Czech Cabinet yesterday approved an amendment to the Commercial Code that would restore the government’s ability to waive mandatory buyout obligations for buyers of government stakes in Czech companies. The move was a response to the new Commercial Code, effective January 1, 2001, that removed the government’s ability to waive public buyouts in case of privatization and thus risked complicating the government’s privatization effort. According to the member of Parliament who sponsored yesterday’s amendment, there should be enough support in Parliament for the amendment's passage. Post-privatization minority buyouts are therefore unlikely now, in our opinion.
Opinion on the post-privatization buyouts had been mixed. Some investors have seen it as a nice way to exit while many portfolio investors have feared (i) the impact on privatization (selling price, number of bidders), and (ii) the impact on the free float and the liquidity of the blue chips (most of which are being privatized). We do not expect any strong response to yesterday’s Cabinet decision from the market today.