OREANDA-NEWS. April 20, 2010. Phosagro Holding made an offer to the government to exchange a 20% stake in Apatit for an equivalent stake in its holding company, according to domestic media sources. Phosagro’s CEO proposed that the state maintain the right of the ‘golden share’ in Apatit and to have all control over Phosagro. After the obtaining of the governmental stake, Phosagro plans to hold an IPO, reported the press-centre of OTKRITIE FC.

View: The government became the owner of a 20% stake in Apatit in early 2009, after a decision of the Arbitrage Court. In Apatit’s 9M09 RAS financial statement, Phosagro’s share in the company’s equity was not disclosed, but in 1H09 Phosagro owned about 60% of Apatit’s stock.

The deal could be beneficial to the government, because the market capitalization of the holding can significantly rise, if it holds an IPO, and the liquidity of the holding’s implied stocks will be significantly higher liquidity of Apatit’s shares. If the state accepts the offer, Phosagro would acquire a controlling stake in Apatit. This could increase the risks of obligatory share buyback from Apatit’s minority shareholders.

Valuation and actions: All in all, we regard this news as negative for Apatit. The stock trades on a 2010E EV/EBITDA of 4.8x (40% discount to peers).