Olympic Entertainment Group AS 26 October 2007
STOCK EXCHANGE RELEASE
Entering into preliminary contract for the acquisition of AS Admirāļu klubs
Today, Olympic Entertainment Group AS (hereinafter OEG) subsidiary company
Olympic Casino Latvia SIA (hereinafter OCL) entered into a preliminary contract
with Jānis Dāvis for the acquisition of 1,100,000 shares of AS Admirāļu klubs
(hereinafter AK), with the nominal value of LVL 1 equaling approximately
EEK 22,3 (EUR 1,43), which constitutes 100% of the share capital of AK,
(hereinafter the Transaction).
Prior to entering into the preliminary contract for the acquisition of the
shares of AK, the Supervisory Board of OEG has taken a resolution on 25 October
2007 on the approval of the Transaction between OEG and Jānis Dāvis 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 AK 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 Admirāļu klubs, registry code 40003249010, address Dzirnieku iela 16, Riga,
is a public limited company, established on 13 March 1993. AK is a casino
operator in Latvia, operating casinos under the trademark “Admirāļu klubs”. AK
has 1 table casino and 59 slot halls, from which 40 halls are situated in Riga.
In the financial year 2006, the turnover of AK amounted to EEK 300.5 million
(EUR 19.2 million) and its net profit amounted to EEK 55.2 million (EUR 3.5
million).
II. Aim of the acquisition of holding and its impact on the operations of OEG
From OEG's perspective, the aim of the Transaction is to enlarge its operations
and secure its position in the Latvian gambling market.
Substantial growth in the OEG's turnover and market shareis expected as a result
of the Transaction. Today OEG operates more than 4 000 slots in Latvia, after
closing of the transaction approximately 2200 slots will be accrued. The pro
forma consolidated turnover of OEG and AK in the financial year 2006 would have
amounted to EEK 1.96 billion (EUR 125.3 million), whereas the Latvian turnover
would have amounted to EEK 808 million (EUR 51.6 million). In addition, the
market share of the OEG Group in the Latvian gambling market will increase up to
approximately 25% as a result of the Transaction. The net turnover of Latvian
gaming market for 9 months of 2007 was LVL 142.5 million which equals EEK 3.2
billion (EUR 204.5 million).
III. Description of the Transaction
3.1 The Transaction in brief
Upon closing of the contract entered into between OCL and Jānis Dāvis, OCL will
acquire 100% of the shares of AK. OCL will pay for the shares in cash. After
closing of the Transaction, AK will be wholly owned by the OEG Group.
3.2 Price of the acquired holding and payment terms
The initially agreed maximum purchase price of the shares of AK is EEK 625.9
million (EUR 40.0 million).
The final purchase price will be calculated on the closing date in compliance
with the following formula:
Initial maximum purchase price - liabilities after due diligence performed by
OEG + the amount of cash and bank account balances as at closing date + the
remaining value of the licenses valid as at closing date + the security deposit
amounts paid for the lease of the premises as at closing date
3.3 Conditions precedent for closing of the Transaction
The closing of the contract entered into by OCL and Jānis Dāvis will take place
within six months at maximum after the fulfilment of the following conditions
precedent:
(i) Latvian Competition Board gives permission to the Transaction;
No breach of the representations and warranties given by OCL and Jānis Dāvis in
the contract or substantial negative financial influence to AK or to their
operations have occurred by the time of closing of the Transaction.
IV Economic performance of AK
The economic features of AK have been translated from LVL to EEK using
approximate exchange rate 1 LVL = 22,3 EEK. 1 EUR = 15.6466 EEK.
4.1 The audited basic economic features of KK for the three previous years
--------------------------------------------------------------------------------
| (EEK) | 2004 | 2005 | 2006 |
--------------------------------------------------------------------------------
| Turnover | 119,205,408 | 187,639,046 | 300,507,263 |
--------------------------------------------------------------------------------
| Net profit (- | 3,155,517 | 30,825,424 | 55,188,397 |
| loss) | | | |
--------------------------------------------------------------------------------
| Dividend per | - | - | - |
| share | | | |
--------------------------------------------------------------------------------
| Ratios | 0.81 | 11.28 | 27.59 |
| (same for both | | | |
| basic and diluted | | | |
| earnings per | | | |
| share) | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| (EUR) | 2004 | 2005 | 2006 |
--------------------------------------------------------------------------------
| Turnover | 7,618,614 | 11,992,321 | 19,205,915 |
--------------------------------------------------------------------------------
| Net profit (- | 201,674 | 1,970,104 | 3,527,181 |
| loss) | | | |
--------------------------------------------------------------------------------
| Dividend per | - | - | - |
| share | | | |
--------------------------------------------------------------------------------
| Ratios | 0.05 | 0.72 | 1.76 |
| (same for both | | | |
| basic and diluted | | | |
| earnings per | | | |
| share) | | | |
--------------------------------------------------------------------------------
Audited Annual Accounts of KK for the two previous financial years
--------------------------------------------------------------------------------
| BALANCE SHEET | (EEK) | (EUR) |
--------------------------------------------------------------------------------
| ASSETS | 31.12.2006 | 31.12.2005 | 31.12.2006 | 31.12.2005 |
--------------------------------------------------------------------------------
| Cash at hand and | 14,594,324 | 39,682,025 | 932,747 | 2,536,144 |
| in bank accounts | | | | |
--------------------------------------------------------------------------------
| Shares and other | 12,651,102 | 0 | 808,553 | 0 |
| securities | | | | |
--------------------------------------------------------------------------------
| Trade receivables | 10,921,581 | 6,656,528 | 698,016 | 425,430 |
--------------------------------------------------------------------------------
| Other short-term | 3,563,540 | 1,019,065 | 227,752 | 65,130 |
| receivables | | | | |
--------------------------------------------------------------------------------
| Accrued income | 1,979,794 | 0 | 126,532 | 0 |
--------------------------------------------------------------------------------
| Prepayments | 10,779,419 | 5,558,275 | 688,930 | 355,239 |
--------------------------------------------------------------------------------
| Inventories | 5,550,738 | 16,254,180 | 354,757 | 1,038,831 |
--------------------------------------------------------------------------------
| Total current | 60,040,498 | 69,170,073 | 3,837,287 | 4,420,773 |
| assets | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Tangible assets | 268,120,683 | 130,774,225 | 17,136,035 | 8,357,996 |
--------------------------------------------------------------------------------
| Intangible assets | 70,022 | 5,843 | 4,475 | 373 |
--------------------------------------------------------------------------------
| Total fixed assets | 268,190,705 | 130,780,067 | 17,140,510 | 8,358,370 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| TOTAL ASSETS | 328,231,202 | 199,950,140 | 20,977,797 | 12,779,143 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| LIABILITIES AND | | | | |
| OWNERS' EQUITY | | | | |
--------------------------------------------------------------------------------
| Debts | 5,051,574 | 151,439 | 322,854 | 9,679 |
--------------------------------------------------------------------------------
| Customer advances | 1,209,552 | 6,939,292 | 77,304 | 443,502 |
--------------------------------------------------------------------------------
| Trade creditors | 14,071,724 | 56,629,690 | 899,347 | 3,619,297 |
--------------------------------------------------------------------------------
| Taxes payable | 7,088,992 | 2,923,887 | 453,069 | 186,870 |
--------------------------------------------------------------------------------
| Accruals | 2,583,968 | 503,177 | 165,146 | 32,159 |
--------------------------------------------------------------------------------
| Other short-term | 135,698,488 | 27,024,612 | 8,672,714 | 1,727,187 |
| liabilities | | | | |
--------------------------------------------------------------------------------
| Total current | 165,704,298 | 94,172,097 | 10,590,435 | 6,018,694 |
| liabilities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Long-term debts | 45,100,524 | 31,345,058 | 2,882,449 | 2,003,314 |
--------------------------------------------------------------------------------
| Other long term | 1,756,660 | 1,449,656 | 112,271 | 92,650 |
| liabilities | | | | |
--------------------------------------------------------------------------------
| Defferred tax | 12,889,690 | 6,172,662 | 823,801 | 394,505 |
| liabilities | | | | |
--------------------------------------------------------------------------------
| Total long-term | 59,746,874 | 38,967,377 | 3,818,521 | 2,490,469 |
| debts | | | | |
--------------------------------------------------------------------------------
| Total liabilities | 225,451,171 | 133,139,474 | 14,408,956 | 8,509,163 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Share capital | 44,600,000 | 63,819,032 | 2,850,460 | 4,078,780 |
--------------------------------------------------------------------------------
| Retained profit | 2,991,634 | (27,833,790) | 191,200 | (1,778,903 |
| (loss) | | | | ) |
--------------------------------------------------------------------------------
| Net profit (loss) | 55,188,397 | 30,825,424 | 3,527,181 | 1,970,104 |
| for financial year | | | | |
--------------------------------------------------------------------------------
| Total owners' | 102,780,031 | 66,810,666 | 6,568,841 | 4,269,980 |
| equity | | | | |
--------------------------------------------------------------------------------
| TOTAL LIABILITIES | 328,231,202 | 199,950,140 | 20,977,797 | 12,779,143 |
| AND | | | | |
| OWNERS' EQUITY | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| INCOME STATEMENT | | | | |
--------------------------------------------------------------------------------
| | (EEK) | (EUR) |
--------------------------------------------------------------------------------
| | 2006 | 2005 | 2006 | 2005 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net sales | 300,507,263 | 187,639,046 | 19,205,915 | 11,992,321 |
--------------------------------------------------------------------------------
| Cost of goods | (242,581,675 | (140,951,053) | (15,503,795) | (9,008,414) |
| sold | ) | | | |
--------------------------------------------------------------------------------
| Gross profit | 57 925 588 | 46 687 994 | 3,702,120 | 2,983,907 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Distribution | (73,612) | 0 | (4,705) | 0 |
| costs | | | | |
--------------------------------------------------------------------------------
| Administrative | (10,586,791) | (7,818,335) | (676,619) | (499,683) |
| and general | | | | |
| expenses | | | | |
--------------------------------------------------------------------------------
| Other operating | 17,369,269 | 235,644 | (1,110,099) | (15,060) |
| income | | | | |
--------------------------------------------------------------------------------
| Other operating | (468,902) | (1,390,227) | (29,968) | (88,852) |
| expenses | | | | |
--------------------------------------------------------------------------------
| Operating profit | 64,165,552 | 37,715,076 | 4,100,926 | 2,410,433 |
| (-loss) | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Financial income | (2, 253,883) | (716,990) | (144,409) | (45,824) |
| and expenses | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit (loss) | 61,911,668 | 36,998,086 | 3,956,877 | 2,364,609 |
| before income | | | | |
| tax | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Income tax | (6,723,272) | (6,172,662) | (429,695) | (394,505) |
| expense | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net profit (- | 55,188,397 | 30,825,424 | 3,527,181 | 1,970,104 |
| loss) for | | | | |
| financial year | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| CASH FLOW STATEMENT | | | | |
--------------------------------------------------------------------------------
| | (EEK) | (EUR) |
--------------------------------------------------------------------------------
| | 2006 | 2005 | 2006 | 2005 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit before | 61,911,668 | 36,998,086 | 3,956,877 | 2,364,609 |
| income tax | | | | |
--------------------------------------------------------------------------------
| Adjustments: | | | | |
--------------------------------------------------------------------------------
| Depreciation of | 45,583,519 | 28,746,239 | 2,913,318 | 1,837,220 |
| fixed assets | | | | |
--------------------------------------------------------------------------------
| Loss from | 662,221 | 2,921 | 42,324 | 187 |
| written-off fixed | | | | |
| assets | | | | |
--------------------------------------------------------------------------------
| Other adjustments | 4,792,092 | 2,900,004 | 306,270 | 185,344 |
--------------------------------------------------------------------------------
| Change in | | | | |
| receivables and | | | | |
| prepayments | | | | |
--------------------------------------------------------------------------------
| connected with | (14,010,466) | (5,188,318) | (895,432) | (331,594) |
| operating | | | | |
| activities | | | | |
--------------------------------------------------------------------------------
| Change in | 10,678,288 | (11,928,315 | (682,467) | (762,358) |
| inventories | | ) | | |
--------------------------------------------------------------------------------
| Change in | | | | |
| liabilities and | | | | |
| prepayments | | | | |
--------------------------------------------------------------------------------
| connected with | 22,197,844 | 40,768,615 | 1,418,701 | 2,605,589 |
| operating | | | | |
| activities | | | | |
--------------------------------------------------------------------------------
| Interest paid | (2,793,187) | (611,622) | (178,517) | (39,090) |
--------------------------------------------------------------------------------
| Gambling tax and | (52,511,750) | (24,916,749 | (3,356,113) | (1,592,470) |
| property tax paid | | ) | | |
--------------------------------------------------------------------------------
| Total cash flow | 76,510,230 | 66,770,861 | 4,889,895 | 4,267,436 |
| from operating | | | | |
| activities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Sales of fixed | 1,973,951 | 1,528,420 | 126,158 | 97,864 |
| assets | | | | |
--------------------------------------------------------------------------------
| Acquisition of | (35,068,333) | (9,640,201) | (2,241,275) | (616,121) |
| fixed assets | | | | |
--------------------------------------------------------------------------------
| Total cash flow | (33,094,382) | (8,111,781) | (2,115,117) | (518,437) |
| from investing | | | | |
| activities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Financial lease | (108,824) | (288,897) | (6,955) | (18,464) |
| payments made | | | | |
--------------------------------------------------------------------------------
| Repayment of bank | (68,226,337) | (26,746,152 | (4,360,458) | (1,709,392) |
| loans | | ) | | |
--------------------------------------------------------------------------------
| Total cash flow | (68,335,161) | (27,035,048 | (4,367,413) | (1,727,854) |
| from financing | | ) | | |
| activities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total cash flow | (24,919,313) | 31,624,031 | (1,592,634) | 2,021,144 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash and cash | 39,682,025 | 8,039,551 | 2,536,144 | 513,821 |
| equivalents, | | | | |
| beginning of year | | | | |
--------------------------------------------------------------------------------
| Effect of exchange | (168,387) | 18,442 | (10,762) | 1,179 |
| rate fluctuations | | | | |
--------------------------------------------------------------------------------
| Cash and cash | 14,594,324 | 39,682,025 | 932,747 | 2,536,144 |
| equivalents, end of | | | | |
| year | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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| CHANGE IN EQUITY | | | |
| STATEMENT | | | |
--------------------------------------------------------------------------------
| (EEK) | Share | Retained | |
--------------------------------------------------------------------------------
| | Capital | Profit | Total |
--------------------------------------------------------------------------------
| Balance as of 31.12.2004 | 87,146,884 | (27,833,790) | (59,313,094) |
--------------------------------------------------------------------------------
| Net profit for financial | 0 | 30,825,424 | 30,825,424 |
| year | | | |
--------------------------------------------------------------------------------
| Share capital decreasing | (23,327,852) | 0 | (23,327,852) |
--------------------------------------------------------------------------------
| Balance as of 31.12.2005 | 63,819,032 | 2,991,634 | 66,810,666 |
--------------------------------------------------------------------------------
| Net profit for financial | 0 | 55,188,397 | 55,188,397 |
| year | | | |
--------------------------------------------------------------------------------
| Share capital decreasing | (19,219,032) | 0 | (19,219,032) |
--------------------------------------------------------------------------------
| Balance as of 31.12.2006 | (44,600,000) | (58,180,031) | (102,780,031) |
--------------------------------------------------------------------------------
| (EUR) | Share | Retained | |
--------------------------------------------------------------------------------
| | Capital | Profit | Total |
--------------------------------------------------------------------------------
| Balance as of 31.12.2004 | 5,569,701 | (1,778,903) | 3,790,798 |
--------------------------------------------------------------------------------
| Net profit for financial | 0 | 1,970,104 | 1,970,104 |
| year | | | |
--------------------------------------------------------------------------------
| Share capital decreasing | (1,490,921) | 0 | (1,490,921) |
--------------------------------------------------------------------------------
| Balance as of 31.12.2005 | 4,078,780 | 191,200 | 4,269,980 |
--------------------------------------------------------------------------------
| Net profit for financial | 0 | 3,527,181 | 3,527,181 |
| year | | | |
--------------------------------------------------------------------------------
| Share capital decreasing | (1,228,320) | 0 | (1,228,320) |
--------------------------------------------------------------------------------
| Balance as of 31.12.2006 | 2,850,460 | 3,718,382 | 6,568,841 |
--------------------------------------------------------------------------------
Overview of significant changes after the end of the last financial year
Since the end of 2006, there has been no significant changes in the business
operation of AK.
V. List of shareholders of AK prior to the Transaction
Prior to the Transaction, AK's shareholder Jānis Dāvis owns 1,100,000 shares of
AK with nominal value of LVL 1 equaling approximately EEK 22,3 (EUR 1,43). The
total share capital of AK 1,100,00 LVL which is approximately EEK 24,530,000
(EUR 1 567 753).
VI. Other information about AK
At the moment of submitting this release, AK has the loan commitment to Parex
Banka AS. The loan balance is EEK 35,987,180 (EUR 2,300,000) with due date in
2021 and with annual interest rate 2,5% + 6 months LIBOR.
At the moment of submitting this release, there are not any valid contracts
between OEG and KK.
At the moment of submitting this release, there is one administrative and two
civil proceedings with respect to AK, which have no significant effect on the
economic activities of AK.
The Management Board of AK has three members - Jānis Dāvis, Margarita Dāve and
Leons Spružs. Laine Dāve, Iljana Rukmane and Elgars Ruskulis are the members of
the Supervisory Board of AK.
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 five business
days after the relevant permission is granted.
Additional information:
Andri Avila
Member of the Management Board
Olympic Entertainment Group AS
Tel + 372 667 1250
E-mail andri.avila@ocg.ee
http://www.olympic-casino.com
Entering into preliminary contract for the acquisition of AS Admirāļu klubs
| Source: Olympic Entertainment Group AS