Interfax reported that according to preliminary data, the shareholders of Azot (Berezniki, the Perm region) adopted a decision at the May 24 AGM to pay out hefty dividends for 2004-2006 amounting to Rub 2.5 bln ($96.48 mln). The company's retained profit stood at Rub 3.076 bln ($118.71 mln) as of the end of 2006. Thus, over 80% of retained profit was allocated to dividend payouts. However, the sale of the company was not announced. Only negotiations on the issue were reported but no precise arrangements have been reached yet.
For the record, in early 2007, one of the company's co-owners Vladimir Nelyubin said that Azot's shareholders are in talks over the sale of their 64% in the company. He named Alfa-Group, Renova and Gazprom among the potential buyers. He added that he plans to sell the shares in order to focus on development of Ecoprombank which he controls. In addition, according to Vladimir Nelyubin, Renova was a better option, since the company is prepared to make payments through Ecoprombank controlled by Nelyubin in the event of acquisition. The owners are prepared to sell the stake for $250 mln at the lowest, which corresponds to the market cap of the entire company at $390 mln. The decision was to have been adopted at the May 24 AGM. The likelihood of the sale increased after the BoD recommended that the shareholders approve the dividend payouts for three years at once (the reporting period of 2004, 2005 and 2006). However, according to the company's management, this step was not attributable to the decision of the company's shareholders to sell their stakes, since the proceeds from the dividend payouts are to be allocated to buy out Ecoprombank's additional share issue and previously, the company paid no dividends due to an unresolved situation with the blocking stake owned by Chairman of Konstruktivnoe Bureau Holding Dmitry Mazepin.
Most likely, ongoing negotiations are attributable to the fact that the parties have not yet agreed on a mutually acceptable price. In our opinion, it would approach the valuation announced by the company's owners. In the event that the transaction is executed at this price, it should push up the enterprise's stock valuations which would reach a new benchmark. Based on the company's valuation of $390 mln, the share price is $960, which implies nearly 50% upside to the current market price.
At present, our estimated target price of Azot (RTS:azop) calculated using the comparative analysis is $1,202, which corresponds to a Buy recommendation.
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