Large acquisitions take Romanian Fondul Proprietatea shares to new record high

Shares of Romanian investment fund Fondul Proprietatea (BVB ticker: FP) have passed the RON 0.9 threshold for the first time since the fund became listed on the Bucharest Stock Exchange (BVB), as local and foreign investors increased their acquisitions of the fund’s shares.

The shares were up 3.6% over the last two trading sessions – September 15-16, and had an overall gain of almost 30% in the last year.

American hedge fund Elliott, which is Fondul Proprietatea’s largest shareholder, bought 26 million shares on Monday, September 15, for EUR 5.2 million. This is Elliott’s first new acquisition in Fondul Proprietatea after almost one year. Another 30 million shares were traded on Tuesday, via a deal, at RON 0.91 per share, the total value of the deal being EUR 6.2 million.

Elliott holds a 17% stake in Fondul Proprietatea, via two investment funds, Manchester Securities and Beresford Energy Corp. Its holdings in the fund are currently valued at more than EUR 470 million, almost double what Elliott paid for the shares.

The whole fund is now valued on the Bucharest Stock Exchange at EUR 2.77 billion, which is still 18% below its net asset value (NAV), which was EUR 3.36 billion at the end of August. The discount between the current share, of RON 0.908 (on Tuesday noon), and the NAV per share, which was RON 1.2639, at the end of August, is some 28%. Franklin Templeton, Fondul Proprietatea’s manager, which starts its new mandate at the end of this month, must reduce the discount to under 15% and keep it there for the following years, while also working on increasing the fund’s NAV per share. These are the main two conditions that Elliott has put in the new management contract, which are not present in the current mandate, which ends September 30.

One year ago, when Elliott first came up with these objectives, Franklin Templeton seemed to have an almost impossible mission, as FP was trading at a 42% discount. But then Franklin Templeton came out with a buyback public offer for 600 million of FP’s own shares and with a share capital decrease of RON 0.05 per share, giving another RON 650 million – some EUR 147 million – back to the fund’s shareholders, which helped the share price go up. The manager also sold some of the fund’s important stakes, such as 15% in gas transport company Transgaz, 15% of Romanian electricity transporter Transelectrica and 5% of gas producer Romgaz.

The fund is also expected to sell a significant stake in oil and gas group OMV Petrom (SNP), in the following weeks. At the beginning of this year, Fondul Proprietatea announced that it planned to sell some of its Petrom shares and to reduce its stake in the company under 15%. The fund currently holds 19% in Petrom, which is currently valued at more than EUR 1.1 billion.

On Tuesday, Economica.net news portal wrote that Fondul Proprietatea would sell its whole stake in OMV Petrom, citing sources from the market. This would be an over EUR 1 billion transaction, the largest ever on the Romanian stock market. The speculations on this transactions sent OMV Petrom (SNP) shares down 2% on Tuesday.

Franklin Templeton made no comment on the rumors while Fondul Proprietatea didn’t make any public announcement.

Fondul Proprietatea is also preparing a secondary listing in London, which has already been on the agenda for a few years, but which was delayed due to the fund lacking all the necessary approvals from the local regulator ASF. The ASF promised to solve this issue so Fondul Proprietatea’s listing on the London Stock Exchange could happen in October, brokers estimate.

Fondul Proprietatea also has a new buyback program in the pipeline, which could be launched in the following months. In April this year, the fund’s shareholders approved a new buyback program, the fourth so far, for 991 million shares. At the current market price, the fund would have to spend some EUR 200 million for the buybacks.

Andrei Chirileasa, [email protected]

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