Pacific Andes likely to settle with Russian Government

09.01.2013

Fishing conglomerate Pacific Andes is likely to settle its dispute with the Russian government, Russian competition lawyers have told this news service. Pacific Andes is the parent of Singapore-listed industrial fishing company China Fishery Group. Russia’s Foreign Investment Commission recently ordered the Chinese group, Pacific Andes, to sell its fishing assets in Russia, as they had been acquired illegally.

FAS says permission was not given for fleet purchase

According to Russia’s Federal Antimonopoly Service (FAS), the Russian Government never gave Pacific Andes permission to acquire its fishing fleet in the country, as the fleet was deemed a strategic asset. It is not clear when Pacific Andes will be required to leave Russia, as the situation is unique, said Nikolay Voznesenskiy, head of the Competition and Antitrust Practice at Goltsblat BLP, the Russian practice of London-based law firm BLP.

He speculated that it might be required to sell its Russian assets within three months after receiving the notification on the issue.

A second local antitrust lawyer added that Pacific Andes is likely to settle with the Russian Government, reasoning that the country's antitrust authorities had given the company little choice in the matter.

However, Voznesenskiy suggested there would be no official settlement notice because, as in the case of the Vimpelcom/ Telenor strategic investment dispute, the parties would be willing to settle amicably. The Foreign Investment Commission has offered Pacific Andes the option of joining with Russian fish-processing companies, so Pacific Andes is likely to be interested in preserving good relations with the Russian government, Voznesenskiy said.

Asked if Pacific Andes can challenge the FAS decision on the basis that it bought its assets before the Strategic Investment Law came into force in 2008, Voznesenskiy said there could be some complications that may prevent the company from doing so. For example, Pacific Andes might have made other investments in Russia after 2008. In any case, in order to challenge the FAS decision, Pacific Andes must request and receive an official notice from the government watchdog for the industry, and it is likely to settle before trying to get such a note, he added.

Russian Sea Group seen as likely buyer for Pacific Andes

Russian Sea Group has been reported as being the most likely buyer of Pacific Andes’ Russian fleet. A spokesperson for Russian Sea confirmed to PARR that “Russian Sea-Dobyha” is currently conducting negotiations with Interros and Turnif, two companies which belong to Pacific Andes.

However, the spokesperson also emphasised that Russian Sea-Dobyha is not technically part of the Russian Sea Group, without commenting further on the matter. In November 2012, Russkaya Rybnaya Kompaniya, a part of Russian Sea Group, was allowed by the Government Commission on Control over Foreign Investments in the Russian Federation to acquire Arkhangelsk Trawl Fleet (ATF), indicating that Russian Sea is interested in expanding in the Russian fish market.

A sector analyst at Russian investment group Aton said that Russian Sea might find it challenging to buy all of Pacific Andes’ Russian assets, as Russian Sea has a limited cash pile. According to Russian Sea’s latest financial results, as of 30 June 2012, their cash and cash equivalents amounted to RUB 494.74m (about USD 15m). The group had debt of RUB 3.84bn (USD 116.2m), out of which near-term debt was RUB 3.5bn (USD 105.5m).

For the period up to 30 June 2012, the company reported a net loss of RUB 290.6m (USD 8.8m). The sector analyst suggested that Russian Sea might conduct an additional share issue of shares in order to buy the Pacific Andes assets.

Some non-fisheries companies or important conglomerates such as AFK Sistema could be interested in Russian Sea’s assets, the Aton analyst speculated, adding that the fisheries business might fit thee portfolio of AFK Sistema, which is currently moving into infrastructure.

However, an AFK Sistema spokesperson said the company has never had such plans. A spokesperson for FAS declined to comment on Pacific Andes situation because the issue is currently being supervised by the Government of the Russian Federation. Spokespeople for the Russian Government and the Singapore office of Pacific Andes declined to comment on the situation.

by Natalia Lapotko in Moscow and Olga Stahl in London with additional reporting by Oliver Adelman in London

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