Savaria Announces Cash Offer to Acquire Swedish Listed Company Handicare Group AB for a Total Enterprise Value of CAD521 Million, to Create a Global Leader in Accessibility

Savaria Corporation (TSX:SIS) (“Savaria” or the “Company”), a global leader in the accessibility industry, is pleased to announce that it has made a recommended cash offer to acquire all the issued and outstanding shares of Handicare Group AB (STO:HANDI) (“Handicare”) for SEK50.00 per share (the “Offer”), representing a total consideration to Handicare shareholders of SEK2.9 billion (CAD452.3 million) and a total enterprise value (including leases) of SEK3.4 billion (CAD521.1 million). The price of the Offer is final and will not be increased. The terms and conditions of the Offer, which are directed only to shareholders in permitted jurisdictions, have been announced in a separate press release.

The board of Handicare has confirmed to Savaria that it has unanimously decided to recommend that Handicare’s shareholders accept the Offer. The recommendation is supported by an opinion from PWC Sverige according to which the Offer is fair to Handicare’s shareholders from a financial point of view. The largest shareholder of Handicare, Cidron Liberty Systems S.à r.l.(1), holding 62.9% of the shares and votes in Handicare, has informed Savaria that it supports the Offer and that it intends to accept the Offer. Nordic Capital Fund VII will enter into an undertaking to that effect once Handicare has announced its year-end report 2020 on February 4th, 2021, in light of the currently applicable restrictions under the EU Market Abuse Regulation. Furthermore, Nordic Capital Fund VII has undertaken towards Savaria not to sell its shares in Handicare without Savaria’s prior approval. The undertaking to not sell its shares applies until May 31st, 2021 and will terminate upon the entering into of an irrevocable undertaking to accept the Offer. If successful, the Offer is expected to be completed before the end of April 2021.

Handicare provides mobility solutions to increase the independence of physically challenged or elderly people. The company manufactures and sells curved and straight stairlifts, transfer, lifting and repositioning aids, and vehicle accessibility products. Handicare is a global company with sales in approximately 40 countries and has primary manufacturing locations in the United Kingdom, the Netherlands, the United States, and China. For the fiscal year ended December 31, 2020, Handicare reported preliminary sales of EUR205 million (CAD317 million) and adjusted EBITDA⁽²⁾ of EUR24 million (CAD37 million). The successful completion in 2020 of the structural cost reduction initiatives as part of Handicare’s “Lift Up” program contributed to the overall improvement in profitability.

(1) Cidron Liberty Systems S.à r.l. is an entity ultimately controlled by Nordic Capital VII Limited, acting in its capacity as general partner to Nordic Capital VII Alpha, L.P. and Nordic Capital VII Beta, L.P. together with associated investment vehicles ("Nordic Capital Fund VII").
(2) Non-IFRS measures. These measures are defined in the “Non-IFRS Measures” disclaimer below.

STRATEGIC RATIONALE

• Enables Savaria to become a global leader in the accessibility industry, with approximately 2,300 employees across the world, and proforma combined preliminary reported revenues of over CAD671⁽¹⁾ million and adjusted EBITDA of CAD96^(1,2) million.
• Represents a unique opportunity for Savaria to acquire a top stairlift manufacturer, producing over 45,000 stairlifts annually, bringing an innovative new product line to complement its elevator and wheelchair platform lift portfolio.
• Highly complementary product offering provides for significant cross-selling opportunities for both the Accessibility and Patient Handling segments across a combined network of over 1,000 dealers and 30 direct sales offices worldwide.
• Along with its extensive dealer network, the proposed acquisition adds commercial operations in the UK and Netherlands to complement Garaventa Lift’s direct sales footprint in Switzerland, Italy, Germany, Poland, and the Czech Republic, providing a tremendous platform for promoting the Vuelift in Europe.
• Savaria’s Patient Handling business can leverage Handicare’s extensive North American sales and installation network, especially in the acute care setting, which is highly complementary to Span-America’s long-term care focus. This segment would have a proforma combined preliminary revenue base of over CAD140^(1,3) million and a full portfolio of safe patient handling solutions comprising lifts, slings, bed frames and pressure treatment surfaces.
• Enhances Savaria’s footprint by 300,000 sq. ft. through the addition of facilities in the U.S., Canada, the U.K., the Netherlands, and China, representing total square footage of approximately 950,000 sq. ft. of production related capacity.
• Gain efficiencies by leveraging best practices in technology and factory automation through shared resources and joint R&D initiatives, bolstered by a combined R&D staff of over 50 persons.
• Annual savings from the full contribution of Handicare’s “Lift Up” program and the expected synergies from the acquisition are estimated at CAD18⁽⁴⁾ million and expected to be achieved within 24 months of transaction close, with the full impact of the “Lift Up” program to be realized in 2021 and 50% of the synergies to be realized over the first twelve months.

 (1) Preliminary figures reported today for the financial year ended December 31, 2020.
 (2) Non-IFRS measures. These measures are defined in the “Non-IFRS Measures” disclaimer below.
 (3) Percentages based on YTD audited financials as at 30-Sept-2020.
 (4) Forward looking statements. Please refer to the “Forward-Looking Statements” disclaimer below.

FINANCIAL HIGHLIGHTS

• Proposed acquisition of Handicare for an enterprise value (including leases) of SEK3.4 billion (CAD521.1 million) represents a 12.1x multiple of Handicare’s preliminary 2020 adjusted EBITDA^(1,2), including the full anticipated impact of Handicare’s “Lift Up” program⁽³⁾, and 9.6x including the additional benefits of expected transaction’s run-rate synergies.⁽³⁾
• Provided that the Offer is successful, the acquisition will be immediately accretive to Savaria’s pro forma combined 2020 free cash flow per share(2) (including the full anticipated impact of Handicare’s “Lift Up” program⁽³⁾), with accretion increasing to over 20% when including the expected transaction run-rate synergies.⁽³⁾
• Transaction is intended to be funded through a combination of Savaria’s new credit facilities of CAD600 million, including an equity bridge of CAD200 million, and CAD160 million private placements of subscription receipts (at a price of CAD15.00 per subscription receipt).
• Net debt (including leases) to pro forma adjusted EBITDA ratio at closing expected to be at 3.6x^(2,3) (including the full anticipated impact of Handicare’s “Lift Up” program but excluding expected transaction synergies) with the combined company being in a position to generate attractive cash flows while providing liquidity to support operations, and allowing for timely deleveraging.

 (1) Preliminary figures reported today for the financial year ended December 31, 2020.
 (2) Non-IFRS measures. These measures are defined in the “Non-IFRS Measures” disclaimer below.
 (3) Forward looking statements. Please refer to the “Forward-Looking Statements” disclaimer below.

ACQUISITION FINANCING

The acquisition and other related transaction costs are to be funded through a combination of new credit facilities and equity private placements of subscription receipts (together the “Equity Private Placements”) with details as follows:

New Credit Facilities: Savaria has secured CAD600 million in new committed credit facilities (including an equity bridge, of CAD200 million, which is planned to be replaced by the proceeds from the Equity Private Placements). National Bank of Canada has committed to underwrite 100% of the new credit facilities.

Bought Deal Private Placement of Subscription Receipts: Savaria has entered into an agreement with a syndicate of underwriters (the "Underwriters"), with National Bank Financial Inc., Desjardins Capital Markets, Scotiabank, and TD Securities Inc. acting as Co-Bookrunners on behalf of the syndicate. As per the agreement, the Underwriters have undertaken to purchase 6,667,000 subscription receipts (the “Subscription Receipts”) of the Company on a bought deal basis at a price of CAD15.00 per Subscription Receipt (the “Issue Price”) for gross proceeds to Savaria of approximately CAD100 million (the "Equity Issuance"). The Subscription Receipts will be offered by way of private placement to accredited investors and other exempt purchasers in all provinces of Canada.

Concurrent Private Placement of Subscription Receipts to CDPQ: Concurrently with the Equity Issuance of Subscription Receipts, the Caisse de dépôt et placement du Québec (“CDPQ”) has agreed to purchase 4,000,000 Subscription Receipts, at the same Issue Price and terms as the Equity Issuance, for gross proceeds to Savaria of CAD60 million.

Savaria has agreed to grant the Underwriters and CDPQ over-allotment options to purchase, in total, up to an additional 1,600,050 Subscription Receipts at the Issue Price, exercisable in whole or in part, at any time and from time to time on or prior to the date of the closing of the Equity Private Placements. If the over-allotment options are exercised in full, an additional CAD24 million in gross proceeds will be raised pursuant to the Equity Private Placements and the aggregate gross proceeds of the Equity Private Placements will be CAD184 million.

All Subscription Receipts issued will be subject to a four month hold period under applicable securities laws in Canada. The completion of each of the Equity Private Placements is contingent upon the concurrent completion of the other. The completion of the Equity Private Placements is also subject to the approval of the Toronto Stock Exchange and other customary closing conditions and is expected to close on February 19, 2021.

The Subscription Receipts will entitle the holder to receive one common share of Savaria (each a “Common Share”) for no additional consideration and without any further action upon the successful completion of the acquisition of Handicare. The gross proceeds of the Equity Private Placements (less 50% of the underwriting fee and expenses of the Equity Issuance) will be deposited in separate escrows with Computershare Trust Company of Canada to be released to Savaria once the conditions to the Offer have been satisfied. The holders of Subscription Receipts will also receive upon conversion of the Subscription Receipts for Common Shares, in the form of a special interest payment, an amount equal to any dividends declared by Savaria and payable to holders of Common Shares of record as of dates from and including the closing date of the Equity Private Placements to but excluding the date of the conversion of Subscription Receipts into Common Shares. Should the conditions to the Offer not have been satisfied by September 30th, 2021 or the Offer lapse, terminate or be revoked or withdrawn in accordance with its terms prior to September 30th, 2021, the gross proceeds of the Equity Private Placements will be returned to holders of Subscription Receipts with interest.

The Subscription Receipts and the common shares of Savaria have not been, and will not be, registered under the U.S. Securities Act or the securities laws of any state of the United States, and may not be offered, sold or delivered, directly or indirectly, within the United States, except in certain transactions exempt from, or not subject to, the registration requirements of the U.S. Securities Act and applicable state securities laws. This press release does not constitute an offer to sell or a solicitation of an offer to buy any of these securities within the United States.

CONDITIONS OF THE ACQUISITION

Completion of the acquisition of Handicare is conditional upon the Offer being accepted to such extent that Savaria becomes the owner of shares representing more than 90 per cent of the total number of outstanding shares in Handicare and other regulatory and customary conditions. The Offer will not be completed at a lower level of acceptance.

PRELIMINARY RESULTS FOR Q4 AND FULL YEAR 2020

In the context of today’s announcement, Savaria is announcing its preliminary financial results for the fourth quarter and full year 2020.

For the fourth quarter, revenue is expected to be approximately CAD90million, representing a decrease of approximately 6% from the same period in 2019, while adjusted EBITDA⁽¹⁾ is expected to increase by approximately 5% to reach approximately CAD16 million, compared with CAD15 million in the fourth quarter of 2019.

For the full year 2020, revenue is expected to be approximately CAD354 million, representing a decrease of approximately 5% from the full year 2019, while adjusted EBITDA⁽¹⁾ is expected to increase by approximately 7% to reach approximately CAD59 million, compared with CAD56 million for the full year 2019.

Management’s expectations with respect to these preliminary results are based on information available to Savaria as of the date of this release and are subject to the completion of financial closing procedures, final adjustments and other developments that may arise between now and the time Savaria’s quarterly and 2020 year-end consolidated financial statements are finalized. It is possible that final reported results may not be what is currently expected. These preliminary results should be read in conjunction with the “Forward-Looking Statements” section below and is subject to the risks and uncertainties summarized therein, which are more fully described in Savaria’s public disclosure documents. Financial results for the fourth quarter and financial year ended December 31, 2020 will be reported on March 24, 2021.

 (1) Non-IFRS measures. These measures are defined in the “Non-IFRS Measures” disclaimer below.

FINANCIAL AND LEGAL ADVISORS

National Bank Financial Inc. is acting as financial advisor and Hannes Snellman Attorneys Ltd. is acting as legal counsel to Savaria on the acquisition. Blake, Cassels & Graydon LLP is acting as legal counsel to Savaria on the Equity Private Placements while Norton Rose Fulbright Canada LLP is acting as legal counsel to the Underwriters on the Equity Issuance and Lavery, de Billy LLP is acting as legal counsel to CDPQ on its concurrent purchase of Subscription Receipts.

FORWARD-LOOKING STATEMENTS

This press release includes certain statements that are “forward-looking statements” within the meaning of the securities laws of Canada. Any statement in this press release that is not a statement of historical fact may be deemed to be a forward-looking statement. When used in this press release, the words “believe”, “could”, “should”, “intend”, “expect”, “estimate”, “assume” and other similar expressions are generally intended to identify forward-looking statements. Forward-looking statements also include, but are not limited to, the statements regarding the Offer and its expected impact on the Company, the Equity Private Placements and the receipt of regulatory approvals. It is important to know that the forward-looking statements in this document describe the Company’s expectations as at the date hereof, which are not guarantees of future performance of Savaria or its industry and involve known and unknown risks and uncertainties that may cause Savaria’s or the industry’s outlook, actual results, or performance to be materially different from any future results or performance expressed or implied by such statements. The Company’s actual results could be materially different from its expectations if known or unknown risks affect its business, or if its estimates or assumptions turn out to be inaccurate. A change affecting an assumption can also have an impact on other interrelated assumptions, which could increase or diminish the effect of the change. As a result, the Company cannot guarantee that any forward-looking statement will materialize and, accordingly, the reader is cautioned not to place undue reliance on these forward-looking statements. Forward-looking statements do not take into account the effect that transactions or special items announced or occurring after the statements are made may have on the Company’s business. For example, they do not include the effect of sales of assets, monetizations, mergers, acquisitions, other business combinations or transactions, asset write-downs or other charges announced or occurring after forward-looking statements are made.

Unless otherwise required by applicable securities laws, Savaria disclaims any intention or obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing risks and uncertainties include the risks set forth under “Risks and Uncertainties” in Savaria’s latest Annual MD&A as well as other risks detailed from time to time in reports filed by Savaria with securities regulators in Canada.

NON-IFRS MEASURES

The information appearing in this press release has been prepared in accordance with IFRS. However, Savaria uses adjusted EBITDA, EBITDA and free cash flow for analysis purposes to measure its financial performance. These measures have no standardized definitions in accordance with IFRS and are therefore regarded as non-IFRS measures. These measures may therefore not be comparable to similar measures reported by other companies.

• Adjusted EBITDA is defined by Savaria as EBITDA before other net expenses (income) and stock-based compensation expense.
• EBITDA is defined by Savaria as earnings before net finance costs, income tax expense and depreciation and amortizations.
• Free cash flow is defined by Savaria as adjusted EBITDA less taxes, investments in working capital, capital expenditures, lease payments, and interest.

Additional details regarding Savaria’s non-IFRS measures can be found in Savaria’s MD&A, which is posted on Savaria’s website at www.savaria.com, and filed with SEDAR at www.sedar.com. 
Similarly, Handicare uses adjusted EBITDA, EBITDA and Other specified items for analysis purposes to measure its financial performance. These measures have no standardized definitions in accordance with IFRS and are therefore regarded as non-IFRS measures. These measures may therefore not be comparable to similar measures reported by other companies.

• Adjusted EBITDA is defined by Handicare as EBITDA excluding Other specified items.
• EBITDA is defined by Handicare as earnings before interest, tax, depreciation and amortization.
• Other specified items is defined by Handicare as transaction costs, integration costs, restructuring costs, IPO costs, recall costs and other efficiency projects.

Additional details regarding Handicare’s non-IFRS measures can be found in Handicare’s 2019 Year-end report, which is posted on Handicare’s website at www.handicaregroup.com.