Borgestad

Borgestad ASA (”Borgestad”, ”the Group” or ”the Company”) announced on October 7, 2026, that its indirect subsidiary Höganäs Bjuf Fastighets AB (”HBF”) has entered into a share purchase agreement with Bjuv municipality for the sale and leaseback of the two properties in Bjuv, Sweden, where Höganäs Borgestad’s production plant and other refractory production facilities are located. The signing follows the Supreme Administrative Court’s decision on September 1, 2026, not to grant leave to appeal, which rendered Bjuv municipality’s approval of the transaction final and binding and thereby satisfied the condition on which the conditional agreement from October 2023 depended. The properties will be transferred to a newly incorporated, wholly owned subsidiary of HBF prior to completion, with Bjuv municipality acquiring the properties through the shares in that entity. The Group will lease the production facilities back and continue production in line with previous practice. Completion is subject to customary closing conditions and is expected during October 2026.

The properties are valued at SEK 145m in the transaction, with a purchase price of approximately SEK 139m after adjustment for stamp duty of approximately SEK 6m, resulting in a net cash effect for the Group of approximately SEK 139m. The purchase price is settled in cash in three instalments: 60% upon completion, 20% after 12 months and 20% after 24 months. The accounting gain, recognized upon completion, is estimated at approximately SEK 102m. Höganäs Borgestad has agreed with Nordea that SEK 10m of the net proceeds will be used to reduce interest-bearing debt. The leaseback comprises 52,484 sqm in the first year, decreasing to 35,234 sqm two years after completion. No rent is payable for the first 24 months, after which an annual rent of SEK 200 per sqm applies, with a maximum lease term of five years and a unilateral right for HBF to terminate at six months’ notice. The Group has furthermore been granted an option to acquire a separate 30,000 sqm property in the municipality at SEK 150 per sqm.

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Summary

In summary, Analyst Group considers the signing of the Bjuv sale-leaseback agreement to be a major event for Borgestad, both financially and operationally. The transaction releases approximately SEK 139m in cash, corresponding to roughly a third of the Group’s net interest-bearing debt at the end of Q2-26, of which SEK 10m is allocated to debt reduction, leaving the large majority available for distribution upward through the structure, in line with the Company’s communicated intention. At the same time, the leaseback terms enable production to be consolidated into a materially smaller facility with no rent payable for the first 24 months, which adds a company-controlled lever toward the refractory segment’s margin target of at least 10%. The terms are better than Analyst Group had expected on both dimensions, with a materially lower debt repayment than previously indicated and a rent-free transition period that was not part of our assumptions. As the transaction has not been included in our estimates, Analyst Group considers the announcement to represent clear upside relative to our published forecasts and, in our view, motivates a higher valuation of Borgestad’s shares.

Analyst Group’s View on the Transaction

The signing concludes a legal process that has run for nearly three years, from the conditional agreement in October 2023 through the revocation by the Administrative Court in Malmö, the reversal The signing concludes a legal process that has run for three years, from the conditional agreement in October 2023 through the revocation by the Administrative Court in Malmö, the reversal by the Administrative Court of Appeal and the Supreme Administrative Court’s refusal of leave to appeal. Throughout the process, the Company held the original terms, including the SEK 145m property valuation, through three court instances and an extended long stop date, and the agreement now executed matches the structure communicated from the outset. With completion expected within the current month, the uncertainty that has weighed on the transaction since the municipal approval was challenged in late 2023 has been removed.

From a capital allocation perspective, the terms exceed what the Company had previously communicated. The Q2-26 report indicated that Nordea debt of NOK 39.8m was to be repaid upon completion, whereas the agreement now reached limits debt reduction to SEK 10m, leaving approximately SEK 129m available for distribution upward through the structure in line with the Company’s stated principle of returning surplus liquidity while keeping the holding company effectively free of interest-bearing debt. Gross proceeds correspond to approximately SEK 4.0 per Borgestad share, and given Borgestad’s 69.7% ownership of Höganäs Borgestad Holding AB, the share attributable to Borgestad’s shareholders after minority interests amounts to approximately SEK 97m, or roughly SEK 2.8 per share, before any present-value adjustment of the deferred 40% of the purchase price. Set against total capital returns of NOK 24.5m in H1-26 and an dividend of NOK 0.50 per share for 2025, the release is significant in scale, and the instalment structure provides a predictable liquidity profile through 2028.

The operational dimension is, in Analyst Group’s view, of at least equal importance. The leased area declines from 52,484 sqm to 35,234 sqm within two years of completion, confirming the consolidation of production into a smaller, more purpose-built facility that the Company has communicated as a step change for the refractory segment’s cost base through lower maintenance and property costs and improved operational flows. The 24-month rent-free period means that the consolidation can be executed without any property cost burden during the transition, while the subsequent rent of approximately SEK 7.0m per year on the reduced area, combined with the six-month termination right, provides flexibility rather than a long-term commitment. The option on a separate 30,000 sqm property at SEK 150 per sqm, corresponding to approximately SEK 4.5m, adds a low-cost path toward a future owned facility should the Company choose that route. With the refractory EBIT margin having reached 12.7% in Q2-26 and 7.0% on an adjusted LTM basis, the Bjuv consolidation complements the cost program and the cyclical recovery from 2027 as a further driver toward the mid-term target of at least 10%.

The cash proceeds, the reduced debt repayment and the rent-free period represent value drivers that have not been captured in our forecasts, and the combination of a sizeable capital release and a strengthened margin outlook supports, in Analyst Group’s view, a higher valuation of Borgestad’s shares than before the announcement.