Ukrros buys back its shares at market price

Ukrros (UROS UK) shareholders, at an EGM last week, approved of a buyback program of 21.16% of outstanding shares at UAH 0.97 each, Interfax said yesterday. The deadline for buyback applications is November 20; deadline for settlement is November 30, 2012. The deal price corresponds to the market price of Ukrros shares prior to the EGM announcement and is a 78% discount to the implied price that Kernel (KER PW) paid for a 71% stake in the company in March 2011.

Alexander Paraschiy: There is no positive surprise in this news – the buyback price is at the bottom of our expected range (refer to our news of August 13) – which suggests Kernel did not treat Ukrros minority shareholders on par with the company’s former large stakeholder. Though, we see a clear trade-off between “fairly treatment” of Ukrros minorities and “delivering value” for Kernel shareholders. From Kernel’s point of view, the decreased buyback price compared to the 71% stake purchase makes sense, as 1.5 years ago Ukrros was treated as a sugar production asset. Now that sugar prices are lower, Ukrros’ farming efficiency remains weak and Kernel significantly downscaled its view on the sugar segment (it plans to decrease sugar output next season), Ukrros delivers much less value to its new parent than it seemed to do in March 2011.