Skanska's proposal rejected

Skanska's proposal rejected - Board demands bid for shares - Changes made to Scancem's management See attachment for background information At the meeting of Scancem's board of directors on October 29, President and CEO Sven Ohlsson presented the results of the assignment given to him by the board on October 20 to evaluate Skanska's proposal for a settlement with the Commission of the European Union and to assess other alternatives. In accordance with Sven Ohlsson's proposal, the board decided to request Aker RGI and Skanska to immediately report on their 1995 transaction to the Commission of the European Union, which means that Skanska's proposed settlement has been rejected as far as it concerns Scancem (the proposal that Scancem sells Finnsementti, its cement business in Finland). Claes Björk and Anders Nyrén registered reservations against the decision. Sven Ohlsson gave the reasons for his proposal, stating that his discussions with Commission officials last week further convinced him that the Commission's arguments against the 1995 transaction are weak, and that the part of Skanska's proposed settlement concerning Scancem (the sale of Finnsementti in Finland) is unnecessary and only aims to solve Skanska's own problems concerning the 1997 transaction. Sven Ohlsson is still of the opinion that the situation with the Commission has come to the point where it is hardly possible to discuss the matter further. This is because the Commission has declared that it is satisfied with the offer that Skanska made after it had negotiated with the Commission against the Scancem board's unanimous decision in August 1998, and without the knowledge of Scancem's management and board. Furthermore, Scancem has been given specific legal advice stating that the settlement does not give Scancem acceptable legal security as far as it concerns the 1995 transaction. Skanska's proposed settlement is being made within the framework of the 1997 transaction but also aims to make a settlement on the 1995 transaction. This is not possible since the Commission has not yet examined this transaction. Against the background of the above, Sven Ohlsson proposed to the board that it request Aker RGI and Skanska to report on the 1995 transaction, before the Commission decides on the 1997 transaction, in order to at least establish an acceptable level of legal security for Scancem with regard to the Commission's decision. Skanska's representatives on the board opposed this decision. Claes Björk reported that Skanska is now awaiting the Commission's decision, which is expected on November 11, after which Skanska expects to announce an extraordinary general meeting and appoint a new board. Board requests that Skanska bid on shares At its meeting on October 29, Scancem's board, with the exception of Skanska's representatives, requested Skanska to make an bid on all remaining shares in Scancem with a view to taking into account the interests of Scancem's other stockholders. Changes to Scancem's management Scancem's board decided at its meeting on October 29 to appoint Bo Jacobsson, currently Scancem's Chief Financial Officer, as Chief Operating Officer and Executive Vice President of Scancem AB, with responsibility for Scancem's day- to-day operations. CEO Sven Ohlsson and Deputy CEO Cato A. Holmsen will devote their efforts to the ongoing business with the Commission of the European Union until the next general meeting. Scancem's board decided that, after the meeting, board members are free to make public statements about the views presented at the meeting. Background - attachment to pressrelease October 29, 1998 According to the EC rules regarding concentrations, a change of the control of an undertaking or parts thereof shall be notified to the Commission of the European Union. Inter alia, in case the undertakings concerned jointly have an annual turnover exceeding 5,000 million ECU worldwide and provided that at least two of the undertakings concerned each had a turnover of 250 million ECU Community wide. Undertakings concerned means, inter alia, undertakings with sole or joint control over another undertaking. The Commission of the European Union may prohibit concentrations falling under the obligation to be notified if they can be considered as creating or strengthening a dominant position and significantly impeding effective competition within the Common Market or a substantial part thereof. Such decision may be appealed to court (Court of First Instance). In 1995, Euroc acquired Aker's cement and building material businesses. The result of this acquisition was that Skanska and Aker possessed 33.3 percent each of the total amount of votes in Euroc. These transactions will henceforth be referred to as the "1995-transaction". Thereafter, Euroc changed name to Scancem. If Skanska and Aker, at that time, had joint control over Scancem, Skanska and Aker would have been under the obligation to notify the transaction according to EU concentration rules. After the 1995-transaction, Skanska as well as Aker was of the opinion that they did not have joint control over Scancem. Thus, neither Skanska nor Aker submitted any notification to the Commission of the European Union. Scancem notified its acquisition of Aker's cement and building material businesses to the Swedish and the Norwegian Competition Authorities according to applicable national rules. Both the Swedish and the Norwegian Competition Authorities approved the 1995-transaction after having analysed the competition effects of the transaction. Even if the 1995-transaction should have been notified to the Commission of the European Union, it is Scancem's opinion that the Commission of the European Union may not prohibit the transaction. Moreover, it can be mentioned that the national authorities during their respective analysis reached the conclusion that the transaction would not affect competition in such a way that it could not be approved according to national competition rules. During autumn 1997, both Skanska and Aker increased their holdings in Scancem. The result of these increases was that Skanska acquired additional 15 percent of the share votes in Scancem and Aker acquired additional 9 percent. During April, Skanska submitted a notification to the Commission of the European Union regarding Skanska's acquisition of additional shares in Scancem. Hence, the notification concerned Skanska's increase in year 1997 of its shareholding in Scancem from 33,3 percent of the share votes to approximately 48 percent ("the 1997-transaction"). In July, the Commission of the European Union decided to initiate an in-depth investigation of the 1997-transaction, that is, Skanska's acquisition of additional shares in Scancem. The reason was that the Commission of the European Union considered the acquisition as giving rise to serious doubts concerning its compatibility with the Common Market. During a board meeting in Scancem on 26 August 1998, a strategy proposal was presented concerning, amongst other things, the parties continuing actions in relation to the Commission of the European Union. Skanska's, Aker's and Scancem's lawyers had together prepared the strategy proposal. The board unanimously decided to adopt the strategy proposal. On 12 October 1998, Skanska issued - without having informed Skanskas board - a press release stating that Skanska had submitted a proposal for settlement to the Commission of the European Union. This contained, in addition to an undertaking from Skanska to divest its holdings in Scancem within a certain period, an undertaking to divest Scancem's cement business in Finland. On 13 October 1998, Scancem's board stated that it dismissed Skanska's proposal for settlement with the Commission of the European Union to the extent it concerns Scancem. Skanska's representatives in the board, Claes Björk and Anders Nyrén, made reservations against the decision. On 20 October 1998, Scancem's board repeated its rejection of Skanska's proposal for settlement. Furthermore, the board gave Scancem's CEO Sven Ohlsson the assignment to closely evaluate Skanska's proposal and to analyse other alternatives. On 21 and 22 October 1998, representatives of Scancem met officials from the Commission of the European Union for the purpose of investigating the situation. The Commission of the European Union has not yet made any official announcement of its view concerning the 1995-transaction. Reservation: Based on this background description, we register our reservation because it is not complete and contains serious faults. Claes Björk Anders Nyrén ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1998/10/29/19981029BIT00210/bit0001.doc http://www.bit.se/bitonline/1998/10/29/19981029BIT00210/bit0002.pdf