Daily analyst comments
Sovcomflot plans to consolidate 100% of Novoship's commons, but not merge to a single share
23.05.08 10:07
Sovcomflot has claimed its right to buy out Novoship's common shares. In line with the company's announcement, the offer price would amount to RUB 81.82, or USD 3.45 per share, the best bid price on the RTS. We believe the news is neutral for Novoship's common shares and negative for preferred shares. According to the management's announcements, the companies are not likely to be merged to a single share in the near future. This practically deprives Novoship's prefs of the most significant upside driver.
On May 22, Sovcomflot notified Novoship about its right to buy out 3.17% of the company's shares from minority holders. This practically means the beginning of a forced minority stake buyout. The buyout price under obligatory offer is to amount RUB 81.82, or USD 3.45 per share, which is currently the best bid price on the RTS.
In late 2007, Sovcomflot acquired Novoship's state share package (67.13% of common shares) in exchange for its additional share issue in favor of the state. In early 2008, Sovcomflot, pursuant to Russian legislation, made a voluntary offer at RUB 82.82 per common share, and thus brought its stake in Novoship to 96.83% of voting shares. After consolidation of more than 95% of Novoship's commons, Sovcomflot was entitled to announce a forced minority stake buyout.
In our view, this news is neutral for Novoship's commons and negative for prefs. In line with the management's announcements, Novoship and Sovcomflot are not likely to switch to a single share in the near future. This actually deprives Novoship's preferred shares of the last possible upside driver. Novoship's prefs are currently traded with a 38% discount to the independent appraiser's valuation within the companies' merger process and with a 46% discount to our fair value. In line with our estimates, given the implementation of fleet renovation program, owners of the company's preferred shares should not expect acceptable dividend yields in the foreseeable future.