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Boards of Kaupthing Bank hf. and Audlind hf. agree on merger   18.9.2002 09:47:31
Flokkur: Fyrirtækjafréttir      Íslenska  English

The boards of directors of Kaupthing Bank hf. and Audlind Closed End Fund hf. have signed a merger schedule between the companies. Audlind Closed End Fund h.f. will merge with Kaupthing Bank hf. by exchanging shares in Audlind Closed End Fund hf. for shares in Kaupthing Bank hf. This merger was proposed as a result of the abolition of tax rebates for individuals purchasing shares, and the likely outflow of capital from the funds as a result of the aforementioned changes. In order for the merger between the companies to go ahead it must be approved at shareholders’ meetings of both companies which the companies intend to hold in November 2002.

 

In line with provisions of legislation on limited companies the boards of directors of Kaupthing Bank hf. and Audlind Closed End Fund hf. have signed a merger schedule which include the following items:

 

·         It is agreed that all shareholders in Audlind Closed End Fund hf. receive 0.1923 share in Kaupthing Bank hf. for each share they own in the fund.

·         This agreement means that shareholders in Audlind Closed End Fund hf. receive a 14% premium based on the market price at the close of trading on 17 September 2002.

·         Those shareholders in Audlind Closed End Fund hf. who wish to do so can sell their shares in Kaupthing Bank hf. which they receive in exchange upon the merger at a price of 12.5 within one month of the transferral of the shares. This ensures a price of 12.5 for the shareholders in Audlind Closed End Fund hf., irrespective of whether the price of the shares decreases from the time when the plans for merger are signed until the merger is finally approved at the shareholders’ meeting, which is proposed for November 2002. Shareholders in the fund also have the option to transfer, at no expense, their holdings in part or in whole to mutual funds in the custody of Kaupthing Bank hf.

 

Background and reason  for the merger

Audlind Closed End Fund hf. was originally founded as an investment fund for individuals who wanted to invest in equity in order to benefit from tax rebates. The majority of the shareholders have therefore invested in the fund for tax purposes. However, new tax legislation means that the tax rebate for individuals investing in equity will be abolished at the end of the year. This change is likely to lead to an increase in redemptions and make the sale of new shares in closed end funds such as Audlind Closed End Fund hf. more difficult and, as a result, they will gradually decrease in size.

 

Closed end funds such as Audlind Closed End Fund hf. are operated as limited companies and therefore pay income tax just like any other limited company. Furthermore, shareholders in closed end funds pay capital income tax and it thus involves double taxation, unlike mutual funds. When there is a flow of capital into the fund, this is unimportant because the paying of income tax on redeemed capital gains can be postponed by reinvesting in other shares. When there is a flow of capital from the fund it is more difficult to postpone paying income tax on redeemed capital gains.

 

Audlind Closed End Fund hf. has served its purpose well through the years. However, now is the time for change, partly as a result of amendments to the tax laws and proposed changes to the operating environment of the closed end funds. Changes in legislation on mutual funds are currently being prepared and the government intends to include closed end funds in legislation on mutual funds. The long-term effect of these changes will most likely mean that it will be beneficial to dissolve closed end funds in one way or another. The agreement involves a 14% premium above the internal value of the fund which is acceptable to the boards of both companies. The transferable tax loss of Audlind Closed End Fund hf. can be utilized by Kaupthing Bank hf. and is part of the premium to Audlind’s shareholders.

 

Kaupthing Bank hf.’s shareholders will also benefit from the merger as the bank’s shareholder’s equity will increase by 30% from the figure on 30 June 2002. This will enable the bank to expand even more, particularly abroad where the management of  Kaupthing Bank hf. believes the opportunities are most promising.

 

Financial impact of the merger

The total assets of the merged company on 30 June 2002 amounted to ISK 113.2 billion and shareholder’s equity amounted to ISK 11.7 billion.

 

The number of outstanding shares in Kaupthing Bank hf. (issued shares minus own shares) before the merger was approximately 1,560 million. Up to 245 million new shares in Kaupthing Bank hf. will be issued as a result of the merger. The total number of shares in Kaupthing Bank hf. to be exchanged for shares in Audlind Closed End Fund hf. depends on changes to the outstanding shares in the fund up until the time when shares are transferred.

 

Conditions of the merger:

·         That the shareholders in Audlind Closed End Fund hf. approve the merger with Kaupthing Bank hf.

·         That the shareholders in Kaupthing Bank hf. approve the merger and the issue of as many shares as is necessary.

 

The next steps

A prospectus will be published and will be available at the company’s headquarters at Ármúli 13 and Kaupthing Bank hf.’s website www.kaupthing.net before the end of October 2002. Information on the merger will be available at the company’s headquarters in accordance with provisions in legislation on limited companies. 

 

The board of directors of Audlind Closed End Fund hf. will in accordance with provisions in legislation on limited companies call a shareholders’ meeting with a period of notice as stipulated by law. The company aims to hold a shareholders’ meeting in November at which the proposal will be made for a merger with Kaupthing bank hf. and the dissolution of the company will be presented by the board of directors of Audlind Closed End Fund hf.

 

The board of directors of Kaupthing Bank hf. will in accordance with provisions in legislation on limited companies call a shareholders’ meeting in order to gain the approval for the merger and the issuing of new shares. The bank plans to hold the shareholders’ meeting in November provided that the prospectus has been published before that time. No brokering or agents’ fees will be paid as a result of the merger between the companies. The price of market makers will be based on the agreed price from and including 18 September 2002.

 

Reykjavík, 18 September 2002

Audlind Closed End Fund hf.

 

For further information please contact Sveinn Hannesson, Chairman of the Board of Directors of Audlind Closed End Fund hf. on +354 591 0100


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