Lion Capital on dividend request: Maintaining a solid financial position is crucial during this period

Maintaining a solid financial position in the market is crucial for the company in this period, marked by international geopolitical and commercial tensions, as well as the presidential elections in our country, according to a report by Lion Capital, published yesterday on the website of the Bucharest Stock Exchange (BVB).

Lion management expressed its position in the context in which it does not intend to propose the allocation of dividends to shareholders. However, the company received a request in this regard from Blue Capital, a shareholder that holds 8.5% of the former SIF Banat-Crişana. Blue Capital requests the distribution of 80.8 million lei, equivalent to half of the profit made last year, in the form of dividends

The Lion press release states: "The conflict in the proximity of the European Union (such as the one in Ukraine), international trade tensions (for example, new customs tariffs imposed by states such as the USA or China), but also the uncertainty related to supply chains, affect global markets. These developments can lead to increased volatility in exchange rates, instability in international financial markets and speculative opportunities. In this context, prudent companies must maintain sufficient liquidity to cope with any unforeseen external shocks".

• Lion Management: We want to use available financial resources to increase net assets

According to Lion management, in our country, the year 2025 is marked by instability. "The presidential elections, which were canceled and will be resumed in May, create a climate of prolonged political uncertainty, with possible negative effects on administrative and economic decisions. Such events affect investor and consumer confidence, and the economic impact will be felt especially in the second half of the year," the report states.

According to the document, the uncertain context can generate a decrease in consumer confidence, which can lead to a decrease in demand, market compression and a decrease in consumption. A tense economic context can lead to price changes and asset revaluations, which creates strategic investment opportunities. "Management expresses its desire to use the available financial resources to increase net assets, an objective that is consistent with Lion Capital's assumed strategy," the report states, adding: "Therefore, in the global and local context shown, maintaining a solid financial position in the market is crucial during this period. This prudent approach is also in line with Lion Capital's Dividend Policy, according to which if the opportunities for reinvesting profits are more attractive to shareholders or in the case of repurchasing shares on the market, the return on Lion Capital's shareholder capital is likely to be higher than a simple taxable dividend distribution".

Lion Capital's management continues to support the proposals of the Company's Board of Directors included on the agenda of the ordinary general meeting of shareholders convened for April 24, 2025, the report also states.

• Blue Capital: The investment prospects - for which Lion does not distribute dividends - were not substantiated, certain or predictab

Blue Capital justifies its request by Lion's dividend policy, according to which the company aims to maintain a balance between shareholder remuneration through dividends and the need to finance new investments from reinvested profits.

The strategy promises two complementary components, namely: (i) increasing the long-term investment attractiveness of Lion shares and (ii) maintaining the investment potential, ensuring the long-term sustainable profitability of the activity in order to increase the value created for the shareholder.

Contrary to the provisions of the dividend policy, in the last three financial years (2022, 2023 and 2024) no dividend distribution was proposed, although Lion reported a profit, Blue Lion's request of April 7 states.

According to the document, the investment prospects - for which Lion would not distribute dividends - were not substantiated, certain or predictable. Moreover, Lion's management team did not substantiate the way in which it made investments from the net profit, respectively the investment return related to the amounts used from the reinvested net profit.

Blue Capital accuses Lion's management of a lack of transparency, which also emerges from the deficient way in which the Income and Expenditure Budget for this year is presented, in the sense that it does not propose a clear direction of growth in selective investment sectors and does not justify the lack of granting dividends.

"The most important argument in favor of distributing dividends is the need to restore investors' confidence in the fund's management," Blue Capital's request also states.

In this regard, the discount of over 70% of the shares compared to the Net Asset Value is invoked, thus being the investment fund with the highest discount on the BVB, according to the request. "We believe that Lion Capital must take immediate measures to restore investor confidence and reduce the gap between the market price and VUAN," the request states, with Blue Capital's recommendations including compliance with the dividend policy, granting dividends to reduce the discount between the price and VUAN, share buybacks to reduce the discount, and portfolio diversification by reducing exposure to the financial and real estate sectors.

• Pilon II pension funds fled from Lion Capital's shareholding

Last year, Blue Capital made a similar request, which was rejected by the shareholders' meeting of the former SIF Banat-Crişana. The Association of Investors in SIFs (AISIF), together with other capital market players, have repeatedly accused Lion Capital's management of using the company's money to control, through intermediaries, the decisions of the shareholders' meeting, exclusively in their own interest.

In recent years, investors have fled from the shareholding of the former SIF Banat-Crişana, the dynamics of the holdings of Pilon II pension funds being suggestive in this regard. If in 2016 six of the seven mandatory private pension funds held shares of the company, according to the administrators' reports and documents from the BVB (including NN Pensii which had requested dividends from SIF), at the end of last year, none of the Pilon II funds had Lion shares. The former SIF Banat-Criaşa has only distributed dividends once in the last ten years, in 2021, under pressure from AISIF. In 2023,

Blue Capital was 65.85% owned by Macelia Investments from Cyprus, according to Risco.ro. Behind Macelia was the Bîlteanu family.