Announcements

Olympic Entertainment Group signs contract for acquisition of Kristiine Kasiino

Posted on 01.03.2007




Prior to entering into the contract for the acquisition of the shares of KK and the sole share of Casinova, the Supervisory Board of OEG has taken a resolution on 28 February 2007 on the approval of the Transaction between OEG and KC Grupp and the conditions thereof.

The Transaction does not constitute a transaction between related parties within the meaning of the Stock Exchange Rules.

The acquisition of KK by OEG upon closing the Transaction qualifies as an acquisition of qualifying holding within the meaning of the Stock Exchange Rules. In compliance with the referred rules, the Management Board of OEG releases the following information about the Transaction.

I. Areas of activity and the description of the economic activities of the companies being acquired

AS Kristiine Kasiino, registry code 10011016, address Katusepapi 4, Tallinn, is a public limited company, established on 13 February 1996. KK is a casino operator in Estonia, operating casinos under the trademark “Kristiine Kasiino”. KK has 11 gaming halls – eight in Tallinn, one in Pärnu, one in Tartu and one in Narva. In the financial year 2006, the turnover of KK amounted to EEK 111.1 million and its net profit amounted to EEK 29.7 million. KK has a 100% subsidiary OÜ Jokker-Pokker (hereinafter JP).

OÜ Jokker-Pokker, registry code 10686317, address Katusepapi 4, Tallinn, is a private limited company, established on 28 August 2000. JP operates bars in the gaming halls of KK. In the financial year 2006, the turnover of JP amounted to EEK 3.3 million and its net loss amounted to EEK 0.05.

OÜ Casinova, registry code 10686317, address Katusepapi 4, Tallinn, is a private limited company, established on 8 December 2005. Casinova has no independent economic activities. It was established with the aim of developing the marketing strategy of KK. In the financial year 2006, the turnover of Casinova amounted to EEK 0.04 and its net loss amounted to EEK 0.07.

II. Aim of the acquisition of holding and its impact on the operations of OEG

The Transaction has been caused primarily by the change in the long-term strategy of KC Grupp, the parent company of KK, and its wish to focus on its main activity, real estate development. From OEG’s perspective, the aim of the Transaction is to enlarge its operations and secure its position in the context of increasingly tense competition in the Estonian gambling market.

Substantial growth in the OEG’s turnover is expected as a result of the Transaction. The pro forma consolidated turnover of OEG and KK in the financial year 2006 would have amounted to EEK 1.78 billion, whereas the Estonian turnover would have amounted to EEK 738 million. In addition, the market share of the OEG Group in the Estonian gambling market will increase as a result of the Transaction.

III. Description of the Transaction

3.1 The Transaction in brief

Upon closing of the contract entered into between OEG and KC Grupp, OEG will acquire 100% of the shares of KK and the sole share of Casinova. OEG will pay for the shares partially in cash and partially by issuing new ordinary shares of OEG to KC Grupp. After closing of the Transaction, KK, JP and Casinova will be wholly owned by the OEG Group.

3.2 Price of the acquired holding and payment terms

The initially agreed purchase price of the shares of KK and the share of Casinova is EEK 250,172,105, whereas the purchase price of the share of Casinova is EEK 40,000 of the initial purchase price and the remaining amount of the purchase price constitutes the purchase price of the shares of KK.

The final purchase price will be calculated on the closing date in compliance with the following formula:

Initial purchase price + (the operating capital of KK as at the end of the month preceding to closing of the Transaction – initial operating capital (EEK 0)) – interest bearing obligations of KK, JP and Casinova

OEG will pay EEK 235,699,000 of the purchase price of the shares to KC Grupp in cash upon closing of the Transaction and the remaining EEK 14,473,105 of the price by issuing 100,000 new freely tradable ordinary shares of OEG listed in Tallinn Stock Exchange. The value of one share is determined on the basis of the closing price of OEG’s share as at the last day prior to signing of the contract between OEG and KC Grupp, i.e. EUR 9.25, to be converted into EEK with the exchange rate EUR 1=EEK 15,6466. Subscription price of the new shares is EEK 10 per share, i.e. new shares are issued without premium with total price of EEK 1,000,000.

The right to decide upon the issuance of new shares rests with the general meeting of shareholders. The Management Board will propose to include the issuance of new shares to KC Grupp into the agenda of the general meeting of the shareholders of OEG. It will be proposed to the general meeting that only KC Grupp will be entitled to subscribe for the new shares and that the priority right of other shareholders will be excluded.

3.3 Conditions precedent for closing of the Transaction

The closing of the contract entered into by OEG and KC Grupp will take place within two weeks after the fulfilment of the following conditions precedent:
(i) Estonian Competition Board gives permission to the Transaction;
(ii) No breach of the representations and warranties given by OEG and KC Grupp in the contract or substantial negative financial influence to KK and Casinova or to their operations have occurred by the time of closing of the Transaction.

IV Economic performance of KK

Although OEG will acquire three companies (KK, JP and Casinova) by the Transaction, only the acquisition of KK qualifies as the acquisition of qualifying holding. Consequently, please find below only information about KK.

4.1  The audited basic economic features of KK for the three previous years

 
 
2004
2005
2006
Turnover
78,243,024
89,332,726
111,056,008
Net profit (- loss)
24,989,218
21,728,775
29,663,042
Dividend per share
-
-
9.67
Ratios
(same for both basic and diluted earnings per share)
41.65
36.21
54.93
 

4.2  Audited Annual Accounts of KK for the two previous financial years

 
BALANCE SHEET (EEK)
 
 
ASSETS
31.12.2006
31.12.2005
Cash at hand and in bank accounts
17,780,368
6,359,497
Shares and other securities
11,413,164
27,498,947
Trade receivables
188,000
0
Receivables from undertakings of the consolidation group
20,980,072
2,824,928
Other short-term receivables
3,383
4,886
Accrued income
19,922
7,389
Prepayments
5,834,991
2,032,721
Inventories
750,259
795,067
Total current assets
56,970,159
39,523,435
 
 
 
Shares in subsidiaries
10,000
10,000
Long-term receivables from parent companies and other
 
 
undertakings of the consolidation group
19,240
18,151
Miscellaneous long-term receivables
278,265
342,736
Tangible assets
38,864,714
29,414,855
Intangible assets
998,348
920,869
Total fixed assets
40,170,567
30,706,611
 
 
 
TOTAL ASSETS
97,140,726
70,230,046
 
 
 
LIABILITIES AND OWNERS’ EQUITY
 
 
Debts
1,423,057
954,007
Trade creditors
1,072,743
1,749,706
Payables to undertakings of the consolidation group
120,011
44,372
Taxes payable
1,607,198
1,657,102
Accruals
3,001,157
1,861,675
Short-term provisions
109,525
213,526
Total current liabilities
7,333,691
6,480,388
Long-term debts
2,194,335
0
Total liabilities
9,528,026
6,480,388
 
 
 
Share capital
5,400,000
6,000,000
Legal reserve
600,000
336,034
Retained profit (loss)
51,949,658
55,684,849
Net profit (loss) for financial year
29,663,042
21,728,775
Own shares
0
-20,000,000
Total owners’ equity
87,612,700
63,749,658
TOTAL LIABILITIES AND
OWNERS’ EQUITY
97,140,726
70,230,046
 
 
INCOME STATEMENT
 
 
(EEK)
 
 
 
 
 
 
2006
2005
 
 
 
Sales revenue
111,056,008
89,332,726
Other operating revenue
253,541
685,449
 
 
 
Goods, raw materials and services
-4,917,029
-3,791,596
Other operating expenses
-36,134,089
-31,224,110
Staff costs
 
 
      Wages and salaries
-19,395,458
-16,948,198
      Social security costs
-6,457,939
-5,669,072
Depreciation and impairment of fixed assets
-12,608,498
-10,648,871
Other operating charges
-985,034
-639,578
 
 
 
Operating profit (-loss)
30,811,502
21,096,750
 
 
 
Financial income and expenses
584,008
632,025
 
 
 
Profit (loss) before income tax
31,395,510
21,728,775
 
 
 
Income tax expense
-1,732,468
0
 
 
 
Net profit (- loss) for financial year
29,663,042
21,728,775
 
 
CASH FLOW STATEMENT
 
 
(EEK)
 
 
 
 
 
 
2006
2005
 
 
 
Operating profit
30,811,502
21,096,750
Adjustments:
 
 
   Depreciation of fixed assets
12,608,498
10,648,871

Loss from written-off fixed assets

179,533
149,037

    Income (loss) from sales of fixed assets

-160,692
-5,400
Change in receivables and prepayments
 
 
connected with operating activities
-3,873,884
-279,593
Change in inventories
44,808
-337,831
Change in liabilities and prepayments
 
 
connected with operating activities
367,677
1,459,441
Interest paid
-151,293
-70,104
Other financial expenses
-45,105
-4,745
Corporate income tax paid
-1,732,468
0
Total cash flow from operating activities
38,048,576
32,656,426
 
 
 
Payment of miscellaneous long-term receivables
63,382
-30,146
Sales of fixed assets
188,000
7,276
Acquisition of fixed assets
-16,868,337
-9,178,327
Acquisition of short-term financial investments
0
-12,143,777
Sales of short-term financial investments
16,085,783
6,147,737
Granted loans
-18,086,700
-6,300,000
Received interest
601,122
1,513,969
Other financial income
0
87,519
Total cash flow from investing activities
-18,016,750
-21,258,322
 
 
 
Dividends paid
-5,800,000
0
Redemption of own shares
0
-6,360,000
Financial lease payments made
-1,898,455
-97,870
Repayment of bank loans
-912,500
-1,564,286
Total cash flow from financing activities
-8,610,955
-8,022,156
 
 
 
Total cash flow
11,420,871
3,375,948
 
 
 
Cash and cash equivalents, beginning of year
6,359,497
2,983,549
Cash and cash equivalents, end of year
17,780,368
6,359,497
Change in cash and cash equivalents
11,420,871
3,375,948
 
 
 
 
CHANGE IN EQUITY STATEMENT (EEK)
 
 
 
 
 
 
Share
Own
Legal
Retained
 
 
Capital
Shares
 Reserve
 Profit
Total
Balance as of 31.12.2004
6,000,000
0
336,034
55,684,849
62,020,883
Net profit for financial year
-
-
 
21,728,775
21,728,775
Redeemed own shares
-
-20,000,000
-
-
-20,000,000
Balance as of 31.12.2005
6,000,000
-20,000,000
336,034
77,413,624
63,749,658
Net profit for financial year
-
-
-
29,663,042
29,663,042
Increase of reserve capital
-
-
263,966
-263,966
0
Dividends paid
-
-
-
-5,800,000
-5,800,000
Withdrawal of own shares
-600,000
20,000,000
-
-19,400,000
0
Balance as of 31.12.2006
5,400,000
0
600,000
81,612,700
87,612,700

4.3 Overview of significant changes after the end of the last financial year

Since the end of 2006, the most significant change in the business operation of KK is the opening of a new gambling hall in the first quarter of 2007 in Narva. No other significant changes in the business operation of KK have taken place since the end of 2006.

V. List of shareholders of KK prior to the Transaction

Prior to the Transaction, KK’s shareholder KC Grupp owns 540,000 shares of KK with nominal value of EEK 10. The total share capital of KK is EEK 5.4 million.

VI. Other information about KK

At the moment of submitting this release, KK does not have any loan commitments.

At the moment of submitting this release, there are not any valid contracts between OEG and KK.

At the moment of submitting this release, no court proceedings (including civil, administrative or criminal) or arbitration proceedings have been initiated or are pending with respect to KK.

The Management Board of KK has one member. Enno Heinla is the sole member of the board. Margus Reinsalu, Herki Hollak and Külli Reinsalu are members of the Supervisory Board of KK.

VI. Approval and closing of Transaction

The closing of the Transaction primarily depends on the permission to be granted by the Competition Board. The Transaction will be closed within two weeks after the relevant permission is granted.


Additional information:

Andri Avila
Member of the Board
Olympic Entertainment Group
Phone + 372 667 1250
E-mail: andri.avila@ocg.ee

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