On February 8, Interfax reported that Power Machines would call an EGM on March 17, 2008 to consider the purchase of a controlling stake in KTP from Highstat Limited Company. The amount of the deal has not been disclosed.
In our opinion the reaction to this should be neutral, and by no means affect the price of either Power Machines or KTP shares, given that Power Machines plans to buy a controlling interest in KTP was known last autumn. The deal was approved at a meeting of the UES of Russia Committee for Strategy and Reform, held on August 28, 2007. At the meeting, UES representatives on the Power Machines board were instructed to vote in favor of buying 50.3% of KTP voting shares from private investors. There were plans to spend USD 50 mn on the shares, or USD 192.18 per common share. In autumn, UES of Russia sold its blocking stake to Highstat Limited, and the new shareholder continues to implement the decisions previously made.
We estimate the fair value of Power Machines at USD 0.175 per share, with a downside of 11.6%, which corresponds to SELL recommendation. We estimate the fair value of KTP shares at USD 212.1 per share, with an upside of 7.4%, and assign HOLD recommendation to the shares.
0.553
1.6
