Velvet Cichlid announces a cash offer to the shareholders of Sleep Cycle AB

The Offer is not being made, and this press release may not be distributed, directly or indirectly, in or into, nor will any tender of shares be accepted from or on behalf of holders in, the United States, Australia, Canada, Hong Kong, Japan, New Zealand or South Africa or any other jurisdiction in which the making of the Offer, the distribution of this press release or the acceptance of any tender of shares would contravene applicable laws or regulations or require further offer documents, filings or other measures in addition to those required under Swedish law. Other restrictions apply. Please see "Important notice" at the end of this press release.

STOCKHOLM, Dec. 19, 2022 /PRNewswire/ -- Velvet Cichlid AB^[1] (the "Bidder"), a company controlled by a consortium consisting of GLA Invest SA, MCGA AB, h265 AB and Petter Wallin (the "Consortium"), today announces a cash offer to the shareholders of Sleep Cycle AB (publ) ("Sleep Cycle" or the "Company"), (the "Offer"). Sleep Cycle's shares are admitted to trading on Nasdaq Stockholm, Small Cap. The Bidder offers SEK 42.50 in cash per share in Sleep Cycle (the "Offer Price").

• The Offer Price represents a premium of approximately^[2]:

o33.6 percent compared to the closing price of SEK 31.8 for Sleep Cycle's share on Nasdaq Stockholm on 16 December 2022, which was the last trading day prior to the announcement of the Offer; and

o37.3 percent compared to the volume-weighted average share price of Sleep Cycle's share on Nasdaq Stockholm during the last 30 trading days prior to the announcement of the Offer

• The Bidder owns no shares in Sleep Cycle. The Consortium, however, holds shares in Sleep Cycle amounting to approximately 68.2 percent of the shares in the Company (the "Consortium's Existing Holdings"), which will be contributed to the Bidder in connection with the completion of the Offer.
• Handelsbanken Microcap Sverige, Cicero Fonder and Evli Swedish Small Cap, with a combined shareholding of approximately 8.6 percent of the shares in Sleep Cycle, have irrevocably undertaken to accept the Offer (the "Irrevocable Undertakings"). Furthermore, a number of additional shareholders including Skandia Fonder, Tredje AP-fonden and E. Öhman J:or AB, with a combined shareholding of approximately 8.8 percent of the shares in Sleep Cycle, have declared that they are positive to the Offer.
• In aggregate, the Consortium's Existing Holdings together with the Irrevocable Undertakings and the positive declarations regarding the Offer amount to a total of approximately 85.6 percent of the shares in Sleep Cycle.
• The acceptance period for the Offer is expected to commence around 20 December 2022 and expire around 31 January 2023. Settlement is expected to take place around 6 February 2023.

"I founded Sleep Cycle in 2009 with the purpose of empowering people to improve their health through better sleeping habits. Since then, Sleep Cycle has grown fast, and today we have over 2 million active users in more than 150 countries. This journey has been a great source of professional and personal pride for me, and the journey reached a pitstop when the company went public in 2021, which was an important step in the company's development. Today, the world is radically different, and we now live in a turbulent environment with great economic uncertainty that will impact the company's ability to grow. In order to achieve the growth and profitability targets that the company has set, and to maintain Sleep Cycle's leading market position in a highly fragmented market, long-term investments will need to be made in product development and market expansion. Our assessment is therefore that these investments are better made in a private environment", Maciej Drejak, founder of Sleep Cycle.

Background to and reasons for the Offer

With over two million active users in more than 150 countries worldwide, Sleep Cycle is one of the world's most used sleep services and the leading mobile sleep application on the market. In June 2021, Sleep Cycle conducted an initial public offering on Nasdaq Stockholm. GLA Invest SA, MCGA AB and h265 AB, all part of the Consortium, have since remained the largest shareholders and have continued to support Sleep Cycle's development in a listed environment. However, market conditions have changed dramatically since the Company's listing. The Consortium believes that the challenging economic outlook, with rising interest rates combined with high inflation and a market that acts more short-term, will impose more strenuous conditions on Sleep Cycle's operations. For the Company to maintain its leading position in a highly fragmented market, and to achieve its ambitious growth targets, continuous investments need to be made with respect to market and product development. As such, the Consortium believes that these investments are more easily provided in a private context.

The Consortium holds the utmost respect and regard for the Company's management and employees and considers them to be an important asset for Sleep Cycle going forward. Completion of the Offer is not expected to entail any significant changes regarding the Company's employees and management (including terms of employment) nor for the existing organization and operations, including effects on the employment rate and the sites where the Company currently conducts business.

The Offer

The Bidder offers SEK 42.50 in cash per share in Sleep Cycle.^[3] 

The Offer Price represents a premium of approximately:

• 33.6 percent compared to the closing price of SEK 31.8 for Sleep Cycle's share on Nasdaq Stockholm on 16 December 2022, which was the last trading day prior to the announcement of the Offer; and
• 37.3 percent compared to the volume-weighted average share price of Sleep Cycle's share on Nasdaq Stockholm during the last 30 trading days prior to the announcement of the Offer.

The total Offer value for all shares in Sleep Cycle amounts to SEK 862 million.^[4]

No commission will be charged in connection with the Offer.

The Bidder's and Consortium's shareholding in Sleep Cycle

As of the date of the announcement of the Offer, the Bidder owns no shares in Sleep Cycle. The Consortium's Existing Holdings, however, amounts to 13,827,875 shares (corresponding to approximately 68.2 percent of the shares in Sleep Cycle).^[5] The Consortium's Existing Holdings will be contributed to the Bidder in connection with the completion of the Offer.

In addition, the Irrevocable Undertakings from Handelsbanken Microcap Sverige, Cicero Fonder and Evli Swedish Small Cap to accept the Offer, amount to 1,746,543 shares (corresponding to approximately 8.6 percent of the shares in Sleep Cycle). The Irrevocable Undertakings, which are unconditional, will terminate if the Offer is not declared unconditional on or before 30 April 2023.^[6] Furthermore, a number of additional shareholders including Skandia Fonder, Tredje AP-fonden and E. Öhman J:or AB, with a combined shareholding of approximately 8.8 percent of the shares in Sleep Cycle, have declared that they are positive to the Offer.

The Consortium's Existing Holdings together with the Irrevocable Undertakings and the positive declarations regarding the Offer amount to a total of 17,306,792 shares (corresponding to approximately 85.6 percent of the shares in Sleep Cycle).

Apart from the Consortium's Existing Holdings and the Irrevocable Undertakings, neither the Bidder nor the Consortium currently holds or control any shares in Sleep Cycle or other financial instruments which give the Bidder or the Consortium a financial exposure equivalent to a shareholding in Sleep Cycle. Apart from the Consortium's Existing Holdings and the Irrevocable Undertakings, neither the Bidder nor the Consortium have acquired or entered into any agreements on the acquisition of any shares in Sleep Cycle during the last six months prior to the announcement of the Offer.

The Bidder may acquire, or enter into agreements to acquire, shares in Sleep Cycle (or any securities that are convertible into, exchangeable for or exercisable for such shares) outside the Offer, but in any event, at a price per share not exceeding the Offer Price. Any acquisitions made or agreed will be in accordance with Swedish law and Nasdaq Stockholm's Takeover Rules (the "Takeover Rules") and will be disclosed in accordance with applicable rules.

Conditions to the Offer

Completion of the Offer is conditional upon:

  i.  the Offer being accepted to such an extent that the Bidder becomes the owner of shares representing more than 90 percent of the total number of shares in Sleep Cycle (on a fully diluted basis);

  ii.  with respect to the Offer and the acquisition of Sleep Cycle, receipt of all necessary regulatory, governmental or similar clearances, approvals and decisions, in each case on terms which, in the Bidder's opinion, are acceptable;

  iii.  no circumstances having occurred which could have a material adverse effect or could reasonably be expected to have a material adverse effect on Sleep Cycle's financial position or operation, including Sleep Cycle's sales, results, liquidity, equity ratio, equity or assets;

  iv.  neither the Offer nor the acquisition of Sleep Cycle being rendered wholly or partially impossible or significantly impeded as a result of legislation or other regulation, any decision of a court or public authority, or any similar circumstance;

  v.  Sleep Cycle not taking any action that is likely to impair the prerequisites for making or completing the Offer;

  vi.  no information made public by Sleep Cycle (or in any other way disclosed by Sleep Cycle to the Bidder) being materially inaccurate, incomplete or misleading, and Sleep Cycle having made public all information which should have been made public; and

  vii.  no other party announcing an offer to acquire shares in Sleep Cycle on terms that are more favorable to the shareholders of Sleep Cycle than the Offer.

The Bidder reserves the right to withdraw the Offer in the event that it becomes clear that any of the above conditions is not satisfied or cannot be satisfied. However, with regard to conditions ii-vii, the Offer may only be withdrawn where the non-satisfaction of such condition is of material importance to the Bidder's acquisition of Sleep Cycle or if otherwise approved by the Swedish Securities Council (Sw. Aktiemarknadsnämnden). 

The Bidder reserves the right to waive, in whole or in part, one, several or all of the conditions set out above, including, with respect to condition i above, to complete the Offer at a lower level of acceptance.

Financing

The Offer is not subject to any financing condition. The Offer is fully financed by funds already available to the Bidder as well as a credit facility secured for the intended transaction. The conditions to drawdown under such credit facilities are customary for facilities of this type.

Treatment of holders of warrants

Certain employees hold warrants in Sleep Cycle issued within the Company's incentive programs. Such financial instruments are not included in the Offer. However, the Bidder will procure that the owners of such warrants in Sleep Cycle will receive reasonable treatment.

The Bidder and the Consortium in brief

Velvet Cichlid AB is a newly formed Swedish private limited liability company (Reg. No. 559407-1721, domiciled in Stockholm), owned by MCGA AB and which by completion of the Offer will be owned by the Consortium, consisting of GLA Invest SA^[7], MCGA AB, h265 AB^[8] and Petter Wallin. Velvet Cichlid AB was formed on 10 November 2022 and registered with the Swedish Companies Registration Office on 22 November 2022. Velvet Cichlid AB has never conducted and at present does not conduct any business. Its sole business purpose is to make the Offer.

Sleep Cycle in brief

Sleep Cycle is the world's leading app for sleep analysis and one of the leading services for improved sleep quality. Sleep Cycle's mission is to improve global health by helping people worldwide sleep better. Since its launch in 2009, Sleep Cycle has helped millions to better understand their sleeping habits and improve their sleep quality. The Sleep Cycle app helps users to fall asleep easier, monitor and analyze their sleep, wakes the user in a light sleep phase and provides the user with insight into how to optimize the sleep quality. Sleep Cycle is one of the world's most comprehensive sources of sleep data, contributing to sleep research and reporting worldwide. The Company's shares are listed on Nasdaq Stockholm under the ticker SLEEP. Sleep Cycle's head office is located in Gothenburg. For further information about Sleep Cycle, please visit www.sleepcycle.com.

Preliminary timetable^[9]

Publication of the offer document  20 December 2022

Acceptance period  20 December 2022 – 31 January 2023

Commencement of settlement  6 February 2023

The Bidder reserves the right to extend the acceptance period for the Offer and to postpone the settlement date.

Approvals from authorities

The completion of the Offer is conditional upon, inter alia, all necessary clearances, approvals, decisions and other actions from authorities or similar, being obtained, in each case on terms which, in the Bidder's opinion, are acceptable. However, it is the Bidder's assessment that the transaction does not require any approvals from authorities.

Compulsory acquisition and delisting

In the event that the Bidder, whether in connection with the Offer or otherwise, becomes the owner of shares representing more than 90 percent of the shares in Sleep Cycle, the Bidder intends to commence a compulsory acquisition procedure under the Swedish Companies Act to acquire all remaining shares in Sleep Cycle. In connection therewith, the Bidder intends to promote a delisting of the Sleep Cycle shares from Nasdaq Stockholm.

Applicable law and disputes

The Offer, as well as any agreements entered into between the Bidder and the shareholders of Sleep Cycle as a result of the Offer, shall be governed by and construed in accordance with the laws of Sweden. The Takeover Rules, and the Swedish Securities Council's rulings regarding the interpretation and application of the Takeover Rules, apply in relation to the Offer. In accordance with the Swedish Takeover Act, the Bidder has undertaken towards Nasdaq Stockholm to comply with the Takeover Rules and to submit to any sanctions imposed by Nasdaq Stockholm upon breach of the Takeover Rules. The courts of Sweden shall have exclusive jurisdiction over any dispute arising out of or in connection with the Offer and the City Court of Stockholm shall be the court of first instance.

Advisers

The Bidder and the Consortium has retained Carnegie Investment Bank AB (publ) as financial adviser and Advokatfirman Vinge as legal adviser.

All information regarding the Bidder's Offer to Sleep Cycle's shareholders is available on the following website: www.better-sleep.se.

Further information

Alexandra Barganowski, Fogel & Partners
Phone: +46 720832750
Email: alexandra.barganowski@fogelpartners.se

This press release was submitted for publication on 19 December 2022 at 08:40 CET.

Important notice

This is a translation of the original Swedish language press release. In the event of discrepancies, the original Swedish wording shall prevail.

The distribution of this press release and any related offer documentation in certain jurisdictions may be restricted or affected by the laws of such jurisdictions. Accordingly, copies of this communication are not being, and must not be, mailed or otherwise forwarded, distributed or sent in, into or from any such jurisdiction. Therefore, persons who receive this communication (including, without limitation, nominees, trustees and custodians) and are subject to the laws of any such jurisdiction will need to inform themselves about, and observe, any applicable restrictions or requirements. Any failure to do so may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, the Bidder disclaims any responsibility or liability for the violations of any such restrictions by any person.

The Offer is not being made, and this press release may not be distributed, directly or indirectly, in or into, nor will any tender of shares be accepted from or on behalf of holders in, the United States, Australia, Canada, Hong Kong, Japan, New Zealand, South Africa or the United States or any other jurisdiction in which the making of the Offer, the distribution of this press release or the acceptance of any tender of shares would contravene applicable laws or regulations or require further offer documents, filings or other measures in addition to those required under Swedish law. Shareholders not resident in Sweden who wish to accept the Offer must make inquiries concerning applicable legislation and possible tax consequences.

The Offer and the information, and documentation made available through this press release have not been prepared by, and not approved by, an "authorized person" as referred to in Section 21 of the UK Financial Services and Markets Act 2000 ("FSMA"). Accordingly, the information and documents made available through this press release may not be distributed to, or forwarded to, the public in the UK. Dissemination of information and documents made available through this press release is exempt from the restrictions on financial marketing in Article 21 of the FSMA on the basis that it is a communication by or on behalf of a legal person relating to a transaction for the acquisition of the day-to-day control of the business of the legal entity, or to acquire 50 percent or more of the voting shares in a legal entity, in accordance with Article 62 of the FSMA (Financial Promotion Order 2005).

Statements in this press release relating to future status or circumstances, including statements regarding future performance, growth and other trend projections and the other benefits of the Offer, are forward-looking statements. These statements may generally, but not always, be identified by the use of words such as "anticipates", "intends", "expects", "believes", or similar expressions. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There can be no assurance that actual results will not differ materially from those expressed or implied by these forward-looking statements due to many factors, many of which are outside the control of the Bidder and Sleep Cycle. Any such forward-looking statements speak only as of the date on which they are made, and the Bidder has no obligation (and undertakes no such obligation) to update or revise any of them, whether as a result of new information, future events or otherwise, except for in accordance with applicable laws and regulations.

Carnegie Investment Bank AB (publ) is not responsible to anyone other than the Bidder and the Consortium for advice in connection with the Offer.

^[1] Pending name change from Goldcup 32046 AB.

^[2] Source for Sleep Cycle's share prices: Nasdaq Stockholm.

^[3] If Sleep Cycle pays dividends or makes any other distributions to its shareholders with a record date occurring prior to the settlement of the Offer, or issues new shares (or takes any similar corporate action) resulting in a reduction of the value per share in Sleep Cycle prior to the settlement of the Offer, the Offer consideration will be reduced correspondingly. The Bidder reserves the right to determine whether this price adjustment mechanism or condition v to the completion of the Offer shall be invoked.

^[4] Based on 20,277,563 shares, being the total number of shares in Sleep Cycle. There is only one class of shares in Sleep Cycle. Each share entitles to one vote.

^[5] Divided between the Consortium members as follows: GLA Invest SA: 4,609,291, MCGA AB: 4,263,595, h265 AB: 4,263,595, Petter Wallin: 691,394.

^[6] The Irrevocable Undertakings also contain an option for the Bidder to acquire the shares subject to the undertakings, at any time during the acceptance period, at the price in the Offer.

^[7] GLA Invest SA is a Luxembourgian societé anonyme (Reg. No. B143 528, domiciled in Luxembourg) owned by Pierre Siri.

^[8] MCGA AB is a Swedish private limited liability company (Reg. No. 559283-9483, domiciled in Askim, Sweden) and h265 AB is a Swedish private limited liability company (Reg. No. 556866-9278, domiciled in Askim, Sweden), both owned by Maciek Drejak.

^[9] All dates are preliminary and may be subject to change.

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