Daily analyst comments

Uralchem, Russia's biggest nitrogenous and phosphorous fertilizer producer, is going ahead with the consolidation of its mineral fertilizer production assets, according to a press release from the company on July 25. In accordance with Chapter XI.1 of the Federal Law ‘On Joint-Stock Companies', the holder of more than 95% of voting stock (along with the shares held by its affiliates) in an open joint stock company is entitled to maker a forced buyout offer to shareholders. Taking advantage of this provision, Uralchem offered to buy out the remaining shares in the Kirovo-Chepetsk plant and Berezniki-based Azot from their shareholders. The company has offered to pay RUB 10,108 (USD 432) per common share in the Kirovo-Chepetsk plant and RUB 22,700 (USD 971) per common share in Azot.

Over the past several months, Uralchem has managed to amass more than 95% in each company, thereby gaining the right to make a forced buyout offer to their minority shareholders.

As we predicted earlier, (see our daily report of May 15, 2008), the forced buyout prices compare with the voluntary buyout prices, slightly surpassing the company's current stock valuations (the excess over the average market prices reaches 4.7% on Kirovo-Chepets plant shares and 6% on Azot shares). During the previous voluntary buyout offers, the company paid RUB 22,700 per common share in Azot and RUB 9,208 per common share in the Kirovo-Chepetsk plant. Therefore, only the latter company's shares have risen in price.

Even though both companies' shares are slightly undervalued, their upside potential is unlikely to be realized in the face of the forced buyout offer. Minority shareholders will have to sell their shares under this offer, while shares of both companies will soon disappear from the market.