BIG's management searches for way to keep control of share package
It seems, though, that the bank may have little other choice than to appeal a shareholders' decision in court, possibly delaying for months or years the fate of a nearly 25% stake in the bank, lawyers said.
"Right now, it would be rather difficult to find a way out," said Marek Szyd-owski, a lawyer with Cameron McKenna.
The share package is key to both large shareholders and management. The stake could be sold to a strategic investor, but who that investor is will be determined by who controls the 25% holding.
That decision will be taken during the shareholders meeting when a resolution is voted on to transfer control of the shares to all shareholders. The upcoming vote is thought to be behind the recent purchase of large blocks of shares in BIG BG by unknown investors. Daily volume last week in the bank's stock was about 4 million shares, similar to the previous week, well above a norm of about 1 million shares a day.
The bank's stock continued to rise last week on the belief that BIG BG is now in play. In the fixed-price session on the Warsaw Stock Exchange (WSE), BIG BG's shares closed at z-. 4.80 on Friday, up 26% from the previous Friday's close and up 60% from more than two weeks ago when buying interest suddenly intensified.
Currently, the disputed shares are owned by BIG BG subsidiaries. This ownership resulted from the merger in 1997 of Bank Inicjatyw Gospodarczych BIG and Bank Gdański, when BIG subsidiaries became owners of 29.3% of the new bank's shares. Of this holding, 4.99% has already been sold to Banco Commercial Portugues, leaving the subsidiaries with a 24.3% stake at the end of January.
Under the bank's articles of incorporation, shares owned by subsidiaries are treated as the bank's own shares and have no voting rights. Decisions on disposing of them are taken by the bank's management.
"The managing board addressed the issue in a very conservative way, to serve the best interests of all shareholders," the bank said in a statement. "The board's aim is to sell the shares on the capital market in a way that would reduce any dramatic changes in their price."
BIG BG's interpretation is that management put in place a self-imposed limitation on the shares for the sake of all shareholders.
"We just wanted to solve the issue in a civilized way," said Wojciech Kaczorowski, public relations director at BIG BG. "We didn't want to put other shareholders at a disadvantage."
However, that's not the way all shareholders view the situation. Templeton Asset Management and ABN Amro Asset Management, which together hold over 10% of the bank, called the shareholders meeting to vote on the resolution to switch control of the stock package to a majority shareholder vote.
"One can understand them," Szyd-owski said. "They are afraid the board could sell the shares behind their backs."
But some lawyers said an argument could be made against a transfer of control of the shares and that the shares should be controlled, with voting rights, by the companies that hold them.
"I can't see any reason why the shares have no voting rights," said Grzegorz Domański, a lawyer with Domański, Szubielska i Wspolnicy. "But in any case, they are owned by separate entities even if the entities are wholly owned by BIG BG."
That's why BIG BG's shareholders have no right to decide about the fate of the package, he argued.
"But if BIG BG's management board can control them, why shouldn't the shareholders meeting?" countered Renata Strzelecka, a lawyer with Ernst & Young.
The biggest difficulty regarding the shares that needs to be cleared up is that they do not have voting rights, she added. But to vest them with rights would require changes to the company's articles, which would require approval from a majority of shareholders.
This is unlikely to happen, though, if Templeton, ABN Amro and other shareholders are looking to transfer control of the shares to all shareholders.
While BIG BG's management could try to sell the package of shares before the meeting, it has agreed not to do so. Which means that despite its search for a loophole to prevent a transfer of control over the shares, its choice is limited.
"The management or other shareholders will be left with one choice," said Szyd-owski. "To appeal the shareholders' resolution in the courts."
"Right now, it would be rather difficult to find a way out," said Marek Szyd-owski, a lawyer with Cameron McKenna.
The share package is key to both large shareholders and management. The stake could be sold to a strategic investor, but who that investor is will be determined by who controls the 25% holding.
That decision will be taken during the shareholders meeting when a resolution is voted on to transfer control of the shares to all shareholders. The upcoming vote is thought to be behind the recent purchase of large blocks of shares in BIG BG by unknown investors. Daily volume last week in the bank's stock was about 4 million shares, similar to the previous week, well above a norm of about 1 million shares a day.
The bank's stock continued to rise last week on the belief that BIG BG is now in play. In the fixed-price session on the Warsaw Stock Exchange (WSE), BIG BG's shares closed at z-. 4.80 on Friday, up 26% from the previous Friday's close and up 60% from more than two weeks ago when buying interest suddenly intensified.
Currently, the disputed shares are owned by BIG BG subsidiaries. This ownership resulted from the merger in 1997 of Bank Inicjatyw Gospodarczych BIG and Bank Gdański, when BIG subsidiaries became owners of 29.3% of the new bank's shares. Of this holding, 4.99% has already been sold to Banco Commercial Portugues, leaving the subsidiaries with a 24.3% stake at the end of January.
Under the bank's articles of incorporation, shares owned by subsidiaries are treated as the bank's own shares and have no voting rights. Decisions on disposing of them are taken by the bank's management.
"The managing board addressed the issue in a very conservative way, to serve the best interests of all shareholders," the bank said in a statement. "The board's aim is to sell the shares on the capital market in a way that would reduce any dramatic changes in their price."
BIG BG's interpretation is that management put in place a self-imposed limitation on the shares for the sake of all shareholders.
"We just wanted to solve the issue in a civilized way," said Wojciech Kaczorowski, public relations director at BIG BG. "We didn't want to put other shareholders at a disadvantage."
However, that's not the way all shareholders view the situation. Templeton Asset Management and ABN Amro Asset Management, which together hold over 10% of the bank, called the shareholders meeting to vote on the resolution to switch control of the stock package to a majority shareholder vote.
"One can understand them," Szyd-owski said. "They are afraid the board could sell the shares behind their backs."
But some lawyers said an argument could be made against a transfer of control of the shares and that the shares should be controlled, with voting rights, by the companies that hold them.
"I can't see any reason why the shares have no voting rights," said Grzegorz Domański, a lawyer with Domański, Szubielska i Wspolnicy. "But in any case, they are owned by separate entities even if the entities are wholly owned by BIG BG."
That's why BIG BG's shareholders have no right to decide about the fate of the package, he argued.
"But if BIG BG's management board can control them, why shouldn't the shareholders meeting?" countered Renata Strzelecka, a lawyer with Ernst & Young.
The biggest difficulty regarding the shares that needs to be cleared up is that they do not have voting rights, she added. But to vest them with rights would require changes to the company's articles, which would require approval from a majority of shareholders.
This is unlikely to happen, though, if Templeton, ABN Amro and other shareholders are looking to transfer control of the shares to all shareholders.
While BIG BG's management could try to sell the package of shares before the meeting, it has agreed not to do so. Which means that despite its search for a loophole to prevent a transfer of control over the shares, its choice is limited.
"The management or other shareholders will be left with one choice," said Szyd-owski. "To appeal the shareholders' resolution in the courts."
