OREANDA-NEWS. October 15, 2009. MTS announced the closing of a deal with Sistema in which it purchased a 50.9% stake in Comstar for total US 1.3bn, or US 6.2 per share, reported the press-centre of OTKRITIE FC.

View: The purchase price is 4% above the previously announced price per Comstar share, which was US 5.98. We expect MTS to come up with an offer to Comstar minorities as the company has stated that it wants to fully consolidate Comstar. The current rally on the stock market suggests that MTS will not be able to purchase the remaining Comstar shares below US 6.2/share anytime soon.

At the same time, MTS does not need to hurry with the offer as long as the 6-month weighted average is below the purchase price. At the moment we estimate 6-month VWAP at US 4.9.  Valuation: Comstar trades at a 2009 EV/EBITDA of 4.1x compared to MTS trading at 6.1x.

Action: We expect Comstar shares to move steadily upward, with US6.2/share being the downside protection for investors. We reiterate our BUY rating for Comstar shares as our highest conviction in the telecom sector.