During last period we observed interesting facts related to companies where Romanian or Polish State is shareholder. In addition to ‘usual’ change of management practised by both Governments as a bonus for politically affiliated actors, the two Governments showed that they may be activist shareholders.
The Polish Government showed his activism with the mergers of PKN Orlen with Grupa Lotos and PKN Orlen with PGNiG – the Government even added new points on the shareholders meetings agenda.
In Romania the Government as activist shareholder added on the agenda of the shareholders meeting of Nuclearelectrica the strategy for next 4 years (but the Government is the controlling shareholder of Nuclearelectrica).
For Fondul Proprietatea where the Romanian State holds over 6% of total voting rights, the activist measure is the proposal for the agenda of the next shareholders’ meetings of Fondul Proprietatea referring to the type of sale of Hidroelectrica (representing over 77% of the NAV) and the use of proceeds.
Listing only on Bucharest Stock Exchange or dual listing?
The Government proposes shareholders to vote the sale of shares held by Fondul Proprietatea through listing of Hidroelectrica on Bucharest Stock Exchange. The Fund Manager of Fondul Proprietatea proposed initially listing Hidroelectrica ‘on one or more regulated markets and/or similar and/or any other trading venue in Romania and/or in a member state of the European Union and/or in a third country’ or a sale in any other manner decided by the Fund Manager. The last part meaning may include a sale without listing as the wording propose is very flexible.
The use of proceeds
The Government proposes shareholders to vote the distribution as special dividends of the amounts resulted from partial or entire sale of the shares owned by Fondul Proprietatea in Hidroelectrica. This proposal is similar with many other proposals done by Fondul Proprietatea during last years for its portfolio companies where Romanian State has control. The Fund Manager proposed initially the shrink of the Fund and implicitly the biggest buy-back tender offer on Romanian capital market. The alternative proposed by the Government is faster and cheaper, but keeps the same number of issued shares, that may significantly affect the liquidity and the market value of the shares. The alternative proposed by Fund Manager is preferred mainly by large institutional shareholders that don’t have the desired liquidity for an exit in a short period of time.
There are advantages and disadvantages for all proposed alternatives. The main question is how the Romanian institutional investors (mainly Romanian pension funds) will vote considering that Romanian institutional shareholders together with Romanian state control together 48% of voting rights?