M&A - UKRAINE

1. M&A - UKRAINE Irina Paliashvili 4th IBA Conference Mergers and Acquisitions in Russia and CIS Moscow 24 October 2012

2. General Overview • Inflow of foreign direct investment (“FDI”) in Ukraine in 2011 totaled 7,5 billion dollars (source: the State Agency on Investments and National Projects) • 53 major M&A deals in 2011, 15 major M&A for 5 months 2012 (source: the National Commission for Securities and Stock Market) • 5 Ukrainian companies announced listing of their shares on the Warsaw stock exchange (KGS Auto, Westa, Coal Energy, Industrial Milk Company, Ovostar Union NV) Key Sectors, Significant Transactions in 2011-2012 Agriculture (several acquisitions made by Kernel, acquisition of Belgravia by Chinese Noble group, acquisition of T&S Holding by Lauffer) Bank & Finance (acquisition of Renaissance Capital Bank by SCM Group) Chemical production (several acquisitions made by DF Group) Energy/Oil&Gas (acquisitions of Dneprobenergo and Donetskoblenergo made by DTEK Group through privatization) Industrial (acquisition of Zaporozhstal by Metinvest) IT/ Telecommunications (privatization of Ukrtelecom by EPIC, setting up a JV United Online Ventures controlling internet portals i.ua, bigmir.net, tochka.net by United Media Holding and Media Group Ukraine, acquisition of mail.ua by Mail.Ru Group)

3. CASE STUDY:Acquisition by a multinational Pharma Company of the distributor chain for special products in CIS countries • Key structure • Private M&A • Acquisition of shares from the direct owners of the Target • Key challenges - Choosing the buyer company and jurisdiction -Target was not ready for DD: provided incomplete set of documents, limited cooperation • Unorganized labor relations with the employees, irregular labor relations with the directors - Long-term agreements of Target on unfavorable terms and conditions; lack of compliance with local regulatory requirements. • Regulatory and other hurdles • Problems with collecting information for the AMC filing: unwillingness of both parties to provide the information, incomplete information disclosure, etc. • Problems with consideration of transaction by the AMC: request for the full set of documents, opening a case on concentration: request for additional information/documents, because the market segment was new for the AMC

4. MAJOR M&A TRANSACTIONS THAT MAY BE SUBJECT TO ANTITRUST PRIOR APPROVAL • merger or consolidation of a business entity; • acquisition of direct/indirect control over a business entity: • direct or indirect acquisition, obtaining of ownership of, or management over, the shares (participating interest) of the business entity, if such acquisition results in the obtaining of or over 25 % (but under 50%) or 50% (or over 50%) of the voting rights of the target business entity • establishment of a JV • acquisition of title to assets comprising the integral property complex or its part (structural subdivision), as well as the rent, lease, concession or acquisition by other means of the right to use such assets, including the acquisition of such assets from a business entity being liquidated THE LIST PROVIDED IN THE LAW IS NOT EXHAUSTIVE THRESHOLDS (a) the combined worldwide total asset value or aggregated sales turnover for the last financial year of all participants in the concentration, taking into account their relations of controls, exceeds €12 million; and (b) the worldwide total asset value or aggregated sales turnover for the last financial year of at least two participants of a concentration, taking into account their relations of controls, exceeds €1 million; and (c) the total asset value or total sales of goods in the Ukraine for the last financial year of at least one participant in a concentration, taking into account its relations of controls, exceeds €1 million; OR, irrespective of the above thresholds,  one or all the participants of the concentration-together with controlled or controlling entities have a market share which exceeds35% of this or an adjacent product market

5. M&A PROSPECTS IN UKRAINE • M&A market in Ukraine has a tendency to mirror key trends of European M&A, but is also prone to local economic and political complications • 2012 did not see any increase in M&A activity, and in 2013 the total value of M&A deals in Ukraine is expected to remain at the same low level – between $5 and $6 billion. • Further consolidation of various sectors of economy • Local market players are expected to dominate the M&A activity • Large Ukrainian business groups will continue their restructuring aimed at optimization • Russian investors will continue to be very active in Ukraine • More transactions involving privatization of the state property (expected considerable reduction of the No-Privatization list of companies) • Oil&Gas Sector is expected to lead, followed by agricultural, retail, telecom and heavy industry sectors • At least half of the transactions are expected to be leveraged mainly by Russian-based banks • There will be limited outbound private M&A activity by local players • A number of IPOs is expected. Primarily at the Warsaw Stock Exchange in the agricultural sector

6. M&A PROSPECTS IN UKRAINE PER SECTORS • Oil & Gas/Energy - Expect to lead M&A deals in 2012-2013 - Geo Alliance Company entered into an agreement with Arawak Energy on the joint ownership and management of oil and gas fields in Ukraine • LLC BNK-Ukraine is to buy a tank farm, located in  Stanishovka (Zhitomir district, Zhytomir region) - Eni Ukraine Holdings BV is to purchase shares in the authorized capital of LLC Zahidhazinvest • In five years investment in Ukrainian market of renewables, including wind, biomass and biofuel energy, may reach USD 5 billion • IT /Telecommunications - is attractive – from 1 January 2013 till 1 January 2023 incomes of IT companies are taxed at a decreased tax rate (5%) • Bank & Finance - Resale of Ukrainian banks, financial institutions - West Midlands Holding Corp plans to increase its interest to 50% of shares in Insurance company Oranta • Industry - Further consolidation of large businesses • Planned acquisition of Dneprodzerzhinsky Koksochemical Plant by Metinvest - Planned acquisition of Serbian Plant Zelezara Smederevo by Donetskstal • Pharma Sector/Healthcare - In 2012-13 more global transactions affecting Ukraine, and increase in transactions targeting Ukrainian companies • (Food) Retail - Increase in M&A activities is expected - New companies are expected to enter the market • Agriculture - M&A activity is expected to remain stable; tnlargement of businesses tendency, consolidation - Further development of cereal, sunflower oil markets - Expanding PSAs to agricultural sector

7. Thank you!