William Malcolm

Shareholders File Suit Against PFNonwovens Holding

A group of almost three hundred small shareholders filed a lawsuit against PFNonwovens Holding demanding an adjustment of the share price, which, according to them, was disproportionately low during the involuntary redemption, the so-called squeeze-out. The dispute will be resolved by the Prague City Court.

In March, the majority shareholder PFNonwovens Holding paid 719.5 crowns per share to each minority shareholder based on a valuation from the consulting firm EY. On the other hand, the small shareholders submitted an opinion from Apelen Valuation, which valued the share twice, more precisely at 1,415 crowns.

“In the spirit of our May pre-litigation summons, we are filing a lawsuit against 281 shareholders with a former holding of 435,000 shares, which then accounted for about five percent of the company’s capital,” said Tomáš Hájek, an investor representing the group of small shareholders. 

“In addition to the lawsuit, we will also lodge complaints with the European supervisory authority ESMA, as we do not trust the national regulator, this is the most scandalous case of property wrongdoing in the history of Czech squeeze-outs,” added Hájek, who previously told the E15 daily that he sees a real price tag approximately 1.6 times the originally proposed price, somewhere between 1150 and 1200 crowns per share. If the court were to accept the minority shareholders, the main owner would have to pay 435 thousand shares in total over 300 million crowns. Small investors will be represented in the case by lawyer Filip Hajný.

According to Apelen Valuation, EY’s original valuation was disproportionate for several reasons. It draws attention, for example, to the too low premium for both market risk and the small market capitalization of PFNonwovens. “The disproportionate nature of the consideration paid also stems from the fact that the consideration paid per share is lower than the market price of these shares before the date of transfer of ownership to the main shareholder,” writes Hajný, a lawyer, in the pre-litigation summons.

According to Fio banka analyst Jan Raška, the proposed price was also low. “We recently withdrew the stock and we no longer cover it analytically. Even so, I can say that it is a relatively conservatively proposed price. Our valuation was at the level of 834 crowns per share, ie about 16 percent higher, “Raška assessed at the end of last year, stating that the estimated price tag was still valid at the time when the intention to crowd out shareholders was announced.

Since 2017, PFNonwovens has been the majority shareholder of PFNonwovens Holding, which is owned by the R2G fund of billionaires Oldřich Šlemr, Eduard Kučera and Pavel Baudyš. R2G Investment Director Jakub Dyba only stated that due to the previous steps of the minority shareholders, the lawsuit could be expected.

PFNonwovens manufactures nonwovens based on polypropylene and polyethylene for the hygiene, industry, construction, agriculture, healthcare and other sectors. They are used for the production of baby diapers or women’s hygiene items. The company also has limited capacity to produce protective equipment such as masks, respirators or protective suits. It has plants in South Moravia, Egypt and South Africa. In the first half of this year, it employed over seven hundred people.