Mercator, d.d. : Announcement of the resolutions adopted at the 17th meeting of the Supervisory Board of the company Poslovni sistem Mercator, d.d., regarding the takeover bid for Pivovarna Laško, d.d.

Announcement of the resolutions adopted at the 17th meeting of the Supervisory Board of the company Poslovni sistem Mercator, d.d., regarding the takeover bid for Pivovarna Laško, d.d.

Pursuant to the Rules and Regulations of the Ljubljana Stock Exchange, d.d, and the relevant legislation, the company Poslovni sistem Mercator, d.d., hereby informs the shareholders and the public of the following:

At the Supervisory Board session, the Management Board presented the strategic project of a takeover bid for Pivovarna Laško, including the business reasons, economic justification, and relevant assessments. Furthermore, the Management Board informed the Supervisory Board about their decision adopted on 19 January 2012 not to announce a takeover bid for all shares of the company Pivovarna Laško, d.d., despite the business appeal of such move. The reason for such decision is the convocation of the Pivovarna Laško, d.d., General Assembly following Mercator announcement of the takeover intent. Some of the resolutions proposed for the Assembly would have, had they been adopted, resulted in uncontainable legal and economic risks that no bidding party would have been able to efficiently and reliably hedge before or during the takeover bid.

To use the jargon of M&A business, the General Assembly of Pivovarna Laško and the proposed resolutions included a set of "poison pills" that Mercator as an interested acquirer in no case could "swallow". Mercator Management Board firmly believes, however, that the governance bodies of Pivovarna Laško, d.d., did not propose the said resolutions in order to render impossible the takeover but simply to pursue their business interests and to protect the interests of the company Pivovarna Laško, d.d.

Major risks in this regard include the following:

1. Issue of up 100 percent of new share capital at a price of EUR 10.00 per share, which is less than 30 percent of the fair value of the company share as appraised by a certified expert commissioned by the Pivovarna Laško Management Board.
2. Possibility of issue of approved capital of up to 50 percent of the company share capital with omission of the pre-emptive right and without specification of price parameters.
3. Signing an agreement to sell the shareholding in the company Mercator, d.d., which included parts that deviate strongly from the market standards and result in imbalance to the benefit of the buyer, where the content of the agreement was not known to the Mercator before the convocation of the Pivovarna Laško Supervisory Board meeting.

Furthermore, the signed Agreements on Management and Organization of Contractual Corporate Group dated 27 December 2011, which are a part of the documentation for the convened General Assembly of the company Pivovarna Laško, d.d., disclose the fair value of the Pivovarna Laško, d.d., stock as appraised by a certified expert commissioned by the Pivovarna Laško, d.d., Management Board in the amount of EUR 34.00 per share. Appraisal of fair value of the Pivovarna Laško, d.d., share, assuming the acquisition of 100-percent interest, conducted for Mercator based on publicly available information by a certified expert, yielded a figure of EUR 19.00 (within a certain interval around this value). Considering this price and the value of all effects of restructuring and potential synergies, the price per share of Pivovarna Laško, d.d., for an investor (in this case Mercator, d.d.) does not reach the value of EUR 34.00 per share, assuming that Mercator would have acquired at least a 75-percent interest in the takeover target, which would afford effective control of the company. Mercator, d.d., based on the company's own appraisals and analyses, considered the price or EUR 19.00 as the starting takeover price per share of Pivovarna Laško, d.d., in a combined offer of Mercator shares issued based on approved capital valued at fair price, and a cash payment, with a 75-percent success threshold; during the takeover bid, if it had been announced, the bidder would have had the option to improve the offer.

As a result of the said deviations in terms of price per share, it was reasonably expectable that the Management Board of Pivovarna Laško, d.d., could not view as appropriate any offer below EUR 34.00 per share and that the owners of major blocks of Pivovarna Laško, d.d., shares would not be able to justify their due diligence in case of disposal of shares below this price (since the price per share of EUR 34.00 was publicly announced in an official company document dated 27 December 2011 and since it represents the best estimate or appraisal of the fair value of Pivovarna Laško, d.d., share as this appraisal was commissioned by the company management who have access to all information about the company, including internal information or information that has not been publicly disclosed). Therefore, it could be reasonably expected that a takeover bid by Mercator, d.d., with a target of 75 percent interest, would not have been successful given the assumed economic starting points.

Due to the new facts that came into effect with the convocation of the Shareholders Assembly of Pivovarna Laško, d.d., following the announcement of Mercator takeover intent, and the related legal risks that could not have been effectively eliminated or dealt with before or during the takeover, and risks regarding the probability of success of the bid given the known economic assumptions and starting points, the Management Board of Mercator, d.d., adopted the decision not to announce a takeover bid for the company Pivovarna Laško, d.d. In making this decision, Mercator Management Board also took into consideration the recommendations of their legal advisor and consultant.

Other resolutions adopted at the 17th meeting of the Supervisory Board are announced under category inside information.

This announcement will be published on the company's website at as of 19 January 2012, and will remain posted for a period of at least five years.