Page 83 - RUSRptAug18

bankruptcies in the tourism sector, with one of country's top 5 traditional tour operators Natalia Tours cancelling all the tours, including the prepaid ones.
9.2.8 Telecoms corporate news
Megafon 's BoD has decided that being a public company is no longer a strategic priority for the carrier. Hence, the company announced a tender offer for the entire free float (both common shares and GDRs) at $9.75 per share, which implies an 8% premium for the GDRs and 20% for the commons as of July 30 close. This is a 22% premium to our target price in rubles. The BoD has also approved a delisting from the LSE. MegaFon will consider delisting from the Moscow Exchange as well following the completion of the tender offer. Bankers recommend taking advantage of the buyout, given the premium offered, as well as given the increase in MegaFon's leverage that will follow and the corporate governance risks we have flagged before. The company plans to acquire up to 128.95mn shares and GDRs (the entire free float, 20.8% of its share capital) for $9.75 per share/GDR (R609 at the current USD/RUB rate), implying respective 8% and 20% premiums for the GDRs and common shares, as well as a 22% premium to our target price in rubles ($8.27 or R500 per share/GDR at the 2018E USD/RUB rate). The maximum the company will spend on the buyout is thus $1.3bn, which the company intends to finance with own cash and debt, and not its stake in Mail.ru Group, according to MegaFon's management. The tender offer started yesterday and expires August 22. Shares held by USM Holdings and Gazprombank, as well as treasury stock, will not be tendered. Goal to become private; delisting to follow. Once the tender offer is completed, MegaFon plans to delist from the LSE and may cancel its GDR program. In this case, owners of GDRs who do not submit their holdings would thus have them converted into commons. Furthermore, MegaFon will consider delisting its common shares from the Moscow Exchange following the buyout, while the exchange itself may trigger a downgrade of the listing from the first to third listing category, according to the company.
MobileTeleSystems (MTS) bought a 28.6% stake in MTS Bank from its parent AFK Sistema multi-industry investment conglomerate for RUB8.27bn ($130mn), becoming the bank’s controlling shareholder with a 55.2% share. Sistema’s direct ownership in MTS Bank decreased from 71.87% to 43.24%. MTS is eyeing fintech revenues and wants a bank in its portfolio to be able to expand the business. But the expansion is a non-core segment that could be met negatively by shareholders. VTB Capital commented on July 6 that such sentiment is already priced in. As for Sistema, the deal will result in cash inflow of about RUB7.5bn post tax, VTB estimates, noting that this could help the company to deleverage, although more sizable transactions could be required to deal with its $3.75bn net financials liabilities as of end of June 2018. MTS believes that gaining control in MTS Bank would speed up the decision-making process and reduce the time-to-market for digital financial products. The operator also anticipates support for the core business, as growing data penetration could translate into strong us of mobile-based financial services. Better utilisation of mobile retail services for the bank’s expansion is also anticipated. Uralsib Capital on July 6 sees the deal as overpriced, while noting that it will not notably worsen MTS's leverage metrics.
83 RUSSIA Country Report August 2018 www.intellinews.com