OREANDA-NEWS. July 29, 2010. Alexei Mordashov’s Highstat Ltd, majority shareholder of Power Machines, sent a mandatory buyout offer to minorities of the machine-building concern. As of 30 July, Highstat owned a 70.06% stake in Power Machines, hence Highstat’s proposal covers 29.94% of capital, reported the press-centre of OTKRITIE Financial Corporation.

View: The buyout price is not yet known, but under current law the buyout price should be the maximum value from an independent valuation or the average price for the past 6 months. Since that average is approximately RUB6.7/share, and the current price is RUB7.3/share, the news is slightly negative for the stock. Nevertheless, this offer is obligatory only for the issuer. For the minorities it is not mandatory and does not require any business decision.

Valuation: Power Machines trade at a discount to its global peers. The company trades on a 2010 EV/EBITDA of 5.1x, while DM peers trade at 8.0x and EM peers at 15.6x. Given the low free-float of shares (less than 5%), we do not believe that Power Machines shares are a strong investment idea at this juncture.