Consolidated financial statement of JSW S.A. Capital Group for 2012

38. Business combinations

Business combinations in 2012

Acquisition of non-controlling interest in Koksownia Przyjaźń

On 20 November 2012, the Extraordinary Shareholder Meeting of Koksownia Przyjaźń Sp. z o.o. adopted a resolution to transform Koksownia Przyjaźń Sp. z o.o. into Koksownia Przyjaźń S.A. As at 31 December 2012, the Group has information that one thousand of the previous Shareholders of Koksownia Przyjaźń Sp. z o.o. holding jointly 10,968 shares corresponding to 0.65% of votes at the Shareholder Meeting have not yet submitted their statements to accede to the transformed company. It is highly probable that they raise claims for payment of amounts equivalent to their shares. Accordingly, this operation is treated in these consolidated financial statements as a share purchase from non-controlling interest, for the amount equal to the expected future payment amounts, i.e. PLN 12.3 million (this value was set on the basis of the financial statements of Koksownia Przyjaźń Sp. z o.o. drawn up for the purpose of the transformation and is PLN 1,124.95 per share). As a result of this transaction, the Parent Company will control 98.43% of votes at the Shareholder Meeting of Koksownia Przyjaźń S.A.

Acquisition of non-controlling interest in Przedsiębiorstwo Energetyki Cieplnej S.A.

SEJ is a party to the privatization agreement concluded with the State Treasury on the sale of shares of Przedsiębiorstwo Energetyki Cieplnej S.A. (“PEC”) and to the Social Guarantee Package linked to that agreement which secures interests of PEC employees. In accordance with the agreements mentioned above, the Group recognized liabilities of PLN 17.8 million for the purchase of PEC employee shares, which are to be repaid by the end of 2014. In these consolidated financial statements, the purchase of PEC employee shares was treated as a share purchase transaction from non-controlling interest, in the amount equal to the expected amount of future payments, i.e. PLN 17.8 million. As a result of that transaction, 100% of the capital and votes at the Shareholder Meeting of PEC will be held/controlled by the Group.

Acquisition of non-controlling interest in SEJ-SERWIS Sp. z o.o.

On 28 November 2012, PEC concluded an agreement to purchase from non-controlling interest 90 shares in SEJ-SERWIS Sp. z o.o. with a par value of PLN 1,000.00 each, which represented 45% of the share capital, for PLN 0.2 million. As at 31 December 2012, 100% of the capital and votes at the Shareholder Meeting of SEJ-SERWIS Sp. z o.o. is held/controlled by the Group.

Non-controlling interest in 2012

	Koksownia Przyjaźń	PEC	SEJ-SERWIS	Total
Non-controlling interest before the transaction	47.3	20.1	0.2	67.6
Remuneration	(12.3)	(17.8)	(0.2)	(30.3)
Net assets acquired	12.2	20.1	0.2	32.5
Change in the balance of non-controlling interest	(12.2)	(20.1)	(0.2)	(32.5)
Difference amount captured in retained earnings	(0.1)	2.3	-	2.2

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Other changes in the structure of the Capital Group in 2012 are described in section 1.1.3. Management Board Reports on the activity of the Jastrzębska Spółka Węglowa S.A. Capital Group for the financial year ended 31 December 2012.

Business combinations in 2011

Subscription for Kombinat Koksochemiczny Zabrze S.A. shares in exchange for a share issue

In 2011, JSW S.A. and the State Treasury signed an agreement to subscribe for shares in the increased share capital by power of which the State Treasury made a contribution-in-kind to JSW S.A. in the form of 5,610,000 shares of Kombinat Koksochemiczny Zabrze S.A. (“KK Zabrze”), representing 85% of the share capital. Accordingly, this company joined the JSW S.A. Capital Group. In exchange for the above shares, the State Treasury subscribed for 6,404,110 JSW S.A. series D shares of a new issue with a par value of PLN 5.00 each. The total value of the issue of series D shares was PLN 267.4 million.

Acquisition of Wałbrzyskie Zakłady Koksownicze Victoria S.A.

Under the agreement of 5 October 2011, JSW S.A. acquired 399,500 shares of Wałbrzyskie Zakłady Koksownicze Victoria S.A. (“WZK Victoria”) representing 85% of the company's share capital from the State Treasury. The ownership title to the company's shares was transferred on 19 December 2011.

Acquisition of Przedsiębiorstwo Energetyki Cieplnej S.A.

On 29 September 2011, the State Treasury Minister signed a share sale agreement with Spółka Energetyczna Jastrzębie S.A. (“SEJ”) under which it sold 72,250,000 shares representing 85% of the share capital of Przedsiębiorstwo Energetyki Cieplnej S.A. (“PEC”). The ownership title to the company's shares was transferred on 20 December 2011.

The following table summarizes the price paid for the acquired shares, net value of the acquired assets measured as at the acquisition date and fair value of non-controlling interest in 2011.

	KK Zabrze	WZK Victoria	PEC	Total
Value of issued shares at issue price	(267.4)	-	-	(267.4)
Purchase price	-	(413.9)	(144.5)	(558.4)
Net assets as at the acquisition date	407.4	408.1	129	944.5
Non-controlling interest	(61.1)	(61.2)	(19.4)	(141.7)
Difference amount captured in retained earnings	78.9	(67.0)	(34.9)	(23.0)

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The table below presents the reconciliation of acquisitions under common control, as shown in the consolidated cash flow statement in 2011:

	KK Zabrze	WZK Victoria	PEC	Total
Cash acquired	73.8	10	4.5	88.3
Cash paid	-	(413.9)	(144.5)	(558.4)
Cash flows for purposes of the consolidated cash flow statement	73.8	(403.9)	(140.0)	(470.1)

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Acquisition of non-controlling interest in Koksownia Przyjaźń

Under the agreement of 19 January 2011, the parent company acquired 36 shares in Koksownia Przyjaźń Sp. z o. o. from Huta Batory S.A. in bankruptcy and under the agreement of 8 June 2011 the parent company acquired 160,690 shares in Koksownia Przyjaźń Sp. z o.o. from the State Treasury; as at 31 December 2011, it held 1,626,407 shares representing 97.78% of votes at the Shareholder Meeting of Koksownia Przyjaźń.

Acquisition of non-controlling interest in Polski Koks S.A.

The Shareholder Meeting of Polski Koks S.A. held on 31 May 2011 retired 245 founding shares and 9,800 series B shares with the total par value of PLN 1,004,500.00 acquired from ArcelorMittal Poland S.A. with its registered office in Dąbrowa Górnicza, thus decreasing the Company’s share capital by the par value of the retired shares. On 5 August 2011, decrease of the share capital was registered in the registry court. As a result of this operation, the Parent Company holds 67.55% of the votes at the Shareholder Meeting whereas Koksownia Przyjaźń controlled by the Parent Company holds 10,045 shares and has 32.45% of the votes at the Shareholder Meeting. As a result, 100% of the capital and votes are held/controlled by the JSW Group.

Non-controlling interest in 2011

	Koksownia Przyjaźń	Polski Koks	Total
Non-controlling interest before the transaction	230.7	19.5	250.2
Remuneration (in cash)	(167.5)	(19.4)	(186.9)
Net assets acquired	189.5	18.9	208.4
Change in the balance of non-controlling interest	(189.5)	(18.9)	(208.4)
Difference amount captured in retained earnings	22	(0.5)	21.5

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