FAQ on transformation of PJSC Detsky Mir into a private business

Reorganization

  1. The record date for shareholders to participate in the PJSC Detsky Mir extraordinary general shareholder meeting (hereinafter – EGM) (the date the list of persons entitled to participate in the EGM is drawn up): 28 November 2022.
  2. Ballot submission deadline: 29 December 2022. The last day for accepting ballots and filling in the electronic form shall be the day preceding the ballot submission deadline date (until 23:59, 28 December 2022).
  3. Date of the EGM: 29 December 2022.

Question: If a shareholder does not take part in voting on the Company reorganization or votes against it, does the shareholder get the right or obligation to present their shares for a redemption? What is the redemption price and amount?

Answer: The shareholder makes their own decision on selling the shares under the redemption procedure. You cannot force the shareholder to sell the stake. If a shareholder decides to sell the shares, PJSC Detsky Mir will have to purchase them at RUB 71.50 per ordinary share. This represents the weighted average price of PJSC Detsky Mir shares that was derived from the results of MOEX trading sessions for the month preceding the release date for the BoD agenda to be considered on 7 November 2022.

The shareholder decides themselves on the amount of shares for redemption by the Company.

Prior to the deadline required by law for submitting orders within the redemption procedure (45 days from the EGM date), the shareholder may withdraw the order at any time but only in respect of all shares tendered for the redemption. If the shareholder withdraws, PJSC Detsky Mir is not obliged to redeem such shares.

However, the cash amount that PJSC Detsky Mir is able to channel to the redemption in this regard shall not exceed 10% of the Company’s net asset value as of the EGM date (for reference: 10% of NAV is approximately RUB 1.6 bln as of the current date). This is due to legal limitations.

If the total value of shares tendered for redemption surpasses 10% of the Company’s net asset value, PJSC Detsky Mir will acquire them proportionally to the submitted orders. Shareholders who do not participate in the redemption procedure will remain holders of PJSC Detsky Mir shares.

Question: What quorum and percentage of the votes “IN FAVOR” is required for the resolution on reorganization to be approved?

Answer: To approve the reorganization, Company shareholders who collectively own 50% + 1 share of the total number of PJSC Detsky Mir shares must participate in the EGM, provided that 75% of EGM attendees voted for the reorganization.

If there is no quorum of 50% + 1 share, regardless of the number of votes “IN FAVOR”, the issue may be put to a repeat vote on the EGM.

For the repeat vote, the required quorum stands at 30% + 1 share of the total number of PJSC Detsky Mir shares. 75% votes of the subsequent EGM attendees are required for a positive resolution.

Question: Will the Company apply to the Government Commission on Monitoring Foreign Investment in Russia (hereinafter – Government Commission) for permission to direct cash for shares sold during redemption from non-resident investors from countries on the list of unfriendly countries (e.g., USA, EU countries, etc.) who did not take part in the voting or voted “against” the reorganization to their designed current accounts by skipping C-type accounts?

Answer: The Company does not plan to apply to the Government Commission for permission to pay cash to shareholders who are non-residents from countries on the list of unfriendly countries and did not take part in the shareholder vote or voted “AGAINST”. Consequently, funds received from the share redemption will be transferred to C-type accounts opened in Russia by shareholders who are non-residents from countries on the list of unfriendly countries. In addition, the Company intends to apply to the Government Commission for permission to acquire its shares from investors who are non-residents from countries on the list of unfriendly countries. If such permission is obtained, these shareholders will also have the right to tender their shares for redemption.

Question: What is the timeline for redeeming shares from shareholders who did not take part in the shareholder vote or voted “AGAINST” the reorganization, provided that there a resolution on reorganization was passed?

Answer: The deadline for tendering the shares is 45 days from the date of the EGM at which the resolution on reorganization was passed. The EGM will be held on 29 December 2022. Accordingly, in case the resolution on reorganization is approved, the deadline for tendering shares is 12 February 2023 (Sunday). Since this is not a business day, the deadline is rescheduled to the first subsequent business day, which is 13 February 2023, according to Russian civil law. PJSC Detsky Mir will then pay cash for the shares presented for redemption within 30 days from the deadline for accepting shareholders’ orders, i.e., by 15 March 2023.

Question:What will happen if shareholders do not approve the reorganization?

Answer: In this case, the Company intends to continue considering any other options available to transform it into a privately held business.

The possibility of shareholders transferring to a private company.

Question:Let us assume that the shareholders approve the reorganization at the EGM. What is the approximate period during which PJSC Detsky Mir shares will be offered for an exchange to shares of the subsidiary privately-owned joint-stock company that will be established by PJSC Detsky Mir  and own 100% of DM Limited Liability Company?

Answer: The reorganization is expected to be completed in April 2023. In May – early June 2023, as part of the voluntary tender offer, shareholders will be offered to exchange their shares into the shares of the PJSC Detsky Mir subsidiary, which will own 100% of the privately held DM Limited Liability Company under the terms and conditions set out by the BoD.

The BoD will make a decision to offer shareholders to transfer to a privately held company in 1H23. PJSC Detsky Mir reserves the right to abandon the planned business transformation or follow any other procedure for such a transformation if this may lead to serious implications for the business, shareholders and partners of PJSC Detsky Mir given the overall economic and political situation at any given time.

Question: Can shareholders exchanging their PJSC Detsky Mir shares for shares in the subsidiary remain shareholders of the non-public company?

Answer: Yes, they can. Following the exchange, the shareholders will own shares in the non-public company. Shares in the non-public company entitle their holder to take part in general meetings of shareholders, vote on agenda items, receive dividends, etc. The Articles of Association of the non-public company will be published along with an offer to transfer to the non-public company.

Question: Can shareholders decide not to exchange their shares of PJSC Detsky Mir for shares of the subsidiary joint-stock company?

Answer: Yes, they do not have to exchange their shares as they should expect an offer to sell their 100% shares of PJSC Detsky Mir simultaneously with the share exchange option.

Offer to sell shares.

Question: What will be the timeframe for sending a voluntary tender offer?

Answer: The voluntary tender offer procedure will run in parallel with a process to exchange shares for shares in the non-public company, approximately from May–June 2023 to no later than August 2023.

Question: What purchase price of the voluntary tender offer can be expected for PJSC Detsky Mir shareholders unwilling to exchange their shares for shares in the non-public company?

Answer: The price of the voluntary tender offer may vary. The PJSC Detsky Mir subsidiary will set the price of the voluntary tender offer it conducts.

All shareholders who decided not to participatein the share exchange are expected to be offered a price not lower than that offered to shareholders who voted against the reorganization or did not participate in the EGM vote, which is set at RUB 71.50 per ordinary share. At that stage, the buyback amount will be 100% of shares outstanding following the exchange of publicly traded shares for shares in the non-public company. `

PJSC Detsky Mir plans to request authorization from the Government Commission before the end of November 2022 to grant a permission to pay cash to shareholders who are non-residents from countries on the list of unfriendly countries (e.g., USA, EU countries, etc.) under the voluntary tender offer and the payments in rubles will be made to respectively indicated accounts of non-resident investors by bypassing C-type accounts. This money can then be used by investors at their own discretion, and no additional approval of the Russian regulator is required.

It is also possible that due to changes in the economic and political situation, Detsky Mir may abandon the voluntary tender offer and completes the business transformation at the organization stage or temporarily suspend it, or amend the term and conditions of the voluntary tender offer.

The Board of Directors will make every effort to make sure the shareholder rights are fully protected.

Question: What price can be expected in a mandatory tender offer?

Answer: As opposed to the voluntary tender offer, the price in the mandatory offer shall meet certain requirements.

The board of directors will be guided by the price to be at least at the average-weighted price of PJSC Detsky Mir shares on the Moscow Exchange for the six months preceding the date of the tender offer as required by Russian legislation on joint stock companies and the cost determined by the independent appraiser. We anticipate the offer price to be at least the price offered to shareholders voting against reorganization or not participating in voting at the EGM which is set at RUB 71.50 per ordinary share.

PJSC Detsky Mir plans to request authorisation from the Government Commission before the end of November 2022 to grant a permission to pay cash to shareholders who are non-residents from countries on the list of unfriendly countries (e.g., USA, EU countries, etc.) under the mandatory tender and the payments in rubles will be made to respectively indicated accounts of non-resident investors by bypassing C-type accounts. This money can then be used by investors at their own discretion, and no additional approval of the Russian regulator is required.

Subject to economic and political developments, PJSC Detsky Mir may decide against launching a mandatory tender offer and therefore either complete the business transformation at the reorganization and voluntary tender offer stage or temporarily suspend further transformation if the subsidiary purchases less than 30% of PJSC Detsky Mir shares, or change the terms of the mandatory tender offer.

The Board of Directors will make every effort to make sure the shareholder rights are fully protected.

Question: How soon after the end of the offer to exchange the shares of PJSC Detsky Mir for the shares of a private company will the mandatory tender offer be made?

Answer: It is anticipated that the mandatory tender offer will be made after completion of the voluntary offer stage in August–September 2023 and will continue for the period of time required by law.

Question: What independent appraiser will be engaged for a valuation of PJSC Detsky Mir?

Answer: PJSC Detsky Mir will engage an experienced and reputable independent appraiser to ensure the appraisal is in full compliance with the law and industry standards.

Question: When does PJSC Detsky Mir plan to request authorization from the Government Commission, and what is the timeframe for their consideration?

Answer: PJSC Detsky Mir plan to apply to the Government Commission before the end of November 2022. There are no rules regarding the period of their consideration. Detsky Mir will keep the stakeholders informed of the progress.

Question: Should the Government Commission grant permission to remit payments in rubles for shares of non-resident investors from unfriendly jurisdictions to their respectively indicated accounts by bypassing C-type accounts under both voluntary and mandatory tender offers, how could these investors withdraw rubles from the Russian Federation?

Answer: It is expected that if the Government Commission grants permission, the payments in rubles will be made to respectively indicated accounts of non-resident investors by bypassing C-type accounts. This money can then be used by investors at their own discretion, and no additional approval of the Russian regulator is required. We recommend that our investors additionally consult with their servicing banks; information on authorization will be published by the Company and made available to the banks for the purpose of making transactions.

Question: Does the private subsidiary of PJSC Detsky Mir have an option of not making a mandatory tender offer to all shareholders next year?

Answer: The private subsidiary company of Detsky Mir will have to make a mandatory tender offer to redeem the shares provided 30%+1 shares of Detsky Mir are acquired as part of the voluntary tender offer. In other cases, the private subsidiary might not make the mandatory offer.

Question: Will the strategic investor of PJSC Detsky Mir participate in the mandatory tender offer (if made) and will the redemption be applicable to it?

Answer: All shareholders, including strategic investors, make their own decision on whether or not to take part in the mandatory tender offer. 

To the best of our knowledge, strategic investors plan to participate in the exchange of their shares for the shares of the private company and, therefore, will not be a part of the redemption program.

Question: How will the redemption under the voluntary and mandatory tender offer be funded?

Answer: The Company anticipates funding the redemption of shares using additional debt. The option of equity financing is not considered.

Question: Could you give us more details on the settlement procedure under the voluntary and mandatory tender offers?

Answer: All technical details will be available from the largest local brokers and local depositories prior to the launch of the voluntary tender offer program. Detsky Mir will prepare the instructions for all shareholders participating in the settlement process (both residents and non-residents) reasonably in advance.

Further actions after completion of the offer

Question: What are the next steps Detsky Mir will take following the completion of the share redemption program?

Answer: Once the program and the settlements with shareholders are completed, the Company will look into different options to return the investments to shareholders who for whatever reasons failed to participate in the exchange or redemption of their shares. We anticipate the sum of this return will be formed considering the appraisal of Detsky Mir at the stage of the tender offer. The Company plans to request authorization from the Government Commission to remit payments in rubles for shares of non-resident investors from unfriendly jurisdictions to their respectively indicated accounts by bypassing C-type accounts. Should such authorization be granted, the shareholders may use the funds at their own discretion and no additional approval from the Russian regulator will be needed.

Disclaimer

This Questions & Answers (Q&A) section as well as any information set forth above (including any forecasts and promises) shall be deemed to be:

  • a preliminary contract (binding for the conclusion of the main contract in the future);
  • a framework agreement; therefore the general terms and conditions set forth in this Section will not apply to legal relations that have arisen or may arise in the future between PJSC Detsky Mir  and/or any person affiliated with PJSC Detsky Mir  and any third parties in case of any transaction or civil law relations on any other legal basis;
  • a put option or an option agreement;
  • an agreement on the rules of negotiations;
  • an offer (including a public offer) and/or acceptance of an offer as well as an offer to make offers and, accordingly, does not oblige Detsky Mir and/or other third parties to enter into transactions with any third parties or perform any other legally significant actions;
  • a transaction that imposes obligations on PJSC Detsky Mir  that may be enforced by a third party, including through a judicial recourse;

This information does not impose any legally binding liabilities on Detsky Mir and/or any third parties.

Any reference to the timing of certain actions does not impose any obligation on PJSC Detsky Mir or any third party to act solely on the dates or time periods indicated, except for the timing of actions required to be taken by Detsky Mir as part of the share redemption requested by shareholders who voted against the reorganization or did not vote if the reorganization is deemed to be approved at the EGM.

In the event that any of the actions specified above require appropriate corporate or regulatory approvals and consents, the relevant actions may not be taken by PJSC Detsky Mir or others in absence of such approvals.

Any of the actions specified in this Q&A section, other than those required by law, may be canceled, modified or revised by PJSC Detsky Mir  and/or other specified parties due to material changes in the economic and political environment or any other factors at the discretion of PJSC Detsky Mir  or other parties involved.

IMPORTANT INFORMATION

This announcement does not constitute a public offer, advertisement or a voluntary or mandatory tender offer under Russian law.

NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO, OR TO ANY PERSON IN, THE UNITED STATES, CANADA, AUSTRALIA, JAPAN, SOUTH AFRICA OR IN OR INTO, OR TO ANY PERSON IN, ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE LAWS OF SUCH JURISDICTION.

This announcement may contain “forward-looking statements” concerning the Company. Generally, the words “will”, “may”, “should”, “could”, “would”, “can”, “plan”, “opportunity”, “believes”, “expects”, “intends”, “anticipates”, “estimates” or similar expressions identify forward-looking statements. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements.  Forward-looking statements include statements relating to business and management strategies of the Company.  Many of these risks and uncertainties relate to factors that are beyond the Company’s ability to control or estimate precisely and therefore undue reliance should not be placed on such statements which speak only as at the date of this announcement.  The Company assumes no obligation in respect of, and does not intend to update, these forward-looking statements, except as required pursuant to applicable law.

Contacts

Nikita Moroz
Investor Relations Director
Ekaterina Mitkina
Deputy Investor Relations Director