Ferrexpo announces squeeze out price for PGOK

Ferrexpo Poltava Mining (FPM, PGOK UZ), the main
Ukrainian production asset of Ukraine’s largest iron ore pellet exporter
Ferrexpo (FXPO LN), announced on May 20 that Ferrexpo AG, the owner of 99.11%
of FPM, plans to squeeze out minority shareholders at the price of UAH 34.24
(USD 1.31) per share.

Dmytro Khoroshun: The
announced price values FPM’s equity at USD 250 mln, only 1.3x its 2018 net
income of USD 193 mln. Therefore, the price is cheap for Ferrexpo, which will
have to spend only USD 2.2 mln on squeezing out 1.7 mln of minority shares. The
squeeze out will be positive for Ferrexpo because it improves corporate
governance by eliminating the bureaucratic burden and legal risks attached to
the current quasi-public status of most Ukrainian companies, including FPM.

The 1.3x P/E multiple for this FPM squeeze out is
very similar to the 1.31x multiple for the recent Metinvest squeeze out of a similar asset, Northern Iron Ore (MCap USD
394 mln, 2018 net income USD 300 mln).