Aeroflot looks to means to secure shareholder support (350 words)

Published: 2/28/2001

In an interesting approach to ensuring the management's position, Aeroflot has offered its shareholders the opportunity to transfer their shares, in trust, to one of its subsidiaries - Partner of Aeroflot Fund (PAF) - administered by the company's pension Aeroflot-Garant; a structure created by Aeroflot after several of its former employees said that they didn't know what to do with their shares or their votes with the AGM approaching! The shareholder wishing to transfer, will sign an agreement putting the shares in trust for six months and offering the shareholder dividends, plus unspecified income from share management. The shareholder remains the owner of the shares and has the right to cancel the agreement at any time, since the shareholder is not obliged to transfer voting rights unless desired. Aeroflot wants to help its employees and pensioners and has no intention of consolidating shares; a view that is treated with some scepticism by industry sources, which believe the offer to be an attempt to garner votes before the forthcoming AGM. The airline attempted to gain votes last year. This year it has used considerably more subtlety and added the promise of additional income, but with the rather obvious intention of making sure the management has as much leverage as possible. Reports indicate that Aeroflot is keen to exclude outside investors from the Board of Directors. That said, the experience of the current outside director, investment manager David Hearne, appears to have been reasonably good, given the novelty of the situation for the carrier. One suspects that the outsider that Aeroflot may fear is actually Russian. Aeroflot's known shareholders are the State (51.17%), Depository Clearing Company (7.46%), and Chase Manhattan Bank (5.8%). Employees and former employees (pensioners, etc.) own approximately 20%. The current Board of Directors includes 6 State representatives, 2 Aeroflot senior managers (the General Director and his first deputy) and one representative of foreign shareholders. The next AGM, which will probably take place in June 2001, will elect new Board Directors. Consequently, the fight for seats has already begun.

Article ID: 2381