UPDATE: Court: Sistema abused shareholder rights while reorganizing Bashneft

(Adds details in paragraphs 7–8)

MOSCOW, Aug 31 (PRIME) – Shareholders of multi-industry holding Sistema have abused their rights during reorganization of oil company Bashneft that it owned in 2009-2014, the Arbitration Court of the republic of Bashkortostan said in a statement on Thursday.

The court said that Sistema as a professional investor must have taken into account the circumstances of Bashneft privatization and understand that the deal was invalid and that all gains under the deal must have been repaid.

“The court believes that the defendants basing on the circumstances of the deal, could not help but know that they are illegal share owners … Consequently, the defendants could not help but know that reorganization will incur significant losses on Bashneft, this is why while withdrawing property from Bashneft they did not act as a good shareholder but solely in its own interests, which confirms that the defendant is guilty of damage,” the statement said.

Oil major Rosneft, the current owner of a controlling stake in Bashneft, filed a 170.6 billion ruble suit against Sistema and its unit Sistema-Invest in May, seeking to recover a loss stemming from an alleged asset stripping at Bashneft by Sistema.

In June, the court issued an order to seize what it assessed as 185 billion rubles worth of assets of Sistema, including a 31.76% stake in mobile operator MTS, 100% in healthcare company Medsi, and 90.5% in Bashkir Power Grid Company, under the case. On August 23, the court ruled Sistema to pay 136.3 billion rubles to Rosneft and Bashneft, partially satisfying the suit.

“While reorganizing Bashneft, the defendant acted contrary to the norm that provides it with corporate control over the subsidiary, did not coordinate its behavior with the interests of the company and the state, such a behavior does not meet the requirements of reasonableness, fair practices and diligence but represents abuse of power by shareholders,” the court said.

The court thinks that conditions of the reorganization made it look like asset stripping, especially since it was done in January–May 2014, months before its renationalization in November.

As a result, the oil company lost a 36.9 billion ruble loan issued to a Sistema subsidiary and 12.5 billion rubles spent to buy back shares from owners discontent with the reorganization. The136.27 billion rubles that the court awarded as payment to Rosneft includes 57.2 billion rubles of shares that Bashneft owned in Sistema-Invest and lost after the procedure, the court said.

The court also said that Sistema had other ways to eliminate cross-shareholding at Bashneft and intra-group loans.

The government re-nationalized the producer in 2014 as it was preparing for an initial public offering. Two years later, when the government put Bashneft up for sale, Rosneft was the lone bidder.

(58.7306 rubles – U.S. $1)

End