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Domina, a hotel real estate developer and hotel operator, is a leader of the hotel time sharing industry in Italy. Its subsidiaries are also dealing with health club development and computer services. The company has a total of one billion kroon assets ($65 million) and received a 261-million kroon profit last year.
The Italian company was also the first one to make the proposal to Pro Kapital in February.
"We are interested in expanding our businesses in the Baltic states," said Luca Milani, manager of commercial and real estate division at Domina. "Pro Kapital is active in all three Baltic states and has very good development opportunities in here. The economies of these markets are growing fast and the returns on investments are high".
He said that it is difficult to develop and expand in Italy, because the competition is tough.
"We can bring our know-how on managing and developing high level hotels," said Milani. Milani also confessed that the taxation system in the Baltic states is very favorable.
"Pro Kapital is developing many different real estate projects. After we had finished the Ilmarise Residence project, we sold it to Domina. Now we do not have to look for hotel operators from outside, everything is done within one company," said Ilona Saari, finance director at Pro Kapital.
The advantages for Pro Kapital behind the consolidation are primarily the access to Italian financial resources at low interest rates and the positive cash flow from the business activities of the Domina group, which can be used to finance Pro Kapital's future large-scale investment projects. Saari said that the agreed takeover would also increase an international interest towards the shares of Pro Kapital, because the structure of ownership will change.
"The circle of shareholders of the consolidated company will expand by approximately two-hundred shareholders and change the current shareholders' structure to positively influence the liquidity of the company's shares. Ernesto Preatoni's share will be less than 50 percent," said Saari.
According to Saari the consolidation will almost double the company's market value, which is presently 0.9 billion kroons.
The executives of both companies decided to approve an exchange rate, according to which one share in Pro Kapital will be exchanged for five shares in Domina. The exchange rate was set up according to the market value of Pro Kapital's shares and the book value of Domina's shares. Pro Kapital will acquire shares in Domina in return for non-monetary payment in the form of ordinary shares of Pro Kapital to be issued.
Ernesto Preatoni, chairman of the supervisory board at Pro Kapital, said that the exchange rate is very favorable to the shareholders of Pro Kapital. Domina's market value is 600 Italian liras more than its book value and thus the shareholders of Pro Kapital will get additional 600 liras per one share.
"The shareholders of Pro Kapital will win 43 billion liras, which is about 360 million kroons," said Preatoni.