Claim against Management
Board of PAO Gazprom
for damage due to the loss of control over PAO Gazprom Gazoraspredelenie Nizhny Novgorod in favor of PAO Gazprom
Addressing to Shareholders
At the beginning of September 2015 the Board of Directors of PAO Gazprom Gazoraspredelenie Nizhny Novgorod decided to increase the authorized capital by issuing additional private placement shares and allotting them among three companies that do not form part of Gazprom Group: ZAO Financial Analytical Center, OOO Investment Partner and ZAO Citytrade that resulted in the lowering of the PJSC Gazprom’s control over PAO Gazprom Gazoraspredelenie Nizhny Novgorod from 75% to 31,98%. The reasons for such issue are not clear up to now as Oblgaz has always been and still remains the highly profitable business that never lacked extra investment.
We call your attention that Gazprom has never been indemnified for the loss of the corporate control over this large entity.
Minority shareholders of the Group are planning to raise a claim against the Management Team of the PAO Gazprom claiming damages for loss of control over Oblgaz. In accordance with Russian laws a lawsuit can only be filed by a group of shareholders (a single shareholder) who possess(es) at least 1% of voting shares of PAO Gazprom.
Please note that we need more voting shares to file the claim.
We call all shareholders of PAO Gazprom to join us because there is only one way we can defend the interest of the Russian main company!
Calculation of damages
Estimating losses we relied on the following facts:
1. According to the Evaluation Report ordered by AO Gazprom Gazoraspredelenie the price of each issued share was RUR 51;
2. Preparing the Report the Appraiser (OOO Stremlenie) used Factset Mergerstat Review that shows the average control premiums and discounts for lack of control;
3. The price of RUR 51 was discounted at 33,7% due to the non-controlling interest (the Report contained one share price information (see p.156 of the Report).
First of all we have determined price of an ordinary share issued by PAO Gazprom Gazoraspredelenie Nizhny Novgorod (GGNN hereinafter) without any discounts and premiums. It was RUR 76,92 (dividing RUR 51 by the result of the calculation: (1 – 33,7%)). AO Gazprom Gazoraspredelenie owns 20 834 100 ordinary shares of GGNN. Accordingly the price of the shares is RUR 1 602 623 077 without any discounts and premiums. Taking into account that prior to the additional issue the block used to form 75% of GGNN’s authorized capital we have applied the control premium. Based on the Factset Mergerstat Review the premium for this control is 50,8% (p.155 of the Report). Therefore all shares of GGNN belonging to AO Gazprom Gazoraspredelenie before the additional issue used to cost RUR 2 416 755 600.
As far as we are aware of one ordinary share non-adjusted price that is RUR 76,92 we have calculated the overall price of GGNN amounting to RUR 2 136 830 769,23 (The authorized capital of GGNN prior to the additional issue was divided into 27 778 800 ordinary shares).
In order to calculate GGNN’s price after the additional issue we have added the raised funds (RUR 1 906 152 897) to the company’s price prior to the additional issue of shares. Consequently once the shares have been issued the price of GGNN amounting to RUR 4 042 983 666,23 has now been divided into 65 154 347 ordinary shares at RUR 62,05 each.
So following the additional issue the shares of AO Gazprom Gazoraspredelenie now amount to 33,98% of the authorized capital of GGNN. In accordance with Factset Mergerstat Review we shall apply a non-controlling discount of 11,4%. Thus the adjusted price of one share from the block of shares belonging to AO Gazprom Gazoraspredelenie is RUR 54,98.
Multiplying the amounts provided above we have calculated the block price of AO Gazprom Gazoraspredelenie that now is RUR 1 145 426 051,72.
Therefore the additional issue of GGNN has reduced the block of shares that belongs to “AO Gazprom Gazoraspredelenie” by RUR 1 271 329 548,28. We consider this sum as losses caused to PAO Gazprom.
List of attachments to the Statement of Claim
1. List of affiliates of PAO Gazprom Gazoraspredelenie Nizhny Novgorod (GGNN), extracts from the Russian state register for OOO Gazprom Mezhregiongaz and extracts from the Charter of AO Gazprom Gazoraspredelenie.
These documents, in our opinion, confirm the absolute influence of PAO Gazprom on all decisions made by AO Gazprom Gazoraspredelenie, including voting at annual general meeting of GGNN.
2. Information reports disclosed by GGNN under the Disclosure law on the approval of additional issue of shares and its essential terms.
These reports confirm that all formal procedures regarding approval of additional issue of shares of GGNN were completely fulfilled.
3. Extracts from quarterly reports of GGNN.
Information published in the quarterly report proves that all the members of Board of Directors of GGNN are not only the members of Boards of Directors in several other ‘oblgazes’, controlled by PAO Gazprom, but also work in OOO Gazprom Mezhregiongaz and are subordinates to CEO of OOO Gazprom Mezhregiongaz.
4. The letter signed by Mrs. E.V. Mikhailova (member of Management Board of PAO Gazprom) to Russian authorities received by OOO Myriad Rus from Russian authorities.
The letter confirms that Mrs. E.V. Mikhailova was acutely aware of additional issue of shares of GGNN long time before the issue was made and registered. Thus she had an opportunity and authority as a member of Management Board of PAO Gazprom to prevent PAO Gazprom from damage caused by the additional issue.
5. Extracts from the evaluation report on equity value of GGNN, extracts from financial statements of GGNN.
Evaluation report on equity value of GGNN was made by OOO Stremlenie against order of BoD of GGNN to determine price calculation of additional issue of shares. We used this report to calculate damage to PAO Gazprom due to additional issue and loss of control in GGNN. Financial statements data was used for alternate calculation of damage.
The most recent information
05.04.2017 | Minority shareholders of PAO Gazprom have required assistance of Rosneftegaz in order to take Oblgaz out of Gazprom’s control.
Rosneftegaz owns almost 11% of shares of PAO Gazprom being one of the principal State representatives among shareholders. We are sure that Rosneftegaz will help us to seek compensation from the Management Team of the Company for the withdrawal of the big structural subdivision.
Full version (in Russian only)
29.03.2017 | Minority shareholders of PAO Gazprom have required the Federal Agency for State Property Management to assist with the removal of Oblgaz out of control of Gazprom.
The Russian Federation is the principal shareholder of PAO Gazprom. This is why the removal of the regional subdivision out of control of so-called National Treasure of Russia will have drastic effect on the interests of the country. We hope that the Federal Agency for State Property Management will join our lawsuit.
Full version (in Russian only)
28.03.2017 | Good redemption deserves fair compensation.
As Minority Shareholders believe basing their opinion on Russian legislature Gazprom should have offered them to buy its shares of Oblgaz. But that has never been done causing to Boreas loss of profit of 11 million rubles. Therefore Minority Shareholders are going to punish Gazprom for non-compliance with Russian laws but experts think that it would be very difficult to prove that any damage…
24.03.2017 | Minority Shareholders require recovering loss in the amount of 11 million rubles caused by Gazprom.
The lawsuit was filed to the Moscow State Commercial Court 23 March (the copy of the document is at disposal of RBC-NN). The date of hearing has not been established yet. Boreas Asset Management Ltd. insists that the reason of such loss of profit was that that while the transaction of sale of 25,5% of voting shares to the affiliated company was in process…
The claim against the Management Team of PAO Gazprom for recovery of losses caused by the loss of control over PAO Gazprom Gazoraspredelenie Nizhny Novgorod will be filed at the beginning of september 2017.