Minority investors take dispute to court
By : Bogda Zukowska
Minority shareholders of tire maker Stomil Olsztyn filed a suit against strategic investor Michelin last Wednesday in response to a supervisory board decision to refuse to listen their requests at a shareholder meeting three weeks ago.
Minority shareholders called the extraordinary meeting to ask that an independent auditor be assigned to determine whether the company's profits were illegally being transferred to Michelin's parent company in France and to discuss fines for management personnel found guilty of participating in such practices.
At the meeting, the minority stakeholders were told by Michelin, which holds a 59% stake in Stomil Olsztyn, that their requests would not be open for discussion. According to Pawel Rymarz, a lawyer at Weil, Gotshal & Manges law firm, which is representing the minority owners in the lawsuit, a failure to listen to the requests of minority shareholders runs contrary to the Commercial Code.
"In case of major differences between shareholders, it's the court's job to resolve the matter and judge who is right," said Waldemar Siwak, who represents Stomil's minority shareholders on the supervisory board.
Access to company information and shareholders' rights have become core issues of disagreement between the two parties since last summer, when conflict first erupted. Minority owners accused Michelin of reducing Stomil's shareholder value, withholding information from minority owners and limiting their right to supervise company policy.
"We have to defend minority owners' rights because if we tolerate regulation breaches like this one, such ill practices might become more common," Rymarz said.
Among minority shareholders holding a 26% stake in the Olsztyn-based tire manufacturer are institutional investors Pekao Pioneer and Korona investment funds and pension funds. Compagnie Financiere Michelin, a member of the Michelin group, owns 59% of the company.
Two weeks ago, an Olsztyn court ruled that such practices were against the law and fined company President Benoit de la Breteche zl. 10,000. Two weeks earlier, Michelin launched an official statement threatening that it would sue minority stakeholders for defamation.
Despite the row, Stomil Olsztyn's stocks were recommended a "buy" in a report issued by WBK brokerage last month. Analysts valued Olsztyn's paper at zl. 30. The stock traded at zl. 22.5 last Thursday. "This dispute is nothing new, so we have already included this factor into our valuation," said Grzegorz Litynski, an analyst with WBK. He said he was aware, though, that minority investors are concerned about alleged non-transparent business practices between Stomil's parent company in France and the plant in Olsztyn. Nevertheless, as domestic competition and plummeting car sales only have a small influence on Olsztyn's performance, zl. 30 per share is justified, Litynski said.
Other analysts are less optimistic. Biuro Maklerskie BPH brokerage is concerned the dispute could negatively influence Stomil's stocks. "In our opinion, investing in Stomil's equities bears a high risk," according to a BM BPH report issued in mid-March.
Minority investors are particularly outraged about $55 million in license fees and services that Michelin charged Olsztyn during the past five years. Michelin also paid 10% below the market rate for tires delivered by the Polish manufacturer for its distribution network. As a result, Michelin had to pay zl. 5 million ($1.2 million) in fines imposed by Polish tax authorities in 1999.
