MOSCOW, Oct 16 (Reuters) - Shareholders in a Russian power firm are considering lawsuits against Russian metals tycoon Mikhail Prokhorov over the withdrawal of a share buyout offer worth up to $1 billion, the shareholders said on Thursday.
Analysts and investors said the dispute, which is now under the purview of a commission headed by Prime Minister Vladimir Putin, will be a test of corporate governance in Russia at a time when the global crisis is playing havoc with asset prices.
Under Russian law, Prokhorov's holding company, Onexim, was obliged to make a buyout offer at 0.027 roubles per share of power generator TGK-4 TGKD.MM after acquiring control of the company in May, when Russian stocks markets were at their peak.
Then, as the global financial crisis pummelled local stocks in the months that followed, the value of TGK-4’s shares sank to 0.013 roubles. This meant Onexim’s offer was at a 50 percent premium to the market price, and nearly all the shareholders jumped at the chance to sell.
If all of TGK-4’s minority shareholders accepted the offer, the price tag would jump to around $1 billion, Onexim spokesman Igor Petrov said, citing analyst estimates. He declined to comment specifically on shareholders’ plans to sue.
On Oct. 13, four days before the buyout deal was to close, Onexim said it would not go forward. An order had come down from the Russian government making TGK-4 the only power producer on the list of strategic assets classed as natural monopolies.
Because the firms on this list are tightly regulated, Onexim would need permission from a state agency headed by Prime Minister Vladimir Putin before it could increase its stake in TGK-4.
Petrov said the company has no intention of applying for this approval.
This in turn precludes any deal that would increase its stake in TGK-4, relieving Prokhorov of the need to make the hefty payout at a time when cash resources are precious.
Onexim’s Petrov dismissed shareholder allegations that Onexim may have lobbied to get TGK-4 classified as a natural monopoly in order to avoid the buyout.
“These notions that we lobbied to get TGK-4 on the list are rumours and speculation. This is not a list you can just ask to be on. The government decides independently and for objective reasons who is on the list and who is not,” Petrov said.
“The company was preparing to complete the buyout in full until this order came down from the government,” he added.
Prosperity Capital Management, an investment fund, owns around 18 percent of TGK-4 and hoped to sell the stake to Prokhorov. Its director, Alexander Branis, said on Thursday that his lawyers are working on a possible legal case to force Onexim to go ahead with the buyout.
“As our foreign investors are also victims of this, we would be able to settle the case not just in Russia but in any jurisdiction where they are registered,” Branis said.
Evgeny Savitsky, a lawyer for Halcyon Advisors, which holds a large minority stake in TGK-4, also said the dispute will likely lead to legal action.
TGK-4’s target price was slashed 30 percent by Citi Bank after the offer was cancelled.
Petrov said Onexim is open to dialogue with the minority shareholders of TGK-4, but declined to comment on any legal proceedings that have not yet been filed with a court.
Editing by Elaine Hardcastle
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