October 22, 2015 [OPIS] - Vitol's Cypriot subsidiary Euromin Holdings has opened a mandatory buyout offer for remaining shares in Latvian Ventspils Nafta (VN Group) after acquiring a majority, the Riga-based logistics company said this week.
Euromin raised its stake in the terminal, pipeline and shipping business’ voting capital to 94.15% from formerly 43.25%, obliging it to make a buyout offer for the remainder. Latvian rules foresee a trigger from “50% or more.”
By stepping up its involvement in Latvian midstream operations, Vitol is defying the gloomy prospect of fading transit flows through the Baltic country as Russia funnels more and more export trade through its own growing seaports on the Baltic Sea shore.
In the first nine months of 2015, VN Group’s 66%-owned transportation division LatRosTrans (LRT) shipped 3.8 million mt through its pipeline system stretching from the Latvian-Belarussian border to Ventspils on the Baltic coast. This was 18% less than a year ago, according to company figures.
The terminal division, operated by 51%-held Ventspils Nafta Terminals, saw nine-month transhipment volumes slide 12.2% on-year to 7.4 million mt as oil product arrivals from Russia through the LRT system slowed. This includes 1.5 million mt in the third quarter, when flows through LRT amounted to 864,000 mt.
The four-berth terminal’s 105 tanks have a storage capacity of nearly 1.2 million cbm, according to co-owner VTTI (49% via Eurotank) which is due to become a full subsidiary of Vitol.
“The geopolitical situation is very complicated at the moment,” Ventspils Nafta said in its quarterly trade update last week, defining factors that could help maintain oil flows through Latvia: “Firstly, companies in the transit sector as such need to be as effective and competitive as possible. And the second direction is a focused government support policy, creating favourable business conditions for the transit sector.”
Nasdaq OMX Riga-listed VN Group further holds 49.94% in the Latvian Shipping Company that runs a handy-size and medium-range tanker fleet.
The buyout offer of 4.56 euros ($5.2) per share, open through Nov. 17, would give the existing holding — comprising 98.37 million shares — a value of nearly 449 million euros ($510 million).
However, Euromin Holdings disputes the valuation of Ventspils Nafta-owned assets by the financial authority, the Financial and Capital Market Commission (FCMC), as “incorrect and contrary to internationally recognised accounting standards (IFRS) and EU Directive 2004/25/EC.”
“Euromin is obliged to make the mandatory offer, but cannot do so other than on the basis of a share price approved by FCMC, based on its calculation,” according to a statement released through Ventspils Nafta. “[T]his repeated and conditional offer has therefore been made under pressure,” given the risk “that Euromin’s legitimate shareholder rights would otherwise be suspended.”
Euromin plans to seek a legal review at the Latvian administrative courts “and, if required, the European Court of Justice,” as per Ventspils Nafta information.
