TA Advisory FZ LLC: Main Fortenova equityholder takes action in Netherlands court to prevent “corporate power grab” by second-largest equityholder

Struggle to protect shareholder rights escalates at Dutch-registered Fortenova Group

Open Pass, Fortenova’s second largest depositary receipts holder, intends to change Fortenova’s governing articles to seize almost complete control for itself and for the board of Fortenova’s Croatian operating company – in apparent violation of recognized good corporate governance principles and practices

Emirati businessman Mr Saif Alketbi, who is Fortenova’s biggest depositary receipts holder, applies to Amsterdam’s Enterprise Chamber to block this proposal and to protect his own interests and those of minority depositary receipts holders

Mr Alketbi, who bought at 43% stake in Fortenova in October 2022, was formerly Director General of the Office of the Crown Prince of Dubai. His investment vehicle faces being stripped of its voting rights because of its recent inclusion in EU sanctions

He calls on the support of minority depositary receipts holders in the Croatia-focused retail and food group, ahead of a crunch shareholder meeting on January 12

Also accuses the second largest depositary receipt holder Open Pass of seeking to amplify its influence at Fortenova by exploiting the sanctions environment

AMSTERDAM–(BUSINESS WIRE)–#agrokor–Mr Saif Alketbi’s investment vehicle, the principal shareholder in Dutch-registered Fortenova, has taken emergency court action in Amsterdam in order to thwart an apparent attempt by the second largest shareholder and Fortenova’s management to seize control of the food and retail group.

Mr Alketbi, a well-known Dubai entrepreneur, has been forced to take this action following unjustified attempts to neuter his legitimate acquisition in October 2022 of a stake in Fortenova, which operates mainly in Croatia.

Following what he believes to be a smear campaign in the Croatian media, Mr Alketbi’s investment vehicle SBK ART LLC (“SBK ART”) was added last month to the list of entities sanctioned by the European Union because it is allegedly under the continued influence of its previous owner, Sberbank. Mr Alketbi, who bought SBK ART from Sberbank in October, denies that the sanctioned Russian bank has any ongoing interest in or control over SBK ART.

He is also fighting what he believes to be a brazen attempt by Fortenova’s management, and the company’s second-biggest shareholder Open Pass Limited (“Open Pass”), to take advantage of the situation by changing Fortenova’s governance structure via a series of resolutions.

On January 3, 2023, Fortenova called a meeting of Fortenova’s depositary receipts holders, scheduled for January 12. The meeting’s agenda contains proposals which, if adopted, would decisively increase Open Pass’s influence, such that Open Pass could nearly always solely determine the outcome of any meeting of depositary receipt holders (Fortenova’s equity is held in the form of depositary receipts).

Such changes represent a serious breach of corporate governance conventions. They could not normally be approved given the checks and balances in Fortenova governance structure (including the mandatory tender offer mechanism in the event of one depositary receipt holder acquiring a controlling stake). However, for voting purposes Open Pass appears to be taking advantage of SBK ART’s temporary status as a sanctioned entity, in order to prevent it from using its voting rights to block the proposals.

The proposed changes also include giving the board of the Croatian operational company power to execute transactions of up to €500 million (a ten-fold increase) without seeking shareholder approval.

The changes appear to be an attack not just on Mr Alketbi’s legitimate interests as Fortenova’s largest depositary receipt holder, but also on all of Fortenova’s minority investors, of whom there are about 700 (including BNP Paribas, JP Morgan, Raiffeisenbank Austria, Banque Pictet and Cie as well as numerous smaller depositary receipts holders). If the proposed changes are adopted, all investors (except for Open Pass) will effectively be deprived of their rights to influence decision-making at the group, which was agreed upon when Agrokor (the Croatian predecessor of Fortenova) was restructured into the current Dutch legal structure.

If the proposed changes are approved at the shareholder meeting on January 12 and implemented, minority investors’ power to hold Fortenova’s management to account and to protect their investments will be severely curtailed, with potentially negative consequences for the valuation of all investors’ stakes in Fortenova other than Open Pass’s.

Via SBK ART, Mr Alketbi has via filed an application with the Enterprise Chamber in Amsterdam, which will also be heard on January 12. This seeks to block the proposed changes and to commence an investigation of Fortenova management’s conduct.

Mr Alketbi is also calling on other depositary receipt holders in Fortenova to protect their own rights in Fortenova. They can vote against the proposals (this can be done by electronic portal before 17:00 CET, on Wednesday January 11, 2023) so as to be entitled to legal remedies in respect of any resolutions taken at the January 12 shareholder meeting.

Additionally, any depositary receipt holder can join the emergency court action in Amsterdam and file (via a Dutch attorney) a statement that it supports SBK ART’s request for an inquiry and provisional measures against the proposed changes. Such statement needs to be filed on Monday 9 January 12.00 CET latest.

Mr Alketbi is advised by lawyers TA Advisory in Dubai, as well as legal counsel in other jurisdictions.

Mr Alketbi said:

“This looks like a new kind of corporate raid that distastefully takes advantage of the Ukraine conflict. Fortenova’s management and Open Pass clearly never wanted Sberbank as a shareholder and hoped to gain full control once the war started. Now it seems they have found to their disappointment that they still have to answer to a principal shareholder. They appear to be looking for ways to circumvent this obligation.

“It is disturbing to see the European Union’s sanctions regime wrongly triggered to assist what is essentially a corporate power-grab. The addition of SBK ART to the sanctions list was apparently based on a disinformation campaign that bears no relation to the facts, and we are confident of getting the sanction removed in due course. In the meantime, however, it is vital that shareholders’ rights are not diluted or removed altogether, in apparent violation of well-established corporate governance and investor protection norms.

“As an international investor in the European Union, I am seeking protection with the competent authorities from this unfair treatment and impairment of my investment.

“I am concerned that the whole value of the company is effectively being expropriated by Open Pass and Fortenova’s management, leaving Fortenova’s owners with no recourse. I am counting on the Enterprise Chamber to take a fair approach to the situation. I invite other equityholders to join the proceedings and to cast their votes at the shareholder meeting, if it proceeds.”

Background Information

The Initial Approach

Having considered expanding his investments to Europe for some time, in summer 2022 Mr Alketbi learned from Mr Miodrag Borojevic (a Croatian businessman with business dealings in the UAE) that Sberbank was looking to sell its stake in the Fortenova Group (held through a Russian special purpose vehicle, SBK ART). Sberbank favoured such a sale in light of the changed political environment and, in particular, in light of various sanctions introduced against it.

Mr Alketbi approached Sberbank and was one of those with whom Sberbank negotiated this potential sale. Concurrently, Mr Alketbi established high-level contacts at Gazprombank to discuss potential financing of the transaction. Gazprombank was chosen because it is a leading Russian bank not under EU sanctions. The bank was also in the midst of expanding its relationships with businesses in the Gulf region.

When a proposed sale to a consortium of Croatian pension funds failed in late October 2022, Sberbank decided to sell the asset to Mr Alketbi, who first proposed a lower price for the asset (€400 million). Sberbank was keen to complete the deal quickly, as it feared (albeit incorrectly) that the deadline of October 31, 2022 as imposed by the EU could be applicable.

With the date of October 31 looming and amidst practical difficulties posed by Russian currency control requirements, it was only realistically possible to structure the transaction within Russia. Mr Alketbi therefore arranged for the acquisition of a Russian SPV company, to serve as borrower of funds from Gazprombank.

The loan from Gazprombank was obtained on market terms and with conventional pledges attached providing security to the lender.

Contrary to some claims in the Croatian media, the transaction with Sberbank itself did not breach any EU sanctions. This is because the seller, the purchaser and the asset in question (a Russian company, SBK ART) are all outside of the EU and the sale and transfer also took place outside of the EU, meaning EU law does not apply. There are no restrictions under EU law (including the EU sanctions regulations) that prohibit a Russian party from selling its interests in a Russian entity to a UAE party. This position is confirmed by leading law firms engaged by Mr Alketbi.

Fortenova’s Reaction

Mr Alketbi had, already by November 3, 2022, informed Fortenova and the board of directors of its Croatian operational company (Fortenova Grupa d.d.) that he had purchased SBK ART and was therefore the ultimate holder of an approximately 43% stake in Fortenova. He also expressed his intention to meet with the management of Fortenova in the near future. Despite this, no response followed from the company.

On November 19, 2022, Mr Alketbi and SBK ART sent further communications to Fortenova, attaching the documentation required for KYC purposes under Fortenova’s transfer regulations. In the same communication Fortenova was asked to confirm that it would no longer treat SBK ART as a sanctioned entity and would no longer prevent it from exercising its rights as depositary receipt holder of Fortenova. Again, Mr Alketbi invited Fortenova to have an introductory meeting with him. On the same day, however, Mr Alketbi learned that, without any consultation with him (or with minority depositary receipt holders), Fortenova had convened a meeting of its depositary receipt holders to vote on various crucial issues, including:

The appointment of various members to the Croatian company’s board for six-year terms. None of those members was nominated by Mr Alketbi, the company’s principal equity holder, as he had not yet even had the opportunity to meet anyone from Fortenova.

The granting of carte blanche power to the Croatian company’s board to approve any transaction up to €500 million. In the circumstances this was highly concerning, since (a) such a figure was very large, given that the annual turnover of Fortenova is around €5 billion; (b) the existing powers of the Croatian company’s board only allow it to approve deals worth up to €30-50 million (depending on the transaction) and (c) the board would need no approval at all for certain acquisitions and divestments and for any loan refinancing. Also of great concern was the fact that two of the six board members of the Croatian company are Mr Pavao Vujnovac (the ultimate beneficial owner of the second biggest depositary receipt holder in Fortenova, Open Pass), and Mr Damir Spudić, a person who serves as a director in several of Mr Vujnovac’s companies.

It was also notable that the meeting on the above resolutions was convened as the third consecutive shareholder meeting. According to Fortenova’s governing documents, this meant that a lower threshold for the adoption of resolutions applied. Therefore, Open Pass could potentially ensure adoption of the resolutions through its own vote only. Since Fortenova had delayed confirming that it would accept SBK ART’s votes at this meeting, SBK ART therefore had no choice but to apply to the Dutch court, asking it to oblige Fortenova to recognise SBK ART’s vote against the relevant proposals.

In response to SBK ART’s application, Fortenova agreed to postpone the depositary receipts holders meeting until late December 2022, in order to allow the parties to go through a proper KYC process. Fortenova also sent a KYC questionnaire to SBK ART.

Mr Alketbi provided Fortenova with all the relevant information it initially required. However, these disclosures were swiftly followed by articles in the Croatian press, apparently based on leaks from Fortenova and portraying Mr Alketbi in a negative light – falsely claiming that he purchased SBK ART in breach of the EU sanctions and even alleging, without evidence, that SBK ART was still controlled by Sberbank.

In December 2022, SBK ART was included into the EU Ninth Sanctions Package on the basis of this alleged continued control by Sberbank over SBK ART. The Croatian government confirmed in the media that it had lobbied for this designation. It is concerning that normal commercial transactions in the EU are being made subject to political lobbying and manoeuvres.

Current dispute

On January 3, 2023, Fortenova again convened a meeting of shareholders. This was designated a third consecutive meeting, replacing the one cancelled in December. In addition to the two resolutions mentioned above, the agenda for this meeting contained a proposal to amend the requirements for decision-making at the meeting of depositary receipt holders, so that the company could formally disregard the votes of sanctioned depositary receipt holders and change the decision-making threshold in general.

Taking into account the generally low attendance at depositary receipt meetings by the company’s circa 700 small minority depositary receipt holders, and the proposed disfranchisement of the company’s largest equityholder, the proposed changes to voting thresholds would enable Open Pass to completely dominate resolutions at the meeting. It would also be able to dominate company decision-making in future, despite holding little more than a quarter of the company’s equity and far less than SBK ART.

In order to contest this attempt to seize control, SBK ART filed an application for investigation with the Enterprise Chamber in Amsterdam and asked for interim measures in support of this investigation. This hearing is scheduled for January 12, 2023.

About Mr Saif Alketbi

Mr Saif Jaffair Suhail Markhan Alketbi is a businessman and investor from the United Arab Emirates. Mr Alketbi studied Accounting at the University of UAE, and began his career serving the office of the Dubai royal family. He rose to the position of Director General of the Office of the Crown Prince of Dubai in 2009, a role which he performed until 2016.

Mr Alketbi’s primary focus since 2017 has been as a private investor and entrepreneur. His assets include numerous commercial, agricultural, and real estate projects in the UAE, as well as investments into various companies, including:

Xoom Delivery Services, a food delivery business and a service partner of Amazon in the UAE

Xoom Volt, the sole agent for a leading electric vehicle brand in the Middle East

D-One Properties, an investment and real estate company

ILA Holding, a market leader in the field of artificial intelligence

Mr Alketbi is also a majority partner in Novo Group, one of the largest pharmacy chains in the UAE. Another one of Mr Alketbi’s companies also owns a franchise of SmashBurger in the UAE, Qatar and Egypt.

He has also held a number of directorship positions in his home country. From 2013 to 2016 he was a member of the board of directors of an UAE based bank, Noor Bank (now merged with Dubai Islamic bank).

From 2011 to 2016, Mr Alketbi was the Chairman of a UAE offshore powerboat racing team, the Victory Team. He was also the Vice Chairman and member of the board of the Dubai Autism Center, a nonprofit dedicated to autistic children.


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Conal Walsh / Andreas Grueter / Will Matthews


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