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. Last Updated: 07/27/2016

Factory Rejects Nominees

Novolipetsk Metallurgical Factory has officially rejected nominees to its board put forth by a group of foreign investors, who said Thursday they will sue unless their candidates are accepted.


Cambridge Capital Management, a client of U.S. investment bank Salomon Brothers, and Renaissance Capital's Sputnik Funds said their group of self-described "reform shareholders" was notified Tuesday that all four nominees to Novolipetsk's nine-seat board had been rejected.


"Their response is a blatant violation of shareholders rights," Jim Dannis, managing director and head of emerging markets at Salomon Brothers, told a news conference Thursday.


"NLMK ... has denied these shareholders the representation their right to proportional representation," Dannis added.


Management of Russia's largest steel producer rejected the outside director nominees at a Feb. 12 board meeting, but "gave no rationale," Dannis said.


The Western investors -- who jointly hold more than 40 percent of Novolipetsk's shares and place the company's value at between $240 million to $250 million -- contend that the rejection violates a new law on stockholders' rights, which will serve as the basis for a lawsuit.


Henrikh Padva, a lawyer with Chadbourne & Parke representing Cambridge Capital, said Novolipetsk's rejection violates a federal law passed last year which "prescribes that nominees to any joint-stock company's board must be put to a vote." If filed, he said, the suit would likely be heard in a Lipetsk regional court.


Salomon represents Cambridge Capital Management, an offshore fund with a 17.2 percent stake in Novolipetsk. Sputnik Funds, Renaissance's direct investment arm, holds 10 percent and includes investors such as financier George Soros and the Harvard University Endowment.