price of the shares offered in the Directed Share Issue is at EUR 7.68 per series A share, the number of the new shares offered in the Directed Share Issue is approximately 839,039 shares, which corresponds approximately 19.7 percent of all the shares in the company prior to the Directed Share Issue and approximately 16.4 percent of the shares in the company after the Directed Share Issue.

The intention is to apply for the admission of the shares issued in the Directed Share Issue to trading on the Official List, taking into account the prospectus requirements, as soon as possible after the completion of the Directed Share Issue.

The purpose of the Directed Share Issue is to support the targeted growth in accordance with the company’s strategy, improve the company’s financial position and to strengthen its capital structure. The directed share issue and the new equity financing to be acquired thereby together with the other actions described in this release aimed at strengthening the company’s capital structure, enables obtaining financing which is significant from the point of view of the company’s strategic objectives. The Board of Directors of the company finds that the directed share issue is an essential contributor in fulfilling the company’s strategic objectives. Therefore, there is a weighty financial reason for the company to deviate from the pre-emptive right of the shareholders.

The Directed Share Issue expands the shareholder base of the company, as a result of which the Board of Directors aims to propose to the Annual General Meeting the establishment of a permanent shareholders’ nomination board to prepare the election and remuneration of the Board of Directors.

Rights Issue

The second share issue would be a rights issue that would be carried out after the Directed Share Issue and the Combination of the Share Classes (the “Rights Issue“). The Board of Directors proposes that the Annual General Meeting authorise the Board of Directors to decide on the Rights Issue. The Rights Issue is intended to be arranged during the second quarter of 2023.

Raute has received binding advance commitments from certain of its existing shareholders, members of the Board of Directors and management as well as from institutional investors and private individuals participating to the Directed Share Issue to subscribe for Raute’s new shares in the Rights Issue. The subscription price would be paid in cash. The advance subscription commitments are conditional upon certain decisions of the Annual General Meeting and certain customary terms and conditions.

In the Rights Issue, the company’s shareholders would have the right to subscribe for shares in proportion to their existing shareholdings in the company. If the shares are not fully subscribed for, the company’s Board of Directors would have the right to decide on offering the unsubscribed for shares for subscription to the company’s shareholders or other persons in the proportion it sees fit. The Board of Directors proposes to the Annual General Meeting that the Board be authorised to decide on other terms and conditions of the share issue and to see to the practical measures related to the share issue.

If the proposals made to the Annual General Meeting concerning the Combination of the Share Classes and the authorisation of the Board of Directors to decide on the Rights Issue are approved, the company will prepare a prospectus to offer shares in the Rights Issue and to have the Conversion Shares and new shares admitted for trading on the Official List.

Possible Junior Loan

The company is in preliminary negotiations with certain institutional investors on a junior loan instrument. At the moment the company is investigating various instruments, which could also include instruments with a conversion right to the company’s new series A shares (the “Junior Loan“). The Board of Directors proposes the Annual General Meeting to decide on sufficient authorisations required for issuing of special rights entitling to shares that may be possibly required for the possible Junior Loan. If the company enters into one or more Junior Loan agreements, the company will announce this separately.

Amendments to Raute’s revolving credit and guarantee facilities

Raute and its key lenders have signed a new secured senior revolving credit facility agreement of EUR 12 million (the “Revolving Credit Facility Agreement“) and have agreed on terms which Revolving Credit Facility agreement will replace certain of the existing multiple revolving credit and guarantee facilities. New terms and conditions of the secured bank credit facilities of EUR 40 million in total, to which the lenders are uncommitted to, were agreed also upon in the Revolving Credit Facility Agreement.

The effects of the contemplated measures on the financial position of Raute

The aforementioned measures, when carried out as planned, will strengthen Raute’s capital structure and improve liquidity and financial position significantly by the end of the second quarter of 2023.

Preliminary schedule

The Combination of the Share Classes and the Directed Share Issue as well as the authorisation of the Board of Directors regarding the Rights Issue will be resolved in the Annual General Meeting on 30 March 2023. The preliminary schedule presented below is based on the assumption that the Annual General Meeting will approve the proposed resolutions.

The Combination of the Share Classes will be registered with the Trade Register on or about 3 April 2023.

The company will publish the prospectus prepared for, among others, the Rights Issue, on or about the second half of May. The company intends to apply for the admission of the shares issued in the Directed Share Issue to trading on the Official List, taking into account the prospectus requirements, as soon as possible after the completion of the Directed Share Issue and the Conversion Shares so that the trading of the shares begins as soon as possible after the publication of the prospectus.

The Rights Issue will commence on or about the second half of May and will end at the end of May or early June. The company intends to apply for the admission of the shares issued in the Rights Issue to public trading on the Official List, whereby the trading in the shares begins on or about by mid-June at the latest.

Change to publication time of interim report January-March 2023

The company reschedules the publication of its interim report January-March 2023 to Friday 28 April 2023. The previous publication date for the interim report was 25 April 2023. The rescheduling relates to the measures described above, including requirements relating to the preparation of the prospectus.

Two large customer deliveries

The company has two well advanced material customer projects concerning new factory scale deliveries, which are geographically in the company’s strategic focus areas. There are still a number of uncertainties relating to the materialisation of the projects. For the first project, an agreement of EUR 50 million has already been entered into with the client, the entry into force of which is still subject to the client’s advance payment to Raute, as is customary in the industry. The second project, which is preliminary assessed to be slightly smaller in size, has progressed to the negotiation phase of a letter of intent.

The company customarily announces larger projects only after it has received the agreed advance payment. The company will announce more detailed information on both of the above mentioned projects as well in more detail after receiving the advance payments.

Advisors

Evli Plc (“Evli“) is acting as the manager of the Directed Share Issue and the Rights Issue and the possible Junior Loan to be agreed later as well as the financial advisor to Raute. The legal advisor to Raute is Castrén & Snellman Attorneys Ltd.

RAUTE CORPORATION
Board of Directors

FURTHER INFORMATION:
Chair of the Board of Directors, Laura Raitio, tel. +358 40 386 0004
President and CEO Mika Saariaho, tel. +358 40 154 9393

DISTRIBUTION:
Nasdaq Helsinki Ltd, principal media, www.raute.com

RAUTE IN BRIEF:
Raute is a technology and service company that operates worldwide. Raute’s customers are companies operating in the wood products industry that manufacture veneer, plywood, LVL (Laminated Veneer Lumber) and sawn timber. Its technology offering covers the entire production process for veneer, plywood and LVL and special measurement equipment for sawn timber. As a supplier of mill-scale projects, Raute is a global market leader both in the plywood and LVL industries. Additionally, Raute’s full-service concept includes technology services ranging from spare parts deliveries to regular maintenance and equipment modernisations. Raute’s head office is located in Lahti, Finland. The company’s other production plants are located in Kajaani, Finland, the Vancouver area of Canada, the Changzhou area of China and in Pullman, Washington, USA. Raute’s net sales in 2022 were EUR 158.3 million. The Group’s headcount at the end of 2022 was 778. More information about the company can be found at www.raute.com.

IMPORTANT INFORMATION:
This release is not an offer for sale of securities in the United States. Securities may not be sold in the United States absent registration with the United States Securities and Exchange Commission or an exemption from registration under the U.S. Securities Act of 1933, as amended. Raute does not intend to register any part of the issues of securities in the United States or to conduct a public offering of securities in the United States.

The distribution of this release may be restricted by law, and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restrictions. The information contained herein is not for release, publication or distribution, in whole or in part, directly or indirectly, in or into the United States, Australia, Canada, Hong Kong, Japan, New Zealand, Singapore, South Africa or any other jurisdiction where such release, publication or distribution would violate applicable laws or rules or would require additional documents to be completed or registered or require any measure to be undertaken in addition to the requirements under Finnish law. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. This release is not directed to, and is not intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, release, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction.

This release does not constitute a prospectus as defined in the Prospectus Regulation and, as such, does not constitute or form part of, and should not be construed as, an offer to sell, or a solicitation or invitation of any offer to buy, acquire or subscribe for, any securities or an inducement to enter into investment activity relating to any security. No part of this release, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. The information contained in this release has not been independently verified. No representation, warranty or undertaking, expressed or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. Raute or any of its respective affiliates, advisors or representatives or any other person, shall have no liability whatsoever (in negligence or otherwise) for any loss however arising from any use of this release or its contents or otherwise arising in connection with this release. Each person must rely on their own examination and analysis of Raute, its subsidiaries, its securities and the transactions, including the merits and risks involved.

The terms and conditions and instructions of the Rights Issue are included in their entirety in the prospectus drafted by Raute in conjunction with the Rights Issue. The Finnish-language prospectus will be published on Raute’s website. Investors should carefully review the information on the risks and terms and conditions concerning the investment presented in the prospectus before making an investment. Approval of the prospectus by the Financial Supervisory Authority may not be considered as approval of the offered securities.

Evli is acting exclusively for Raute and no one else in connection with the transaction. Evli will not regard any other person as its respective client in relation to the transaction. Evli will not be responsible to anyone other than Raute for providing the protections afforded to its respective clients nor for giving advice in relation to the transaction or any measures or share issues referred to herein.

This release contains forward-looking statements. Such statements are not necessarily based on historical facts, but they are statements concerning future expectations. When used in this release, the words “aims,” “anticipates,” “assumes,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “should,” “will,” “would” and similar expressions as they relate to Raute and the measures and share issues identify certain of these forward-looking statements. Other forward-looking statements can be identified from the context in which such statements have been made. These forward-looking statements are based on present plans, estimates, projections and expectations and are not guarantees of future performance or events. They are based on certain expectations, which, even though they seem to be reasonable at present, may turn out to be incorrect. Such forward-looking statements are based on assumptions and are subject to various risks and uncertainties. Readers should not rely on these forward-looking statements. Numerous factors may cause the planned measures, share issues or actual results of operations or financial position of Raute to differ materially from the realisation of events, results of operations or financial position expressed or implied in the forward-looking statements. Raute or any of its affiliates, advisors or representatives or any other person undertakes no obligation to review or confirm or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise after the date of this release.

Appendix: Fairness opinion by Evli Plc, 9 March 2023
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