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. Last Updated: 07/27/2016

Gazprom Allies Move In On BorsodChem

BUDAPEST, Hungary - Big shareholders seen as allies of Russian gas giant Gazprom Wednesday moved to assert control of Hungarian chemicals firm BorsodChem following months of intricate manoeuvring.

At an extraordinary general meeting in Budapest, the three big shareholders ousted five of the seven members of the board of directors, retaining only CEO Laszlo Kovacs and one other holdover, and appointed allies in their place.

Two of the five new directors voted on to the board are corporate officers of Sibur, Gazprom's chemicals arm.

"At a certain level, everyone came out well. The management remains...while the new shareholders have a right to be represented. Yes, the takeover has happened but the owners have a right to do what they want," said Zoltan Kevi, analyst at Raiffeisen Securities.

BorsodChem, which at first resisted the takeover effort that began six months ago, also caved in to Gazprom and cancelled options to sell its remaining 15 percent stake in Hungarian sector peer TVK.

Half the stake had been earmarked for Hungarian oil group MOL Rt, the other half for a TVK subsidiary.

"That would be in Gazprom's interest for the 15 percent not to be transferred," said one London-based analyst, who asked not to be named.


The meeting, one of the most closely watched corporate events in recent Hungarian history, was seen as a test of strength for Gazprom.

As the meeting got under way, trading in BorsodChem shares was suspended by the Budapest bourse, which said the EGM could have a significant impact on the share price. BorsodChem shares had risen 2.44 percent to 6,940 forints at the time of suspension.

Gazprom, the world's biggest gas group, is not known to own any shares directly in BorsodChem, but is thought to have amassed almost a 50 percent stake through allies in an effort to move into Hungary's chemicals business.

All five of the new directors were nominees from three big shareholders seen as supporting Gazprom.

Three of the new directors were nominated by CIB Bank, the Hungarian unit of Italian bank Banca Commerciale Italiana, which holds a 24.8 percent stake. That was bought from an Irish holding company that purchased it on behalf of Gazprom and other investors.

If CIB wants to sell, it must offer the stake first to Sibur, which holds an option on the shares.

The three directors nominated by CIB are CIB managing director Peter Bakos-Blumenthal plus two Sibur officials, Sergey Zenkin, vice president for corporate finance, and Mikail Sobolev, vice president for international relations.

Austria's CE Oil & Gas and Vienna Capital Partners, which jointly hold 16 percent of BorsodChem, and Moscow-based commercial bank MDM, with an 8.15 percent stake, also nominated one new director apiece.

The CE nominee was Georg Stahl, CEO of Austrian paper industrial firm Heinzl and senior partner at Vienna Capital, while Boris Titov, whose affiliation was unknown, was nominated by MDM bank.

The complicated manoeuvring over BorsodChem, Hungary's biggest chemical company, capitalised at $293 million, had provoked a sharp response from the country's regulatory watchdog PSZAF.

The agency has called for big investors to make a buyout offer in line with regulations which say that any shareholder or group of shareholders owning 33 percent must make such an offer, to protect minority interests.