An Austrian holding company closely connected to a paper production facility in Russia has consolidated its stake in a...An Austrian holding company closely connected to a paper production facility in Russia has consolidated its stake in a Kyiv Region paper plant in what appears to be an attempt by the owners of the Russian facility to protect their assets in Ukraine under an EU legal umbrella.
Austria’s Pulp Mill Holding has consolidated its stake in the Kyiv Paper-Board Plant (KPPP) to roughly 95.1 per cent, according to a recent wire report from Ukrainian News.
The news agency reported on June 6 that the Austrian company had increased its share in the statutory fund of KPPP from 40.2 to 95.1 per cent on May 22 of this year.
The sales price of the Austrian holding’s additional 55-per-cent stake in the Ukrainian plant was not disclosed.
The Austrian holding also controls approximately 65 per cent of the Arkhangelsk Pulp and Paper Mill, one of Russia’s largest pulp and paper producers.
The Kyiv Paper-Board Plant, located in the town of Obukhiv, in Kyiv Region, is one of Ukraine’s largest pulp and paper producers.
Nina Kolodiy, the deputy general director for economics and financing at KPPP, said that Austria’s Pulp Mill Holding had come to an agreement with the plant’s other shareholders to increase its stake.
Kolodiy declined to disclose the other KPPP shareholders from whom the Austrian company had bought the additional shares or for what price the shares had been sold, adding, however, that the shareholder registry of KPPP, an open joint stock company, is publicly available on the securities market.
Yevhen Hrebeniuk, an equity analyst at Millennium Capital, one of Ukraine’s leading integrated financial services providers, said that "the shares of the plant are not actively traded on the stock market and [KPPP] is not even listed on PFTS." He added that although information that Pulp Mill Holding has consolidated its stake in KPPP was released through several public sources, "we cannot really speak about an ‘acquisition’ or change of ownership."
"This transaction seems to reflect the asset restructuring undertaken by the Arkhangelsk Pulp Mill owners in response to mounting pressure coming from Russian law-enforcement and tax agencies on their business. And one effective way to protect the business [including its assets in Ukraine] would be to have an EU registered company legally own it."
Hrebeniuk added that this is also the reason why the price they paid for this stake is irrelevant. According to him, KPPP could be fairly valued at USD 120 million, which means that the 55-per-cent addition to Pulp Mill Holding’s stake would cost at least USD 65 million.
As reported in January 2004, Austria’s Pulp Mill Holding first bought a 30-per-cent stake in the plant from the state-owned UkrPapirProm in a privatisation tender completed in November 2003. The tender was opposed by both KPPP’s minority shareholders and other Ukrainian pulp and paper producers, including the Rubizhansky Cardboard and Packaging Mill in Luhansk Region, which was disqualified from taking part in the bidding because of tender requirements.
As a part of the tender agreement, Austria’s Paper Mill Holding was to invest USD 13.5 million over three years to modernise and upgrade the Kyiv plant’s facilities.
Eduard Litvak, deputy chairman of the board of UkrPapirProm, said that since UkrPapirProm had sold its shares to the Austrian company in 2003, his state-owned company was not privy to the details of their recent acquisition of the 55-per-cent stake. However, UkrPapirProm has kept track of Pulp Mill Holding’s fulfillment of the tender agreement, and Litvak said that the Austrian company has already paid a considerable portion of the USD 13.5 million owed and is on track to pay out its final installment by the end of 2006, as per the agreement.
Millenium Capital’s Hrebeniuk noted that this investment in 2003-4 by Pulp Mill Holding has changed the market share of KPPP considerably, although its recent acquisition of an additional 55-per-cent stake should not cause major shifts in Ukraine’s paperboard packaging market because the owners of the Kyiv plant have remained, de facto, the same.
"In 2001, the Kyiv plant did not produce any corrugated paperboard packaging. And after the owners of Arkhangelsk bought them they became the number two producer of corrugated packaging (after Rubizhanskiy) and the number 1 producer of various paperboards – both containerboards and boxboards."