ARCO VARA AS (Incorporated with Limited Liability in the Republic of Estonia) ______Offer Price Range EEK 37 – 44 Per Offer Share ______
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OFFERING CIRCULAR Offering of 34,450,000 Offer Shares ARCO VARA AS (Incorporated with limited liability in the Republic of Estonia) _________________________ Offer Price Range EEK 37 – 44 per Offer Share ______________________________ A proposed 34,450,000 shares with a nominal value of EEK 10 each (the “Offer Shares”) of Arco Vara AS (the “Company”, together with its subsidiaries, the “Group” or “Arco Vara”) are being offered in a combined offering (the “Combined Offering”), which consists of (i) an offering of up to 6,950,000 existing Offer Shares by Osaühing Toletum and Osaühing HM Investeeringud (the “Selling Shareholders”) and (ii) an offering of 27,500,000 new Offer Shares by the Company. The Combined Offering is made to (i) institutional investors in and outside Estonia and Latvia and outside the United States in reliance on Regulation S (“Regulation S”) under the United States Securities Act of 1933, as amended (the “Securities Act”) and in the United States to qualified institutional buyers (“QIBs”), as defined in and in reliance on Rule 144A (“Rule 144A”) under the Securities Act, and to certain employees of the Group and its joint ventures in Lithuania, Romania and Bulgaria (the “International Offering”); (ii) the public in Estonia and Latvia, including employees and certain managers of the Group and its joint ventures in Estonia and Latvia (the “Retail Offering”) and (iii) certain key managers of the Group and its joint ventures in reliance on applicable private placement rules (the “Management Incentive 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 37 – 44 (the “Offer Price Range”). See “Underwriting - General” for a discussion of certain factors affecting the Offer Price. The Company reserves an option to increase the number of new Offer Shares to be offered in the Combined Offering by up to 8,000,000 Offer Shares prior to the determination of the Offer Price (the “Upsizing Option”). The Selling Shareholders have 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 Shareholders to sell up to an additional 5,400,000 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 21 June 2007. 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 2007, 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 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 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. ACCORDINGLY, THE OFFER SHARES ARE BEING OFFERED AND SOLD IN THE UNITED STATES ONLY TO QIBs IN RELIANCE ON THE EXEMPTION PROVIDED BY RULE 144A AND ARE BEING OFFERED OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT. YOU ARE HEREBY NOTIFIED THAT THE SELLERS OF THE OFFERED SHARES MAY BE RELYING ON THE EXCEPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A. THE SHARES ARE SUBJECT TO CERTAIN SELLING RESTRICTIONS. SEE “UNDERWRITING - SELLING RESTRICTIONS.” Advisor to the Company, Global Coordinator and Lead Manager: SEB ENSKILDA The date of this Offering Circular is 1 June 2007. This Offering Circular has been prepared by the Company in connection with the Retail Offering and the listing of the Shares on the Tallinn Stock Exchange in accordance with the Estonian laws implementing Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC (the “Prospectus Directive”) and in accordance with the Commission Regulation (EC) No 809/2004 of 29 April 2004 implementing the Prospectus Directive. This Offering Circular constitutes a prospectus in the form of a single document within the meaning of the Prospectus Directive and the Securities Market Act of Estonia and has been approved as such by the Estonian Financial Supervisory Authority (Finantsinspektsioon) (the “EFSA”), in its capacity as the competent authority in the Republic of Estonia. The approval of this Offering Circular referred to above will be notified to the Latvian Financial and Capital Market Commission by the EFSA pursuant to Article 391 (2) of the Securities Market Act of Estonia, for the purposes of ensuring the Retail Offering to the public in Latvia. The information contained in this Offering Circular has been provided by the Company and other sources identified herein. It is prohibited to copy or distribute the Offering Circular or to reveal or use the information contained herein for any other purpose than considering an investment in the Offer Shares. The Company accepts responsibility for the information contained in this Offering Circular. To the best of the knowledge and belief of the Company, having taken all reasonable care to ensure that such is the case, the information contained in this Offering Circular is in accordance with the facts and contains no omission likely to affect its import. The Selling Shareholders accept responsibility for the information in the subsections “Shareholders of the Company”, “Selling Shareholders” and “Shareholders’ Agreements” in the section “Company, Share Capital and Ownership Structure”. To the best of the knowledge and belief of the Selling Shareholders, having taken all reasonable care to ensure that such is the case, the information contained in the said subsections is in accordance with the facts and contains no omission likely to affect its import. Tallinn, 1 June 2007 Arco Vara AS Osaühing Toletum Osaühing HM Investeeringud Management Board Management Board Management Board Viljar Arakas Arti Arakas Hillar-Peeter Luitsalu Sulev Luiga Richard Tomingas Ivar Siimar Veiko Pedosk Ahto Altjõe 2 The Combined Offering will be governed by and construed in accordance with Estonian law. Any disputes relating to the Combined Offering will be settled in a competent court of law, having its jurisdiction in Estonia. No person has been authorized to give any information or to make any representation in connection with the Combined Offering other than as contained in this Offering Circular and, if given or made, such information or representation must not be relied upon as having been authorized by the Company or by Skandinaviska Enskilda Banken AB (publ), London Branch (the “Global Coordinator”). This Offering Circular does not constitute an offer to sell or a solicitation of an offer to buy any of the Offer Shares in any jurisdiction to any person to whom it is unlawful to make such an offer or solicitation in such jurisdiction. The distribution of this Offering Circular and the offering or sale of the Offer Shares in certain jurisdictions is restricted by law. Persons into whose possession this Offering Circular may come are required by the Company and the Global Coordinator to inform themselves about and to observe such restrictions. Further information with regard to restrictions on offering and sale of the Offer Shares and the distribution of this Offering Circular is set out in “Underwriting – Selling Restrictions”. Neither the delivery of this Offering Circular nor any sale made in connection with the Combined Offering shall, under any circumstances, create any implication that the information contained herein is correct as of any time subsequent to the date hereof or that the affairs of the Company have not since changed. The Company will update any information presented in this Offering Circular in accordance with the applicable provisions of the Securities Market Act of Estonia. The Offer Shares have not been approved or disapproved by the United States Securities and Exchange Commission (the “SEC”), any state securities commission in the United States or any other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of the Combined Offering or the accuracy or adequacy of this document. Any representation to the contrary is a criminal offence in the United States. THE OFFER SHARES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE 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.