A lot is at stake when it comes to the proposal to sell or buy companies whose value does not exceed 20% of the fund’s assets without asking for the shareholders’ approval: Fondul Proprietatea’s holdings in energy companies Petrom, Hidroelectrica, Nuclearelectrica and Romgaz, which are considered strategic, and in which the fund and the Romanian government are joint shareholders.
At present, the fund’s manager needs to correlate its decisions over these holdings with the national strategy, it needs to have the government’s or a ministry’s consent, which is why it has to summon the General Meeting of Shareholders (GM). In the GM, the Government, as shareholder of the fund, can impose its point of view and can oppose a decision that does not comply with the national strategy.
The proposal will be voted on at the GM on November 23. If approved, Templeton could decide on its own on transactions of up to EUR700 million a year.
The chances of this proposal being endorsed by shareholders are high, considering that the fund’s largest shareholders at present are foreign investment funds, while the Romanian government retains 5%.
Franklin Templeton, which has been managing Fondul Proprietatea for around a year now, has brought on board strong shareholders, who will be its allies when the Romanian government runs out of shares, and on November 23 it could use this advantage.
An investment company controlled by American hedge fund Elliott Associates is the fund’s largest institutional investor, with 6.61% of the capital, followed by London-based company City of London Investment, with 5.85% of Fondul Proprietatea, according to the latest reports.
Georgia Palade van Dusen, one of the granddaughters of inter-war industrialist Nicolae Malaxa, holds 6.68% of the shares, being the largest individual shareholder. Malaxa’s descendants, who live in New York, are among the shareholders who supported the takeover of Proprietatea fund’s management by American group Franklin Templeton.
By approving this proposal, the fund’s shareholders would leave it for the manager to decide on its own on selling 10% of Petrom or 10% of Hidroelectrica, i.e. half the stake held by the fund in the two companies, which it got from the Romanian government when it was set up.
The manager could sell the entire stakes it holds in Petrom, the largest company on the Romanian market, and in Hidroelectrica, the largest national energy producer, because these stakes do not account for more than 20% of the fund’s EUR3.6 billion assets.
Templeton could also sell its full stakes of 15% in Romgaz and 10% in Nuclearelectrica, whose value is less than 20% of the assets.
Since the government will soon exit the fund, calling a GM to consult with the government over the stakes in strategic companies will soon become unnecessary, but analysts say the government needs to retain some sort of control over these companies after it is no longer a shareholder.
The shares that Fondul Proprietatea holds in “energy pearls” Hidroelectrica, Romgaz, and Nuclearelectrica are not listed on any stock exchange, so they are out of the reach of foreign investors, making the Proprietatea fund one of the most attractive investments in the region.
The government has voiced its intention of listing these companies on the stock exchange, but so far no such action has been taken.
(English version by Daniela Stoican)