Kvika banki hf.

On 25 November last year, the Boards of Directors of Kvika banki hf. (Kvika), TM hf. (TM) and Lykill fjármögnun hf. (Lykill) agreed to merge the companies.

Today, the companies' Boards completed and signed the proposed merger plan. The Boards expect this merger to prove beneficial to the companies and their shareholders.

The following provisos in the original merger agreement of 25 November 2020 are yet to be satisfied:

1. that the Financial Supervisory Authority of the Central Bank of Iceland (FME) give its consent for the merger, cf. Art. 106 of the Act on Financial Undertakings, No. 161/2002;
2. that FME grant its approval for Kvika to own a qualifying holding in TM tryggingar hf, TM líftryggingar hf and Íslensk endurtrygging hf., cf.  Art. 58 of the Act on Insurance Activities, No. 100/2016;
3. that the Competition Authority will not invalidate the merger or impose onerous conditions, in the opinion of the merging parties, cf. Chapter V of the Competition Act, No. 44/ 2005; and
4. that shareholders approve the merger, as provided for in Art. 93 of the Public Limited Companies Act, No. 2/1995, at legally convened shareholders' meetings of Kvika, TM and Lykill.

According to the merger plan, TM's shareholders will receive, in consideration for their shares in TM, 2,509,934,076 shares in Kvika, which will be paid for by issuing new share capital.

The companies' Boards of Directors consider it realistic to expect that the provisos in the merger agreement will be satisfied and that the companies will be merged at the end of Q1 2021.

As previously disclosed, the companies' Boards consider it realistic to expect that this merger could achieve cost synergies of ISK 1,200-1,500 million annually, excluding transaction and one-off costs. Other opportunities for synergies are expected; however, they will require further analysis following the merger. The companies' Boards also consider it realistic to expect the merger will enable the companies to increase their income, but no financial assessment has been made of these opportunities.

The intention is to present the merger for approval by shareholders’ meetings of the companies at the end of March. Merger documents will be made available on the companies’ websites no later than one month before the shareholders' meetings, in accordance with the fifth paragraph of Art. 124 of the Public Limited Companies Act, No. 2/1995. The meetings themselves will be announced subsequently.