On 14 January 2020 EfTEN Real Estate Fund III AS as an acquiring fund and EfTEN
Kinnisvarafond AS as a fund being acquired concluded a merger agreement with the
aim of merging EfTEN Kinnisvarafond AS with EfTEN Real Estate Fund III AS
without liquidation proceedings. Upon entry into force of the merger, i.e. as of
making a merger entry in the commercial register, EfTEN Kinnisvarafond AS
dissolves. Approvals from the general meetings of both funds is one of the
preconditions for the merger.
Fund being acquired - EfTEN Kinnisvarafond AS
EfTEN Kinnisvarafond AS (registry code 11505393; located at Tallinn, A. Lauteri
5), which shall be merged with EfTEN Real Estate Fund III AS, is a closed-ended
non-public alternative investment fund founded as a public limited company on
2008. Upon entry into force of the merger, the management contract concluded
between EfTEN Kinnisvarafond AS and fund manager EfTEN Capital AS shall be
terminated and on account of the success fee deriving from the management
contract (counted up to 29 February 2020) shares in EfTEN Kinnisvarafond AS
shall be placed to the fund manager. From thereon no success fee shall be
calculated under the management contract and EfTEN Kinnisvarafond AS shall only
pay the base fee to the fund manager until the merger takes effect. Furthermore,
the depositary contract concluded between EfTEN Kinnisvarafond AS and the
depositary shall be terminated upon entry into force of the merger. LHV pension
funds have informed of their intention to decrease their shareholding in EfTEN
Kinnisvarafond AS by 25 million euros before the merger takes effect and divest
a significant part of the shareholding to co-founders of the fund manager and
other institutional investors. The list of shareholders of EfTEN Kinnisvarafond
AS, whose shares in the fund shall be exchanged with the shares of EfTEN Real
Estate Fund III AS upon the merger, shall be determined as of 31 March 2020.
Reasons for the merger
The merging funds' management boards consider the broader market sentiment for
retail investments to remain positive. Upon the merger, the resulting fund will
have ca 350 million euros worth of assets, including 29 commercial buildings
across the Baltic states. As a result of the merger, diversification of assets
is increased, incl. geographically, and the weight of individual investments as
well as the risks stemming therefrom to the merging funds as well as their
investors (shareholders) is decreased. The opportunistic and value-adding
investment strategy of EfTEN Kinnisvarafond AS is identical to the investment
strategy of EfTEN Real Estate Fund III AS. The investment strategy and risk
profile of EfTEN Real Estate Fund III AS will not be changed in the course of
the merger.
Due to a greater market capitalisation, the merger will bring along better
visibility, incl. amongst foreign investors, which in turn provides a more solid
foundation for increasing market liquidity and financing and developing real
estate investments.
The merger and calculating the exchange ratio
In order to carry out the merger, the share capital of EfTEN Real Estate Fund
III AS shall be increased on account of the totality of assets of EfTEN
Kinnisvarafond AS transferred to EfTEN Real Estate Fund III AS (non-monetary
contribution), the value of which shall be the EPRA Net Asset Value (NAV) of
EfTEN Kinnisvarafond AS as at 31 March 2020. Having regard to the fact that the
tax regimes of various countries differ widely (including in the Baltic states),
the European Public Real Estate Association has recommended the use of EPRA NAV,
which differs from the net asset value calculated in accordance with
International Financial Reporting Standards (IFRS) by excluding the deferred
income tax liabilities and interest derivatives related to the real estate
investment from the calculation of the net asset value. Considering the long-
term business strategy of the funds where divestment of assets in the near
future is unlikely and temporary differences in financial assets or liabilities
obscure the transparency of the fair value of the net assets of the fund, EPRA
NAV is considered as suitable and appropriate for the purposes of the merger.
The extent of the increase of share capital of EfTEN Real Estate Fund III AS as
well as the number of shares to be issued upon the increase shall be calculated
on the basis and in accordance with the principles specified in the merger
agreement annexed to this notice and the number of shares used for the exchange
and the increase of share capital of EfTEN Real Estate Fund III AS shall be
approved with the resolution of the supervisory board of EfTEN Real Estate Fund
III AS. The calculation of the exchange ratio shall be verified by the
depositary.
Upon the increase of share capital of EfTEN Real Estate Fund III AS in
connection with the merger, other shareholders will not have a pre-emptive right
for the acquisition of the shares. The shareholders of EfTEN Real Estate Fund
III AS and EfTEN Kinnisvarafond AS do not have the right to demand redemption of
the fund's shares.
In accordance with applicable law, the merging funds are not required to prepare
a merger report or interim balance sheet. The merger agreement shall be reviewed
by the depositary, which shall prepare a report in which it shall indicate
whether the depositary approves the merger. Furthermore, the merger is subject
to the authorisation from the Financial Supervision Authority. Upon issue of the
authorisation, the merging funds shall publish a respective notice together with
information on the merger addressed the shareholders.
The approval from the depositary, the authorisation from the Financial
Supervision Authority and the approval of the merger agreement by the general
meetings of the merging funds are all preconditions for the completion of the
merger.
Post-merger, EfTEN Real Estate Fund III AS will continue operating under the
business name EfTEN Real Estate Fund AS.
The indicative timetable of the merger is the following:
+---------------------------+--------------------------------------------------+
|14 January 2020 |Signing of the merger agreement |
+---------------------------+--------------------------------------------------+
|On or about 15 January 2020|Approval from the depositary |
+---------------------------+--------------------------------------------------+
| |Authorisation from the Financial Supervision|
| |Authority and publication of a respective notice|
| |together with information on the merger addressed|
|On or about 16 March 2020 |to shareholders |
+---------------------------+--------------------------------------------------+
| |General meeting of EfTEN Kinnisvarafond AS for the|
|17 March 2020 |approval of the merger |
+---------------------------+--------------------------------------------------+
| |General meeting of EfTEN Real Estate Fund III AS|
|24 March 2020 |for the approval of the merger |
+---------------------------+--------------------------------------------------+
| |Balance sheet date of the merger. The final|
| |balance sheet of EfTEN Kinnisvarafond AS will be|
| |prepared as at the day preceding the balance sheet|
|1 April 2020 |date of the merger, i.e. as at 31 March 2020 |
+---------------------------+--------------------------------------------------+
| |Resolution of the supervisory board of EfTEN Real|
| |Estate Fund III AS for the approval of the|
| |increase of share capital and number of exchanged|
| |shares calculated in accordance with the formula|
|13 April 2020 |specified in the merger agreement |
+---------------------------+--------------------------------------------------+
| |On the calculation of the exchange ratio an|
| |additional report on merger conditions by the|
|On or about 25 May 2020 |depositary |
+---------------------------+--------------------------------------------------+
| |General meeting of EfTEN Kinnisvarafond AS for the|
|10 June 2020 |approval of the final balance sheet |
+---------------------------+--------------------------------------------------+
| |Expected effective date of the merger (entry in|
| |the commercial register of the merger and increase|
|On or about 17 June 2020 |of share capital) |
+---------------------------+--------------------------------------------------+
| |Date when trading is expected to commence with the|
| |new shares on the regulated market operated by|
| |Nasdaq Tallinn AS (on the Baltic Main List of|
|On or about 22 June 2020 |Nasdaq Tallinn Stock Exchange) |
+---------------------------+--------------------------------------------------+
The merger agreement is annexed to this notice and available also on the website
of EfTEN Real Estate Fund III AS www.eref.ee (http://www.eref.ee) and on the
website of the fund manager of the funds EfTEN Capital AS www.eften.ee
(http://www.eften.ee). In addition to the merger agreement, a summary of the
merger in a presentation format has been annexed to this notice.
Viljar Arakas
Member of the Management Board
Tel. 655 9515
E-mail: viljar.arakas@eften.ee (mailto:viljar.arakas@eften.ee)
|