CEZ shareholders (basically the National Property Fund, the 68% owner) approved several measures at Tuesday’s AGM.
First, there was a change to the articles of association, increasing the powers of the supervisory board at the expense of the board of directors. Also, the board of directors will now be appointed by the supervisory board rather than at the shareholders’ meeting. The supervisory board will now have 12 members (compared to 9 members previously).
Second, there were wide-ranging personnel changes to the supervisory board. The new board members represent government ministries and the National Property Fund, and include well-known officials (e.g., Milada Vlasakova of the Ministry of Industry) as well as low-profile names. Minority shareholders failed to get a supervisory board seat, which subsequently led Templeton Asset Management, the second largest CEZ shareholder (with a 6.3% stake), to express disappointment with the composition of the new board.
Third, the new supervisory board then appointed a new chairman of the board of directors: Jaroslav Mil, an ex-CEZ man and recently a CEO of Elektrarny Opatovice, the largest Czech independent power producer. Mil replaces Theodor Dvorak, who was not re-elected to the BoD following internal BoD disagreements about strategy and individual issues.
Fourth, just before leaving his post, CEO Dvorak announced that Vivendi of France was chosen as strategic partner for CEZ’s subsidiary CEZTel, confirming previous market rumors. Dvorak also said that Vivendi would get a 66% stake in CEZTel. The exact price will be determined after two separate audits, but Dvorak reportedly said that CEZ will demand at least CZK 4 bil. This would imply value of CEZTEL of (at least) CZK 6.06 bil., and value of CEZ’s 34% stake of CZK 2.06 bil., or CZK 3.5 per CEZ share. These calculations are based on the limited information provided thus far, and should be treated as preliminary.
Overall, news of the telecom deal with Vivendi should in theory help the stock, though the price, influenced by widespread market rumors prior to Tuesday’s announcement, may have already partially reflected this. On the other hand, the market has to digest the personnel changes, and the response here is much less predictable. Given the overall inactivity in the market these days, we do not expect any major response today.