Sistema says court 'arrests' stake in its largest asset over Rosneft dispute

MOSCOW (Reuters) - Russian conglomerate Sistema SSAq.LAFKS.MM said on Monday a Russian court had "arrested" some shares it owns, including in the country's biggest mobile operator MTS MBT.N, in a legal dispute with oil company Rosneft ROSN.MM.

The logo of Sistema JSFC is seen on its headquarters building in Moscow, September 17, 2014. REUTERS/Maxim Shemetov

Rosneft is suing Sistema for 170.6 billion roubles ($2.9 billion) in damages over the purchase of oil producer Bashneft BANE.MM. Sistema proposed an out-of-court settlement last week.

Rosneft spokesman Mikhail Leontyev said the arrest of the shares, which halts their use but does not seize them, was a “security measure” and the shares arrested equaled the value of Rosneft claims against Sistema.

Sistema is one of the largest private holdings in Russia and is controlled by businessman Vladimir Yevtushenkov. MTS, with the market value of $8 billion according to Thomson Reuters data, is Sistema’s largest asset. Sistema interests also include agriculture, real estate and other assets.

On Monday, Sistema said it had received notice of an enforcement action from the Moscow Directorate of the Federal Bailiffs Service and a copy of a court order from the Republic of Bashkortostan Arbitration Court.

According to the court order, an arrest was imposed on a 31.76 percent stake in MTS, 100 percent of its Medsi chain of medical clinics, and 90.47 percent of Bashkirian Power Grid company owned by Sistema and its unit Sistema-Invest.

Under the order, a relatively common device in Russia, Sistema still owns the shares but cannot carry out any action using them until the court allows it to. The court can order the shares to be seized, released or sold off as part of the dispute.

Sistema owns a little over 50 percent in MTS, also present in Ukraine, Belarus, Armenia and Turkmenistan with a total 110 million clients. MTS shares lost over 6 percent in New York trade following shares arrest.


“The arrest of shares was made ... as a security in the framework of the legal claim lodged by Rosneft, Bashneft and the Republic of Bashkortostan against Sistema and Sistema-Invest,” Sistema said on Monday.

It said it considered the demands “unlawful and unfounded”.

MTS said in a separate statement: “This situation does not impact operations with MTS shares, and the rights to receive dividends on MTS shares owned by other shareholders.”

Bashneft, which produces around 400,000 barrels of crude oil a day, was owned by Sistema for a couple of years until 2014, when the court has ruled to return the company to the state.

Yevtushenkov himself was accused in 2014 of misappropriating Bashneft shares and held for three months under house arrest. The charges, which Sistema denied, were eventually dropped

Rosneft bought Bashneft from the state last year.

“Shares are not being seized but a number of actions such as sale, purchase, usage as a collateral, are being suspended ... Rosneft needs a fair compensation of its claims and these assets act as guarantee for this becoming possible,” Rosneft spokesman Leontyev said.

He was later quoted by RIA news agency as saying that Rosneft was ready to accept any other “adequate” collateral from Sistema.

Independent directors on Sistema’s board have asked Russian President Vladimir Putin to intervene in the dispute, but Kremlin has said Putin will not.

Additional reporting by Jack Stubbs,; Writing by Katya Golubkova; Editing by Alison Williams