Alchemy and Kingstown: Open Letter to Orco's Shareholders

LONDON, May 23, 2013 /PRNewswire/ --

Dear Shareholder,

• We, Alchemy Special Opportunities and Kingstown Capital Management, believe Radovan Vitek will attempt to take control of the Board of Orco Property Group ("Orco") at the upcoming AGM on May 30^th.
• Mr. Vitek owns less than 30% of the ordinary shares in Orco but has proposed 5 new Directors to the Board which if voted for would allow him to control the Board.
• Alchemy and Kingstown have notified the Company that they intend to adjourn the AGM for 4 weeks until 27^th June to give shareholders time to register their shares in order to vote.
• We strongly recommend that shareholders register their shares by a date to be determined by the Board which will be on or around 21^st June and to VOTE AGAINST the 5 new Directors.

Background

Alchemy Special Opportunities ("Alchemy") and Kingstown Capital Management ("Kingstown") own 11.4 million shares or 10.6% and 13.5 million shares or 12.5%, respectively, of the ordinary share capital of Orco.  Both Alchemy and Kingstown are funds acting in a fiduciary capacity on behalf of Pension and other institutional funds in Europe and the United States.  In addition, since the shareholders' meeting of the 4^th of February 2013, Messrs. Ian Cash and Alex Leicester from Alchemy and Mr. Guy Shanon from Kingstown have been on the Board of Directors of Orco.

As Board Directors of Orco, the representatives of Alchemy and Kingstown have at all times acted in the best interests of Orco. We are not acting in concert with each other as each of us makes their own independent determination of how to exercise its voting rights in the company. Our interests are aligned in defending the rights of all minority shareholders and their respective stakes in Orco, which is the reason for this joint open letter to Orco shareholders.

In late 2012, Mr. Vitek, through two wholly-owned vehicles, Gamala Ltd (incorporated in Cyprus)^[1] and Crestline Ventures Corp (incorporated in the British Virgin Islands)^[2] disclosed that he had acquired 32 million shares, or 29.7% of the ordinary share capital of Orco.  This shareholding is just below the 33.33% level, at which a mandatory takeover would be triggered under Luxembourg law.  According to its Annual Report, Radovan Vitek is also the 100% owner of Czech Property Investments (CPI), a Czech-based property company.

Currently, the Board of Orco has 11 Directors, and we believe is balanced because neither a combination of the Alchemy/Kingstown Directors nor the CPI Directors can carry a vote without the support of the Independent Directors.  We believe it is vital to the interests of all shareholders to maintain this balance.

The current Board comprises:

• 2 Executive Directors: Chairman and CEO Jean-Francois Ott, Deputy CEO and CFO Nicolas Tommasini
• 3 Independent Directors: Alexis Juan, Bernard Kleiner and Guy Wallier and
• 6 Shareholder Directors: Ian Cash and Alex Leicester (from Alchemy), Guy Shanon (from Kingstown) plus Radovan Vitek, Martin Nemecek and Jiri Dedera (from CPI).

Following Bernard Kleiner's recent resignation, we believe it is imperative for the company to appoint a replacement independent director of similar standing at the AGM.

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1. As indicated in the notice of major shareholdings published by Orco on October 19th, 2012.

2. Idem.

Shareholder Issues

Board of Directors - On 29^th April, Orco convened the Annual General Meeting for 30^th May 2013.  In the convening notice, Orco nominated each of the current Directors for re-election.  However, on 7^th May, without warning or any discussion with the Board, Gamala Ltd wrote a letter to the Orco Board of Directors requesting a modification of the AGM agenda.  This amendment proposes 5 new candidates (the "Gamala Directors") to the Orco Board of Directors.  These Gamala Directors were chosen by Mr. Vitek without any consultation at the Board.

The identity of Directors is of critical importance to all shareholders as your Directors are responsible for approving the strategic goals of the company, appointing and supervising the management and making certain specific decisions such as approving any related party transactions, including any transactions between Orco and any company affiliated with any Board Director (such as CPI or its affiliates).  

Despite numerous requests, Gamala has refused to provide any explanation of the reasons for the nomination of the 5 Gamala Directors (beyond providing additional choice for shareholders) and has not provided any indication of its voting intentions at the AGM.

Both Alchemy and Kingstown are very concerned about this development.  

This is for the following reasons:

• None of the representatives of CPI, Gamala or Crestline, including the 3 Orco Board Directors from CPI, discussed this proposal with the Board before writing to the company.
• The agenda with the proposed Gamala Directors was published by Orco on 15^th May, 1 day before the record date (16^th May) for voting at the May 30^th AGM, thereby leaving shareholders no time to consider this crucial matter, nor to react to register their shares and so be eligible to vote at the AGM.
• Whilst the Gamala Directors are certainly well known to Gamala and Radovan Vitek, the Board Directors have not examined their candidacy or met any of them.

If the Gamala Directors are appointed, Radovan Vitek will take control of the Board of Orco (with 8 Directors chosen by him) and thereby take control of the company without making an offer to all shareholders.  

In light of this concern, we have requested that the AGM of 30^th May be adjourned for 4 weeks so as to allow all shareholders to register with Orco to vote at the AGM, in order to prevent such a takeover of control of the Board to happen.  

As a result, the adjourned AGM will take place on June 27^th.  All shareholders who owned shares as at 16^th May 2013, and who wish to vote at the adjourned meeting MUST register their shareholding with Orco by a date to be determined by the Board, which will be on or around 21^st June 2013.

Alchemy and Kingstown recommend that shareholders vote AGAINST the 5 Directors proposed by Gamala.

Contacts
Should any shareholder wish to discuss this then please contact:

In the UK: Buchanan Communications, +44-20-7466-5000
Richard Oldworth
 
In France LPM Strategic Communications, +33-1-44-50-40-39
Sophie Ryan/Luc Perinet
 
Alchemy
Ian Cash, icash@alchemypartners.co.uk
Alex Leicester, aleicester@alchemypartners.co.uk
Kingstown
Guy Shanon, guy@kingstowncapital.com
TJ Carter, tj@kingstowncapital.com