Kolomoisky threatens suit to block Odesa Portside sale

Nortima LLC, a company allegedly controlled by tycoon Igor Kolomoisky, said it will treat the acquisition of a 99.6% stake in fertilizer plant Odesa Portside by any party as the purchase of a stolen asset, according to a June 15 letter from the company’s CEO published by the UNIAN news agency. In the letter, Nortima calls on all the potential investors in Odesa Portside to “exercise reasonable care” and consider Nortima’s rights to the stake.

Nortima provided the highest bid of three competitors at the privatization tender for the 99.6% stake in Odesa Portside in September 2009. Its bid of UAH 5 bln, or USD 600 mln at the exchange rate at the time, exceeded the starting price by 25%. Afterwards, Ukraine’s State Property Fund (SPF) declined to recognize Nortima as the tender winner – claiming the price was too low – and refused to sign the sale-purchase agreement. Since then, Nortima has appealed this decision in local courts, without apparent success. Nortima warned in its letter that the local court rulings will merely be a basis for a battle in the international courts. 

Recall, the SPF scheduled a new tender for 99.6% stake in Odesa Portside for July 26, with a starting price of UAH 13.2 bln (USD 526 mln at today’s exchange rate).

Alexander Paraschiy: The privatization of Odesa Portside will be the state’s biggest sale in the last five years. If it’s successful, it will serve as a strong image boost for the Ukrainian government. Also, this sale should bring the vast majority of proceeds from this year’s privatization plan of UAH 17.0 bln. So the sale will be a top priority for the government and Nortima’s statements are aimed at spoiling this event.

The potential investors in Odesa Portside will study the 2009 privatization and perform their assessment of legal risks in their due diligence process. So Nortima is unlikely to offer something new to them. However, two clauses from Nortima’s letter may play to reduce Odesa Portside’s price. First, investors may now consider the involved image risks more seriously, and secondly, they have learned that the Odesa Portside winner will also be buying a ticket for war with Kolomoisky. However, we do not think it will radically change the privatization process.