ZAGREB (Croatia), Mar 12, 2010 -- (InPR) -- Conducting Business in the circumstances of recession, substantial decline in majority of citizens' purchasing power and loss of consumers' trust had a considerable effect on Business results of Magma Group in 2008 and 2009. Decrease in capital caused by Business results in the previous two years, the problem of market illiquidity, decline in sales income and macroeconomic forecasts for 2010 are the reasons due to which the company management decided to convene Extraordinary General Assembly with proposal on increase in the original capital of the company. The proposed recapitalisation would result in level of capital that is satisfactory to the company unimpeded acquisition of goods and services, restructuring short-term liabilities into long-term ones and further growth and development.
The management and the Supervisory Board proposed increase in the capital by the issue of 200,000 new stocks at the price of HRK 57.00 each, which would result in increase in capital for the amount of at most HRK 114,000.00.
Regarding the fact that provisions of Capital market Act state that every bid of stocks to the existent shareholders is considered to be a public bid, which requires creating a prospectus approved by the Croatian Financial Services Supervisory Agency, the company management has decided to utilise the exceptions to the aforementioned obligation in order to accelerate the company's recapitalisation procedure. Pursuant to Article 351 paragraph 1 item 11 of the Capital market Act, a public bid of securities is allowed without publishing a prospectus from that bid in advance if the bid is sent to fewer than a hundred legal and natural persons. Utilising the aforementioned exception to the making, approving and publishing of a public prospectus would not in itself be possible without cancelling the right of pre-emption in the subscription of new stocks. In the case that the cancelling was not affected, dynamics of the recapitalisation process, and inflow of new capital, would be slowed down considerably, taking into consideration the legal procedure and deadlines which have to be obeyed in the case of exercising the right of pre-emption, and on the other hand it would present a relatively high cost for the company. Stated separately, regarding the existent number of all Magma shareholders (more than 4,500 shareholders), as well as the fact that the shareholders who will not have the opportunity to subscribe stocks represent just over 4% of the company original capital, which in itself cannot have considerable effect on the amount of the increase, or the existent rights attached to shares.
Subsequently, the company management and the company Supervisory Board propose to the General Assembly that the right of pre-emption should be cancelled, the opportunity to subscribe shares should be given to the company shareholders, which regarding their current share have more pronounced interest in subscription and, as it is assumed, sound financial position to participate in the company recapitalisation. Under existing circumstances of conducting Business, the largest shareholders bear the greatest risk because they are the most exposed ones due to their share in the original capital, which is additional reason to provide htem with an opportunity (and to expect from them) to actively participate in stabilising the company's operations by participating in increase in the original capital, proportionally to existent shares in the company.
In order to still provide an opportunity for as many shareholders as possible to subscribe stocks, i.e. not only for the largest shareholders, but to evade the obligation to publish the prospectus, the company management and the Supervisory Board propose that subscription right be given to the shareholders holding 1,000 or more company stocks, and which are known to the company by their names. The afore mentioned shareholders represent 92,37% of the original capital of the company before the proposed recapitalisation.
The company management and the Supervisory Board propose that the persons who were as at 1 March 2010 registered (directly or via a representative) in the depository of the Central Clearing and Depository company d.d. (SKDD) as shareholders in the company are regarded as shareholders in the company for the requirements of recapitalisation, because that took place before the company publicly announced its recapitalisation decision, and that would prevent stock price manipulation in the market.
Due to all given reasons, the management and the Supervisory Board of the company propose that the General Assembly should cancel the right of pre-emption in the subscription of new stocks in the decision on increase in the original capital.
Goranko Fižulić, Chairman of the Board
Source: Zagreb Stock exchange, March 11, 2010
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