PIK.L Regulatory News (PIK)

1 Jun 2007 08:26

PIK Group01 June 2007 THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS RESTRICTED AND NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN AUSTRALIA, CANADA, JAPAN, RUSSIA OR THE UNITED STATES OF AMERICA This press release is not a prospectus but an advertisement. Investors should not subscribe for any transferable securities referred to in this announcement except on the basis of information in the prospectus to be published by PIK Group in connection with the admission of GDRs representing PIK Group's shares to the Official List of the UK Financial Services Authority. PIK GROUP ANNOUNCES PRICING OF THE OFFERING AT US$ 25 PER SHARE AND US$ 25 PER GDR Part I PIK Group ("PIK" or the "Group"), one of Russia's leading residential realestate developers, today announces the offer price of its Initial PublicOffering (the "Offering" or "IPO") of ordinary shares (the "Shares") and globaldepository receipts ("GDRs"), with one GDR representing one Share. Summary of the Offering: • The offer price has been set at US$ 25 per ordinary share and US$ 25 per GDR. • The Offering consists of a total of 37 million existing ordinary shares (assuming no exercise of the over-allotment option) and 37 million newly issued shares. A total of 74 million shares, 50.1 million of which are in the form of GDRs, were allocated in the Offering (assuming no exercise of the over-allotment option), representing 15% of PIK's enlarged share capital. • At the offer price, the market capitalisation of PIK Group after the Offering will be approximately US$12.3 billion. • The total offer size is approximately US$ 1.85 billion (excluding the over-allotment option), and approximately 50% of the net proceeds will be received by the Company. • The selling shareholders have granted an over-allotment option to the Joint Global Coordinators to purchase up to an additional approximately 7.5 million GDRs, solely to cover over-allotments in the offering, exercisable for a period of 30 days from 1 June 2007. • Conditional dealings will commence on the London Stock Exchange today. Admission of GDRs to the Official List of the UK Listing Authority (" Admission"), and dealings of the GDRs on the London Stock Exchange under the symbol "PIK", is expected to take place on or about 6 June 2007. Dealing in the Shares on the RTS in Moscow, Russia, under the symbol "PIKK" will start on or about 4 June 2007, and dealing in the Shares on MICEX under the symbol "PIKK" will commence on or around 11 June 2007. • Deutsche Bank AG, Morgan Stanley and Nomura International acted as Joint Global Coordinators and Joint Bookrunners and Merrill Lynch International as Joint Lead Manager for the IPO. • The Offering is Europe's largest ever Real Estate IPO and the largest IPO by a private sector company in the CIS. Commenting on today's announcement, Kirill Pisarev, CEO of PIK said: "We are delighted with the reception PIK has received during our roadshow. Thequality and geographical spread of investors supporting our offering, despitethe challenging market conditions, underscore the fundamental appeal of theRussian residential property market and our integrated business model andpositioning. We are very proud to welcome our new investors from Asia, Europeand the United States whose partnership we greatly value and with whom we lookforward to sharing our ongoing growth and development." - END - Enquiries: PIK Group Tel: +7 (495) 291-67-54Viktor Szalkay Citigate Dewe Rogerson Tel: +44 20 7638 9571David WestoverTom BaldockMarina Zakharova NOTES TO EDITORS PIK Group Overview Founded in 1994, PIK is one of the leading vertically integrated residentialdevelopers in Russia with over 14,000 employees across the country. Its businessactivities are concentrated in Moscow and the Moscow region with an increasingpresence in many of Russia's other regions. Its principal activity is thedevelopment, construction and sale of residential properties in large scaledevelopments targeted primarily at the middle income housing market in Russia. PIK's core activities include: o development of residential real estate projects and sales of completedunits, including servicing and maintenance of residential real estate developedby PIK and other developers; o production and assembly of concrete panel housing in Moscow as asubcontractor for the Moscow city government; and o production and sale of raw materials and construction materials. PIK Group has a substantial land bank of approximately 1,100 hectares withunderlying net selling area of approximately 10.5 million square meters as ofDecember 31, 2006. According to CB Richard Ellis, an independent appraiser, thecombined market value of the Group's properties valued as of January 1 2007 wasapproximately US$ 8.8 billion. (This valuation is subject to certain assumptions and qualifications and may notreflect the market value of our properties as of any other date. Moreover, thisvaluation may not reflect the actual market value of our properties). Since the beginning of 2004, it has developed over 2.5 million square meters ofresidential housing and over 36,000 residential units in Russia, including over1.2 million square meters and over 17,000 residential units in 2006 alone. Year ended December 31 2004 2005 2006Total square meters completed 497,000 827,000 1,244,000Total number of residential units completed* 6,608 12,238 17,314 (*) including construction services rendered to the Moscow city government byour Construction Services segment Group Financial Summary Revenue for 2006 rose by 90% and equalled US$ 1,546 million, while EBITDA for2006 amounted to US$ 486 million. Net profit was US$ 298 million in 2006compared to US$ 20 million in 2005. *** This press release does not constitute or form part of any offer or invitationto sell, or any solicitation of any offer to purchase nor shall it (or any partof it) or the fact of its distribution, form the basis of, or be relied on inconnection with, any contract therefore. The offer and the distribution of thispress release and other information in connection with the listing and offer incertain jurisdictions may be restricted by law and persons into whose possessionany document or other information referred to herein comes should informthemselves about and observe any such restriction. Any failure to comply withthese restrictions may constitute a violation of the securities laws of any suchjurisdiction. This communication is only directed at (i) persons who are outside the UnitedKingdom or (ii) investment professionals falling within Article 19(5) of theFinancial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (iii) high net worth entities, and other persons to whom it maylawfully be communicated, falling within Article 49(2)(a) to (d) of the Order(all such persons together being referred to as "relevant persons"). The offeredsecurities are only available to, and any invitation, offer or agreement tosubscribe, purchase or otherwise acquire such securities will be engaged in onlywith, relevant persons. Any person who is not a relevant person should not actor rely on this communication or any of its contents. Any offer of securities to the public that may be deemed to be made pursuant tothis communication in any EEA Member State that has implemented Directive 2003/71/EC (together with any applicable implementing measures in any Member State,the "Prospectus Directive") is only addressed to qualified investors in thatMember State within the meaning of the Prospectus Directive. This press release may not be published, distributed or transmitted in or intothe United States. This press release does not constitute an offer to sell orthe solicitation of an offer to buy the securities discussed herein. The securities mentioned herein have not been, and will not be, registered underthe United States Securities Act of 1933 (the "Securities Act") and may not beoffered or sold in the United States unless they are registered under theSecurities Act or pursuant to an exemption from registration. There will be nopublic offering of the securities in the United States. This press release is not an offer, or an invitation to make offers, sell,purchase, exchange or transfer any GDRs or shares in the Russian Federation orto the benefit of any Russian person, and does not constitute an advertisementof the GDRs or shares in Russian Federation and must not be passed on to thirdparties or otherwise made publicly available in the Russian Federation. The GDRshave not been and will not be registered in the Russian Federation and are notintended for "placement" or "public circulation" in the Russian Federation. Part II Appendix - Further Details of the Offering Capitalised terms used but not defined herein shall have the meanings given tothem in the preliminary prospectus dated 17 May 2007. Risk Factors Risks Relating to the GDRs, the Shares and the Trading Market Because the Depositary may be considered the owner of the Shares underlying theGDRs, these Shares may be arrested or seized in legal proceedings in Russiaagainst the Depositary. In the past, a lawsuit was filed against a depositary other than the Depositaryseeking the seizure of various Russian companies' shares represented by globaldepositary receipts issued by that other depositary. In May 2007, the FederalCustoms Service of Russia filed a new lawsuit against that other depositary,based on allegations of fact common to the prior lawsuit. In the event that alawsuit seeking the seizure or arrest of the Shares underlying our GDRs were tobe successful in the future against the Depositary, and the Shares underlyingour GDRs were to be seized or arrested, the GDR holders involved would losetheir rights to such underlying Shares and all of the money invested in them. The Offering The Offering consists of an offering of 74,000,000 Ordinary Shares, consistingof 37,000,000 newly issued shares by the Company in the form of GDRs and18,500,000 existing Ordinary Shares by IBG Development Group Inc. ("IBG") and18,500,000 existing Ordinary Shares by FMC Realtors Holding Inc. ("FMC",together with IBG the "Selling Shareholders"), of which 23,900,000 are in theform of Shares and 13,100,000 in the form of GDRs. The offer price per Share isUS$25.00 and the offer price per GDR is US$25.00. In connection with the offering, the Selling Shareholders have granted to theUnderwriters an Over-allotment Option, exercisable within 30 days of today'sdate, to purchase up to an additional 7,515,000 Ordinary Shares in the form ofGDRs at the offer price, solely to cover over-allotments in the Offering. The net proceeds that the Company will receive from the Offering, afterdeducting underwriting commissions, fees and expenses incurred in connectionwith the Offering, will be approximately US$895 million. Following the Offering, Mr. Pisarev and Mr. Zhukov will each beneficially ownapproximately 42.5% of the Company's issued Ordinary Shares assuming no exerciseof the Over-allotment Option, or 41.7% assuming that the Over-allot Option isexercised in full. Holders of GDRS and Shares will contribute 70.4% of the Company's total bookequity capitalization as of 31 December 2006, but will own only 15.0% of ourtotal equity outstanding. Upon completion of the Offering and assuming all Shares offered in the Offering(including pursuant to the Over-allotment Option) are deposited into the GDRprogram, the GDR program will account for approximately 16.5% of the Company'sOrdinary Shares. A significant portion of the Shares and GDRs is being offered in the Offering tocertain institutions in the Russian Federation and elsewhere. Four investorseach intend to purchase more than 5% of the Shares and GDRs in the Offering,together accounting for approximately 62.9% of the Offering, and four investorseach intend to purchase more than 5% of the GDRs in the Offering, togetheraccounting for approximately 56.1% of the GDRs to be sold in the Offering, ineach case assuming exercise of the Over-allotment Option in full. Conditional trading in the GDRs on the London Stock Exchange is expected tocommence on an if-and-when issued basis today. The Company's existing Ordinary Shares have been admitted to list "V" on theMoscow Interbank Currency Exchange. Admission to the Official List and to trading on the regulated market is expectto take place on or about 6 June 2007. Trading in the GDRs on PORTAL is expected to commence on or about 1 June 2007. It is expected that delivery of the GDRs will be made against payment thereforin US dollars in same day funds through the facilities of DTC, Euroclear andClearstream on or about 6 June 2007. Number of GDRs in respect of which the Company has applied to the FSA foradmission: 172,641,134, of which: • the number of GDRs to be issued on the Closing Date: 50,100,000; and • the maximum number of additional GDRs which may be issued from time totime (to the extent permitted by law) against the deposit of shares with theDepositary: 122,541,134. Capitalization The following figures set forth our cash and cash equivalents, current loans andborrowings and total capitalization as of 31 December 2006 as adjusted to giveeffect to (i) the issuance of 37,000,000 Shares in the Offering and (ii)crediting the net proceeds of the Offering to cash pending use as describedunder "Use of Proceeds" in the Preliminary Prospectus (RUB/US$ thousands): • Cash and cash equivalents: 24,699,409 / 938,071 • Current loans and borrowings: 13,983,348 / 531,080 • Non current loans and borrowings: 10,040,180 / 381,321 • Equity: • Share capital: 30,842,614 / 1,171,387 • Reserve resulting from additional share issue: -7,253,430 / 275,482 • Retained earnings: 9,481,598 / 360,106 • Total equity attributable to shareholders of the company: 33,070,782 / 1,256,011 • Minority interest: 425,480 / 16,160 • Total equity: 33,496,262 / 1,272,171 • Total capitalization: 43,536,442 / 1,653,492 Management's Discussion and Analysis of Financial Condition and Results ofOperations Recent Developments For the period from January 1, 2007 to May 14, 2007, we experienced an increasein unaudited consolidated loans and borrowings, excluding finance leaseliability, of RUB 4.8 billion. In the first quarter of 2007, we had fewer buildings completed and accepted byrelevant local regulatory authorities (the "State Commission"), relative to thecorresponding period in the prior year. As explained under "-Certain FactorsAffecting Our Results of Operations-Revenue Recognition," our consolidatedrevenue is significantly impacted by the size and often long development cycleof projects. Consequently, with respect to the first quarter of 2007, weexperienced lower revenues. For the period from January 1, 2007 to May 14, 2007,we experienced a decrease in unaudited consolidated revenues from sales ofapartments of RUB 518.4 million when compared to the corresponding period in theprior year. In addition, for the period from January 1, 2007 to May 14, 2007, weexperienced a decrease in unaudited consolidated cash and cash equivalents ofRUB 582.9 million, primarily as a result of expenditures to obtain land plots.As discussed under "Business-Real Estate Development Activities-Description ofour Key Projects," we have a number of projects in development in relation towhich we expect to be able to recognize revenue from buildings completed andaccepted by the State Commission during the remainder of 2007. Material Transactions Since December 31, 2006 In 2006, we concluded a partnership agreement with a co-investor relating to thedevelopment of a land plot located in an industrial area of Moscow. In February2007, we acquired this same co-investor's rights to develop this land plot for$140.0 million, and as of May 31, 2007 we had paid $105.0 million of thisamount. This land plot comprises 15.3 hectares and we currently plan toconstruct a residential micro district with a total area of 188,100 squaremeters at this location. Business Projects under consideration Kaluga and Kaluga region In March 2007, we entered into a framework agreement and in May 2007 wecompleted the acquisition of stakes in the legal entities that own facilities inKaluga and Obninsk in the Kaluga region for the production of constructionmaterials together with the rights to three projects located in Kaluga, Obninskand the village of Likhun (also in the Kaluga region) for total consideration ofapproximately RUB 1.5 billion. The Kaluga region is adjacent to the Moscowregion and is the site of a number of our developments, including industrialparks to house production facilities of multinational companies. We aim to develop approximately 420,000 square meters of net selling area at theKaluga land plot, and 57,000 square meters of net selling area at the Obninskland plot. In addition, we aim to develop approximately 16 panel buildings withapproximately 170,000 square meters of net selling area at the Likhun land plot. Principal and Selling Shareholders The following sets forth information regarding ownership of the Company'sOrdinary Shares as adjusted to reflect the sale of Shares in the Offering(assuming no exercise of the Over-Allotment Option) in terms of number ofOrdinary Shares and percentage of total issued Ordinary Shares: • FMC: 209,630,192 / 42.5% • IBG: 209,630,192 / 42.5% • Free float (including GDR holders): 74,000,000 / 15.0% • Total: 493,260,384 / 100% Russian Tax Considerations New Changes in Russian Tax Laws The new tax law establishing changes in the taxation of dividends regime wassigned by the President on May 16, 2007 and will come into force starting fromJanuary 1, 2008. Beginning January 1, 2008, the rate on dividends from foreign companies toRussian companies will be reduced from 15% to 9%. Under current Russian law, dividends paid to a non-resident holder of the Sharesgenerally will be subject to Russian withholding tax at a rate of 15% fororganizations and at a rate of 30% for individuals. The latter will be reducedto 15% beginning on January 1, 2008. Subscription and Sale The Company, the Selling Shareholders and the Managers entered into a PricingSupplement dated 1 June 2007. The underwriting commitments of the Underwriters in terms of total number ofShares (in the form of Shares and GDRs) are as follows: • Deutsche Bank AG, London Branch: 29,600,000 Shares • Morgan Stanley & Co. International plc: 29,600,000 Shares • Nomura International plc: 14,800,000 Shares • Total: 74,000,000 Shares The offer price is $25.00 per Share and $25.00 per GDR. The Joint GlobalCoordinators will receive total fees and commissions of $55,000,000. Our estimated expenses in relation to the Offering, other than commissions, areapproximately $5,000,000. General Information The offer of the Ordinary Shares was authorized by FMC Realtors Holding Inc. on31 May 2007 and by IBG Development Group Inc. on 31 May 2007. This information is provided by RNS The company news service from the London Stock Exchange