On February 11, 2007 the BoD of Lukoil (RTS: LKOH) viewed as advisable an acquisition by the oil major's affiliate of a controlling interest in SGK TGK-8 (RTS: TGKH) that corresponds to 82.3% of the genco's charter capital. The payment is to be in Lukoil shares and cash. The oil producer's board approved the use of 23,550,000 common shares in Lukoil that were previously bought back from the open market at USD 70.15 per share.
After the acquisition of 82.3% of the genco's charter capital, by law Lukoil has to make a mandatory buyout offer to TGK-8's minority shareholders. If we calculate the buyout offer price, which doesn't include cash, the purchase price of TGK-8 by Lukoil is USD 0.001459 per share, or 4% higher than the closing price on RTS as of February 11. The amount reserved for Lukoil's acquisition of TGK-8 shares is most likely insignificant. Earlier, the media reported that only Lukoil shares are reserved to buy TGK-8 shares. If the company's minority shareholders accept the buyout offer, money is expected to be transferred only in 5-6 months. Therefore we question the advisability of presenting the shares for the buyout. We therefore see no appealing investment ideas based on this news. This development is neutral for Lukoil.
Our recommendation on TGK-8 is HOLD with a target price of USD 0.00143 per share. Our recommendation on Lukoil is BUY with a target price of USD 100.30 per share.
11.8
12.74
