The fight between minority shareholders and the management for control over the developer Orco is quietly culminating. A group of Orco shareholders, creditors and bond holders are in talks with an investor that would make it possible to gather a large block of shares in the company.
Last week, negotiations were held in various places across Europe aimed at gathering enough shares to call an extraordinary general meeting or to promote own items to the agenda of a general meeting, according to information available to E15. This would enable small shareholders to change the company’s management or achieve the firm’s bankruptcy in a few months.
On the other hand, the developer’s management and former owners are also reinforcing their position ahead of the general meeting scheduled to take place on 30 April. The news agency Bloomberg reported that as of 17 April, the biggest shareholder in Orco, with a 12% stake, was Orco Holding through which Orco founder Jean-François Ott controlled the company in the past. But Orco managers have already announced that the awaited conflict between minority shareholders and the management will not take place. “Given the fact that we do not have audited results, we will not be able to discuss last year’s performance at the April general meeting. We will call another meeting of shareholders in the summer,” Orco senior vice-president Aleš Vobruba told the daily E15. The April general meeting will therefore be just a formality – the management will open the meeting and then close it.
According to E15, small shareholders do not yet have a sufficient number of shares to be able to remove the management and push through other steps at a general meeting. In line with the Luxembourg law, they need at least 10% of shares to do that. “The talks with the investor are proceeding well. However, minority shareholders will not manage to take any steps before the annual general meeting,” one of the sources close to the talks told E15. Two independent sources confirmed to the daily that James Woolf, the founder of the Prague-based developer Flow East, has been very active in the talks between minority shareholders and bond holders. In the past, Woolf was involved for example in the battle of investors over Prague’s department store Kotva and the football club Slavia. At present, he is on the side of the holders of Orco bonds, according to E15.
If they fail to gather the necessary 10% of shares, the small shareholders want to buy the rest on the bourse with the assistance of an unnamed investor, according to the E15 source.
The association SOS Orco also represents small shareholders, trying to address especially retail investors. But it does not have any powers of attorney yet and its effort to unite retail investors will most probably bear no fruit. The Luxemburg law virtually rules out the possibility for small shareholders to push through their demands in concert without the assistance of large law offices.
Apart from the holders of Orco shares, whose price on the bourse has dropped by 90% on the year, bond owners are also exerting considerable pressure on Orco. The value of their securities has fallen markedly. Orco is now in a six-month creditor protection period granted by a French court and trying to reduce its debts. One of the methods proposed by the company rests in a significant cut in resources to be paid out to bond owners. The nominal value of the bonds is currently EUR 400 million (more than CZK 10 billion). “If the firm went bankrupt, the bond owners could theoretically obtain a higher sum within the liquidation proceedings than what they would get for the bonds if they accepted Orco’s proposal,” another of the sources told E15. However, bond holders cannot speak at the general meeting, that is why they need support from shareholders.
After postponing the release of 2008 results twice, Orco announced in early April that it sustained a loss exceeding CZK 10 billion in 2008. A year earlier, the company made a CZK 2.2 billion profit. The huge loss was caused mainly by asset revaluation.
The shareholder structure has been changing in recent weeks. According to news agency Bloomberg, Orco Holding was the largest shareholder with 12% as of 17 April. The company Prosperita held 6.6% of shares as of 9 April, and Euro Strategic Holdings had just under 6%. Bernard Gauthier holds over 2% of shares and so does Ott though his company Ott & Co.
