Investor Update

Nov 26, 2020

My name is Henrik Saxborn. I'm the CEO of Castellum. And we just wanted to have this webcast to give you some information about the offer we this morning launched on Entra. And we can take next slide, please. This is, not anything else than a marriage. It's a marriage between the strongest two companies in the Nordic sector and we are simply building a platform for the future. We are building a sustainable platform and we will describe that we are building something that will be unique in the Nordic market. Next slide, please. This, entity or this new platform, these companies will be the leader in office and logistics. It will be the main builder of new, offices in the Nordic sector. It will have 36% of its tenants income coming from the government. And we also see the opportunity to unlock the synergies that we see in these two company combined, and I will come back to that. It will also have capacity for the future since we are simply having the strongest balance sheet also in the Nordic sector. And we will already from start be the largest producer of office space going forward. So I can take the next slide, please. And how do we then create value? This offer is an offer of 85% shares and 15% cash. The bid today stands for 30% over the average weighted average for Entra share price the last three months. It's a price that is almost NOK 175 NOK 171, sorry, NOK 171 per share. And we think that it's possible to release synergies over the next coming years, approximately NOK $450,000,000 in synergies on both sides. The new company could have a balance sheet, a gross balance sheet of approximately SEK 150,000,000,000. This is a company that will be a blue chip company like they both are from the beginning and it will be a high quality existing new company simply. And we can take the next slide, please. Going into the bid, this bid will be, done 85% in shares, 15% in cash. It means that for 20 shares in Entra, we'll have 13 shares in Kasselen. The bid price is 170 and 86 NOK per share, and it's almost 19% over the undisturbed share price that was the November 23. So it's 19% over that simply. And let's go to the next slide, please. This is a marriage. This is a marriage where we bought the ring this night. We bought the ring from the government of 8% of the shares and are the owners in the entire portfolio. This is a marriage of 90 assets in Norway and six thirty seven assets in Denmark, Sweden and Finland. The gross asset value is 150 billions and is the strongest balance sheet in the Nordic sector. This gives us opportunity to continue to create sustainable investments, be a leader in prop tech, sustainability and the largest producer of office space going forward. The next slide, please. As said, the most the largest tenant in this is the Swedish and Norway governments, totally to 36% of the income team. We already from beginning would have 9,000,000,000 in developments and the strongest pipelines together that you have in The Nordics. It would have 5,600,000 square meters of space. I think, honestly, that would be one of the largest companies in Europe. So this is simply an extremely strong match. And looking into our next slide, please, you can see that the occupancy rate is 95%. You can see that the remaining contract period of average contract period in the portfolio is to combined five years. So it's a strong company of many, many ways, and it's the future to go ahead. It is an opportunity to merge these two companies we can't miss. And we do this because we understood that we have the support from the shareholders on both sides. Therefore, we offer the market this today. And then going into the synergies on the next slide, please. How can we then create SEK150 million in synergies? Of course, the first thing is obvious, we don't need two of everything, but we also will combine knowledge from these two very good companies to make it even better. We will, of course, be more efficient and we have experience of doing that when we bought Norporten from the Castellum side. We know there is opportunities on the existing portfolio. But we will be very certain this is a marriage. This is a marriage where we will be very positive that we will have the best persons on each role. And we will also that will give us in the future to combine the possibility of working with existing, financing, but we'll also directly, of course, look through the portfolio and maybe then sell in the Swedish part of the portfolio that is not so efficient going forward. So there's the 150,000,000 in synergies. And the next slide, please. As said, this is a marriage. I said it many times now. But the companies will be strong together, and we will have the possibility to create something that's unique. And I can take the next slide, please. Going forward on the financing, we can see that we have a buffer of approximately 24,000,000,000, and it's the strongest balance sheet. We have the good liquidity, and it will keep us strong going forward and give us the opportunity. So there is no financing risk in that. It's also the strongest balance sheet we have. Next slide, please. So with this said, we would propose that we can continue with the work we have started. And we hope that we, going forward now, can simply commit the marriage between the two companies and continue with the work we have started today and create one of the strongest balance sheet with the biggest opportunities going forward into the market. The next slide, please. And we take the next slide, please. And I think with this said, I will open for questions. You. So I will read some questions here. I've gotten questions about if it's acceptable to accept less than 90%. As we speak, no. We have the offer out at 90% simply. So that's the answer. And then we'll see if we're coming up some more questions. Henrik, can you publicly confirm that this is one and only offer on the table for Entra shareholders to consider? Is the zero possibility of entering into a bid war? Thank you. This is the bid we have out to the market right now and that's the only thing I can comment so far. And the next one is, so should we expect combined company to sell assets in Sweden and not in Norway? What do you like to sell in Sweden? We have a large portfolio. We have over the years simply worked with a turnover in portfolio. And for me, personally, it's much, much faster to look at the opportunities in the portfolio in Sweden and react more confident and quickly there. So, therefore, the Swedish portfolio is the target if we should sell anything. So that's it. Okay. I got another one. Can you explain the difference in the SEK of 450,000,000 in synergies over four years you mentioned first and then 150 synergies? Oh, sorry. It should be just a mistake from my side. If I said 450, the correct figure is 150,000,000 SEK over some years and nothing else. Sorry for that. Yeah. Many questions here. Interesting. Did you anchor the bid with any main owner? Okay. So the yes. We, what we've done is, like I was writing in the press release and nothing else, we have been buying the shares from the government, and we have then and we have then, also getting the acceptance from the shareholders we write in the press release. Yes. Next one. Okay. I'm getting the question. What has changed between today and yesterday? You pulled away yesterday, and now you are making a bid. What's the change in in heart? No. The change is the reality. We was yesterday for twenty four hours ago not giving the support from the share from the board, and that we expected, and we hold a lot of our shareholders that couldn't do some activity in the market. Therefore, we was had to reconsider our position. And during that twenty four hours, we had a huge amount of positive reflections and no negative from shareholders in the market, and that made us confidence that this is what the shareholders want. And with that, they saw the same thing that we did. And with that, we simply made a deal tonight with the government. And with the deal done up to the government, we decided this morning to launch the bid. So that's it. Does the larger company mean you are more willing to take greater debt development speculations risk? No. No. No. We don't take more speculations risk in this. It's just the figures I referring to is the existing figures from the the both companies simply, where you can see that this volume is simply the volume that's in pipeline and or existing ones in the companies. So no more risk. That's not the the the item here. And I take another one. Is the acquisition of Entra shares from Norwegian state complete? Yes. We bought and we are owners of that part, simply already. You are on. I got a question if we are if we are unsuccessful in in the approach, if we would continue to hold the 8.2% stake in ENTRE, and that is to be seen simply. We are not here to do anything else than getting the marriage done. So so that's a question for the future that I don't see would come simply. And then I get a question about what's the best part of the portfolios in Entra, and and how does your view its development pipeline? I think Entra is one of the strongest companies in The Nordics. It's for me a golden nugget, and it's for me something that will be a perfect partner to the ambition we have in Constellium. And in many ways, we share the views and ambition of this company. Therefore, we're talking about marriage and nothing else. What is the dividend strategy going forward post combination? What we see is that we have the opportunity to keep the same dividend policy as we have, and so that's the target. And I have one more. Any clear boundaries on the condition external expansion drive in Nordics? Denmark is still a small part. Just wondering where the end game might be for external growth. Yes. That's a large question. Our aim is to build a stronghold in The Nordics on the office and logistics sector. We are creating that, and it's a long way to end game. And I think, honestly, that will be after my leaving the company when I'm in pension or something like that. This will not end the next coming five years, ten years, something like that. We it's volume enough in The Nordics. We're creating that value. And then how is the purchase of the Norwegian government's share financed? We have done that by our own cash with our credits we have and credit lines, so that's all we find right financed. How was the sorry. How important is the board recommendation to getting the deal done integration. I think where we are right now, we are in a situation simply where, the shareholders view is the absolutely most important, but we also, of course, would appreciate if we're getting the support from the board. And I would be very, very clear here. This is not a hostile bid. This is a ask for marriage and nothing else. Okay. What is the approved requirement for Castellum's EGM to approve the shares issue of 50%? Okay. It's, it's a 50 that's needed for the EGM in in Castello. And okay. We can take the next question, please. Is this the final and best offer for Entra? And for my sake, this is the offer for Entra, and that's it. Next question, please. You have many questions. It's really interesting, actually. Did you try and buy 11.8% stake from Volkvik Fund two? Any discussion with any other shareholders is, of course, nothing we can discuss openly, so I can't answer that. I'm sorry. And the next one, please. Are you expecting the transaction to be accretive on earnings perspective and by when? I mean, us, as we said, the first part is going to be that we directly look into the efficiency we can create on cash flow, and that's, of course, going to organization. And to be clear, it's nothing mean, simply then saying that we don't need double of everything. That's the first part. Then we will, like in Norport, then look into the portfolio and then property management there and see if we can be more clever together and learning from each other, and we're expecting that will be part of it. We will also then look through the portfolio and the ineffective part that we have and definitely focus being on the Swedish side. And after that, of course, we look at the balance sheet and what we can achieve on financing in the combined new entity. And all this together, we think there is SEK 150,000,000 to achieve. So that's the plan. And the next one was okay. I'm getting a question about the current bid is 85% shares and 15% cash. What are the terms for the mix and match? And simply, I mean, we are stating that in the press release on the mix and match. So I please briefly read it in the press release. Okay. I get a question about did we receive any feedback from the board of ENTRE on their view, and we have not received anything from the Entra Board at this moment. During your discussions with the Entra management, have you had any sight of updating NAV? We have conducted a DG process, and we are very, let's say, we are very thinking the values. We can't see anything problem there. If we had seen any problems on the data process, we would not have gone through with this bid. And on values, I assume that the Entra, what we can see, has quality in the valuations like like we have. So my answer is I assume that the evaluation is correct for the q three. Okay. I get the next question. Did you envisage getting shareholder support from Entra? Is the irrevocables from Entra shareholders possible to giving their overwhelming support? I think absolutely it could be irrevocables coming from the shareholders, and that is meant to be seen now when we are out with this simply. And then the next one, can you please elaborate on a bit more on potential financing synergies? Now it's too early stage for simply doing this, but of course, we know that it's appreciated in the financing sector with more stability, larger capacity, longer vault, and we are bringing that to both sides. We're also knowing that the total quality of the group will be larger we combined it. And therefore, we think that it would be appreciated by the finance sector and the banks and to the market and that we can benefit from that. Simple as that. And then we're getting next one. Now we're going through the last five questions. So let's see. This is number five. Following up on question two, another one. This 5,000,000 synergy when only for the reduction of costs or does that also include assumption of potential I lost that. I lost it. No. This is this is what we're talking about now is simply the 150,000,000 is not taking account any financing, items. And this is will Castellum need to make any additional share issue to finance, the cash bid? No. The good part of this is we are ready to go, and we don't need that simply. Okay. We have three more to go, they say, to me here. So let's see. Given the complementary nature of the this transaction and great job that EntraManagement and the board has done, we are expecting the Entra board and management to join the Castellum board and management. This is two different items then. I can answer for the management side. First of all, we will, in a marriage, get married and combine the management. On the board sector, we have, it's it's, of course, regulated how that will be done, and we will follow the rules from Castello, in this case. And then how important is the entire board recommendation for Castellum given this merger? I think I asked that and I answered that earlier. And that is, of course, something we would like to see and hope to see and that's why we're proposing. But the most important part is getting the acceptance from the shareholders, of course. And now the last question. What are your assumption behind refinancing savings amount and all in interest rates? And would you consider SIC financing to reduce cost and bear some slight FX exposures. On if we're getting the same rating as Entra, more calculation or assumption is that, we will go down on the Castellum part approximately 10 to 15 bps, and that would mean that we could save theoretically approximately 50 to 70,000,000 Swedish crowns, something like that. Okay, everyone. I'm very pleased that you had, was able to listen to this for almost an hour. And I'm very pleased with all the questions, and I hope we we answered it and want to thank you. Thank you very much for listening.