Russia's largest producer of poultry meat and finished meat products - the Cherkizovo group refused to place shares on the Moscow Stock Exchange, two people close to different sides of the failed transaction told Vedomosti. The company failed to collect the book of applications, because it valued itself too highly, the Vedomosti interlocutors explain. A company representative canceled the SPO confirmed: the book of applications could not be collected. There was a great interest of investors, including foreign funds - American, British and Scandinavian, says a representative of Cherkizovo.
Plans to hold an SPO group announced on March 19. The company itself was going to offer securities to investors - it has 6.6% of treasury shares, another 13.4% intended to be sold by its main shareholders. At the same time, they were going to send part of the funds received to purchase shares in the additional issue of Cherkizovo, which should take place after the SPO.
The controlling shareholder of the group with a share of 82.1% is the family of its founder Igor Babayev: sons Sergey (group general director) and Eugene (chairman of the board of directors) Mikhailov, as well as former spouse Lidia Mikhailova, in the Spanish agricultural company Grupo Fuertes 8% of the shares. Another 2.4% is traded on the Moscow Stock Exchange. In 2018, Cherkizovo's revenue increased by 13% to 102.6 billion rubles, net profit doubled to 12 billion rubles. Among the brands "Cherkizovo" - "Petelinka", "Chicken Kingdom", "Cherkizovo", "Pava-paw".
Last week, the company announced the price range - 1875–2125 rubles. per share. The lower limit corresponds to the company's capitalization of 89 billion rubles, the upper limit is 101 billion. On the eve of the announcement of the SPO, the group’s capitalization on the exchange exceeded 90 billion rubles, to the announcement of the price range on April 3 it fell to 83.2 billion rubles. At the close of trading on April 10, it fell to 67.7 billion rubles.
In mid-March, the value of the company's shares jumped: if from the beginning of the year to the 10th of March, Cherkizovo’s shares traded in the range of 1,118–1,508 rubles, on March 14 they jumped 50% to 2,500 rubles. The recent jump in quotations occurred in the absence of any news and could scare off investors, says senior analyst at Gazprombank Marat Ibrahimov.
Such behavior of quotations with low liquidity of securities before re-offering “discourages investors,” says an employee of a large investment fund who was offered to participate in an SPO. A more fair assessment of one of the interlocutors "Vedomosti" calls 1,300 rubles. - at this price in 2017, the Babayev family bought shares from minority shareholders. In addition, it is very alarming when the controlling shareholder sells the shares, he adds.
The price range is unjustifiably high: the lower limit of the range is higher than the market price, and it would be more logical to sell closer to the price offered by minority shareholders two years ago, Ibrahimov says. By offering a high price, shareholders adhere to the logic of a strategic investor, and the funds must understand what they will earn on - what is the history of the company's value growth.
Further investment history of the company is not clear, says the investment fund manager, who was offered to buy Cherkizovo securities: import substitution in the main markets - pork and poultry - is almost complete and now it is logical to develop exports, but it is not known how much profit the company will bring.
If the shareholders agreed to a discount to the current market price of 20%, then investors would probably be interested in their securities, Ibrahimov summarized.
The purpose of the placement was not only to attract money, but also to make the company truly public, to increase the free float, Cherkizovo representative explains: “Now the free float is small, and they (market participants. - Vedomosti) consider the secondary placement as an IPO. Investors were afraid to enter a company with an average capitalization, taking into account potential liquidity, then it will be difficult to exit the capital of such a company taking into account the macroeconomic situation, first of all potential sanctions. ” After the transaction and the subsequent acquisition of shares by controlling shareholders, the free float should have increased to 22%, the company indicated in the prospectus for placement.
Representatives of the organizing banks (Goldman Sachs, Sberbank CIB and the London branch of UBS) declined to comment.
With the selected price range, the company, according to Vedomosti's calculations, could receive more than $ 200 million from the transaction, and its controlling shareholders - more than $ 70 million if the placement went through the upper range. The money was planned to be sent for general corporate purposes, including debt repayment and potential acquisitions. At the end of 2018, Cherkizovo’s net debt exceeded 58.6 billion rubles. - this is 2.9 EBITDA.
This is the second attempt by Cherkizovo to conduct an SPO. The first group undertook in the spring of last year, but it was postponed due to the volatility of the market - not long before this, the US imposed new sanctions on Russia. Sergei Mikhailov then promised that the company will hold the placement when investors can fully appreciate its investment attractiveness.
In the next 5–10 years, Cherkizovo does not exclude a secondary placement of shares on the market, said a company spokesman: the group’s shareholders believe that it will become a blue chip in the Russian consumer market.