OREANDA-NEWS. April 27, 2010. Preferred shares for Mechel will be listed on NYSE. The listing could take place in May for the sale of preferred shares held by the Justice family, former owners of Bluestone. Mechel acquired Bluestone from the Justice family last April for USD436m and 83.3m preferred shares (which comprises 60% of Mechel’s preferred shares). According to media sources, the Justice family plans to sell less than half of its Mechel prefs, reported the press-centre of OTKRITIE FC.

View: The preferred shares make up about 25 percent of the Mechel's total registered share capital. The company also has 55.5 million preferred shares, but does not plan to put them on the market yet. The price of ADRs representing preferred shares will be at a discount to ADRs that represent ordinary shares, and also will be more attractive in terms of dividends. Therefore, investors might consider switching into the new ADRs. That said, we view this news as slightly negative for Mechel’s ADRs that represent ordinary shares.

Valuation and Action: We reiterate our BUY rating for Mechel. Our target price of USD 40.5 implies a 47% upside. Mechel trades on a 2011EV/EBITDA of 5.7x, which is in line with EM peers.