Tiimari Oyj Abp - Company Announcement

Tiimari Plc

THE BOARD OF DIRECTORS OF TIIMARI PLC. IS CONVENING AN EXTRAORDINARY GENERAL
MEETING AND IS PLANNING A RIGHTS ISSUE OF UP TO EUR 14.83 MILLION AS WELL AS A
DIRECTED SHARE ISSUE OF UP TO EUR 23.8 MILLION IN ORDER TO STABILIZE THE
COMPANY'S FINANCIAL POSITION AND TO ENABLE THE IMPLEMENTATION OF THE NEW
BUSINESS PLAN. 


Tiimari Plc. Stock Exchange Release June 10, 2011 at 10.30

NOT TO BE PUBLISHED OR DISTRIBUTED PARTIALLY OR IN ITS ENTIRETY IN THE UNITED
STATES OF AMERICA, GREAT BRITAIN, CANADA, JAPAN, OR AUSTRALIA. 

THE BOARD OF DIRECTORS OF TIIMARI PLC. IS CONVENING AN EXTRAORDINARY GENERAL
MEETING AND IS PLANNING A RIGHTS ISSUE OF UP TO EUR 14.83 MILLION AS WELL AS A
DIRECTED SHARE ISSUE OF UP TO EUR 23.8 MILLION IN ORDER TO STABILIZE THE
COMPANY'S FINANCIAL POSITION AND TO ENABLE THE IMPLEMENTATION OF THE NEW
BUSINESS PLAN. 

The Board of Directors of Tiimari Plc (“Tiimari” or the “Company”) has on June
10, 2011 decided to convene an Extraordinary General Meeting to be held on July
1, 2011 to decide on the authorization of the Board of Directors to undertake a
rights issue pursuant to the shareholders pre-emptive right of subscription of
up to EUR 14.83 million (“Rights Issue”) , as well as a directed share issue of
up to EUR 23.8 million to be directed to some of the Company's creditors
(“Directed Issue”). Upon granting of such authorization by the Extraordinary
General Meeting of shareholders, the intention would be to arrange the share
issues in the autumn of 2011.   For the contemplated Rights Issue the Company
has received subscription and underwriting commitments totaling EUR 11.0
million and for the Directed Issue, in which subscriptions are to be paid for
by offsetting loan receivables from the Company, the Company has received
subscription commitments totaling EUR 21.8 million. Such commitments are
conditional upon preconditions presented herein. Upon realization, the planned
share issues would significantly strengthen the Company's liquidity and
solvency. Further it would secure the continuity of the business of the Company
and would enable the implementation of the new business plan. The execution of
the share issues is conditional only upon the decision by the Extraordinary
General Meeting of Shareholders on the share issue authorization. 

The proposals of the Board of Directors and its committees for the
Extraordinary General Meeting are presented in their entirety in the invitation
to the Extraordinary General Meeting, which will be published today as a
separate stock exchange release as well as on the Company's internet site. The
nomination and remuneration committee of the Board of Directors is also
proposing to the Extraordinary General Meeting the following amendments to the
composition of the Company's Board of Directors: In addition to its current
board members Hannu Ryöppönen, Juha Mikkonen, and Alexander Rosenlew, Benedict
Wrede and Mia Åberg would be elected to the Board of Directors. 

The Company has, in accordance with the Company's Standstill-agreement
announced by the Company in December 2010, during the first half of the year,
evaluated various structural and financial alternatives to strengthen the
Company's balance sheet. According to the agreement, the Company committed to
outline a new strategy and to take measures related to operational
improvements. The Company has evaluated various alternatives to strengthen its
balance sheet, and to improve the Company's current weak financial position,
and it has also negotiated with its creditors, certain domestic and foreign
external investors, as well as its largest shareholders in putting together the
notable financial restructuring package as outlined in this release. The
Company has simultaneously fine-tuned its strategy and business plan in order
to improve operational profitability. In order to improve its financial
situation, the Company has also considered and is evaluating the possible sale
of the Gallerix business unit. No decision has been made regarding the sale of
the Gallerix business unit, nor is the possible sale a prerequisite for the
realization of the planned financial restructuring. 

The objectives of the planned financial restructuring are

(a)     to raise, through the Rights Issue, at least EUR 11 million of new
capital needed to implement the Company's new business plan and to turn the
business profitable, to stabilize the Company's balance sheet and financial
position, and to ensure the continuity of the business, and 

(b)     to lower the current interest bearing debt level of the Company by at
least EUR 21.8 million through the Directed Issue with the effect of lowering
the net gearing of the Tiimari Group, improving the equity ratio, as well as
lowering financial expenses. 

In the planned Rights Issue the Company's shareholders would, for each share of
the Company held on the record date of the Rights Issue, be given a
subscription right in the form of a book-entry (the “Subscription Right”)
entitling to subscribe for ten (10) new shares to be offered for the
subscription price of EUR 0.09 per share. The subscription rights would be
subject to public trading on NASDAQ OMX Helsinki, whereby they would be freely
transferrable. The total number of new shares offered in the Rights Issue would
be 164,747,550 new shares and the aggregate subscription price would amount to
a maximum of EUR 14.8 million. 

In connection with the financial restructuring the Company's current main
shareholder Virala Oy Ab Group and Vessilä Oy Ab have announced that they have
agreed to sell all shares and convertible capital notes of the Company that
they currently hold to Unioca Partners Oy (“Unioca”), which would lead to
Unioca representing 23.29% of the Company's shares before the planned financial
arrangement. The agreed upon sales price of the shares exceeds the Company's
current share price. Unioca, majority of which is held by the main shareholders
of Virala Oy Ab, has committed to the financing arrangement with certain
preconditions, as described in more detail below. Upon completion of the
transaction Unioca's ownership of the Company would rise above 30% and could,
according to subscription commitments and guarantees provided by Unioca, rise
to at most 68.4%, which would lead to Unioca becoming the parent company of
Tiimari Oyj Abp - group. Unioca's resultant ownership depends on the
participation of other shareholders in the planned share issues and it is
possible that a group relationship would not come to exist. The Finnish
Financial Supervisory Authority has, as described below, granted Unioca an
exemption from the obligation to launch a mandatory takeover bid as outlined in
chapter 6 of the Finnish Securities Markets Act. 

The following is a brief description of the commitments received to secure the
execution of the restructuring, all of which are subject to the fulfillment of
pre-conditions described below. 

Unioca, Assetman Oy (controlled by board member Juha Mikkonen), Baltiska
Handels A.B., as well as Belgrano Investments Oy that together represent
approximately 41.73 percent of Tiimari's outstanding shares before the Rights
Issue, have pursuant to their current shareholdings, each given their separate
pre-commitments to subscribe for in total 60,871,811 new shares in the Rights
Issue to an aggregate subscription price of approximately EUR 5.48 million
subject to pre-conditions described below. Further, Unioca has given a
conditional underwriting commitment for the Rights Issue, according to which
Unioca has, in addition to the shares to be subscribed for by it pursuant to
the subscription commitment, committed to either subscribe itself or obtain
subscribers for shares possibly left unsubscribed for in the Rights Issue for
an amount of no less than EUR 5,217,158. In addition, Belgrano Investments Oy
has given a conditional underwriting commitment for the Rights Issue, according
to which Belgrano Investments Oy has, in addition to the shares to be
subscribed for by it pursuant to the subscription commitment, committed to
either subscribe itself or obtain subscribers for shares possibly left
unsubscribed for in the Rights Issue for an amount of no less than EUR 229,252.
 Furthermore, the Company's CEO, Niila Rajala, has given an underwriting
commitment to subscribe for possibly unsubscribed shares in the Rights Issue
for an amount of no less than EUR 75,125. Subsequently, the total amount of
conditional subscription and underwriting commitments in the Rights Issue
totals EUR 11.0 million. 

The holders of the Company's convertible capital loans issued on October 19,
2009 and on December 30, 2010 with a principal amount totaling EUR 7.98
million, the holder of the Company's debenture loan maturing on 9.10.2014 with
a principal amount of EUR 11.0 million, as well as a creditor of a portion of
the Company's interest bearing debt from financial institutions with a
principal amount totaling EUR 4.8 million, would in the Directed Issue be
offered to subscribe for up to 264,222,221 shares to the same subscription
price per share as in the Rights Issue, i.e. EUR 0.09 per share. Such
subscriptions shall be paid by the subscriber by offsetting of the loan
receivable entitling to the subscription right. The aggregate subscription
price of the offered shares would total approximately EUR 23.8 million. The
subscription right in the Directed Issue would not be transferable separately
from the share of the loan entitling to the subscription right. 

The purpose of the Directed Issue is to secure the prerequisites for the
realization of the financial restructuring, to fulfill the preconditions of the
subscription and underwriting commitments given for the Rights Issue, to
significantly lower the Company's financial expenses as well as to ensure the
Company's liquidity and its ability to repay its outstanding loans, wherefore
the Board of Directors considers there to be a weighty financial reason for the
Directed Issue. Considering the effect on interest expenses of the
pre-conversion or prepayment of the loans in question, the associated
uncertainty and arrangement fees related to repayment of the interest and
principal amounts of the convertible capital loan, debenture loan, and bank
loan through an equity offering of similar size, as well as the savings in
other financing costs achieved through loan conversion and the resultant
improvement in the Company's equity ratio, the Board of Directors deems the
subscription price of the Directed Issue to be reasonable from both the
Company's and its shareholders' perspective. 

The following holders of the convertible capital loans: Unioca, Assetman Oy,
Baltiska Handels A.B., Pecun Inc. (controlled by Chairman of the Board Hannu
Ryöppönen), and board member Sven-Olof Kulldorff, have committed, subject to
pre-conditions described below, to subscribe in aggregate 66,555,552 new shares
in the Directed Issue and to pay the aggregate subscription price of
approximately EUR 5.99 million by offsetting their loan receivables of the
associated convertible capital loans. 

Furthermore, of the Company's creditors, Varma Mutual Pension Insurance Company
(“Varma”) and Aktia Pankki Oyj (“Aktia”) have, subject to preconditions
described below, committed to subscribe in aggregate 175,555,555 new shares in
the Directed Issue and to pay for the aggregate subscription price of
approximately EUR 15.8 million by offsetting their loan receivables of the
associated loans. 

According to information that the Company has received, Aktia and Varma have
made binding forward contracts regarding shares received in the event that the
Directed Issue is executed, with the effect that Varma's ownership in Tiimari
would immediately following the transaction be decreased to under 10 percent,
i.e. the sale of in aggregate a minimum of 85,008,407 shares and Aktia's
ownership in Tiimari would immediately following the transaction be eliminated
in whole, i.e. the sale of in aggregate 53,333,333 shares. According to
information received by the Company, Unioca, Assetman Oy, Baltiska Handels
A.B., Belgrano Investments Oy, and the CEO of the Company, Niila Rajala, have,
upon realization of the Rights Issue and Directed Issue, each committed to
acquire the shares in question, of which Unioca's share would be 109,052,492
shares, Assetman Oy's 14,172,217 shares, Baltiska Handels A.B.'s 4,724,072
shares, Belgrano Investments Oy's 9,448,145 shares, and Niila Rajala's 944,814
shares. The shares will be purchased at separately negotiated prices (that are
below the subscription price of the share issues) and terms. 

The subscription and underwriting commitments submitted for the Rights Issue
and Directed Issue are conditional upon the fulfillment of the following
preconditions: 

(i)     The Extraordinary General Meeting of Tiimari, to be held on July 1,
2011, decides to grant the Board of Directors the authorization to execute the
Rights Issue and the Directed Issue; 

(ii)   The Board of Directors of Tiimari decides by October 31, 2011 at the
latest to execute the Rights Issue and Directed Issue in accordance with the
above mentioned preconditions of the subscription and underwriting commitments; 

(iii) Prior to commencing the share issues the Board of Directors of Tiimari
drafts and publishes listing prospectuses, in accordance with the Finnish
Securities Markets Act, based on which Tiimari's new shares would become
subject to public trading in accordance with the terms of the Share Issues and
the Company has complied to the disclosure requirements of the Finnish
Securities Markets Act. 

Should the financial restructuring materialize in full, the total number of the
Company's shares outstanding would increase from the current 16,474,755 shares
to a maximum of 445,444,526 shares. Should all of the shares offered in the
Rights Issue be subscribed for, Tiimari would receive gross proceeds from the
Rights Issue of in aggregate at most EUR 14.8 million in the form of additional
cash. The Company plans to use the net proceeds from the Rights Issue to
finance its net working capital, to strengthen its liquidity and capital
structure, and to implement its new business plan. The net proceeds would also
be used to repay the below mentioned bridge financing, which will be drawn to
strengthen the Company's liquidity, totaling at most EUR 3.0 million. The
provider of the bridge financing, Unioca, has also been granted the opportunity
to pay for the shares possibly to be subscribed for pursuant to the
underwriting commitment that Unioca has given to the Rights issue by setting
off its bridge financing related receivables. The Company would receive, as a
result of the arrangement, a total net increase in new equity amounting to a
maximum of EUR 37.2, of which the gross effect of the conversion of the above
mentioned liabilities into shares would account for a maximum of EUR 23.33
million. 

Should all of the shares in the contemplated Rights Issue and Directed Issue be
subscribed for, the Company would according to IAS 32 and IAS 39 standards, and
IFRIC 19 record a financing expense totaling approximately EUR 7.8 million in
its income statement. Should the planned Rights Issue and Directed Issue be
subscribed only to the extent of current subscription and underwriting
commitments (totaling EUR 32.8 million), the financing expense to be accounted
for in the income statement would total EUR 6.8 million. However, the expense
does not have an impact on the Company's equity, nor does it have a cash flow
effect. The final amount of the expense will be dependent on and determined by
the final subscription rate in the Rights Issue and Directed Issue as well as
the fair value of the shares at the time of subscription. 

Should the planned Rights Issue and Directed Issue have been executed on March
31, 2011 in their entirety, the Tiimari Group's reported 440.1 percent net
gearing at the end of the first quarter would have been approximately -2.8
percent. Should the planned Rights Issue and Directed Issue have been executed
on March 31, 2011 to the extent of current subscription and underwriting
commitments, Tiimari Group's reported 440.1 percent net gearing at the end of
the first quarter would have been approximately 11.5 percent. The estimated
non-recurring transaction expenses related to the financial restructuring
arrangement amount to approximately EUR 1 million. 

The bank that finances Tiimari Group's business operations has, upon execution
of the financial restructuring, committed to renew the Company's current
financing agreement such that the Company's long term bank loan with a
principal amount of EUR 3.2 million as well as the existing facilities to
finance the Company's working capital, including a bank overdraft limit, credit
facilities, as well as commercial guarantee limits of in aggregate EUR 16.2
million, would remain intact in accordance with the renewed financing
agreement. 

In addition, the Company has agreed with Unioca on temporary bridge financing
totaling at most EUR 3 million, which will be used to support the Company's
liquidity during the period between the decision by the Extraordinary General
Meeting on July 1, 2011 and the closing of the share issues. Unioca has set as
a precondition of the temporary bridge financing that the Extraordinary General
Meeting to be held on July 1, 2011 grants to the Board of Directors the
authorization needed to arrange the planned share issues, that the Company has
received all of the above-mentioned subscription and underwriting commitments,
that the subscriptions are not conditional, with the exception of the
authorization decision by the Extraordinary General Meeting, upon the
fulfillment of external preconditions, and that the Board of Directors of
Tiimari commits to arrange the share issues if authorized by the Extraordinary
General Meeting. The temporary bridge financing is to be repaid with net
proceeds from the Rights Issue, to the extent that the above-mentioned right to
set off the loan is not utilized. 

The Company's shareholders who have given subscription commitments and/or
underwriting commitments for the planned share issues and whose combined
shareholding of the Company's shares and votes totals approximately 46.76
percent, have committed to vote in favor of the proposals by the Board of
Directors' in the Extraordinary General Meeting. 

Should the financial restructuring be executed only to the extent of current
subscription and underwriting commitments and assuming that the aforementioned
transactions of Varma's and Aktia's shares materialize between the parties in
the amounts presented, Unioca's shareholding of all Tiimari shares outstanding
after the restructuring would be 68.37%, Varma's 9.99% and Assetman Oy's 9.74%.
The remaining parties giving subscription and underwriting commitments would in
aggregate hold 9.60% of the shares after the transactions. 

The FFSA has on 10 June 2011 granted Unioca an exemption from the obligation to
make a tender offer for the shares and instruments entitling to shares in
Tiimari pursuant to Chapter 6, Section 10 of the Finnish Securities Markets
Act. The exemption is in force as long as the ownership of Unioca pursuant to
Chapter 6, Section 10 of the Finnish Securities Markets Act exceeds three
tenths (3/10) of Tiimari's votes. The exemption is subject to the condition
that neither Unioca nor other persons, entities or foundations as defined in
Chapter 6, Section 10, sub-section 2 of the Finnish Securities Market Act
acquire or subscribe more shares in Tiimari or otherwise increase their number
of votes in Tiimari. 

The FFSA has on 10 June 2011 also granted Varma an exemption from the
obligation to make a tender offer for the shares and instruments entitling to
shares in Tiimari with respect to the transaction. The exemption is in force as
long as the ownership of Varma pursuant to Chapter 6, Section 10 of the Finnish
Securities Markets Act exceeds three tenths (3/10) of Tiimari's votes. The
exemption is subject to the condition that neither Varma nor other persons,
entities or foundations as defined in Chapter 6, Section 10, sub-section 2 of
the Finnish Securities Market Act acquire or subscribe more shares in Tiimari
or otherwise increase their number of votes in Tiimari. As a result of Varma's
share sales under the forward contracts immediately following Varma's
subscription of shares in the Directed Issue, Varma's ownership in Tiimari will
be decreased to under 10%. 

The focal points of the Company's renewed strategy relate to increasing
customer flow and average purchases, increasing store and chain total sales and
increasing efficiency in the Company's procurement to increase net sales and
gross margin. Due to impaired liquidity, the Company's sourcing has in the last
few years centered on local wholesalers. Purchases from local wholesalers has
offered the Company reasonable payment terms as well as fast deliveries that
have enabled minimizing working capital, but simultaneously brought a redundant
step in the supply chain with its associated profit share, which has led to a
weakening of the gross margin. The targeted financing position as a result of
the financing arrangement would allow the Company to concentrate a
significantly larger portion of goods purchases to the Far East. Furthermore,
the arrangement would eliminate one step in the supply chain, enable on-site
quality control, shorten product lead times, and in accordance with the
Company's objectives, enable differentiation of its assortment from that of its
competitors. While formulating its growth strategy, the Company has noticed
that one of its sources of significant competitive advantage is the ability to
open and profitably operate stores with fairly low level of sales. This opens
up the opportunity, contrary to its competition, to open up considerably
smaller stores into small areas with no competing non-grocery retailers. The
Company is planning to, during the next three years, open tens of these
smallish Tiimari stores, with investment payback times that can be less than
one year. In the Baltic States operations will be concentrated into larger
cities and shopping centers. In addition, the Company's objective is to
diminish the average store size in Finland as well as renew and improve store
concepts and assortment to better serve its locations and customer base in both
Finland and the Baltic States. Marketing will focus on in-store marketing,
seasonal and seasonal sales increase, and efforts for reinforcing Tiimari's
affordable price perception. The Company's Board of Directors deems that the
Company's weak financial situation does not enable the realization of essential
parts of the Company's new business plan in a manner, that would lead to the
desired improvement of net sales and profitability. 

Prior to the execution of the share issues, a listing prospectus containing
detailed information regarding the share issues and the entire financing
restructuring arrangements, including its preconditions and other regulative
information regarding the Company and its shares will be published. 

Nordea Corporate Finance acts as the Company's financial advisor, and upon
execution of the financial arrangement, as the lead manager in the equity
issues proposed to the Extraordinary General Meeting. 

Tiimari Plc

Board of Directors



Further information:
CEO Niila Rajala, Tiimari Plc, tel. + 358 (0)3 812911



Distribution:
NASDAQ OMX Helsinki
Important news media
www.tiimari.com

THE INFORMATION CONTAINED HEREIN IS NOT FOR RELEASE, PUBLICATION OR
DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE
UNITED STATES, GREAT BRITAIN, CANADA, JAPAN OR AUSTRALIA, OR IN OTHER
JURISDICTION, WHERE PUBLICATION OF THIS RELEASE WOULD CONSTITUTE A BREACH OF
LOCAL LEGISLATION OR WOULD REQUIRE REGISTRATION, EXEMPTION FROM REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION, OF SHARES OR
OTHER FINANCIAL SECURITIES OF TIIMARI PLC. THE INFORMATION CONTAINED HEREIN
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY,
NOR SHALL THERE BE ANY SALE OF THE SECURITIES REFERRED TO HEREIN IN ANY
JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION, EXEMPTION FROM REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH JURISDICTION. THE SHARE ISSUES PRESENTED IN THE
RELEASE ARE TO BE EXECUTED IN ACCORDANCE WITH THE POSSIBLE DECISIONS MADE BY
THE EXTRAORDINARY GENERAL MEETING OF TIIMARI PLC AND ITS BOARD OF DIRECTORS,
SUBJECT TO POSSIBLE SUBSEQUENT RESTRICTIONS OR PRECONDITIONS RELATED TO THOSE
DECISIONS.