Position of the Board of Directors regarding the tender offer concerning the shares of the Company

The Board of Directors of Przedsiębiorstwo Przemysłu Spożywczego Pepees S.A. (‘Pepees’, ‘the Company’), pursuant to Article 80 Clause 1 of the Polish Act of 29 July 2005 on public offering, conditions governing the introduction of financial instruments to organised trading, and public companies (‘the Offering Act’), hereby presents its position concerning the offer to tender shares of the Company for sale (‘the Tender Offer’) announced on 8 January 2018 by Mr Maksymilian Skotnicki and Mr Michał Skotnicki (‘the Bidders’).
Pursuant to the Tender Offer, the Bidders intend to acquire, as a result of the Tender Offer announced pursuant to Article 73 Clause 1 of the Offering Act, 31,396,707 (thirty one million three hundred and ninety six thousand seven hundred and seven) ordinary bearer shares issued by Pepees, with the nominal value of PLN 0.06 (six grosz’es) each, corresponding to 31,396,707 (thirty one million three hundred and ninety six thousand seven hundred and seven) votes at the General Meeting of Shareholders of the Company, representing 33.05% of the total number of shares of the Company and of the total number of votes at the General Meeting of Shareholders of the Company.
The Bidders, acting in concert referred to in Article 87 Clause 1 item 5 of the Offering Act, hold the total number of 31,303,293 (thirty one million three hundred and three thousand two hundred and ninety three) shares of the Company, which account for 32.95% of the total number of shares in the share capital of the Company and entitle their holders to the total number of 31,303,293 (thirty one million three hundred and three thousand two hundred and ninety three) votes at the General Meeting of Shareholders of the Company, which account for 32.95% of the total number of votes in the Company. Mr Maksymilian Skotnicki holds 20,603,282 (twenty million six hundred and three thousand two hundred and eighty two) shares of the Company, which account for 21.69% of the total number of shares in the share capital of the Company and entitle their holder to 20,603,282 (twenty million six hundred and three thousand two hundred and eighty two) votes at the General Meeting of Shareholders of the Company, which account for 21.69% of the total number of votes in the Company. And, Mr Michał Skotnicki holds 10,700,011 (ten million seven hundred thousand and eleven) shares of the Company, which account for 11.26% of the total number of shares in the share capital of the Company and entitle their holder to 10,700,011 (ten million seven hundred thousand and eleven) votes at the General Meeting of Shareholders of the Company, which account for 11.26% of the total number of votes in the Company.
As a result of the Tender Offer, the Bidders intend to acquire, including the shares of the Company held by them prior to the announcement of the Tender Offer, 66% of the total number of shares of the Company and votes at the General Meeting of Shareholders of the Company, i.e. 62,700,000 (sixty two million seven hundred thousand) shares entitling them to 62,700,000 (sixty two million seven hundred thousand) votes at the General Meeting of Shareholders of the Company; the shares tendered as part of the Tender Offer will be purchased first by Mr Maksymilian Skotnicki, up to 100,000 (one hundred thousand) Shares, representing 0.11% of the total number of shares of the Company and the votes at the General Meeting of Shareholders of the Company. Other tendered shares will be acquired by Mr Michał Skotnicki.
The Tender Offer has been announced with the following conditions:
a) Placing, as part of the Tender Offer, tenders for the sale of minimum 16,196,708 (sixteen million one hundred and ninety six thousand seven hundred and eight) Shares entitling their holder(s) to 16,196,708 (sixteen million one hundred and ninety six thousand seven hundred and eight) votes at the General Meeting of Shareholders of the Company, which account for 17.05% of the total number of shares of the Company and of the votes at the General Meeting of Shareholders of the Company;
b) Obtaining an unconditional consent of the President of the Polish Office of Competition and Consumer Protection on the concentration by taking over the control of the Company by Mr Michał Skotnicki as a result of the acquisition of the Shares as part of the Tender Offer, or of the expiry of the period in which the said consent should be given
c) Adopting by the General Meeting of the Shareholders of the Company of the resolution concerning changes in the composition of the Supervisory Board of the Company and appointing one candidate indicated by Mr Michał Skotnicki as a member of the Supervisory Board of the Company. Mr Michał Skotnicki will indicate the candidate for the Supervisory Board of the Company, referred to in the preceding sentence, within ten (10) days at the latest from the date of convening the General Meeting of Shareholders of the Company, the agenda of which will include making changes in the composition of the Supervisory Board. Mr Michał Skotnicki’s failure to indicate his candidate for the Supervisory Board of the Company within such a time limit will be equivalent to the withdrawal of this condition by the Bidders;
d) Concluding, by Mr Michał Skotnicki and the Company, a strategic cooperation agreement concerning Mr Michał Skotnicki’s support for the Company to implement the present strategy of the Company and to shape the future strategy of the Company.
The conditions laid down in this Tender Offer should be fulfilled no later than on the last day of accepting tenders, i.e. 8 February 2018, if the deadline for accepting tenders is not extended.
1. Grounds for the position of the Board of Directors:
The position of the Board of Directors of the Company is based on the following available information and data:
a) the analysis of the content of the Tender Offer;
b) the review of market prices of the shares of the Company quoted on the Warsaw Stock Exchange in the period of six months preceding the announcement of the Tender Offer;
c) the Company’s financial statements.
In order to determine whether the price proposed in the Tender Offer corresponds to the fair value of the shares in the Company, the Board of Directors of Pepees, acting in accordance with Article 80 Clause 3 of the Offering Act, ordered Rubicon Partners Corporate Finance S.A. (‘Rubicon’) to prepare an independent opinion on the price of the shares in the Tender Offer (‘the Opinion’), which is attached to this position.
2. Reservations
a) Apart from the review of the information sources identified in this position, the Company’s Board of Directors did not take any measures to analyse, collect or verify any information that did not originate from the Company.
b) The Company’s Board of Directors is not responsible for the accuracy, fairness, completeness and adequacy of information and data originating from external sources on the basis of which its position was prepared, except for the information originating from the Company.
c) This position does not constitute any recommendation concerning the acquisition or sale of financial instruments referred to in Article 3(1)(34) and (35) of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC.
d) Each of the Company’s shareholders should make their own assessment of the conditions of the Tender Offer and obtain advice from their own advisers with appropriate qualifications, in order to decide whether to respond to the Tender Offer. The decision to sell the Company’s shares in response to the Tender Offer should be an independent decision of each shareholder of the Company. In particular, any shareholder of the Company should assess the investment risk and any legal or tax-related implications of responding to the Tender Offer.
e) The Board of Directors does not hold any inside information referred to in Article 7 of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC, which should be disclosed and, according to its best knowledge, does not know about any facts concerning the Company or its shares which are or might be considered to be inside information applicable to the assessment of the Tender Offer, which should be disclosed and which the Company has not disclosed yet.
f) The Board of Directors stresses that there may be opinions on the value of the Company differing from the opinions presented in this document.
3. The impact of the Tender Offer on the Company’s interest, including the employment in the Company, the Bidders’ strategic plans concerning the Company and their probable impact on the employment in the Company and the location of its business.
In accordance with the Tender Offer, the Bidders’ intention is to acquire an appropriate number of shares of the Company to make it possible for the Bidders to get involved in the implementation of the present, and in the development of the future, strategy of the Company. The Bidders treat the acquisition of shares as part of the Tender Offer as a multi-annual and strategic investment. The Bidders, if they accomplish the objective of the Tender Offer, intend to exercise their corporate powers in the Company in such a way so as to support its continuous development in accordance with the Company’s present strategy until 2018, particularly as regards: a) the production upgrading; b) the growth of the export of the Company's products to foreign markets; and c) ensuring, in the long-term, the sources of materials: potato and wheat, also by increasing the areas for the Company’s own cultivation activities. The Bidders have a positive opinion about the Company’s development strategy until 2018 and, in the period of its implementation, do not intend to change it in any substantial way.
Furthermore, the Bidders do not see any need to change the present location of the Company’s business, and the existing employment policy. The Bidders also assume that the Company’s shares will continue to be traded on the regulated market of the WSE.
In the opinion of the Company’s Board of Directors, the Bidders’ strategic plans are consistent with the existing directions of the Company’s development. The information contained in the Tender Offer does not suggest any changes of the Company’s business profile or of the existing employment policy. The change of the Company’s location and the Company delisting from the Warsaw Stock Exchange are not envisaged. On this basis, the Company’s Board of Directors estimates that the positive completion of the Tender Offer should not have any adverse impact on the Company’s interests.
4. Determining whether the price proposed in the Tender Offer corresponds to the fair value of the Company.
The Board of Directors would like to note that, under Article 79 of the Offering Act, the Company's share price proposed in the Tender Offer may not be lower than:
a) the average market price from the period of six months preceding the announcement of the Tender Offer in which the shares were traded on the main market;
b) the highest price paid for the shares subject to the Tender Offer by the entity obligated to announce the Tender Offer, its subsidiaries or its parent entities or entities with which it concluded the agreement referred to in Art. 87 Clause 1 item 5 of the Offering Act, in the period of 12 months preceding the announcement of the Tender Offer;
c) the highest value of assets or rights which the entity obligated to announce the Tender Offer, its subsidiaries or its parent entities or entities with which it concluded the agreement referred to in Art. 87 Clause 1 item 5 of the Offering Act, delivered in exchange for the shares subject to the Tender Offer in the period of 12 months preceding the announcement of the Tender Offer.
In accordance with the Tender Offer, the arithmetic mean of the average daily volume-weighted prices on the WSE main market from the period of 6 months preceding the announcement of the Tender Offer was PLN 1.29 (one złoty and twenty nine grosz’es). In the period of 12 months prior to the announcement of the Tender Offer, Mr Maksymilian Skotnicki, who is the first Bidder, had acquired shares of the Company. The highest price paid for the shares of the Company by Mr Maksymilian Skotnicki in that period amounted to PLN 1.45 (one złoty and forty five grosz’es). In the same period, Mr Michał Skotnicki, who is the second Bidder, had not acquired any shares of the Company. The Bidders do not have any parent companies. The Bidders’ subsidiaries had not purchased any shares of the Company in the period of 12 months prior to the announcement of the Tender Offer. Apart from the agreement between the Bidders, there is no and, in the period of 12 months prior to the announcement of the Tender Offer, there had been no other agreement referred to in Article 87 Clause 1 item 5 of the Offering Act, which the Bidders would be parties to.
The price proposed for the shares subject to the Tender Offer is PLN 1.45 (one złoty forty five grosz’es) per share of Pepees, and therefore it is consistent with the legal minimum price established in accordance with Article 79 Clauses 1 and 2 of the Offering Act.
In accordance with the opinion prepared by Rubicon, the price proposed in the Tender Offer corresponds to the fair value of a single share of Pepees.
Having regard for the above, the Board of Directors of Pepees is of the opinion that the price proposed in the Tender Offer reflects the fair value of the Company.

SIGNATURES OF THE COMPANY’S REPRESENTATIVES
Date Name and surname Position/Function Signature
2018-01-23 Wojciech Faszczewski President of the Board of Directors
2018-01-23 Tomasz Rogala Member of the Board of Directors