Romanian property restitution fund Fondul Proprietatea, which owns a 22% minority interest in four unlisted regional subsidiaries of power distribution group Electrica, failed to reach an agreement on a price for the minority stakes, Fondul announced in a March 28 press release. Fondul remains open for further negotiation with a view to selling the minority stakes to Electrica.

The gap between Fondul’s expectations for its stakes and Electrica’s offer was quite wide: RON85mn (€19mn), or more than 10% of the value estimated by Fondul for its minority stakes.

Fondul evaluated its holdings in Electrica’s subsidiaries at RON841mn. After several rounds of negotiations, Fondul’s final asking price was lowered to RON805mn. To further smooth the deal, Fondul offered to pay back to Electrica RON36mn of the RON106mn to which it is entitled for the 2015 financial year.

The final price offered by Electrica was RON790mn and it also asked for the entire RON106mn dividends from the subsidiaries for the 2015 financial year. Therefore, the effective price offered by Electrica for the fund’s holdings in the subsidiaries was RON684mn, Fondul concluded.

“We remain committed and willing to resume negotiations at a future point if there is a similar commitment from Electrica,” Greg Konieczny, Fondul’s fund manager, commented.

The shareholders of Electrica, which is 49% state-owned, approved at the general shareholders meeting on November 10 last year, plans to start negotiations with Fondul on the purchase of minority stakes in Electrica’s regional distribution firms. The negotiations were scheduled for completion by March 31, 2016.

Shareholders mandated the company’s managing board to negotiate the deal and asked it to disclose at the end of the process the price offered to Fondul for the minority stakes, even if it was refused by Fondul, and to explain the economic arguments for the price offered.

Electrica received around €445mn in 2014 when it increased its capital through an IPO, but the company declared that the money from the IPO would be spent on investments in the upgrade of the power distribution networks.