Kernel to cancel treasury shares, increasing Verevsky's stake to 94.37%

MOSCOW. March 26 (Interfax) - Kernel, one of Ukraine's largest agribusiness group, will reduce its share capital by cancelling 2.2% or 6.602 million shares held in treasury by its subsidiary Etrecom Investments Limited.

Shareholders approved this decision at an extraordinary general meeting on March 21, with about 278.122 million votes in favour, 588,726 against and 200,600 abstentions, Ukrainian media reported, citing an exchange filing by the group.

"This decision is part of an effort to streamline the group ownership structure pertaining to the subsidiaries of Kernel Holding S.A., ensuring alignment with regulatory standards and optimizing operational efficiency," the statement said.

Kernel recalled that these shares were acquired in a buyback program approved at a shareholder meeting in August 2021, which also decided that the repurchased shares could be "subsequently cancelled, retained, sold or utilized for any lawful purposes as deemed advisable by the board of directors."

"Given that the board of directors foresees no practical reason to retain, sell, or otherwise utilize the Treasury Shares in the near future, it is proposed that these shares be cancelled," the company said.

As a result, the number of shares will decrease to about 293.429 million and share capital will drop to $7.748 million.

According to information on Kernel's website, the stake in the company held by founder and board chairman Andrei Verevsky through his company Namsen Limited will increase to 94.37% from 92.30% after the treasury shares are cancelled.

Kernel minority shareholders speculated earlier that one of the goals of cancelling the shares is for Verevsky to increase his stake to 95%, which would enable him to announce a mandatory buyback of shares.

Verevsky's Namsen increased its stake in the group from 41.3% to 74.05% in a buyback offer announced in March 2023 with a view to subsequently delisting Kernel from the Warsaw exchange. As a result of an issue of 216 million new shares initiated by Verevsky in August 2023, Namsen acquired another 212.6 million shares. Kernel said at the time that the new shares are held in registered form and will not be allowed to trade on any stock exchange.

In November 2023, Namsen acquired another 1.2 million shares or 0.4%, increasing Verevsky's stake to 94.37% of voting shares taking into account treasury stock.

Minority shareholders announced plans to dispute the new share issue with the Luxembourg regulator and in the courts. Private investor Pavel Boiko said the group of investors was working with law firm Brucher Thieltgen&Partners. He said more than 1,000 investors from around the world, from the smallest to ones with 1 million shares, had joined forces.

However, on February 23 Boiko said that a decision had been made to file a lawsuit on behalf of eight shareholders, as the lawyers need to identify each plaintiff and carry out compliance. But any agreement and settlement will apply to all who financially participated in the legal proceedings, he said.

The group of eight minority shareholders with a combined 0.4% of Kernel shares appealed to a court in Luxembourg to challenge the board of directors' decision to delist the company and subsequent decisions on the additional share placement and Namsen's right to vote with shares from the new issue. The first preliminary hearing in one of the lawsuits was scheduled for March 18 but then rescheduled for the end of April.

In the lawsuit that disputes the board decision of April 13, 2023 to delist and buy back shares, the plaintiffs allege that the directors had a conflict of interests and lacked the necessary authority. As an alternative, the minority shareholders propose to appoint an expert to assess the fair price of the tender offer for shares Namsen announced on March 30, and assess the impact the boards' decisions, including regarding the delisting, had on the company's corporate interests.

The Polish regulator has suspended proceedings in the delisting case until the court until Luxembourg issues a verdict.

Kernel's shares on the Warsaw Stock Exchange are currently trading at PLN9.06 ($2.28 at the current exchange rate).

Kernel is one of Ukraine's largest producers and exporters of sunflower oil. The group also cultivates and sells other agricultural products.

Kernel closed the 2023 financial year with a net profit of $299 million, compared to a net loss of $41 million a year earlier. Revenue fell 35% to $3.455 billion, while EBITDA rose 150% to $544 million.