Mansvell to take over Cimber Sterling and create Nordic regional group

Cimber Sterling has entered into a subscription agreement with Mansvell Enterprises which is subject to certain conditions in order to ensure a long-term strengthening of the capital base and strategic market position of the airline.

Cimber Sterling entered into a non-binding term sheet with Mansvell on 16 June 2011 with a view to finalising an agreement for Mansvell’s subscription of shares in Cimber Sterling against a cash contribution, subject to certain terms and conditions being fulfilled.

The subscription agreement is a result of Cimber Sterling’s negotiations with Mansvell, which have taken place since 16 June.

The completion of Mansvell’s subscription is subject to certain customary conditions being fulfilled or waived including: approval by the general meeting of Cimber Sterling of the capital increase directed at Mansvell; approval of Mansvell as majority shareholder of Cimber Sterling by the Danish Transport Authority; and merger control approval in relevant jurisdictions.

Subject to the terms and conditions being fulfilled or waived, Mansvell will subscribe for 110,500,000 new shares of a nominal value of DKK 1.00 each at a subscription price of DKK 1.50 by way of a cash contribution, which will result in gross proceeds to Cimber Sterling in the amount of approximately DKK 165 million.

Cimber Sterling will convene an extraordinary general meeting to obtain shareholders’ approval of the capital increase. Major shareholders of Cimber Sterling making up approximately 46% of the outstanding share capital have undertaken to vote in favour of the directed share issue.

If all conditions are met, Mansvell will become a new majority shareholder in Cimber Sterling with an ownership of approximately 70% which will trigger an obligation for Mansvell to make a mandatory takeover offer pursuant to applicable Danish law, unless Mansvell applies for and obtains a special dispensation from the Danish Financial Supervisory Authority.

It is Mansvell’s intention to maintain the listing of Cimber Sterling on NASDAQ OMX Copenhagen A/S and it is Mansvell’s wish that as many of Cimber Sterling’s existing shareholders as possible remain shareholders in the company going forward. Major shareholders representing 46% of the outstanding share capital have undertaken not to tender their respective shareholdings in a mandatory tender offer.

Mansvell recently acquired Swedish regional airline Skyways, operating out of Stockholm, and City Airline, operating out of Gothenburg. Besides significantly strengthening the capital base of Cimber Sterling, it is the intention of Mansvell to create a leading Nordic regional airline utilising the synergy effects with the existing Swedish operations and with the investment in Cimber Sterling, Mansvell will conclude a significant step towards this ambition.

The deal came about following the announcement that Cimber Sterling’s recent guidance for the financial year 2010/11 forecast an EBIT loss before special items of DKK 190-200 million. Extraordinary winter costs, higher fuel prices and additional cash tied up with, for example, the Danish Travel Guarantee Fund and Cimber Sterling’s credit card acquirer put an adverse squeeze on Cimber Sterling’s cash resources and left Cimber Sterling very vulnerable to tightened credit and payment terms and increased guarantee obligations. Simultaneously, Cimber was requested to repay a seasonal extension of its credit line of DKK 10 million.

In preparation of the annual report for the financial year 2010/11, it became evident that the equity in the company was lost. As a result, the facility established with GEM Global Yield Fund Limited in March 2011 was insufficient to provide Cimber Sterling with the necessary cash resources.

With unrelenting challenges in the airline industry as well as tightened credit conditions, Cimber’s board resolved that Cimber Sterling would not be able to operate on a standalone basis but needed new equity and cash resources to service its creditors as well as to secure its continued operations and ensure a long-term strengthening of its capital base.

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