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ENRC Reshuffle May Fail to Reverse Losses on Board Conflict

Eurasian Natural Resources Corp., which has lost almost half its value since its chief executive officer resigned in February, may fail to reverse losses with a board reshuffle as analysts seek clarity on who is in control.

ENRC, a ferroalloys producer in Kazakhstan, announced the result of a three-month review of its management yesterday after a conflict prompted CEO Felix Vulis to resign and shareholders voted against rehiring independent directors Richard Sykes and Kenneth Olisa. The management will include six independent directors on a board of 11, handing them a majority.

“We are attracted by the commodity mix, but expect the share to trade at a discount until visibility improves on strategy, growth, governance,” Ben Davis and Myles Allsop, analysts in London at UBS AG, wrote in a report today. There is a “risk of disappointment on the degree of change,” they said.

Vulis, who stayed on as CEO after resigning to allow the company to seek a replacement, will now remain in his position, while Johannes Sittard, a former CEO, will stay as chairman.

ENRC slid 0.5 percent to 576.5 pence at the 4:30 p.m. close in London, after falling 30 percent since the review began June 8 and 46 percent since Vulis offered his resignation on Feb. 4.

“The performance of the company was never affected by these issues,” Sittard said in e-mailed response to questions today. “This is a strong, independent and unified board.”

‘Shareholder Value’

ENRC founders Alexander Machkevitch, Alijan Ibragimov and Patokh Chodiev own 14.6 percent of the London-based company, which makes ferroalloys, iron ore, aluminum and power in Kazakhstan. Machkevitch applied to the U.K. Listing Authority for clearance to be chairman, the Observer reported Sept. 11.

The company will seek to maximize “shareholder value” after the review, newly appointed senior independent director Mehmet Dalman said in the e-mail. The company wasn’t studying selecting Machkevitch as chairman, Dalman said yesterday.

“We question whether all that much has really changed,” Liberum Capital Ltd. wrote in a note today. “To our mind a number of questions remain and confusion surrounding who ultimately drives the company is likely to linger.”

A row between independent directors and major shareholders began August 2009 as Chairman David Cooksey was replaced by Sittard, then CEO, and Vulis was hired, Olisa said on June 10.

“We feel problems arose in the first instance because the oligarchs had no direct representative at board level,” Liberum wrote. “Like it or like it not, we feel the appointment of Machkevitch as chairman, together with a majority independent board would have put to bed the issue once and for all.”

Glencore Plan?

Glencore International Plc, the commodities trader reported to have studied a bid, may still be interested, Liberum said.

London’s Sunday Times reported June 12 that Glencore was considering a 12 billion-pound ($19 billion) takeover and had held talks with shareholders. Glencore said in a June 15 statement it was “not in active consideration of an offer.”

The U.K. Takeover Panel barred Glencore from bidding for ENRC for six months following the company’s announcement.

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