Highwood Partners has taken Agros Holding to the Warsaw Registration Court following the local food and liquor exporter's failure to call a shareholders meeting after repeated requests from Highwood.

Highwood said Agros had ignored more than one request for a meeting first made on Aug. 18 to discuss the details of a February distribution agreement between Agros and majority shareholder Pernod Ricard.

Highwood is asking the court to force Agros to convene the meeting. Agros, meanwhile, was not available for comment.

"We are shocked that Agros and Pernod Ricard are mocking the law in such a public way," said Bogdan Gryca, Highwood's representative in Poland.

Highwood is also demanding the appointment of an independent expert to review the February transfer of export rights to certain vodkas to Pernod Ricard.

It is alleged that under the agreement, Agros gave Pernod Ricard the right to register abroad and profit from the sale of vodkas, such as Wyborowa and Luksusowa, whose foreign registration rights previously belonged to Agros.

The vodkas are produced by the Polmos companies, which were stripped of the right to sell their own products during the communist era. Although that right was theoretically returned in the 1970s, Agros never signed over the registrations to the Polmoses. Polmos and Agros have been battling for those rights in the courts for nearly 10 years.

"The case is in the (Registry) courts now, and it is highly probable that the courts will rule in favor of Highwood," said Bogna Sikorska, an analyst at CDM Pekao Securities. "If not, the case on breaking the minority shareholders' rights will explode."

According to Highwood, Agros is currently violating their rights as minority shareholders. "We regard the failure of Agros' management board to call the meeting requested by us as a contemptuous act," said Gordon Singer, portfolio manager at Highwood. "Polish law clearly states that if a shareholder has over 10% of a company's share capital, as we do, they have the right to call a shareholders' meeting."

The U.S.-based Highwood owns 12% of Agros, with its affiliates Edgewater Partners and Elliott Associates holding an additional 3%. The three have only 5% of the vote at shareholder meetings, compared with Pernod Ricard, which has a 37.05% stake and 74.09% of the vote.

According to CDM Pekao Securities' Sikorska, the way in which Pernod Ricard became a strategic investor in Agros was inevitably going to cause problems for minority shareholders.

"Pernod Ricard entered Agros by the back door," Sikorska said. "It bypassed the necessity to call a bid." Pernod Ricard gained a majority in the exporter in 1999 after purchasing Agros-dependent entities registered in Ireland. "And nobody seemed to be concerned by that fact," she added.

Highwood became suspicious about the distribution contract when Agros failed to honor a supervisory board resolution to divulge details about the deal to the minority shareholders' representative Zbigniew Piotrowski.

Highwood also discovered that the distribution deal was signed for 25 years, considerably more than the usual 10-year term.

For Sikorska, Pernod Ricard's behavior deserves condemnation. "The Securities and Stock Exchange Commission (KPWiG) should react," she said. "Pernod should call for a public purchase, withdraw Agros from the Warsaw Stock Exchange and only then can it act however it wants."

Justyna Wrobel
Warsaw Business Journal