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Prosperity Capital Management Issues Open Letter to Petropavlovsk Shareholders Regarding ISS Recommendations


Prosperity Capital Management (“Prosperity”), a leading Russia-focused asset manager that controls approximately 20 per cent of the outstanding share capital of Petropavlovsk PLC (“the Company”), today issued the following public letter to Petropavlovsk shareholders regarding the voting recommendations made by leading independent proxy advisor Institutional Shareholder Services (“ISS”). The overwhelming majority of institutional shareholders receive ISS’ advice.

Fellow Petropavlovsk shareholders,

We are pleased that ISS has recommended that shareholders vote in line with Prosperity’s proposals and for a strong, independent and balanced Board at Petropavlovsk’s Extraordinary General Meeting (“EGM”) to be held on 10 August. In their analysis they conclude:

  • VOTE FOR the six highly qualified director nominees nominated by Prosperity – represented by Resolutions 1-6 – “as the election of those directors provides the best possible alternative for protecting the interest of minority shareholders”;
  • VOTE AGAINST the election of Everest Alliance Limited’s (“Everest”) nominees – Resolutions 7-8 – “given the insufficient rationale provided by the proponent”; and
  • VOTE AGAINST Resolution 18, “which effectively provides for the removal with immediate effect of any of the director candidates nominated by Prosperity”.

It is clear that this independent proxy advisor recognises the risk posed to shareholders by Everest’s proposals and believes that the Company and its shareholders deserve a strong, independent, and balanced Board that can create sustainable value.

We are pleased with the opinions that ISS has shared, which align with our view that:

  • “From a minority shareholder perspective, the main concern at present is the possibility that a small group of shareholders, including the Company's competitor and largest shareholder UGC, Everest and the parties allegedly acting in concert with them, takes control of the Company without paying a control premium or negotiating a transaction that is in the best interest of all shareholders.”
  • “In the context of the current situation and based on the available information at the time of publication of this report, and considering that five of the six PCM [Prosperity] nominees are independent and four of the six are among those unanimously recommended for (re)election by the Board for the 2020 AGM, we believe that the election of PCM [Prosperity] nominated directors provides the best possible alternative for protecting the interest of minority shareholders.”
  • “This [electing the Prosperity nominees] will ensure a well-balanced and majority independent board is in place and provide the possibility for an optimal resolution of the shareholder stand-off.”

It is clear that ISS has seen Everest’s proposals for what they really are: A vehicle to effect a creeping takeover of the Company. In an underhand manner, a group of concert parties led by JSC Uzhuralzoloto Group of Companies (“UGC”) and Everest indicated support for the existing Board, management and governance structure (through their own elected Board nominees/representatives) and then voted the exact opposite way at the Company’s 30 June 2020 Annual General Meeting (“AGM”), taking advantage of most shareholders being unaware and as a result successfully removed most of the Board and aligned it to their interests. This group of concert parties will collectively control not less than 35% and likely above 40% of Petropavlovsk’s outstanding shares at the EGM (subject to bond conversion and other factors).

Whilst the concert parties have not formally stated their strategic intentions for Petropavlovsk, it is obvious from their actions, relationships, public remarks and other available information that they intend to take control of the Board and management of our Company and then execute a merger or other combination between Petropavlovsk and UGC without paying a control premium to Petropavlovsk’s shareholders. We have formalised our objection to this with the Takeover Panel.

The concerted parties’ actions prior to and at the Company’s AGM make this clear:

  1. Prior to the AGM, UGC board representative Maxim Kharin was amongst the directors of Petropavlovsk’s Board to unanimously approve the AGM agenda, including the reelection of all incumbent directors.
  2. UGC subsequently reneged on its Board representative’s commitment so as to remove seven existing directors – including more senior directors and the Company’s co-founder and CEO, under whose combined leadership the Company has created tremendous value over recent years, achieving sales and production growth while reducing net debt and improving cash flow.
  3. This enabled the concert parties to install their own hand-picked representatives and one directly affiliated nominee, creating a sympathetic Board designed to give control of the Company to them and at the same time putting Petropavlovsk’s Premium Listing status and independence at risk.

Following these dramatic and unfortunate events, we felt that it was our responsibility as a significant, long-term, minority shareholder owning approximately 20 per cent of Petropovlavsk’s common stock to correct the situation to ensure that Petropavlovsk retains an independent Board that works in the best interests of all shareholders. We therefore requisitioned the EGM and nominated a slate of six professional and independent candidates to be added to the four directors elected at the AGM. We believe that the small board formed at the AGM lacked independence and requires strengthening and balance in keeping with best practice corporate governance in the UK.

Subsequently, Everest has not only proposed the election of two additional hand-picked directors at the EGM, it has also cynically proposed Resolution 18.

If passed, this resolution would immediately remove all of the director nominees that we have proposed if they are elected at the EGM. Resolution 18 is plainly dangerous for other shareholders and perversely designed to obfuscate and frustrate the will of the majority of shareholders by creating an almost unimaginable scenario in which one could vote for appointment of a director and their removal in the same meeting. This is further evidence of Everest’s efforts to subordinate other shareholders. The Interim Board and ISS have strongly cautioned shareholders about the deceptive implications of Resolution 18, and it is critical that shareholders vote AGAINST it at the EGM in addition to voting AGAINST Resolutions 7 and 8 proposing the election of Everest’s nominees.

We believe that the transparency, independence and experience of Prosperity’s nominees stands in stark contrast to Everest’s nominees, whom ISS have recommended that shareholders vote against. We have good reason to believe that, at a minimum, at least one of Everest’s candidates has direct business links to UGC. Nominee Ivan Kulakov and UGC founder and President Konstantin Strukov have a long-term friendship and have recently been engaged in certain business agreements recently. Additionally, in contrast to our nominees’ commitment to transparency, Everest has been unwilling to submit its candidates to the Professional Investor Association’s vetting process.

It is critical that you follow our appeal and ISS recommendations and VOTE FOR Resolutions 1 - 6 and VOTE AGAINST Resolutions 7, 8 and 18 at the EGM. As ISS has highlighted, this vote is about preserving the independence of our Company, maintaining a strong and professional Board that is able to resist any inappropriate pressure to sell the company on the cheap and that will maximise value for all shareholders. The ongoing development of the Company and any bid for the Company should be considered independently, in the interests of all shareholders and certainly not by a small board aligned to a potential suitor.

For more information, including instructions on how to vote your shares, please visit

The choice is ours.


Prosperity Capital Management


About Prosperity Capital Management

Founded in 1996, Prosperity Capital Management is a leading Russia-focused asset manager controlling assets of around USD 4 billion on behalf of pension funds, endowments, foundations, family offices, sovereign wealth funds and high net worth individuals from across Europe, North America, Middle East and Australasia. The firm employs a long-term, fundamental value, active and engaged shareholder approach to access the public equity investment opportunity amongst Russian and Former Soviet Union companies.

Contact information

Investor contact
Nicholas Laugier

Nina Atkinson

Media contact
Kepler Communications
Charlotte Balbirnie
+44 7989 528421

Michael Henson
+44 7551 720441

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