Encavis, KKR, Viessmann and ABACON enter into strategic partnership

On 14 March 2024, Encavis AG announced that the company has signed an Investment Agreement with Elbe BidCo AG, a holding company controlled by investment funds, vehicles and accounts advised and managed by Kohlberg Kravis Roberts & Co. L.P. and its affiliates (KKR). The aim is to enter into a strategic partnership to ensure long-term growth for Encavis. The family company Viessmann will invest as a co-investor in the KKR-led consortium.

KKR has already signed binding agreements with the major shareholder ABACON CAPITAL GmbH and other existing shareholders holding approximately 31 percent of the total share capital.

On 24 April 2024 KKR has made the offer document for the voluntary public takeover offer available on the offer website (www.elbe-offer.com). The Management Board and Supervisory Board of Encavis are carefully reviewing the offer document and subsequently intend to recommend the acceptance of the offer to Encavis’ shareholders in a joint Reasoned Statement.

Upon publication of the offer document, the acceptance period will commence for the shareholders of Encavis AG. The acceptance period ends on 29 May 2024.

The signed Investment Agreement sets out the terms of the strategic partnership with the KKR-led consortium including Viessmann. Under the terms of the agreement, the KKR-led consortium supports Encavis' current growth strategy, including maintaining the existing management team, and acknowledging the dedicated workforce. Encavis’ registered office and headquarters in Hamburg as well as other locations shall be maintained. Furthermore, any debt of Encavis that is subject to change of control provisions is to be fully backstopped.

The offer document is a comprehensive set of documentation that must be prepared and published by a bidder. It contains all the necessary information to enable interested parties to fully understand and evaluate the offer. This includes details of the offer such as the name and address of the bidder, the securities offered, the type and amount of consideration as well as conditions and acceptance periods.

In addition, the document contains information on planned measures to finance the offer, expected effects on the bidder´s financial position and statements on future business plans, including possible effects on employees and other involved parties.

The bidder has submitted an offer document to the German Federal Financial Supervisory Authority ("BaFin") in accordance with applicable statutory German takeover law provisions, which has been published after review by BaFin on 24 April 2024. The offer document is available on the offer website (www.elbe-offer.com). Upon publication of the offer document, the acceptance period will commence during which Encavis shareholders will have the opportunity to tender their shares.

After publication of the offer document, the Management Board and Supervisory Board of Encavis carefully review the offer document. Subsequently, the Management Board and the Supervisory Board intend to recommend the acceptance of the ffer to Encavis’ shareholders in a joint Reasoned Statement.

Upon publication of the offer document, the acceptance period will commence for the shareholders of Encavis AG. The acceptance period ends on 29 May 2024.

After publication of the offer document, Encavis shareholders will receive a notification from their respective custodian bank. On the offer website (www.elbe-offer.com) and in the notifications from the custodian banks, shareholders will be informed about the specific steps to tender their shares.

The offer price of EUR 17.50 per share in cash stated in the offer document represents a premium of 54 percent to the XETRA closing share price of Encavis on 5 March 2024, the last undisturbed share price prior to the ad-hoc release of Encavis on 6 March 2024 that the company is in discussions with KKR, and and 33 percent to the undisturbed three-month volume weighted average share price prior to 5 March 2024.

Ultimately, Encavis shareholders will have to decide for themselves whether they find the offer attractive, as this depends on several individual factors. Encavis shareholders are advised to read the offer document carefully. The Management Board and the Supervisory Board intend to recommend the acceptance of the offer to Encavis’ shareholders in a joint Reasoned Statement.

Encavis shareholders that have not declared their acceptance of the takeover offer within the initial acceptance period, have the possibility of accepting the offer during the so-called “additional acceptance period”. However, this only applies if the minimum acceptance threshold is reached at the expiry of the initial acceptance period and none of the further offer conditions have definitively lapsed until then except if such condition has been validly waived in advance. The minimum acceptance threshold is 54.285 percent.

The additional acceptance period is expected to commence on 5 June 2024 and to expire on 18 June 2024. After the end of the additional acceptance period, the takeover offer cannot be accepted anymore.

Encavis shareholders who do not want to accept the offer don’t need to do anything.

The bidder intends to delist Encavis from the stock exchange as soon as legally and practically possible after closing.

Completion of the offer is subject to a minimum acceptance threshold of 54.285 percent to be reached by the end of the initial acceptance period.

This threshold ensures that the bidder will retain at least 50 percent of the shares at closing in case holders of the hybrid convertible bond decide to exercise their conversion rights during the offer. Possible new Encavis shares that could be created by conversion of the 2021 convertible bond would also be tendered in the takeover offer. However, with the publication of the Offer, there is no reason to expect that the 2021 convertible bond will be converted into potential new Encavis shares, as the adjusted conversion price will be far above the offer price which is why it cannot be assumed that a rational investor would undertake such a conversion.

Encavis anticipates that no (or if any only very few) holders of the hybrid convertible bond will exercise their conversion right, as the adjusted conversion price would be higher than the offer price.

Until the end of the initial offer period of the tender offer, bondholders can notify the Company with a conditional conversion notice. Conversion will in such case become effective during the additional acceptance period. Conversion shares can then be tendered into the tender offer for the shares. Investors don’t have a put option for the bond, the issuer is allowed to redeem the bonds at par in case of a change of control. The Company will provide more detailed information to the bondholders separately.

The Management Board and the Supervisory Board of Encavis have approved the conclusion of the Investment Agreement on 14 March 2024 and expressly support the offer, subject to their review of the offer document by the bidder as part of their fiduciary duties. The Management Board and the Supervisory Board intend to recommend the acceptance of the offer to Encavis’ shareholders in a joint Reasoned Statement.

Post-settlement, the intention is to delist Encavis from the stock exchange as soon as legally and practically possible after closing. This may impact remaining shareholders in their ability to sell their shares.

The final terms of the takeover offer are set out in the offer document.

The offer document and other information in connection with the public takeover offer are available on the following website: www.elbe-offer.com. For further questions, please contact the Encavis IR department: ir@encavis.com.

If you have any questions about your securities account or your own Encavis shares, please contact your custodian bank.

An intended indirect acquisition of a significant participation in an investment firm requires a notification to the German Federal Financial Supervisory Authority ("BaFin") in accordance with Section 24 (1) German Investment Firms Act ("WpIG"), which is followed by an ownership control proceeding (“Inhaberkontrollverfahren”).

The Encavis Group business unit Encavis Asset Management (“EAM”) includes Encavis Portfolio Management GmbH ("EPM"), which is licensed in Germany as an “investment firm” under the WpIG and subject to supervision by BaFin. The planned acquisition of Encavis Group by the KKR-led consortium therefore triggers such a proceeding.

We are supporting the KKR-led consortium to receive regulatory owner control clearances. BaFin will assess, inter alia, whether the relevant acquirers meet the regulatory requirements for a reliable shareholder in an investment firm.