The restriction was imposed to ensure that shares are sold to residents and not the mediators and large owners who own large amounts of privatization vouchers which they purchased on the secondary market.
This decision was approved by the company's Russian shareholders Gazprom and Itera Latvija and by its German owners Ruhrgas and E.ON. Energie, which earlier asked the government to sell it the stake.
Ruhrgas' spokeswoman Astrid Zimmerman said the decision was an "improvement compared to earlier ideas," although Ruhrgas would still have liked to buy the whole 3 percent stake, thereby creating a balance between Eastern and Western investors on the company's board. Without limiting the number of shares individuals can buy, the company's Western investors, who lack privatization vouchers, would have lost out, she said.
Currently Gazprom and Itera Latvija together own about 49 percent of Latvijas Gaze while Ruhrgas and E.ON.Energie together have 43 percent.
Itera Latvija head Juris Savickis said it was not vital for his company to acquire the final stake because it already holds a little over 25 percent of the shares, enabling it to block decisions it disapproves of.
"We are not worried about the continuation of the privatization process as it's already clear who's playing the decisive role," Savickis told the Latvian business daily Dienas Bizness.
"The Russian side has always and will continue to play the decisive role in Latvijas Gaze. Only the Russian side can tell whether we'll be getting the gas and for what price."
He praised the government's handling of the privatization process, saying it had ensured the state received as "much money as possible" and that the most appropriate strategic investors had been found. Ownership by Russian gas suppliers is a guarantee that Latvia won't be left without gas, he stressed.
The outgoing Privatization Agency Director General Janis Naglis criticized the government's plan, saying the restriction would not promote redemption of vouchers.
Latvian privatization vouchers, which were issued in the early 1990s to enable people to purchase their apartments and shares in state-owned companies, were due to expire this year but have been extended until Dec. 31, 2002. About 16 percent of the vouchers remain unused.
Latvijas Krajbanka broker Andrejs Martinovs said that because of the restriction on the amount of Latvijas Gaze shares purchasable by a single buyer, the shares could be distributed among some 6,000 shareholders, which would liven up the secondary market in these securities.
"The number of Latvijas Gaze shares in free circulation will increase, which will prompt growth of turnover and liquidity," he said.
Considering that Latvijas Gaze shares cost 5.88 lats ($9.37) on the stock exchange and that vouchers are now traded at 3.45 lats a piece, no more than 1.7 vouchers per share should be asked, Martinovs said.
Baltijas Tranzitu Bank's securities department deputy head Janis Neimanis welcomed the fact that a decision had finally been made. Latvijas Gaze's existing large shareholders would eagerly seek ways to purchase as many shares as possible, he said.
But Hansabanka broker Normunds Novickis said the limit on the number of vouchers redeemable by one buyer would succeed in preventing the company's large stake holders from snapping up the offering.
"Small shareholders will be able to buy shares against vouchers, an investment option they may find attractive. If any of the large shareholders is interested in these shares, they will be buy them on the stock market, by which time the price is likely to have increased," Novickis said.
The public offering could start on Dec. 20 and last until Feb. 1, 2002, Naglis predicted.
Latvijas Gaze shares are quoted on the official list of the Riga Stock Exchange. The gas company has a registered capital of 39.9 million lats. After the sell-off the Latvian state will retain ownership of two Latvijas Gaze shares.
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