Information on the Target

The Terranor Group AB (publ), listed on the Nasdaq First North Growth Market in Stockholm, is a prominent provider of operational and maintenance services with projected revenues of approximately EUR 285 million (SEK 3,147 million) for the year 2024. This company has established itself as a leading player in the field since being carved out by Mutares in 2020/2021 and has successfully implemented a turnaround strategy that has positioned it as a key service provider in the Nordic region.

Terranor's service offerings encompass winter services like snow removal and anti-slip solutions, alongside summer services including repair and asphalt work. The company's diverse portfolio also includes landscape maintenance, road safety services, and light infrastructure projects. With a strong customer base and a robust order portfolio, Terranor is well-positioned for continued growth in the sector.

Industry Overview in the Target’s Country

The Nordic countries, particularly Sweden, Finland, and Denmark, are witnessing steady demand in the road infrastructure services industry. Various factors underpin this trend, such as urbanization and increasing traffic volumes, which require ongoing investment in road maintenance and improvements. Moreover, the complexity of modern road construction projects has led to the emergence of specialized providers, bolstering the industry's growth.

Sustainability concerns are increasingly shaping the industry's direction, with stakeholders demanding higher safety and environmental standards. This has resulted in regulatory frameworks that encourage infrastructure upkeep and enhancements, further stimulating the market. As a result, companies like Terranor, which focus on efficient operations and sustainability, are strategically positioned to benefit from these developments.

Furthermore, local governmental initiatives to rectify maintenance backlogs have created additional opportunities for firms specializing in infrastructure services. Governments are focusing more on collaborative projects with private companies, which enhances the potential for long-term growth as public and private sectors unite to improve transportation networks.

The competitive landscape of road maintenance services in the Nordic region has grown increasingly dynamic. New entrants challenge established firms, but the combination of expertise, reliability, and a diverse service offering can serve as vital differentiators in acquiring and retaining long-term contracts.

The Rationale Behind the Deal

The successful IPO of Terranor is seen as a significant step for Mutares to highlight its value creation model and attract a broader investor base to participate in the growth of the company. By offering 25% of its stake while retaining 75%, Mutares demonstrates its confidence in Terranor's future performance and growth potential. The capital raised, approximately SEK 100 million (around EUR 9 million), will provide essential funds for further expanding Terranor's service capabilities and reach.

This dual approach of maintaining majority ownership while opening to public investment reflects an overarching strategy to balance private control with increased public accountability and resources, contributing to sustainable growth in the infrastructure sector.

Information about the Investor

Mutares SE & Co. KGaA is a German investment company renowned for its focus on acquiring and transitioning underperforming companies into successful entities. Since 2008, Mutares has specialized in turnaround management, successfully repositioning targets to establish them as leaders in their respective markets. With an extensive experience in the infrastructure sector through prior investments, Mutares brings operational expertise and a strategic vision to its portfolio companies, including Terranor.

The company has earned a reputation for adding significant value to its invested entities, and its commitment to the Nordic market further underscores its plans for growth and sustainability in infrastructure services. Mutares' leadership, particularly under CIO Johannes Laumann, emphasizes a strong belief in continued government support for infrastructure investments, extending Terranor’s growth trajectory.

View of Dealert

The IPO of Terranor presents a promising investment opportunity, especially given the consistent growth in the Nordic infrastructure service market. The company's strong financial performance, including an impressive CAGR of 21% from 2022 through 2024, signals robust operational health and effective management. Holding a majority share with strategic plans for expansion suggests that Mutares will effectively leverage Terranor’s strengths, leading to potential returns for investors.

Moreover, the growing demand for infrastructure investments and the government's commitment to addressing maintenance backlogs creates a conducive environment for sustained growth. These factors signal a healthy outlook for Terranor, making the IPO not only timely but strategically aligned with broader market trends.

Additionally, the cautious approach taken by Mutares through lock-up agreements reinforces investor confidence in the company’s stability and strategic direction. By limiting immediate stock sales and prioritizing long-term value, Mutares showcases its commitment to Terranor's future success.

Overall, the continuing expansion of services, strong management, and favorable market conditions indicate that this investment could yield significant value both for Mutares and public investors in the long term.

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