Memorandum of understanding signed between PKN ORLEN and State Treasury (with Grupa LOTOS participating) concerning PKN ORLEN’s intended acquisition of Grupa LOTOS shares from State Treasury
Report no. 31/20192019-08-26

Grupa LOTOS S.A. (the “Company” or “Grupa LOTOS”) announces that on August 22nd 2019 a memorandum of understanding was signed between the State Treasury and PKN Orlen S.A. (“PKN Orlen”), with Grupa LOTOS participating in the process, concerning a proposed transaction in which PKN Orlen would acquire Company shares from the State Treasury (the “Memorandum”) (the “Transaction”), which in turn would result in PKN Orlen acquiring, directly or indirectly, control of Grupa LOTOS.

The Memorandum is related to the letter of intent signed between PKN Orlen and the State Treasury, as announced by PKN Orlen in Current Report No. 26/2018.

The Memorandum is not binding on, nor does it give rise to any obligations for, the parties to follow through with the Transaction. It only outlines their common understanding of the envisaged Transaction structure and further cooperation in its implementation. The parties to the Memorandum and Grupa LOTOS may enter into separate agreements or arrangements to govern more specifically or differently the Transaction structure and other pertinent matters. The Memorandum is not an offer or preliminary agreement within the meaning of the Polish Civil Code of April 23rd 1964, nor does it constitute any other legal transaction that would bind the State Treasury to enter into the proposed Transaction.

The Memorandum confirms the framework structure of the Transaction, as outlined in the letter of intent executed on February 27th 2018 between the State Treasury and PKN Orlen, subject to its more detailed specification at a later stage of the process, based in particular on remedies resulting from the European Commission’s future decision concerning the intended concentration.

If any part of Company shares are sold other than by way of a tender offer, the price of such shares would be determined based on a valuation performed by the State Treasury using at least two generally accepted valuation methods, taking into account the relevant requirements laid down in the laws of general application, especially the Polish Act on State Property Management. The sale price of Company shares covered by the tender offer would be determined  in accordance with the laws of general application specifying the rules for pricing shares in tender offers referred to in the Polish Act on Public Offering, Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies.

The parties to the Memorandum expect that the Transaction will be possible upon the occurrence of the following events, in particular the pre-conditions for disposal of Grupa LOTOS shares, i.e.:

  1. the European Commission’s authorising the proposed concentration of undertakings: PKN Orlen and Grupa LOTOS;

  2. the provisions of the Company’s Articles of Association that limit the voting rights of shareholders holding more than 10% of total voting rights existing at Grupa LOTOS on the date of a General Meeting being repealed or amended;

  3. the Polish Council of Ministers’ approving the disposal of Grupa LOTOS shares by the State Treasury to PKN Orlen in accordance with the applicable provisions of the Polish Act on State Property Management;

  4. corporate approvals being given by PKN Orlen’s relevant governing bodies for the acquisition of Grupa LOTOS shares, in accordance with the applicable laws;

  5. an agreement being made regarding the exercise of voting rights attached to Grupa LOTOS shares by PKN Orlen and the State Treasury such that, if the tender offer results in a proportional reduction of shares tendered in the offer by the State Treasury, i.e. if the State Treasury remains a minority shareholder of Grupa LOTOS – then, subject to any written arrangements providing otherwise, PKN Orlen and the State Treasury would exercise their voting rights at the Grupa LOTOS General Meeting independently of each other and would not be bound by any written or oral agreement concerning acquisition of Grupa LOTOS shares, voting in concert at the Grupa LOTOS General Meeting, or pursuit of any consistent policy towards Grupa LOTOS.

As a signatory of the Memorandum, Grupa LOTOS confirms its knowledge of the proposed Transaction, and further confirms its declaration of will to duly cooperate with the State Treasury and PKN Orlen within the limits defined by applicable laws, including in applying for the European Commission’s approval of the concentration and submission of the Grupa LOTOS Management Board’s position regarding the proposed tender offer for Company shares.

Legal basis: Article 17(1) of MAR