On September 24, Cyprus-based Highstat Ltd, which represents the interests of Russian businessman Alexei Mordashov, issued a press release about the purchase of 30.4% in Power Machines from Interros Holding. This acquisition was also reported to be Alexei Mordashov’s personal investment which has nothing to do with his core asset Severstal.
According to the agreement between the three largest shareholders of Power Machines (Interros holds 30.4% and UES and Siemens own 25%+1 share each), if any shareholder wishes to divest its equity position, the remaining two shareholders will be entitled to a pre-emptive buyout right. However, UES failed to exercise this right and FAS has prohibited Siemens from buying this stake, since the German company could command over 50% of the utilities turbine market, which is at odds with the national competition legislation. As a result, Siemens had to back away from its pre-emptive right and Interros stake was sold to a third-party investor.
The value of the transaction was not disclosed. However, according to Interfax, it was around $470 mln, down 8% from the market price of the stake, not including a control premium. Given that Oleg Deripaska’s business structures has eyed these shares, Interros could hold an auction and divest the equity position not only without a discount, but even at a premium, which could prop up the company’s market share price. We therefore view the news of the stake’s sale at a discount as downbeat.
According to our estimates, the estimated fair price of Power Machines is $0.299 per share, which corresponds to a Buy recommendation.
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