Minority shareholders see Kellner as anything but a Czech mate

27 Nov 2014

Bloomberg News writes that a plan by O2 Czech Republic to take a loan to help its majority shareholder – the Czech billionaire Petr Kellner’s private-equity company PPF Group – have come unstuck amid grumblings from minority stakeholders that the proposal is ‘too risky’. Under the plan, O2 Czech Republic is looking to borrow up to CZK31.8 billion (USD1.4 billion), with around CZK24.8 billion of that sum set aside as a loan to PPF Arena 2, part of the PPF Group. However, the PPF loan – which is estimated to be equivalent to 30% of the Czech telco’s market value – has been questioned by Richard Doyle, a money manager at Setanta Asset Management, which has a 0.72% stake in the company, as opening it up to unnecessary financial exposure. According to Doyle, Setanta is not alone: Brandes Investment Partners LP, another shareholder, has reportedly sent a letter to O2’s supervisory board, opposing the deal. In Doyle’s opinion: ‘In the event of failure to recover the loan, it is our view that it is O2 Czech Republic and ultimately the minority shareholders that would bear the brunt of the losses … While we would not be opposed to O2 Czech Republic taking on a reasonable amount of leverage to pay a special dividend or return on capital to all shareholders, we are resolutely against the current proposal.’

Czech Republic, O2 Czech Republic (incl. CETIN), PPF Group