The Uralchem holding company said in a press release that it had consolidated more than 95% of Azot shares and over 95% of voting stock in Kirov-Chepets chemical plant. In accordance with Article 84.4 of the Federal Law ‘On Joint-Stock Companies', Uralchem intends to buy out the remaining shares in both companies from their minority shareholders to bring its total holdings in the companies to 100% of the share capital and voting stock, respectively.
According to previous reports, in March 2008 Uralchem offered to buy out minority shareholders in Azot (Berezniki, Perm territory) and Kirov-Chepets chemical plant at a respective RUB 22,700 (USD 957) and RUB 9,208 (USD 388). The validity period of the latter buyout offer expired on May 13.
Through the use of voluntary buyout offers, Uralcham has managed to mass over 95% of shares in both companies, and is now in a position to make a forced buyout offer. If the forced buyout offer goes ahead, the prices will likely be comparable to those used under the voluntary buyout offers, which, in turn, were in line with the companies' current stock valuations.
In our opinion, Uralchem will most likely buy out the shares as part of its reorganization program with the goal of holding an IPO, which may take place at the year-end.
Although both companies' shares have a large upside potential, it is unlikely to be realized given the high likelihood that the forced buyout offer will go ahead. Investors are therefore recommended to abstain from buying into Azot (RTS: azop) and Kirov-Chepets chemical plant (RTS: kchk). Current shareholders are advised to sell their shares on the market.
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