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. Last Updated: 07/27/2016

Gazprom Takes Spotlight In Battle for BorsodChem

BUDAPEST, Hungary — Hungarian chemicals group BorsodChem could see control seized by suspected key stakeholder Gazprom at an extraordinary shareholders meeting Wednesday.

Gazprom may hold almost 50 percent of BorsodChem through a patchwork ownership of its allies, and the oil and gas giant could seek up to three posts on the Hungarian chemical firm’s board of directors, analysts said.

The Hungarian market regulator, PSZAF, has made it abundantly clear it does not approve of Gazprom’s moves and has become a major player in the most hotly contested corporate takeover in recent Hungarian history.

PSZAF is meeting with BorsodChem’s main shareholders Tuesday to discuss "issues related to the company."

Gazprom’s ally, Irish-based ally Milford Holdings Ltd., called a shareholders meeting for last November, but it was delayed by the regulator, which weighed into the fray to seek clarification on BorsodChem’s ownership structure.

Milford then had a 24.8 percent stake in BorsodChem, but has since sold it to an Italian banking firm that, if it wants to sell, must offer it to Gazprom’s chemicals partner Sibur first.

Austria’s CE Oil & Gas and Vienna Capital Partners jointly hold just above 16 percent of BorsodChem, while Moscow-based commercial bank MDM has 8.15 percent.

The Hungarian regulator has said that it would not seek to delay the meeting any further. "I don’t know about any circumstances that would suggest that there would not be a general meeting," said PSZAF spokesman Ferenc Gulacsi.

PSZAF has threatened to sue CIB Bank, the Hungarian unit of Banca Commerciale Italiana, for breach of Hungary’s transparency rules after CIB bought Milford’s stake — with Gazprom chemicals ally Sibur having an option to buy.

The regulator is also mounting an assault on Gazprom’s strategy by calling for a buyout of BorsodChem — which by law any shareholder or group of shareholders is required to do if they hold or exceed 33 percent of outstanding shares.

Gazprom wants BorsodChem for strategic reasons and wants to avoid a costly public offer while controlling the company through investors acting on its behalf, analysts said.

They said Gazprom would probably seek to name only two or three members to the seven-member board, in effect tiptoeing around what could be a contractual mine field.

One of BorsodChem’s biggest suppliers is Hungarian sector peer TVK, and a sweeping change in board structure would jeopardize a valuable ethylene delivery contract.

"If a change in control occurs all at once, the contract is invalid," said Attila Vago, analyst at Concorde Securities.