Open Letter to NattoPharma Shareholders

Fellow NattoPharma shareholders,

I believe the offer from Lesaffre at 30 NOK per NattoPharma share does not compensate shareholders for the profitable growth prospects of NattoPharma as a stand-alone entity.

The offer (i) possibly represents a negligible or no premium to the share price that would have prevailed after the 4Q 2020 report release and (ii) has unusual circumstances. This makes me question why the board of directors and management would accept such an offer.

Potential conflicts of interest with ImmunoPharma AS:

The only, seemingly, ImmunoPharma independent board members are Sjur Thorsheim (61) and Annette Elmqvist (71). Sjur has, according to NattoPharma’s website, a focus of “investing in non-listed companies”. His NattoPharma stake may also represent a smaller part of his total assets.

ImmunoPharma controls Eqology AS and TG Montgomery AS (both vitamin K2 distributors). NattoPharma has had related party transactions with both over the years. All four companies also share the same address: Lilleakerveien 2B, 0283 Oslo, Norway.

• TG Montgomery and NattoPharma seem to be quite intertwined: “TG Montgomery is one of NattoPharma's largest customers of the brand MenaQ7®.” In Norne Securities’ research TG Montgomery seems to be the key Norwegian distribution partner for NattoPharma.
• Eqology (listed on NOTC) notably disclosed that ImmunoPharma’s recent de-listing attempt of Eqology failed in November 2020: “Due to feedback from certain minority shareholders, ImmunoPharma has requested the board of Eqology to cancel the extraordinary general meeting”.
• Concerns regarding potential conflicts of interest seem not to have been apparent for NattoPharma historically. A private placement dated 30 December 2013 stated: “There are no conflicts of interest between the members of the Board of Directors’ and the members of the executive Management’s duties to NattoPharma and their private interests and/or other duties”.
• Lesaffre could, e.g. through the NattoPharma competitor Gnosis, provide ImmunoPharma stakeholders value that cannot accrue to regular NattoPharma shareholders. Potential preferential partner treatment with NattoPharma after a transaction could also sway potentially conflicted parties to accept an otherwise inadequate offer.
• Unfortunately, management did not open up for Q&A in the 4Q 2020 presentation on 17 February 2021, citing “the special situation related to the announcement yesterday”.

Lesaffre’s seemingly low bid:

• Please form your own opinion. In the 3Q 2020 presentation, NattoPharma management maintained their target for 2022 of NOK 350m in sales and 20% adj. EBITDA margin (“representing a conservative estimate based on organic growth in a base case scenario” - 2Q 2020 presentation). The 4Q 2020 presentation did not mention any update of this guiding.
• In the NattoPharma commissioned research by Nordea the listed peers included: Biogaia AB, Chr Hansen Holding A/S, Croda International PLC, Koninklijke DSN NV, Givaudan SA, Novozymes A/S, Probi AB and Symrise AG.
• NattoPharma’s historical financial results and guiding may be impressive but also remember the potential value arising from a new ingredient launch.

If Lesaffre wants to acquire NattoPharma, a potentially highly profitable asset with growth runway, Lesaffre should compensate NattoPharma minority shareholders for its standalone entity prospects. I believe the minimum fair price that would compensate minority shareholders is 38.5 NOK per each NattoPharma share. For any lower offer, I would prefer NattoPharma to remain a standalone entity.

If you are a NattoPharma shareholder and are unsatisfied with the seemingly low-balled bid from Lesaffre, please reach out via email with your full name and number of shares owned.

Best,

Gustaf Håkansson

2021-02-18

Disclaimer:

Gustaf Håkansson is a private investor. This information is provided for informational purposes only and does not constitute investment advice or an offer or solicitation to buy or sell an interest in any security. The information is based on public sources which may prove wrong and should not be relied upon as a basis for any decision.

Gustaf Håkansson may change his views about or his investment positions in any security mentioned in this document at any time, for any reason or no reason. Gustaf Håkansson may buy, sell, or otherwise change the form or substance of any of his investments. Gustaf Håkansson disclaims any obligation to notify the market of any such changes.