Nasdaq Tallinn Stock Exchange announcement regarding the planned merger of AS Baltika

Investors' interest in connection with AS Baltika's merger and their plan to
delist has been significant. Neither AS Baltika nor its main shareholder has
considered it necessary to disclose additional information as a market
announcement, which would help AS Baltika's minority shareholders to form an
opinion. AS Nasdaq Tallinn, as the organizer of the Regulated Market, plays an
important role in ensuring a transparent trading environment as well as better
investor communication. Therefore, Nasdaq Tallinn Stock Exchange considers it
necessary to clarify the already disclosed information and to disclose the
additional information provided by AS Baltika to Nasdaq Tallinn Stock Exchange,
which may help the shareholders of AS Baltika to form their opinion, including
preparing for the extraordinary general meeting of AS Baltika, to be held on
July 27th, 2023, the agenda of which includes the approval of the merger
agreements signed between AS Baltika and KJK BLTK Holding OÜ on June 26th,
2023, the takeover of the shares of minority shareholders and the process of
delisting of AS Baltika shares. 

Takeover offer versus Squeeze-out Takeover of shares for conducting merger

Nasdaq Tallinn Stock Exchange first states that AS Baltika's main shareholder,
KJK BLTK Holding OÜ, will take over (squeeze-out) the shares of the minority
shareholders of AS Baltika to carry out the merger in accordance with § 4211 of
the Commercial Code
(https://www.riigiteataja.ee/en/eli/509012023001/consolidepara421b1). Carrying
out a merger with taking over the shares is not considered as a takeover offer
in the sense of § 165 of the Securities Market Act
(https://www.riigiteataja.ee/en/eli/513042023004/consolidepara165). Therefore,
the Financial Supervision Authority does not check the legality of the
determination of the fair price offered for each share. Nasdaq Tallinn Stock
Exchange has also previously explained the specifics of the takeover offer and
the squeeze-out, available in Estonian only:
https://nasdaqbaltic.com/et/news/ulevotmispakkumine-voi-aktsiate-ulevotmine/. 



Determining the fair price for the share

§ 4211 of the Commercial Code requires the compensation paid for the share to
be determined according to § 3632 of the Commercial Code
(https://www.riigiteataja.ee/en/eli/509012023001/consolidepara363b2), which
stipulates that the amount of compensation to be paid to the minority
shareholders shall be determined by the main shareholder, and the amount of
compensation (fair price) shall be determined based on the shares' value 10
days prior to the issuer's market announcement of convening the extraordinary
shareholders meeting. Nasdaq Tallinn Stock Exchange notes that 10 days prior to
AS Baltika's announcement of convening their extraordinary shareholders
meeting, i.e., June 16th, 2023, the share of AS Baltika traded at a price of
approximately 0.15 euros. The minority shareholders can find the price chart
here: https://nasdaqbaltic.com/statistics/en/instrument/EE3100145616/trading. 

The main shareholder of AS Baltika has calculated and set the price of the
share to be paid to the minority shareholder at 0.08 euros based on the
discounted cash flow (DCF) method. In the takeover report, compiled by the main
shareholder, and published on AS Baltika's website
(https://baltikagroup.com/wp-content/uploads/2023/06/Ulevotmisaruanne_KJK-BLTK-H
olding.pdf),
the main shareholder has specified that using DCF method is considered to be
the most appropriate, and further claims, that the fair value of shares could
not be determined using the market value because of no active and liquid market
conditions (clause 4.4.1 of the takeover report of the main shareholder). The
main shareholder refers to the FTSE Russell methodology for determining market
liquidity, which determines the market liquidity threshold for Micro Cap Index'
shares, but has not disclosed this document's link for the convenience of the
minority shareholders. Nasdaq Tallinn Stock Exchange notes that the mentioned
document is publicly available here:
https://research.ftserussell.com/products/downloads/Guide_to_Calculation_Methods
_for_GEIS_Liquidity.pdf. 

AS Baltika explained to Nasdaq Tallinn Stock Exchange that the main shareholder
has chosen the discounted cash flow (DCF) method instead of the market value,
taking into account the decisions of the Supreme Court, but did not specify
which decisions of the Supreme Court are being referred to. However, Nasdaq
Tallinn Stock Exchange draws the attention of minority shareholders to the fact
that the decisions of the Supreme Court, with keywords "Aktsiate ülevõtmine,
ülevõtmispakkumised" can be found in Estonian language here:
https://www.riigikohus.ee/et/lahendid/marksonastik?marksonadObjektIds=206108690. 

Nasdaq Tallinn Stock Exchange notes that pursuant to § 3632 of the Commercial
Code, the Management Board of AS Baltika had to submit to the main shareholder
all the data, documents, and information necessary for calculation purposes and
determining the compensation to be paid for shares. Nasdaq Tallinn Stock
Exchange has asked AS Baltika to consider disclosing the future forecasts and
cash flow report, in order to give the minority shareholders also the
opportunity to calculate the amount of fair compensation for their shares,
similarly to the main shareholder. AS Baltika informed Nasdaq Tallinn Stock
Exchange that disclosure of financial forecasts is not mandatory for listed
issuers according to current regulations, and since AS Baltika has not
previously disclosed internal financial forecasts, AS Baltika has no obligation
to disclose financial forecasts in connection with the intention of the main
shareholder to take over the shares. AS Baltika also found that, according to
their understanding, the Commercial Code does not oblige the issuer to disclose
the information or forecasts provided to the shareholder by the issuer's board
in connection with the process of minority shareholders' squeeze-out through
the stock exchange announcement system. 

However, AS Baltika has confirmed to Nasdaq Tallinn Stock Exchange that
minority shareholders have the opportunity to ask questions to which no answers
can be found in AS Baltika's stock exchange announcements during the
extraordinary general meeting. 

Finally, Nasdaq Tallinn Stock Exchange draws attention to the fact that,
although pursuant to § 3638 subsection 2 of the Commercial Code, the takeover
decision cannot be declared invalid on the grounds that the compensation to be
paid to the minority shareholders was determined to be too low, yet, according
to subsection 3 of § 3638 of the Commercial Code, the minority shareholder has
the right to request that the fair compensation is determined by the court. 



Timely disclosure of Inside Information by AS Baltika

Nasdaq Tallinn Stock Exchange has also asked AS Baltika why AS Baltika or the
main shareholder (taking into account that the management members and
supervisory board members partially overlap) did not inform the market and
investors about the takeover plan until June 22nd, 2023, although it can be
assumed that this plan was probably known to both the main shareholder and the
issuer. Nasdaq Tallinn Stock Exchange asked AS Baltika to refer to the basis
given in the Market Abuse Regulation (MAR)
(https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02014R0596-20210101
)
or the ESMA guidelines "Delay in the disclosure of inside information"
(https://www.esma.europa.eu/sites/default/files/library/2016-1478_mar_guidelines
_-_legitimate_interests.pdf),
or to explain why they do not apply. 

AS Baltika responded to the inquiry that according to MAR, AS Baltika, as an
issuer, is obliged to disclose such information, which qualifies as "Inside
Information" in the sense of Article 7 of MAR (undisclosed information of a
precise nature, which, if disclosed, would likely have a significant impact on
the price of AS Baltika's shares). In this regard, according to Article 7,
section 2, of the MAR, information shall be deemed to be of a precise nature if
it indicates a set of circumstances which exists or which may reasonably be
expected to come into existence, or an event which has occurred or which may
reasonably be expected to occur, where it is specific enough to enable a
conclusion to be drawn as to the possible effect of that set of circumstances
or event on the prices of the financial instruments. 

According to AS Baltika's understanding, the obligation to disclose arises when
it is considered as "inside information" within the meaning of MAR.
Accordingly, AS Baltika disclosed the process in question through stock
exchange announcement system on the first day when the planned merger and the
intention of the main shareholder to take over the minority shares had become
sufficiently specific that it could be considered precise information within
the meaning of the above provisions of MAR. AS Baltika explained that, as far
it knows, the main shareholder made a specific internal decision to carry out
the planned merger immediately before announcing it to AS Baltika on June 22nd,
2023, and that the plan for the merger and takeover was not yet clear enough
before making the corresponding decisions. The initiation of the takeover of
minority shareholders' shares and the related merger process depended on
several different factors and processes, among other things, the prerequisite
for making the relevant decision was the completion of the fair value
assessment of the shares by an independent appraiser and its result, as well as
the preliminary confirmation of the correctness of the assessment from the
independent auditor. 

According to the information provided to AS Baltika, the above-mentioned
valuation process was completed on June 21st, 2023, after which, as far as AS
Baltika is aware, several substantive discussions took place at the level of
the main shareholder and its parent company, and the main shareholder informed
AS Baltika about the final internal decision to start the takeover and merger
process on June 22nd, 2023, after which AS Baltika announced publicly the
corresponding intention of the main shareholder with a stock exchange
announcement on the same date. 

AS Baltika emphasized that, in their opinion, the mere fact that the members of
AS Baltika's Supervisory Board act simultaneously as members of the main
shareholder's management body does not mean that the discussions at the level
of the main shareholder regarding possible plans or considerations would be
known to AS Baltika (including its management board) or would automatically be
considered as AS Baltika inside information. At the level of AS Baltika's
Supervisory Board, the first decisions related to takeover and merger were made
on June 26th, 2023, when the main shareholder submitted a request for the
takeover of minority shareholders' shares to the Management Board of AS Baltika
and a merger agreement was signed between the main shareholder and AS Baltika.
On June 26th, 2023, AS Baltika informed through the stock exchange announcement
about all the mentioned processes. 


In summary

Although Nasdaq Tallinn Stock Exchange has not currently identified direct
grounds for initiating a surveillance procedure, AS Nasdaq Tallinn emphasizes
that it expects transparency and the timely disclosure of such information
through the stock exchange announcement system from all listed issuers, which
would ensure the reliability of securities market. Nasdaq Tallinn Stock
Exchange also refers to point 2.1.3. of the section "Requirements for Issuers"
of the stock exchange rules, whereby the Issuer shall consider in its
operations that the time of disclosure of information about a
transaction/act/event in the Issuer's operations or otherwise related to the
Issuer does not depend on the performance of any formalities necessary for its
occurrence, and the disclosure of information shall not be delayed with the
excuse of waiting for an event or circumstance to become official. If the event
has occurred or its occurrence is likely, but the formalities necessary for the
occurrence of the event, or any other formalities, have not been performed at
the moment of disclosure of information, or if another condition or risk
relates to the occurrence of the event, such facts shall be presented along
with the information being disclosed. 

Nasdaq Tallinn Stock Exchange emphasizes that it is not usual for the operator
of the Regulated Market to publish additional information for this purpose, but
in this particular case Nasdaq Tallinn Stock Exchange found that the disclosure
of the information as a press release is appropriate. 



Additional information:

Ott Raidla
Marketing and Communications Manager
Nasdaq Tallinn
[e-mail]
[phone]