The Swedish Ministry of Enterprise, Energy & Communications, The Danish Ministry of Transport and CVC Capital Partners (“CVC”) have signed a letter of intent regarding a merger between Posten AB (“Posten”) and Post Danmark A/S (“Post Danmark”). The rationale for the merger is to create a strong and more competitive new company able to meet the increasing challenges in the postal market. Furthermore, the merger will allow for the continued provision of a first class mail and parcel service in both countries to both business customers and households.

The agreement envisages the merger of Posten and Post Danmark through the creation of a new parent company which will be jointly owned by the Swedish state, the Danish state, CVC and the employees. The merged group will have annual revenue of approximately SEK 45 billion and more than 50,000 employees.

Fritz H. Schur, currently Chairman of Post Danmark, will be appointed Chairman of the new company. Erik Olsson, currently the CEO of Posten, will assume the position as CEO of the new company. This new company will be Swedish and the headquarters will be located in Stockholm. The Swedish state together with the employees of Posten will own 60 percent of the new company and the Danish state together with the employees of Post Danmark and CVC will own 40 percent. As part of the agreement, Posten will distribute an extraordinary dividend of SEK 1,400 million to the Swedish state. In all other respects, the influence of the owners is balanced in such a way that the Swedish state will have voting rights equal to those of the Danish state and CVC together.

The new company will be organised along specialised business divisions, similar to the way in which Posten has been organised since January 1, 2007. The traditional postal business in each respective country will continue to be operated as national entities adhering to national regulations and using the same brands as today (”Posten” and ”Post Danmark”). The logistics businesses will be joined under one division and under an own brand. The information logistics and graphical business will be joined under the Strålfors brand in the new company. Beyond the four main businesses, the new company will comprise group functions and one unit for shared services. Post Danmark’s 25% ownership in De Post - La Poste (Belgium) will also be part of the new company.

"Both Posten and Post Danmark are well managed businesses. By establishing a new company that acts on several markets offering a more competitive portfolio of services, we create a Nordic player with the right prerequisites to fulfill each respective service obligation with the quality we all expect. Business customers in both countries will have access to a business partner with a larger capacity to accommodate increased requirements on communication and logistic solutions within, and outside, the Nordic area," says Fritz H. Schur the Chairman of the new company.

The postal and logistics markets are changing rapidly all across the world. When national postal markets are deregulated, competition increases within the most attractive segments and sub-markets. In this environment, small, national players struggle to reach the needed volumes to compete with global players, especially as relates to their ability to support the increased costs of developing the required IT solutions. The deregulation decision taken by the EU will lead to consolidation of both traditional postal as well as logistic businesses.

The increasing internationalisation entails an increased demand of cross-border distribution solutions. Simultaneously, technological development leads to an increase in electronic communication which in turn means a decrease in mail volumes, so called electronic substitution. For businesses operating in small national markets, with limited financial strength and “reach”, the need to cooperate with international partners increases – primarily within logistics but also within traditional postal operations.

The merger between Posten and Post Danmark provides significant value creating synergies for the new company and its owners. In addition to cost synergies within IT, sourcing and administration/shared services, estimated to be SEK 1 billion annually at full run-rate, the merger is expected to generate significant operating and financial synergies.

-“We operate in a market exposed to rapid change. The competition from international players increases when postal markets are deregulated and electronic communication challenges traditional mail operations. The merger between Posten and Post Danmark constitutes a proactive step in the right direction in order to meet these challenges. A combined company with strongly rooted national operations, creates the foundation for increased competitive strength across all business divisions”, says Erik Olsson the CEO of the new company.

The completion of the signed letter of intent is subject to required approvals by the parliaments in Sweden and Denmark respectively, signing of definitive agreements and completion of due diligence. The merger is also dependent on approval by relevant regulatory authorities. The ambition of all parties is to complete the merger by the end of 2008.

SEB Enskilda has acted as Posten’s financial advisor, while Nordea Corporate Finance has acted as Post Danmark’s financial advisor in the transaction. Goldman Sachs International has acted as financial advisor to the Swedish government.