2008-10-10 11:26:50 CEST
2008-10-10 11:27:51 CEST
REGULATED INFORMATION
Ruukki Group Oyj - Company Announcement
THE PROPOSAL OF THE BOARD OF DIRECTORS TO THE EXTRAORDINARY GENERAL MEETING FOR THE ACQUISITION OF CHROME ORE AND FERROCHROME BUSINESSES FROM KERMAS LIMITED
Ruukki Group Plc, Stock Exchange Release, 10 October 2008 at 12:26 p.m. Summary The Board of Directors of Ruukki Group Plc proposes that the Extraordinary General Meeting shall resolve, in a way described in this proposition of the Board of Directors, on execution of acquisition related to chrome and ferrochrome operations so that: (1) Ruukki Group Plc shall purchase about 99.999 % and its subsidiary Rekylator Oy about 0.001 % of the shares of a Maltese Company called RCS Limited (hereinafter referred to as “RCS”) from a company called Kermas Limited; and (2) Ruukki Group Plc shall purchase approximately 98.75 % of the shares of a Turkish company called Türk Maadin Sirketi A.S. (hereinafter referred to as “TMS”) from Kermas Limited; and (3) Ruukki Group Plc has a put option for two years after the purchase of TMS shares to sell back whenever it wishes the shares of TMS it owns; and (4) RCS and Elektrowerk Weisweiler GmbH (hereinafter referred to as ”EWW), a subsidiary fully owned by Kermas Limited, will as part of the transaction enter into a toll manufacturing agreement for a period of up to 10 years, whereby EWW commits to manufacture low carbon ferrochrome as a toll manufacturer from chrome ore provided by RCS and other raw materials needed; and (5) as related to EWW: (i) Kermas Limited will up and until 31 December 2013 not to transfer the shares of EWW to any third party; and (ii) Ruukki Group Plc has a call option to acquire, at fair value, all the shares of EWW from Kermas Limited during a period commencing 1 January 2014 and ending 31 March 2014; and (iii) since April 1, 2014 until March 31, 2018 Ruukki Group Plc has a right of first refusal and right to match any offer in case Kermas would sell EWW shares to any third party. Kermas Limited that is seller in the contemplated acquisitions described above is a related party to Ruukki Group Plc. Kermas Limited commits to assist and provide services to Ruukki Group Plc until 31 December 2013 for execution of business of all the target companies. Kermas Limited for its part has committed itself to that RCS receives chrome ore from TMS's reserves the amount agreed or Kermas Limited takes care otherwise of the availability of chrome ore. Ruukki Group Plc pays as a purchase consideration for the vertically integrated business that is comprised of RCS, TMS and EWW the following: (i) EUR 80,000,000 in cash at the closing; and (ii) as a potential additional earn-out purchase consideration, 50 % of the combined net profit of RCS and TMS during a five year period covering financial years 2009 - 2013, so that a. in any case the maximum total earn-out consideration is EUR 150,000,000; and b. these additional purchase considerations shall be paid annually after the financial statements of RCS and TMS have been completed; and c. these additional earn-out considerations shall be paid with Ruukki Group Plc issuing 73,170,731 option rights; and d. Kermas Limited will for its 50 % share cover for any combined RCS and TMS losses during the years 2009-2013. The exercise price of the call option related to the shares of EWW is based on market value of EWW derived from a third party valuation definition confirmed by external independent party or to legislation. The execution price of the put option of the shares of TMS is EUR 1.00. Moreover, Ruukki Group Plc is committed to at the maximum EUR 8,000,000 funding to TMS to finance its capital expenditure so that and based on the assumption that the tailings located at TMS's mines may be exploited better than before with economic and feasible way. CONTENTS 1. General Information on Ruukki 2. Strategic Background 3. About the Chrome Ore and Ferrochrome Businesses 4. Preliminary Agreement on June 4th, 2008 5. Kermas Limited - Group Introduction 6. The Target of the Transaction 6.1. Due Diligence 6.2. Structure of the Transaction 6.3. RCS 6.4. TMS 6.5. RCS-TMS-EWW Business Entity 6.6. Description of the Target of the Transaction, Historical Economic Information 6.6.1. RCS Limited (Malta) 6.6.2. Türk Maadin Sirketi A.S. (Turkey) 6.6.3. Elektrowerk Weisweiler GmbH (Germany) 6.7. Employees and Bilateral Sales 7. Other Agreements 7.1. EWW Call Option 7.2. TMS Put Option 7.3. Toll manufacturing agreement 7.4. Management Agreements 7.5. Lock-up 8. Option Rights of Kermas Limited 9. Purchase Consideration 9.1. Purchase Consideration 9.2. Additional Earn-Out Purchase Consideration 10. Paying of the Purchase Consideration and the Additional Earn-Out Purchase Consideration 11. Financing of the Purchase Consideration 12. Estimations on the Target of the Transaction 12.1. Fairness Opinion 13. Risks and Uncertainties 14. Risk Management 15. Alternative Ways to Use Cash /Capital 16. Ruukki - Group Structure after the Transaction 17. Reporting Structure 18. Possible Additional Diversifying in Chrome and Mineral Business 19. Schedule and Time of Coming into Force 20. The proposal of the Board of Directors 21. Documentation Related to the Proposal by the Board of Directors 21.1. The Documentation in the internet pages of the Company: 21.2. The Documentation at Ruukki's premises in Addition to Documentation Mentioned in 21.1.: 21.3. The Documentation at the Extraordinary General Meeting in Addition to Documentation Mentioned in 21.1. and 21.2.: 1. General Information on Ruukki Ruukki Group Plc (hereinafter referred to also as “Ruukki” and “Company”) focuses on wood-based industrial business operations which are developed on a long-term basis taking corporate responsibility into account. In addition, based on the strategic decisions by Ruukki's Board of Directors, the company is looking for entering into minerals business. The Board of Directors of Ruukki selects the lines of business in which the group operates, either directly or through the companies it owns. The group may conduct business operations in Finland and abroad. The company may also conduct its business under various brands or auxiliary business names. The Board of Directors of Ruukki has decided redefine the Group's strategy by diversifying into new business areas on May 2008. The Group will expand both in geographic and industry terms, utilising in full the best expertise and contacts available to the Board of Directors. The goal is to increase and maximise the return on the Group's significant balance sheet potential, as soon as possible. Ruukki will enter into the minerals business and will initially focus on opportunities in the Chrome and Ferro Chrome sector. With regards to the forestry business, the Board of Directors has decided to strengthen Ruukki's position in Finland and proactively pursue its Russian opportunities. The Group aims to increase the shareholder value by operating responsibly on a long-term basis. 2. Strategic Background The extraordinary general meeting of Ruukki decided on June 12 2007 upon a directed share issue against payment in order to finance the investments made to Russia. The funds were primarily meant for the financing of the building of a sawmill and a bleached chemi thermo mechanical pulp or alternatively a chemical pulp on the Kostroma area in Russia. As a secondary purpose, the funds could be used on other industrial investments accordant to the strategy of Ruukki, especially in Russia, and to strengthen the capital structure of Ruukki and to cover general financial needs. The shares and supplementary shares in accordance with the terms of the share issue were subscribed at the subscription price of the share issue 2.30 euro per share. The subscription price was according to the terms of the share issue subscribed as a whole to the fund of the invested unrestricted equity. The total amount of net assets acquired by the Ruukki with this share issue was about EUR 337,000,000. These assets are still primarily in the possession of the Company as invested in a distributed manner in interest-bearing deposits. The Company prepared actively the Kostroma investment project during year 2007 and at the beginning of 2008. On March 3 2008 the Board of Directors of the Company stated that on the basis of the decisions made by the local administration in Kostroma there were no longer preconditions to continue the planning and realization of the investments on the Kostroma area. Ruukki decided thus to interrupt all preparations and realization concerning the Kostroma project and related to the investments. After this decision the Board of Directors of the Company has actively gone through different alternatives. On May 19 2008 the Company published a decision according to which the strategy of the Group shall be amended in that way that the Group expands to new areas of business. The objective was that the Group expands its activity both geographically and in respect of lines of business by exploiting fully the know-how and connections in the use of the Board of Directors. The objective was to add and maximize the significant profit potential of the consolidated balance sheet as quickly as possible. Ruukki shall go into mineral business activity and the focus is in the beginning in the possibilities of chrome and ferrochrome market. 3. About the Chrome Ore and Ferrochrome Businesses The world's annual chrome ore production was in 2007 (source: Heinz Pariser) in total about 22.1 million metric tons of which the proportion of Turkey was about 1.8 million tons. The majority of the world's chrome ore reserves are located in the South Africa. The exact chemical consistency and quality of chrome ore ranges areally and for example the chrome ore reserves in Turkey suit well for the production of low-carbon ferrochrome. TMS is a Turkish company specialized in the mining industry of chrome ore and it has worked for decades. The company has three mines in Turkey and in total twelve mine reserve areas. The mining activity is being practiced both in underground mine shafts and as strip mining above the ground or by exploiting the tailing reserves of earlier mining industry. TMS processes raw ore into chrome oxide (Cr2O3) which it delivers to EWW to be processed further into ferrochrome. The annual production of TMS is at the moment about 35,000 tons chrome oxide the average chrome percentage of which is about 50 %. TMS has two subsidiaries which do not have operational activity. Ferrochrome is a compound which includes mainly iron and chrome in a metallic form. The percentage of chrome ranges among others due to the qualities of the used ore. Ferrochrome is used as raw material in the manufacturing of stainless steel where ferrochrome improves the corrosion tolerance of steel. The most significant raw materials needed in the manufacturing process of ferrochrome are chrome oxide (Cr2O3), silicochrome (FeSiCr), lime and electric energy. The low-carbon ferrochrome which is the main focus area of the production of EWW is used in special steels for example in aeroplane and space industry, car industry and in the plumbings of industrial plants. The annual production of ferrochrome (FeCr) and its substitute chrome metal in 2007 was following (source: Heinz Pariser and CRU International Limited) in different market segments as thousands of tons: -------------------------------------------------------------------------------- | Chrome (Cr) | 45 | -------------------------------------------------------------------------------- | Ultra low-carbon ferrochrome (ULC FeCr) | 33 | -------------------------------------------------------------------------------- | Low-carbon ferrochrome (LC FeCr) | 358 | -------------------------------------------------------------------------------- | Medium carbon ferrochrome (MC FeCr) | 243 | -------------------------------------------------------------------------------- | High carbon ferrochrome (HC FeCr) | 7,685 | -------------------------------------------------------------------------------- The production of EWW is specialized in low-carbon and ultra low-carbon ferrochrome products which are delivered to customers especially in Europe (about 70 per cent of the revenue) and in the United States (about 25 per cent of the revenue). 4. Preliminary Agreement on June 4th, 2008 Based on the strategic decision announced on 19 May 2008, Ruukki entered into a preliminary agreement with Kermas Limited to acquire Kermas Limited's chrome ore operations in Turkey and related sales operations in Malta. According to the preliminary agreement, the furnace capacity is provided based on a contract processing agreement with German producer Elektrowerk Weisweiler GmbH that belongs to Kermas Limited's group of companies. The Turkish mining operations were noted to contain approximately 4 million metric tons of economically mineable probable chrome ore reserves. Based on the actual operating performance of the acquisition target as well as on current ferrochrome market prices and on currency exchange rates, the annualised revenue of the acquisition target was estimated to total about EUR 140 million. The number of employees in the target companies was noted to be in total about 300. According to the preliminary agreement, the initial purchase price would have been EUR 200 million. In the preliminary agreement it was agreed that Kermas Limited would provide Ruukki with an EBITDA performance guarantee for the period of 1 July 2008 - 30 June 2012 at the level of EUR 50 million per year. According to the preliminary agreement the enterprise value of the operations to be acquired will be based on the future years' actual realised IFRS-based minimum cumulative EBITDA level of EUR 200 million for four years. In the preliminary agreement the parties agreed on an earn-out component equalling 50% of the amount in excess of the EUR 200,000,000 cumulative EBITDA level for the four-year period starting 1 July 2008. According to the preliminary agreement the purchase price was based on an enterprise value of EUR 200 million. Moreover, it was agreed that the consolidated balance sheet as of 30 June 2008 of the business to be acquired would form the basis for any balance sheet adjustment on the purchase price. The parties agreed on the preliminary agreement that Ruukki would pay EUR 108 million, with additional net debt adjustment if any, to Kermas Limited in cash at the closing of the transaction. Moreover, an additional EUR 92 million of the purchase price, with any net debt adjustment, was agreed in the preliminary agreement to be paid by issuing a convertible loan, the maturity of which is intended to be five (5) years from the subscription. According to the preliminary agreement the loan could be converted into new shares in Ruukki at EUR 2.30 per share. It was agreed that the conversion could occur after 1 September 2010 and the right to convert would remain for at least two (2) years from such date. In case convertible bond was fully converted into Ruukki's shares, altogether 40,000,000 million new Ruukki's shares would be issued. Any additional earn-out payment was agreed to be paid in cash as a lump-sum after the four years' guarantee period. It was also agreed in the preliminary agreement that it is intended that Kermas Limited will offer all new opportunities in minerals and mining that it is working on now and in the future first to Ruukki. It was noted in the preliminary agreement that the information on the acquisition targets and the operations received by Ruukki so far are still preliminary and limited, and thus subject to completion and further investigations and verifications in separate due diligence processes to be conducted by independent advisors and experts. The completion of the transaction was agreed to be conditional upon fulfilment of certain conditions, which include for example satisfactory due diligence reviews of the operations to be acquired, Kermas Limited providing the EBITDA guarantee as described above, receipt of relevant governmental and regulatory approvals and approval of the transaction by the shareholders' meeting of Ruukki. Furthermore, it was noted that the closing of the transaction requires execution of the transaction documents in form and substance satisfactory to both parties. 5. Kermas Limited - Group Introduction Kermas Limited, a company registered to British Virgin Islands, is a parent company in a group that is one of the biggest ferrochrome producers in the world. Significant part of its ferrochrome business is situated in South Africa. Samancor Chrome is its most significant subsidiary company that is specialised in ferrochrome business and its annual production (HC FeCR) was approximately 1.0 million tonnes on 2007 (source: CRU International Limited). In addition, Kermas Limited Group has other mineral business activities, including the companies that are subject of this proposed transaction, and other assets, for example real estate investments. Kermas Limited's subsidiary company RCS Trading Corp, a company registered to Bahama Islands and a different company than the target of the proposed transaction, RCS Limited, has disclosed that its portion of holdings in Ruukki has exceeded altogether 25 %. Thus, the proposed transaction would be made with a related party of the Company's significant shareholder and thus, on Ruukki's point of view it is question of a transaction made with a related party. Alwyn Smit, Jelena Manojlovic, Esa Hukkanen, Markku Kankaala and Tom Borman were elected as the members of the Board of Directors in the Extraordinary General Meeting of the Company held on July 11th, 2008. Tom Borman resigned from the Board of Directors due to personal reasons on August 2nd, 2008. Board Members Smit and Manojlovic have been noted to be disqualified to take part in the discussion on this matter on behalf of Ruukki. Thomas Hoyer and Terence McConnachie, who were elected as members of the Board of Directors in the Extraordinary General Meeting of the Company held on October 7th, 2008, have been able to take part in the discussion on this matter. 6. The Target of the Transaction 6.1. Due Diligence Ruukki has used as a part of the preparation process of the transaction several external experts of which the most significant have been listed below: (i) financial and tax Due Diligence: Ernst & Young (Finland, Malta, Germany and Turkey); (ii) Due Diligence on agreements and legal issues and preparation of the agreements: Attorneys-at-law Castrén & Snellman Oy (Finland), Salans LLP (Germany), MamoCTV (Malta), Özel&Özel (Turkey), Harney, Westwood & Riegels LLP (British Virgin Islands); (iii) project coordination and fairness opinion: HSBC Bank plc; (iv) market analyses on ferrochrome market: Heinz H. Pariser Alloy Metals & Steel Market Research and CRU International Limited. In addition, as a part of the evaluation of the target of the transactions Kermas Limited has given for the use of the Company the reports of Istanbul Technical University and DAMA Engineering A.S. to evaluate the ore reserves in Turkey. German SMS DEMAG AG has performed the technical analysis on the EWW furnace. Ruukki will, after the possible execution of the transaction, perform necessary additional enquiries related to technical issues of mining and processing activities and to environmental effects as well as evaluate possibly more strictly the ore reserves in Turkey with different test drillings. The shareholders will have an opportunity to inspect the summaries of Financial and Tax Due Diligences related to the targets of the transaction and the summaries of key findings as well as summaries of Legal Due Diligences related to the targets of the transaction and the summaries of key findings before the general meeting. 6.2. Structure of the Transaction The proposed transaction is one entity at Ruukki's point of view even though the target of the transaction includes several units and contractual arrangements. The business in question is chrome business that includes - chrome ore mines and benefication plants (TMS); - contractual possibility to exploit the furnace capacity of Kermas Limited's owned EWW, through which special products are being produced from the output of the mines for the customers; and - sales company (RCS) that has the selling activities and customer contacts. After the preliminary agreement June 4th, 2008, the parties have been negotiating on the structure of the transaction. Based on the inspections by the experts, the Board of Directors of Ruukki has considered best to alter the structure of the transaction from what was agreed in the preliminary agreement so that the risks that are related to the target of the transaction are better in control. 6.3. RCS The target of the transaction is all the shares of a Maltese company called RCS Limited (register number C43287). The company has been founded in the beginning of the year 2008 and its business has practically begun in March 2008. The business of the company is to perform trade on ferrochrome products and on products and materials related to that. The summaries of the Financial, Tax, Legal and Contractual Due Diligences concerning RCS will be available from October 14th on the company's website at the address www.ruukkigroup.fi. The key numbers of RCS related to period 3/2008-8/2008 have been presented later under the headline “Historical Economic Information”. 6.4. TMS In addition to the shares of RCS Limited, the target of the transaction includes also approximately 98.75 % of the shares of a Turkish company called Türk Maadin Sirekti A.S. (register number 2996). The company runs mining and extractive business together with its two subsidiary companies. These Turkish companies are Tasfiye Halinde Ören Madencilik Türk Anonim Ortakligi and Metal ve Maden Ltd. Sti. The summaries of the Financial, Tax, Legal and Contractual Due Diligences concerning TMS and its subsidiary companies will be available from October 14th on the company's website at the address www.ruukkigroup.fi. The key numbers of TMS related to period 1-8/2008 (not audited), 1-12/2007 (audited) and 1-12/2006 (audited) have been presented later under the headline “Historical Economic Information”. 6.5. RCS-TMS-EWW Business Entity The businesses of RCS and TMS Group and the long-term processing capacity of EWW jointly comprise the business that Ruukki is interested in acquiring. RCS currently purchases chromite concentrate from TMS and from third party suppliers. RCS's ferrochrome production is carried out under toll manufacturing arrangement by German EWW, operating a ferrochrome smelting and production operations in Germany. In case the representations and warranties given concerning the target of the transaction are correct, the chrome ore reserves owned by TMS enable it to produce chromite concentrate to such extent that EWW's annual production capacity can be consummated completely. 6.6. Description of the Target of the Transaction, Historical Economic Information Information related to profit and loss statements and balance sheets of the target companies has been presented below according to local accounting practice. The own reporting currency of each company has been converted to euro values according to the calculatory exchange rates specified below. 6.6.1. RCS Limited (Malta) -------------------------------------------------------------------------------- | | EUR '000 | -------------------------------------------------------------------------------- | RCS Limited (Malta) | | -------------------------------------------------------------------------------- | established 2008, operations started 03/2008 | 3-8/2008 | -------------------------------------------------------------------------------- | INCOME STATEMENT | unaudited | -------------------------------------------------------------------------------- | | (6 months) | -------------------------------------------------------------------------------- | EUR/USD (Bank of Finland, average 3-8/2008) | 1.5522 | -------------------------------------------------------------------------------- | Revenue | 62 311 | -------------------------------------------------------------------------------- | COGS | -37 222 | -------------------------------------------------------------------------------- | Fixed expenses | -488 | -------------------------------------------------------------------------------- | EBITDA | 24 600 | -------------------------------------------------------------------------------- | % of revenue | 39,5 % | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Depreciation and amortisation | 0 | -------------------------------------------------------------------------------- | EBIT | 24 600 | -------------------------------------------------------------------------------- | % of revenue | 39,5 % | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net finance expense | -340 | -------------------------------------------------------------------------------- | EBT | 24 261 | -------------------------------------------------------------------------------- | % of revenue | 38,9 % | -------------------------------------------------------------------------------- | Income taxes | -8 491 | -------------------------------------------------------------------------------- | Net Income | 15 769 | -------------------------------------------------------------------------------- | % of revenue | 25,3 % | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | EUR '000 | -------------------------------------------------------------------------------- | RCS Limited (Malta) | 31 Aug 2008 | -------------------------------------------------------------------------------- | BALANCE SHEET | unaudited | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR/USD (Bank of Finland, 31 Aug 2008) | 1.4735 | -------------------------------------------------------------------------------- | ASSETS | | -------------------------------------------------------------------------------- | Tangible assets | 2 | -------------------------------------------------------------------------------- | Intangible assets | 0 | -------------------------------------------------------------------------------- | Other non-current assets | 211 | -------------------------------------------------------------------------------- | Non-current assets total | 214 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Inventory | 8 829 | -------------------------------------------------------------------------------- | Accounts receivable | 8 777 | -------------------------------------------------------------------------------- | Other current assets | 15 917 | -------------------------------------------------------------------------------- | Current assets total | 33 523 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents | 5 999 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Assets total | 39 736 | -------------------------------------------------------------------------------- | | | -------------------------------------------------------------------------------- | EQUITY AND LIABILITIES | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Share capital | 1 | -------------------------------------------------------------------------------- | Retained earnings | 16 612 | -------------------------------------------------------------------------------- | Equity total | 16 613 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Appropriations | | -------------------------------------------------------------------------------- | Long-term liabilities total | 0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Short-term interest-bearing liabilities | 104 | -------------------------------------------------------------------------------- | Accounts payable | 13 934 | -------------------------------------------------------------------------------- | Other short-term liabilities | 9 084 | -------------------------------------------------------------------------------- | Short-term liabilities total | 23 122 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Equity and liabilities total | 39 736 | -------------------------------------------------------------------------------- 6.6.2. Türk Maadin Sirketi A.S. (Turkey) -------------------------------------------------------------------------------- | Turk Maadin Sirketi A.S. | EUR '000 | | | | (Turkey) | | | | -------------------------------------------------------------------------------- | established 1918 | 1-8/2008 | 1-12/2007 | 1-12/2006 | -------------------------------------------------------------------------------- | INCOME STATEMENT | unaudited | audited | audited | -------------------------------------------------------------------------------- | | (8 months) | (12 months) | (12 months) | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR/TRY (Bank of Finland, | 1.8772 | 1.7865 | 1.8089 | | average 1-8/2008; 2007; 2006) | | | | -------------------------------------------------------------------------------- | Revenue | 5 783 | 7 009 | 5 413 | -------------------------------------------------------------------------------- | COGS | -3 727 | -6 227 | -5 555 | -------------------------------------------------------------------------------- | Fixed expenses | -1 144 | -650 | -216 | -------------------------------------------------------------------------------- | EBITDA | 913 | 133 | -358 | -------------------------------------------------------------------------------- | % of revenue | 15,8 % | 1,9 % | -6,6 % | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Depreciation and amortisation | -60 | -91 | -122 | -------------------------------------------------------------------------------- | EBIT | 852 | 42 | -479 | -------------------------------------------------------------------------------- | % of revenue | 14,7 % | 0,6 % | -8,9 % | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net finance expense | -1 | -2 | -2 | -------------------------------------------------------------------------------- | EBT | 851 | 40 | -481 | -------------------------------------------------------------------------------- | % of revenue | 14,7 % | 0,6 % | -8,9 % | -------------------------------------------------------------------------------- | Income taxes | 0 | 0 | 0 | -------------------------------------------------------------------------------- | Net Income | 851 | 40 | -481 | -------------------------------------------------------------------------------- | % of revenue | 14,7 % | 0,6 % | -8,9 % | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Turk Maadin Sirketi A.S. | 31 Aug 2008 | 31 Dec 2007 | 31 Dec 2006 | | (Turkey) | | | | -------------------------------------------------------------------------------- | BALANCE SHEET | unaudited | audited | audited | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR/TRY (Bank of Finland 31 Aug | 1.7415 | 1.7170 | 1.8640 | | 2008; 31 Dec 2007, 31 Dec 2006) | | | | -------------------------------------------------------------------------------- | ASSETS | | | | -------------------------------------------------------------------------------- | Tangible assets | 2 354 | 1 919 | 1 842 | -------------------------------------------------------------------------------- | Intangible assets | 0 | 0 | 4 | -------------------------------------------------------------------------------- | Other non-current assets | 37 | 190 | 168 | -------------------------------------------------------------------------------- | Non-current assets total | 2 392 | 2 108 | 2 013 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Inventory | 1 543 | 1 435 | 1 719 | -------------------------------------------------------------------------------- | Accounts receivable | 738 | 648 | 257 | -------------------------------------------------------------------------------- | Other current assets | 982 | 841 | 276 | -------------------------------------------------------------------------------- | Current assets total | 3 262 | 2 923 | 2 252 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents | 476 | 226 | 100 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Assets total | 6 131 | 5 257 | 4 365 | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | EQUITY AND LIABILITIES | | | | -------------------------------------------------------------------------------- | | 117 | 118 | 109 | -------------------------------------------------------------------------------- | Share capital | 4 073 | 4 090 | 3 767 | -------------------------------------------------------------------------------- | Retained earnings | -1 630 | -2 361 | -1 959 | -------------------------------------------------------------------------------- | Equity total | 2 560 | 1 848 | 1 917 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Appropriations | 1 072 | 1 087 | 815 | -------------------------------------------------------------------------------- | Long-term liabilities total | 1 072 | 1 087 | 815 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Short-term interest-bearing | 95 | 0 | 0 | | liabilities | | | | -------------------------------------------------------------------------------- | Accounts payable | 1 034 | 899 | 1 208 | -------------------------------------------------------------------------------- | Other short-term liabilities | 1 371 | 1 424 | 424 | -------------------------------------------------------------------------------- | Short-term liabilities total | 2 499 | 2 323 | 1 632 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Equity and liabilities total | 6 131 | 5 257 | 4 365 | -------------------------------------------------------------------------------- 6.6.3. Elektrowerk Weisweiler GmbH (Germany) -------------------------------------------------------------------------------- | Elektrowerk Weisweiler GmbH | EUR '000 | | | | (Germany) | | | | -------------------------------------------------------------------------------- | EWW in its current legal form | 1-8/2008 | 1-12/2007 | 1-12/2006 | | from 2003 merger | | | | -------------------------------------------------------------------------------- | INCOME STATEMENT | unaudited | audited | audited | -------------------------------------------------------------------------------- | | (8 months) | (12 months) | (12 months) | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Revenue | 56 142 | 52 943 | 55 643 | -------------------------------------------------------------------------------- | COGS | -42 585 | -34 880 | -35 348 | -------------------------------------------------------------------------------- | Fixed expenses | -11 223 | -15 236 | -15 769 | -------------------------------------------------------------------------------- | EBITDA | 2 334 | 2 827 | 4 526 | -------------------------------------------------------------------------------- | % of revenue | 4,2 % | 5,3 % | 8,1 % | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Depreciation and amortisation | -89 | -206 | -206 | -------------------------------------------------------------------------------- | EBIT | 2 245 | 2 622 | 4 320 | -------------------------------------------------------------------------------- | % of revenue | 4,0 % | 5,0 % | 7,8 % | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net finance expense | 4 | -1 624 | -174 | -------------------------------------------------------------------------------- | EBT | 2 249 | 998 | 4 146 | -------------------------------------------------------------------------------- | % of revenue | 4,0 % | 1,9 % | 7,5 % | -------------------------------------------------------------------------------- | Income taxes | -760 | -1 084 | -1 378 | -------------------------------------------------------------------------------- | Net Income | 1 489 | -86 | 2 768 | -------------------------------------------------------------------------------- | % of revenue | 2,7 % | -0,2 % | 5,0 % | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Elektrowerk Weisweiler GmbH | 31 Aug 2008 | 31 Dec 2007 | 31 Dec 2006 | | (Germany) | | | | -------------------------------------------------------------------------------- | BALANCE SHEET | unaudited | audited | audited | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | ASSETS | | | | -------------------------------------------------------------------------------- | Tangible assets | 1 297 | 1 320 | 1 325 | -------------------------------------------------------------------------------- | Intangible assets | 2 | 7 | 4 | -------------------------------------------------------------------------------- | Other non-current assets | 601 | 1 201 | 2 755 | -------------------------------------------------------------------------------- | Non-current assets total | 1 900 | 2 528 | 4 084 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Inventory | 1 995 | 15 474 | 17 964 | -------------------------------------------------------------------------------- | Accounts receivable | 12 535 | 8 536 | 5 340 | -------------------------------------------------------------------------------- | Other current assets | 11 573 | 1 436 | 311 | -------------------------------------------------------------------------------- | Current assets total | 26 103 | 25 446 | 23 615 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents | 912 | 244 | 139 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Assets total | 28 915 | 28 218 | 27 837 | -------------------------------------------------------------------------------- | | | | | -------------------------------------------------------------------------------- | EQUITY AND LIABILITIES | | | | -------------------------------------------------------------------------------- | | 100 | 100 | 100 | -------------------------------------------------------------------------------- | Share capital | 400 | 400 | 400 | -------------------------------------------------------------------------------- | Retained earnings | 7 297 | 5 807 | 6 400 | -------------------------------------------------------------------------------- | Equity total | 7 797 | 6 307 | 6 900 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Appropriations | 10 659 | 10 659 | 10 205 | -------------------------------------------------------------------------------- | Long-term liabilities total | 10 659 | 10 659 | 10 205 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Short-term interest-bearing | | | | | liabilities | | | | -------------------------------------------------------------------------------- | Accounts payable | 3 214 | 3 857 | 3 730 | -------------------------------------------------------------------------------- | Other short-term liabilities | 6 638 | 6 124 | 4 033 | -------------------------------------------------------------------------------- | Short-term liabilities total | 607 | 1 271 | 2 969 | -------------------------------------------------------------------------------- | | 10 460 | 11 252 | 10 732 | -------------------------------------------------------------------------------- | Equity and liabilities total | | | | -------------------------------------------------------------------------------- | ASSETS | 28 915 | 28 218 | 27 837 | -------------------------------------------------------------------------------- 6.7. Employees and Bilateral Sales The number of employees in different companies, on average on 2008: -------------------------------------------------------------------------------- | RCS | 5 | -------------------------------------------------------------------------------- | TMS | 328 | -------------------------------------------------------------------------------- | EWW | 115 | -------------------------------------------------------------------------------- During the financial period 2007 approximately 77 % of TMS's revenue was consisted of sales to EWW and approximately 23 % from sales to third parties. EWW has acted as a toll manufacturer to RCS from March 2008 and after that the majority of EWW's revenue has consisted of sales to RCS. 7. Other Agreements 7.1. EWW Call Option Kermas Limited will undertake up and until December 31st, 2013 not to transfer the shares of EWW to any third party, Ruukki has a call option to acquire all the shares of EWW from Kermas Limited during a period commencing January 1st, 2014 and ending March 31st, 2014, and since April 1st, 2014 until March 31st, 2018 Ruukki has a right of first refusal and right to match any offer in case Kermas would sell EWW shares. 7.2. TMS Put Option Ruukki has a put option for two years after the purchase of TMS shares to sell back whenever it wishes the shares of TMS that Ruukki or some of its subsidiary owns. Upon exercise of the put option and as a consideration for the TMS shares, Kermas Limited has to pay EUR 1.00. Ruukki and Kermas Limited will sign an agreement related to this in connection with closing of this transaction. In case Ruukki exercises the put option Ruukki will be set to position in which it would be in case that it had never owned the shares of TMS. 7.3. Toll manufacturing agreement As a part of the proposed transaction, RCS and EWW shall enter into a 10-year toll manufacturing agreement, based on the structure of the proposed acquisition, whereby EWW commits to manufacture low carbon ferrochrome as a toll manufacturer from chrome ore provided by RCS and other raw materials needed. 7.4. Management Agreements Unlike Ruukki Kermas Limited has know-how and expertise related to mining industry and the Business and thus it and its affiliates and the key employees of RCS, TMS and EWW are committed to assist Ruukki to successfully take over the Business and conduct the Business in the future. 7.5. Lock-up Kermas Limited undertakes for a period of five years commencing from the closing of the proposed transaction to hold 15,000,000 shares of Ruukki. 8. Option Rights of Kermas Limited A separate proposal by the Board of Directors has been given on the option rights to be granted to Kermas Limited. 9. Purchase Consideration 9.1. Purchase Consideration The fixed consideration payable for the Business shall be an amount equal to EUR 80,000,000 that shall be paid in cash. 9.2. Additional Earn-Out Purchase Consideration Kermas Limited will receive, as an additional earn-out purchase consideration, half (50 %) of the combined net profit of RCS and TMS group during a five year period covering financial years 2009-2013. The additional earn-out purchase consideration shall be determined on the basis of the audited and approved annual accounts of RCS and TMS group from the combined net profit of RCS and TMS group after taxes. Kermas Limited will also for its 50 % share cover for any combined RCS and TMS group losses during the years 2009-2013 10. Paying of the Purchase Consideration and the Additional Earn-Out Purchase Consideration In case the general meeting approves the proposed transaction, the purchase price shall be paid in connection with the closing of the transaction. Ruukki shall pay the additional earn-out purchase consideration annually within 30 Business Days after the annual general meetings of RCS and TMS confirming the annual accounts for each year. The additional earn-out purchase consideration shall be paid in the format of option rights that entitle to Ruukki's shares and based on which Kermas Limited has a right to subscribe for the shares of Ruukki in amount of the possibly accrued additional earn-out purchase consideration. 11. Financing of the Purchase Consideration Ruukki is able to finance and it has planned to fund the purchase consideration in cash to be paid from its cash reserves, but might possible later finance some portion of it with debt. Also possible investments in the targets of the transaction may be financed from cash reserves. 12. Estimations on the Target of the Transaction Along with the disclosure of the preliminary agreement on June 4th, 2008, Ruukki informed that in case the transaction is finalised, Ruukki will enter a new business area and new geographical locations, which can significantly alter the group's strategic, operational and financial risks and can have major impact on future financial performance of the group. The Board of Directors estimates that in case the proposed transaction would be implemented, it would augment the group revenue more than 50 % and the purchased business entity would be very profitable in level of operating profit. 12.1. Fairness Opinion It was agreed on the preliminary agreement on June 4th, 2008 that as the transaction, if finalised, is to be done with a related party, the Board of Directors of Ruukki will obtain a fairness opinion of the purchase price from a recognized and independent investment bank. Ruukki chose HSBC Bank plc as the maker of the fairness opinion. HSBC Bank plc acted also as the project coordinator in the preparation of the transaction. Based on the enquiries it has made, HSBC Bank plc has provided a fairness opinion to the Board of Directors of Ruukki. The fairness opinion will be available from October 14th, 2008 on the Company's website (www.ruukkigroup.fi) along with all other documents prepared for the extraordinary general meeting of Ruukki shareholders. 13. Risks and Uncertainties Ruukki group does not have prior business know-how, experience or background information on minerals business or chrome ore and ferrochrome production or market. Transition to a new area of business and to new market and production areas may thus significantly alter and/or multiply the overall risk position and it requires execution of new risk management actions after the implementation of the transaction. Temporal delays or a need to adapt the business activities or management to correspond the requirements for a listed company may occur related to the taking the companies into possession and integrating them to Ruukki group and to its activities. The prices of ferrochrome and chrome ore are determined according to supply and demand in world market. Especially changes in global stainless steel industry and on the other hand the general economic situation of China may have a significant effect to the sale volumes of ferrochrome, sale prices, purchase prices of inputs or to other similar matters and thus affect to the profitability of the purchased companies in future, even though EWW's production is mainly very specialised and its market price development is not expected to correlate fully with the general market price changes. The recent changes in commodities' and metals' market prices have been significant and the volatility of prices shall continue in future. It is not typically possible to hedge against the price changes of ferrochrome straight with derivatives. Changes in exchange rates, development of inflation in different countries or possible limitations in international trade or their cancelling may affect the profitability of the purchased business significantly in Ruukki's group reporting point of view. Due to limited information received concerning the chrome ore reserves of TMS, the exploitability of the reserves and environmental questions related to the mines, Ruukki shall perform after the implementation of the transaction Due Diligence inspections related to technical issues and environmental matters and to TMS's underground chrome ore reserves, whose expenses and outcomes are not clear at the time of purchase. These inspections, for example the test drillings of the ground and the analyses of the drillings, may take several months. In case the results of these additional inspections would be adverse it may result to that Ruukki would use the agreed put option of the shares of TMS or that changes in asset values that are now evaluated by basis of appraisal may be possible. In addition larger environmental or reconstruction responsibilities than what is estimated may occur to Ruukki. The scope of the Due Diligence inspections that have been performed before the transaction may be imperfect due to the schedule and other limitations. Also the conclusions or proposals for action may be imperfect when considered in retrospect. The received information may not necessarily be comparable for some parts. In addition it has to be taken into consideration that RCS has been founded as a company not before than on 2008 and thus it does not have historical information. Mining and metal industry and the target of this proposed transaction is related to system of different permissions, provisions and legislation that may cause unforeseeable additional costs or investment needs if it changes, or change the execution of the production and delivery. Human resources of the purchased business entity shall be transferred together with the purchased companies. If after the transaction somebody or some of the key persons of the targets of transactions would not continue at Ruukki's service Ruukki group may lose valuable knowhow. Recruting or training new professionally skilled personnel may require a long time. It may be difficult to recruit persons that are specialized in the business. In addition the Board of Directors and the senior management require knowledge of the line of business and after the transaction more attention shall be paid in follow-up and surveillance of foreign subsidiaries. The transaction shall, if materialized, require use of own cash reserves from Ruukki, possibly also external financing and an issue of option rights to Kermas Limited. The payment of the purchase price and possible tranches of additional purchase price will affect significantly to the balance sheet position of Ruukki. In the future the possible repatriation of profits which are materialized in different countries may affect significantly to the tax position of the Ruukki group. Kermas Limited has given representations and warranties related to the target of the transaction. In case the target would not meet these representations and warranties or Kermas Limited would not otherwise be able to meet the liabilities based on the transaction agreements Ruukki would have a counterparty risk. 14. Risk Management Ruukki has taken into account in the agreements and in the transaction's structure the risks related to the transaction in the negotiations of the transaction as follows: Limited Scope of the Due Diligence on TMS 2-year period to conduct due diligence, during which Ruukki will have a put option over TMS; Put option will have a make-whole provision such that if the put is exercised, Ruukki's consolidated financial position will be restored as if it had never owned the TMS shares; Unlimited indemnity on environmental and tax liabilities that originate from the time before Closing; and Warranty by Kermas Limited that the quantity and quality of chrome ore reserves at the Kavak site in Turkey are sufficient for production of ferrochrome by EWW. Significance of EWW in the Value Chain Toll manufacturing agreement with a minimum term of 10 years; After December 31st, 2013, Ruukki receives a right to buy the EWW shares for 3 months. After expiry of the 3-month period, Ruukki will have a 5-year right of first refusal over EWW shares and a right to match, in the event Kermas Limited is approached with an offer for EWW Warranty by Kermas Limited that EWW will be able to provide RCS with the required quantity of ferrochrome; in addition 10 % additional capacity buffer built in such that EWW can produce more than the minimum quantity required (33,000 tons p.a.); and Representation that EWW fulfils all operational preconditions for production under the frame agreement related to the transaction. Kermas Limited Counterparty Risk Counterparty risk limited to the EUR 80,000,000 purchase price consideration and any claims under indemnities; Ruukki will receive the full benefit of trading results of RCS and TMS for 2008; The 50:50 profit and loss sharing structure fully aligns Kermas Limited's interests with those of Ruukki and incentivises Kermas Limited to fulfil its obligations under the transaction agreements; Kermas Limited has an obligation to hold 15,000,000 shares in Ruukki, which will be placed in an escrow account for 5 years; Kermas Limited warrants that it will retain enough substance within itself to fulfil its liabilities and obligations under the transaction documents; and Kermas Limited enters into a 3-year non-compete undertaking whereby it will neither enter into the ultra-low ferrochrome business nor compete with Ruukki via its existing chrome metal operations. Other Protections Uncapped indemnity on all environmental liabilities, tax liabilities, as well as tax liabilities arising from intra-group acquisitions and corporate restructuring, that pertain to the period prior to Closing; No leakage provisions in relation to RCS and TMS since their respective effective dates of acquisition; and Investment requirements related to tailings of the TMS and exploitation of the ore reserves in excess of EUR 8,000,000 shall be fulfilled by Kermas Limited. 15. Alternative Ways to Use Cash /Capital The Board of Directors of the Company has set a goal to increase and maximise the return on the Group's significant balance sheet potential as soon as possible. While contemplating their decision making the shareholders should pay attention to the fact that the Company has not, outside the chrome business, a serious and well enough prepared project or plan which would enable to utilize balance sheet profit potential within short term. 16. Ruukki - Group Structure after the Transaction Ruukki has, as a part of Due Diligence review and other review and evaluation of the target of the transaction, performed a preliminary evaluation of the purchase consideration and its allocation to the different assets of the target of the transaction to be acquired, as well the related accounting. Ruukki shall later more thoroughly analyze the determination and allocation of the purchase consideration. The Board of Directors of the Company has decided to present a preliminary estimation of the determination and allocation in context with the notice of the meeting. Ruukki shall purchase a vertically integrated enterprise entity. The Purchase price is based on an entity which is formed by all businesses and agreements and in which all the transaction documents form also one entity. Purchase Price As the 2009-2013 net profits of targets of the transaction, RCS and TMS, shall affect the total purchase price, the purchase price is subject to estimation and consist of the following tranches. All numbers below in EUR million. -------------------------------------------------------------------------------- | | EUR million | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Fixed cash purchase price. which shall be paid at | 80 | | Closing | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Estimated transaction costs and taxes | 5.3 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Estimated additional earn-out purchase consideration | 137.2 | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Estimated total purchase price | 222.5 | -------------------------------------------------------------------------------- The above mentioned estimation on the amount of additional purchase price is based on business activity prognosis which is drafted based on outside market analysis (for example Heinz H. Pariser report) and may not become materialized as estimated. The different components of the purchase price are values which have been discounted to the present with an estimated, safe, long-term interest level of 4.50 % and are based on the presumed payment time of each tranche of purchase price. Since all earn-outs are paid by option rights issued by the Company, there shall be no cash flow effect from that. RCS and TMS shall be consolidated with an immediate effect after the Closing to the Ruukki group as subsidiary companies based on direct majority of shares and votes. Based on preliminary analysis of the Company, also EWW shall be consolidated into the Ruukki Group even though the share of ownership is 0 % and even though the exercise period of the EWW option start only on January 1st, 2014, since based on IFRS SIC-12 principles and on comprehensive view of the target, the signs of control are estimated to be existing. The profit of EWW shall be fully recognised as a minority interest until and unless Ruukki executes the EWW option. A draft of preliminary purchase price allocation below: -------------------------------------------------------------------------------- | BALANCE SHEET AT 31 AUGUST 2008 SITUATION: | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EUR million | RCS-TMS-EWW | IFRS-adjustmen | Fair value | | | | ts | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | ASSETS | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-current assets | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Intangible assets | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Clientele | 0.0 | 126.6 | 126.6 | -------------------------------------------------------------------------------- | Brand | 0.0 | 16.0 | 16.0 | -------------------------------------------------------------------------------- | Other Intangible assets | 0.0 | 0.0 | 0.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Tangible assets | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Land and buildings | 2.2 | 4.3 | 6.5 | -------------------------------------------------------------------------------- | Machinery and equipment | 0.4 | 0.0 | 0.4 | -------------------------------------------------------------------------------- | Other tangible assets | 0.9 | 0.0 | 0.9 | -------------------------------------------------------------------------------- | Ore reserves | 0.0 | 22.4 | 22.4 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Long-term financial assets | 0.9 | 0.0 | 0.9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Deferred tax assets | 0.0 | 2.0 | 2.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Current assets | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Inventory | 21.7 | 6.0 | 27.7 | -------------------------------------------------------------------------------- | Order book | 0.0 | 0.3 | 0.3 | -------------------------------------------------------------------------------- | Receivables | 50.1 | 0.0 | 50.1 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash and cash equivalents | 6.9 | 0.0 | 6.9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | ASSETS TOTAL | 83.0 | 177.6 | 260.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | LIABILITIES | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Long-term liabilities | 9.1 | 0.0 | 9.1 | -------------------------------------------------------------------------------- | Appropriations | 14.7 | 9.9 | 24.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Deferred tax liabilities | 0.0 | 54.0 | 54.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Short-term liabilities | 23.0 | 0.0 | 23.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | LIABILITIES TOTAL | 46.8 | 63.9 | 110.7 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | NET ASSETS | 36.2 | 113.7 | 149.9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Goodwill | 0.0 | 73.0 | 73.0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | TOTAL | 36.2 | 186.7 | 222.9 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash flow effect on closing of the transaction | EUR million | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Cash flows needed to finalise the transaction at closing | -84.6 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Acquired cash and cash equivalents, ownership share | 6.5 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net cash flow effect at closing | -78.1 | -------------------------------------------------------------------------------- 17. Reporting Structure At the moment Ruukki group has the following business areas that are reported as separate segments: house building, sawmill business, furniture business and investment projects. In case the proposed transaction will be implemented, the chrome business will become a separate reporting segment. In that situation the business of the group will in practice divide into two different business areas; in the first hand business based on wood products and on the other hand mineral business. These areas of business have not been estimated to have synergy benefits from each other. 18. Possible Additional Diversifying in Chrome and Mineral Business As it is described before, the Board of Directors of Ruukki has made a strategic decision to diversify into mineral business, at first into chrome business. The proposed transaction means execution of this strategic decision. It is possible that Ruukki diversifies furthermore its mineral business for example with acquisitions, by founding new companies, with organic diversifying, with cooperation agreements or by founding joint ventures. Specific decisions have not been made on these issues and the profitability of each project will be estimated case-specific. As a part of the transaction a Memorandum of Understanding was signed. According to the Memorandum of Understanding the parties shall aim to cooperate in development projects planned by Kermas Limited to strengthen the position of Ruukki. 19. Schedule and Time of Coming into Force The execution of the transaction shall commence immediately in case the Extraordinary General Meeting approves the proposed transaction and the execution shall happen as fast as possible. 20. The proposal of the Board of Directors The Board of Directors of the Company proposes that the Extraordinary General Meeting would resolve to approve the transaction. It is often noted in transactions that are same size and structure than the proposed transaction that a need to alter or specify the agreements. Due to this the Board of Directors proposes that the Board of Directors would be authorised to alter or specify the agreements that are related to the transaction in case the changes in conditions or other matters require alterations and the alterations are estimated to be in advantage of the Company. The Board of Directors however has not right to alter the most essential elements of the transaction. 21. Documentation Related to the Proposal by the Board of Directors This proposal by the Board of Directors is related to the invitation to Extraordinary General Meeting that has been disclosed with a stock exchange release on October 10, 2008, and in Helsingin Sanomat on October 11, 2008. According to the invitation, the Extraordinary General Meeting will be held on October 28, 2008. In addition to this transaction proposed in this proposal by the Board of Directors, other matters will be discussed and resolved in this meeting. The documentation that is for inspection of the shareholder related to this Extraordinary General Meeting is as follows: 21.1. The Documentation in the internet pages of the Company: - Invitation to Extraordinary General Meeting - This proposal by the Board of Directors - The proposal by the Board of Directors for option rights related to the proposed transaction - The terms and conditions of the option rights related to the proposed transaction - The proposal by the Board of Directors for option rights that will be given to CEO - The terms and conditions of the option rights that will be given to CEO - The proposal by the Board of Directors for acquiring own shares - Financial Statements and Audit Statement of Ruukki per 31.12.2007 - AGM dividend resolution on 31 March 2008 - Interim Reports Q1 and Q2/2008 - Board of Directors description of significant developments after 30 June 2008 - Fairness Opinion - Instructions how to attend EGM - Proxy forms - List of material available at Ruukki's head office in Espoo - Financial Statements of TMS and EWW per 31.12.2007 (prepared according to the accounting and audit practices of each country) - Interim Accounts of RCS, TMS and EWW per 31.8.2008 (prepared according to the accounting and audit practices of each country) - Purchase price allocation draft based on IFRS accounting standards. 21.2. The Documentation at Ruukki's premises in Addition to Documentation Mentioned in 21.1.: - Master Purchase Agreement related to RCS, TMS and EWW; - Summary of Toll Manufacturing Agreement between RCS and EWW - Summary related to Call Option Agreement concerning EWW; - Summary of the Agreements made with Kermas group (Memorandum of Understanding); - Summary of Financial and Tax Due Diligences and list of the most significant findings; - Summary of Legal Due Diligence of the targets of the transaction and list of the most significant findings. 21.3. The Documentation at the Extraordinary General Meeting in Addition to Documentation Mentioned in 21.1. and 21.2.: - Heinz H. Pariser market report - CRU International Limited Market report - DAMA Engineering A.S. report on Turkish ore reserves - SMS DEMAG AG report on EWW furnace - Istanbul Technical University report on Turkish tailings - Benny Ngwenya report on EWW ESPOO ON OCTOBER 10, 2008 RUUKKI GROUP PLC BOARD OF DIRECTORS Ruukki Group Plc's shares are listed on OMX Nordic Exchange Helsinki in which the shares of the Company are traded in the mid cap segment, in the industrials sector. For additional information, please contact: Alwyn Smit Chairman of the Board and CEO Ruukki Group Plc Telephone +358 50 442 1663 / +41 7960 19094 www.ruukkigroup.fi This stock exchange release is based on a translation into English of a document written in Finnish. In case of any discrepancies, inconsistencies or inaccuracies, the Finnish version of the release shall prevail.
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