Prospectus. Block Watne Gruppen ASA

Transcription

1 Prospectus Block Watne Gruppen ASA Completed private placement of 14,497,758 new Block Watne Gruppen shares, each with a par value of NOK 0.20, at a subscription price of NOK 45 per share Private placement of 6,502,242 new Block Watne Gruppen shares issued to the sellers of Prevesta AB, each with a par value of NOK 0.20, at a subscription price of NOK per share This prospectus serves as a listing prospectus as required by applicable laws and does not constitute an offer to buy, subscribe or sell the securities described herein. Manager: 4 June 2007

2 IMPORTANT INFORMATION This Prospectus has been prepared in connection with the listing of 21,000,000 new shares in Block Watne Gruppen ASA (the Company or Block Watne Gruppen ) issued or to be issued in connection with the completed Private Placements as described herein. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities of the Company. The Prospectus has been prepared to comply with the Norwegian Securities Trading Act and related secondary legislation including the EC Commission Regulation EC/809/2004. The Prospectus has been prepared solely in the English language. Oslo Børs has reviewed and approved this Prospectus in accordance with the Norwegian Securities Trading Act Section 5-7. The information contained herein is as of the date hereof and subject to change, completion and amendment without notice. The publication and distribution of this Prospectus shall under no circumstances create any implication that the information herein is correct as of any date subsequent to the date of the Prospectus. Any new material information and any material inaccuracy that might have an effect on the assessment of the shares in Block Watne Gruppen ASA after the publication of this Prospectus and prior to the listing of the new shares on Oslo Børs, will be published and announced promptly as a supplement to this Prospectus in accordance with the Securities Trading Act Section Investing in the Company s Shares involves certain risks. See chapter 2 Risk factors of this Prospectus. Restrictions The distribution of this Prospectus and any separate summary documentation may be restricted by law in certain jurisdictions. The Company and the Managers require persons in possession of this Prospectus to inform themselves about and to observe any such restrictions. United States The Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended or under any of the relevant securities laws of any state or other jurisdiction of the United States. Neither the U.S. Securities and Exchange Commission nor any U.S. states securities commission has approved of the Shares or determined if this document is accurate or complete. Enforceability of civil liabilities The Company is organised under the laws of Norway. Currently, all of its directors are residents of Norway, and a substantial portion of its assets is located in Norway. As a result, it may not be possible for non-norwegian investors to affect service of process in their own jurisdiction on the Company or any of such persons, or to enforce against them judgements obtained in non-norwegian courts. Norway is party to the Lugano Convention and a judgement obtained in another Lugano Convention state will in general be enforceable in Norway. However, there is substantial doubt as to the enforceability in Norway of judgments of non-lugano Convention state courts, hereunder the courts of the United States. 1

3 Table of Contents 1 SUMMARY Presentation of Block Watne Gruppen Board of directors, executive management and employees Advisors and auditors Major shareholders and related party transactions Financial information Shares and articles of association Presentation of Prevesta Reasons for the Private Placements and use of proceeds The Private Placements Documents on display Summary of risk factors RISK FACTORS Business operational and financial risks Risks related to the acquisition and integration of Prevesta Risks relating to the Shares STATEMENT BY THE BOARD AND FORWARD LOOKING STATEMENTS THE COMPANY AND ITS BUSINESS Company history and important events Company strategy Block Watne AS business description Presentation of Prevesta Property, plant and equipment Investments Material contracts Working capital MARKET OVERVIEW Residential house-building market development Residential house-building market structure Brand awareness / brand recognition ORGANISATION, BOARD OF DIRECTORS, MANAGEMENT AND AUDITOR Registered address and organisation number Legal structure Board of Directors Management Conflicts of interest, family relations, convictions and bankruptcies Remuneration to Board and Management Shareholdings of Board of Directors and Management Employees Pensions and other obligations Corporate Governance Statutory auditors OPERATING AND FINANCIAL INFORMATION Pro Forma financial information for Block Watne Gruppen and Prevesta combined Historical financial information Operating and financial review of historical financial information Summary of accounting policies Significant changes in financial or trading position since 31 March Trends

4 7.7 Capital resources, capitalisation and indebtedness Legal and arbitration proceedings SHARE CAPITAL AND SHAREHOLDER MATTERS Share capital Share Registration and Listing Authorisations Shareholders Articles of Association Transaction with related parties Dividend and shareholder policy Voting rights Dividend rights Rights in event of liquidation Restriction on Ownership of Shares Additional Issuances and Preferential Rights Mandatory Bid Rules Compulsory Acquisition Disclosure of Acquisition and Disposals Shareholders Agreements TAXATION Shareholders resident in Norway for tax purposes Shareholders not resident in Norway for tax purposes Duties on the transfer of shares Inheritance tax THE PRIVATE PLACEMENTS General Block Watne Gruppen's share capital prior to and after the Private Placements Purpose of the Private Placements and use of proceeds Resolutions related to the Private Placements Subscriptions in the Private Placements and settlement Listing on Oslo Børs of the New Shares The rights of the New Shares Dilution Manager Expenses and net proceeds ADDITIONAL INFORMATION DEFINITIONS, GLOSSARY AND OTHER MATTERS APPENDICES Appendix 1 - Articles of Association for Block Watne Gruppen ASA Appendix 2 - Auditors statement regarding the Pro forma financial figures Appendix 3 - Board of directors and management s board and management positions Appendix 4 - Prevesta AB financial statements

5 1 SUMMARY This summary provides an overview of selected information contained elsewhere in this Prospectus and should be read as an introduction to the Prospectus. Any decision to invest should be based on consideration of the Prospectus as a whole, including the documents incorporated by reference and the risks of investing in the Shares set out in Section 2 Risk Factors and the consolidated combined financial statements and the notes thereto that appear elsewhere in this Prospectus. This summary is not complete and does not contain all the information that you should consider in connection with any decision relating to the Shares. Where a claim relating to the information contained in this Prospectus is brought before a court, the plaintiff might under the applicable legislation have to bear the costs of translating the Prospectus before the legal proceedings are initiated. Under laws in effect in the states within the European Economic Area ("EEA"), no civil liability will attach to the Board of Directors of Block Watne Gruppen in respect of this summary, unless it is misleading, inaccurate or inconsistent when read together with the other parts of this Prospectus. 1.1 Presentation of Block Watne Gruppen Block Watne Gruppen is the largest independent house-building company in Norway. Following the acquisition of Prevesta, as further described in this Prospectus, Block Watne Gruppen is also positioned as a leading producer of prefabricated houses in Sweden. Block Watne Gruppen offers a comprehensive portfolio of single-unit or multi-unit homes, with a focus on wood based construction. Block Watne Gruppen focuses on standardized and affordable quality housing in densely populated areas in the outskirts and suburbs of cities in central and southern Norway, and following the acquisition of Prevesta also in Sweden. Block Watne Gruppen has a strict focus on its target segment and emphasizes set standards for customers choices in regards to their preferences for customization in order to remain cost efficient in the construction process. Typically, Block Watne projects in Norway are located between 10 to 30 minutes driving distance from city centres, with the distances typically being greater the larger the city. The average sales price of a Block Watne house-unit is about NOK 1.9 million (including value added tax). The demand for affordable housing near cities has historically been more stable than the housing market in general, and specifically more stable than the housing markets in city centres. Block Watne offers 43 different house models. Block Watne Gruppen has been listed on Oslo Børs with since March 2006 with ticker code BWG. 1.2 Board of directors, executive management and employees The Board of Directors of Block Watne Gruppen is comprised of Harald Walther (Chairman), Hege Bømark (Deputy chairman), Petter Neslein (Director), Brit Hagelund (Employee representative), Tore Morten Randen, (Employee representative) and Øyvind Wiik (Employee representative). The executive management of Block Watne Gruppen is comprised of Lars Nilsen (CEO, Block Watne Gruppen ASA), Ketil Kvalvik (CFO, Block Watne Gruppen ASA) and Ole Feet (CEO, Block Watne AS). Mikael Olsson (CEO, Prevesta) will become part of the executive management of Block Watne Gruppen following the acquisition of Prevesta. 4

6 1.3 Advisors and auditors SEB Enskilda has acted as Manager for the Private Placements. KPMG AS is the statutory auditor of Block Watne Gruppen. The audit partners of KPMG AS are members of the Norwegian Institute of Public Accountants (DnR). 1.4 Major shareholders and related party transactions The main shareholder of Block Watne Gruppen is Lani Industrier AS which owns 33.97% of the issued share capital subsequent to Private Placement I. Lars Nilsen, the CEO of Block Watne Gruppen, indirectly owns 39.60% of the issued share capital subsequent to Private Placement I through his ownership in Lani Industrier AS, Lani Development AS (which holds 5.46% of the share capital subsequent to Private Placement I) and Lagulise AS (0.17%). Following the completion of Private Placement II, Lani Industrier AS will own 30.62%. Lars Nilsen will indirectly own a total of 35.70% through shares held by Lani Industrier AS, Lani Development AS and Lagulise AS. Other than Pareto Funds which will hold (based on number of shares held as at the date of this Prospectus) 5.56%, Morgan Stanley and Co. Intl. PLC which will hold (based on number of shares held as at the date of this Prospectus) 5.51%, and Industri Kapital Funds which will hold 8.43%, the Company does not have knowledge of any other shareholder which will hold more than 5% after the completion of the Private Placements. CEO Lars Nilsen is the main owner of the company WaterGuard Intl. AS which has a four year contract with Block Watne AS for the supply of WaterGuard s water safety system to Block Watne AS. The agreement implies annual deliveries in the amount of around NOK 5 million. The agreement is on market terms and based on arms length principles. Lani Development AS, which is owned by CEO Lars Nilsen, has provided two subordinated loans to Block Watne AS. The loans amount to NOK 65 million and NOK 30 million respectively. The loans are not repaid, but can be cancelled by giving 12 months notice. The loans carry an annual interest rate based on the best investment rate plus one percentage point. There are no other related party transactions. 1.5 Financial information Below is an extract of the financial statements of Block Watne Gruppen. For more detailed financial information, please see Section 7. Summary consolidated historical income statements Block Watne Gruppen ASA Q Q IFRS IFRS IFRS IFRS Amounts in NOK 1,000 Audited Audited Unaudited Unaudited Operating revenues 89,729 1,529, , ,074 EBITDA 14, ,766 51,003 61,811 EBIT 13, ,636 49,733 60,109 Result before tax 10, ,708 43,613 52,089 Net income 7, ,752 37,203 37,519 The majority share of the profit 7, ,752 37,203 37,519 The minority share of the profit EPS / diluted EPS Dividends per share

7 Summary consolidated historical balance sheets Block Watne Gruppen ASA March March 07 IFRS IFRS IFRS IFRS Amounts in NOK 1,000 Audited Audited Unaudited Unaudited Total fixed assets 860, , , ,662 Total current assets 1,320,291 1,282,213 1,278,576 1,314,546 Total assets 2,180,907 2,150,358 2,136,618 2,184,208 Shareholder's equity 407, , , ,468 Total long term liabilities 930, , , ,681 Total current liabilities 842, , , ,059 Total equity and liabilities 2,180,907 2,150,358 2,136,618 2,184,208 Summary consolidated historical cash flow statements Block Watne Gruppen ASA Q Q IFRS IFRS IFRS IFRS Amounts in NOK 1,000 Audited Audited Unaudited Unaudited Cash flow from operations -408, ,966 64,019-95,441 Cash flow from investments ,648 1,335-3,218 Cash flow from financing 1,398, , ,267 53,990 Net change in cash and cash equiv. 129,481-43,263-53,914-44,669 Cash and equiv. start balance 0 129, ,479 86,216 Cash and equiv. end balance 129,481 86,216 75,566 41,547 Operational and financial review Block Watne Gruppen s operating revenues for the Q amounted to NOK 400 million. This is an increase of NOK 43 million (12.1%) on the figures for Q Operating revenues reflect increased production capacity with considerably more carpenters and other production-oriented employees. The increase in the quarter is also reflective of a good production climate in the winter months. Operating profit (EBIT) for Q amounted to NOK 60 million, an increase of NOK 10 million (20.9%) on Q The EBIT margin rose from 13.9% in Q to 15.0% in Q The results reflect sound and stable operation in the quarter, and solid margins in projects completed in the same period. At the end of Q the order backlog amounted to NOK 971 million, compared with NOK 887 million at the end of Q1 2006, an increase of 9.5%. This provides a good basis for future production. Operating revenue in 2006 was NOK million and operating expenses NOK million. The operating profit (EBIT) was 246 million in the same year, implying an operating margin of 14.8%. The strong result must be seen in conjunction with the good operations, especially in the second half of the year, and the group s stringent cost control. Net orders received in 2006 totalled NOK million in 2006, 11.5% more than in 2005 (pro forma basis). Block Watne Gruppen s order book at year-end 2006 was NOK 966 million, compared to NOK 807 million at the end of 2005 (+19.7%). The shareholders equity was NOK 715 million at year-end 2006, implying an equity ratio of 33.2%, compared with NOK 408 million and an equity ratio of 18.7% at year-end The consolidated financial statement for 2005 only comprises Block Watne Gruppen s subsidiaries income statement items for December Block Watne Gruppen acquired its subsidiaries, Block Watne AS and Hetlandhus AS in November The annual report for 2006 includes an audited pro forma income statement for 2005 as if the group had been established 1 January The annual report of Block Watne Gruppen for 2006 is incorporated by reference (see Section 11). 6

8 The cash flow from operations in 2006 was positive with NOK 112 million driven primarily by a net profit for the period of NOK 163 million. Net cash outflow from investing activities in 2006 was NOK 8 million including purchase of tangible fixed assets of NOK 11 million and sale of fixed assets of NOK 3 million. Net cash outflow to financing activities was NOK 148 million including repayment of long term debt of NOK 252 million and proceeds from a share issue of NOK 144 million. Net change in cash and cash equivalents was negative with NOK 43 million and cash and cash equivalents amounted to NOK 129 million at year-end As commented above, the consolidated financials for 2005 only comprise Block Watne Gruppen s subsidiaries income statement items for December The cash flow from operations for 2005 as recorded in the consolidated cash flow statement was negative with NOK 116 million, primarily due to a negative cash flow from change in inventory of NOK 136 million. Net cash outflow from investing activities in the consolidated accounts for 2005 was NOK million including a cash outflow of NOK for purchase of subsidiaries. Net cash inflow from financing activities in 2005 was NOK million including proceeds from new long term debt of NOK million. Significant changes in financial or trading position since 31 March 2007 There has been no significant change in the financial or trading position of the Company since 31 March 2007 and to the date of this Prospectus, except for those related to the acquisition of Prevesta which are described in this Prospectus. Capitalisation and indebtedness The Company s consolidated capitalisation as at 31 March 2007 was NOK 1,514 million. Financial debt as at 31 March 2007 was NOK 761 million and total shareholders equity was NOK 752 million. Net financial indebtedness was NOK 675 million. On a pro forma basis the corresponding figures were NOK 1,816 million (financial debt), NOK 1,609 million (shareholders equity) and NOK 1,634 million (net financial indebtedness). 1.6 Shares and articles of association The Company's share capital prior to the Private Placements was NOK 9,000,000 divided into 45,000,000 shares, each with a par value of NOK The Company's share capital following Private Placement I is NOK 11,899,551.60, made of up of 59,497,758 shares, each with a par value of NOK Following completion of Private Placement II the Company s share capital will be NOK 13,200,000, made of up of 66,000,000 shares, each with a par value of NOK All issued Shares are vested with equal shareholder rights in all respects. There is only one class of shares issued and all Shares are freely transferable. The Company s articles of association are included as appendix 1 to this Prospectus. Pursuant to the articles of association, the object of the Company is to engage in building operations and other similar operations, either directly or indirectly through participation in other companies. The Company may grant loans and provide security. The articles of association provide that the Board of Directors of the Company shall have no less than five and no more than seven members, as decided by the general meeting. The articles of association provide that members of the Board of Directors shall be elected for two-year terms and that the Chairman and the Deputy Chairman of the Board shall be elected by the general meeting. The rights, preferences and restrictions attaching to the Shares are set out in the Public Limited Companies Act. 7

9 1.7 Presentation of Prevesta Prevesta AB is Sweden s leading producer of prefabricated houses with the highly recognized brands Myresjöhus and SmålandsVillan. Since its inception in 1927, Prevesta has delivered more than houses primarily in the Swedish market. Prevesta has its headquarters in Myresjö in the province of Småland and has three leased production facilities for prefabrication in Myresjö, Vrigstad and Sundsvall. The target market segment for Myresjöhus, Prevesta s main brand, is the same as regards house size and price as Block Watne targets in Norway; affordable quality housing in the outskirts of cities and pressure areas. Myresjöhus offers a comprehensive portfolio of wooden single-unit (one-family) and multi-unit houses, with typical customers being middleincome second-time buyers. The average price of a house is SEK 1.6 million (excluding land and VAT), comparable with that of Block Watne. Myresjöhus offers approximately 50 models (compared to Block Watne s 43 models), and the panel based prefabrication method (as further described below) allow for a relatively high degree of internal customization. 1.8 Reasons for the Private Placements and use of proceeds On 23 March 2007, Block Watne Gruppen entered into an agreement to acquire Prevesta from the Industri Kapital 2004 Fund and Prevesta s management. The agreed purchase price for Prevesta was SEK 1,900 million (NOK 1,731 million) on a cash and debt free basis ( enterprise value ). The purchase price will be financed through a combination of 6,502,242 new shares in the Company to be issued to the Prevesta shareholders (Private Placement II), and approximately SEK 1,600 million (NOK 1,460 million) in cash including refinancing of existing debt in Prevesta. The entire purchase price is fully financed through committed credit facilities. The proceeds from Private Placement I will be used to pay part of the purchase price for the acquisition of Prevesta. The closing of the acquisition took place on 31 May The Private Placements Private Placement I The issue of 14,497,758 New Shares, each with a par value of NOK 0.20 in the Private Placement I directed against institutional and professional investors, was completed on 26 April The subscription price in Private Placement I was fixed at NOK 45 per New Share following a book-building process in the period 20 April 2007 to 26 April The gross proceeds from Private Placement I were approximately NOK 652 million. The issue of the New Shares in connection with Private Placement I were resolved by the Board of Directors on 26 April 2007, based on the authorisation granted to it by the annual general meeting held 18 April To facilitate early delivery and settlement, the subscribers in Private Placement I were delivered existing and unencumbered shares in Block Watne Gruppen that were already listed on Oslo Børs. Such Shares were made available pursuant to a Stock Lending Agreement entered into between the Manager and the Company s largest shareholder, Lani Industrier AS. The Shares delivered to the subscribers have consequently been tradable on Oslo Børs from the date they were delivered. The Company's share capital following Private Placement I is NOK 11,899,551.60, made of up of 59,497,758 shares, each with a par value of NOK

10 The percentage of immediate dilution in terms of share of issued Shares resulting from Private Placement I for the Company's shareholders as at 26 April 2007 is 24%. Private Placement I results in an increase in net book value for the Company s shareholders as at 26 April 2007 of NOK 6.13 and a dilution for the new investors of NOK 22.1 (being the difference between the subscription price and net book value per share including Private Placement I). The expenses of Private Placement I were approximately NOK 23 million, and the net proceeds from Private Placement I were approximately NOK 629 million. The New Shares in Private Placement I have been registered in the Norwegian Register of Business Enterprises (Foretaksregisteret) and delivered to the Manager. The New Shares in Private Placement I have not been admitted to listing on Oslo Børs prior to the publication of this Prospectus. Following the publication of this Prospectus the New Shares in Private Placement I will be registered in the VPS under the same ISIN number as the Company s other Shares and admitted to listing on Oslo Børs. The New Shares in Private Placement I will subsequently be transferred to Lani Industrier AS to settle the loan of shares according to the share lending agreement. Private Placement II The sellers of Prevesta shall receive as a part of the purchase price for Prevesta (as commented in section 1.8 above) and are obligated to subscribe for 6,502,242 New Shares to be issued in Private Placement II in accordance with the resolution by the general meeting held 18 April The subscription price is NOK per Share. The New Shares in Private Placement II were subscribed for on 31 May 2007 in connection with the closing of the acquisition of Prevesta, but the share capital increase representing such New Shares have not as at the date of this Prospectus been registered in the Norwegian Register of Business Enterprises and thus not been delivered to the subscribers VPS accounts. Registration and delivery is expected to take place 5 June Following the registration of the share capital increase in connection with Private Placement II, the Company s share capital will be NOK 13,200,000, made of up of 66,000,000 shares, each with a par value of NOK The percentage of immediate dilution in terms of share of issued Shares resulting from Private Placement II for the Company's shareholders as at 31 May 2007 will be 10%. Private Placement II results in an increase in net book value for the Company s shareholders as at 31 May 2007 of NOK 1.80 and a dilution for the new investors of NOK 16.4 (being the difference between the subscription price and net book value per share including Private Placement I). There were no expenses related to Private Placement II. The New Shares in Private Placement II will have ISIN NO and be listed on Oslo Børs as soon as the share capital increase in connection with Private Placement II has been registered in the Norwegian Register of Business Enterprises and in VPS Documents on display For the life of the Prospectus, the Prospectus, Block Watne Gruppen s annual reports for 2006 and 2005 and the Q1 report 2007, as well as the annual reports for 2006, 2005 and 2004 for the Company s subsidiary undertakings and the Company s memorandum of incorporation and articles of association (or copies thereof where applicable), may be inspected during usual business hours at the offices of the Company at Munkedamsveien 45, NO-0123 Oslo, Norway. There are no reports, letters, valuations or statements prepared by any expert at the Company s request which is referred to in the Prospectus. 9

11 1.11 Summary of risk factors Prior to investing in the Shares, prospective investors should consider, together with the other information contained in this Prospectus, the risks associated with an investment in the Shares, including the following: Block Watne Gruppen may experience difficulty in acquiring land to develop Legal proceedings and disputes in the course of its business may adversely affect Block Watne Gruppen s operating results and financial condition and may result in negative publicity Environmental liabilities related to land owned for development of property projects Adverse macro-economic development which may reduce the demand for Block Watne Gruppen s products and services Loss of key personnel Block Watne Gruppen may be unable to compete successfully Insufficient access to financing, failure to renew current loan agreements and credit facilities, and failure to comply with contractual covenants Failure to comply with covenants related to Block Watne Gruppen s debt financing and failure to negotiate waiver(s) if needed will result in the banks being entitled to demand repayment of the loans in full prior to the stated maturity date. Furthermore, there is no guarantee that a renewal or replacement of loan facilities can be achieved or achieved at satisfactory terms upon expiration of the current agreements. The integration of Prevesta subsequent to closing of the acquisition may be challenging and involve risks Block Watne Gruppen s share price could fluctuate significantly in response to quarterly variations in operating results, adverse business developments, changes in financial estimates by securities analysts and / or changes to the regulatory environment in which Block Watne Gruppen operates Block Watne Gruppen may experience limited liquidity in the secondary market which could may adversely affect the stock price The materialization of these or other risk factors could have a material adverse effect on Block Watne Gruppen s business, operating results or financial condition. 10

12 2 RISK FACTORS An investment in the Shares offered by this Prospectus involves known and unknown risks. The following factors, in addition to the other information contained in this Prospectus, should be carefully considered before making any such investment. 2.1 Business operational and financial risks Block Watne Gruppen may experience difficulty in acquiring land to develop While Block Watne has a large portfolio of properties that could be developed, no assurance can be given that this portfolio, and additional future properties secured, will be sufficient for the Company to maintain its current level of business. A reduction in the number of projects successfully developed and marketed could adversely affect Block Watne Gruppen s operating results and financial condition. Legal proceedings In the course of its business, Block Watne Gruppen is party to legal proceedings and disputes, including relating to contracts with consumers and disputes with regulatory authorities. Block Watne Gruppen makes provisions to cover the expected outcome of the proceedings and disputes to the extent that negative outcomes are likely and reliable estimates can be made. Block Watne Gruppen evaluates on a regular basis whether additional provisions are appropriate based on how the proceedings and disputes develop. However, the final outcome of proceedings and disputes is subject to uncertainties and resulting liabilities may therefore exceed booked provisions. The final outcome could adversely affect Block Watne Gruppen s operating results and financial condition. Further, given that most of Block Watne s and Prevesta s customers are consumers, the proceedings and disputes may from time to time result in negative publicity on the hand of Block Watne Gruppen regardless of the justification for or outcome of the cases. Negative publicity could adversely affect the activity level and the operating results and financial condition. Environmental risks related to land In the course of its business, Block Watne Gruppen acquires land for development of property projects through its subsidiaries. Block Watne Gruppen has procedures for evaluating environmental risks related to land, however such risks are an inherent part of the business. Environmental problems related to land may entail additional costs or liability to Block Watne Gruppen that could adversely affect its operating results and financial condition. Adverse macro-economic development Norway has experienced a long period with increasing house-building activity and falling interest rates. Macro-economic experts, as well as financial markets, expect an overall reduction in the total house-building activity as well as an increase in interest rates. Block Watne operates in a market segment that it believes to be less sensitive to changes in macro-economic factors than the overall market. However, a sharp increase in interest rates, and/or an adverse change in other economic variables for which Block Watne s end customers are sensitive to, could adversely affect Block Watne s activity level and Block Watne Gruppen s operating results and financial condition. Block Watne Gruppen may lose key personnel or be unable to secure the services of a sufficient number of qualified workers Block Watne Gruppen is dependent upon attracting and retaining key employees and management personnel. Competition for qualified workers and other factors could adversely affect the ability to attract and retain key employees. The loss of the services of key 11

13 personnel may adversely affect Block Watne Gruppen s operating results and financial condition. Block Watne Gruppen may be unable to compete successfully The Norwegian house-building market is fragmented with many competitors. Increasing competition and consolidation in the market may result in future reductions in income and loss of market share, which could adversely affect Block Watne Gruppen s operating results and financial condition. Access to sufficient financing In addition to cash generated from operations, Block Watne Gruppen may be dependent upon having access to loans and credit lines or the capital markets to fund its operations and capital expenditures. Should Block Watne Gruppen experience weakening markets and lower cash flow, Block Watne Gruppen may have to make substantial changes including curtailments to its business to adapt the business to the funds available. Block Watne Gruppen s main loan matures in The loan agreement gives the lender the right to cancel the loan agreement if Mr. Lars Nilsen reduces his ownership, directly or indirectly, to below 33% of the outstanding shares of the Company. Should Mr Lars Nilsen subsequently to the Offering reduce his ownership to below 33% the lender may cancel the loan agreement such that the loan must be repaid before maturity in The Company has no guarantee that a renewal or replacement of the loan can be achieved or achieved at satisfactory terms. The result of negotiations to renew or replace the loan facility will be influenced by the prevailing market conditions at the time of the renegotiation. Block Watne has several credit lines that are subject to annual renewal. While Block Watne has historically been able to secure renewal or replacement of such credit lines, the Company has no guarantee that renewals or replacements can be achieved or achieved at satisfactory terms in the future. Block Watne Gruppen may not be able to comply with debt covenants Block Watne Gruppen s main loan is subject to financial covenants. These financial covenants relate in particular to the ratios of net interest bearing debt to EBITDA and EBITDA to interest payable as defined in the loan agreement. Failure to comply with such covenants will constitute an event of default under such agreements. The occurrence of an event of default, whether as a result of breach of covenants or otherwise, will entitle the banks to accelerate the relevant credits and demand repayment in full prior to the stated maturity date. Should Block Watne Gruppen not have sufficient funds to repay the loans or be able to obtain alternative financing, it will be dependent on an agreement with the banks for waiver of covenants, to refinance the existing loans and/or to dispose of assets to meet debt payments. Failing any of the foregoing actions Block Watne Gruppen may face bankruptcy proceedings. The nature of the current key financial terms is described in Section Risks related to the acquisition and integration of Prevesta Integration of Prevesta into Block Watne Gruppen The integration of Prevesta subsequent to closing of the acquisition may be challenging and involve risks. Furthermore, there is no guarantee that expected synergies will materialise to the extent expected and within expected time frames. Any delays or unexpected costs incurred in the integration process may have a material adverse affect on the merged Block Watne Gruppen s financial condition and results of operations. 12

14 2.3 Risks relating to the Shares Block Watne Gruppen s share prices may experience volatility The trading price of the Shares could fluctuate significantly in response to quarterly variations in operating results, adverse business developments, interest rate changes, changes in financial estimates by securities analysts, matters announced in respect of major customers or competitors or changes to the regulatory environment in which Block Watne Gruppen operates. Furthermore, the market price of the Shares could decline due to sales of a large number of Shares in Block Watne Gruppen in the market or the perception that such sales could occur. Such sales could also make it more difficult to offer equity securities in the future at a time and at a price that are deemed appropriate. Limited liquidity Block Watne Gruppen may experience limited liquidity in the secondary market. Limited liquidity may adversely affect the stock price. 13

15 3 STATEMENT BY THE BOARD AND FORWARD LOOKING STATEMENTS RESPONSIBILITY FOR THE PROSPECTUS The Board of Directors of Block Watne Gruppen ASA accepts responsibility for the information contained in this Prospectus. Having taken all reasonable care to ensure that such is the case, the information contained in this Prospectus is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. Oslo, 4 June 2007 The Board of Directors of Block Watne Gruppen ASA Harald Walther Chairman Hege Bømark Deputy Chairman Petter Neslein Brit Hagelund Tore Morten Randen Øyvind Wiik 14

16 Disclosure regarding forward looking statements Included in this Prospectus are various forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "projects", "forecasts", "estimates", "expects", "anticipates", "believes", "plans", "intends", "may", "might", "will", "would", "can", "could", "should" or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historic facts, including statements regarding the intent, opinion, belief or current expectations of the Company or its management with respect to, among other things, (i) goals and strategies, (ii) evaluation of the Company s financial position, operating results, liquidity, prospects, growth, markets, competition and competitive position, (iii) trends which may be expressed or implied by financial or other information or statements contained herein. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and other factors that may cause the actual results, performance and outcomes to be materially different from any future results, performance or outcomes expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the risk factors described elsewhere in this Prospectus. 15

17 4 THE COMPANY AND ITS BUSINESS Block Watne Gruppen is the largest independent house-building company in Norway, as shown in section 5.2. Following the acquisition of Prevesta, as further described in Sections 4.4 and 10, Block Watne Gruppen is also positioned as a leading producer of prefabricated houses in Sweden. Block Watne Gruppen offers a comprehensive portfolio of single-unit or multi-unit homes, with a focus on wood based construction. Block Watne Gruppen focuses on standardized and affordable quality housing in densely populated areas in the outskirts and suburbs of cities in central and southern Norway and in Sweden. Block Watne Gruppen has a strict focus on its target segment and emphasizes set standards for customers choices in regards to their preferences for customization in order to remain cost efficient in the construction process. Examples of Block Watne Gruppen s projects and houses Brekkestø house model Sørli house model Project Hinna Park, Sandnes 4.1 Company history and important events The predecessor to Block Watne AS was founded by Mr. Martin Larsen in Sandnes in 1872 with an initial focus on wood processing and trading of building supplies. By 1926, Mr. Gabriel Block Watne had taken control of the organisation. The limited liability company G. Block Watne AS was incorporated in 1965, and in 1972 this company was listed on Oslo Børs. At the time the company comprised, among other, the house building activities currently carried out by Block Watne AS. In 1990, G. Block Watne AS was taken over and delisted by Wani Holding AS, a company owned by the Nilsen family, including current CEO Mr. Lars Nilsen. In 1994 Lars Nilsen took over as chairman of the company. He became CEO in 2000 and in 2004 he became the sole owner of Block Watne. Block Watne has built some 84,000 homes in Norway and has been building residential wooden houses under the Block Watne name since the late 1950s. The Block Watne name is currently, and has been for a long time been, the most recognised residential house brand name in Norway. During the 1970s and 80s Block Watne s main focus was on building wooden houses based on prefabrication of pre-cut house modules and wall elements on the customers own land. A lesser part of the company was focusing on property development as well as commercial construction. Following the delisting in 1990, and with Wani Holding AS as its owner, the focus was changed to residential project development and on-site construction. The prefabrication business was discontinued as well as the commercial construction. The focus was further shifted to include multi-unit construction based on wood framed homes. In 1994, the activities of the bankrupt company Hetlandhus were acquired from the creditors and the undertaking to complete their project portfolio was handled successfully. The brand Hetlandhus was transferred to the company Nye Hetlandhus AS. In 1995 Nye Hetlandhus 16

18 AS was merged with Block Watne. 1998/99 the Hetlandhus departments and the separate brand were discontinued. However, the right to the brand was retained, and in 2003 Hetlandhus AS was established as a dormant company to be the owner of the Hetlandhus brand. During the latter part of the 1990s Block Watne started developing projects based on concrete based constructions in addition to its wood based houses. This strategy has proven successful and thus complementing the wood based lighter construction business of Block Watne. In 2000/01, Block Watne started an offensive in regards to standardisation of the building process, construction details, building material specification, and set standards for customers choices in regards to their preferences for customisation of the product. Block Watne Gruppen ASA was incorporated in September 2005 and was from November 2005 the new holding company for Block Watne AS and Hetlandhus AS. The shares of Block Watne Gruppen ASA were listed on Oslo Børs 17 March 2006 with ticker code BWG. In March 2007, Block Watne Gruppen entered into an agreement to acquire Prevesta for purchase price of SEK 1,900,000 on a cash and debt free ( enterprise value ) basis from Industri Kapital 2004 Fund and Prevesta s management. Prevesta is Sweden s leading producer of prefabricated houses, and has delivered more than 80,000 houses primarily in the Swedish market since its inception in Prevesta and the background for the acquisition of the company are descried in more detail in section Company strategy The starting point for further profitable growth for Block Watne Gruppen is its years of experience, building methods that combine craftsmanship with streamlined production, a modern product portfolio and adaptability to market opportunities. The Company aims to also take an active role in consolidation processes in the Nordic market. Block Watne Gruppen s long-term strategy is based on four main points: To maintain the position as the leading and most profitable residential builder in the Norwegian market To maintain the position as the industry s best-known brand name To continuously improve the business model by continuing to streamline building processes, refine the product portfolio and pursue controlled, organic growth with stable high profitability. To pay a dividend to shareholders comprising 50 to 70% of profits Comment on Prevesta and strategy for the Swedish market The acquisition of Prevesta, as further described in section 4.4, rests on a strong industrial logic and will support future profitable growth. Block Watne Gruppen doubles its business and obtains the position as the leading Nordic residential house builder. The strategy for further development of Prevesta and the strategy for the Swedish market will be developed together with the executive management of Prevesta subsequently to the completion of the acquisition of Prevesta. 17

19 4.3 Block Watne AS business description The subsidiary Block Watne's focus is on standardised and affordable quality housing in densely populated areas in the outskirts of cities in eastern, southern, western and central Norway. Typically, Block Watne projects are located between 10 to 30 minutes driving distance from city centres (or high-pressure areas ), with the distances typically being greater the larger the city. The average sales price of a Block Watne house-unit is about NOK 1.9 million (including value added tax). Demand for affordable housing near cities has historically been more stable than the housing market in general, and specifically more stable than the housing markets in city centres. Block Watne offers a comprehensive portfolio of wooden houses for customers ranging from first-time buyers to well-established and sophisticated buyers. The comprehensive product catalogue ( Husboken") presents, with photos and drawings, the single-unit wooden house offering aimed at private customers. For multi-unit projects, Block Watne offers not only wooden houses, but also concrete based houses depending on the specific project. Houses or buildings can be tailor made for a specific project, but Block Watne uses standardised products and/or designs whenever possible. Block Watne has strict focus on its target segment and emphasises standardisation and limited options and extras in order to remain cost efficient in the building process. Residential building project categories Block Watne categorises its residential building projects in four categories; Residential project development (representing 86% of 2006 revenues) Property sales with commitment to construction (representing 5% of 2006 revenues) Residential construction for individual customers (representing 6% of 2006 revenues) Professional client residential construction (representing 3% of 2006 revenues) The majority of Block Watne s revenues are generated through Residential project development, that is through projects were the company controls the entire value chain, from project idea through property acquisition and development to sale of the finished homes. Block Watne constructs the house, and uses subcontractors for electric-, plumbingand land development/infrastructure and for concrete work (including the foundation). The buyers are usually the end customer, a private individual or individuals buying the house or apartment as their home. The steps and systems for project management related to such projects are described in more detail below. These projects can comprise a number of houses, semi-detached houses or apartment buildings. The size of projects varies from four to 10 units up to 250 units (i.e. houses or apartments). Large projects are built in steps, i.e. whereby sale and subsequently construction of parts are initiated and completed in sequence significantly reducing the risk related to large development projects. Typically around projects are being developed at any given time, of which typically in excess of 100 are being marketed. Examples of Block Watne residential projects Langbrygga, Halden Husebyhagen, Trondheim Husebyhagen - interior, Trondheim 18

20 Residential project development projects are mainly invoiced according to the progress of the construction. However certain apartment projects have deviating invoicing plans with a larger share of the invoicing taking place at the completion of the project. Around 30% of the projects are financed by the Norwegian State Housing Bank with funding (65-90% of total price) being paid a few weeks after completion of the project. Property sales with commitment to construction comprise sale of pre-regulated properties that are prepared for construction work and with an obligation to acquire and build a Block Watne house on the property. Figures reported for this project type includes revenues from both the property sale and the sale of the house to be built. Residential construction for individual customers is projects where Block Watne constructs one of its standard single-unit wooden houses on property owned by the customer. Houses that are offered are those presented in the product catalogue Husboken. Professional client residential construction is projects where professional customers, typically professional property developers, tenants associations, housing co-operatives and municipalities, buy more than four units. The projects are usually for construction only as the customer often owns the property and has already developed it when a contract is entered into. Such projects are to a larger extent tailor-made than projects in the other project categories. However, Block Watne focuses on using its own standardised products and/or designs also with regards to these types of projects. As opposed to the residential project developments, Block Watne has no risk related to the sale of the units being built and no capital expenditures on land and land development. Regional offices Through its 21 regional offices throughout Norway, Block Watne is well positioned to reach its target customers. The offices are located in, or in the outskirts of, most major cities in the central and southern parts of Norway, matching the target areas for Block Watne s projects. Block Watne believes it is important to have such extensive local presence in the target regions in order to develop the necessary knowledge of each region s characteristics in terms of customer preferences and housing requirements. Local presence is also critical in order to secure suitable property acquisitions. Block Watne has three operational managers, who are part of its executive management group and who each are responsible for overseeing around seven regional offices. The regional office organization is standardised, with each regional office headed by a regional manager overseeing three teams; The Sales team is responsible for marketing local building projects and first-line contact towards customers in that region. The Construction team is responsible for organising construction (carpenters) on all projects in the region. At each construction site Block Watne appoints a construction manager who is responsible for all the construction activities. The Project team is responsible for initiating and developing building projects from initial project idea, through securing land for projects, property development (regulatory approvals etc), to entering into and finalising negotiations with subcontractors. Project management and sales and marketing Depending on the type of project, Block Watne controls various parts of the value chain from acquiring land to the finished home. For its residential project developments (the main project category) the company controls the entire process from the acquisition of a property to 19