Interfax has announced that the Uralchem chemical company bought 7.5% in Tolyattiazot from the Renova group for USD 147 million. The relevant deal was signed on June 26. Given the current quotations for Tolyattiazot shares on RTS, the share package should have been priced at around USD 204 million, meaning the purchasing price appeared to be 28% lower that the company's price on RTS. The free market price of the share package is now estimated at USD 249 million.
Despite the low price at which the share package was bought, this has not impaired Tolyatti stock valuations; on July 3, Tolyattiazot shares gained another 9% in value.
Due to the ongoing conflict, the company's shares have long remained on the sidelines of investor attention, while the majority of the other companies in the sector have boosted their market caps considerably, taking advantage of favorable price trends on the mineral fertilizer market. This is why the news that the conflict may soon be defused has not immediately affected quotations for Tolyattiazot shares. The emergence of a large publicly-traded chemical holding company among the company's shareholders (the company is to hold an IPO in the autumn) may enhance its transparency and help fully disclose its fundamental value.
To add to this, the probability is high that Uralchem will seek full control of the plant, for which it may buy out the stake of Tolyattiazot general director V. Makhlai, who owns more than 70% in the company. The price of the potential deal is likely to be on a par with the asset's fundamental value and may appear to be above the current stock valuations.
Our target price for Tolyattiazot shares (RTS: tlaz) is USD 34.9 per share, which implies a limited upside potential and corresponds to a HOLD recommendation.
0.569
0.073
