Motor Sich in Talks on Joining Russian Holding.

The company’s (MSICH: BUY)management confirmed to us that it is negotiating a possible merger with a Russian aviation industry holding that is being formed under the direction of the Russian government. The holding will include four Russian makers of aviation engines: Klimov, Moscow Machine Building Chernyshev, Salyut and Ufa Motor. Motor Sich is considering swapping a large block of its shares for shares in the holding. According to a newspaper report Motor Sich’s stake in the holding would be not bigger than 25%. Olha Pankiv: We tentatively view the news as positive for Motor Sich, as its participation in the Russian holding would protect it from Russian threats to punish Ukraine for its intention to join Nato by stopping stop purchases of Ukrainian-made military helicopter engines. Currently Salyut and Ufa Motors depend heavily on parts from Motor Sich, while Motor Sich relies on Russia as its main export destination.