LetterOne, backed by a Russian oligarch, is suing a private equity firm that manages its billions
LetterOne, the UK-based investment group backed by sanctioned Russian oligarchs, is suing a private equity firm that manages about $5 billion of its money.
The London-based investor is trying to force Pamplona Capital Management to open its books on the funds LetterOne invested in the buyout group, which is trying to cut ties with him after the large-scale invasion of Ukraine by the Russia.
LetterOne subsidiaries are “seeking to enforce their rights as sponsors to inspect the books and records” of Pamplona, according to US court documents seen by the Financial Times.
The dispute reveals how relations between the groups have deteriorated since sanctions were imposed by the UK and EU on LetterOne shareholders Mikhail Fridman, Petr Aven and German Khan.
Pamplona was founded by Alex Knaster, who ran Russia’s Alfa-Bank, the sanctioned lender of which Fridman was founder and chairman.
Following the invasion, Pamplona said it wanted to end all “direct or indirect exposure to any Russian capital” – a step that could be achieved either by selling LetterOne’s holdings or selling the companies it Pamplona had purchased. Pamplona appointed Jefferies to advise him on how to cut his ties with LetterOne.
LetterOne, which is not itself under sanctions, has also sought to separate itself from its Russian owners by freezing their stakes and dividends, and cutting them off from its operations and offices. It is now led by Lord Mervyn Davies, a former British Labor government minister.
He said his cash was 90% of Pamplona’s fund money, with a value of around $5 billion. LetterOne told the FT that in recent months Pamplona has taken “unilateral action which threatens to cause material harm” to its investments.
He accused Pamplona of “continued and unjustified refusal to share information with its biggest sponsor” at a time when Pamplona was looking to sell its investments.
LetterOne said “L1’s repeated attempts to engage with Pamplona on their proposed actions and the status of current assets have been pushed back, rejected or ignored and have resulted in LetterOne issuing a formal request for access to books and records” .
He said that because Pamplona did not comply with this request, “unfortunately, LetterOne had no choice but to resort to legal action in an attempt to resolve this issue”.
In response, Pamplona said it was “quite surprised and intrigued by LetterOne’s new demands”, but “would of course fully comply to the extent provided” in its investor agreement with LetterOne.
He said he was “aware of the request for books and records and can confirm that LetterOne has received or will soon receive substantially all material elements of this request, and communication has continued throughout”.
He added that LetterOne had “received and continues to receive the information to which they are entitled under the limited partnership agreement.”
Pamplona, which has an office on Park Lane in London, has bought companies such as Yorkshire-based pest control company Pelsis and Dutch snacks company Signature Foods.
A person familiar with the dispute said LetterOne argued that Pamplona had not been sufficiently transparent about the valuation of the portfolio, pointing out that LetterOne had not seen any memorandum provided to potential buyers of its holdings.
The case shows the level of uncertainty still caused in Western financial markets by the sanctions imposed on Russian oligarchs who own billions of dollars in assets, including businesses and homes in the UK, EU and in the USA.
In March, Holland & Barrett, the LetterOne-owned UK healthcare retailer, struggled to make a scheduled interest payment because one of its banks was struggling to process the transaction.
Additional reporting by Sujeet Indap in New York