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

21 selling the finished home to the end customer, while for the project category residential construction for individual customers Block Watne only controls the house construction process. The main steps in the project value chain are illustrated below. Block Watne project steps Identifying and securing suitable sites Outline projecting Further outline projecting Local authority approvals Detailed projecting Negotiations with sub-contractors and suppliers Construction work Hand-over of finished home Sales and marketing Since the execution of the various steps in the value chain is performed locally, Block Watne has developed detailed procedures through a project management handbook, and quality control mechanisms through a quality control handbook. Both handbooks are comprehensive and are used extensively throughout the organisation. Every decision on acquisition of a property, initiation of sale/marketing of a project and initiation of construction of a project needs to be approved by the project manager, the regional manager, the operational manager, a controller and Block Watne s CEO. The Quality Control System is ISO 9001:2000 certified. Identifying and securing suitable sites Access to properties that can be developed in the future is important to ensure that the project portfolio is maintained as commented under the Land and project portfolio section below. Block Watne therefore devotes significant resources to identifying suitable sites and initial project outlining. Each regional office has a detailed property acquisition plan covering the estimated property needs for several years going forward. Agreements with land owners are usually made subject to Block Watne obtaining satisfactory zoning approvals as well to the satisfactory outcome of environmental investigations of the land. Agreements are structured such that the land is not formally acquired by Block Watne, but that the land will be sold directly from the owner to the end customers of the projects being constructed on the land. The period from an agreement is entered into with a land owner until construction is initiated is typically between two and five years. Payments to land owners are typically structured with a down payment upon satisfactory zoning approval and with further payments as construction progresses. However payment plans vary according to the specific agreement with the land owner. Outline projecting Before applying for the necessary permits from local authorities with regard to a specific property, Block Watne decides what type of project that appears to be most suitable. At this stage, Block Watne also evaluates the mix of house-types that could be built on the property, and considers whether standardised house models can be used or whether new models have to be designed. Local authority approvals Following agreement with a property owner and outline projecting, Block Watne initiates the process towards local authorities in order to obtain necessary regulation of the property and building permits. Only after these have been obtained, Block Watne initiates sale and subsequently construction. 20

22 Detailed projecting Following the regulatory approvals, and decisions regarding the development potential of the property, the detailed planning takes place. The detailed planning will involve sectioning the property, determining how the various sections are best utilised, and exploring market related possibilities and restrictions. Negotiations with sub-contractors and suppliers Sub-contractors are used for other work than what is performed by Block Watne s carpenters, such as land development/infrastructure, foundation work, construction of concrete structures, painting, plumbing and electrical wiring. Most such contracts are local, and in order to enhance its cost control, Block Watne tries to have as many fixed-price agreements as possible with such contractors. Frame agreements for supplies of building materials are negotiated centrally. Construction work At each construction site Block Watne appoints a construction manager who is responsible for all the construction activities. The construction manager is responsible for supervision of quality standards, adherence to time tables, and co-ordination of the employed carpenters with hired sub-contractors and public authorities. The regional offices organise their carpenters in specialised teams in order to benefit from specialisation and to ensure a smooth and predictable workflow. Block Watne is constantly working with specialisation of the carpenter teams in order to further enhance efficiency. The construction manager reports progress on the construction work internally and reports when milestones have been reached that allow Block Watne to invoice its customers for partial payments Construction is usually initiated once contracts for the sale of 50% of the units built on the project (or the part of the project initially initiated) have been entered into with customers. Sales and marketing Block Watne has its own sales force responsible for the majority of house sales. An important tool used by the sales force is the house catalogue Husboken. Approximately copies of this catalogue are distributed annually, and the standard houses can also be viewed on Block Watne s web-page. Even though the primary targets for Husboken are residential construction customers buying a single-units house, it represents an important tool in establishing general recognition for the Block Watne brand and product range, which will benefit also with regard to residential project development. Show houses represent another important marketing tool. All of the regional offices have their own furnished show houses that serve as sales offices as well. When visiting the show houses, the customers get an excellent opportunity to experience and inspect the quality of the Block Watne houses first-hand. With the exception of three to four national housing-weekends per year, Block Watne seldom runs centralised and nation-wide advertising campaigns. Advertising is rather used locally in connection with the marketing of specific projects. All local advertising is done in strict conformance with the guidelines established by Block Watne centrally. Land and project portfolio An important part of Block Watne s business is the maintenance of a significant land and project portfolio to ensure that new projects can continuously be initiated and marketed. The regional offices are continually acquiring local properties. The land bank has a development horizon of approximately 10 years, and a capacity of about housing units. 21

23 Block Watne divides its project portfolio into three categories: Acquisition projects; Identified projects where no formal agreement has been entered into with the landowner; Projects under development; Projects where an agreement has been entered into with a land owner and project planning has started, but the external sale process has not yet been initiated; and Projects in progress; Projects where the sale process toward customers has been started for parts of, or the entire, project. As of year end 2006, the total number of units in the three categories would be sufficient for around ten years of construction in Block Watne, while projects under development and projects in progress represented in excess of five years activities. 4.4 Presentation of Prevesta Background for the acquisition of Prevesta Block Watne Gruppen has for a period of time evaluated potential strategic opportunities in Scandinavia. As part of this evaluation, Block Watne Gruppen has set certain criteria for defining attractive acquisition targets. These are: High quality in management Sound historical operational and financial performance Strong brand names and product portfolio Focus on similar market segments as Block Watne AS in Norway Acquisitions to be financially attractive for Block Watne Gruppen s shareholders, also on a stand-alone basis (before any synergies) Complementary operations and potential for realising synergies The acquisition of Prevesta fulfils these criteria, based especially on Prevesta s highly recognized brands Myresjöhus and SmålandsVillan and on its sound operational and financial performance. While the evaluation of Prevesta as an attractive acquisition target is made on a stand-alone basis. Block Watne Gruppen believes that there is potential for realising synergies following the acquisition of Prevesta. Areas for such potential synergies include economies of scale within purchasing, implementing of best practice, cross-selling of house concepts between the Norwegian and Swedish operations, and potential for increased capacity utilisation at Prevesta s production facilities in Sweden. Business description Prevesta AB is a Swedish public limited company incorporated under the laws of Sweden with registration number The Company was incorporated in March 2005 as the new holding company for the Prevesta group. Its registered office is Myresjö, SE Vetlanda, Sweden, telephone number and fax number Prevesta is Sweden s leading producer of prefabricated houses with the highly recognized brands Myresjöhus and SmålandsVillan, as shown in section 5.2 and 5.3. Since its inception in 1927, Prevesta has delivered more than houses primarily in the Swedish market. Prevesta was owned by the construction group Skanska from the mid 1970s to 2004/05 when the company was sold to funds managed by Industri Kapital. 22

24 Prevesta is headquartered 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. With the SmålandsVillan brand, Prevesta targets the highly standardized and affordable segment of the market, similar to the segment that Block Watne Gruppen is considering for the Hetlandhus brand in Norway. The box unit prefabrication method used for the SmålandsVillan model portfolio (as further described below) allows for a high degree of standardization. SmålandsVillan comprises seven single-family house models and average price for a house is SEK 1.1 million (excluding land and VAT), below that of Block Watne in Norway and Myresjöhus in Sweden. SmålandsVillan sells houses to customers with their own property only. Examples of Prevesta house models Myresjöhus house model SmålandsVillan house model Prefabrication of houses Both Myresjöhus and SmålandsVillan offer prefabricated houses. The prefabrication is based on highly industrialised production of modules at Prevesta s three production facilities. For the Myresjöhus line, a panel based production method is used for prefabrication of panels (sections). The panels, comprising walls (both outer- and inner walls) and roof sections, are produced at Prevesta s prefabrication facilities and delivered as a construction kit to the building site. The panels are subsequently put together at the site, followed by interior work, such as painting, plumbing and electrical wiring. In total, approximately 80% of total construction of a Myresjöhus house is done on the building site, and around 20% is prefabricated. For the SmålandsVillan line a box-unit production method is used for prefabrication of parts of houses. Box-units comprising a section of the house are made at Prevesta s production sites including interior work such as painting, plumbing and electrical wiring. Only final finishing is done at the building site. In total, approximately 20% of total construction of a SmålandsVillan house is done on the building site, and around 80% is prefabricated. Typically, a SmålandsVillan house is ready to be moved into by the customer some two weeks after the box units have been put together at the site. A finished house typically comprises two box units. 23

25 Illustration of prefabrication Production of panels for Myresjöhus Assembly of box units for SmålandsVillan Prevesta s three production facilities for prefabrication are located in Myresjö, Vrigstad and Sundsvall. The main facility in Myresjö is focused on panel production for Myresjöhus, while the facilities in Vrigstad and Sundsvall manufacture box-units for SmålandsVillan. Combined capacity at the sites is more than 2,000 houses per year, with space for further expansion. The production facilities are leased, while Prevesta owns the production equipment. Project management Myresjöhus delivers individually built single family houses, which are supplied mostly under total turn-key contracts where Myresjöhus is responsible for land and work on the foundation and building the house, and participates in collectively-built projects which are similar to Block Watne s project category Residential project development. Collectively-built projects are projects either developed by Prevesta alone or with large developers as partners, such as Skanska, Riksbyggen, JM, NCC, Peab or Veidekke. When developed alone, Prevesta controls the entire value chain, from project idea through property acquisition and development to sale of the finished houses. The split of responsibility varies in the case of projects with partners, but Prevesta is often responsible for both marketing and sales to the end customer. SmålandsVillan only delivers single-family houses to customers with their own property and the houses are delivered as turnkey projects, that is where Prevesta delivers a house ready to be moved into, but were the customer owns the land and is responsible for work on the foundation (prior to assembly of the box units from SmålandsVillan), similar to that of Block Watne s project category Residential construction for individual customers. Sales and marketing Prevesta s sales and distribution channels include own sales staff (similar to that of Block Watne), independent agents and project partners such as Skanska, Riksbyggen, JM, NCC, Peab and Veidekke (as commented above). Myresjöhus sells through all three channels, while SmålandsVillan is sold through independent agents only. Show houses are used as a marketing tool, and Prevesta has such houses in several places in Sweden. Furthermore, both Myresjöhus and SmålandsVillan have house catalogues and the house models can be viewed on the company s web-pages ( and Access to land As in the Norwegian market, an important part of the business in Sweden is securing land. There is at present a shortage of sites in large parts of Sweden and the long site queues greatly exceed the site allocations planned by municipalities. With a long-term approach to planning the building rights portfolio, Prevesta is considered to have a strong situation compared with other players in the market. 24

26 Prevesta owns around 950 sites of its own. In addition, it has access to an additional approximately 500 sites via co-operation partners throughout the country, typically with a contract for building a Prevesta house attached. In addition, there are around 1,200 building rights in pre-study phase, which means that it cannot be guaranteed that Prevesta will obtain a building right for the site in question. Around 40% of the houses from Myresjöhus are sold on sites owned by Prevesta, and the company provides around 300 sites a year to customers such that the sites owned are sufficient for some three year s of activity. Associated companies Prevesta owns 33.6% of Gar-Bo Försäkring AB. The company is owned jointly with other house developers in the Swedish market. When purchasing a Myresjöhus house or a SmålandsVillan house, the buyer may receive a completion insurance and construction fault insurance which is provided by Gar-Bo. The supplier/contractor usually takes out the insurance while the purchaser/customer is the beneficiary and recipient of the insurance policy. Gar-Bo is accounted for as an associated company in Prevesta s accounts as well as in the pro forma financial figures presented in section Property, plant and equipment As at 31 March 2007, Block Watne Gruppen had non-current assets of NOK 870 million, of which NOK 34 million tangible assets and NOK 826 million intangible assets. Intangible assets comprise mainly goodwill that was created in connection with the acquisition of Block Watne AS by Block Watne Gruppen ASA in Tangible assets comprise mostly land and machinery. The largest part of Block Watne Gruppen s tangible assets are accounted for as current assets and comprise agreements on the purchase of land (which have the associated terms of payment as a liability) when implementation of the agreement is highly likely. On a pro forma basis, non-current assets as at 31 March 2007, were NOK 3,055 million, of which NOK 110 million tangible assets and NOK 2,945 million intangible assets. Intangible assets comprise mainly goodwill as noted as above as well as goodwill created through the acquisition of Prevesta. Tangible assets comprise mostly land and machinery, including the machinery at Prevesta s production facilities. There are no planned material fixed assets, nor are there any major encumbrances on existing fixed assets. 4.6 Investments The table below shows Block Watne Gruppen s actual historical investments for 2005 and 2006 and the first quarter of 2006 and Block Watne Gruppen ASA Q Q Amounts in NOK 1,000 IFRS IFRS IFRS IFRS Divestments of fixed assets Investments of fixed assets 0-10,942-1,479-2,907 Purchase of subsidiaries -1,085, Total investments -1,085,665-10, ,907 Investments in Block Watne Gruppen ASA in 2006 comprise mostly smaller purchases of equipment related to the construction operations in Block Watne AS, including scaffolding and other safety equipment. 25

27 The purchase of subsidiaries in 2005 comprises the acquisition of Block Watne AS and Hetlandhus AS as described in section 7.2. Investments in the first quarter of 2007 comprise mainly smaller purchases of equipment related to the construction operations in Block Watne AS. Other than the agreement to acquire Prevesta as described in this Prospectus (see section 10), there have been no significant investments since the end of first quarter 2007 to the date of this Prospectus. Principle investments in progress and/or committed by Block Watne Gruppen include only the agreement to acquire Prevesta. The acquisition will be financed with Block Watne Gruppen s current funds, new debt facilities that have been established and with the proceeds from the Private Placements, as further described in section Material contracts Block Watne Gruppen s main material contracts are contracts for acquiring land as described in Section 4.3 as well as the contracts related to Block Watne Gruppen s debt financing as described in Section 7.7. There are no material contracts entered into other than in the ordinary course of business. Block Watne Gruppen believes that the main material contracts for Prevesta include those that have been entered into for the leasing of its production facilities. In addition, the purchase agreement with regard to the acquisition of Prevesta (see section 10) is a material contract. 4.8 Working capital Block Watne Gruppen believes that its current working capital is sufficient, also after the acquisition of Prevesta, to meet its operational and financial requirements including for the 12 month period after the date of the Prospectus. 26

28 5 MARKET OVERVIEW Block Watne Gruppen confirms that information in this section which has been sourced from third parties has been accurately reproduced and that as far as Block Watne Gruppen is aware and is able to ascertain from information published by such third parties, no facts have been omitted which would render the reproduced information inaccurate or misleading. The residential house-building market is influenced by many of the same variables as the overall construction industry, and is therefore sensitive to changes in macroeconomic variables such as interest rates, unemployment rates and consumer confidence. However, the residential house-building segment is not as reliant on government spending patterns as the general construction industry. Furthermore the house-building market tends to be less cyclical than the commercial construction market. This especially applies for the segment which Block Watne Gruppen targets - affordable quality housing in densely populated areas in the outskirts of cities. This segment is - in Block Watne Gruppen s experience - less cyclical than the overall housing market. 5.1 Residential house-building market development Norway The number of housing starts per year since 1980 is shown in the figure below along with forecast for Housing starts in Norway in 1,000 units E Sources: Statistics Norway, Prognosesenteret - Nye boliger, Sept E The number of housing starts has been increasing since the early 1990s. Following a couple of especially strong years in 2004 and 2005, the total number of housing starts increased with 5.5% in The main driver for the growth, including the expected growth for 2007, has been the starts of apartments in cities, as can be seen below. Housing starts in Norway split by type E Apartments Multi unit houses Detached houses E Source: Prognosesenteret - Nye boliger, April 2006 and Sept

29 Detached houses comprise detached single-family houses; Multi-unit houses comprise undetached houses, terraced houses and apartment buildings with up to four housing units; and Apartments comprise detached or un-detached buildings with at least two stories and more than four housing units. Apartments have increased their share of the housing starts, primarily driven by significant building activity in major cities; especially in the Oslo region. Apartment new starts increased 14 % in 2006, representing 51% of the total housing starts compared with the historic level of around 30-40%. The development in share of housing starts by area is shown below. Housing starts in Norway split by region ( ) 100 % 90 % 80 % 70 % 60 % 50 % 40 % 30 % 20 % 10 % 0 % 7 % 9 % 8 % 7 % 8 % 15 % 15 % 15 % 13 % 14 % 24 % 22 % 21 % 26 % 26 % 14 % 14 % 13 % 14 % 12 % 13 % 11 % 9 % 12 % 11 % 27 % 29 % 34 % 28 % 30 % Source: Prognosesenteret - Nye boliger, Sept The regions are; Oslo = Oslo, Akershus, Østfold; East = Hedmark, Oppland, Buskerud; South = Vestfold, Telemark, Aust-Agder, Vest-Agder; West = Rogaland, Hordaland, Sogn og Fjordane; Central = Møre og Romsdal, Sør-Trøndelag, Nord-Trøndelag; North = Nordland, Troms, Finnmark. The Oslo region represented a relatively large share of housing starts in the period with around 31% share in 2006 up from 27% in Housing starts in the City of Oslo isolated increased with 23% in 2006; mainly apartments. Block Watne is active in all regions, except region North and the City of Oslo. North Central Sweden The number of housing starts per year since 1980 is shown in the figure below. West South East Oslo Housing starts in Sweden in 1,000 units Source: Statistics Sweden, The Swedish housing market went through a period with a relatively low activity level during the 1990s. The number of housing starts started picking up in 1999 and has been increasing since. The increase has been driven by improved macro economic conditions, falling interest 28

30 rates and by the built up demand following a period with low activity. The level of activity is still, however, at a relatively low level compared to the level in Norway, with the number of units housing starts at around 3.3 per thousand inhabitants compared to around 6 per thousand in Norway. The number of housing starts split by detached houses (single-family houses) and multi-unit houses is shown below. Housing starts in Sweden split by type Multi unit houses Detached houses Source: Statistics Sweden, The share of single-family (detached) houses has been around 40% of total number of housing starts since the mid 1990s. However, in 2006, the share fell to around 30% as the number of multi unit houses started increased with some 48%, compared to a growth of 2.3% for single-family houses. The number of housing starts in 2005 split by county ( län ) is shown below Housing starts in Sweden in 2005 split by region Stockholm Uppsala Södermanland Östergötland Jönköping Kronoberg Kalmar Gotland Blekinge Skåne Halland Västra Götaland Värmland Örebro Västmanland Dalarna Gävleborg Västernorrland Jämtland Västerbotten Norrbotten Source: Prognoscentret - Nya bostäder, May 2006 The largest regions for house-building are found in the Southern part of Sweden, including the greater Stockholm area and the west and south west coast of Sweden, were Prevesta has its main activities. 29

31 5.2 Residential house-building market structure Norway The Norwegian residential house-building market is competitive and fragmented with a large number of smaller players. The most important players tend to fall within one of three different categories: divisions of construction companies small independent house-builders operating under a common brand ( chain organisations ) independent house-building companies (such as Block Watne) The table below shows the largest house-building companies in Norway (percentage share of the total housing starts 2006). Market position 2006 Company / entity Share Category / owner Mesterhus 6.2 % Chain Nordbohus 5.0 % Chain Blink 3.4 % Chain Byggmann Gruppen 3.3 % Chain Norgeshus 3.3 % Chain Block Watne 3.2 % Independent Selvaagbygg 2.9 % Divisjon in Selvaag Gruppen Skanska Bolig 2.8 % Divisjon in Skanska AB Veidekke Eiendom 2.5 % Divisjon in Veidekke ASA Systemhus Norge 1.9 % Chain Ten largest groups 34.6 % Others 65.4% Total housing starts 100.0% Source: Prognosesenteret - Boliganalyse, Feb Block Watne tends to have a relatively low market share in periods with relatively high building activity, such has been seen during the recent years, and relatively high in periods with relatively low building activity. This as the main contributor to changes in activity level is new buildings in city centres where Block Watne is not active (as commented above). Sweden Within the market for single family houses, that is, excluding multi-unit apartment buildings, a segment where Prevesta is not present, Prevesta s market share was some 9.6% in 2006 (by number of building permits applied for). Market position 2006 (by number of building permits applied for) Company / entity Share Category / owner Prevesta 9.6% Pending acquisition by Block Watne Gruppen Älvsbyhus 8.5% Privately held company Trivselhus 6.1% Privately held company Finndomo 4.6% Privately held company LB-Hus 4.0% Privately held company Forshem 3.1% OTC listed company Eksjöhus 3.0% Privately held company Seven largest groups 38.9% Others 61.1% Total building permits 100.0% Source: Byggfakta, Feb

32 The prefabrication model is more common in the Swedish market than the Norwegian market, and Block Watne Gruppen estimates that prefabricated houses comprise some 70% of the total market for single family houses with wood based construction - which in turn is estimated to comprise some 95% of the total market for single family houses. 5.3 Brand awareness / brand recognition The Block Watne name is the most recognized brand name for residential construction in Norway. In annual consumer surveys since 2001 commissioned by Block Watne, the unassisted brand recognition as regards to Block Watne have been in the level of 45-50%, with the second most recognised brand have been at a level of 15-20%. The assisted brand recognition was in the same period in the level of 95% with the two next brands at around 81% and 76% respectively. The consumer surveys are carried out by Prognosesenteret AS. In Sweden, Myresjöhus is the strongest brand name in the residential market with an assisted brand recognition in the level of 84% in 2006 with the two next brands at around 75% and 70% respectively. SmålandsVillan has a corresponding recognition of 53% as the 11 most recognised brand name. The biannual consumer surveys since 2002 are carried out by IMA Marknadsutveckling AB. 31

33 6 ORGANISATION, BOARD OF DIRECTORS, MANAGEMENT AND AUDITOR 6.1 Registered address and organisation number Block Watne Gruppen is a Norwegian public limited company with registration number incorporated under the laws of Norway on 20 September 2005 by Lani Invest AS. Block Watne Gruppen s principal place of business is in Oslo county and its registered office since its incorporation is Munkedamsveien 45, NO-0123 Oslo, Norway, telephone number and fax number Legal structure Block Watne Gruppen s legal structure as at the date of this prospectus is shown below. The table also indicates the corporate structure following consummation of the acquisition of Prevesta. Block Watne Gruppen ASA Block Watne AS Hetlandhus AS [Husinvest i i Stockholm AB] Norpartner Sp. z.o.o. (Poland) Project companies Prevesta AB All activities in Block Watne Gruppen are currently carried out in Block Watne AS. Block Watne has its registered office in Oslo and Block Watne Gruppen holds 100% of the shares and voting rights. Hetlandhus AS, with its registered office in Oslo, is a dormant company in which Block Watne Gruppen holds 100% of the shares and voting rights. Block Watne Gruppen ASA has no operating activities and comprises only two functions, the group CEO and CFO. Norpartner Sp. z.o.o. is an office in Poland which supplies logistics services related to materials acquired by Block Watne in Poland as well as certain other services. Block Watne AS holds 100% of the shares and voting rights in Norpartner Sp. z.o.o. Project companies comprise nine special-purpose companies established for specific real estate development projects. Block Watne has stakes in these companies varying between 20 and 50%, and the co-owners are other property developers. The companies are set up to handle common tasks for the development of a specific area, e.g. with regards to infrastructure. A full list of the companies is included in Block Watne Gruppen s annual report (see Section 11 for reference). Prevesta AB, with its registred office in Myresjö, will be owned by Block Watne Gruppen ASA partly indirectly through a Swedish subsidiary, Husinvest i Stockholm AB with 80% of the share capital and votes and partly directly by Block Watne Gruppen ASA with 20% of the share capital and votes. Prevesta AB owns Myrsjöhus AB, which in turn owns five subsidiaries, including SmålandsVillan AB. 32

34 6.3 Board of Directors The Board of Directors of Block Watne Gruppen consists of six persons, of which three are elected by the general meeting and three are elected by and among the employees in Block Watne AS. In accordance with the Public Limited Companies Act and the Company s Articles of Association, the Board members elected by the general meeting serve for a term of two years calculated from their election, and the term shall expire at the conclusion of the annual general meeting in the year in which the period of office expires. All of the current shareholder elected members were re-elected at the Block Watne Gruppen annual general meeting held 18 April 2007, and accordingly, the period of service for such members of the Board of Directors shall expire at the conclusion of the 2009 annual general meeting. The name, age, qualifications, business address and certain other information relating to each member of the Board of Directors are set out below. Harald Walther (61), Chairman of the Board Mr. Walther has a law degree from the University of Oslo, He was consultant in the Ministry of Finance from 1971 to 1973 and has been a practising lawyer with his own firm since He has been a member of the board of Block Watne AS since 1994, chairman of the board , deputy chairman from Mr. Walther has been the chairman of the Board of Block Watne Gruppen from He serves as chairman or director of the board in a number of privately owned companies (complete list enclosed in appendix 3). Mr. Walther lives in Bærum, Norway. He owns 21,200 Shares (including Shares held by close associates). His business address is Munkedamsveien 45, NO-0123 Oslo. Hege Bømark (43), Deputy Chairman of the Board Ms. Bømark holds an MBA degree from the Norwegian School of Economics and Business Administration (NHH), She has worked as a financial analyst in Orkla Finans (Fondsmegling) AS, Fearnley Finans (Fondsmegling) AS and as project manager in AS Eiendomsutvikling. Ms. Bømark has been on the board of Block Watne AS and deputy chairman of the Board of Block Watne Gruppen since She is currently a director of the board of Norwegian Property ASA and Norgani Hotels ASA. Ms. Bømark lives in Oslo, Norway. She owns no Shares. Her business address is Florabakken 10, NO-1162 Oslo. Petter Neslein (53), Director of the Board Mr. Neslein holds an MBA from Columbia University, New York, 1981 and a Msc in Economics and Business administration from Universite Fribourg, Switzerland, He is since 1985 managing director and main owner of Pecunia A/S, an investment company with main focus on real estate. He was managing director of Nevinvest A/S from 1983 to 1985 and management consultant in The Boston Consulting Group from 1981 to Mr. Neslein has been on the board of Block Watne AS and the Board of Block Watne Gruppen since He is currently a director of the board of Formuesforvaltning ASA and several private investment companies (complete list enclosed in appendix 3). Mr. Neslein lives in Oslo, Norway. He owns 110,000 Shares (including Shares held by close associates.). His business address is Olav V s gate 5, NO-0110 Oslo. Brit Hagelund (53), Employee representative Ms. Hagelund has worked in Block Watne as salary administrator since 1998, She is educated at Otto Treider commercial college. She has served as employee representative of the board of Block Watne AS since 2001 and the Board of Block Watne Gruppen since Ms. Hagelund lives in Rælingen, Norway. She owns 400 Shares. Her business address is Munkedamsveien 45, NO-0123 Oslo. 33

35 Tore Morten Randen (41), Employee representative Mr. Randen has worked in Block Watne as carpenter since He is educated at a technical college. Mr. Randen has served as employee representative of the board of Block Watne AS since 2001 and the Board of Block Watne Gruppen since He is also senior trade union representative for the carpenters in Block Watne. Mr. Randen lives in Trondheim, Norway. He owns 200 Shares. His business address is Munkedamsveien 45, NO-0123 Oslo. Øyvind Wiik (56), Employee representative Mr. Wiik has worked in Block Watne as project manager since 1999 and in other positions in Block Watne in the period He is educated within business economy and has army officer training. Mr. Wiik served as employee representative of the board of Block Watne AS and the Board of Block Watne Gruppen since Mr. Wiik lives in Råholt, Norway. He owns 400 Shares. His business address is Munkedamsveien 45, NO-0123 Oslo. 6.4 Management As of the date of this Prospectus, the management team of Block Watne Gruppen consist of the following persons: Lars Nilsen (39), Chief Executive Officer, Block Watne Gruppen Mr. Nilsen was appointed CEO of Block Watne Gruppen in 2005 and was appointed CEO of Block Watne AS in 2000 after having served as chairman of the board since He is educated at the University of Denver where he majored in finance and real estate, Chairman of the board of Block Watne AS since Mr. Nilsen serves as chairman or director of the board in a number of privately owned companies (complete list enclosed in appendix 3). He lives in Drammen, Norway. Through the wholly owned companies Lani Industrier AS, Lani Development AS and Lagulise AS he owns 23,560,000 Shares. His business address is Munkedamsveien 45, NO-0123 Oslo. Ketil Kvalvik (48), Chief Financial Officer, Block Watne Gruppen ASA Mr. Kvalvik was appointed CFO of Block Watne Gruppen ASA in He has worked in Block Watne since 1996 as Finance Manager / Chief Financial Officer. Prior to joining Block Watne, Mr Kvalvik worked some 10 years as an accountant and auditor. He is educated within auditing at Nordland Distriktshøgskole and Norges Handelshøyskole, Bergen. He lives in Oslo, Norway. He owns 6,000 Shares. His business address is Munkedamsveien 45, NO Oslo. Ole Feet (47), Chief Executive Officer, Block Watne AS Mr. Feet was appointed CEO in Block Watne AS in June Prior to this he was Operational Manager in Block Watne from 2001 and manager of the regional offices in Romerike ( ) and Follo ( ). Prior to joining Block Watne, Mr. Feet held various project management positions at two real estate development companies, Håvard Olaussen AS ( ) and Håkon Solberg Eiendom AS ( ). Mr. Feet holds a Bachelor degree in civil engineering in addition to business economics and agronomy. He lives in Nittedal Norway. He owns Shares. His business address is Munkedamsveien 45, NO-0123 Oslo. Mikael Olsson, the CEO of Prevesta, will become part of the executive management of Block Watne Gruppen following the acquisition of Prevesta. Mikael Olsson (47), Chief Executive Officer, Prevesta AB Mr. Olsson was appointed CEO in Prevesta AS in Prior to this he was CEO in Myresjöhus AB since 2003, production manager Myresjöhus AB ( ) and managing director Myresjö Nederland B.V. ( ). He held various management positions in the house building industry He is educated within business administration and accounting, University College, Jönköping. Director of the board of Prevesta AB since 2003 and of Gar-Bo AB since His business address is Stationsgatan, SE Vetlanda. 34

36 6.5 Conflicts of interest, family relations, convictions and bankruptcies 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 and Lagulise AS. Upon the completion of Private Placement II, Lars Nilsen will indirectly own a total of 35.70% of the Company s issued share capital through his ownership in Lani Industrier AS, Lani Development AS and Lagulise AS. Other than the abovementioned, the Company is not aware of any potential conflicts of interests between any duties to the Company and any private interests or other duties of any member of the Company s management or Board of Directors. There are no family relations between any of the Company s board members or management. Nor have any of the Board members or management, except as stated below, within the last five years been (i) convicted in relation to a fraudulent offence, (ii) involved in any bankruptcies, receiverships or liquidations as member of the board, management, supervisory body, as partner with unlimited liability, founder or as senior manager, or (iii) subject to any official public incrimination and/or sanctions as such person by statutory or regulatory authorities or designated professional bodies or been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of a issuer or from acting in the management or conduct of the affairs of any issuer. Harald Walther was a member of the boards of Breen Invest AS and Øyvind Breen AS, which were declared bankrupt in The appointed bankruptcy trustee did not issue any negative statements with regard to the exercise of the directorships. Lars Nilsen was chairman of the board of Huseby AS which was liquidated in 2003 following termination of the ordinary business activity in the company. The appointed trustee did not issue any negative statements with regard to the exercise of the chairmanship. 6.6 Remuneration to Board and Management Board of Directors For 2006, the remuneration to Harald Walther (Chairman of the Board) totalled NOK 180,000, remuneration to Hege Bømark (Deputy Chairman), NOK 150,000 and to Petter Neslein (Director) NOK 120,000. The remuneration to the employee representatives totalled NOK Block Watne Gruppen has not granted any loans, guarantees or other similar commitments to any member of the Board and there are no unusual agreements regarding extraordinary bonuses to any member of the Board. There are no agreements with any members of the Board, which provide for compensation payable upon termination of the directorship. Management The compensation to executive management for 2006 is summarised below Annual compensation for 2006 (NOK 1,000) Name Salary Bonus Other benefits Pension premium Lars Nilsen Ketil Kvalvik Ole Feet The management group has agreements to receive salary for 12 months beyond the given 6- month period of notice on certain conditions. There are no other agreements for the management group for compensation on termination of employment or change of position. 35

37 6.7 Shareholdings of Board of Directors and Management The following table sets forth the number of Shares owned by the Board of Directors and executive management as of the date of this Prospectus. Shareholding and options of Board of Directors and Management 1) Shares Board of Directors Harald Walther 21,200 Hege Bømark 0 Petter Neslein 110,000 Brit Hagelund 400 Tore Morten Randen 200 Øyvind Wiik 400 Management Lars Nilsen 23,560,000 Ketil Kvalvik 6,000 Ole Feet 15,400 Total 23,713,600 1) Including shares held through close associates None of the members of the Board of Directors and executive management hold any warrants, stock options, convertible bonds or other securities convertible into Shares of the Company. Following the acquisition of Prevesta and completion of Private Placement II, Mikael Olsson will hold 116,279 Shares in the Company. 6.8 Employees Employees As of the date of this Prospectus, Block Watne Gruppen has around 1,180 employees including 530 employees in Prevesta which will be included in Block Watne Gruppen upon completion of the acquisition of Prevesta. The total number of employees in Block Watne Gruppen was 553 at year-end 2004, 561 at year-end 2005 and 606 at year-end Including Prevesta, the number of employees was 1,140 at year-end Pensions and other obligations Block Watne Gruppen: Retirement benefit obligations consist of contractual early retirement pension (AFP), collective pension arrangements (funded) and unfunded pension obligations. From 1 January 2007, the subsidiary Block Watne AS moved from a defined-benefit to a defined-contribution collective arrangement. As the defined-benefit pension arrangement has ceased, plan assets and pension liabilities from this arrangement are not included in the balance sheet. The underlying estimates were reviewed in autumn 2006 and are considered reasonable. A subsequent recommendation was made to use a lower discount rate (4.35%), a higher salary adjustment (4.5%), a lower pension adjustment (1.6%), a higher NI base rate change (4.25%) and a lower return (5.4%). The effect of this has been calculated and shows that net pension obligations for AFP increase by NOK 1,400,000. This has not been incorporated into the 2006 financial statements, as the calculation came after the annual financial statements were prepared. 36

38 At the end of the year, collective pension plans included 604 members (579 at ), of whom 124 (121) were retired. At the end of the financial year, 15 (12) employees had taken out AFP pensions, while 1 (1) person had been paid pension directly from the company. Net pension expense for the year in the income statement was NOK 7,500,000 in Prevesta: Provisions for pensions within Prevesta are reported in accordance with IAS 19, "Employee Benefits". Commitments for old-age pensions and family pensions for employees in Prevesta are met through insurance with Alecta. The pension plan is reported as a definedcontribution pension. Prevesta has no employees with defined-benefit pension schemes, except for commitments covered with insurances through Alecta. Obligations regarding contributions to defined-contribution pensions are reported as an expense in the profit and loss account as they occur. Net pension expense for the year in the income statement was MSEK 16,3 in Corporate Governance Block Watne Gruppen bases its corporate governance on, and complies with, the principles of the Norwegian Code of Practice for Corporate Governance dated 28 November Block Watne Gruppen provides on an annual basis statements with regard to its compliance with the Norwegian guidelines on a comply-or-explain basis. Block Watne Gruppen s corporate governance policy is described in the annual report for 2006 (see section 11 for reference) and at the investor site at A majority of the members of the Board of Directors of Block Watne Gruppen are independent from the Company s executive management and important business relationships. The Board also satisfies the requirement that at least two directors shall be independent from major shareholders Statutory auditors Block Watne Gruppen s auditor is KPMG AS, Sørkedalsveien 6, NO-0369 Oslo. The audit partners of KPMG AS are members of the Norwegian Institute of Public Accountants (DnR). KPMG has been the Company s auditor since it was established in September KPMG s audit opinions for the years 2004, 2005 for Block Watne and for the years 2005 and 2006 for Block Watne Gruppen have not contained qualifications or emphasis of matter paragraphs. Annual reports and accounts have been duly published in accordance with the accounting legislation in respect of these years. KPMG has delivered a statement regarding the pro forma figures in this Prospectus as included in appendix 2. 37

39 7 OPERATING AND FINANCIAL INFORMATION 7.1 Pro Forma financial information for Block Watne Gruppen and Prevesta combined Block Watne Gruppen has entered into an agreement to acquire Prevesta as described in section 10. The pro forma financial information is prepared to show the combined financial information for Block Watne Gruppen and Prevesta adjusted as if the acquisition of Prevesta had been made with financial effect from 1 January The pro forma financial information is prepared for illustrative purposes only and there is higher uncertainty in pro forma financial information than in historical financial information. The pro forma financial information addresses a hypothetical situation and therefore does not represent the Company s actual financial position or results, nor does it necessarily reflect what the actual results would have been if the transactions had occurred earlier, and it is not indicative of future results of operation or financial position. The below pro forma financial information consists of estimated balance sheet as of 31 March 2007, and furthermore estimated income statements for the year ended 31 December 2006 and the first quarter 2007 as if the acquisition of Prevesta had been made with financial effect from 1 January The actual consolidation of Prevesta into Block Watne Gruppen is expected to take place with effect from and including June Basis for presentation The pro forma financial information has been prepared in accordance with CESR s recommendations for the consistent implementation of the European Commission s Regulation on Prospectuses number 809/204. The basis for the pro forma consolidated financial information is the historical consolidated audited financial statements of Block Watne Gruppen, the historical consolidated audited financial statements of Prevesta, the unaudited effect of presenting Prevesta according to Block Watne Gruppen accounting principles, and the unaudited effect of consolidating Prevesta into Block Watne Gruppen, i.e. purchase price allocation. Prevesta consolidated audited financial information for 2006 has been extracted from the company's annual report for The figures for the three-month interim period ended 31 March 2007 are unaudited. Actual Actual Adjustment Pro forma Block Watne Gruppen Prevesta Block Watne Gruppen Figures in NOK million Notes 1Q Q Q Q 2007 Operating revenues Operating expenses before depreciation 1) EBITDA Depreciation EBIT Net financial items 2) Profit/loss before tax Tax 3) Net income Actual Actual Adjustments Pro forma Block Watne Gruppen Prevesta Block Watne Gruppen Figures in NOK million Notes Operating revenues Operating expenses before depreciation 1) EBITDA Depreciation EBIT Net financial items 2) Profit/loss before tax Tax 3) Net income

40 Actual Actual Adjustments Pro forma Block Watne Gruppen Prevesta Block Watne Gruppen Figures in NOK million 1Q Q Q Q 2007 Intangible fixed assets Trademarks 4) Goodwill 5) Other intangible assets Total intangible assets Tangible fixed assets Land and buildings Machinery and equipment Total tangible fixed assets Financial fixed assets Financial fixed assets Total financial fixed assets Total fixed assets Buildings under construction Properties for sale Land 1) 6) Other inventory Inventory Receivables Accounts receivable Other receivables Total receivables Cash and bank deposits Total current assets Total assets Equity Share capital 9) Share premium reserve 9) Retained earnings 9) Total equity Liabilities Deferred tax 7) Other long-term liabilities Long term interest bearing debt 8) Total long-term liabilities Short-term liabilities Debt to credit institutions Accounts payable Tax payable Public duties payable Current liabilities related to land and projects Other short-term liabilities Total short-term liabilities Total liabilities Total Equity and Liabilities Notes to the pro forma consolidated balance sheet and income statement 1) The adjustment for operating expenses is related to the amortisation of added value in land portfolio acquired as part of Prevesta 2) The adjustment in net financial items is the estimated interest cost for the debt financing related to the acquisition of Prevesta. The interest cost is calculated at current interest rates. 3) The adjustment for tax effect is based on a tax rate of 28% of the other adjustments commented in notes 1 and 2 4) Adjustments for increased value in trademarks related to the acquisition of Prevesta, that is, the portion of the excess value in the purchase price allocated to trademarks 5) Adjustment for the portion of the excess value in the purchase price allocated to goodwill 6) Adjustment for the portion of the excess value in the purchase price allocated to land 7) Adjustment for deferred tax in trademarks and land, adjusted for tax on the amortised amount in ) Adjustment for new interest bearing loans for the financing of the acquisition of Prevesta 9) Adjustment for the Private Placements that are described in this Prospectus The pro forma financial information is based on actual financial information prepared on the basis of the same accounting principles as for the historical 2006 audited financial 39

41 statements for Block Watne Gruppen. The pro forma adjustments are expected to have a continuing impact on the issuer. 7.2 Historical financial information As commented in section 4.1 Company History and important events, Block Watne Gruppen ASA was incorporated in September In November 2005 Block Watne Gruppen ASA acquired Block Watne AS and Hetlandhus AS from Lani Development AS for a total of NOK 1,100,000,000 in cash. The acquisition of Block Watne AS and Hetlandhus AS is considered as a common-control transaction, where there is no specific guidance under International Financial Reporting Standards. Block Watne Gruppen has elected as an accounting policy, in accordance with IAS 8, that all common-control transactions is accounted for using fair values using the principles of IFRS 3. At the time of the acquisition, Hetlandhus AS was a dormant company and all operations were carried out through Block Watne AS. The financial information presented herein has been derived from the Company s audited consolidated financial statements for 2005 and 2006 and the unaudited consolidated interim financial statements for the three month periods ended 31 March 2007 and 2006 prepared and presented in accordance with IFRS. The consolidated financial statements including an overview of Block Watne Gruppen s accounting policy, explanatory notes and auditor s statement are incorporated by reference (see section 11). The historical results are not necessarily indicative of the results to be expected for any future period. Income statements The table below shows consolidated profit and loss figures Block Watne Gruppen ASA for the years 2005 and 2006, and three month periods ended 31 March 2007 and The profit and loss statement for Block Watne Gruppen ASA for 2005 includes the results from operations from 20 September 2005 the date which Block Watne Gruppen ASA was established. 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 Cost of materials 38, , , ,651 Payroll 25, ,119 73,406 82,681 Other operating expenses 11, ,726 27,416 29,931 EBITDA 14, ,766 51,003 61,811 Depreciation and amortisation 479 5,130 1,270 1,702 EBIT 13, ,636 49,733 60,109 Income from associates Financial cost, net 3,294 22,928 6,921 8,256 Result before tax 10, ,708 43,613 52,089 Tax expense 2,432 54,956 6,410 14,570 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

42 Balance sheets The table below shows year consolidated year-end balance sheets for Block Watne Gruppen ASA for the years 2005 and 2006 and balance sheet as at 31 March 2006 and Block Watne Gruppen ASA March March 07 IFRS IFRS IFRS IFRS Amounts in NOK 1,000 Audited Audited Unaudited Unaudited Assets Other intangible assets Trademark 125, , , ,000 Goodwill 700, , , ,882 Total intangible fixed assets 826, , , ,069 Land and buildings 14,969 14,576 14,870 14,477 Machinery and plant 10,193 16,302 10,406 17,634 Total property, plant and equipment 25,162 30,878 25,276 32,111 Investments in associates 3,937 5,498 3,938 5,801 Loans to associates 2,651 5,321 2,651 5,321 Other receivables 2, Financial assets 9,251 11,171 6,589 11,482 Total fixed assets 860, , , ,662 Construction work in progress 174, , , ,499 Properties for sale 1,737 8,850 12,249 8,850 Land 702, , , ,487 Total land and buildings under constr. 878, , , ,836 Trade receivables 293, , , ,428 Other receivables 9,582 15,440 19,188 22,599 Fair value of financial derivatives 0 6,373 2,018 7,137 Total receivables 312, , , ,164 Bank deposits, cash and cash equival. 129,479 86,216 75,566 41,547 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 Equity and liabilities Total paid-in capital 399, , , ,884 Other equity 7, , , ,584 Shareholder's equity 407, , , ,468 Pension obligations 11,582 15,403 15,539 15,539 Deferred tax 63,800 64,775 51,742 51,742 Total provisions 75,382 80,178 67,281 67,281 Subordinated loans 95,000 95,000 95,000 95,000 Liabilities to financial institutions 759, , , ,400 Other non-current liabilities 854, , , ,400 Liabilities to financial institutions 143, , , ,835 Trade payables 105, ,032 82, ,258 Tax payable 62,520 53,857 72,200 81,042 Tax deduction and other deduction 21,648 31,050 21,743 38,916 Current liab. related to land and projects 313, , , ,870 Other current liabilities 195, , , ,138 Total current liabilities 842, , , ,059 Total liabilities 1,772,945 1,435,610 1,547,647 1,431,740 Total equity and liabilities 2,180,907 2,150,358 2,136,618 2,184,208 41

43 Comment on opening balance for Block Watne Gruppen ASA As commented above the acquisition of Block Watne AS and Hetlandhus AS in September 2005 is considered as a common-control transaction, where there is no specific guidance under IFRS. Block Watne Gruppen has elected as an accounting policy, in accordance with IAS 8, that all common-control transactions is accounted for using fair values using the principles of IFRS 3. The absence of specific guidance on accounting for common-control transactions means that the use of book values is also an acceptable accounting policy for this type of transaction. According to management s judgment, the use of fair value rather than book values for this kind of transactions, results in information that is more relevant to the economic decisionmaking needs of users as well as provides reliable information in the financial statements in accordance with IAS 8. Cash flow statements The table below shows consolidated cash flow for Block Watne Gruppen ASA for the years 2005 and 2006 and for three month periods ended 31 March 2007 and Block Watne Gruppen ASA Q Q IFRS IFRS IFRS IFRS Amounts in NOK 1,000 Audited Audited Unaudited Unaudited Cash flows from operating activities Profit before tax 10, ,648 43,613 52,089 Current tax paid 0-61, Depreciation and write-downs 479 5,130 1,270 1,702 Change in invent., trade receiv., trade payab. -1,065,894 21,005-83,323-93,853 Net change in liabilities relating to land 313,589-53,607 38,684-21,112 Change in other accrual accounting entries 333,369-11,532 63,775-34,267 Net cash flow from operating activities -408, ,966 64,019-95,441 Cash flows from investing activities Sale of fixed assets Purchase of tangible fixed assets -25,641-10,940-1,479-2,907 Purchase of intangible fixed assets -826,204 Net other investments -9, , Net cash flow from investing activities -861,096-10,648 1,335-3,218 Cash flows from financing activities Increase/(decrease) current liabilities 143,825-39,580-11,867 54,290 Repayment long-term liabilities 854, , , New share capital 399, , ,900 0 Net cash flow from financing activities 1,398, , ,267 53,990 Net change in cash and cash equivalents 129,481-43,263-53,914-44,669 Cash and cash equivalents by start of period 0 129, ,479 86,216 Cash and cash equivalents at end of period 129,481 86,216 75,566 41,547 Changes in equity The table below shows the changes in consolidated shareholders equity for Block Watne AS for the years 2004 and 2005 and for Block Watne Gruppen ASA for the years 2005 and 2006 and for the three months periods ended 31 March 2007 and

44 Amounts in NOK 1,000 Share capital Block Watne Gruppen ASA Share premium reserve Translation differences Retained earnings Total equity Group establishment 8, , ,984 Total recognised and expensed ,979 7,979 Balance 31 December , , , ,963 Balance 1 January , , , ,963 Total recognised and expensed , ,885 Share issue, net 1, , ,900 Balance 31 December , , , ,748 Balance 1 January , , , ,963 Total recognised and expensed ,203 37,107 Share issue, net 1, , ,900 Balance 31 March , , ,970 Balance 1 January , , ,00 170, ,748 Total recognised and expensed ,720 Share issue, net Balance 31 March , ,468 Key figures The table below summarizes key figures for Block Watne Gruppen ASA for the years 2005 and 2006 and for three month periods ended 31 March 2007 and Q Q IFRS IFRS NGAAP IFRS Audited Audited Unaudited Unaudited Earnings per share (NOK) Dividend per share (NOK) Operating margin (%) Equity ratio (%) Return on equity (%) 4 n.m. 29% n.a. n.a. Ave. no. of outstanding shares ( 000) 40,000 43,959 45,000 45, Net profit / average no. of outstanding shares 2. (Operating profit / operating revenues) x (Total shareholders' equity / total assets) x (Net profit / average shareh. equity) x 100, annualized 7.3 Operating and financial review of historical financial information Three month period ended 31 March 2007 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 the 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 Profit before tax (EBT) for Q was NOK 52 million, an increase of NOK 8 million (19.4%) on the figure for 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. 43

45 Year ended 31 December 2006 Operating revenue was NOK million and operating expenses NOK million. Operating profit (EBIT) was 246 million implying an operating margin of 14.8%. Profit before tax (EBT) amounted to NOK 218 million. 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 totalled NOK million in This is 11.5% more than in 2005 (pro forma basis). Based on the volume of orders received in the first half of 2006, sales starts were postponed on certain projects in the second half of the year in order to improve the balance between order book and production capacity. Block Watne Gruppen s order book at year-end was NOK 966 million, compared to NOK 807 million at the end of This is a rise of 19.7% over 2005 (pro forma basis), providing a good basis for future production. Shareholders equity was NOK 715 million and total assets were million at year-end 2005, implying an equity ratio of 33.2%. Year ended 31 December 2005 The consolidated income 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). The consolidated income statement for 2005 shows revenues of NOK 89.7 million and an operating profit of NOK 13.6 million, being the group s results for the last month of the year. Shareholders equity was NOK 408 million and total assets were million at year-end 2005, implying an equity ratio of 18.7%. Cash flow 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 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 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 was NOK million including a cash outflow of NOK for purchase of subsidiaries. Net cash inflow from financing activities was NOK million including proceeds from new long term debt of NOK million. 7.4 Summary of accounting policies Please refer to Block Watne Gruppen s annual report for 2006, prepared according to IFRS as adopted by EU, which is incorporated into this Prospectus by reference (see section 11). 44

46 7.5 Significant changes in financial or trading position since 31 March 2007 There has been no significant change in the financial or trading position of Block Watne Gruppen 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. 7.6 Trends Block Watne Gruppen has not experienced any significant changes or trends outside the ordinary course of business that are significant to the Company after 31 March 2007 and to the date of this Prospectus, other than those related to the acquisition of Prevesta which are described in this Prospectus. 7.7 Capital resources, capitalisation and indebtedness The table below shows Block Watne Gruppen s consolidated actual capitalisation and net indebtedness as of 31 March Amounts in NOK 1,000 Current debt Guaranteed 0 Secured 158,835 Unguaranteed / unsecured 0 Total current debt 158,835 Non-current debt Guaranteed Secured 507,400 Unguaranteed / unsecured 95,000 Total non-current debt 602,400 Total indebtedness (A) 761,235 Share capital 9,000 Legal reserve 534,884 Other reserve 208,584 Shareholders equity (B) 752,468 Total capitalisation (A+B) 1,513,707 Cash 86,216 Cash equivalents 0 Trading securities 0 Liquidity (C) 86,216 Current financial receivables (D) 0 Current bank debt 158,835 Current portion of non current debt 0 Other current financial debt 0 Current financial debt (E) 158,835 Net current financial indebtedness (C + D E) (F) 72,619 Non-current bank loans 507,400 Bonds issued 0 Other non-current loans 95,000 Non-current financial debt (G) 602,400 Net financial indebtedness (F-G) 675,019 This table above should be read together with Block Watne Gruppen s consolidated financial statements and the related notes thereto. Since incorporation, Block Watne Gruppen has financed its operations by a combination of operating revenues, private placements and debt issues. Its cash and liquid assets and borrowings are in NOK. The financial risk management is described in Block Watne Gruppen s annual report for 2006 (see section 11 for reference). 45

47 Indebtedness The table below sets out the repayment schedule of Block Watne Gruppen s consolidated debt as of 31 March Maturity Amounts in NOK 1, After 2010 Credit facility 158, Subordinated loan 95, Term loan 499, , Mortgage loans 8, ,200 1,200 1,200 1,200 2,700 Total liabilities debt 761, ,200 1, ,200 1,200 2,700 Term loan Block Watne Gruppen s main financing is a term loan established in November The facility amounts to NOK 1,100 million of which NOK 601 million had been repaid as at 31 March The loan matures at year-end 2010 with NOK 499 million. The interest rate is linked to NIBOR plus a margin of 55 basis points. The key financial terms (covenants) for the term loan are: the ratio of the term loan to Block Watne Gruppen s EBITDA must be less than 4.10 until the end of The required ratio is stepped down gradually to 2.40 from March The ratio is calculated quarterly based on rolling 12 month periods; and the ratio of Block Watne Gruppen s EBITDA to total interest cost must be higher than 3.40 until the end of The required ratio is stepped up gradually to 5.00 from year end The ratio is calculated quarterly based on rolling 12 month periods Block Watne Gruppen was as at 31 March 2007 in compliance with all these covenants. In addition to the financial covenants, 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 BWG-shares. Following the Private Placement Mr. Nilsen will own 35.7%. Mortgage loans The mortgage loans of NOK 8.4 million at 31 March 2007 are loans made by Block Watne AS secured with mortgages on the company s own office buildings. Repayment of the loans is with a total of NOK 1.2 million annually as shown in the table above. Subordinated loans Subordinated loans comprise two loans from Lani Development AS, which is owned by CEO Lars Nilsen, 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. Credit/drawing facilities Block Watne AS had drawn / utilized a total of NOK million in short term credit facilities at 31 March 2007, reported as short term interest bearing debt in the balance sheet. The unutilised amount under its credit facilities at year end was approximately NOK 860 million. The credit facilities are used to finance acquisition of land and construction. The main financial term (covenant) for the facilities is that Block Watne AS must have a ratio of shareholders equity and subordinated loan to total assets of more than 20%. Block Watne AS was in compliance with this covenant as of 31 March

48 Financing related to the acquisition of Prevesta In connection with the acquisition of the shares in Prevesta, Block Watne s subsidiary Husinvest I Stockholm AB has entered into a term loan agreement amounting to SEK 1,000 million. A repayment of SEK 110 million is due at year-end There are no further repayments for the first five years after the initial payment date for the loan following which the entire loan is due (however the latest repayment date is 30 June 2012). The loan is guaranteed by Block Watne Gruppen ASA. The interest rate is linked to STIBOR plus a margin of 80 basis points. The margin is reduced to 60 basis points if the ratio of net interest bearing debt measured on a 12 month rolling basis falls below 3.75% for Block Watne Gruppen on a consolidated basis, and further down to 40 basis points if the ratio falls below The key financial terms (covenants) for the term loan are: The equity ratio (defined as equity capital + subordinated loans (if any) divided by total assets) must be at least 30% in Block Watne Gruppen on a consolidated basis; and the ratio of the interest bearing debt to Block Watne Gruppen s EBITDA must be less than 3.75 until the end of 2007, less than 3.5 in 2008 and less than 3.0 in 2009 and thereafter. The ratio is calculated quarterly based on rolling 12 month periods. Pro forma capitalisation The table below shows Block Watne Gruppen s unaudited pro forma consolidated capitalisation and net indebtedness as of 31 March Amounts in NOK million Current debt Guaranteed 0 Secured 211 Unguaranteed / unsecured 0 Total current debt 211 Non-current debt Guaranteed Secured 1510 Unguaranteed / unsecured 95 Total non-current debt 1605 Total indebtedness (A) 1,816 Share capital 13 Legal reserve 1,506 Other reserve 89 Shareholders equity (B) 1,609 Total capitalisation (A+B) 3424 Cash 182 Cash equivalents 0 Trading securities 0 Liquidity (C) 182 Current financial receivables (D) 0 Current bank debt 211 Current portion of non current debt 0 Other current financial debt 0 Current financial debt (E) 211 Net current financial indebtedness (C + D E) (F) 29 Non-current bank loans 1,510 Bonds issued 0 Other non-current loans 95 Non-current financial debt (G) 1,605 Net financial indebtedness (F-G) 1,634 47

49 This table above should be read together with the pro forma financial information presented in section 7.1 together with the related notes thereto. 7.8 Legal and arbitration proceedings Block Watne Gruppen is at the date of this Prospectus not aware of any actual, pending or threatened governmental, legal or arbitration proceedings during the previous 12 months which may have, or have had in the recent past significant effects on its financial position or profitability. 48

50 8 SHARE CAPITAL AND SHAREHOLDER MATTERS 8.1 Share capital Block Watne Gruppen s share capital prior to the Private Placements was NOK 9,000,000 made up of 45,000,000 Shares each with a par value of NOK 0.20, all fully paid. The share capital following Private Placement I is NOK 11,899,551.60, made of up of 59,497,758 Shares with a par value of NOK 0.20 per Share, all fully paid. Block Watne Gruppen's share capital following Private Placement II will be NOK 13,200,000, made of up of 66,000,000 Shares with a par value of NOK 0.20 per Share. The New Shares in Private Placement II have been subscribed on 31 May 2007 in connection with the closing of the acquisition of Prevesta, but the share capital increase representing such New Shares has not been registered in the Norwegian Register of Business Enterprises as at the date of this Prospectus and thus not been delivered to the subscribers VPS accounts (as described in Section 10.5). The development of Block Watne Gruppen's share capital since it is incorporation is set forth in the table below. Year Description of issuance Change in share capital Par value per Share Share capital after change No. of Shares after change Price per share in issue (NOK, except for number of shares) 2005 Incorporation 5,000, ,000,000 25,000,000 Private placement of NOK new shares 3,000, ,000,000 40,000, Share issue 1,000, ,000,000 45,000,000 NOK Private Placement I 2,899, ,899, ,497,758 NOK Private Placement II* 1,300, ,200,000 66,000,000 NOK * The share capital increase in the connection with Private Placement II is expected to be registered in the Norwegian Register of Business Enterprises on 5 June 2007 The share capital contribution in connection with the Company s incorporation in 2005 was paid with assets other than cash, such non-cash contribution representing more than 10% of the Company s capital from its incorporation. In addition, the share contribution in Private Placement II is with shares in Prevesta. There are no outstanding warrants, stock options, convertible bonds or other securities convertible into Shares of the Company. Block Watne Gruppen does not own any of its own Shares and the Board has not been granted authorisation to purchase own Shares. 8.2 Share Registration and Listing Block Watne Gruppen's Shares are registered in book entry form in the VPS. The securities number of the Shares is ISIN NO Block Watne Gruppen s account operator (VPS registrar) is Nordea Bank Norge ASA, Issuer Service, P.O. Box 1166 Sentrum, NO Oslo, Norway. The Company's Shares are listed on Oslo Børs with ticker code BWG. 8.3 Authorisations Authorisations to issue new shares At the annual general meeting of Block Watne Gruppen held 18 April 2007, the general meeting authorised the Board of Directors of the Company to increase the Company s share capital by up to NOK 4,500,000 for the purpose of conducting Private Placement I. The 49

51 authorisation is valid to 31 December As described in Section 8.1 hereof, 14,497,758 Shares were issued under this authorisation, and no further shares will be issued thereunder. Block Watne Gruppen does not hold any other authorisations in relation to the Company s share capital. 8.4 Shareholders The following table sets forth the largest shareholders of Block Watne Gruppen, as registered in VPS as 4 June Name Shareholding % of total SEB Securities ASA 1) 14,497, % Lani Industrier AS 5,712, % Morgan Stanley & Co. Inc. 3,541, % Lani Development AS 3,250, % Pareto Aksje Norge 2,501, % Bank Of New York, Brussels Branch 2,231, % Vital Forsikring ASA 1,633, % Citibank Intl. PLC. (Lux Branch) 1,367, % Pareto Aktiv 1,166, % Folketrygdfondet 1,155, % JPMorgan Chase Bank 1,048, % State Street Bank And Trust Co. 1,014, % BNP Paribas Sec. Services London 861, % Verdipapirfond Odin Norden 857, % Barclays Bank PLC 834, % DnBNOR Norge (Iv) VPF 793, % Verdipapirfond Odin Norge 777, % AG Invest AS 760, % JPMorgan Chase Bank 750, % Clearstream Banking S.A. 715, % Commerzbank AG 664, % Euroclear Bank S.A./N.V. ('Ba') 620, % Nordea Bank Denmark AS 600, % GMO Foreign Small Companies Fund 483, % UBS AG, London Branch 427, % Skandinaviska Enskilda Banken 399, % Goldman Sachs International 342, % Terra Spar VPF 325, % Deutsche Bank AG London 319, % Mutual Insurance Company Pension 300, % Sum 30 largest 49,952, % Total 59,497, % 1) Shares held as part of the stock lending agreement entered into between the Manager and Lani Industrier AS as described in section 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% of the issued share capital. 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%, Block Watne Gruppen does not have knowledge of any other shareholder which will hold more than 5% after the completion of the Private Placements. 50

52 Based on the above, Lars Nilsen will have negative control in all matters requiring a vote of 2/3 or more on general meetings, such as capital increases, mergers, de-mergers, the issuance of warrants or convertible loans and all matters requiring an amendment to the Company s articles of association. The interests of Mr. Nilsen in deciding these matters and the factors he considers in exercising its votes could be different from the interests of the Company s other shareholders. 8.5 Articles of Association Block Watne Gruppen s articles of association are set out in appendix 1 to this Prospectus. Pursuant to section 3 of the Company s 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 Company shall have an election committee consisting of three members elected by the general meeting for one year at a time. The election committee shall nominate candidates for the Board of Directors and the Corporate Assembly (if any) and the remuneration for the members of these bodies. The Board of Directors may lay down instructions for the election committee. The articles of association do not provide for any rights, preferences and restrictions attaching to the Shares. The rights, preferences and restrictions attaching to the Shares are set out in the Public Limited Companies Act. The articles of association do not lay down more significant conditions necessary to change the rights of shareholders than required by the Public Limited Companies Act. Under the Public Limited Companies Act, general meetings must be convened by written notice to all shareholders whose address is known. The notice must be sent at the latest two weeks before the date of the general meeting. The notice must set forth the time and date of the meeting and specify the agenda of the meeting. It must also name the person appointed by the Board of Directors to open the meeting. All shareholders who are registered in the register of shareholders maintained by the VPS as of the date of the general meeting, or have otherwise reported and proved an acquisition of Shares, are entitled to admission without any requirement for pre-registration. The articles of association do not contain any provisions as to the manner in which general meetings of the Company are called or as to the conditions of admission to general meetings. There are no provisions in the articles of association which would have an effect of delaying, deferring or preventing a change of control of the Company, or which require disclosure of ownership above any thresholds. However, please see section 8.13 for a description of the requirements under the Securities Trading Act for the disclosure of transactions which cause certain thresholds to be passed. The articles of association do not impose more stringent conditions for changing the capital of the Company than required by law. 51

53 8.6 Transaction with related parties In November 2005, Block Watne Gruppen ASA acquired Block Watne AS and Hetlandhus AS from Lani Development AS for a total of NOK 1,100,000,000 in cash. Lani Development was at the time indirectly owned by Lars Nilsen, the CEO of Block Watne Gruppen. Block Watne Gruppen was at the time of the acquisition of Block Watne AS and Hetlandhus AS indirectly wholly owned by Lars Nilsen and the transaction is considered as a commoncontrol transaction. 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 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. Under Norwegian law, an agreement between the Company and a shareholder, the shareholder's parent, a director of the Company or the general manager of the Company, or any connected person to the shareholder or the shareholder's parent, that involves consideration from the Company in excess of 1/20th of the Company's share capital at the time of such agreement is not binding on the Company unless the agreement has been approved by a general meeting. Certain exemptions may apply, such as for business agreements in the normal course of the Company's business containing pricing and other terms and conditions that are normal for such agreements, as well as the purchase of securities at a price that is in accordance with market quotes. Any performance of an agreement that is not binding on the Company must be reversed. 8.7 Dividend and shareholder policy Block Watne Gruppen s policy is to pursue a strategy of maximising shareholder value. This will be achieved by sound business development and continuous growth. Block Watne Gruppen aims to give shareholders a competitive return on capital relative to the underlying risk. The payment of future dividends will depend on the earnings, financial condition, cash requirements for potential business development and other factors including taxation, regulation and the pay-out ratios of comparable companies. Block Watne Gruppen will focus on having an attractive dividend policy with the aim of the annual dividends to be stable and in the level of 50-70% of annual consolidated profits after taxes. Block Watne Gruppen aims to be an attractive investment, with an open information policy. Block Watne Gruppen will seek to ensure that the market has the best possible basis for evaluating its status and prospects. Block Watne Gruppen will ensure its shareholders timely, relevant and accurate information. Information on important events which may influence valuation of the company will be made public through Oslo Børs' information system and on the website, Voting rights All Shares of Block Watne Gruppen are of the same class and are equal in all respects. The Company's articles of association do not provide for shares of other classes. Each Share carries the right to one vote in shareholders' meetings, and as a consequence the 52

54 Company s major shareholders do not have different voting rights. Shares transferred to new owners do not give entitlement to voting rights until the acquisition has been registered with the Norwegian Central Securities Depository. The Company's articles of association do not provide for limitations on the transferability or ownership of Shares. As a general rule, resolutions that shareholders are entitled to make pursuant to Norwegian law or the articles of association require approval by a simple majority of the votes cast. In the case of election of directors to the Board, the persons who obtain the most votes cast are deemed elected to fill the positions up for election. However, as required under Norwegian law, certain decisions, including resolutions to waive pre-emptive rights in connection with a share issue, to approve a merger or demerger, to amend the articles of association, to authorize an increase or reduction in the share capital, to authorize an issuance of convertible loans or warrants or to authorize the Board of Directors to purchase the Company s Shares or to dissolve the Company, must receive the approval of at least twothirds of the aggregate number of votes cast as well as at least two-thirds of the share capital represented at a shareholders meeting. Norwegian law further requires that certain decisions, which have the effect of substantially altering the rights and preferences of any shares or class of shares receive the approval of all the holders of such shares or class of shares as well as the majority required for amendments to the articles of association. Decisions that (i) would reduce any existing shareholder s right in respect of dividend payments or other rights to the assets of the Company or (ii) restrict the transferability of the shares require a majority vote of at least 90% of the share capital represented at the general meeting in question as well as the majority required for amendments to the articles of association. Certain types of changes in the rights of shareholders require the consent of all shareholders affected thereby as well as the majority required for amendments to the Articles. 8.9 Dividend rights All Shares carry rights to dividends, if any, which the general meeting may resolve to distribute in accordance with the requirements of the Norwegian Public Limited Companies Act. Under Norwegian law, no interim dividends may be paid in respect of a financial period as to which audited financial statements have not been approved by the annual general meeting of shareholders, and any proposal to pay a dividend must be recommended or accepted by the Company s Board and approved by the shareholders at a general meeting. The shareholders may vote to reduce (but not to increase) the dividends proposed by the directors. The Company s Board will consider the amount of dividend (if any) to recommend for approval by the Company s shareholders, on an annual basis, based upon the earnings of the Company for the years just ended and the financial situation of the Company at the relevant point in time. Hence, the shareholders do not have an absolute entitlement to share in the Company s profits. All shareholders that are shareholders at the time of the general meeting making its resolution are entitled to dividend. There is no time limit under which the individual shareholders entitlement to a declared dividend lapses, except for general limitation rules under Norwegian law. There are no particular restrictions or procedures relating to distributions of dividends to shareholders who are resident outside of Norway. See section 9 for a description of the withholding tax provisions relating to the distributions of dividends to non-residents Rights in event of liquidation All Shares carry an equal right to any surplus in the event of a liquidation of the Company. The Shares are not subject to any redemption or conversion provisions. 53

55 8.11 Restriction on Ownership of Shares The articles of association of Block Watne Gruppen contain no provisions restricting foreign ownership of shares. There are no limitations under Norwegian law on the rights of nonresidents or foreign owners to hold or vote the shares Additional Issuances and Preferential Rights All issuances of shares by Block Watne Gruppen, including bonus issues, require an amendment to the articles of association, which requires the same vote as other amendments to the articles of association (i.e., support by at least two-thirds of the votes cast). Furthermore, under Norwegian law, the Company s shareholders have a preferential right to subscribe for issues of new Shares by the Company. The preferential rights to subscribe in an issue may be waived by a resolution in a general meeting by the same vote required to approve amendments to the articles of association. A waiver of the shareholders preferential rights in respect of bonus issues requires the approval of all outstanding shares, irrespective of class. Under Norwegian law, bonus issues may be distributed, subject to shareholder approval, by transfer from the Company s free equity or from its share premium reserve. Such bonus issues may be carried out either by issuing Shares or by increasing the par value of the Shares outstanding. To issue Shares to holders who are citizens or residents of the United States upon the exercise of preferential rights, the Company may be required to file a registration statement in the United States under United States securities laws. If the Company decides not to file a registration statement, such holders may not be able to exercise their preferential rights and in such event would be required to sell such rights to eligible Norwegian persons or other eligible non-u.s. holders to realize the value of such rights Mandatory Bid Rules Norwegian law requires any person, entity or group acting in concert that acquires more than 40% of the voting rights of a Norwegian company listed on Oslo Børs to make an unconditional general offer for the purchase of the remaining shares in the company. The offer is subject to approval by Oslo Børs before submission of the offer to the shareholders. The entity whose shareholdings exceed the 40% threshold may also elect to sell the portion of shares which exceeds 40%. Notification to Oslo Børs of whether an offer will be made or if a sale will occur must be done immediately after the mandatory offer obligation is activated. The offer price per share must be at least as high as the highest price paid or agreed by the offeror in the six-month period prior to the date the 40% threshold was exceeded, but equal to the market price if the market price was higher when the 40% threshold was exceeded. In the event that the acquirer thereafter, but prior to the expiration of the bid period acquires, or agrees to acquire, additional shares at a higher price, the acquirer is obliged to restate its bid at that higher price. A mandatory offer must be in cash or contain a cash alternative at least equivalent to any other consideration offered. A shareholder who chooses to reduce its shareholding to below 40% or fails to make the required offer must within four weeks dispose of sufficient shares so that the obligation ceases to apply (i.e., to reduce the ownership to a level below 40%). Otherwise, Oslo Børs may cause the shares exceeding the 40 % limit to be sold by public auction. A shareholder who fails to make such bid cannot, as long as the mandatory bid requirement remains in force, vote the portion of his shares that exceeds the 40% limit or exercise any rights of share ownership in respect of such shares. The shareholder can, however, exercise the right to receive dividends and exercise pre-emption 54

56 rights in the event of a share capital increase. The Oslo Børs may impose a daily fine upon a shareholder who fails to make the required offer. A shareholder or consolidated group that owns shares representing more than 40% of the votes in a listed company, and that has not made an offer for the purchase of the remaining shares in the company in accordance with the provisions concerning mandatory offers (e.g., due to available exemptions), is obliged, in general, to make a mandatory offer in the case of each subsequent acquisition. However, there are exceptions to this rule, including for a shareholder or a consolidated group that, upon admission of the company to listing on a stock exchange, already owns more than 40% of the shares in the company. The Norwegian Ministry of Finance has proposed that the threshold for triggering mandatory offer requirements be reduced to 1/3 and with repeated offer requirements at 40% and 50%. It is uncertain when the new rules, if adopted, will enter into force but it is expected that the Norwegian Parliament will deal with the proposal before end of June Compulsory Acquisition A shareholder who, directly or via subsidiaries, acquires shares representing more than 90% of the total number of issued shares as well as more than 90% of the total voting rights of a company has the right (and each remaining minority shareholder of that company would have the right to require the majority shareholder) to effect a compulsory acquisition of any shares not already owned by the majority shareholder. A compulsory acquisition results in the majority shareholder becoming the owner of the shares of the minority shareholders with immediate effect. A majority shareholder who effects a compulsory acquisition is required to offer the minority shareholders a specific price per share and to pay the consideration offered to a separate bank account for the benefit of the minority shareholders. The determination of the offer price is at the discretion of the majority shareholder. Should any minority shareholder not accept the offered price, such minority shareholder may, within a specified period of not less than two months, request that the price be set by the Norwegian courts. The cost of such court procedure would normally be charged to the account of the majority shareholder, and the courts would have full discretion in determining the consideration due to the minority shareholder as a result of the compulsory acquisition Disclosure of Acquisition and Disposals Under the Securities Trading Act, a person, entity or group acting in concert that acquires or disposes of shares, options for shares or other rights to shares resulting in its beneficial ownership, directly or indirectly, in the aggregate, reaching, exceeding or falling below the respective thresholds of 1/20, 1/10, 1/5 1/3, 1/2, 2/3 or 9/10 of the share capital has an obligation to notify Oslo Børs immediately. The Norwegian Ministry of Finance has proposed that 15% and 25% be included in the thresholds which trigger disclosure obligations. It is uncertain when the new rules, if adopted, will enter into force but it is expected that the Norwegian Parliament will deal with the proposal before end of June Shareholders Agreements The Company is not aware of any shareholders agreements having been entered into by the shareholders. 55

57 9 TAXATION Set out below is a summary of certain Norwegian tax matters related to the purchase, holding and disposal of shares in Norwegian limited liability companies. The summary is based on Norwegian laws, rules and regulations applicable at the date of this Prospectus, and does not address foreign tax laws. Such laws, rules and regulations are subject to change, possibly on a retroactive basis. The summary is of a general nature and does not purport to be a comprehensive description of all the tax considerations that may be relevant to the Investors. Investors who wish to clarify their own tax situation should consult with and rely upon their own tax advisers. Investors resident in jurisdictions other than Norway should consult with and rely upon local tax advisors as regards the tax position in the country of residence. In particular, this document does not include any information with respect to U.S. taxation. Prospective investors who may be subject to tax in the United States are urged to consult their tax adviser regarding the U.S., federal, state, local and other tax consequence of owning and disposing of New Shares. Please note that for the purpose of the summary of tax issues below, a reference to a Norwegian or foreign shareholder refers to the tax residency rather than the nationality of the shareholder. 9.1 Shareholders resident in Norway for tax purposes This section summarizes Norwegian tax rules relevant to shareholders that are residents of Norway for Norwegian tax purposes ( Norwegian shareholders ). Taxation of dividends Norwegian corporate shareholders (i.e. limited liability companies and similar entities) are exempt from tax on dividends received on shares in Norwegian limited liability companies and similar entities. Dividends distributed to Norwegian individual shareholders are taxable as general income at a flat rate of 28% to the extent the dividends exceed a calculated tax-free allowance. The allowance is calculated separately for each share as the tax purchase price of the share, including RISK-adjustments up to 1 January 2006, multiplied with a determined risk-free interest rate, which will be based on the effective rate after tax of interest on treasury bills (Norwegian: statskasseveksler) with three months maturity. The part of the allowance one year exceeding the dividend distributed on the share the same year ( unused allowance ) will be added to the tax purchase price of the share and be included in the basis for calculating the allowance the next year, and may also be carried forward and set off against future dividends received on, and against gains upon the realization of, the same share. The allowance is calculated for each calendar year, and is allocated solely to Norwegian individual shareholders holding shares at the expiration of the relevant calendar year. Norwegian individual shareholders will thus not be entitled to deduct any calculated allowance related to the year of transfer. Taxation of capital gains upon the realization of shares Norwegian corporate shareholders are exempt from tax on capital gains upon the realization of shares in Norwegian limited liability companies and similar entities. Losses upon the realization and costs incurred in connection with the purchase and realization of such shares are not deductible for tax purposes. 56

58 Norwegian individual shareholders are subject to taxation in Norway on capital gains upon the shares, and have a corresponding right to deduct losses which arise upon such realization. The tax liability applies irrespective of time of ownership and the number of shares and realized. Gains are taxable as, and losses may be deducted from, general income in the year of realization. The tax rate for general income is currently 28%. The taxable gain/deductible loss related to the realization of shares is calculated per share as the difference between the consideration received and the purchase price of the share, including any RISK-adjustments up to 1 January Any unused allowance on a share (see above) may be set off against gains upon the realization of the same share, but this may not lead to or increase a deductible loss, i.e. any unused allowance exceeding the capital gain upon the realization of a share will be annulled. The allowance is calculated for each calendar year, and is allocated solely to Norwegian individual shareholders holding shares at the expiration of the relevant calendar year. Norwegian individual shareholders will thus not be entitled to deduct any calculated allowance related to the year of transfer. If shares acquired at different times are realized, the shareholder must apply a first-in firstout (FIFO) principle when calculating the gain or loss, i.e. the shares that were first acquired will be deemed as first sold. Norwegian individual shareholders who move abroad and cease to be tax resident in Norway as a result of this, are deemed taxable in Norway for any potential gain related to the shares held at the time the tax residency ceased, as if the shares were realized for tax purposes at this time. Gains of NOK 500,000 or less are not taxable. Potential losses are as a main rule not deductible. If the person moves to a jurisdiction within the European Economic Area ( EEA ), potential losses related to shares held at the time the tax residency ceased will be tax deductible when exceeding the NOK 500,000 threshold. The actual taxation (loss deduction) will occur at the time the shares are actually realized for tax purposes. If the shares are not realized for tax purposes within five years after the shareholder ceased to be resident in Norway for tax purposes, the tax liability calculated under these provisions will not apply. Costs incurred in connection with the acquisition and realization of shares may be deducted from the Norwegian individual shareholders general income in the year of realization. Net Wealth Tax Norwegian limited liability companies and certain similar entities are exempt from Norwegian net wealth tax. For other Norwegian shareholders, shares will form part of their capital and be subject to net wealth taxation by the state and the local municipality. Listed shares are valued at 85% of their stock value on 1 January in the assessment year. The maximum combined state and municipal rate of the wealth tax is 1.1%. 9.2 Shareholders not resident in Norway for tax purposes This Section summarizes Norwegian tax rules relevant to shareholders that are not residents of Norway for Norwegian tax purposes ( foreign shareholders ). Foreign shareholders tax liabilities in their home country or other countries will depend on tax rules applicable in the relevant country. Taxation of dividends Dividends paid by Norwegian limited liability companies and similar entities to foreign shareholders, both corporate and individual, are subject to withholding tax in Norway at a flat rate of 25%, unless otherwise provided for in an applicable income tax treaty or the recipient 57

59 is covered by the specific regulations for shareholders resident within the EEA (see below). Norway has entered into income tax treaties with more than 70 countries, and in most of the treaties the withholding tax rate is reduced to 15%. The withholding obligation lies with the company distributing the dividends. Foreign corporate shareholders who are tax resident within the EEA are exempt from Norwegian withholding tax on dividends distributed from Norwegian limited liability companies and similar entities, provided that the shareholder is the beneficial owner of the dividends. Foreign individual shareholders who are tax resident within the EEA are subject to Norwegian withholding tax on dividends received from Norwegian companies at the regular rate or at a reduced rate determined in an applicable tax treaty. However, such shareholders may apply individually to the tax authorities for a refund of an amount corresponding to the calculated tax-free allowance on each individual share (see above). In contrast to Norwegian individual shareholders, the authorities have stated that foreign individual shareholders resident within the EEA may not carry forward any unused allowance. In accordance with the present administrative system in Norway, a distributing company will normally deduct withholding tax at the applicable reduced rate when dividends are paid directly to an eligible foreign shareholder based on information registered with the VPS (the Norwegian Central Securities Depository) as to the tax residence of the foreign shareholder. Dividends paid to foreign shareholders in respect of nominee registered shares are not eligible for reduced treaty-rate withholding at the time of payment unless the nominee, by agreeing to provide certain information regarding beneficial owners, has obtained approval for reduced treaty-rate withholding from the Central Office for Foreign Tax Affairs (Sentralskattekontoret for utenlandssaker). Foreign shareholders who have suffered a higher withholding tax than set out by an applicable tax treaty may apply to the Norwegian tax authorities for a refund of the excess withholding tax deducted. Foreign shareholders should consult their own advisers regarding the availability of treaty benefits in respect of dividend payments including the ability to effectively claim refunds of over-withheld amounts. If a foreign shareholder is carrying on business activities in Norway and the relevant shares are effectively connected with such activities, the shareholder will be subject to the same dividend taxation as Norwegian shareholders as described above. Taxation of capital gains upon the realization of shares Capital gains upon the realization of shares in Norwegian companies by foreign corporate shareholders are not subject to taxation in Norway. For foreign individual shareholders, capital gains upon the realization of shares will be subject to taxation in Norway if the shareholding is effectively connected with a business which the shareholder takes part in or carries out in Norway. If a foreign individual shareholder has been a resident of Norway for tax purposes and has realized shares less than five calendar years after termination of the tax residency in Norway, the latent capital gain on the shares at the time of such termination will be subject to taxation in Norway, provided that such latent capital gain on the shareholder s total shareholding exceeds a tax-free allowance. The taxation of capital gains upon the realization of shares may be limited pursuant to an applicable tax treaty. 58

60 Net Wealth Tax Foreign shareholders are not liable to pay net wealth tax in Norway on shares in Norwegian companies unless the shareholder is an individual and the shareholding is effectively connected with a business which the shareholder takes part in or carries out in Norway. 9.3 Duties on the transfer of shares No stamp or similar duties are currently imposed in Norway on the transfer or issuance of shares in Norwegian companies. 9.4 Inheritance tax When shares are transferred either through inheritance or as a gift, such transfer may give rise to inheritance or gift tax in Norway if the decedent, at the time of death, or the donor, at the time of the gift, is a resident or citizen of Norway, or if the shares are effectively connected with a business carried out through a permanent establishment in Norway. However, in the case of inheritance tax, if the decedent was a citizen but not a resident of Norway, Norwegian inheritance tax will not be levied if inheritance tax or a similar tax is levied by the decedent s country of residence. 59

61 10 THE PRIVATE PLACEMENTS 10.1 General This section comprises information regarding Private Placement I consisting of 14,497,758 New Shares issued by Block Watne Gruppen with gross proceeds to the Company of NOK 652 million and Private Placement II consisting of 6,502,242 New Shares issued by the Company as part of the purchase price for the acquisition of Prevesta. The New Shares issued in Private Placement I have been fully subscribed for and the New Shares to be issued in Private Placement II will be issued to the sellers of Prevesta, as further described below. The New Shares have been or will be created pursuant to the Norwegian Public Limited Companies Act Block Watne Gruppen's share capital prior to and after the Private Placements Block Watne Gruppen s share capital prior to 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 with a par value of NOK 0.20 per Share. The share capital following completion of Private Placement II will be NOK 13,200,000, made of up of 66,000,000 shares with a par value of NOK 0.20 per Share Purpose of 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 ( Industri Kapital ) 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 is 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 Private Placement I and Private Placement II and the credit facility described in Section 7.7 under the heading Financing related to the acquisition of Prevesta. The closing of the acquisition of Prevesta took place on 31 May Resolutions related to the Private Placements Private Placement I The annual general meeting of Block Watne Gruppen held on 18 April 2007 authorised the Board of Directors of the Company to increase the Company s share capital by up to NOK 4,500,000, for the purpose of effecting Private Placement I. The authorisation was given for the period to 31 December The authorisation permitted the Board of Directors to waive the pre-emptive rights of the shareholders in the Company with respect to Private Placement I because it is, in line with market practice, assumed to be advantageous for the subscription price to accomplish the share issue through a private placement (through a book-building process). The authorisation did not include capital increase against payment in kind or by merger in accordance with the Public Limited Liability Companies Act section

62 The issue of the New Shares in connection with Private Placement I, as described in section 10.5 below, was 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 The Board resolved to increase the Company s share capital with NOK 2,899,551.60, by issuing 14,497,758 New Shares, for a subscription price of NOK 45 per New Share, totally NOK 652,399,110. The New Shares were subscribed by the Manager in the minutes of the Board meeting. The deadline for payments was 3 May The New Shares are entitled to dividends resolved from and including the financial year 2007 after the share capital increase was registered in the Norwegian Registry of Business Enterprises, and have otherwise from the registration the same rights as the other Shares. On 4 June 2007 the Board resolved a clarification of its resolution of 26 April 2007 with regard to dividend entitlement, so that the New Shares are entitled to any dividends declared after the share capital increase was registered in the Norwegian Registry of Business Enterprises. Private Placement II The annual general meeting of Block Watne Gruppen held on 18 April 2007 resolved to increase the share capital by NOK 1,300, by the issuance of 6,502,242 New Shares to the sellers of Prevesta AB at a subscription price of NOK per Share. The payment shall be made by contribution in kind of in aggregate 139,798 shares in Prevesta AB. The 6,502,242 New Shares in Private Placement II was 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 has not been registered in the Norwegian Register of Business Enterprises (Foretaksregisteret) as at the date of this Prospectus and thus not been delivered to the subscribers VPS accounts The New Shares to be issued in Private Placement II will be entitled to dividends declared after the registration of the relevant share capital increase the Norwegian Registry of Business Enterprises. Otherwise the New Shares carry rights from the time of registration of the relevant share capital increase per in the Norwegian Registry of Business Enterprises. The pre-emptive rights of the shareholders in the Company were set aside with respect to Private Placement II because the purpose of the capital increase is to issue consideration shares in connection with the acquisition of Prevesta AB Subscriptions in the Private Placements and settlement Private Placement I A total of 14,497,758 Shares, being equal to the number of Shares issued in Private Placement I, were placed by the Manager through a book-building process towards institutional and professional investors in the period 20 April 2007 to 26 April 2007 at a price per Share of NOK 4, totally NOK 652,399,110. To effect early delivery and settlement of the Shares placed, 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 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 to 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 61

63 will subsequently be transferred to Lani Industrier AS to settle the loan of shares according to the stock lending agreement. The issue of 14,497,758 New Shares under Private Placement I has been completed at the date of this Prospectus and is thus not subject to any conditions, and cannot be revoked or suspended. Private Placement II Pursuant to the agreement to acquire Prevesta, the sellers of Prevesta shall receive as a part of their purchase price in form of and are obligated to subscribe for the 6,502,242 New Shares to be issued in Private Placement II in accordance with the resolution by the annual general meeting held 18 April The subscription price is NOK per share, totally approximately NOK 267,123,870. 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 has 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 on 5 June 2007 Industri Kapital has entered into a six month lock-up agreement commencing from the closing of the transaction for the Shares in Block Watne Gruppen received upon completion of Private Placement II. All management shareholders of Prevesta have similarly entered into a 12 month lock-up agreement commencing from the closing of the transaction for the Shares received in Private Placement II Listing on Oslo Børs of the New Shares The shares of Block Watne Gruppen are listed on Oslo Børs with the ticker BWG. One trading lot consists of 200 shares. The New Shares in Private Placement I have been issued and will be admitted to listing on Oslo Børs subsequent to the approval by Oslo Børs and publication of this Prospectus. The New Shares in Private Placement II will 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 The rights of the New Shares The New Shares will be entitled to dividends, if any, resolved after the registration of the share capital increase pertaining to the relevant Private Placement in the Norwegian Register of Business Enterprises. Otherwise, the New Shares carry full shareholders rights in Block Watne Gruppen from the time the share capital increases pertaining to the relevant Private Placement was or is registered in the Norwegian Register of Business Enterprises. Each New Share entitles the holder to cast one vote at the Company s general meetings Dilution The percentage of immediate dilution resulting from Private Placement I for Block Watne Gruppen 's shareholders as at 26 April 2007 is 24% and the percentage of immediate dilution resulting from Private Placement II for the Company s shareholders as at 31 May 2007 is 10%. 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). 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 62

64 investors of NOK 16.4 (being the difference between the subscription price and net book value per share including Private Placement II) Manager SEB Enskilda ASA, Filipstad Brygge 1, NO-0250 Oslo, Norway, acted as Manager of Private Placement I Expenses and net proceeds Transaction costs and all other directly attributable costs in connection with the Private Placements will be covered by Block Watne Gruppen. The total costs related to Private Placement I were approximately NOK 23 million, resulting in net proceeds from Private Placements I of NOK 629 million. There were no costs related to Private Placement II, resulting in net proceeds from Private Placement II of NOK 267 million with payment by contribution in kind of in aggregate 139,798 shares in Prevesta AB. 63

65 11 ADDITIONAL INFORMATION Documents on display For the life of the Prospectus, the Prospectus, Block Watne Gruppen s Q1 report 2007, as well as the annual reports for the Company and its subsidiary undertakings for 2006 and 2005, the Company s memorandum of incorporation and the Company s 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, telephone number and fax number Copies of this Prospectus may also be obtained from the Manager. There are no reports, letters, valuations or statements prepared by any expert at the Company s request which is referred to in the Prospectus. Confirmation regarding sources The information in this Prospectus that has been sourced from third parties has been accurately reproduced and as far as the Company is aware and able to ascertain from information published by that third party, no facts have been omitted which would render the reproduced information inaccurate or misleading. The source of third party information is identified where used. Incorporation by reference The Norwegian Securities Trading Act and the Prospectus Directive allow the Company to incorporate by reference in this Prospectus information that has been previously filed with the Oslo Børs (in its capacity as Norway s competent authority for the purposes of the Prospectus Directive) in other documents, which means that: The Company can disclose important information to you by referring you to those documents; incorporated documents are considered part of this Prospectus; and information in this Prospectus automatically updates and supersedes information in earlier documents that are incorporated by reference in this Prospectus. The Company incorporates its Q1 report 2007 and the consolidated annual reports for the Company for 2006 and The information incorporated by reference in this Prospectus shall be read in connection with the cross-reference list below set out in the table below. Except as provided in this section, no other information is incorporated by reference into this Prospectus. Section in the Prospectus Annex 1 - Minimum disclosure requirements for the Share Registration Document 7.2 Section 20.1: Audited historical financial information 7.2 Section : Audit report 7.4 Accounting Policies 7.2 Section : Quarterly financial information Reference document and link Consolidated Annual Report 2006: Consolidated Annual Report 2005: Consolidated Annual Report 2006: Consolidated Annual Report 2005: Page (P) in reference document P27 P 61 P1-27 Consolidated Annual Report 2006: P37 P 41 Consolidated report for the Company for first quarter 2006: Consolidated report for the Company for first quarter 2007: P75 P29 P8 P17 P

66 12 DEFINITIONS, GLOSSARY AND OTHER MATTERS Block Watne Block Watne Gruppen Board or Board of Directors Company EBT EBIT EBITDA EPS Group IFRS Manager Norwegian GAAP or NGAAP NOK New Shares Oslo Børs Prevesta Private Placement I - Private Placement II - Private Placements Prospectus - Public Limited Companies Act Securities Trading Act - Shares Stock Exchange Regulations VPS - Subsidiary Block Watne AS - Block Watne Gruppen ASA - Board of Directors of the Company Block Watne Gruppen ASA - Earnings Before Tax - Earnings Before Interest and Tax - Earnings Before Interest, Tax, Depreciation and Amortisation - Earnings per share - Block Watne Gruppen ASA with subsidiaries - International Financial Reporting Standards - SEB Enskilda ASA Generally accepted accounting principles in Norway (in - Norwegian: God Regnskapsskikk i Norge) - The currency of the Kingdom of Norway (Norwegian krone) The 21,000,000 new shares issued or to be issued by the - Company under the Private Placements - Oslo Børs ASA (the Oslo Stock Exchange) - Prevesta AB with subsidiaries as applicable The issue of 14,497,758 Shares, each with a par value of NOK 0.20, at a subscription price of NOK 45 per Share, directed against certain institutional and professional investors, as adopted by the Board on 26 April 2007 in accordance with authorisation granted to it by the Company s annual general meeting held 18 April 2007 The issue of 6,502,242 Shares, each with a par value of NOK 0.20, at a subscription price of NOK per Share, to be subscribed by the sellers of Prevesta within 30 September 2007, as adopted by Company s the annual general meeting held 18 April Private Placement I and Private Placements II combined This prospectus prepared in connection with the Private Placements, including all appendices The Norwegian Public Limited Companies Act of 13 June No. 45 (as amended) The Norwegian Securities Trading Act of 19 June 1997 No. 79 (as amended) - All shares issued by the Company - - The Norwegian Stock Exchange Regulations of 17 January 1994 No. 30 (as amended) The Norwegian Central Securities Depository or Verdipapirsentralen 65

67 Appendix 1 - Articles of Association for Block Watne Gruppen ASA 66

68 Appendix 2 - Auditors statement regarding the Pro forma financial figures 67

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70 Appendix 3 - Board of directors and management s board and management positions 69

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73 Appendix 4 - Prevesta AB financial statements

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97 Block Watne Gruppen ASA Munkedamsveien 45 P.O. Box 1817 Vika NO-0123 Oslo Phone: Fax: SEB Enskilda ASA Filipstad Brygge 1 P.O. Box 1363 Vika NO-0113 Oslo Phone: Fax: