Odesa Portside Privatization Terms Announced

Yesterday Ukraine’s Cabinet of Ministers announced terms of the privatization tender for a 99.52% stake in Odesa Portside Plant. Companies will be eligible to participate if they have posted three consecutive profitable years and are not registered in tax-shelter countries. The winner will be obligated to deliver on financial result targets and complete a UAH 1.3 bln (USD 256 mln) 5Y investment program. In particular, plant revenues must be not less than USD 463 mln (+5% over 2007) in the first year of ownership and USD 598 mln in the fifth year. The new owner is obliged to pay out dividends of USD 38 mln from 2007 earnings, and should keep existing personnel and their privileges for at least 10 years. Other restrictions relate to asset disposal, use of transshipment facilities, etc. The auction must take place in 45 days after the announcement, which is still to be approved by the State Property Fund. The starting price is set at UAH 3 bln (USD 594 mln). Nine companies have expressed an interested in the plant: Azot Cherkasy (AZOT: N/R), Chernigiv Khimvolokno (CHIM: BUY), DF Group (linked to Ukrainian businessman Dmitry Firtash), Dniproazot (DNAZ: SELL), Renova (Russia), Acron (Russia), EuroChem (Russia), Sibur Holding (Russia), and Yara International (Norway). Vladimir Nesterenko: The starting price implies EV/EBITDA ’07 of 5.9x, and EV/EBITDA ’08 of 8.0x, assuming a decrease in Odesa Portside’s EBITDA margin from 22.6% in 2007 to around 15.0% next year on gas price growth. Foreign peers (Yara, Agrium, Kemira, etc) on average trade at 8-9x EV/EBITDA ’08. Given the discount to peers, the plant’s strategic position in transshipment, possible synergies for a buyer and competing bids, the selling price could reach USD 0.8-1.0 bln.