R.G.I. International Limited

May 06, 2011 13:22 ET

R.G.I. International EGM Circular

LONDON, UNITED KINGDOM--(Marketwire - May 6, 2011) - R.G.I. International Limited (AIM:RGI)

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should take, you are recommended to obtain yourown personal financial advice immediately from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the Financial Services and Markets Act 2000 (as amended) if you are resident in the United Kingdom or, if not, from another appropriately authorised independent financial adviser.

If you sell or have sold or otherwise transferred all of your Shares in the capital of R.G.I. International Limited, you should send this circular at once to the purchaser or transferee or to the stockbroker, bank or other agent through which the sale or transfer was effected, for transmission to the purchaser or transferee. If you sell or have sold or otherwise transferred only part of your holding of Shares, you should retain this circular.

R.G.I. International Limited
(a company incorporated with limited liability under the laws of Guernsey with registered number 44527)
Recommendation of Your Board to Vote AGAINST all the Resolutions to be proposed at the Requisitioned Extraordinary General Meeting to be held on 12 May 2011, with the exception of Resolution 2

This circular should be read as a whole. Your attention is drawn to the letter from the Company's Chairman set out in this circular which contains a recommendation from the Directors that you vote AGAINSTall the Resolutions to be proposed at the Extraordinary General Meeting referred to below, with the exception of resolution 2.



(a company incorporated with limited liability under the laws of Guernsey with registered number 44527)

Registered Office: Frances House, Sir William Place, St. Peter Port, Guernsey GY1 4HQ

Jacob Kriesler (Non-Executive Chairman)
Boris Kuzinez (Founder and CEO)
Emanuel Kuzinetz
Yoram Evan
Timothy Fenwick (Non-Executive Director)
Reginald Webb (Non-Executive Director)
Mark Holdsworth (Non-Executive Director)

Dear Shareholder,

On 30 March 2011, the directors of the Company (the "Directors") received a notice from a nominee on behalf of Synergy Classic Limited ("Synergy") to requisition an Extraordinary General Meeting ("EGM") to consider resolutions for:

  • the removal from office as a Director of Jacob Kriesler, Chairman of the Board, Timothy Fenwick and Reginald Webb; and
  • the appointment as a Director of Yuri Borisenko, Mark Hanson and James Corrigan.

On 6 May 2011, the Directors received a subsequent notice, dated 5 May 2011, from the nominee of Synergy withdrawing the proposed appointment of James Corrigan as a Director.

The Resolutions are to be considered at an EGM to be held at noon on 12 May 2011 at La Frégate Hotel, Les Cotils, St Peter Port, Guernsey, GY1 1UT.

The Board of Directors (the "Board") of R.G.I. International Limited ("RGI" or the "Company") unanimously recommends shareholders of RGI ("Shareholders") to vote AGAINST all the Resolutions, with the exception of resolution 2, as it does not believe these are in the best interests of the Company and its Shareholders as a whole.


Over the course of May and July 2010, RGI issued new Shares representing 22.25 per cent. of the Company's enlarged issued share capital, for a total consideration of US$90 million, to Synergy, an investment vehicle. Petr Shura ("Mr Shura") has warranted that he is the sole controller of Synergy. Mr Shura is a former journalist and media company employee. This share issue provided additional capital to develop the Company's projects and to take advantage of new investment opportunities.

Pursuant to the terms of Synergy's investment, Mr Shura was, as Synergy's Board nominee, appointed as a non-executive Director as announced on 3 August 2010. Following his appointment, Mr Shura began to adopt increasingly aggressive tactics in seeking to impose his will on RGI, which the Board considered impinged on its efficacy and the Company's operations. Within weeks of his appointment as a Director, Mr Shura ceased, in the Board's view, cordial discussion with the Board, and directed the majority of his communications with the Board through his legal advisers. Despite Mr Shura's approach, the Board has considered, and continues to consider, those proposals made by Mr Shura that the Board deems constructive and in the best interest of the Company.

Over the course of the past six months, Mr Shura has made public allegations of improper payments and mismanagement by the Company. Mr Shura instructed Ernst & Young to undertake an inspection on his behalf of the Company's books. The Company gave Mr Shura access to the books in his capacity as a director and cooperated with the inspection. Despite repeated requests, Mr Shura has not provided the Board with Ernst & Young's report or details of its conclusions. The Company rejects all the allegations made by Mr Shura in this respect. All the relevant payments were made in accordance with the relevant directors' service agreements and were accrued, as appropriate, in the Company's financial statements in respect of the year ended 31 December 2009 (see p. 59, Note 16) and the six months ended 30 June 2010.

Synergy has also made public allegations of bribery, which the Board has taken very seriously. The Board has commissioned Skadden, Arps, Slate, Meagher & Flom ("Skadden Arps"), who are the Company's external counsel, to conduct an investigation, which remains ongoing. Another law firm is also reviewing the work undertaken and the draft report prepared by Skadden Arps. An announcement will be made by the Company as soon as the investigation and review of Skadden Arps' draft report are completed.

In October 2010, Synergy sought to recover its investment of US$99 million from RGI, while retaining substantially all of its stake in the Company, by seeking to exercise a put option granted to Synergy by the Company. Synergy claimed that RGI did not allot and issue certain Shares to Synergy by an agreed deadline. The Company rejects the purported exercise of the put option as legally invalid as the Board believes that the Shares were issued and allotted in accordance with the required deadline. The Company has, as a result, initiated High Court proceedings to defend RGI and the interests of Shareholders as a whole. In order to advance resolution of this matter, RGI has proposed to Synergy that the issue of the put option be determined by the Court as a preliminary matter. However, Synergy has rejected this approach and the matter remains unresolved.

In December 2010, Synergy requisitioned an EGM to remove certain Directors and amend the Company's Articles of Incorporation. The Board, with the exception of Mr Shura, did not support the resolutions, which would have removed key members of the Board and negatively impacted the Company's business, operations and prospects. At the EGM, a majority of the votes cast were against all of the resolutions proposed by Synergy.

In January 2011, Synergy issued legal proceedings against, amongst others, the Company and certain Directors in the Royal Court of Guernsey, this being in addition to legal proceedings initiated in the UK. The Board believes that these have been driven largely by Synergy's desire to disrupt the management of the Company. The proceedings in Guernsey have since been struck-out and Synergy has been ordered to pay RGI's legal costs.

Mr Shura was removed from the Board on 25 February 2011 because the Board considered there had been clear and persistent breaches of his obligations as a Director, which included repeated public disclosure of sensitive and confidential, commercial information by publishing information through press interviews and press releases posted on Synergy's website, including statements that the Board concluded to be false and misleading and to the detriment of RGI and its Shareholders as a whole. Mr Shura also purchased Shares on 17 February 2011 during a close period and in direct contravention of the Company's share dealing code (the "Share Dealing Code") governing Directors' trading in Shares, adopted by the Company on admission to AIM.

The Share Dealing Code requires a Director to seek permission from the Chairman of the Board at all times before trading in Shares. Contrary to a statement made by a Synergy spokesman to the Daily Telegraph, as reflected in an article published on 28 February 2011, the Directors concluded that Mr Shura was fully aware of RGI's reporting timetable when he acquired additional Shares in the Company. The Company has subsequently sought to investigate certain trading in RGI shares conducted by Vidacos Nominees Limited, which holds Synergy's Shares in RGI. Despite numerous requests, Synergy has refused to cooperate in this investigation and as such, other than the purchase made on 17 February 2011, the Company is unable to confirm or deny whether any such trading was conducted on behalf of Synergy or Mr Shura.

On 30 March 2011, Synergy requisitioned the upcoming EGM. The Board strongly believes that the Resolutions (other than resolution 2) are unnecessary and against the best interests of the Company and its Shareholders as a whole. The Board believes that the EGM itself is an unwelcome and unnecessary distraction.

On 14 April 2011, Synergy announced an offer to acquire at least a 29.9 per cent. shareholding in RGI from D.E.S. Commercial Holdings Limited ("DES"), RGI's largest Shareholder. The offer was rejected by DES but would have resulted in collective ownership of RGI by Synergy and undisclosed connected third parties increasing to over 50 per cent. had it been accepted. The offer also contained a proposal to issue an option to DES to allow DES to sell the remainder of its stake in the Company in 12 months time. Under the Articles of Incorporation of the Company, the initial acquisition would require Synergy to make an offer to all Shareholders of the Company on the same terms. However, to date, no such offer has been made. The Board believes that, in making the offer, Synergy was attempting to gain control of RGI without extending an offer to all Shareholders.

Pursuant to Synergy's investment in RGI, Synergy retains the ability to sell back the 36 million Shares acquired during the investments in the Company made in May and July 2010 for US$90 million plus 16 per cent. annual interest. This put option, subject to certain other conditions, is only exercisable in the event that RGI fails to be admitted to the Main Market of the London Stock Exchange (the "Main Market") by 30 June 2011. The Board has made significant progress towards seeking admission to the Main Market. Although the Board is fully committed to a Main Market listing, the Board believes that the process is significantly more challenging as a result of the ongoing dispute with Synergy.

Why Shareholders should vote AGAINSTthe Resolutions (other than resolution 2)

Synergy's campaign against RGI is aimed at destabilising the Company in order to gain control without making an offer to all Shareholders

As explained above, the Board believes that Synergy is attempting to gain control of RGI without making an offer to all Shareholders. The Board notes that Synergy, together with undisclosed connected third parties, proposed on 14 April 2011 to acquire a significant proportion of DES's stake in RGI. Although DES rejected this proposal, the Board believes that acceptance of the proposal by DES would have resulted in Synergy and its undisclosed connected third party holding more than 50 per cent. of RGI. As a result, Synergy and the undisclosed third party would have, in effect, taken control of RGI without extending an offer to all Shareholders and without offering Shareholders any appropriate minority protection.

The Board also notes that Mr Shura, as announced on 31 March 2011, suggested that, in return for support for certain of Synergy's demands, it would relinquish its alleged entitlement to a put option which would enable Synergy to receive $99 million from RGI while retaining substantially all of its stake in the Company. The Board rejects the purported exercise of the put option as legally invalid and believes Synergy's threats to be aimed at destabilising the Company.

RGI is successfully executing its current strategy which the Board believes will create value for all Shareholders

Contrary to Synergy's assertions, DES does not set the Company's objectives and strategy. The strategy of RGI is set by the Company's Board and is described in detail in the Company's preliminary results published on 15 April 2011. The Board believes the Company must invest on the basis of a strong business and investment case rather than speed, and therefore rejects Synergy's claims that it has been "slow" to commit available funds. The Board believes that Synergy's criticism of the Company's investment strategy is unfounded.

The Company is currently focused on progressing two projects: Tsvetnoy, a 36,522m2 department store; and Kingston, a 1,336,345m2 mid-market residential development. The Company is also seeking to secure preliminary planning and statutory approval for four other major developments (Khilkov, Victory Park, Ostozhenka and Chelsea). A further four projects (Zemlianoy, Media City, Dream and Maya) were removed from RGI's portfolio as the Company does not currently believe developing these would benefit shareholder value under prevailing market conditions and in light of the work required. RGI therefore did not attribute any value to these projects in the 2009 year-end financial report, 2010 preliminary results statement and NAV calculations. This decision to adopt a more conservative approach was largely due to the uncertain real estate market during the credit crisis and the Board's desire to safeguard the Company's future and not, as Synergy implies, a reluctance to grow the business.

The Board would like to highlight the successful "soft" opening of Tsvetnoy on 9 December 2010. Tsvetnoy has received positive reaction from consumers and has also recently been awarded a "Special Prize of the Jury" by the Russian Council of Shopping Centers. The Company currently continues to follow its vision for turning Tsvetnoy into the city centre destination of choice for contemporary fashion, style, food and dining.

At Kingston the final construction permit has been received and ground works began on Phase 1 at the beginning of March 2011, in line with previous guidance. A funding offer in the form of a bank loan has been received to finance the first phase. The Board believes that RGI can leverage the experience it has in the elite residential market and use it to create a project that can stand out from the competition. The Directors also believe that this large multi-phase development will serve to address a lack of affordable quality residential developments in and around Moscow, which are attractive to families.

The Board believes that the strategy referred to above remains appropriate. In the last 24 months of trading, the Share price has risen approximately six times in value, significantly outperforming various benchmarks, including the MSCI Russia and the FTSE 350 Real Estate indices. The Company's strong performance is evidenced by its recently announced results. The total fair value of RGI's portfolio has increased from US$597.8 million as at 31 December 2009 to US$695.7 million as at 31 December 2010. The Company also generated profit before tax of US$36.0m for 2010 (2009: loss of US$60m).

Synergy has on several occasions criticised the activities carried out by the Company's Israeli subsidiary. This subsidiary principally deals with certain administration, treasury, legal and accounting functions which it provides to the RGI group. Similar off-shore structures are typically employed by a number of companies in Russia and elsewhere in order to maximise tax efficiency. It is likely that certain functions currently performed in Israel may be transferred to other jurisdictions in due course but certain costs will continue to be incurred in Israel for the foreseeable future to ensure the Company's ongoing tax efficiency.

The Company is actively pursuing admission to the Main Market despite the hurdles created by Synergy

The Company is currently using its best endeavours to achieve admission to the Main Market as soon as practicable. It should be noted however that in the Board's opinion Synergy has issued yet more false statements in relation to RGI's commitment to pursue this listing. Admission to the Main Market is not possible until the number of the Company's Shares in public hands (the "free float") is above the minimum free float requirement of 25 per cent.

In April 2011, following the receipt of further shareholder notifications, the Company appeared to have reached a position where the free float was above 25 per cent. However, it subsequently came to light that Synergy and its related parties (including Mr Shura) had not properly disclosed details of their own shareholdings. The Company has previously on numerous occasions sought to clarify Synergy and Mr Shura's shareholding in RGI but Synergy and Mr Shura have refused to provide this information to the Company. Most recently, the Company's lawyers have written to Synergy's lawyers seeking clarification of Synergy and Mr Shura's shareholding in the Company specifically in order to establish the Company's free float position for the purpose of seeking admission to the Main Market. Synergy's lawyers have refused to respond to this request.

As a result, the Company is unable to confirm that its free float is currently above the required minimum threshold of 25 per cent. While remedial actions are being explored by the Board, this remains a key factor obstructing the Company's admission to the Main Market. RGI is committed to pursuing a Main Market listing and will continue to use its best endeavours to ensure a listing is achieved.

The Directors proposed by Synergy would replace the existing, experienced Board members with representatives with potential allegiance to Synergy

The Directors believe that the Board changes proposed in the Resolutions have been proposed with the principal purpose of transferring control to Synergy. The Board rejects the idea that the changes proposed by Synergy would improve RGI's standards of governance. Under Synergy's proposals, the number of independent non-executive Directors would be reduced and the number of Directors connected to Synergy would increase.

The Board believes that Synergy has offered no valid reasons for the removal of Timothy Fenwick, Reginald Webb and myself, whom the other Board members consider to be of high caliber. In addition, the Board believes that despite Synergy's claims to the contrary, the independence of Timothy Fenwick and Reginald Webb is beyond question. The Board believes that the proposed removal of myself represents a further example of Synergy's attempts to gain control of RGI through destabilising the Board, the effect of which will be further exacerbated by replacing me with Yuri Borisenko, a Synergy representative and senior Synergy employee. The Board has informed me of their complete support in my continued stewardship of the Company, having served successfully as Company Chairman since the IPO in 2006.

Synergy asserts that Timothy Fenwick should be removed because he has been a director during the period that Synergy alleges bribery payments to have been made, and "has taken no action or, indeed, even raised it as a concern". It is wholly misleading for Synergy to claim that Mr. Fenwick "has taken no action" in this regard. Mr. Fenwick supported the establishment of an external enquiry, being conducted by Skadden Arps, to investigate Synergy's allegations. Synergy has previously recognised Timothy Fenwick's independence, changing its stance only recently, at a time when RGI was forced to remove Mr Shura from the Board. The Board fully supports Timothy Fenwick as a highly qualified and fully independent Director. Timothy Fenwick has at all times conducted himself with the utmost integrity and has maintained a steadfast independence throughout Synergy's attack on the Company, despite numerous legal threats.

Synergy has asserted that Reginald Webb is not independent by virtue of his position as a retired partner of PricewaterhouseCoopers ("PwC"), the Company's auditor, "during the period that questionable payments were made, and thus has vested interests in avoiding scrutiny of the Company". The Company would like to highlight that as a partner of PwC, Reginald Webb was Chairman of the Supervisory Board for PwC Central and Eastern Europe and had specific responsibility for Risk, Compliance, Independence and Ethics and Business Conduct. The Company confirms that Mr. Webb had no involvement with RGI in his capacity as a partner at PwC, where his geographic focus was on Central and Eastern Europe, not specifically Russia. The Board fully supports Reginald Webb as a highly qualified and fully independent Director with 40 years experience in the accounting profession and believes Synergy's claims to be unfounded.


The Board's objective has always been to do what is in the best interests of the Company and all its Shareholders as a whole. Management's first priority remains the development of quality properties within Moscow and the surrounding areas. Management believes that the value to Shareholders, as measured by NAV per Share, will be driven by the successful development of the Company's current portfolio and the identification of new development opportunities. We have recently added a highly respected group of independent Directors. In addition, we have commissioned an investigation into Synergy's bribery allegation as described above. Finally we continue to pursue a Main Market listing. The Board believes that Synergy is waging a costly attack on the Company for its own interests and is seeking to gain control of RGI without extending an offer to all Shareholders. Whilst the Board will continue to work for the Company and Shareholders as a whole to seek resolution of the dispute with Synergy, I believe that the current Board is the right team to implement RGI's strategy and to continue the Company's success.

Details of the EGM

The EGM has been convened for noon on 12 May 2011 at the La Frégate Hotel, Les Cotils, St Peter Port, Guernsey, GY1 1UT.

Actions to be taken by Shareholders

Forms of proxy for use at the EGM or any adjournment were sent to Shareholders on 15 April 2011. Whether or not a Shareholder wishes to attend the EGM, he/she is urged to complete and return the form of proxy in accordance with the instructions set out thereon, as soon as possible but in any event by no later than noon on 10 May 2011. Completed forms of proxy should be returned to Computershare Investor Services (Jersey) Limited, c/o The Pavilions, Bridgewater Road, Bristol, BS13 8AE. The completion and return of the form of proxy will not preclude a Shareholder from attending and voting in person at the EGM if he/she so wishes.

Each of the Resolutions to be considered at the EGM requires a simple majority of votes cast to be in favour for it to be passed. In the Board's opinion, your vote AGAINST all the Resolutions, with the exception of resolution 2, would be in the interest of the Company and Shareholders as a whole.


Your Board unanimously recommends that you vote AGAINST all the Resolutions to be proposed at the EGM, with the exception of resolution 2, as it does not believe they are in the best interests of the Company and Shareholders as a whole.

Yours sincerely,

Jacob Kriesler, Chairman of RGI




To consider and, if thought fit, pass the following resolutions as ordinary resolutions:

1THAT Jacob Kriesler be removed from the office of director of the Company with immediate effect.
2THAT, in the event that Mr Jacob Kriesler is removed from the Board of Directors of the Company pursuant to the resolution proposed by Vidacos Nominees Ltd with their requisition dated the 30 March 2011, Mr Jacob Kriesler be appointed as a director of the Company with immediate effect.
3THAT Timothy Fenwick be removed from the office of director of the Company with immediate effect.
4THAT Reginald Webb be removed from the office of director of the Company with immediate effect.
5THAT Mark Hanson be appointed as a director of the Company with immediate effect.
6THAT James Corrigan be appointed as a director of the Company with immediate effect.(1)
7THAT Yuri Borisenko be appointed as a director of the Company with immediate effect.


To consider and, if thought fit, resolve (by separate ordinary resolutions) upon the appointment of further directors (to be proposed in accordance with article 79 of the articles of incorporation) and/or the removal of directors.


The following definitions apply throughout this circular unless the context required otherwise:

"Board"the board of Directors of the Company;
"Company"R.G.I. International Limited;
"D.E.S."D.E.S. Commercial Holdings Limited;
"Directors"the Directors of the Company;
"EGM"the extraordinary general meeting of the Company to be held on 12 May 2011;
"High Court"the High Court in London;
"Main Market"the main market for listed securities of the London Stock Exchange;
"Resolutions"the resolutions proposed for consideration at the EGM;
"RGI"R.G.I. International Limited;
"Share Dealing Code"the share dealing code adopted by the Company;
"Shareholder"a holder of Shares;
"Shares"the ordinary shares of the Company of £0.000000004;
"Skadden Arps"Skadden Arps Slate Meagher & Flom LLP and Affiliates; and
"Synergy"Synergy Classic Limited.

1 On 6 May 2011, the Directors received a notice, dated 5 May 2011, from the nominee of Synergy withdrawing the proposed appointment of James Corrigan as a Director. At the EGM, the Chairman does not intend to move the relevant resolution, absent any objection from the Shareholders present. Shareholders are nonetheless recommended to vote AGAINST the relevant resolution, in the event that the Chairman is required to move the relevant resolution.

Contact Information

  • Baron Phillips
    011 44 7767 444 193