GRUPA AZOTY SA (47/2018) Answers to shareholder's questions

The Management Board of Grupa Azoty S.A. (hereinafter: "Issuer", "Grupa Azoty") informs that in connection with the request of the Issuer's Management Board addressed to the General Meeting regarding the consent for the Issuer to purchase 25,000 shares, representing 100% of the share capital of Goat TopCo GmbH ("Goat TopCo ") (" Transaction "), the Issuer received the following questions on 20 September 2018 from the Issuer's shareholder:
• What is the synergy effect of the Goat TopCo GmbH acquisition assumed in the acquisition process to be achieved within two years from the acquisition date?
• What is the dynamics of the adjusted EBITDA of Goat TopCo GmbH in fiscal year 2018 according to the latest data available to you?
• Goat TopCo GmbH reports do not appear in Bundesanzeiger, but Goat BidCo GmbH is present. Is this the same entity? If so, please explain the difference in names.
• If you answered yes to the previous question: Goat BidCo GmbH had EUR 103 million net debt in the financial year ending 30/09/2016. Has the Net debt / EBITDA LTM ​​index below 2.5x been successful since then?
• What are the main risks associated with Goat TopCo GmbH's operations referred to in the Deloitte Advisory sp. z. o.o. "Opinions on the financial terms of buying shares"?
The Issuer below presents the answers to the questions:
Synergies resulting from the acquisition of the COMPO EXPERT Group
According to the information provided by the Issuer in Current Report No. 45/2018 of 24 September 2018, it is estimated that the acquisition of COMPO EXPERT GmbH with its registered office in Münster, Germany ("COMPO EXPERT") may achieve the following synergies:
1. Synergies in the field of know-how - transfer of know-how in the production and application of advanced fertilizer products, and thus, the possibility to extend the existing competences of Grupa Azoty in the field of fertilizer production, especially in the field of nitrification inhibitors and polymer coating technologies.
2. Sales synergies - use of existing sales channels of Grupa Azoty and COMPO EXPERT to place products on target markets. In addition, it is possible to transfer advanced solutions for the sales and consumer support systems developed by COMPO EXPERT to Grupa Azoty.
3. Synergies in the field of research anddevelopment - joint running of research and development activities for the benefit of connected entities within the three research and development centers of Grupa Azoty and COMPO EXPERT research centers. The acquisition of new know-how will allow us to focus the Group's research and development resources on work on more advanced technologies, eg biodegradable coatings and substitutes for the DMPP nitrification inhibitor.
4. Raw materials and product synergies - use of Grupa Azoty's products as raw materials for further processing into specialist fertilizers at COMPO EXPERT.
5. Synergies in the area of ​​financing - organization of debt financing on more favorable terms offered by Grupa Azoty on the market.
The synergies identified, in line with the Issuer's conservative approach, have not been included in the calculation of the purchase price of the Goat TopCo shares and represent an additional value that may affect the results and value of the Azoty Group in the following years.
Organizational structure of the Goat TopCo capital group.
Goat TopCo is a holding company and indirectly through two further holding companies - Goat HoldCo GmbH (a 100% subsidiary of Goat TopCo) and eventually Goat BidCo GmbH (a 100% company dependent on Goat HoldCo GmbH), controls 20 operating companies from the Compo Expert group, including the leading operating company COMPO EXPERT.
Adjusted EBITDA dynamics in 2018
After the first three quarters of the 2018 financial year ended 30 September 2018, the adjusted, consolidated EBITDA of the COMPO EXPERT Group in a growing increment amounted to EUR 26.7 million, which means an increase EUR 1.8 million compared to the results for the third quarter of the 2017 financial year ended 30 September 2017. The level of normalized EBITDA in the last 12 months, i.e. from 1 July 2017 to 30 June 2018, was 33 , EUR 4 million, by EUR 3.8 million more than in the corresponding 12-month period preceding. The data presented is only management data that does not come from the audited financial statements.
Net debt / EBITDA ratio
The bank debt of the Goat TopCo capital group will be refinanced as part of the transaction by Grupa Azoty S.A. The structure of external financing of the Goat TopCo capital group after closing the Transaction will be characterized by indicators well below 2.5x net debt / EBITDA.
In progressThe preparation of the Transaction verified the impact of acquisition and refinancing on the financial condition of the entire capital group of the Issuer, including the expected operating ratios and the level of collateral and restrictions related to debt, analyzed in accordance with current projections.
Risks related to the Goat TopCo activity
"Opinion on the financial terms of shares purchase" ("Opinion") provided by the Issuer in the current report No. 43/2018 of September 7, 2018 was prepared on the basis of documents indicated in it. These documents contained, among others description of a number of risks related to the operations of the Goat TopCo capital group that have been identified by the Issuer and its advisors in the due diligence process.
The Issuer then indicated in Current Report No. 45/2018 of 24 September 2018 that during the preparation of the Transaction, potential risks related to the investment in the areas of management, regulatory, financial, legal, tax, environmental and commercial model were identified. It is these risks, described in current report No. 45/2018 of 24 September 2018 and identified by the Issuer and its advisers, are referred to by the Opinion.
The Issuer again points out that an analysis has been made and a way to mitigate the risks that may have influenced the Goat TopCo value has been developed. The risks identified were included in the price of the Transaction to the extent that it was possible to quantify them according to the best knowledge of the Issuer and its advisers conducting the due diligence, or secured by appropriate provisions in the share purchase agreement. In addition, the Issuer indicates that the Transaction will be covered by an insurance policy protecting the interests of Grupa Azoty covering issues unknown or undisclosed during the transaction process, in particular covering the area of ​​legal and tax risks. We would like to point out, however, that every transaction process is inseparably connected with taking risks whose identification and quantification at the stage of concluding the Transaction may be incomplete and their complete elimination impossible due to the fact that future circumstances may turn out to be different than expected or expected at the stage concluding a Transaction.
Legal basis: § 19 section 1 point 12 of the Regulation of the Minister of Finance on current and periodic information provided by issuers of securitiesvalues ​​and conditions for recognizing as equivalent the information required by the law of a non-member state of 29 March 2018 (Journal of Laws of 2018, item 757).

Source: company website, investor relations, current and periodic reports.

Company information
Company name:Grupa Azoty SA
Adress: ul. Eugeniusza Kwiatkowskiego 8 33-101 Tarnów
Phone:+48 14 6330781

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