PPF Investments accuses Bazovy element of media manipulation

Oct 17, 2007

PPF Investments strictly rejects the accusations spread in the media by certain shareholders of the Ingosstrach insurance company, most notably by the Bazovy element company, which state that the sale of three Russian companies, which are Ingosstrach shareholders, to the PPF Investments group reportedly took place in conflict with Russian law.

"We did not breach any Russian act and it is a lie to state anything like this," says Tomáš Brzobohatý, Chairman of the Board of Directors of PPF Investments. "Russia's Federal Anti-monopoly Service approved the sale of the three Russian companies, namely Vega, Investitsionnaya Initsiativa and Novy kapital to PPF Investments," he adds.

The accusations published in the media are based on unfounded statements of Bazovy element to the effect that former Ingosstrach shareholders reportedly had agreements in place on a pre-emptive right for the purchase of shares and that this right was not respected upon the sale of the shares to PPF Investments.

"The selling shareholder, Mr Mamut repeatedly assured us orally and in writing that there were no agreements whatsoever between the shareholders that would prevent the sale to PPF Investments through its PPF Beta fund", Brzobohatý said. "We held discussions with Ingosstrach's majority shareholder before and after the transaction and Bazovy element never proved or even mentioned to us the existence of any agreement on a pre-emptive right for shares. If any such agreements existed, we challenge Bazovy element to prove them", he said.

In PPF Investments' opinion, this is targeted media manipulation aimed at distracting attention from the scandalous summoning and non-transparent deliberations of the Extraordinary General Meeting of Ingosstrach, which adopted a resolution on the increase of share capital pursuing a single objective - i.e. to reduce PPF Investment's interest below 10%.

"This reminds us of the infamous period of the early 1990's. We are reluctant to believe that something like this is possible in today's stabilised Russia," Brzobohatý added.

PPF Investments is ready for a due increase of Ingosstrach's share capital in accordance with the requirements of the law and the usual standards of international markets, and also if there is a business reason for the increase. "We obviously have funds ready for this," Brzobohatý says.

 

Notes for editors:

PPF Investments is an independent international private equity group registered in Jersey. It focuses on the transitional period economies in the Central and Eastern European and Asian regions. PPF Investments' investment strategy is based on the following targets: sound business and corporate strategy, considerate management and optimal capital structure. PPF Investments has the right for the commercial use of the 'PPF' registered brand contained in the name of PPF Group, a leading international financial group. However, PPF Investments is not interchangeable with PPF Group, as these two mutually independent companies differ in their assets, management, shareholders and business focus.

 

 

Attachment - position of Mr Alexandr Mamut on the sale of Ingosstrach shares:

Quoted from a daily: "Bazovy element believes that the transaction between Mamutem and the Czechs breached the pre-emptive right for shares that Deripaska's companies had. A source in the Bazovy element management states that Mamut dodged Deripaska in selling the shares and that the transaction between Mamut and Durbe involved serious breaches of the law, including the anti-monopoly act."

The ponderings that appeared in Alexei Rozhkov's article entitled The Imperfectly Diluted Shareholder (Vedomosti daily, 16 October 2007, issue 195(1969) - with reference to the Bazel company, stating that 1) the transaction leading to the acquisition of 38.5% of the shares of Ingosstrach by PPF Beta Ltd. breaches the pre-emptive right of companies controlled by Mr O. V. Deripaska for the purchase of said shares, and 2) the aforementioned transaction involved a breach of the anti-monopoly law, are totally at odds with reality, because:

1. The moment that PPF Beta Ltd. acquired the shares of Ingosstrach, the main shareholders of Ingosstrach (both nominal and beneficiary ones) lacked any agreements giving any of the shareholders the pre-emptive right for the purchase of Ingosstrach shares from third parties. Such a right is not even enacted in the Federal Act on Public Limited Companies of 26 December 1995, No. 208-FZ, which immediately regulates the relationships between the shareholders of Ingosstrach, for i) Ingosstrach is an open public limited company; and ii) the transaction structure does not assume the immediate acquisition of the actual Ingosstrach shares or the shares (interest in the share capital) of the companies immediately owning the shares of Ingosstrach;

2. PPF Beta Ltd. obtained the approval of the FAS RF for the acquisition of both the control over Ingosstrach shares and the assets that formed the actual subject matter of the transaction.

Therefore, the acquisition by PPF Beta Ltd. of Ingosstrach shares met all relevant requirements of the Russian law and it did not breach any rights of other Ingosstrach shareholders (both nominal and beneficiary).