Acquisition by Telefonia DIALOG S.A. of shares in the company SA

Friday, 20 October, 2006

The Management Board of KGHM Polska Miedź S.A. announces that 19 October 2006 Telefonia DIALOG S.A. (a subsidiary of KGHM Polska Miedź S.A.) acquired from the company Sovereign Capital S.A. with its registered head office in Warsaw – based on an agreement entered into on 19 October 2006 for the acquisition of assets – 90% of the shares of the company SA with its registered head office in Warsaw.

The share capital of SA amounts to PLN 5 300.0 thousand and is divided into 530 000 shares, fully and properly paid, having a face value of PLN 10 each. The acquisition price for 90% of the shares having a total nominal value of PLN 4 770.0 thousand amounts to PLN 1 662.8 thousand. Additionaly, within this assets purchase agreement, liabilities of SA due to loans for the amount PLN 487.2 thousand were transferred to Telefonia DIALOG S.A. The total amount of the transactions for the acquisition of assets amounted to PLN 2 150.0 thousand.

The carrying value of these assets in the accounts of Telefonia DIALOG S.A. amounts to PLN 3 434.5 thousand.The carrying value of these assets covers costs related to the purchase of the company which as of today are estimated at PLN 1 284.5 thousand in total.

The acquisition of these assets was financed using the internal funds of Telefonia DIALOG S.A.

The assets acquired are of a long-term, equity investment nature.

There are no relations between the management and supervisory personnel of KGHM Polska Miedź S.A. and the seller of the shares.

The criteria used for describing the assets as significant is that the financial assets acquired by Telefonia DIALOG S.A. exceed 20% of the share capital of SA

This transaction is the result of signed on 27 September 2006 a preliminary agreement between Telefonia DIALOG S.A. and Sovereign Capital S.A., in which Telefonia DIALOG S.A. committed to the following:

  • The signing of a promisory agreement to acquire from Sovereign Capital S.A. 90% of the shares of SA within 1 month of the date of acquiring 90% of the shares of SA by Sovereign Capital S.A., and
  • The acquisition from Sovereign Capital S.A. of remaining 10% of the shares of SA if Sovereign Capital S.A. up to 31 December 2006 acquires the above minority stake as the result of realising a put option.

The subject of activities of SA includes retail sale of books, press, stationery, retail sale of home appliances, consumer electronics, computers and telephones, games and toys, retail mail-order sale, publishing, other information technology related activities.

The decision on purchase of SA results from the strategy adopted by Telefonia DIALOG S.A. to increase the scope of products offered on the dynamically growing e-commerce market.

Legal basis: § 5 section 1 point 1 of the Decree of the Minister of Finance dated 19 October 2005 regarding current and periodic information published by issuers of securities (Journal of Laws from 2005 Nr 209, item 1744).