PSzÁF suspends approval to BorsodChem buyout offer

The State Financial Supervisory Authority (PSzÁF) on Tuesday said it had suspended a public buyout offer for chemicals company BorsodChem Nyrt by First Chemical Holding Vagyonkezelõ Kft (FCH) pending the conclusion of an investigation into market circumstances. PSzÁF said it was investigating to determine whether rules regarding the acquisition of companies had been broken. FCH announced the buyout offer at a price of Ft 3,000 per share on September 20. The offer was made on behalf of Kikkolux Group and the Austrian company Vienna Capital Partners (VCP). FCH, a company registered in Hungary was set up by Permira Funds, the owner of Kikkolux for the public buyout. Permira Funds is the largest private equity fund in Europe, with capital in excess of €20 billion. If the offer is successfully completed, VCP, which currently owns 21.5% of BorsodChem shares (21.83% of voting rights), will indirectly hold close to 13% of BorsodChem, instead of selling all its BorsodChem shares to Kikkolux as agreed under an option agreement signed in July and modified just days before FCH's buyout offer was announced. The earlier option agreement is also for Ft 3,000 per share.

Firthlion, another big BorsodChem shareholder which holds a similar-condition options agreement with Kikkolux, will sell all its BorsodChem shares if the purchase offer is successful. The price of Ft 3,000 puts the company's market value at €850 million, Econews calculated. The offer does not apply to employee shares neither to GDRs on BorsodChem shares. GDR holders may, however, sell their shares in the offer if they ask for the shares behind their GDRs. After the successful close of the purchase offer, BorsodChem will be delisted from the Budapest Stock Exchange (BÉT) as well as from the Warsaw Stock Exchange, and BorsodChem GDRs will be delisted from the securities section of the London Stock Exchange according to the bidder's announced plans. Upon the successful completion of the purchase offer, VCP will retain an indirect stake of 13% in BorsodChem through its acquisition of a stake in one of the Permira group companies. Heinrich Pecina, VCP's leading partner, said that VCP, with its indirect stake and its experience in Central and Eastern European investments would help Permira to develop BorsodChem from a leading position in the region to a European-size chemicals company.

According to the public offer, VCP's indirect stake in BorsodChem will serve as a guarantee of the quality of Permira's investment. It will also allow Permira to draw on VCP's experience as a successful investor in the region. Kikkolux signed option agreements on July 6 with VCP and Firthlion, a UK-based company controlled by Medget Rahimkulov, the head and owner of Hungary's ÁÉB Bank, the biggest shareholders of chemicals company BorsodChem, together controlling 52%, to purchase all of their shares. Kikkolux said at the time it had informed the board of its potential intention to make a public takeover bid for the remaining shares of the company. Kikkolux said on September 8 it had completed due diligence at BorsodChem and it would make a public purchase offer for the company pending financing negotiations. Standard and Poor's Ratings Services said in the middle of July that it has placed its 'BB' long-term corporate credit rating on BorsodChem on negative watch, saying that Permira could finance its takeover by putting additional, material debt into the group. Permira partner Thomas Jetter said on July 12, that loans which would finance part of their buyout would become a liability of BorsodChem "in a way which would serve BorsodChem's further development." The fact that a credit rating agency puts the company on its watch list is "absolutely normal as the company is undergoing significant changes," he added. BorsodChem shares were trading at 2,850 shortly after the start of the session on Tuesday, down 2.7%. (Bloomberg, portfolio.hu)