Stuck holding "Amonil" stock, Swedish "East Capital" requests a public takeover bid again

• The CNVM has its hands tied, as offshore companies Jovline and Zalois refuse to launch a public takeover bid

• Cristian Duţescu, the representative of "East Capital": "A document proving that Interagro owns Amonil has surfaced"

Swedish company "East Capital", which owns 13.5% of "Amonil" Slobozia, through "Salink Limited", is again demanding that shareholders which control the majority stake in the fertilizer producer launch a public takeover bid.

"Salink Limited" became a shareholder of "Amonil" (AMO) in June 2008, when the price of its stock was 0.08 lei/share. Since then, the value of their stake in the company dropped about 78%: on Friday, shares of AMO were trading at 0.0177 lei. The launch of a public takeover offer for "Amonil" seems the best possibility for the Swedes to make an exit as honorable as possible, since if they were to sell their stake on the Bucharest Stock Exchange they would suffer heavy losses.

The request of the Swedish firm is not a new one, as they have been trying since 2008 to convince the Romanian Securities Commission (CNVM) to force the shareholders who hold the majority stake of "Amonil" to launch a public takeover bid. "Amonil" is controlled by two companies located in the Belize islands, Zalois and Jovline, which hold 32.19% and 18.22%, respectively. A company of the county of Bihor, "Eurorom Trade & Invest", holds around 5%, according to data published on the website of the Bucharest Stock Exchange.

"The first reply of the Commission when we asked for a public takeover bid was that they do not have sufficient information concerning the shareholders of Amonil", said for BURSA, Cristian Duţescu, the lawyer of "Salink Limited" in Romania, who added: "Some new information has surfaced... following information which appeared in the media, we have uncovered a document from the Ministry of the Economy which implies that Interagro owns Amonil, or at the very least has a controlling interest in it. Regardless of whether Interagro is an indirect majority shareholder in the plant or whether the company is controlled by the two companies located in the Belize Islands and regardless of whether the two offshore firms are acting in concert or not, in our opinion Amonil should launch a public takeover bid".

According to Mr. Duţescu, a possible takeover bid for the fertilizer plant should be made at a price based on the financial ratios which "Amonil" had at the time of its takeover by the two companies. A price calculated based on those ratios, would allow "Salink" to make an exit without losing a significant amount of money, like it would if it tried to sell its stake on the Bucharest Stock Exchange, at the current price.

"Salink does not intend to sell at just any price and under just any circumstances. I am not sure they would even sell in a public takeover bid, what matters here is compliance with the legal provisions in effect, because this is the only way to preserve investor confidence in the capital market. Besides, they have proposed the increase of the company"s capital by approximately 59 million lei, to allow the company to pay off its debts to the former Distrigaz Sud, which shows that they would even be willing to increase its stake", said Cristian Duţescu.

Last autumn, "Amonil" was foreclosed upon for a debt of approximately 60 million lei which "Chemgas Holding Corporation" took over from another company, "Riverside Development", which had in turn acquired it from "Distrigaz Sud" (GDF Suez). "Chemgas Holding Corporation" later acquired the most important assets of "Amonil", in an auction.

"Salink Limited" tried to avoid the foreclosure of the chemical plant, by proposing that the company"s share capital be increased by the amount owed to "Distrigaz Sud", but the other shareholders rejected the proposal. The Swedes later tried to get a representative on the board of the company, but this has yet to yield any results, because in the General Shareholders" Assembly of November 2009, the candidate of Salink obtained the largest number of votes, and the other two candidates received an equal number of votes, but the shareholders have not decided on the criteria that would allow the selection of the winner of the voting process. The CNVM has demanded that the management of "Amonil" summon a new meeting of the members of the board to solve the current deadlock, but the current board of directors refused to comply, which left the whole situation unsolved to this day.

"Salink wanted to get a representative on the Board of Directors of Amonil in order to increase the transparency of this company"s operations. For example the interests of Salink and of investors in general were affected by the fact that, in the first semester of 2008, Amonil did not inform the public about the gas processing agreement it concluded with Interagro, which significantly affected the financial results of the company. Had Salink been aware of the essential terms of this contract, it would have most likely not invested in Amonil stock. This contract should have been reported in a manner similar to the notice sent by Amonil in December 2009, when the company posted the gas processing agreement it had with Interagro on the website of the BSE", Mr. Duţescu concluded.

In the autumn of 2009, the CNVM attempted to force the two companies of Belize which control "Amonil" to make a public takeover bid and repeatedly fined them due to their failure to comply. According to the officials of the CNVM, in this particular case, the market watchdog can"t do much more than issue fines.