AS EESTI EHITUS (Incorporated with Limited Liability in the Republic of Estonia) ______Offer Price Range EEK 82.50 – 97.80 Per Offer Share ______
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OFFERING CIRCULAR Offering of up to 2 950 324 Offer Shares AS EESTI EHITUS (Incorporated with limited liability in the Republic of Estonia) _________________________ Offer Price Range EEK 82.50 – 97.80 per Offer Share ______________________________ Up to 2 950 324 shares with a nominal value of EEK 10 each (the “Offer Shares”) of AS Eesti Ehitus (the “Company”, together with its subsidiaries, the “Group” or “Eesti Ehitus”) are being offered in a combined offering (the “Combined Offering”), which comprises (i) an offering of up to 1 499 536 existing Offer Shares by AS EE Grupp (the “Selling Shareholder” or “EE Grupp”) and (ii) an offering of up to 1 450 788 new Offer Shares by the Company. The Combined Offering is made (i) to institutional investors in and outside Estonia (the “Institutional Offering”) in reliance on certain exemptions available under the laws of each jurisdiction where the Institutional Offering is being made and (ii) to the public in Estonia (the “Retail Offering”). This Offering Circular relates only to the Retail Offering. The offer price per Offer Share (the “Offer Price”) will be determined through a book building process and shall be the same for all investors in the Combined Offering. The offer price range for the Offer Shares is EEK 82.50 – 97.80 (the “Offer Price Range”). See “Underwriting - General” for a discussion of certain factors affecting the Offer Price. The Selling Shareholder has granted the Global Coordinator an option (the “Over-Allotment Option”), exercisable within 30 days of the date of commencement of trading in the shares of the Company on the Tallinn Stock Exchange, to require the Selling Shareholder to sell up to an additional 327 814 existing shares of the Company (the “Additional Shares”) for purposes of covering possible over-allotments. Prior to the Combined Offering, there has been no public market for the Offer Shares or the existing shares of the Company (together, the “Shares”). The Company has made an application to list the Shares on the Main List of the Tallinn Stock Exchange. Trading in the Shares is expected to commence on the Tallinn Stock Exchange on or about 18 May 2006. See “Listing”. The existing Offer Shares and, once the increase of share capital relating to the issue of new Offer Shares is registered with the Estonian Commercial Register, the new Offer Shares will rank pari passu with all the remaining existing shares of the Company and will be eligible for any dividends declared and paid on the Shares for the financial period starting on 1 January 2006, and for any dividends declared and paid thereafter. Possible dividends paid by the Company to shareholders who are not generally subject to taxation in Estonia may be subject to deduction of Estonian taxes as described in “Taxation.” See “Risk Factors” for a discussion of certain factors that should be considered by prospective investors. THE OFFER SHARES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE SHARES ARE SUBJECT TO CERTAIN SELLING RESTRICTIONS. SEE “UNDERWRITING ― SELLING RESTRICTIONS.” Advisor to the Company, Global Coordinator and Lead Manager: Suprema Securities Joint Lead Managers for the Estonian Retail Offering: Suprema Securities Hansapank The date of this Offering Circular is 28 April 2006. TABLE OF CONTENTS Summary................................................................................................................................................................................7 Risk Factors ........................................................................................................................................................................12 Risks Relating to the Group’s Business .......................................................................................................................12 Risks Relating to the Group’s Industry ........................................................................................................................20 Risks Associated with the Combined Offering ...........................................................................................................21 Political, Economic and Legal Risks............................................................................................................................22 Terms and Conditions of the Retail Offering....................................................................................................................25 Background to the Combined Offering .............................................................................................................................32 Listing ..................................................................................................................................................................................33 Use of Proceeds ..................................................................................................................................................................34 Dividends and Dividend Policy .........................................................................................................................................35 Capitalization......................................................................................................................................................................36 Industry Overview...............................................................................................................................................................37 European Construction Market.....................................................................................................................................37 Baltic Construction Markets .........................................................................................................................................38 Ukrainian Construction Market ....................................................................................................................................38 Estonian Construction Market ......................................................................................................................................39 Competition....................................................................................................................................................................42 Business...............................................................................................................................................................................43 Summary ........................................................................................................................................................................43 Competitive Strengths ...................................................................................................................................................43 Strategy...........................................................................................................................................................................44 History ............................................................................................................................................................................46 Operational Segments....................................................................................................................................................48 Operations ......................................................................................................................................................................54 Customers.......................................................................................................................................................................58 Suppliers.........................................................................................................................................................................59 Principal Markets and Market Developments .............................................................................................................59 Competition....................................................................................................................................................................60 Project Pipeline ..............................................................................................................................................................61 Construction Insurance and Guarantees.......................................................................................................................62 Employees......................................................................................................................................................................63 Property, Plant and Equipment .....................................................................................................................................64 Intellectual Property.......................................................................................................................................................68 Environmental Issues.....................................................................................................................................................68