A Merger of Equals
Summary of the principal terms of the combination of Axalto (which changed
its name to Gemalto N.V. on June 2, 2006) and Gemplus
A merger of equals
- On December 6, 2005 in Amsterdam, The Netherlands, Axalto Holding N.V.
(“Axalto”) and Gemplus International S.A. (“Gemplus”) entered
into a Combination Agreement (the “Combination Agreement”) governed
by French law pursuant to which the two companies agreed to a merger of
equals.
- The combination between Axalto and Gemplus has created on June 2, 2006
Gemalto, a world leader in the digital security market.
- The Boards of Directors of each company unanimously approved this merger
of equals. The two largest shareholders of Gemplus, the American investment
firm Texas Pacific Group (“TPG”) and certain Quandt family entities
(the “Quandt Entities”), also approved this combination and have also
entered into the Combination Agreement.
- The combination is being completed in two distinct, successive steps:
- an increase in the share capital of Axalto, which changed its name to
Gemalto N.V. on June 2, 2006 (hereinafter referred to as “Gemalto”)
through the contribution in kind of the entirety of the Gemplus shares held
by TPG and the Quandt Entities (approximately 43.44% of the share capital of
Gemplus) (the “Contribution in Kind”), such Contribution in Kind
having been completed on June 2, 2006 upon satisfaction of all conditions
precedent thereto; and
- upon completion of the Contribution in Kind, a
voluntary public offer filed with the French AMF on June 1, 2006 by Gemalto,
for the balance of the Gemplus shares that Gemalto does not already hold (approximately
56,44% of the share capital of Gemplus).
The following is a summary of the principal terms of the combination,
including the structure of the transaction, shareholders approvals, Gemalto’s
governance and management, the conditions precedent to the combination and the
restrictions on third-party offers.
The First Step, completed on June 2, 2006 — Increase in the share capital
of Gemalto through the Contribution in Kind of the entirety of the Gemplus
shares held by TPG and the Quandt Entities (approximately 43,44% of the share
capital of Gemplus)
- As part of the first step of this combination, TPG and the Quandt Family
each respectively signed with Gemalto a contribution agreement under the
terms of which they irrevocably agreed to contribute to Gemalto, all Gemplus
shares that they held, namely 159,305,600 shares representing approximately
25.18% of the share capital of Gemplus and 115,508,200 shares representing
approximately 18.26% of the share capital of Gemplus respectively. The
Contribution in Kind was in exchange for newly issued ordinary shares issued
through an increase in the share capital of Gemalto reserved to TPG and the
Quandt Family, which was carried out at the exchange ratio of 2 Gemalto
shares for 25 Gemplus shares, i.e. an aggregate of 21,985,104 Gemalto shares
representing approximately 35.14% of the share capital of Gemalto
respectively allocated to TPG and the Quandt Family as follows: 12,744,448
Gemalto shares representing approximately 20.37% of the share capital of
Gemalto issued to TPG and 9,240,656 Gemalto shares representing
approximately 14.77% of the share capital of Gemplus issued to the Quandt
Family.
- Immediately prior to the Contribution in Kind, Gemplus made a
distribution of part of its available reserves in an amount of 0.26 euro per
Gemplus share which benefited TPG and the Quandt Entities as shareholders of
Gemplus, as it benefited the other shareholders of Gemplus.
- This Contribution in Kind would still have been completed, even if the
Gemplus Board of Directors had received an unsolicited third-party offer in
the meantime, had determined that the terms of the aforementioned offer were
more favorable than those of the combination with Gemalto and then had
decided to recommend to the Gemplus shareholders that they tender their
Gemplus shares to the aforementioned offer.
The Second Step — Launching by Gemalto of a voluntary public offer for the
balance of the Gemplus shares (approximately 56,44% of the share capital of
Gemplus).
- Having completed the increase of the share capital of Gemalto discussed
above, Gemalto, is offering all the other Gemplus shareholders and holders
of Gemplus American depositary shares to exchange their shares or their
American depositary shares for Gemalto shares at the same exchange ratio as
the Contribution in Kind discussed above, 2 new Gemalto shares for 25
tendered Gemplus shares.
- The filing by Gemalto with the Autorité des marchés financiers (“French
AMF”) of the public exchange offer for the balance of the Gemplus shares
occurred on June 1, 2006. The French AMF has declared the offer acceptable
(recevable) on June 13, 2006, pursuant to decision No. 206C1148.
- On June 30, 2006, the Dutch Authority for the Financial Markets (“Dutch
AFM”) approved the prospectus in connection with the admission to
trading of 21,985,104 Gemalto ordinary shares.
- The joint French language offering document (note d’information)
prepared by Gemalto and Gemplus, relating to the exchange tender offer
initiated by Gemalto for the Gemplus shares, received the visa n° 06-252
from the French AMF on July 6, 2006.
- On July 11, 2006 the exchange tender offer for the shares issued by
Gemplus commenced. The duration of the offer period was from July 11, 2006
to August 14, 2006. Shareholders of Gemplus were able to exchange their
Gemplus shares for Gemalto shares during the entire duration of the exchange
offer.
- On August 25, 2006 Euronext Paris published a notice with the result of
the public exchange offer as announced by the French AMF. Following the
public exchange offer by Gemalto for the Gemplus shares, 324,481,977 Gemplus
shares have been tendered to the offer, representing 94.56% of the share
capital of Gemplus.
- The 25,958,559 new Gemalto shares corresponding to the exchange of
shares have been issued and registered on the Eurolist of Euronext Paris on
August 30, 2006. These new Gemalto shares are added to the 62,563,539
already existing Gemalto shares. The number of Gemalto shares is now
88,522,098.
- Gemalto holds more than two thirds of the share capital of Gemplus as a
result of the public exchange offer, hence it will propose the reopening of
the offer. This reopening will enable the shareholders to tender their
shares in the same conditions.
- On September 8, 2006 Gemalto communicated that the public exchange offer
initiated by Gemalto for the shares issued by Gemplus is reopened from
September 12, 2006 to October 9, 2006 included.
- October 2, 2006: Gemalto announced, at the request of the Luxembourg
Commission de Surveillance du Secteur Financier ("CSSF"), that
the minority shareholders of Gemplus will be entitled to sell their Gemplus
shares to Gemalto, within three months as from the day following the close
of the reopened public exchange offer,
i.e. from October 10, 2006 until January 9, 2007 included, subject to
a possible decision by Gemalto to implement a squeeze-out procedure, in
accordance with Luxembourg law.
- October 9, 2006: As announced by the French AMF on October 6, 2006, the
duration of the reopened public exchange offer by Gemalto for Gemplus shares
will be extended at the request of the CSSF as agreed with the French AMF. The
object of such extension is to allow an independent expert to assess the
evaluation methodology and price of the sell-out. Such sell-out price will be
communicated to the market immediately after completion of the independent
expert's assessment.
- November 2, 2006: As announced by the French AMF on November 2, 2006, the
public exchange offer by Gemalto for Gemplus shares will close on November 8,
2006. Gemplus shareholders will be entitled to exercise their statutory sell-out
right during three months as from the day following the close of the reopened
public exchange offer, i.e., from November 9, 2006 through February 8, 2007, or
such earlier date that Gemalto may determine to implement a mandatory
squeeze-out procedure under applicable Luxembourg law.
- On November 17, 2006, the final results of the reopened public exchange
offer by Gemalto for the shares of Gemplus were announced. Gemalto will hold on
the date of settlement of the reopened offer,
i.e. on November 21, 2006, 96.67% of the share capital and 96.78 of the
voting rights of Gemplus.
The 1,086,546 new Gemalto shares corresponding to
this exchange will be issued and registered on the Eurolist of Euronext Paris on
November 21, 2006. The total number of Gemalto shares outstanding will be
89,608,644.
Shareholder approvals
- The Combination Agreement required each of Gemalto and Gemplus to
hold a shareholders meeting in connection with the combination.
- The Gemalto shareholders meeting, which occurred on January 31,
2006, has approved the combination.
- The Gemplus shareholders meeting occurred on February 28, 2006. The
Gemplus shareholders approved, under certain conditions, the
distribution of reserves discussed above and the restructuring of the
Gemplus Board of Directors. TPG and the Quandt Entities voted in favor
of the resolutions submitted to this shareholders meeting.
Gemalto’s governance and management
- Immediately following the completion of the Contribution in Kind, the
Gemalto Board of Directors, consists of 10 members, as follows:
- the former Chief Executive Officer of Gemplus;
- the Chief Executive Officer of Gemalto;
- four independent directors from the Gemalto Board;
- one independent director from the Gemplus Board;
- two representatives of TPG and one representative of the Quandt Entities.
- an eleventh director will be jointly proposed by Gemalto and Gemplus.
The effective date of appointment of the new directors by the General
Meeting of shareholders held on January 31, 2006 was June 2, 2006.
- The Combination Agreement provided that the following individuals would hold
the following positions with Gemalto:
- Alex Mandl: Executive Chairman*
- Olivier Piou: Chief Executive Officer
- Charles Desmartis: Chief Financial
Officer
- Frans Spaargaren: Chief Administrative Officer
* For a term of 18 months beginning on the date of completion of the
Contribution in Kind of the entirety of the Gemplus shares held by TPG and the
Quandt Entities to Gemalto, which is June 2, 2006, and ending on December 2,
2007.
Conditions precedent
The parties to the Combination Agreement have entered into the agreement on
the combination of Gemalto and Gemplus subject to the satisfaction, by no later
than October 31, 2006, of conditions precedent which include:
- the approval by the Gemalto shareholders meeting of the combination,
which was obtained on January 31, 2006;
- the approval by the Gemplus shareholders meeting, which was obtained on
February 28, 2006, of the distribution of reserves discussed above and the
restructuring of the Gemplus Board of Directors;
- the approval of the combination by the competition authorities,
including the U.S. Department of Justice pursuant to the Hart-Scott-Rodino
Antitrust Improvement Act of 1976, which raised no objection by March 8,
2006, the end of the waiting period; and the Directorate General for
Competition of the European Commission pursuant to Council Regulation (EC)
no. 139/2004 of January 20, 2004 on the control of concentrations between
undertakings who cleared the proposed combination, with specific
undertakings, on May 19, 2006;
- the performance by each of the parties to the Combination Agreement of
their obligations and the reiteration of the representations made under the
terms of the Combination Agreement as of the date of the completion of the
increase of the share capital of Gemalto through the Contribution in Kind of
the entirety of the Gemplus shares held by TPG and the Quandt Entities; and
the absence of a material adverse change affecting, inter alia, the business
or results of operations of Gemalto or Gemplus.
All the conditions precedent described above having been satisfied, the
completion of the Contribution in Kind occurred on June 2, 2006.
Third-party offers
The parties to the Combination Agreement are prohibited from soliciting or
engaging in discussions with third parties concerning other acquisition offers,
except that the Boards of Directors of Gemalto and Gemplus may, to the extent
obligated under applicable law, consider and recommend for approval an
unsolicited third-party offer that the Board of Directors of Gemalto or Gemplus,
as the case may be, determines is superior to the combination. Even if this
would have occurred, the increase of the share capital of Gemalto through the
Contribution in Kind of the entirety of the Gemplus shares held by TPG and the
Quandt Entities and the distribution by Gemplus of reserves in the amount of
0.26 euro per Gemplus share, would still have occurred, as required by the
Combination Agreement.
About Gemalto
Gemalto is a public company with limited liability (naamloze vennootschap)
incorporated in The Netherlands with headquarters in Amsterdam, The Netherlands,
and its address is Koningsgracht Gebouw 1, Joop Geesinkweg 541-542, 1096 AX,
Amsterdam, The Netherlands, registered with the trade register of the Chamber of
Commerce and Industries for Amsterdam under the number 27255026.
Gemalto operates its business and exercises its knowledge base principally in
the area of secure plastic cards. The company is primarily present in two lines
of business which are, on the one hand, the chip card business, including in
particular the products, applications and the related services for the fixed and
mobile telephone industry, the financial services industry as well as
applications for the public sector, and, on the other hand, the point-of-sale
terminals business.
Gemalto’s shares are listed on Euronext Paris S.A.’s Eurolist.
About Gemplus
Gemplus is a joint stock corporation (société anonyme) incorporated in
Luxembourg with headquarters at 46a, avenue J.F. Kennedy, L - 1855 Luxembourg,
listed in the register of business and companies of the Grand Duchy of
Luxembourg under the number B 73 145.
Gemplus also operates its business in the area of secure plastic cards. It is
present in the telecommunications industry, including products, applications and
related services for fixed and mobile telephony, the financial services industry
and the personal identification market and security applications based on chip
card technology.
Gemplus’ shares are listed on Euronext Paris S.A.’s Eurolist, as well as on
the Nasdaq National Market, represented by American depositary shares.
