FAQ on share repurchase programs of PJSC Detsky Mir’s shares (including voluntary tender offers and buyback)
1) Question: What is the status of reorganization of PJSC Detsky Mir (the Company), which was approved at the Extraordinary General Meeting of Shareholders of the Company on December 29, 2022?
Answer: In line with a plan of gradual transformation of the Company into a private business, announced in November 2022, PJSC Detsky Mir completed its reorganisation in the form of a spin-off of LLC DM, as a subsidiary operating company.
2) Question: Which entity will make a tender offer to repurchase shares of the Company (hereinafter referred to as the “Shares”) and how long will it be valid?
Answer: Subsidiaries of PJSC Detsky Mir launched three programs to repurchase shares of PJSC Detsky Mir (“Shares”):
1. On May 29, 2023, LLC DMI submitted a voluntary tender offer to purchase the Shares with a deadline of 71 days: from May 30, 2023 to August 8, 2023 (“DMI TO”);
2. On May 30, 2023 JSC “DMFA” made a competing voluntary tender offer for the purchase of the Shares, the period for the acceptance of applications for the sale of Shares is 70 days: from May 31, 2023 to August 8, 2023 (“DMFA TO”);
3. On May 30, 2023 JSC “DMK” launched a program for the purchase of Shares on the PJSC Moscow Exchange in trading mode “Buyback: Target Orders”, which will run during 60 days: from May 30, 2023 to July 28, 2023 (hereinafter the “DMK Offer”). JSC DMK has the right to terminate the Buyback Offer prior to the expiration of the Buyback Period once it has a concentration of 25% of all outstanding Shares.
3) Question: What are the differences between these three programs?
Answer: Each share repurchase program has its own characteristics, the main are the following:
- In respect of DMI TO – payments for the Shares sold by non-resident investors from unfriendly countries under the terms of voluntary tender offer from LLC DMI could be made to bank accounts opened outside of the Russian Federation. Therefore, this tender offer may be of interest to non-resident investors who decides to receive funds at their own discretion and no additional approval of the Russian regulator is required. The Company underscores that all payments for the Shares will be made in rubles, therefore non-resident investors willing to receive payments for the Shares to accounts outside the Russian Federation are advised to consult with their servicing banks.
- In respect of DMFA TO – payments for the Shares sold under the DMFA TO could be made both in cash and in shares of JSC DMK, which may be of interest to shareholders deciding to exchange their shares into the shares of a private company that owns a 100% stake in LLC DM (JSC “DMK”).
- In respect of DMK Offer – the payment due date for the Shares sold under the DMK Offer are significantly shorter than the payment deadlines for the Shares sold under tender offers, and therefore the DMK Offer may be of interest to resident shareholders. In addition, in the event of the sale of Shares under the DMK Offer, the shareholder does not have to provide the documents confirming the right to reduce the income tax.
The Company recommends that prior to making a decision to sell their Shares, shareholders should carefully review the terms of the announced share repurchase programs and all related materials published (or to be published) on the Internet.
- DMI TO: https://www.e-disclosure.ru/portal/company.aspx?id=38862
- DMFA TO: https://www.e-disclosure.ru/portal/company.aspx?id=38840
- DMK Offer: https://www.moex.com/n56394/?nt=0
4) Question: How many Shares are going to be repurchased from the shareholders of the Company?
Answer: At that stage, the buyback amount will be up to 100% of outstanding Shares.
At the same time, as part of the buyback of Shares on the Moscow Exchange, JSC DMK has the right to terminate the acquisition program (DMK Offer) ahead of schedule, from the moment it owns 25% of all outstanding Shares.
5) Question: At what price will the shares be repurchased from the shareholders of PJSC Detsky Mir and when the payments will be made?
Answer: As a general rule, payments for the acquired Shares will be made in the currency of the Russian Federation (rubles) at a price of 71.5 rubles per Share, which is equal to the buyback price of one Share in the course of the completed reorganization of the Company (except the case when non-resident investors from unfriendly countries select special conditions for transferring funds abroad as indicated below).
1) Payment for the Shares sold under the DMK Offer at a price of 71.5 rubles will be made on the day of delivery of the Shares for the entire period of validity of the DMK Offer (from 05/30/2023 to 07/28/2023).
2) Payment for shares during the DMI TO and DMFA TO will be made in the currency of the Russian Federation (rubles) within 90 days from the date of the expiration of the acceptance period for the voluntary tender offer (between 08/09/2023 and 11/07/2023).
In accordance with the permission from the Government Commission, non-resident investors from unfriendly countries will be entitled to sell their Shares under the voluntary tender offer on the following terms:
• At a price of 71.50 rubles with receipt of funds to C-type accounts or,
• At a price of 60.77 rubles with the receipt of funds to accounts specified by the shareholders, bypassing C-type accounts.
Non-resident investors from unfriendly countries who plan to sell their Shares and receive payments to respectively indicated accounts, bypassing C-type accounts, have to participate in the DMI TO.
Payment for the Shares under the DMFA TO is possible at the discretion of the shareholders both in cash and shares of JSC DMK on the terms and conditions set within the DMFA TO.
6) Question: Who defines which states are unfriendly?
Answer: Classification of a state as unfriendly is carried out by the Government of the Russian Federation. At the moment, the list of unfriendly states is determined in accordance with the Decree of the Government of the Russian Federation No. 430-r dated March 5, 2022 (as amended).
7) Question: Can non-resident investors from unfriendly countries receive payment for their Shares to a bank account opened outside the Russian Federation?
Answer: Yes, if the Shares are sold under the DMI TO, non-resident investors from unfriendly countries will be able to receive payments will be made to respectively indicated accounts of non-resident investors, including accounts opened outside the Russian Federation, without additional approval from the regulators of the Russian Federation.
All payments for the Shares will be made in Russian roubles, therefore non-resident investors planning to receive payments for the Shares to accounts outside the Russian Federation are advised to consult with servicing banks.
The Company reiterates that, in accordance with the permission from the Government Commission, in case of transferring funds for the acquired Shares to bank accounts opened outside the Russian Federation, payment will be made at a price of 60.77 rubles per Share.
8) Question: Is a shareholder required to provide any documents regarding participation in tender offer to a company acquiring Shares?
Answer: The Company recommends that individual shareholders who have accepted the DMI TO or DMFA TO provide the documents necessary for the correct calculation of the amount of personal income tax (“Tax”) to company acquiring the Shares.
As a general rule, a company acquiring Shares from individuals is recognized as a tax agent for the Tax on the transaction (except for cases when transactions for the sale of Shares in the interests of a shareholder – an individual are carried out by a broker, trustee acting in the interests of a shareholder).
The tax is withheld by the tax agent from the positive difference between the income from the sale of Shares and the shareholder’s actually incurred and documented expenses on operations related to the acquisition and sale of the alienated Shares. The list of documents recommended for submission to the company acquiring the Shares for the correct calculation of the amount of Tax will be published on the website of PJSC Detsky Mir on the Internet at https://ir.detmir.ru/general-meeting-of-shareholders/.
If a shareholder does not provide all documents confirming the expenses incurred in regards transactions with the Shares, and the acquirer of the Shares withholds the Tax in an excessive amount, the shareholder will have the right to return the overpaid Tax in the manner prescribed by the tax legislation. If the shareholder accepts the DMK Offer, which will be executed through a broker, then in addition to the reduced payment time, the shareholder will not provide any documents for the correct calculation of the Tax (this will be done by the broker). The Company underscores to its resident shareholders that the sale of Shares via transactions on PJSC Moscow Exchange simplifies the procedure for the shareholder to sell the Shares.
9) Question: How to become a shareholder of a non-public company JSC “DMK”?
Answer: In order to become a shareholder of the non-public company JSC DMK, a shareholder of PJSC Detsky Mir has to accept a voluntary tender offer to acquire shares sent by JSC DMFA (DMFA TO) and indicate shares of JSC DMK, which owns a 100% stake in LLC DM as a method of payment for the Shares, based on the exchange ratio of 3 750 000 shares of PJSC Detsky Mir for 1 share of JSC DMK on the terms and conditions set in the DMFA TO.
10) Question: How will the procedure for submitting applications for the sale of Shares and settlements under the share repurchase programs be carried out technically?
Answer: All technical details can be clarified with the largest local brokers and local depositories, as well as with the Registrar – Joint Stock Company “Independent Registrar Company R.O.S.T.”.
An order for the sale of Shares under the DMK Offer shall be sent in the “Redemption: Address Orders” mode.
An application for the sale of Shares under the DMI TO and DMFA TO shall be sent to:
• Shareholders directly registered in the register of shareholders of PJSC Detsky Mir: To the Registrar at the following address: Russian Federation, 107076, Moscow, st. Stromynka, 18, bldg. 5B (Central Office of the Joint Stock Company “Independent Registrar Company R.O.S.T.”), or at the address of any of the branches of the Registrar, which will be indicated in the Unified State Register of Legal Entities on the date of filing the application of the owner of securities registered in the register of shareholders PJSC Detsky Mir, on the sale of securities. Information about the branches of the Registrar of PJSC Detsky Mir is published on the page: https://rrost.ru/ru/filials/.
• Shareholders who are not directly registered in the register of shareholders of PJSC Detsky Mir (that is, who own the Shares through nominal holders): by giving appropriate instructions (instructions) to the person who records his rights to the Shares (nominal holder). Such indication (instruction) is given in accordance with the rules of the legislation of the Russian Federation on securities.
11) Question: Do the shareholders or nominal holders (custodians) have to pay any commissions to NSD for proceeding with corporate actions of DMI TO and DMFA TO by non-resident investors?
Answer: Acceptance of DMI TO and DMFA TO may in some cases be processed through NSD’s infrastructure but not directly and without paying any fees to NSD.
12) Question: Can a shareholder withdraw an application to sell Shares under the DMI TO and DMFA TO?
Answer: A Shareholder who submitted an application for the sale of Shares under the DMI TO or DMFA TO has the right to withdraw his application before the expiration date for accepting the relevant voluntary tender offer, including in the event that a decision is made to sell his Shares under another program for the acquisition of Shares.
13) Question: If the shareholders of PJSC Detsky Mir do not want to participate in any of the announced share repurchase programs, will they be able to remain shareholders of the Company?
Answer: Shareholders of the Company are not required to participate in any of the announced tender offers. If a shareholder decides not to sell his Shares, he will remain a shareholder of PJSC Detsky Mir. It is planned that the Shares will continue to be traded on the stock exchange.
It is expected that upon completion of share purchase programs the Company may be liquidated subject to appropriate corporate approvals. In this case, the shareholders of PJSC Detsky Mir, who any reason did not sell the Shares before the start of liquidation, will be able to receive the property of the liquidated Company remaining after the completion of settlements with creditors (liquidation value) as part of the voluntary liquidation of the Company. The terms of the voluntary liquidation and distribution of the property of the liquidated Company will be announced later, subject to the relevant corporate approvals.
14) Question: Will there be a mandatory offer to purchase Shares after the completion of the current share repurchase programs?
Answer: If any of the Company’s subsidiaries acquires more than 30% of the outstanding Shares (including Shares held by its affiliates) as a result of the Share purchase programs, it will be required to send a mandatory offer to the remaining shareholders of the Company within 35 days from the date of such acquisition. At the same time, there is an option that as a result of the share acquisition programs, none of the Company’s subsidiaries will be required to send a mandatory offer (in the event that the subsidiary (including the Shares owned by its affiliates) acquires less than 30% of the Shares).
15) Question: In case a non-resident investor from unfriendly countries cannot take part in the current tender offers, will it be possible to receive payments to account specified by him, bypassing the type “C” account, as part of a mandatory tender offer, that may follow after the completion of the current tender offers?
Answer: In accordance with the decision of the Government Commission, non-resident investors from unfriendly countries will be able to receive funds for the Shares sold during the mandatory (in case the mandatory tender offer will take place) only to the “C” type accounts.
The Company underscores that in accordance with the legislation of the Russian Federation, tender price during the mandatory offer has to be at least the average-weighted price of PJSC Detsky Mir shares on the Moscow Exchange for the six months preceding the date of the tender offer sent to the Bank of Russia for preliminary consideration, and the price at which the Company and its affiliates purchased the Shares for the six months preceding the date of sending the mandatory offer to the Company (after its prior review by the Bank of Russia). We anticipate the offer price under the mandatory offer will not be lower than the price offered to the Company’s shareholders under the current share repurchase programs, which is set at RUB 71.50 per Share.
16) Question: How will the settlements with the shareholders of PJSC Detsky Mir be carried out after the completion of the current tender offers and the mandatory tender offer (in case the mandatory tender offer will take place)?
Answer: Following the completion of the share repurchase programs and the mandatory tender offer (in case the mandatory tender offer will take place) PJSC Detsky Mir may be liquidated, subject to the necessary corporate approvals. In this case, non-resident investors from unfriendly countries who, for one reason or another, do not take part in the offer to sell the Shares prior to such liquidation, will be able to receive the property of the liquidated company remaining after the completion of settlements with creditors (liquidation value) as part of the voluntary liquidation of PJSC Detsky Mir.
17) Question: How will the share repurchase programs and mandatory tender offer (in case the mandatory tender offer will take place) be funded?
Answer: The buyback of the shares will be funded by raising additional debt. The option of equity financing is not considered.
THIS DOCUMENT AND INFORMATION CONTAINED HEREIN ARE NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO, OR TO ANY PERSON IN, ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION.
THE RELEASE, PUBLICATION OR DISTRIBUTION OF THIS DOCUMENT AND/OR THE VOLUNTARY TENDER OFFER DOCUMENT MAY BE RESTRICTED BY LAW IN CERTAIN JURISDICTIONS. PERSONS INTO WHOSE POSSESSION THESE QUESTIONS & ANSWERS, THE VOLUNTARY TENDER OFFER DOCUMENT AND/OR ANY RELATED MATERIALS MAY COME ARE REQUIRED TO INFORM THEMSELVES ABOUT, AND TO OBSERVE, ANY SUCH RESTRICTIONS. FAILURE TO OBSERVE SUCH RESTRICTIONS MAY CONSTITUTE A BREACH OF SECURITIES LAWS IN THE RELEVANT JURISDICTIONS.
THIS QUESTIONS & ANSWERS SECTION IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE OR FORM PART OF ANY OFFER OR ADVERTISEMENT OR INVITATION TO SELL OR ISSUE, OR ANY SOLICITATION OF ANY OFFER TO PURCHASE OR SUBSCRIBE FOR, ANY SECURITIES OF THE COMPANY, NOR SHALL ANY PART OF IT NOR THE FACT OF ITS DISTRIBUTIONS FORM PART OR BE RELIED ON IN CONNECTION WITH ANY CONTRACT OR INVESTMENT DECISION RELATING THERETO, NOR DOES IT CONSTITUTE A RECOMMENDATION REGARDING SECURITIES OF THE COMPANY. ANY SUCH OFFER OR SOLICITATION IS MADE ONLY BY MEANS OF THE VOLUNTARY TENDER OFFER DOCUMENT RECEIVED BY THE COMPANY.
THE TERMS OF THE VOLUNTARY TENDER OFFER ARE CONTAINED IN THE VOLUNTARY TENDER OFFER DOCUMENT. INVESTORS AND SHAREHOLDERS OF THE COMPANY ARE STRONGLY ADVISED TO READ THE VOLUNTARY TENDER OFFER DOCUMENT AND RELATED MATERIALS AS SOON AS THEY HAVE BEEN PUBLISHED, AS THESE WILL CONTAIN IMPORTANT INFORMATION. IN CONSIDERING THE VOLUNTARY TENDER OFFER, THE COMPANY SECURITYHOLDERS SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THE VOLUNTARY TENDER OFFER DOCUMENT.
NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY U.S. STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED OF THE VOLUNTARY TENDER OFFER, PASSED UPON THE FAIRNESS OR MERITS OF THE VOLUNTARY TENDER OFFER OR DETERMINED WHETHER THE VOLUNTARY TENDER OFFER IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE IN THE UNITED STATES.
THE OFFEROR DOES NOT PLAN TO PURCHASE THE COMPANY’S ORDINARY SHARES, OTHER THAN PURSUANT TO THE VOLUNTARY TENDER OFFER, DURING THE VOLUNTARY TENDER OFFER PERIOD. IN ACCORDANCE WITH APPLICABLE RUSSIAN LAW, ANY ADVISER TO THE OFFEROR OR ANY OF THE OFFEROR’S AFFILIATES, AND ANY PERSON ACTING, DIRECTLY OR INDIRECTLY, IN CONCERT WITH ANY SUCH PERSONS, MAY FROM TIME TO TIME MAKE PURCHASES OF, OR ARRANGEMENTS TO PURCHASE, THE COMPANY’S ORDINARY SHARES OTHER THAN PURSUANT TO THE VOLUNTARY TENDER OFFER, BEFORE OR DURING THE PERIOD OF THE VOLUNTARY TENDER OFFER, SO LONG AS THOSE ACQUISITIONS OR ARRANGEMENTS COMPLY WITH APPLICABLE LAW. ANY OF THE PURCHASES REFERRED TO IN THIS PARAGRAPH MAY OCCUR EITHER IN THE OPEN MARKET AT PREVAILING PRICES OR IN PRIVATE TRANSACTIONS AT NEGOTIATED PRICES. INFORMATION ABOUT SUCH PURCHASES WILL BE DISCLOSED AS AND IF REQUIRED BY APPLICABLE SECURITIES LAWS.
THIS ANNOUNCEMENT, AND ANY INVESTMENT ACTIVITY TO WHICH IT RELATES, IS AVAILABLE ONLY TO (I) PERSONS WHO ARE OUTSIDE THE UNITED KINGDOM, (II) INVESTMENT PROFESSIONALS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE “ORDER”), (III) HIGH NET WORTH COMPANIES FALLING WITHIN ARTICLE 49(2)(A) TO (D) OF THE ORDER, (IV) PERSONS WITHIN THE SCOPE OF ARTICLE 43 OF THE ORDER, OR (V) ANY OTHER PERSONS TO WHOM IT MAY OTHERWISE LAWFULLY BE MADE UNDER THE ORDER (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS “RELEVANT PERSONS”). THIS ANNOUNCEMENT MAY NOT BE ACTED OR RELIED ON IN THE UNITED KINGDOM BY ANYONE WHO IS NOT A RELEVANT PERSON.
THE COMPANY IS A COMPANY ORGANISED UNDER THE LAWS OF THE RUSSIAN FEDERATION. THE VOLUNTARY TENDER OFFER IS MADE PURSUANT TO RUSSIAN LAW. THE VOLUNTARY TENDER OFFER IS SUBJECT TO DISCLOSURE AND PROCEDURE REQUIREMENTS OF THE RUSSIAN FEDERATION WHICH ARE DIFFERENT FROM THOSE OF THE UNITED KINGDOM OR THE UNITED STATES. IN ADDITION, U.S. INVESTORS SHOULD BE AWARE THAT THE VOLUNTARY TENDER OFFER DOCUMENT HAS BEEN PREPARED IN A FORMAT AND STYLE, WHICH DIFFER FROM THE U.S. FORMAT AND STYLE. FURTHERMORE, THE PAYMENT AND SETTLEMENT PROCEDURE WITH RESPECT TO THE VOLUNTARY TENDER OFFER FOR ORDINARY SHARES DIFFERS FROM U.S. PAYMENT AND SETTLEMENT PROCEDURES, PARTICULARLY WITH REGARD TO THE DATE OF PAYMENT OF CONSIDERATION.