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MINORITY SHAREHOLDERS J&T AND ISTROKAPITÁL THREATEN LEGAL ACTION, SAY DISPUTE UNRESOLVED

New owners thwart Slovnaft coup

A MARATHON of meetings, characterised by clashes between majority and minority stakeholders, secured the position of Hungarian oil company MOL in the Slovnaft refinery, although legal action may put those results in doubt.
The main objectives of Slovnaft's general assembly on May 17 were to discuss the division of last year's profits, changes of company statutes, and the appointment of new representatives in company bodies.
Minority shareholder J&T, a financial speculator, called for an extraordinary meeting of shareholders to be held the same day. Transfers of Slovnaft shares, economic results for 2002 and 2003, and activities of some company representatives were to be on the agenda of that meeting.


HUNGARY's MOL is now the majority shareholder of Slovnaft.
photo: File photo

A MARATHON of meetings, characterised by clashes between majority and minority stakeholders, secured the position of Hungarian oil company MOL in the Slovnaft refinery, although legal action may put those results in doubt.

The main objectives of Slovnaft's general assembly on May 17 were to discuss the division of last year's profits, changes of company statutes, and the appointment of new representatives in company bodies.

Minority shareholder J&T, a financial speculator, called for an extraordinary meeting of shareholders to be held the same day. Transfers of Slovnaft shares, economic results for 2002 and 2003, and activities of some company representatives were to be on the agenda of that meeting.

MOL had the strongest position at both the meetings. On March 28 the Hungarian refinery officially acquired a 32 percent stake in Slovnaft, which, in addition to a 36 percent stake bought in 2000 and a 2 percent stake later acquired from small shareholders, brings the MOL's share to just over 70 percent.

According to Slovak legislation, because it has acquired more than 66 percent of shares in a joint stock company, MOL is obliged to announce a public offer for the purchase of shares from the remaining minority shareholders.

The value of the bid cannot be lower than the average price per share over the six-month period before the majority stake was acquired. MOL has claimed that J&T artificially raised the average market price to gain higher profits from the sale of shares. No final decision has as yet been made on J&T's alleged speculative trading. J&T plans to take the issue to court if its trading is cancelled.

MOL offered a takeover bid of Sk1,200 (Ř29.29) per share, an offer the state Financial Markets Office (ÚFT) rejected due to uncertainties over the amount to be paid per share. MOL has appealed against the decision.

Before such an offer is officially issued and approved by the ÚFT, any company is banned from exercising voting rights exceeding specified statutory limits. As a result, MOL was able to only exercise voting rights equal to 50 percent of the shares minus one at the recent shareholders' meeting.

The meeting started off with deliberations on the amount of dividends to be paid to shareholders.

The board of Slovnaft proposed the amount to be Sk30.80 (Ř0.75) per share, meaning a quarter of Slovnaft's net profit of Sk2.5 billion (Ř61 million) for 2002 would be distributed. J&T suggested twice the amount be divided between shareholders.

Neither of the proposals passed and the ordinary meeting adjourned.

The start of the extraordinary general assembly of Slovnaft initiated by J&T followed. Right after its start, chairman of the meeting Roman Kvasnica, appointed by Slovnaft's board, adjourned the extraordinary meeting as well, the SITA news agency reported.

Minority shareholders disregarded Kvasnica's decision, claiming he had no right to interrupt the session before the meeting approved its agenda, and continued deliberations after his departure. Shareholders in control of 15.5 percent of the shares attended this continuing session. J&T along with investment company Istrokapital hold around that number of shares.

J&T spokesperson Michal Sýkora told the SITA news agency that at the meeting those present removed the members of the board and the supervisory board of Slovnaft and elected eight new members of the board and four members of the supervisory board.

Slovnaft officials expressed anger at the move, charging the minority shareholders with attempted sabotage.

"Some companies and individuals seem to be determined not only to risk the reputation of one of Slovakia's largest industrial companies, but also to threaten the improving credit of Slovakia as an attractive investment location in order to gain short-term financial advantages," said Slovnaft representatives in a press statement.

"They used an officially announced break of the extraordinary meeting and declared themselves to be the statutory bodies of the company," the statement continued.

On the following day, the ordinary meeting continued and approved amendments to Slovnaft's statutes. According to the changed wording of the company document a simple majority of shareholders' votes suffices for a valid decision of the company's general assembly. The quorum had previously been set at 67 percent.

"If even one shareholder does not attend the general assembly, MOL will have a majority of votes," J&T representative Martin Fedor told SITA. J&T claims this move is aimed against minority shareholders, as it will allow MOL to have its way in all decisions.

"Since the proposal [to amend the statute] was approved by over 77 percent of present shareholders, representatives of the European Bank for Reconstruction and Development (EBRD) had to vote in favour of it," said Fedor.

The EBRD owns 8.4 percent of Slovnaft's shares.

The amendments of the statutes became valid right after their approval. Subsequently, MOL proposed a vote on the withdrawal of all members of Slovnaft's bodies previously elected by the extraordinary meeting initiated by J&T, although Slovnaft representatives repeatedly stressed that the decision of the extraordinary session was in no way valid.

"It was necessary to avoid any risk, which these persons could pose by taking unauthorised steps on behalf of the company and potentially by confusing business partners. That could damage all Slovnaft shareholders," said Slovnaft's statement.

This proposal passed and new members of the bodies put forward by MOL were elected in their place.

However, the matter may drag on for months, as one side, or both, takes their arguments to the courts. In addition to the initial points of contention, insiders say the validity of the general assembly may also come under scrutiny.

"It is most likely that minority shareholders will ask the courts to declare the general assembly to be invalid," said J&T's Sýkora, adding that their rights were violated by the decisions.

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