VAS "Privatizācijas aģentūra"
Kr.Valdemāra 31, Rīga, LV-1887
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E-pasts: info@pa.gov.lv

Government approves sales strategy of the Citadele Bank

NOT FOR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN.

On December 17, 2013 the Cabinet of Ministers of the Republic of Latvia (CM) approved the strategy for attracting investors to Citadele Bank. The strategy envisages dual track process of simultaneously contacting strategic and financial investors with the purpose of selling shares via the trade sale whilst also exploring the potential for an initial public offering. Preliminary there will be marketing activity to determine the interest of the various categories of potential investors. The decision on the specific sales model shall be taken upon completion of marketing activities [March 2014].

The dual track sales process has been favoured in order to maintain maximum flexibility. An advantage of the dual track approach is the ability to speak to large number of different types of potential investors whilst leaving the final decision on the specific sales model until the preliminary marketing process is completed. This approach encourages the greatest competition among investors, with a view to ensuring the best outcome for the shareholders of Citadele Bank.

In order to ensure that the sales process is well supervised and effectively coordinated among stakeholders, the Government acknowledged that high level committees have been established to supervise the sales process. The supervising committee shall include representatives of the Ministry of Economics, Prime Minister's Office, Ministry of Justice, Ministry of Finance and representative from the Association "Society for transparency — Delna" as an independent observer. The project steering committee established by JSC "Privatization Agency" (PA) shall include representatives of the Ministry of Economics, the PA, and the European Bank for Reconstruction and Development (EBRD), Prime Minister's Office, Ministry of Finance, State Treasury, Citadele Bank, the financial advisor and the legal advisor. The supervising committee shall supervise the overall sales process and shall be responsible for strategic issues whereas the project steering committee shall oversee tactical and operational issues.

In July 2013, the CM decided to resume the process of attracting investors to Citadele Bank. In a report submitted to the CM it was concluded that the initial goal set by the restructuring plan — to establish financially stable financial institution — has been achieved. Having achieved the objectives of the restructuring plan, Citadele Bank is successful and profitable, and its further development requires private capital.

As reported earlier through the tender process the international investment bank Société Générale was selected as the financial advisor to the PA in connection to the sales transaction of Citadele Bank. The financial advisor shall assist the PA in determining the best model for attracting investors, and assist with actual implementation of the established model. International law firm Linklaters has been selected as the legal advisor for the sales process.

Since the operation commencement of Citadele Bank in 2010 in less than three years it has become profitable. In the first half of 2013 the bank announced profit valued at EUR 5.8 million, which increased by 27% in comparison to the same period in 2012. Operating income in the first half of 2013 in comparison to the same period in 2012 has increased by 12%. In 2012 the Baltic Institute of Corporate Governance recognized Citadele Bank as the best managed state-owned enterprise in the Baltic States.

Approximately 75% shares of Citadele Bank are held by the State Joint Stock Company Privatization Agency and the owner of approximately 25% shares is the EBRD.

Important Information

Société Générale is acting solely for the PA in connection with any arrangements, services or transactions referred to in this document and no one else. Société Générale is not and will not be responsible to anyone other than the PA for providing the protections afforded to the Clients of Société Générale or for providing advice in relation to the arrangements, services or transactions, referred to in these documents.

Société Générale is a French credit institution (bank) authorised and supervised by the Autorité de Contrôle Prudentiel et de Résolution (the French Prudential Control and Resolution Authority). Société Générale is subject to limited regulation in the Financial Conduct Authority and Prudential Regulation Authority. Details about the extent of Société Générale’s authorisation and regulation by the Prudential Regulation Authority, and regulation by the Financial Conduct Authority are available from Société Générale on request.

This announcement is not for distribution, directly or indirectly, in or into the United States (including its territories and possessions, any State of the United States and the District of Columbia). This announcement does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States. The Shares mentioned herein have not been, and will not be, registered under the United States Securities Act of 1933 (the “Securities Act”).

The shares may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act. There will be no public offer of securities in the United States.