APK and VPC to merge - creating a strong Nordic Central Securities Depository VPC AB and OM HEX AB (publ) have signed a Letter of Intent concerning a merger between the OMHEX-owned Finnish Central Securities Depository (APK), and VPC, the Swedish equivalent, thereby creating a strong joint central securities depository (CSD) group within the Nordic area (NCSD). The Letter of Intent also covers implementation of OMHEX’s systems solution for settlement and depository, EXIGO CSD (EXIGO), on the Finnish market. In addition, NCSD will also acquire a license to use and develop EXIGO in the Nordic area. The creation of a Finnish-Swedish CSD will facilitate the harmonization of rules and settlement processes and promote the development of a common technology platform, which will accelerate the horizontal integration of the post-trade part of the value chain. This will increase the efficiency and thereby the competitiveness of the Nordic region as a financial market and provide benefits for issuers, market participants and investors. NCSD will cover approximately 70 per cent of the total Nordic CSD activities. 1. In the intended merger between APK and VPC, VPC offers new shares and cash to OMHEX as consideration for all outstanding shares in APK. 2. Following the transaction, OMHEX and the four principal owners of VPC - FöreningsSparbanken, Nordea Bank, Skandinaviska Enskilda Banken, and Svenska Handelsbanken - will each own approximately 19.8 per cent of NCSD. 3. Additional Finnish market participants will be invited by the principal owners of NCSD to subscribe for new shares representing up to a 10 per cent ownership in NCSD. 4. The appointment of VPC’s CEO Kjell Arvidsson as the Group CEO of NCSD is proposed. 5. As part of the Letter of Intent, NCSD will acquire a license from OMHEX for the use of EXIGO in the Nordic region and with the intent to use EXIGO as a new common technology platform going forward in close cooperation with the market participants. 6. The total value of the proposed transaction amounts to approximately SEK 1,020 million, including the EXIGO license but excluding future development and maintenance costs. 7. The proposed transaction is subject to due diligence and relevant regulatory approvals. Jukka Ruuska, President of HEX Integrated Markets and deputy CEO of OMHEX: The creation of a strong Nordic CSD is an important part of fulfilling our common vision of a truly integrated Nordic securities market. The common CSD platform and harmonization of trading as well as clearing and settlement practices will generate benefits for all market participants by facilitating access to and operations in the Nordic markets, thus making it also more attractive to new participants. Kjell Arvidsson, CEO of VPC and proposed Group CEO of NCSD: This transaction will make it possible to enhance existing infrastructure and the services that we provide for market participants, issuers and investors, both private individuals and corporate enterprises. The knowledge and experience within the current operations of APK and VPC give us a solid platform for further development. During recent years, the Nordic CSDs have had a constructive and close dialogue and we share common views on how to develop the Nordic markets. The proposed merger, creating a joint Finnish-Swedish CSD, is a first step in fulfilling our ambitions and increases the competitiveness of the Nordic financial markets. Magnus Böcker, President and CEO, OMHEX: This is another important step in the integration of the Nordic securities markets and it is in line with OMHEX’s strategy to enable efficient securities transactions. It is also consistent with our belief that integration of the financial infrastructure is key to market efficiency and customer value. By promoting integration and the benefits of common technology platforms, we continue to improve market efficiency. Björn G Olofsson, Chairman of VPC: We hope this will be the first step in a further consolidation and integration of the Nordic markets. It is important to develop the local Nordic market model in order to meet demands from both domestic and international customers. This transaction will create favorable conditions for increased operational efficiency which will be to the advantage to all market participants. Further details and background material are attached to this press release. Note to editors: There will be a press briefing in Helsinki at 09.30 CET (10.30 local Finnish time) at OMHEX premises, Unioninkatu 32B - 6 floor. It will be possible to listen in by calling the following conference call number: +358 9 8248 5596, pin code: 8325. A power point presentation will be available on www.omhex.com approximately 10 minutes before the press briefing. For more information or comments, please contact: Björn G Olofsson, Chairman VPC +46 8 701 50 78 Kjell Arvidsson, CEO VPC +46 8 402 92 23 Press contact, VPC +46 734 340 776 Magnus Böcker, President and CEO, OMHEX +46 8 405 66 44 Jukka Ruuska, President HEX Integrated Markets, deputy CEO, OMHEX +358 9 6166 7200 Anna Rasin, VP Marketing & Communications, OMHEX +46 8 405 66 12 Merger background and motives An integrated Nordic financial market is in the common interest of all Nordic market participants as well as the providers of central infrastructures like exchanges and CSDs. The merger between APK and VPC accelerates horizontal integration of CSDs in the Nordic countries, creating a basis for a joint Nordic CSD platform. A common technology platform has been identified as essential for the consolidation of the Nordic CSDs. EXIGO, a standardized system solution for CSDs, developed by OMHEX with the SFE Corporation (Sydney Futures Exchange) as its first customer, is considered to be a suitable common technology platform for the Nordic region. Transaction structure The proposed merger between VPC and APK, forming the new NCSD group, will be carried out through a combination of a share exchange offer and a cash offer whereby VPC as consideration offers new shares for 54 per cent of APK and cash for the remaining 46 per cent to OMHEX. The transaction values APK at SEK 750 million and VPC at SEK 1,650 million. The value of the cash consideration is SEK 343 million and the newly issued shares - corresponding to a 19.78 per cent ownership in NCSD post-transaction - are valued at SEK 407 million. The total value of the proposed transaction amounts to approximately SEK 1,020 million, including the EXIGO license but excluding future development and maintenance costs. Furthermore, OMHEX will, with the support of NCSD, develop a CSD system with EXIGO as the common technology platform. In the first phase, implementation will take place in the Finnish market in 2005-2006. A design study will be initiated regarding the envisaged expansion of the EXIGO system into the Swedish operations. In addition, the parties shall establish a joint understanding, taking into account the interests of the market participants, on how and when a CCP-functionality for cash and derivatives markets can be provided for the Nordic market. Such a CCP-functionality is envisaged to be jointly developed by OMHEX and NCSD. Ownership structure, management and corporate governance of NCSD Following the merger, the shareholding of NCSD will be distributed as follows; Owner Share of capital and votes in % FöreningsSparbanken 19.78 Nordea Bank 19.78 OMHEX 19.78 Skandinaviska Enskilda Banken 19.78 Svenska Handelsbanken 19.78 Others 1.10 Total 100% OMHEX and the principal shareholders of VPC have jointly agreed that additional Finnish market participants will be invited to subscribe for new shares in NCSD through a directed issue. The issue of new shares will not exceed 10 per cent of the shares in NCSD, thereby maximum diluting the principal shareholders' ownership to a new ownership level of approximately 17.8 per cent each. The management and organizational structure of the NCSD group will reflect a one company approach. However, due to regulatory reasons, NCSD’s business will be conducted by separate legal entities. Kjell Arvidsson, the current CEO of VPC, is proposed as the Group CEO of NCSD. A deputy Group CEO will also be appointed. English will be NCSD’s corporate language. OMHEX specific financial information OMHEX is responsible for the following company specific financial information. OMHEX has earlier stated that the expected annual cost savings from the merger between OM and HEX in 2003 would amount to up to SEK 220 million. Of these cost savings, around SEK 70 million would have been derived from the business area Settlement and Depository (equivalent to APK). As reported in OMHEX group financials as business area Settlement and Depository, APK had net sales of SEK 146 million and operating profit SEK 19 million in the second half of 2003. The corresponding numbers for the first quarter 2004 was net sales of SEK 79 million and operating profit of SEK 11 million. The effect on OMHEX EPS is expected to be positive following the transaction, also in 2005. OMHEX currently holds an option to acquire VPC shares from its principal shareholders corresponding to an 11 per cent ownership in VPC. Subject to the fulfillment of the terms of the Letter of Intent, VPC’s principal shareholders have agreed to redeem the option in cash, corresponding to approximately SEK 65 million. More information regarding the financial effects will be announced upon signing of the final agreements. Timetable and regulatory matters Following the Letter of Intent, due diligence reviews will be conducted. It is estimated that final agreements regarding the transaction including relevant agreements regarding EXIGO will be signed during summer 2004. Completion of the transaction is expected to take place during the third quarter 2004. The proposed merger is conditional upon approvals from relevant authorities. Financial and legal advisors Erneholm & Haskel has acted as financial advisor and Advokatfirman Cederquist as legal advisor to VPC. Mandatum has acted as financial advisor to OMHEX. About VPC VPC is the central link between issuers and owners/custodians of financial instruments. VPC plays a central role in the financial system and the main parts of securities possessions and transactions on the Swedish capital markets are registrated and processed through VPC. As a CSD and clearinghouse, VPC is responsible for providing long-term secure and cost-effective services for the management of shares, bonds and other financial instruments. For more information, visit www.vpc.se About OMHEX OMHEX owns and operates the largest securities marketplace in Northern Europe and is a leading provider of marketplace services and solutions for the financial and energy markets. OMHEX consists of two divisions: OM Technology - a world-leading provider of solutions and services (outsourcing and transaction processing) based on pioneering and proven technology and HEX Integrated Markets - the integrated Nordic and Baltic marketplace for securities, giving customers access to 80 percent of the Nordic and Baltic securities market. For more information, visit www.omhex.com About APK APK (Suomen Arvopaperikeskus) makes up OMHEX’ business area Settlement and Depository within the HEX Integrated Market division. It operates the Finnish settlement and registry systems, offering market participants efficient securities clearing, settlement and depository services. For more information, please visit www.hex.com.
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