Metinvest offers Pokrovske Coal shareholders to sell their shares

Shareholders of private joint stock company Pokrovske
Coal on April 2 were offered to sell their stakes at UAH 12.8 (USD 0.46) per
share to Metinvest B.V., the top holding company of Metinvest (METINV),
Ukraine’s largest steelmaker.

 

According to an April 5 regulatory filing by Pokrovske
Coal, the sell-out offer per-share price was approved by the coking coal
miner’s board on March 31 as the higher of two values: an appraised value (UAH
12.1) and the highest direct purchase price by Metinvest B.V. during the last
12 months (UAH 12.8). Metinvest B.V. owns 67.3% of Pokrovske Coal, including a
9.99% direct ownership stake, according to the filing.

 

Recall, in March Metinvest disclosed that it had increased
its effective interest in the so-called Pokrovske coal business, which includes
PrJSC Pokrovske Coal, to a controlling stake. The only
other significant asset of Pokrovske coal business is Svyato-Varvarynska
Enrichment Plant LLC, in which PrJSC Pokrovske Coal owns 55%.

 

The total value of Pokrovske Coal’s equity (848.5 mln
shares outstanding) amounts to USD 389 mln at the sell-out offer price,
according to Concorde Capital calculations.

 

Pokrovske coal business is valued at USD 747 mln,
according to Concorde Capital calculations that use the amount, USD 185 mln,
Metinvest paid in 2018 for a 24.77% stake (the revised data from Metinvest’s
2019 financial statements).

 

Pokrovske coal business generated USD 144 mln in
EBITDA for 2020 (2019: USD 259 mln), according to managerial accounting data disclosed by
Metinvest in March.

 

PrJSC Pokrovske Coal generated about USD 120 mln in
EBITDA for 2019 (2018: USD 48 mln), according to Concorde Capital calculations.

 

Dmytro Khoroshun: Metinvest
might spend up to USD 7.2 mln on about 15.8 mln of Pokrovske Coal shares (1.9%
of the total shares outstanding) owned by minority shareholders not associated
with the holding as a result of this offer, we estimate.

 

The remaining 30.9% stake in Pokrovske Coal belongs to
Metinvest’s co-investors in the Pokrovske coal business. The co-investors will
likely not offer this stake to Metinvest under this sell-out offer, which
values this stake at USD 120 mln.

 

Rather, the co-investors, which might still own 49.99%
in Pokrovske coal business, might sell this stake in the collection of assets
to Metinvest in 2022, when the holding plans to exercise this part of its option,
at around USD 373 mln, we estimate.

 

We maintain our neutral view on METINV bonds.