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Court blocks trading of insurer

PPF Investments' stake in Russia's Ingosstrakh at heart of dispute

By Victor Velek
Staff Writer, The Prague Post
November 14th, 2007 issue

PPF Investments (PPFI) has scored an initial victory in an
ongoing power struggle at Russia’s second-largest insurance company, Ingosstrakh, as an arbitration court in Moscow has halted all sales of the company’s shares until PPFI’s complaints are resolved.
The dispute began last month at a general meeting of Ingosstrakh, where the insurer’s shareholders voted to quadruple its capital to 10 billion rubles ($407 million). Notably absent from that meeting was PPFI, the Czech private equity group, which controls 38.5 percent of Ingosstrakh.
PPFI claims it was not told of the October meeting, which it says was illegal and convened with the sole objective of diluting its share in Ingosstrakh to less than 10 percent. Ingosstrakh is controlled by the Russian aluminum tycoon Oleg Deripaska.
After the meeting, PPFI filed complaints with several Russian authorities, the first of which gained initial results Nov. 12 when the arbitration court suspended the sale of Ingosstrakh’s shares, pending a completed investigation.
Legal actions notwithstanding, PPFI has said that it is open to talks with Ingosstrakh about the capital increase, with certain conditions.
“The talks must be transparent and respect the rights of all minority shareholders,” said PPFI’s CEO and majority shareholder, Tomáš Brzobohatý, Nov. 11. “We don’t want to be deceived twice.”
Basic Element, the Deripaska-owned investment company that controls Ingosstrakh, has denied any wrongdoing. And Ingosstrakh’s head, Vyacheslav Shcherbakov, has rejected PPFI’s complaints as ungrounded, saying that all shareholders had the chance to participate in the meeting.
Basic Element has also challenged how PPFI came to control such a large minority share in Ingosstrakh. The three shareholders bought by PPFI held stakes subject to preemptive buying rights by Basic Element, the company said.
Should PPFI’s complaints fail to gain further ground, Ingosstrakh’s shareholders will have to increase their investments fourfold in order to maintain their current stakes in the insurer. PPFI will have the chance to boost its investment as well, a Basic Element spokesperson told Reuters.
“We obviously have funds ready for this,” Brzobohatý said, but the firm questions whether it will be allowed to actually increase its investment.
“We have justified concerns that in case the increase of registered capital is approved … [Basic Element] will again prevent us from participating in the process,” the firm said in a statement Nov. 11.
PPFI, which is loosely connected to the financial firm PPF — controlled by the Czech Republic’s richest man, Petr Kellner — has even launched a Web site (IngoVeritas.eu) dedicated to the dispute.

Victor Velek can be reached at vvelek@praguepost.com


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