Sudden sale of minority share in leading tire plant raises questions
Ukraine’s largest tire manufacturer could be about to lose its only lucrative asset on the eve of its privatization.
The details of the budding controversy are hazy.
What is clear is that someone plans to sell a minority stake in the Rosava tire‑making joint venture (Rosava JV). What is unclear is who owns the shares being put up for sale – the Ukrainian or the foreign partner.
The controversy surfaced on April 28 when Alfa Capital, a Russian securities firm, made public its plans to sell 49 percent of Rosava JV.
The joint venture was created in 1998 by the state‑controlled Rosava tire plant (Rosava OJSC) and Irish‑registered Tapistron, a company linked to Amtel, a diversified holding company believed to have Russian and Singaporean roots. Rosava OJSC holds a 49 percent share and Tapistron has the controlling 51 percent stake, according to Inna Burmych, deputy head of pre‑privatization at the State Property Fund.
The hitch is that Rosava OJSC says it knows nothing about the sale. Meanwhile, neither Amtel nor Alfa Capital is talking.
If it is in fact Rosava OJSC’s stake that is in the offing, the tire giant, located 80 miles south of Kyiv in the town of Bila Tserkva, could be rendered virtually worthless as the SPF prepares to privatize it later this year. All of the tire plant’s assets are tied up in Rosava JV.
With questions more plentiful than answers, the State Property Fund is investigating the deal, even though it says it may be powerless to stop what could prove to be the evisceration of a state‑controlled company slated for privatization – an act that could deprive the government of millions in revenue.
Alfa Capital said it would auction the shares in Rosava JV on the PFTS stock exchange between May 14 and May 24, and that the share package could carry a Hr 103.9 million starting price.
An Alfa Capital spokesman said only that the firm was selling the shares on behalf on a client, but declined to name the shareholder.
Government officials and shareholders appeared baffled by Alfa Capital’s announcement. Viktor Tuluk, technical director at Rosava OJSC, said he did not know whose shares had been put on the block. Tuluk said he was unaware that a stake equal to his company’s holding was being offered for sale.
Sudhir Gupta, president of Moscow‑based Amtel, declined to comment on the matter.
Rosava OJSC is 74.26 percent owned by the state, with the remainder held by private investors. If the 49 percent stake in Rosava JV up for sale belongs to Rosava OJSC, who authorized the sale?
The SPF’s Burmych was at a loss to explain.
“[Rosava OJSC] itself did not announce a sale of its shares in Rosava JV,” she said. “So it is difficult to say who has planned this sale, or why.”
Burmych said that only Rosava OJSC’s shareholders could confer the legal authority to sell the company’s shares in Rosava JV.
“Even if the shares were used as collateral for a loan, creditors would have had to follow certain procedures before they could take possession of and sell the shares,” she said. “Apparently, that hasn’t been done.”
Halyna Davydova, head of Rosava OJSC’s privatization department, said that she is unaware of any decision by the company to sell its interest in the joint venture. Such a decision would require action by Rosava OJSC shareholders, she said.
Rosava JV accounts for 75 percent of the country’s tire production. It’s also the former Soviet Union’s only producer of radial tires containing steel‑cord sidewalls.
To form the joint venture with Tapistron in 1998, Rosava OJSC contributed the tire plant, while Tapistron ostensibly contributed cash. In doing so, Rosava OJSC exchanged its only valuable asset for stock.
While Rosava OSJC gained stock in the newly formed joint venture, it did not lose its old debts and social‑payment obligations. In 1999, Rosava OJSC had a net loss of $17 million and the company’s shares traded at close to zero.
Analysts said any planned sale of Rosava OJSC’s interest in the JV would undermine the government’s plan to privatize its 74.26 percent stake in the firm later this year.
“If the sale goes through, the only thing that will remain of Rosava OJSC will be the sign over the company’s door,” said Dmytro Tarabakyn, director at the Dragon Capital investment firm.
Burmych said the State Property Fund will look into the legality of Alfa Capital’s offer. She said it isn’t clear what the legal basis is for the sale of Rosava OJSC’s stake in the venture.
“It’s a murky secret,” she said. “As a person authorized by the state, I’m trying to figure it out now.”
