PRESS RELEASE: Minority Shareholders of Corolex (Former Allseeds Group) Express Concern Over Corporate Governance and Media Activity of Kernel Holding
Kyiv, 21 October 2010 – Cross Trade Financial Limited (Cross), the 6% shareholder in Corolex (formerly known as Allseeds Group), wishes to express its concern over the corporate governance practices which Kernel Holding, its 94% partner in Corolex, employs in managing the company as well as the majority shareholders’ recent activity in the media. "Cross has not been in any way involved in recent press articles nor has Cross made any allegation that the acquisition by Kernel of 94% is not complete or can be reversed," Ton Huls, CFO of Cross says. Corolex’ minority shareholder is not involved in any disputes that Kernel might currently have to finalize the acquisition of Corolex’ assets in Ukraine. "However, taking into account the way that Kernel handles its relationship with Cross, we are not surprised that certain issues have arisen domestically," Huls adds. "We find Kernel’s allegations of Cross attempting to artificially maximize the value of its holding in Corolex ungrounded. Corolex (then Allseeds Group) was one of the largest agricultural companies of Ukraine prior to the transaction with Kernel. Our reasonable desire is to ensure that the value of Corolex which was confirmed by Kernel’s pricing at the time of the transaction is maintained and not deliberately destructed. We are glad to see the remarkable growth of Kernel’s shares since the Corolex call option was announced in January. As minority shareholders in one of Kernel’s principal/important assets we are pleased to participate in this growth," Cross’ CFO says. "However, we find it extremely difficult to assess if Kernel-appointed directors of Corolex (the Directors) manage the company in a diligent manner. We were glad to learn from the press that the transfer of Corolex’ property into Kernel was not completed yet, and that Corolex still owns its two oilseed crushing plants as well as other assets," Huls asserts. During the past several months, Cross attempted to receive information required to assess the current standing of Corolex and the respective value of Cross’ holding in the company. However, the Directors declined to provide the minority shareholders with the information on Corolex’ restructuring already made or in process, or to give access to the company’s current articles of association, audited accounts, as well as minutes of the meetings of the board of directors and the management board. Cross has not started a court case in Cyprus yet but it has requested for an extraordinary shareholders meeting. So far no reaction from the majority shareholders nor the Directors has been received on this request. Cross is surprised by Kernel’s statement claiming it is in compliance with "customary and legal obligations towards minority shareholders" and is concerned by the poor corporate governance practices employed by the Directors it has appointed. "It has become known to us that the current management is not even keeping the public corporate records up to date. Cross consulted these public records to investigate what the new registered office of Corolex is as Directors informed Cross of change of address, without giving such new address. Results of the consultation revealed that no change of address was recorded, while the shareholders records of Corolex showed the list of old shareholders," Huls explains. In spring 2010 Cross called for negotiations to sell its 6% share to Kernel on agreeable market terms. This step was taken in appreciation of risks arising of the fact that 94% of the business was consolidated in the hands of a single holder who was also a major competitor of the former Allseeds Group. Following a series of negotiations, Kernel has made a written offer which was accepted by Cross. However, Kernel subsequently walked away from this proposal without giving any further explanations. Cross has not had any further communications with Corolex’s majority shareholder since then. As previously reported, Dragon Corporate Finance (B.V.I) Ltd. has been appointed as a financial advisor to the shareholders who own 6% of the Corolex shares, and has previously acted as exclusive adviser to the sellers of a 37.6% stake in Allseeds Group, which sale was successfully completed in February 2010. About Corolex (formerly known as Allseeds Group) Prior to the sale, Corolex was one of the world leading producers and exporters of vegetable oil. In 2007 Corolex held 10% of sunflower-seed oil’s world trade and 17% of crude sunflower oil imports into the European Union. The company was the third largest producer of crude sunflower oil in Ukraine with a 25-27% market share of sunflower oil exports from Ukraine. Corolex operated two sunflower seed crushing facilities with 565 kt/year capacity in Kirovograd and Mykolayiv regions. It also owned16 grain storage facilities with 600 kt/year capacity; 11 seed purchasing stations, a sunflower oil transshipment terminal in Mykolayiv with 1.0 Mt throughput capacity and a truck fleet. About Dragon Capital Dragon Capital is Ukraine's largest investment bank offering a full range of securities brokerage, investment banking, private equity and asset management services to institutional, corporate and private clients. Established in 2000, the company is an independent partnership controlled by management, with a minority stake held by Goldman Sachs. Dragon Capital is also a leading broker on the Ukrainian stock market accounting for approximately a third of reported transactions. The firm has completed 25 IPOs and private placements for Ukrainian companies since 2005, raising $2.0bn. Dragon’s asset management arm has approximately $0.6bn under management. Financial magazine Euromoney recognized Dragon Capital as the Best Equity House in Ukraine in 2002 and 2004-2008. Thomson Reuters Extel and Institutional Investor surveys have recognized Dragon Capital analysts as a leading Ukrainian equity research team in 2007-2009. Financial publication emeafinance named Dragon Capital the Best Broker in Ukraine in 2010. For further information, please contact: Dragon Capital Brian Best, Managing Director, Head of Investment Banking Aliona Osmolovska, Director of Marketing and Communications Tel.: +380 44 490 7120 E-mail: pr@dragon-capital.com Web: www.dragon-capital.com