Romanian investment fund Fondul Proprietatea (BVB ticker: FP) will sell a 3.78% stake in local gas producer Romgaz Medias (SNG), via an accelerated book building offer. Franklin Templeton, the fund’s manager, has decided to sell the Romgaz stake as Fondul Proprietatea needs cash to finance its ongoing share buyback program.

The 14.6 million Romgaz shares that the fund wants to sell have a market value of close to EUR 100 million. The fund will likely have to take a discount on the market price of RON 30.45 per share at which Romgaz closed the trading session on Monday, October 19. Romgaz shares went down 3.5% on Tuesday morning, after Fondul Proprietatea’s announcement.

The gas producer is also listed on the London Stock Exchange, via global depository receipts (GDRs), as is Fondul Proprietatea.

Goldman Sachs International will act as the Global Coordinator and a Joint Bookrunner in the transaction, Czech brokerage firm Wood & Company as a Joint Bookrunner, and local lender BCR as the Lead Manager. After this deal, Fondul Proprietatea will reduce its stake in Romgaz from 10% to some 6.2%.

Fondul Proprietatea also announced it planned to sell a significant stake in oil & gas producer OMV Petrom (SNP), as soon as the company got listed on the London Stock Exchange. OMV Petrom’s shareholders have approved the secondary listing in London, but are waiting for a better moment to move forward, as the low oil price has erased a quarter of the company’s value in the past 12 months. Fondul Proprietatea owns 19% of OMV Petrom, which makes 30% of its portfolio.

Romgaz’ shares have also lost almost 10% of their value in the past year and are currently trading close to all-time lows. However, Fondul Proprietatea doesn’t have much of choice, as more than half of its portfolio (54%) was made of unlisted state-controlled companies, while OMV Petrom and Romgaz represented about 40% of its net asset value (NAV), which stood at EUR 2.72 billion, as of September 30, 2015.

Fondul Proprietatea had to borrow some RON 500 million (EUR 112 million) from Citibank in May this year to finance its buyback programs. The ongoing share repurchase scheme includes some 8% of the fund’s shares and would require some EUR 160 million to complete (considering the current market price of RON 0.789 per share). The fund may try to accelerate it by launching another buyback offer at a higher price, later this year.

Foreign institutional investors currently hold more than 55% of Fondul Proprietatea’s shares and are looking to cash in their profits. American hedge fund Elliott is the biggest shareholder, with an 18.8% stake.

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Andrei Chirileasa, andrei@romania-insider.com