According to the company’s press release, Baltika Brewery’s BoD has convened an EGM to adopt a decision about decreasing the charter capital via buyback of part of shares and their subsequent redemption. The BoD plans to buy back up to 9,894,230 common shares, which corresponds to 6.125% of the charter capital and also 1,225,114 preferred shares, which corresponds to 9.05% of the brewery’s charter capital.
In addition, the buyback price is set at Rub 1,300 ($50.64) per common share and Rub 880 ($31.16) per preferred share, which exceeds the company’s current valuations on MICEX by nearly 10%.
We are not in a position to speak of a raise in the stake of Baltika’s core shareholder Baltic Beverages Holding which owns 85.6% in the company. According to the press release, BBH has announced its intention to participate in the share buyback and its stake in the company will not rise.
The share buyback targets raising returns per share which will strengthen the investment appeal of Baltika shares and also optimization of capital structure. However, the buyback procedure is often used as a possible means of payment to a majority shareholder, taking into account that the buyback price is currently higher than the company’s market valuations.
At present, we have no formal recommendation on Baltika Brewery shares. However, we project speculative demand for the company’s shares in the short term.
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