Kryukiv Wagon buys back 23% stake

Teko-Dniprometiz, one of Kryukiv’s Wagon’s (KVBZ UK) major shareholders, which had controlled a 23.3% stake, cut its holdings in the company to below 10%, according to a filing with the Ukrainian SEC. A Kryukiv representative told us yesterday the company purchased the shares to treasury after Teko-Dneprometiz realized a put option (which it gained by voting against “significant deals” at Kryukiv’s AGM on April 12).

Roman Dmytrenko: We estimate the deal value at UAH 21.3/share or USD 70.8 mln for the stake. The company had USD 28.8 mln in net cash as of end-2011, so the transaction is likely to lead to the emergence of positive net debt on the company’s balance sheet (though this amount is not critical to the company’s solvency). By closing the deal, Kryukiv will economize on USD 3.9 mln in cash by not distributing dividends for the acquired stake. An increased in leverage slightly worsens our outlook for the company’s bottom line to USD 90.9 mln for 2012 vs. USD 94.0 previously. Nevertheless, we see the deal as value accretive for Kryukiv Wagon minority shareholders. Kryukiv has 12 months to sell the treasury shares, otherwise it will have to cancel them. As we see the latter outcome as most probable, and taking into account that the buyback was executed at a discount to our implied fair value for Kryukiv Wagon shares (12M target of USD 5.03), we are going to upgrade our price target for the stock.