From Mr A. Muscat

The history of private shareholding in this country is littered with instances where the interests of private minority shareholders were at best ignored and at worst trampled upon. The first instance that comes to mind is the National Bank saga. The shareholders were defrauded out of their investment by, of all possible villains, the State (that same State that was duty bound to protect their interests) and today, decades later, they are still waiting for justice to be done.

The Mid-Med privatisation exercise came next. It is now generally accepted by all and sundry that the suspension of trading in these shares for months on end was hardly the best way in which to safeguard the minority shareholders’ interests. At the time, the EU’s directive on takeover of listed companies (only introduced by the MFSA in 2006) was not in force so the British multinational was in a position to offer a paltry sum for the outstanding shares it did not hold. Thankfully, an organisation was created to safeguard the interests of the thousands of minority shareholders. At one point it managed to elect a representative to the bank’s board but this was short-lived and the board is now practically controlled by the majority shareholder, as is the case in most other listed companies.

The government’s attempts to sell its holdings in BOV also completely ignored the interests of the other shareholders. The process was a long drawn affair and the policy of complete secrecy led to an abundance of rumours, all of which made the bank’s share price much more volatile than its solid fundamentals would have suggested. At present, the government has declared that its holding is not on the market. This has stabilised matters somewhat. Its management seems to be doing a very good job and BOV has, once again, announced record profits proving that foreign ownership and management is by no means a sine qua non for more efficiency. One would contend that the best thing the State could do is to offer its holding to the public, ensuring that at least one major bank remains in Maltese hands and enabling the Maltese public to participate in the bank’s continued success. It goes without saying that the original shareholders of the bank, namely the National Bank shareholders, should be the primary beneficiaries of this exercise. Their outstanding claims could be settled by transferring an equivalent number of BOV shares from the State, with any difference being offered to the public.

The most recent privatisation to draw criticism from many quarters was the sale of Maltacom to TECOM. When the deal was announced, Maltacom’s share price surged to over Lm2 but TECOM managed to secure a majority shareholding for much less than that – at just over Lm1.50 per share. Of particular interest is the fact that this deal was announced just a couple of days before the EU takeover code was enforced by the MFSA and was thus exempt from the provisions of the said code aimed at protecting minority shareholders. The bid for Grand Harbour Marinas by Camper & Nicholson will be subject to this code and the minority shareholders will benefit considerably, unlike their counterparts in Maltacom. A lot of fuss is being made concerning Maltacom’s land in Qawra. The government has always stated that it has an agreement with TECOM to transfer this land back to the State. The mere fact that such an agreement was entered into by the parties shows just how little they cared for the minority shareholders. TECOM only controls 60 per cent of Maltacom so it is legally bound to act in the best interest of the minority shareholders. Disposing of over Lm10 million worth of land is simply not something a serious listed company would agree to before giving exhaustive attention to the interests of ALL its shareholders. A look at Maltacom’s own corporate governance rules will further confirm this.

Things would surely have been different had the stock exchange been truly independent of the State; this can only be secured if the former is privatised, as is the case in most Western and European exchanges. One can only hope that the recent reports in the press do not take much longer to materialise. Only then can minority shareholders’ rights be truly and universally upheld. This might also boost investor confidence and thus channel more public savings into the vital financing of corporate investment, generating more employment and providing wealthy investors with an alternative to the continued rape of our country’s landscape.

Ambrose J. Muscat

Msida