Metinvest to squeeze out Pokrovske Coal minority shareholders

Metinvest B.V. the top holding company of Ukraine’s
largest steel producer Metinvest (METINV), will squeeze out the minority shareholders
of private joint stock company Pokrovske Coal, according to an Aug. 20
announcement by the coal miner.

Metinvest B.V. and its affiliate Industrial Coal
Holding LLC (Ukraine) directly own 41.93% and 57.29% of Pokrovske Coal, respectively,
the announcement said. The minority shareholders own 0.78% or 6.61 mln shares
of Pokrovske Coal, according to Concorde Capital calculations.

Metinvest B.V. plans to acquire the minority stakes at
UAH 12.8 (USD 0.48) per share, which values Pokrovske Coal’s total equity at
USD 407 mln.

Recall, in 2018 Metinvest and its co-investors acquired stakes in Pokrovske Coal
valuing its total equity at USD 734 mln, or USD 0.87 per share.

Pokrovske Coal will increase its raw coal mining
volume by 25% yoy in 2021, according to Metinvest’s CEO Yuriy Ryzhenkov,
Interfax-Ukraine reported on June 23. In 2020, Pokrovske Coal’s output was 6.13
mmt of raw coking coal (16.8 kt per day), a 22.6% yoy rise. In 2019, Pokrovske
Coal produced 5.0 mmt of coal (13.7 kt per day), a 25.8% yoy jump.

Dmytro Khoroshun: The
squeezeout will be positive for Metinvest because it will improve corporate
governance by eliminating the bureaucratic burden and legal risks attached to
the current quasi-public status of Pokrovske Coal.

Pokrovske Coal’s squeezeout valuation is not excessive
and the amount to be spent by Metinvest on the squeezeout, USD 3.2 mln, is
affordable for Metinvest (which earned USD 752 mln of EBITDA in May and
had USD 1.2 bln of cash at the month’s end), we think.

We maintain our neutral view on METINV bonds.