51.5 Acquisition of Bank Pekao SA

On 28 September 2016, the negotiations started aiming at the acquisition of a substantial package of Pekao shares from UniCredit S.p.A. ("Seller", "UniCredit”, PZU, PFR and Sellers are collectively referred to as "Parties") by PZU acting in consortium with PFR. The negotiations ended on 8 December 2016.

The Management Board and the Supervisory Board of PZU granted their consent for concluding the Share Purchase Agreement ("SPA") with UniCredit concerning the package of shares of Pekao, as well as for concluding other agreements indispensable for the realization of the planned transaction.

On 8 December 2016, PZU and PFR signed the SPA with UniCredit.

The point of the transaction resulting from the SPA is the acquisition of a substantial (ultimately covering approx. 32.8% of the total number of votes) Pekao shares package by PZU and PFR acting in concert. The transaction shall be realized under the structure covering two stages. During the first stage:

  • PZU will purchase from the Seller 100% of shares in the special purpose vehicle ("SPV"), which will be the owner of Pekao shares representing approx. 20% of the total number of votes; and, at the same time,
  • PFR will perform direct acquisition of the share package representing approx. 10% of the total number of votes.

In the second stage, falling to a period no shorter than 60 days from the first acquisition, PFR will directly acquire the remaining package of Pekao shares covered by the SPA, representing approx. 2.8% of the total number of votes (both stages combined are called "the Transaction").

The price agreed upon by the Parties is PLN 123 per share, which implies total price of PLN 10,589 million for the whole package acquired by PZU and PFR, of which the price for the package purchased by PZU amounts to PLN 6,457 million. As a rule, SPA does not provide the basis for corrections of acquisition price except for automatic decrease of the total sales price by the amount of the dividends paid to the Seller.

The realization of the transaction will be conditional upon the fulfillment of the conditions precedent described in the SPA, which include mainly the following:

  • (i) obtaining consents of anti-trust authorities operating in Poland and Ukraine; and
  • (ii) obtaining appropriate consents or decisions of PFSA by the Seller and PZU and PFR.

According to the SPA, the conditions have to be fulfilled before the end date, which, as a rule, is fixed at the first anniversary of signing the SPA, i.e. on 8 December 2017. In the case in which the conditions are not met or are cancelled in accordance with SPA, each party shall be entitled to terminate the SPA, which will result in withdrawal from the realization of the Transaction in line with the rules determined in the SPA.

SPA covers a specific catalogue of declarations and warranties made by the Seller with regard to the shares for sale and to business situation and condition of Pekao and other entities from the capital group of Pekao. Moreover, SPA provides exemption from liability to PZU and PFR due to any damages resulting from regulatory changes influencing Pekao’s current credit portfolio denominated in CHF. The Parties agreed that the abovementioned exemption from liability will not exceed the amount agreed upon and will be available to PZU and PFR generally for the period of 3 years since the acquisition of Pekao shares by PZU and PFR during the first stage of the Transaction.

Under the SPA, PZU and PFR agreed with the Seller on the prohibition clause biding the Seller and the entities from its capital group, as well as on the non-solicitation clause concerning key staff members of Pekao.

Due to the need to appropriately separate Pekao from the Seller’s capital group, the Parties will conclude an agreement regulating the basic rules for separating Pekao (in terms of IT) from the Seller’s capital group. The agreement shall determine the rules mainly for the provision of process handling continuity based on the IT systems owned by Pekao and regulation of the principles and costs related to ensuring Pekao’s self-sufficiency after the realization of the Transaction in the context of access to services and rights to software.

Moreover, the Parties determined that their intention is to fully include Pioneer Pekao Investment Management SA (and, indirectly through this, Pioneer Pekao TFI SA as well), Pekao Pioneer PTE SA and Dom Inwestycyjny Xelion Sp. z o.o. in the capital group of Pekao. Therefore, SPA included a term sheet for the purchase of shares of the entities mentioned above, which as at the date of signing the SPA were owned by the Seller (or the entities from its group) and not by Pekao.

It was determined that the maximum share purchase price for Pioneer Pekao Investment Management SA, Pekao Pioneer PTE SA and Dom Inwestycyjny Xelion Sp. z o.o. will not exceed the amount of PLN 634 million in total, and the shares will be purchased for this price by either Pekao or PZU or the entity indicated by PZU. As a rule, there is no basis for corrections of the abovementioned acquisition prices except for automatic decrease of the total sales prices by the amount of dividends paid to the Seller or the entities from its group.

On 8 December 2016, in relation to the SPA, PZU and PFR concluded also the Consortium Agreement. The Consortium Agreement determines mutual rights and obligations of PZU and PFR in terms of carrying out and closing the Transaction and joint cooperation of PZU and PFR in relation to SPA and the Transaction ("Consortium Agreement").

The law governing the SPA, the Consortium Agreement and the Shareholders’ Agreement is the Polish law.

Shareholders’ Agreement between PZU and PFR

On 23 January 2017, PZU and PFR singed the Shareholders’ Agreement ("Shareholders’ Agreement") constituting a part of documentation for the transaction of acquisition of a substantial package of Pekao shares described above.

The Shareholders’ Agreement was concluded due to the fact that PZU and PFR want to: build long-term value of Pekao, pursue the policy to provide development, financial stability and effective yet prudent management towards Pekao after closing the share purchase agreement, as well as provide adequate standards of corporate governance for Pekao.

The point of the Shareholders’ Agreement is to set the rules of cooperation between PZU and PFR after the realization of Pekao shares purchase and the rights and obligations of Pekao’s shareholders, especially in terms of determining the method of exercising the joint voting rights attached to the owned shares, as well as to manage the common long-term policy for Pekao’s activity in order to achieve the abovementioned goals.

Especially the provisions of the Shareholders’ Agreement cover the following matters:

  • PZU and PFR mutually agreed to vote "for" adopting the resolutions concerning distribution of profit and dividend payout according to the rules and within the limits determined by the applicable provisions of law and PFSA’s recommendations and in line with the current practices of Pekao;
  • with reservation of certain exceptions – in a situation in which the consensus upon the method of exercising voting rights is not reached by PZU and PFR, PZU will determine the method for voting and PFR will be obliged to vote in accordance with PZU’s standpoint;
  • mutual obligations of PZU and PFR aiming at limiting the possibilities of disposal of owned Pekao shares by each party, as well as contractual pre-emptive right in a case in which a party intends to dispose any or all owned Pekao shares;
  • party’s right to perform shares repurchase concerning the shares owned by the other party which would reject or terminate the Shareholders’ Agreement;
  • rules of cooperation and mutual relations between PZU and PFR and the entity providing financing to PFR for the realization of Pekao shares purchase. PZU and PFR will also start negotiations in order to conclude an additional tripartite agreement with this entity, which will provide clarifications on their mutual relations in the context of the content of the Shareholders’ Agreement and documentation of financing PFR;
  • method of conduct for the Parties in order to monitor if they fulfill the obligations arising from the Act of 29 July 2005 on Public offering, conditions governing the introduction of financial instruments to organized trading, and public companies (i.e. Journal of Laws of 2016, item 1639), as well as to exclude the obligation to make a call to subscribe for sale of Pekao shares in line with the provisions of the abovementioned Act.

The Shareholders’ Agreement comes into force on the date of realization of the first stage of the Transaction concerning Pekao shares purchase by PZU and PFR.

The Shareholders’ Agreement was concluded for a limited period of 5 years from the time of entry into force, and during the period of 12 months from its coming into effect it cannot be rejected or terminated by either party.

The law governing the Shareholders Agreement is the Polish law.

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