Cambridge Capital Management (CCM) and international asset management company will not support a proposal made yesterday by AO Novolipetsk Metallurgical Plant (NLMK) to make a new US$100million dilutionary issues of shares in NLMK.
CCM speaks on behalf of parties controlling more than 25% of NLMK's shares. The lack of support by these shareholders will effectively block the proposed new issue since approval by more than 75% of all shareholders is required under Russian law for a new issue to take place.
Shareholders hand not been notified of the proposed share issue prior to managements surprise announcement to the press on 27 January. There has been grave concern with the way that the Company's management has acted. Tom Gaffney, the Chairman of CCM stated "This proposal is another attempt by management to deflect attention from the real issue of how the Company is being run".
Accusations have increasingly been made that management repeatedly has not acted in the best interests of the shareholders, the workforce or the Company. Mr Gaffney has shown his disquiet on a number of occasions and has expressed fears that the Company is being financially drained by management working with the support of minority shareholders.
A number of shareholders believe that business with links to management are providing materials at inflated prices and have been purchasing finished goods at lower than market price. Last year CCM refused to join a partnership between MFK Renaissance the current management led by Vladimir Lissin to operate a private Cyprus based offshore trading company, Paragale, to handle approximately US $1.5 billion in export business from NLMK.
Despite CCM's repeated requests, NLMK management and NFK Renaissance refuse to make Paragale's operations and profits available to NLMK or its shareholders. CCM wants to have no part in the current management practices advocated by Lissin and supported by MFK renaissance, practices that have contributed to a dramatic decline in the performance of the Company.
It is noteworthy that MFK Renaissance manages the shareholder in NMLK on behalf o the Sputnik Funds whose investors included George Soro's Quantum Fund and Harvard Endowment. MFK Renaissance, led by Boris Jordan was rebuffed in 1998 for attempting to dilute minority shareholders' interest in one of Russia's largest oil companies AO Sidanco. The Russian SEC was forced to intervene to protect minority shareholder rights by cancelling the dilutionary share issue.
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