Best welcomes BRE, but market cold to new strategic investor
While the Sopot-based trading and financial services company welcomed the new strategic investor, some argued BRE had found a loophole in the law that would further discourage investment in a market already down 28% from mid-summer highs.
Shares remained flat at zl. 9 on Monday, Sept. 14, the first full-day of trading after the announcement. Best's all-time low is zl. 8.90 a share. BRE is paying zl. 22 for 420,000 A-series shares from Best's founder Wojciech Gawdzik. The move will give BRE 50% voting rights in the company, effectively giving BRE control board control.
BRE purchased the shares without making an open bid for traded shares. The off-market sale gave minority shareholders little say over choosing Best's new owner, said Dariusz Piszczatowski, head of primary markets at ABN AMRO Securities.
Also, because the transaction occurred off-market, shareholders of the publicly traded shares got left out of the deal, he said.
Since Best's initial public offering last spring, share prices have plummeted more than 80%, making Best attractively priced for a strategic investor. But for initial investors, the exclusive sale just rubbed salt in the wound.
The effects of the sale reached beyond Best's shareholders, Piszczatowski said.
"Minority shareholders in most cases are quite concerned," he said. "For the last couple of months we've seen increased caution."
Although Best's free float amounted to 77% of Best's total shares, Gawdzik's preferred shares gave him majority voting rights. Piszczatowski estimated that 10-15% of the more than 150 companies traded on the exchange had similar shareholder structures, where majority control rested in non-traded shares.
"This case has made it evident that if you have a structure like Best, you don't have minority shareholder protection to get out of the deal if the company is taken over by somebody else," he said.
Under the Securities Act, buyers who want to acquire more than 10% ownership within 90 days must make a public offer to shareholders, said Beata Stelmach, commission spokeswoman.
"In this particular case, there is no need to make the (public) offer," Stelmach said. "These are preferred, not traded shares."
A loophole?
Not necessarily, said Leslaw Paga, current head of Deloitte & Touche in Warsaw and former Securities Commission chief.
"Minority shareholders need some protection, but they can't stop the company from doing what's in the best interest of the company," Paga said, adding that the revised Securities Act is up to international standards.
For Best, BRE's takeover could be the light at the end of the tunnel. Best went to market last year to raise capital to add leasing to its financial services division which included consumer credit. But the project was late getting off the ground and the company brought in only 25% of its projected zl. 16 million ($4.4 million) in revenue.
"The long-term effect on the company is very positive," said CEO Krzysztof Banaszak. "The era of independent consumer credit agencies is over."
Banaszak said he was eager to finalize the sale and start working on synergies with BRE and its affiliated financial services such as consumer credit agency Finoko and BRE Leasing.
In the short term, Best was on target for its projected zl. 12 million ($3.3 million) in revenue, despite lower-than-expected mid-year results, Banaszak said. Concerning BRE's effect on year-end results, he said, "I don't see any possible negative effects."
Shares remained flat at zl. 9 on Monday, Sept. 14, the first full-day of trading after the announcement. Best's all-time low is zl. 8.90 a share. BRE is paying zl. 22 for 420,000 A-series shares from Best's founder Wojciech Gawdzik. The move will give BRE 50% voting rights in the company, effectively giving BRE control board control.
BRE purchased the shares without making an open bid for traded shares. The off-market sale gave minority shareholders little say over choosing Best's new owner, said Dariusz Piszczatowski, head of primary markets at ABN AMRO Securities.
Also, because the transaction occurred off-market, shareholders of the publicly traded shares got left out of the deal, he said.
Since Best's initial public offering last spring, share prices have plummeted more than 80%, making Best attractively priced for a strategic investor. But for initial investors, the exclusive sale just rubbed salt in the wound.
The effects of the sale reached beyond Best's shareholders, Piszczatowski said.
"Minority shareholders in most cases are quite concerned," he said. "For the last couple of months we've seen increased caution."
Although Best's free float amounted to 77% of Best's total shares, Gawdzik's preferred shares gave him majority voting rights. Piszczatowski estimated that 10-15% of the more than 150 companies traded on the exchange had similar shareholder structures, where majority control rested in non-traded shares.
"This case has made it evident that if you have a structure like Best, you don't have minority shareholder protection to get out of the deal if the company is taken over by somebody else," he said.
Under the Securities Act, buyers who want to acquire more than 10% ownership within 90 days must make a public offer to shareholders, said Beata Stelmach, commission spokeswoman.
"In this particular case, there is no need to make the (public) offer," Stelmach said. "These are preferred, not traded shares."
A loophole?
Not necessarily, said Leslaw Paga, current head of Deloitte & Touche in Warsaw and former Securities Commission chief.
"Minority shareholders need some protection, but they can't stop the company from doing what's in the best interest of the company," Paga said, adding that the revised Securities Act is up to international standards.
For Best, BRE's takeover could be the light at the end of the tunnel. Best went to market last year to raise capital to add leasing to its financial services division which included consumer credit. But the project was late getting off the ground and the company brought in only 25% of its projected zl. 16 million ($4.4 million) in revenue.
"The long-term effect on the company is very positive," said CEO Krzysztof Banaszak. "The era of independent consumer credit agencies is over."
Banaszak said he was eager to finalize the sale and start working on synergies with BRE and its affiliated financial services such as consumer credit agency Finoko and BRE Leasing.
In the short term, Best was on target for its projected zl. 12 million ($3.3 million) in revenue, despite lower-than-expected mid-year results, Banaszak said. Concerning BRE's effect on year-end results, he said, "I don't see any possible negative effects."
