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. Last Updated: 07/27/2016

Lomonosov Bosses Refuse To Recognize New Board




Western investors, who on Thursday took control of the board at St. Petersburg's Lomonosov Porcelain Factory, were barred Friday from entering the factory after plant management refused to recognize the legality of the new board, Lomonosov's newly elected director Douglas Boyce said.


Lomonosov director Yevgeny Barkov refused to leave the plant at the request of the new board chairman, and canceled a morning meeting with Boyce, Boyce said. They did speak over the telephone and agreed to meet Monday.


However, in the telephone conversation Barkov remained adamant that he would not step down.


"He said he is the director of a state enterprise that has no board of directors," Boyce said.


"The idea that Barkov is the director is absolutely ludicrous," he said.


Boyce said when he tried to enter Lomonosov on Friday a security guard told him he was not welcome inside.


In addition to his new post as director, Boyce is the vice president of Delta Capital Management, which runs major Lomonosov shareholder The U.S. Russia Investment Fund.


Armed with an 84 percent stake in the factory, foreign shareholders led by the U.S. Russia fund have been battling to gain control of the 255-year-old porcelain plant after a St. Petersburg court renationalized some of its physical property last October. Factory management and the State Property Ministry had asked for a renationalization after they found out that foreigners held a controlling stake in Lomonosov. They said Russia was losing a national treasure to the West.


The factory's major foreign shareholders are the U.S. Russia fund, backed by the U.S. government, and Wall Street buyout giant Kohlberg Kravis Roberts. Together they hold a stake of just over 58 percent. Other foreign companies and offshore funds own another 25 percent.


Boyce said by telephone from St. Petersburg that on Monday he would personally ask Barkov to step down. If Barkov refused, Boyce was ready to take legal action to enforce the decision of the annual shareholders meeting held Thursday, he said.


But Boyce said he is confident that the shareholders will take control of the factory.


"Barkov has no legal cards left in his hand and it's a matter of time until he realizes that he has lost," he said.


Barkov could not be reached for comment Friday.


Factory shareholders on Thursday managed to hold the company's first shareholders meeting in two years after St. Petersburg courts rejected injunctions filed by the State Property Ministry and the Lomonosov management to stop the meeting.


With an estimated 90 percent of the shareholders' casting votes, investors handed six of the nine board seats to The U.S. Russia Investment Fund and KKR, Delta Capital Management said.


Foreign investors are continuing to fight the October decision to renationalize some plant property, and expect a court date for their second appeal to be decided soon, Boyce said.


He added that the legal struggle over plant assets was unrelated to the shareholders meeting. While the state may ultimately confiscate buildings and equipment, the joint-stock company continues to own Lomonosov's intellectual property such as the contracts with the employees who make the porcelain, he said.