Russian Standard might review parameters for transaction with CEDC because of accounting mistakes - Tariko
MOSCOW. June 9 (Interfax) - Russian Standard has not ruled out a revision of the parameters in a merger with Central European Distribution Corporation because of mistakes in the financial reporting for the Polish company, Russian Standard's owner and board chairman, Rustam Tariko, told journalists.
"Potentially, yes," Tariko said when journalists asked whether adjustments might be made to the transaction's parameters.
"The only thing I can say now is that this is a serious issue," he said.
"I think there will be negotiations. Now, it is hard to say. But this is a serious development," Tariko added.
He said that the mistakes in CEDC's financial results had been "unexpected" for Russian Standard" adding that "it is not so much the event itself as much as the size" (total possible corrections to CEDC's financial results).
CEDC earlier said that the new management of its Russian subsidiary, Russian Alcohol, following a audit of the company's operations, uncovered that sales revenue posted for 2010 and 2011 did not reflect total discounts presented to clients in Russia. According to a preliminary estimate, the adjustment to the results would reduce sales revenue and operational profit posted between January 1, 2010 and December 31, 2011, by around $30 million-$40 million.
Owing to this development, CEDC's management is revising the timeframe of the annual shareholder meeting, which was to take place on June 29.
"They don't have much of a chance to push this back further than a month because they should confirm their accounts by August anyway. They might move it forward by 15-30 days but no more," Tariko said, commenting on a planned rescheduling of the Polish company's annual meeting.
He added that the mistakes in CEDC's financial results would probably not cause the transaction's cancelation. "But this is a problem that needs to be resolved. The amount of money the company's declared and what's been lost isn't a lot for CEDC. At the same time, this happened and they should figure out why this occurred," he said.
"They say up to $40 million a year. $20 million for CEDC is not a big deal. But why this problem happened should be figured out...we don't like it when people say there isn't $20 million for some reason. This doesn't happen at Russian Standard and we should do everything so that this doesn't happen again," Tariko said.
It was earlier reported that Russian Standard completed the first stage of an acquisition of a stake in CEDC at the start of May. Roust Trading Ltd purchased 5,714,286 new shares in CEDC at $5.25 each worth a total of $30 million. In addition, Russian Standard Bank purchased $70 million debt bonds.
Tariko's stake in the Polish holding now comes to 16.4% (it earlier stood at 9.9%).
According to the agreement signed in April, Russian Standard structures will acquire additional shares and CEDC notes converted into ordinary shares worth $100 million, as well as buy $210 million in new bonds. CEDC will use the proceeds from its bond sales to refinance previously issued bonds with maturity in 2013.