PRO KAPITAL

ANNOUNCEMENT

 

ABOUT MERGER WITH DOMINA HOTEL E COMPROPRIETA ALBERGHIERE SPA

 

After exploring the details of the merger proposal made by the 

syndicate of shareholders of Domina Hotel e Comproprieta 

Alberghiere Spa (hereinafter: Domina), hearing the expert opinions 

and additional negotiations regarding the exchange of shares, the 

Management Board of Pro Kapital decided on 13.03.2000 to advise the 

company's Supervisory Board to support the merger.

 

After hearing the Management Board's report, the Supervisory Board 

of Pro Kapital approved the merger proposal and authorized the 

Management Board to convene the general meeting of Pro Kapital 

shareholders on 11.04.2000 to decide among other agenda items also 

about the merger of Domina and Pro Kapital.

 

Below are listed the main arguments supporting the merger, 

according to the evaluations of the Management Board of Pro 

Kapital:

1) consolidated company will have a larger asset and income base, 

which is more independent of economic development of Baltic 

countries. Such company is of greater interest for investors who 

prefer companies operating in more stable economic environment;

2) consolidation will almost double the company's market value, to 

attract the interest of institutional investors,

3) circle of shareholders of the consolidated company will expand 

by approximately two-hundred shareholders, thus changing the 

current shareholders' structure to positively influence the 

liquidity of the company's shares;

4) according to the analysis and forecasts made by Domina group, 

the company can generate significant positive cash flow from 

business activities, which can be used to finance the large-scale 

investment projects of Pro Kapital;

5) Domina group has long-term and reliable relations with Italian 

financial institutions, enabling to Pro Kapital an access to 

financial resources at lower interest rate;

6)Domina group will bring to Pro Kapital know-how on development 

and management of high-level hotel projects.

 

Pro Kapital used Deloitte & Touche and Italian auditors Cee 

Revisione e Certificazione Srl as counselors to thoroughly evaluate 

the merger proposal and Domina group. CRC used financial reports 

audited by PriceWaterhouseCoopers to evaluate Domina. Preatoni Pank 

was used as a counselor on behalf of Pro Kapital.

 

The parties used the following end-1999 information on two 

companies to determine the exchange rate of shares: 

- book value of shares: EEK 24 for Pro Kapital, EEK 8 for Domina; 

- Pro Kapital shares traded on the stock exchange at EEK 41; 

- share price based on fair value of net assets: EEK 52 for Pro 

Kapital, EEK 13 for Domina.

 

According to the transaction counselors, the most conservative way 

is to ground the evaluation of the company on market value of Pro 

Kapital's shares and book value of Domina's shares. As of today, 

the executives of both companies and Domina's shareholders' 

syndicate have approved the exchange rate, according to which one 

share in Pro Kapital will be exchanged for five shares in Domina.

 

Based on the advise of transaction counselors, Pro Kapital will 

acquire shares in Domina in return for non-monetary payment in the 

form of ordinary shares of Pro Kapital to be issued. The exchange 

rate will be one Pro Kapital shares per five Domina shares.

 

According to the Management Board's proposal, the transaction 

schedule will be as follows: on 11.04.2000 the general meeting of 

Pro Kapital shareholders will make a decision on merger. In case 

the general meeting approves the transaction, 14,400,000 new shares 

will be issued, to be subscribed for by Domina shareholders before 

the end of May. First consolidated financial reports for the new 

group as of end-June 2000, and published via the Tallinn Stock 

Exchange information system within two months after the end of the 

first half year.

 

The Management Board also proposed to change the structure of Pro 

Kapital group. At the same time with the issue of shares directed 

to Domina shareholders, the company will begin restructuring of Pro 

Kapital in Estonia and form a new company Pro Kapital Eesti AS. All 

assets and subsidiaries located in Estonia will be transferred to 

the new company in the form of non-monetary payment. Pro Kapital 

Group will thus become a holding company owning subsidiary concerns 

in Estonia, Latvia, Lithuania and Italy. 

 

 

Ilona Saari

CFO

Pro Kapital

+372 614 4920