OTE prepares for shareholder showdown following new stake cap

10 Dec 2007

A new law was introduced last Friday by the Greek government which limits private holdings in state firms to 20%. The law, which came into force immediately without consultation, is widely thought to be specifically aimed at blocking domestic equity firm Marfin Investment Group (MIG) from gaining management control of incumbent telco Hellenic Telecommunications Organisation (OTE). Politicians have previously expressed concern that OTE, which is 28% state-owned, would be the target of a hostile takeover. ‘This is an important statutory regulation for our country and for securing the public interest,’ Finance Minister George Alogoskoufis told reporters on Friday, whilst on the same day, OTE’s management issued a statement clarifying that the stake owned by MIG now stood at 18.46%.

MIG has repeatedly said it has no interest in gaining control of the telco, but has upped its stake from 5.3% since September, is seeking a seat on the board of directors as the second largest shareholder and has called for an EGM to force OTE to explain the details of the planned complete buyout of its mobile division Cosmote, a deal which MIG says may not be in shareholders’ interests. According to sources close to the matter, quoted by local news site reporter.gr, MIG, OTE and the government are in talks with foreign investment funds which own stakes in OTE, in preparation for the EGM, which is scheduled to take place in the first 15 days of January. According to the same sources MIG’s influence extends beyond its 18.46% equity stake in OTE, as some of MIG’s international fund shareholders (including Fidelity, Franklin, MKM, Laxey, Julius Baer) also hold shares in OTE and are expected to back the company’s attempts to change the former monopoly’s board. The total stake that MIG and its fund allies control is seen by the sources as close in size to the government’s holding. However, the government has reportedly sought support from at least 16 finance houses ahead of the EGM, whilst the total state-controlled stake including other public funds (including ATEBank and pension funds) is around a third of OTE’s equity.

Greece, Cosmote