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. Last Updated: 07/27/2016

Meeting May End Metals Mill Saga




Foreign shareholders are poised to win their two-year battle against incumbent directors for seats on the board of the Novolipetsk Metals plant at an emergency shareholders' meeting set for Tuesday.


The so-called "reform" group, which includes Bahamas-registered Cambridge Capital Management Fund and Renaissance Capital's direct investment vehicle, the Sputnik fund, claim to hold a majority stake in the plant.


But for more than two years, an alliance between incumbent management and British metals group Trans-World Group, which own 35 percent of the plant, has blocked all attempts to include the reform group's representatives on the list of eligible candidates for elections to the board of directors.


The Novolipetsk case has become a test case for shareholders' rights. The company is the country's second largest steel producer and has some of the most modern equipment of all Russia's mills.


Trans-World has controlled Novolipetsk through "tolling agreements," paying for inputs and buying the finished products for export. But the relationship between Trans-World and Novolipetsk went sour at the end of October when management ceased shipments to Trans-World.


Vladimir Lisin, a board member who controls over 10.5 percent of company stock and who was previously an ally of Trans-World, halted the supplies of metal, claiming Trans-World owed the plant $220 million. Since then Lisin has been in talks with the reform group, whose members hope he will make the difference at Tuesday's meeting.


Russian law allows seats on the board in proportion to the number of shares held. The reformers' 50 percent stake in Novolipetsk entitles them to at least four of the nine board seats. With Lisin's support, the reform group hopes the five candidates they have put forward will be elected.


The reform group is cautiously optimistic about a consensus they have reached with Lisin. But according to a reform group source, "the agreement we have is not a blood oath and it could all still blow up in our face."


Also on the agenda is a vote on the new company charter. Russian corporate law requires all companies to have a charter and at the last two meetings the existing management have proposed a charter that would allow them to automatically renew their places on the board, which the reformers voted down on both occasions. The new charter was still being negotiated last night, but the offending clause had been removed and should be accepted by both camps.