Scandic Hotels' Acquisition of Provobis Concluded

On 12 May, Scandic made a public offer to the shareholders of Provobis Hotels & Restauranger in respect of all outstanding shares in Provobis. Provobis' shareholders were offered the choice between a cash payment of SEK 31 per share or a swap of 3 Scandic shares for every 10 Provobis shares. The deal was conditional both on the approval of the competition regulatory authority and on the authorisation by an Extraordinary General Meeting of Scandic of a selective new share issue to the Provobis shareholders. The fact that the competition regulatory authority has decided to approve the acquisition without taking further action, both of these conditions have now been met.

Scandic Hotel's offer was accepted by Provobis shareholders representing 85.1% of the votes and 81% of the share capital by the end of the subscription period on 31 May. A total of 600,000 class A shares and approximately 7.8 million class B shares had been handed in under the cash alternative and a further 7.5 million B shares under the share alternative. Scandic has also bought 3.3 million shares in Provobis on the Stockholm OM Stock Exchange since announcing its offer. As a result, Scandic's total holding now corresponds to 98.6% of the votes and 98.2% of the share capital in Provobis.

The new share issue in conjunction with the acquisition will comprise 2.253.338 Scandic shares corresponding to a dilution of the company's share capital of 3,5%.

Provobis comprises 16 high quality city centre hotels in Sweden. The hotels are located in Stockholm, Gothenburg and Malmo, and a number of the larger university towns and cities. A hotel under construction in Turku, Finland, is also included in the deal. In 1999, Provobis reported a turnover of SEK 877 million and a pre-tax profit of SEK 51 million. Like Scandic, the company is a dedicated hotel operator and the deal consequently involves no actual hotel properties.

"The acquisition of Provobis gives us some very good hotels in Stockholm, Gothenburg, Malmo, Umea and elsewhere," says Roland Nilsson, President and CEO of Scandic Hotels. "The strong demand growth that we have experienced has led to a need for additional hotels, we also gain a first time presence in new but important towns for Scandic. It is also important that we reinforce our position in the domestic market, given the hotel market consolidation we are now seeing in Europe, where the major international hotel chains are growing stronger."

The Provobis hotels will be successively incorporated into the Scandic chain during the autumn and in the early part of next year. The new hotels will gain access to the Scandic brand name and sales programmes as Scandic's IT system is installed in the various hotels. These programmes include Scandic Club, the Scandic loyalty programme, with 370,000 members. The hotels will, simultaneously, retain their local brand names and, thus, be able to further reinforce their strong local position.

The acquisition is expected to generate goodwill depreciation and certain restructuring costs. As anticipated synergy profits and cost cutting measures are realised, however, the acquisition is expected to make a positive contribution to EPS as early as 2001.

Scandic Hotels AB is the leading hotel operator in the Nordic region, with 153 hotels in 10 countries. Scandic's strategy is to be a dedicated hotel operator. Its business mission is "to offer many people the highest value for money when staying in its hotels, during work and leisure."