According to the RBC Daily, the Oboronprom state holding company has offered to buy 13% in the Saturn Research & Production Company. The deal would enable Oboronprom to bring its total holding in the company to a controlling interest. The price of the deal is not yet known, as the share package has not yet been valued.
The main goal pursued by Oboronprom is to build an engine production holding company. At present, a controlling stake in Saturn is in the hands of its managers, who oppose the proposed deal. In our view, the stance adopted by the management is justified, given that Saturn is one of the most successful companies in the sector, while most the companies brought together into the holding company are in a precarious financial position and do not have sizeable orders and modern technology. Participation in the holding company will make Saturn shares less attractive, as its orders and production technology could be partly redistributed in favor of other companies in the holding.
We believe that the Oboronprom offer will be rejected by the company's management. Otherwise, the company would be incorporated into an engine production holding company and control over the company would be lost. In the short term, the potential conflict of company shareholders may have negative effects on the company's shares, while its resolution would give the company every chance to increase its market value.
According to our estimates, the fair price of one common share in the Saturn Research & Production Company is USD 0.132 per share, with an upside of 61%, which corresponds to a BUY recommendation.
0.569
0.073
