Kuchuksulphate is Fighting off Hostile Takeover

Kuchuksulphate is Fighting off Hostile Takeover

Photo: https://infourok.ru/

Hostile takeover bids against Kuchuksulphate, Russia's only producer of natural sodium sulphate, have been mounted since 2017. Finally, certain solutions have emerged. They give an idea that...

...not only the enterprise is resisting perpetrators of illegal aquisitions, but the state has also found the strength to confront the forces destroying the domestic economy.

A total of 300 inspection requests have been initiated against the company since July 2020 and 94 were carried out. No violations were found but of course, each inspection destabilized the company's mode of operation.

A five-month tax audit has just ended. The tax authorities found no violations. In early September, Interdistrict Tax Inspectorate No. 8 for the Altai Territory issued a resolution not to prosecute Kuchuksulphate. The remarkable fact is that it was with the tax claims that the hostile takeover of the company began in 2017. At that time, no violations were found either.

Meanwhile, the only claim against the plant during those years was falsified. It relied on the act by the Federal Service for Supervision of Natural Resources (Rosprirodnadzor,) adopted by Svetlana Zhulina, Rosprirodnadzor’s Deputy Head, and Vyacheslav Filatov, Deputy Head in the segment of subsoil use of solid minerals of the State Geological Supervision Department of Rosprirodnadzor. In February 2021, five rank-and-file Rosprirodnadzor employees confessed to falsifying the act. Trying to avoid punishment Filatov resigned as he knew that he was responsible for what had happened.

Meanwhile, the Novosibirsk Region Prosecutor's Office has resumed its pre-investigation check against Alexey Beloborodov, a former department head at Rosbuilding, a company known for its active hostile takeover activities. The inspection was initiated on the report by Vasily Gamayunov, Chairman of the board of directors of Kuchuksulphate, who claimed compulsion to enter into a contract, a crime punishable under Article 179 of the Criminal Code. However, the inspection was suspended because Beloborodov was allegedly abroad. This is despite the fact that even court verdicts are delivered in absentia in other situations.

However, the takeover attempt was thwarted, and Beloborodov’s involvement will be investigated.

According to the case materials, in January 2019, Beloborodov attempted to force the management and owners of Kuchuksulphate to sell the company. The previous takeover bid was mounted by his former colleague at Rosbilding Andrei Tyasto, who was president of the A1 company at the time. It was Tyasto who sent Alexei Asachenkov, the then managing director of A1, to Kuchuksulphate on the acquisition mission. Apparently, Beloborodov acted in the interests of A1, the investment subsidiary of Alfa Group Consortium.

“Probably, A1 is now the market leader in the M&A segment which somehow follows in the scandalous footsteps of such corporate raiders as Rosbuilding. It uses not only the opportunities provided by the law but also administrative pressure on the “victim.” As the examples with the falsification of the Rosprirodnadzor act or the numerous dubious inquiries initiated by law enforcement agencies show, these actions are comparable to corrupt practices.

The fact that the Novosibirsk Prosecutor's Office has decided to restart the investigation despite the opposition of some law enforcement officials is definitely a victory for the law. However, a complete victory is still a long way off. The asset is so attractive that the most powerful forces at the federal level have been brought in to attack it.

Various departments of the Interior Ministry such as the Investigative Committee, the Federal Tax Service etc. have suddenly become interested in Kuchuksulphate. They are looking for an opportunity to get the shareholder register and other confidential information. Everything is being done in the best traditions of Russian hostile takeover practice, a technique which already fell into oblivion in the civilised world but not in the regions far from Moscow where attempts to seize the register and rewrite it were made.

When the attackers failed to seize the register, they took quite unthinkable actions. In particular, they made attempts to organize a review of the results of the privatization of Kuchuksulphate, which took place back in 1992, when 1,693 members of the workforce became shareholders in the enterprise through a lease with a buy-out. In addition, the Prosecutor's Office of the Altai Territory and the Blagoveshchensk Interdistrict Prosecutor's Office have been carrying out an inspection since March 2021, allegedly on the instructions of Russia’s Prosecutor General's Office. They check whether the land at the plant, allotted for its construction back in 1955, has been in lawful use. The Prosecutor's Office has been investigating the details of Kuchuksulphate's privatization since last autumn.

The situation is highly unlikely to work out well for the criminals, as the company’s corporatization has never been challenged. A precedent of this kind would call into question the whole process of converting enterprises into joint-stock companies in the country. Chances are it will create grounds for revision, raise doubts about any ownership and finally deprive the domestic economy of any stable foundation.

However, the people behind this scheme do not care about this. They are just trying to achieve their goal and fulfill the takeover order by any means. According to the investigators, the powerful administrative pressure has been linked to a person on the Forbes list who is interested in the asset. A pre-investigation check found that both A1 and, in particular, Beloborodov had acted on behalf of oligarch Roman Trotsenko. The latter visited the plant to declare his interest in the company but got a refusal. Apparently, his claimed status of adviser to a respected executive of a state-owned raw materials company did not have the expected intimidating effect on Kuchuksulphate’s management.

Therefore, chances are there will be more far-fetched claims. In this case, not only Kuchuksulphate but also the entire Blagoveshchensky district of the Altai Territory, for which the company is a major employer and source of revenue, might face huge problems.

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