Thus, the state has in less than a year relinquished control over assets worth over EUR3.7 billion and over an extremely important field in the economy, energy. This has happened as the Fund owns significant stakes in the most important companies in the energy sector and can thus block strategic decisions.
On the other hand, Franklin Templeton has stepped up the process whereby state-owned companies are due to become more transparent, publishing the annual reports of the 20 largest companies in its portfolio for the first time, and is fighting to boost their efficiency through private management.
Instead, the initial objective for which the Fund was set up, namely compensating the former owners whose properties were confiscated by the communist regime, has been lost along the way.
At present, the state still holds around 10% in the Fund’s stock and over the past three months has given around 25% of stock as compensations. Because of the process, the Fund has a dispersed shareholding structure: over 4,000 individuals of Romania, some of them former owners whose properties were confiscated by the communist regime, control 38% of its capital, while foreign investment funds, over one hundred, control 31%, according to data available on June 31.
Since the Fund was listed in late January, the funds have operated massive stock purchases, taking advantage of the low prices. This gives rise to the question of who will control the Fund after the state exits its shareholding structure.
The investment funds managed by Britain’s City of London Investment Management are the biggest foreign shareholder in FP, with 5.85% in stock.
“Foreign investors have been the most active in buying Fund stock, piling up significant stakes. The most powerful ones are the British investors, which I estimate hold around 8% in the fund. The state’s exit from the shareholding structure and foreign funds’ taking over control will mean the Fund’s entering normality,” said Adrian Lupsan, a deputy general manager with Intercapital Invest brokerage.
Florin Dolea, an executive manager with Pioneer Asset Management, believes the state’s exit is natural and that Franklin Templeton will be the one to hold control over the Fund as foreign investment funds will not get actively involved in the Fund’s management.
However, he warns that should the low price at which shares are now traded on the Bucharest Stock Exchange maintain over the coming years, FP may be the target of a hostile takeover by a foreign fund. Only in the case of such a takeover does Dolea expect a shareholder to get actively involved in the Fund’s management.
(English version by Catalina Apostoiu; Editing by Oana Gavrila)