Daily analyst comments
Renova gains control over New Cheboksarsk-based Khimprom
28.08.07 07:55
Sector: Soda
Renova Orgsintez has executed an option to acquire 75% in Novocheboksarsk-based Khimprom which was purchased in spring 2007 and become the company's new owner. The value of the transaction was not disclosed. However, Renova Orgsintez could buy out a stake in Khimprom based on the company's previously announced valuation in the range of $275-300 mln which is nearly 3-fold as much as Khimprom's current market cap. If the transaction was implemented at this price, it could serve as a new benchmark for market participants in determining Khimprom's fair price which could push up the company's stock valuations.
Interfax reported that Renova Orgsintez completed a transaction to acquire over 75% in Khimprom (Novocheboksarsk). The transaction was closed on August 27 and the value of the transaction was not disclosed. In the new future, the company's new shareholder will place its nominees in the enterprise's governing bodies. The company's EGM is to be held, at which the shareholders are to reelect the BoD.
For the record, in spring 2007, Renova Orgsintez received an option from Khimprom's owners which is valid until the end of 2007 to buy out 75% + 1 share in the company based on Khimprom's valuation in the $275-300 mln. At the same time, Renova Orgsintez inked a cooperation agreement with Khimprom which provides for assistance in production expansion.
Novocheboksarsk-based Khimprom is one of Russia's largest chemical enterprises which produces main organic synthesis products. As the only producer of a number of chemical products and the largest Russian hydrogen peroxide producer, Khimprom possesses a serious production base and the new asset will be useful for Renova Orgsintez which is establishing a vertically integrated chemical holding and will be able to capitalize on the synergetic effect from using the production facilities of the Novocheboksarsk-based concern, in particular, for nitrobenzene processing. Khimprom's advantages from the arrival of the new shareholder include Renova Orgsintez's corporate governance experience in the chemicals industry, possibilities of raising investments and using production capacities of chemical companies in the holding.
It's noteworthy that as of the moment of the transaction, Khimprom's market cap was slightly below $100 mln. For this reason, the new price could become a further benchmark for the company's shares.
Our fair price estimate for Khimprom (RTS: HIMC) based on comparative analysis is $0.12 which corresponds to a Sell recommendation. However, we do not rule out that news of a high price of the transaction could trigger speculative investor interest in the plant's shares.