A minority shareholder in Energia AD is taking action in the Supreme Administrative Court against Bulgaria’s financial regulator, the Financial Supervision Commission (FSC), seeking to overturn FSC approval of the price offered by the majority owner in a buyout bid.
The first hearing in the court application has been scheduled for May 4. This is the first such court action in Bulgaria.
Boyan Gyuzelev has 513 shares and, like other minority shareholders, is being asked to accept a share price offer of 49.57 leva a share. He holds that the price should be 73.10 leva a share. Gyuzelev’s calculation is based on the lowest price paid by the majority owner, Luxembourg-based EnerSys Holding, in the past six months. He says that the price approved by the FSC is a violation of Bulgarian law.
Unofficial calculations are that if Gyuzelev were forced to accept the majority shareholder’s offer, he would lose about 12 000 leva.
According to EnerSys’s announcement in January 2007 about its intention to buy full ownership of Energia, “the total purchase price for this transaction is expected to be approximately 13 million euro (approximately $17 million) including all transactions costs and adjustments and will be financed using existing EnerSys credit facilities. Subject to finalising our integration plans, this transaction is expected to be accretive to earnings per share in the first year and accretive in excess of $0.07 per share in the second year”.
Gyuzelev told The Sofia Echo that this announcement meant that the purchase price for a share was about 79.40 leva (there were 320 104 in the majority stake at the moment of the deal) and in the second year, 2008, Energia AD’s profit would add $3.81 million to EnerSys’s bottom line. This calculation, Gyuzelev said, was based on the fact that EnerSys had 46.87 million shares, which multiplied by 0.07 cents made this amount.
However, he said, in the buyout offer as published in Bulgarian newspapers Dnevnik and Pari on March 9 2007, the buyers – a consortium of two majority shareholders and EnerSys formed prior to finalising the deal – diluted this message by saying that the price of 13 million euro included not just all transactions costs and adjustments, but also “current debts, buy-out cost for minority shares (10 per cent of capital), working capital etc”.
Gyuzelev said that the most important argument in his application was that EnerSys had purchased shares in Energia AD on the Bulgarian Stock Exchange for the price of 62 leva a share.
According to the Public Offering of Securities Act, the price of a buy-out offer cannot be less than the highest price paid for the stock by the buyer over the previous six months, Gyuzelev said. EnerSys had bought Energia shares for 62 leva, “and they have also admitted this fact in the public offer announcement published in Pari and Dnevnik", he said.
He told The Sofia Echo that he had written to the FSC to object to its approval of the price, and getting no satisfaction, had decided to go to court. Given that the majority shareholder was ultimately a US company, Gyuzelev said that he also intended writing to US ambassador to Bulgaria John Beyrle to explain his objection to the share price offer.
Should the majority buyout bid go through, it was certain that the company would be de-listed and minority shareholders would lose their opportunity to sell their shares, Gyuzelev said.
He said that it was a moral issue in addition to being a legal issue. He compared the situation to that when Greece’s Eurobank EFG bought DZI Bank, and offered the same price to majority and to minority shareholders.
The issue of such share price offers was likely to continue because many companies were being de-listed, Gyuzelev said. “If other big companies act the same way, people will lose millions.”
The FSC was rigid in its approach, he said. “They do not want to do anything other except look at the papers from the majority shareholders. They do not ask minority shareholders for their opinions.”
Speaking to Pari on April 17, Energia sales director Kamen Tonkov said the deal was in compliance with the law and “we have no concerns about the claim, because the shareholder has accepted our proposal”.
