National Company KazMunaiGas has sweetened its offer to buy out minority shareholders in its London-listed subsidiary after talks with China’s sovereign wealth fund, according to the Kazakh state oil company’s chairman.
KazMunaiGas, which is 100 per cent owned by the Kazakh state, last month launched an attempt to over KazMunaiGas Exploration Production, or KMG EP, its UK-listed subsidiary, and offered to buy out its minority shareholders.
NC KMG’s proposals to reform its relationship with KMG EP, Kazakhstan’s third-largest oil producer, have run into stiff opposition from the London-listed unit’s independent directors. They said the changes would “severely undermine the corporate governance of the company” and threatened to resign.
On Wednesday, NC KMG increased its buyout offer to KMG EP’s minority shareholders from $7.88 to $9 per global depositary receipt, meaning the transaction is worth up to $1.3bn.
NC KMG also dropped one of the most contentious elements of the proposed package of changes to the agreement governing its relationship with KMG EP.
Frank Kuijlaars, chairman of NC KMG, said the company had dropped the element — which would have given the parent company veto powers over the appointment of independent directors to the board of its subsidiary — after a meeting with China Investment Corporation, the Chinese fund that is the largest minority shareholder in KMG EP, with an 11 per cent stake.
“That was their number one concern,” he told the Financial Times. “We said let’s give in, let’s recognise this. Giving up a veto doesn’t mean you cannot challenge certain decisions.”
The move underscores Beijing’s growing sway in central Asia as it targets investment in the region. Chinese companies own close to a quarter of Kazakhstan’s oil production.
Beijing’s concerns over KMG EP are in line with those of other shareholders, who described NC KMG’s offer to buy out minority investors as “a fiasco” and “outrageously low”, and told the Financial Times that they would planned by the Kazakh government if the oil company did not alter its position.
NC KMG controls about 65 per cent of the voting rights in KMG EP.
Chris Hopkinson, deputy chief executive of NC KMG and chairman of the board of KMG EP, said that the proposed changes were necessary to allow the parent company to push through efficiency improvements at KMG EP’s Soviet-era oilfields.
Several shareholders in KMG EP said on Wednesday that the revisions to NC KMG’s proposals were not sufficient.
“Too little, too late,” said Jacob Grapengiesser, partner at East Capital, one of the top funds specialising in the former Soviet Union and a KMG EP shareholder.
Glass Lewis, the shareholder advisory service, on Wednesday advised that investors vote against the proposals by NC KMG to tighten its grip on KMG EP.
Mr Kuijlaars said that CIC had not indicated whether it would support NC KMG’s proposals, but added he would be surprised if the Chinese fund sold its shares.
