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Ferrexpo rebel shareholders retain governance concerns

Published 06/12/2009, 11:38 AM
Updated 06/12/2009, 11:41 AM

By Julie Crust

LONDON, June 12 (Reuters) - Rebel shareholders in Ukrainian iron ore producer Ferrexpo see themselves as long-term holders of the stock, but continue to have corporate governance concerns, people close to the rebel shareholders said.

Ralkon Commercial Ltd and Fayver Properties Inc, who together hold more than 10 percent of Ferrexpo's shares, failed to oust the group's chief executive and appoint two new board members at an extraordinary general meeting on Friday.

The rebel shareholders said Ferrexpo's chief executive, Kostyantin Zhevago, is in breach of Ukrainian law which prohibits a Ukrainian member of parliament from holding any senior management position.

Zhevago, who became chief executive last October, is a Ukrainian billionaire and has been a member of parliament since 1998 as part of the Yulia Tymoshenko Bloc. He holds 51 percent of Ferrexpo's shares.

London-listed Ferrexpo said it had taken independent legal advice on the matter and is satisfied that the appointment of Zhevago is valid and complies with all relevant legislation to which the company is subject.

At the EGM, a spokesman for the rebel shareholders said they are concerned about the company's future, in particular if there is a change in the balance of power in Ukraine.

"Ukraine is a difficult political environment. It is potentially unhelpful for a company to be quite so closely associated with one political party."

The rebel shareholders can't take legal action regarding Zhevago's position on the board.

"It is down to the Ukrainian parliament to decide whether or not he has broken any rules there," said a person close to the rebel shareholders.

"It looks at the moment as if they are not going to do anything about it because he is well ensconced with the prime minister and it's one of those things that everyone has just turned a blind eye too."

The rebel shareholders made it clear that they are not critical of the group's recent share performance.

Shares in Ferrexpo have jumped 450 percent this year to around 163 pence, valuing the group at 960 million pounds ($1.6 billion), but are still short of last June's record high of 484.50 pence. (Editing by Rupert Winchester)

($1=.6059 Pound)

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