Kazakh oil company warns of price collapse at UK unit if minority shareholders reject bid for tighter control

By bne IntelliNews June 22, 2016

Shares at KazMunayGas' London-listed upstream subsidiary may decline sharply if minority shareholders reject the Kazakh oil company bid for greater control, the head of the state-owned company Sauat Mynbayev said on June 21. At the same time he said KazMunayGas is not forcing minorities to exit KazMunaiGas Exploration Production (KMG EP).

KazMunayGas, which holds a 63% stake in KMG EP, offered to buy minorities at a price $47.28 per common share, or $7.88 per global depository receipt (GDR). The offer, part of the Kazakh firm's plans to establish greater control over the well-heeled subsidiary, was announced on June 17 and represented a 12.6% premium to the closing price of $7.00 on June 16.

The purchase offer is part of a broader proposal to amend KMG EP’s charter and an agreement governing the relationship between the two companies and is conditional on the approval of those amendments, to be voted at an extraordinary shareholders meeting scheduled for August 3. Independent non-executive directors of KMG EP oppose the plan saying that proposed changes “would significantly weaken the protections afforded to independent shareholders”

“If [independent] shareholders say that our offer is not interesting to them there will be no buyback. However, then responsibility for a future trend of the share price would be spread among all minorities shareholders,” Mynbayev told journalists on May 21. “I assume the share price will plunge and I assume it may be $5 per share. That’s why this is an issue and decision of each and individual minority shareholder.” KMG EP shares edged down 0.14% to close at $7.32 on June 21.

The head of the national company denied attempts to force minority shareholders to sell their stakes. “It seems fair to me that if you don’t want to sell, don’t sell. This is not an offer of compulsory purchase and this is not an offer of delisting. We believe we should go to the market with such open position and make an offer,” Mynbayev said.

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