UGC’s claim to prevent the sale of IRC Limited shares
JSC Uzhuralzoloto Group of Companies (“UGC”) is a major shareholder of Petropavlovsk PLC (“Petropavlovsk”), holding 29.19% of its shares. In March 2020, Petropavlovsk entered into an agreement for the sale to Stocken Board AG of a 29.9% shareholding in IRC Limited, the only Russian iron ore company in the Russian Far East, for a cash consideration of U.S. $10 million (“Transaction”), together with certain further consideration concerning the release of Petropavlovsk from guarantees given to Gazprombank.
UGC has consistently stated that the Transaction is against the business interests of Petropavlovsk and its shareholders and that the Transaction price is significantly lower than the fair value of the sold shares. On 22 November 2021, UGC requested the Board of Directors of Petropavlovsk to postpone completion of the Transaction to enable it to be considered at a general shareholders’ meeting. The Board of Directors refused to do so.
In the absence of support from the Board of Directors, UGC was compelled to file a claim with the High Court of Justice to restrain completion of the Transaction until it had been considered at a meeting of Petropavlovsk’s shareholders. On 2 December 2021, the court dismissed the claim.
On 3 December 2021, Petropavlovsk completed the Transaction and transferred the 29.9% share in IRC Limited to Stocken Board AG. On the same day, as has been reported by IRC Limited, Stocken Board AG agreed to sell the same 29.9% shares in IRC Limited to two other purchasers for a total consideration of c. U.S. $32.5 million (the “Subsequent Sale”). This consideration that Stocken is expected to receive under the Subsequent Sale is yet another vivid demonstration that the Transaction was on terms that were materially unfair to Petropavlovsk. The terms of the Subsequent Sale, and its timing, deepens UGC’s disappointment in relation to the stance taken by Petropavlovsk’s directors with regard to UGC’s attempts to enable the Transaction to be considered at a general meeting of shareholders.
However, and regrettably, since the Transaction has been completed and a meeting of Petropavlovsk shareholders at this time would in all probability be unable to take steps, or to procure the taking of steps, to reverse this fact, UGC has decided to discontinue the claim.
UGC will continue to explore various options to protect the interests of Petropavlovsk and its shareholders.