CapMan expands its operations to Russia and acquires private equity house Norum

 

The Norum team has been present in the Russian private equity market since 1995 and is one of the most experienced teams in that market. Norum has offices in Moscow and St Petersburg and strong networks in the Russian regions. As a part of the transaction Norum Russia Fund III established in July 2007 will transfer under the management of CapMan. The size of Norum Russia Fund III is currently EUR 88 million including CapMan’s own investment of EUR 13.5 million. The fund’s fundraising will continue under the name CapMan Russia Fund.

 

 

Norum’s 13 private equity professionals will transfer to the employment of CapMan at closing. The team’s investment professionals have a strong track record with investments in 24 Russian companies. Of these companies 18 have already been exited with good returns to investors. The team will in future form CapMan Russia team. Mr Hans Christian Dall Nygård, the current Managing Director of Norum, has been appointed as the Head of CapMan Russia Investment Operations responsible for all investment activity and management of the CapMan Russia team. He will report to Senior Partner Petri Saavalainen, who will assume the responsibility of integrating and developing the Russian business area within the CapMan Group as Head of CapMan Russia. Saavalainen has been responsible for CapMan’s previous Russian and Eastern European investments in 1995-2006.

 

“The announced transaction is a significant step in CapMan’s strategy of utilising growth opportunities within the alternative asset class. Russia is one of the fastest growing economies with a strongly emerging private equity market. Norum team is an excellent acquisition target for CapMan, as it has been in the market for long time, has a proven track record and has a good cultural fit to CapMan’s operating model,” states Heikki Westerlund, CEO of CapMan Plc.

 

“The transaction with CapMan will provide the existing Norum team with necessary resources to fully take advantage of the opportunities in the booming private equity market in Russia. Furthermore, CapMan’s investment experience from Russia and Eastern Europe complements Norum team’s experience,” says Hans Christian Dall Nygård, Managing Director of Norum. “Thanks to the pioneering and visionary work of DnB NOR and Sitra Norum has become one of the leading private equity companies in Russia. Now we look forward to grow our business further as a part of CapMan Group.”

 

 

In the first phase of the transaction 51% of the share capital and voting rights of Norum Russia Fund III’s management company and 100% of the share capital and voting rights of the fund’s advisory company will be transferred to CapMan Plc’s ownership. The purchase price for the shares is approx. EUR 3.4 million. Of the purchase price one million will be paid in cash and approx. EUR 2.4 million in CapMan B shares through a directed issue to the Sellers. CapMan Plc’s Board of Directors has resolved on the basis of the authorization granted by the Company’s Annual General Meeting to issue a total of 982,539 new CapMan Plc B shares. The value of each B share in the transaction is EUR 2.43 corresponding to the volume weighted average trading price of CapMan B shares between 22 April 2008 and 21 May 2008. After the share issue there will be 74,990,171 CapMan Plc B shares in total. The transaction and the resolution of the Board are in accordance with the signed agreement conditional to that the registration authorities of Guernsey grant the necessary regulatory approvals to CapMan Russia Fund and management company CapMan (Guernsey) Russia GP Ltd replacing the current Norum Russia Fund III and its management company.

 

The transaction price is based on future management fees to be received from CapMan Russia Fund and the possible future carried interest income to be received from the Fund. The transaction price will increase linearly with the fundraising so, that if the fund reaches its target size EUR 150 million at its final closing the transaction price will be approx. EUR 4.1 million, and if the fund reaches EUR 200 million at its final closing the transaction price will be approx. EUR 4.6 million. The possible additional transaction price will be paid to Sellers in CapMan B shares through a directed share issue as resolved by the CapMan Plc Board of Directors today.

 

There will be a three-phase lock-up for the B shares issued in the directed share issue and for the shares issued as payment for the possible additional transaction price. The lock-up will end three years after the signing of the transaction, i.e. on 25 May 2011, for all issued shares.

 

 

CapMan Plc will have the right to buy the remaining 49% of Norum shares and voting rights when the investment period for CapMan Russia Fund ends, that is at the latest in July 2012. The Sellers have the right to sell their remaining Norum shares to CapMan at any time. Depending on the final size of the CapMan Russia Fund, the transaction price for the remaining shares will be approx. EUR 3.3-4.4 million The payable transaction price per share will however be the same as the fundraising adjusted transaction price in the first phase of the transaction.

 

The acquired companies will be consolidated in CapMan Group’s figures as subsidiaries after the closing, presumably as of 1 July 2008. In CapMan Plc’s financial reporting CapMan Russia will be part of CapMan Private Equity business area together with CapMan Buyout, CapMan Technology and CapMan Life Science. 

 

 

Including CapMan Plc’s own commitment of EUR 13.5 million, EUR 88 million has been raised to Norum Russia Fund III i.e. CapMan Russia Fund. The fund’s target size is EUR 150 million. CapMan Plc’s share of the carried interest depends on the final fund size, and it will be communicated in connection of the fund’s final closing.

 

The fund’s investment focus is on small and medium-sized Russian companies with enterprise value of approximately EUR 5-50 million. The target companies typically operate in selected industries like consumer goods and services, manufacturing, telecom, transportation, financial services and media, and have net sales of approximately EUR 5-100 million. The companies have strong growth potential, experienced and motivated management and transparent business practises.

 

“Since 1995 we have been able to develop several companies into becoming market leaders in their niches in Russia. As the Russian private equity industry is still under-developed, there are vast opportunities to pursue in different industries. Our team will put strong efforts into sourcing deals from the Russian regions, as the growth rate of selected Russian regions is outperforming even the strong national GDP growth rate of approximately 8%,” says Hans Christian Dall Nygård.

 

Press and analyst conference on expanding CapMan’s business to Russia and the Norum acquisition will be held in Finnish for the media and analysts today, 26 May 2008 at 10.30 a.m. in CapMan’s premises at the address Korkeavuorenkatu 32, Helsinki. The presentation material will be available in English on the Company’s website www.capman.com at the same time.

 

 

Heikki Westerlund, CEO, Senior Partner, CapMan Plc, tel. +358 50 559 6580

Hans Christian Dall Nygård, Managing Director of Norum, Head of CapMan Russia Investment Operations,
tel. +7 812 913 7834

Petri Saavalainen, Head of CapMan Russia, Senior Partner, tel. +358 500 415 911

 

 

CAPMAN PLC

 

 

 

Mari Reponen

Communications Director

Investor Services

 

 

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www.capman.com