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F-Secure Corporation’s Board of Directors has decided to pursue towards the separation of the company’s Consumer Security business into a new listed company and has approved a demerger plan

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F-Secure Corporation, Insider Information, February 17, 2022, at 08.00 am EET

F-Secure Corporation’s Board of Directors has decided to pursue towards the separation of the company’s Consumer Security business into a new listed company and has approved a demerger plan

NOT FOR DISCLOSURE OR DISTRIBUTION IN OR INTO THE UNITED STATES, OR IN ANY OTHER JURISDICTION WHERE DISCLOSURE OR DISTRIBUTION WOULD BE PROHIBITED BY APPLICABLE LAW.

The Board of Directors of F-Secure Corporation (the “Company”) has decided to pursue the separation of the Company’s Consumer Security business through a partial demerger. It is planned that the Consumer Security business will be transferred into a new independent company to be named F-Secure Corporation (“F-Secure”) and to be established in connection with the demerger (the “Demerger”). The Demerger is expected to become effective as of June 30, 2022, and the trading in F-Secure’s shares is expected to commence on the official list of Nasdaq Helsinki Ltd. (“Nasdaq Helsinki”) on July 1, 2022 or as soon as possible thereafter. In connection with the Demerger, the Company will retain its Corporate Security business, which is planned to be renamed and launched by the end of March as WithSecure Corporation (“WithSecure”).

Highlights

  • The Board of Directors has completed a review and evaluation of strategic options, resulting in the decision to pursue a separation of the Company’s Consumer Security business into a new independent company to be named F-Secure Corporation. The existing Company will retain its Corporate Security business, which is planned to be renamed WithSecure Corporation.

  • In the view of the Board of Directors, the Demerger has, among other things, potential for shareholder value creation for both companies and it would enable them to better serve and meet the specific needs of their respective customers and partners.

  • The transaction will be implemented through a partial demerger of the Company, in which shares in the newly established F-Secure will be delivered to the Company’s shareholders. Upon completion, the Company’s shareholders will receive as demerger consideration one (1) share in F-Secure for each share they hold in the Company.

  • The Demerger is subject to approval by an Extraordinary General Meeting of the Company, expected to be held in May 2022. The completion of the Demerger is expected to become effective as of June 30, 2022.

  • The intention is that Pertti Ervi be appointed as the Chairman of the Board of the new Consumer Security company F-Secure and Timo Laaksonen as the President and CEO of F-Secure.

  • The intention is that Risto Siilasmaa will continue as the Chairman of the Board of the Company and that Juhani Hintikka will continue as the President and CEO of the Company.

  • Certain F-Secure shareholders, including Risto Siilasmaa, Mandatum Life Insurance Company Limited, Ilmarinen Mutual Pension Insurance Company, Elo Mutual Pension Insurance Company, Varma Mutual Pension Insurance Company and Kaleva Mutual Insurance Company, holding in the aggregate approximately 50.6 percent of the shares and votes in the Company, have, subject to certain customary conditions, irrevocably undertaken to attend the Company’s Extraordinary General Meeting and vote in favor of the Demerger with all the shares they hold on the date of record.

  • In conjunction with the preparations for the Demerger, the Company is investigating alternatives for an optimal capital structure, one possible alternative being to raise funding by way of a share issue to finance the implementation of the growth strategy relating to its Corporate Security business.

Risto Siilasmaa, Chairman of the Board of the Company, comments:
“The optimal business structure for F-Secure has been under consideration for some time. Now, when both businesses have reached the EUR 100 million revenue milestone, we feel it is the right time for our customers, personnel and shareholders to pursue the separation of F-Secure’s consumer security business. At the same time, we are planning to list it as a separate company on the official list of Nasdaq Helsinki. We believe that the planned demerger has potential for shareholder value creation for both the new consumer security company as well as for the corporate security company.”

Juhani Hintikka, President & CEO of the Company, comments:
“I am really pleased to be able to announce the contemplated demerger of our consumer security business. I believe this would be the right time to pursue this change in our business to create two great companies, which would benefit from their current strong momentum. The demerger would enable us to serve our end customers even better from two separate companies, which would be more focused on the differing needs of our customers. These companies would also have different financial profiles, which would support shareholder value creation in the long term. I believe that the planned demerger would create two even more successful companies and offer new, exciting opportunities also for our employees.”

Transaction overview

The Board of Directors of the Company has decided to pursue the separation of the Company’s Consumer Security business and has today on February 17, 2022 approved a demerger plan according to which all assets and liabilities of the Company’s Consumer Security business shall be transferred to a company to be incorporated in connection with the partial demerger and to be named F-Secure Corporation. The decision is based on the outcome of a review and evaluation of different strategic options, including the possible separation of the Company’s Consumer Security business as an independent listed company. The evaluation process was initiated by the Company’s Board of Directors and announced by the Company in August 2021.

According to the demerger plan, the Company will retain the assets and liabilities related to its corporate business and is planned to be renamed as WithSecure Corporation in connection with the Demerger.

Upon the completion of the Demerger, shareholders of the Company will receive as demerger consideration one (1) share in F-Secure for each share they hold in the Company; that is, the demerger consideration shares will be issued to the Company’s shareholders in proportion to their existing shareholdings with a ratio of 1:1. The Company’s shareholders will retain their shareholdings in WithSecure.

The Demerger is subject to, among other things, approval by a majority of two-thirds of votes cast and shares represented in the Company’s Extraordinary General Meeting. The Company will publish a notice to the Extraordinary General Meeting separately at a later stage. The Demerger is expected to become effective as of June 30, 2022. The Company intends to apply for the shares in F-Secure to be admitted to trading on the official list of Nasdaq Helsinki. The trading in F-Secure’s shares on Nasdaq Helsinki is expected to begin on or about July 1, 2022, or as soon as reasonably possible thereafter. The Demerger will not affect the listing of, or trading in, the shares of the Company.

The demerger plan is attached in its entirety to this stock exchange release and contains information on, among other things, the demerger consideration to the Company’s shareholders, the planned time for the completion of the Demerger and the allocation of the Company’s assets and liabilities between F-Secure and WithSecure (Appendix 1).

Background and strategic rationale for the Demerger

During the past few years, the Company has successfully transformed its operations and today comprises two strong businesses, Consumer Security and Corporate Security, which have good opportunities to grow in their respective main markets. The Board of Directors of the Company expects that the Demerger will strengthen the preconditions for shareholder value creation both in WithSecure as well as in F-Secure.

  • The Demerger will enable WithSecure and F-Secure to better serve and meet the specific needs of their respective customers and partners

  • The Demerger will clarify the strategic focus of F-Secure and WithSecure to capture the growth potential of consumer and corporate security markets

  • The Demerger will accelerate the speed of execution and increase competitiveness of
    F-Secure and WithSecure

  • The Demerger will allow for optimal capital allocation

  • The Demerger will clarify the equity stories with different value creation profiles

Exploring strategic alternatives for optimal capital structure

In conjunction with the preparations for the Demerger, the Company is investigating strategic alternatives for an optimal capital structure, one potential alternative being to raise funding by way of a share issue. The proceeds from the potential share issue would remain with the Company and finance the implementation of the Company’s growth strategy relating to its Corporate Security business.

Certain preliminary unaudited illustrative carve-out financial information of F-Secure

The following certain preliminary, unaudited and illustrative carve-out financial information of F-Secure (Consumer Security Business) has been prepared on a carve-out basis and derived from the Company’s historical consolidated financial statements for the years ended 31 December 2021, 2020 and 2019. For more information on the basis of preparation, sources of financial information, definitions for the alternative performance measures and reconciliations, refer to Appendix 2 of this release.

(EUR million)

2021

2020

2019

Revenue

106.3

100.1

94.8

Adjusted EBITDA

47.4

46.7

40.1

Adjusted EBITDA margin, %

44.6%

46.6%

42.3%

Adjusted EBITA

47.2

46.5

39.9

Adjusted EBITA margin, %

44.4%

46.5%

42.0%

Adjusted EBIT

45.9

44.7

37.7

Adjusted EBIT margin, %

43.2%

44.6%

39.8%

EBIT

43.5

44.7

37.0

Mid-term financial targets for F-Secure

Growth Target: High single digit organic revenue growth.

Profitability Target: After initial growth investments, adjusted EBITA margin of above 42%.

Certain preliminary unaudited illustrative financial information of WithSecure

The following certain preliminary unaudited illustrative financial information of WithSecure is derived from the Company’s consolidated financial statements for the years ended 31 December 2021, 2020 and 2019 to illustrate WithSecure’s continuing operations as if the Demerger would have taken place. For more information on the basis of preparation, sources of financial information, definitions for the alternative performance measures and reconciliations, refer to Appendix 2 of this release.

(EUR million)

2021

2020

2019

Revenue

130.0

120.1

122.5

Adjusted EBITDA

-10.8

-10.9

-16.8

Adjusted EBITDA margin, %

-8.3%

-9.1%

-13.7%

Adjusted EBITA

-17.2

-18.0

-23.2

Adjusted EBITA margin, %

-13.2%

-15.0%

-18.9%

Adjusted EBIT

-20.6

-21.7

-28.0

Adjusted EBIT margin, %

-15.8%

-18.1%

-22.9%

EBIT

-25.7

-24.9

-29.7

Mid-term financial targets for WithSecure

Growth Target: To double revenue organically by the end of 2025.

Profitability Target: Adjusted EBITDA breakeven by the end of 2023 and adjusted EBITDA margin of some 20% by 2025.

Financing arrangements

As is customary, the Company has entered into negotiations with its financiers to obtain the necessary consents, confirmations and waivers for its financing agreements in relation to the completion of the Demerger.

Board of Directors and management of WithSecure and F-Secure

The Annual General Meeting of the Company to be held on March 16, 2022 will elect the members of the Board of Directors of WithSecure. The intention is that Risto Siilasmaa be appointed as the Chairman of the Board of WithSecure and Pertti Ervi will be proposed to continue in the Board of Directors of the Company. Juhani Hintikka will continue as the President and CEO and Tom Jansson as the Chief Financial Officer of WithSecure.

The Extraordinary General Meeting resolving on the Demerger will also elect the members of the Board of Directors of F-Secure for a term commencing upon the completion of the Demerger. The intention is that Pertti Ervi be appointed as the Chairman of the Board of the new consumer security company F-Secure and Risto Siilasmaa be proposed to be elected as a member of the Board. Timo Laaksonen will be the President and CEO and Sari Somerkallio the Chief Financial Officer of F-Secure.

Shareholder support

Certain major F-Secure shareholders, including Risto Siilasmaa, Mandatum Life Insurance Company Limited, Ilmarinen Mutual Pension Insurance Company, Elo Mutual Pension Insurance Company, Varma Mutual Pension Insurance Company and Kaleva Mutual Insurance Company, holding in the aggregate approximately 50.6 per cent of the shares and votes in the Company, have, subject to certain customary conditions, irrevocably undertaken to attend the Company’s Extraordinary General Meeting and vote, with respect to all shares they hold, in favor of the Demerger.

Advance tax ruling

The Company has received an advance tax ruling, which is legally binding, from the Finnish Tax Administration on the tax treatment of the Demerger. According to the advance tax ruling, the Demerger will be treated as a partial demerger as defined in section 52c, subsection 1, paragraph 2 of the Finnish Business Income Tax Act, and therefore, the Demerger is treated as tax neutral, and it does not cause any direct income tax consequences for the Company. The demerger should not cause any direct income tax consequences for the shareholders either (subject to verification by local tax advisor in country of residence of shareholders outside of Finland).

Risks relating to the Demerger

The Demerger involves risks, many of which will be inherent to the Transaction and the respective businesses of WithSecure and F-Secure. After the Demerger, WithSecure and F-Secure may not be able to maintain the market position that they have enjoyed as a single company. Pursuant to the Finnish Companies Act, both WithSecure and F-Secure are jointly liable for the debts of the demerging company that have arisen prior to the registration of the completion of the Demerger.

Risks related to the Demerger and F-Secure as an independent company include but are not limited to the following:

  • There is no certainty that the Demerger will be completed, or the completion may be delayed, and any delay in the completion of the Demerger could result in increased expenses or loss of alternative business opportunities

  • F-Secure may not be able to implement its business organization and its independent strategy in the manner and timeframe currently anticipated, and it may not be able to realize any or all of the anticipated benefits of the Demerger

  • F-Secure’s business operations will be dependent on certain functions provided by WithSecure under the transitional services agreement, and WithSecure’s inability to provide these functions would have a material adverse effect on F-Secure’s business operations

WithSecure will provide more detailed information about the risks related to the planned Demerger in its Q1 2022 Interim Report. F-Secure will provide more detailed information about the risks related to the planned Demerger in its demerger and listing prospectus.

Demerger and listing prospectus

The Company will publish a demerger and listing prospectus, which will contain more detailed information on the contemplated Demerger and F-Secure. The demerger and listing prospectus is expected to be available in May 2022.

Employees

The Company will commence change negotiations in Finland in accordance with the Co-operation Act to negotiate on the planned reorganization that is connected to the contemplated separation of the Company’s Consumer Security business. Similar local employee processes are also commenced in other countries where the plans may lead to potential changes to the employees to the extent required by local legislation. The potential personnel reductions are estimated to be out of 1,700 employees a maximum of 24 employees globally, out of which 9 in Finland. Change negotiations will commence in Finland on February 22, 2022, covering all employees in Finland. The negotiations are expected to be finalized during March 2022.

Subject to the approval of the Extraordinary General Meeting and the completion of the Demerger, all the Company’s employees belonging to the Consumer Security business in Finland at the moment of completion of the Demerger would transfer to the service of F-Secure as existing employees.

Advisors to the Company

Carnegie Investment Bank AB, Finland Branch acts as the sole financial advisor in the partial demerger and the potential share issue. Castrén & Snellman Attorneys Ltd acts as the legal advisor to the Company. Hill+Knowlton Strategies acts as the communication advisor.

Webcast

Risto Siilasmaa (Chairman of the Board), Juhani Hintikka (CEO), Tom Jansson (CFO) and Timo Laaksonen (EVP Consumer Security) will present the plan for the contemplated Demerger in the Company’s 2021 results webcast that is held today, February 17, 2022 at 14:00 EET. The webcast will be held in English and can be accessed at https://f-secure.videosync.fi/2022-02-17-fsirq4/. Questions are to be submitted in written format in the webcast portal.

Analysts following F-Secure are invited to the presentation at the company headquarters, Tammasaarenkatu 7, Helsinki, Finland.

The presentation materials and the webcast recording will be available later on the Company’s website at www.f-secure.com.

Contact information:

Tom Jansson
CFO
+358 40 700 1849

investor-relations@f-secure.com
Demerger website: https://www.f-secure.com/en/investors/demerger

Appendix 1: The demerger plan and its appendices
Appendix 2: Certain preliminary unaudited illustrative financial information of F-Secure and WithSecure

Important notice

This release is not an offer of demerger consideration shares in the United States, and it is not intended for distribution in or into the United States or in any other jurisdiction in which such distribution of this release would be prohibited by applicable law. The demerger consideration shares have not been registered and will not be registered under the U.S. Securities Act of 1933 (the “Securities Act”), and may not be offered, sold or delivered within or into the United States, except pursuant to an applicable exemption of, or in a transaction not subject to, the Securities Act.

This release does not constitute an offer of or an invitation by or on behalf of, F-Secure Corporation, or any other person, to purchase any securities.

This release does not constitute a notice to an Extraordinary General Meeting or a demerger and listing prospectus. Any decision with respect the proposed demerger of F-Secure Corporation should be made solely on the basis of information contained to be contained in the actual notices to the Extraordinary General Meeting of F-Secure Corporation, and the demerger and listing prospectus related to the demerger as well as on the independent analysis of the information contained therein. Investors are encouraged to familiarise themselves with the demerger and listing prospectus for more complete information about the future F-Secure Corporation and its securities and the demerger.

This release includes “forward-looking statements” that are based on present plans, estimates, projections and expectations and are not guarantees of future performance. They are based on certain expectations and assumptions, which, even though they seem to be reasonable at present, may turn out to be incorrect. Shareholders should not rely on these forward-looking statements. Numerous factors may cause the actual results of operations or financial condition of the future entity to differ materially from those expressed or implied in the forward-looking statements. Neither F-Secure Corporation, nor any of its respective affiliates, advisors or representatives, or any other person undertake any obligation to review or confirm or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise after the date of this release.

This release includes estimates relating to the benefits expected to arise from the potential separation of the business operations of F-Secure Corporation’s consumer security business, which have been prepared by F-Secure Corporation and are based on a number of assumptions and judgments. Such estimates present the expected future impact of the potential separation of the business operations of F-Secure Corporation on the future company’s business, financial condition and results of operations. The assumptions relating to the estimated benefits and related costs are inherently uncertain and are subject to a wide variety of significant business, economic and competitive risks and uncertainties that could cause the actual benefits from the potential separation of the business operations of F-Secure Corporation, if any, and related costs to differ materially from the estimates in this release. Further, there can be no certainty that the demerger will be completed in the manner and timeframe described in this release, or at all.

Attachments