On August 6, the Federal Antimonopoly Service adopted a decision to roll back hearings in a petition filed by Alexei Mordashov's company to acquire 100% in Power Machines. The official reason is the need to submit further information. FAS spokespersons said the decision is to be adopted by the end of August. The statutory framework provides for a maximum period to consider petitions of two months. The initial petition was submitted on July 6. In addition, on July 31, an offshore company controlled by Oleg Deripaska filed an application to acquire 82% in Power Machines.
Both companies are eyeing a 30.04% stake in Power Machines owned by Interros. The latter has already voiced plans to divest its equity position. However, in line with agreements between majority shareholders they have a pre-emptive right to buy out the shares (for details, see our Daily dated July 30). Taking into account that UES will sell its stake as part of its reorganization and FAS will not likely allow Siemens to up its stake above the blocking interest in the strategically important company, a third-party investor will acquire Interros's stake.
Power Machines is the only Russian manufacturer of mid and high capacity turbines, which suggests large orders over the next 5 years, taking into account utility sector reform. Stronger demand will push up the company's headline financial indicators and its value in terms of fundamentals. In our opinion, competition around the company has just begun. We do not rule out that Renova's structures controlled by Victor Vekselberg could join the team. Competition around control over Power Machines could drive up the company's stock valuations.
At present, we have no recommendation on Power Machines shares.
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