CNVM changes its own rules in the case of the tender offer bid for "Rompetrol Rafinare"

The National Securities Commission (CNVM) requested on Wednesday that Rompetrol Group raise the minimum bid for the public takeover offer of "Rompetrol Rafinare" (symbol: RRC) from 0.0625 lei to 0.0741 lei/share. The Commission requested this change based on the value of the company"s net assets according to the audited financial statement it received from RRC at the end of 2008.

The stance of the CNVM in the case of this specific takeover bid is surprising. For instance, in the case of another public takeover bid for "Subex" Bacău (symbol: SUBX on the Rasdaq tier of the Bucharest Stock Exchange), the capital market watchdog decided that the usual method for determining the true price of a stock was outdated. The use of that method had been requested by some of the investors in "Subex" who had calculated that the fair price for acquiring stock in the company in order to have it delisted would be 1.47 lei/share (based on the company"s net assets), instead of the price of 0.73 lei/share, set by the evaluator using the revenue based approach.

Vladimir Cojocaru, the general manager of the Commission, provided the following answer to Subex investors no earlier than last week:

"It is an almost generalized situation under the current economic circumstances that reports based on accounting records no longer match reality and mot of the times they inflate the company"s real worth due to new tax regulations (the inability to deduct certain types of expenses), and the number of revaluations over the years, etc"

The general manager of the CNVM concluded his address to shareholders who filed the complaint, claiming that "no infringements of the current legislation were found in the case of the delisting of "Subex".

• Is CNVM entitled to recommend an evaluation method?

The securities market regulator yesterday indicated for the second time the suggested evaluation method that the evaluator of Rompetrol Rafinare should use in determining the price at which for the tender offer. In October 2009, CNVM demanded that Rompetrol Group produce an evaluation which would also include the revenue based approach, and rejected the evaluation report submitted by the oil group.

Cristian Duţescu, attorney specializing in capital markets, made the following statement for BURSA:

"I see that the CNVM now abandoned their own preferred evaluation method and are going for another. I am not sure their position is adequate, because the law states that it is up to the evaluator to select the method for calculating the price of the tender offer. I can"t understand why the Commission is so deeply involved in the case of the Rompetrol takeover, it probably is of far greater interest since it concerns a much larger company".

Mr. Duţescu says that the Rompetrol Group was supposed to make tender offers for "Rompetrol Rafinare" and "Well Services" by January 2008, according to the capital market legislation. In that case, the tender offer price would have been even greater than the one indicated by the CNVM for RRC shares, (0.16 lei/share).

"I don"t know who should compensate the shareholders for the losses they incurred because the tender offer was not made within the legal delay, and at that time"s price", Cristian Duţescu said: "It is up to a court to decide on this matter. I hope the decision made by the CNVM on Wednesday does not serve any hidden interest, and that it was made based on the beliefs of its members".

Even though according to the law, the Rompetrol Group was supposed to make public takeover bids for the RRC and PTR within at most two months after KazMunayGaz acquired 75% of Rompetrol (in October 2008), the Romanian Securities Commission remained quiet. Gabriela Anghelache, the president of the Commission, stated for BURSA, in the summer of 2009, that she did not know whether the Commission was still reviewing the tender offers for the two companies. The Commission became far more active on the matter of the two mandatory tender offers only after Dinu Patriciu, the former chairman of the Rompetrol Group, sold his remaining stake of 25% to the Kazakh group.

Also, in autumn, nine shareholders of "Rompetrol Rafinare", who own roughly 5% of the company, one of them being UDMR senator Verestoy Attila, started lobbying for a fairer price for the two takeover bids, which would not be a bad thing in itself, as long as it didn"t lead to arbitrary and discriminatory decisions.