On Friday, KMG EP reported unanimous approval by the Board of Directors of the launch of a conditional tender offer for the repurchase of GDRs at a price of $ 14 / GDR. In addition, the Board of Directors approved the convening of the EGM on January 22, 2018 with a view to conducting voting to amend the methodology for the valuation of KMG EP.
The share valuation methodology currently provides that any voluntary repurchase of shares will be conducted by the Company at the then current market price. The Amended Share Valuation Methodology will create a distinction between voluntary repurchases of preference shares and voluntary repurchases of common shares and GDRs. Any voluntary repurchase by the Company of preference shares will be conducted at the then current market price, whereas any voluntary repurchase of common shares or GDRs will be conducted either at the then current market price or at any other price taking into account the market value of common shares or GDRs and the value of the Company’s assets and the prospect of any change in the Company's assets in accordance with the development plans of the Company and other factors.
Holders who apply for the sale of their GDRs at $ 14 / GDR irrevocably commit themselves to vote in favor of changing the assessment methodology at the EGM 1.
If the consent of the GDR holders for redemption provides the parent KMG NC 75% stake in KMG EP, the latter will announce the repurchase of common shares on the same economic conditions as the GDR. In the future, the Company intends to convene another EGM to approve the delisting of common shares and GDRs at KASE and LSE, respectively, and other changes to the Charter.
Noting privileged shares separately, the Company refers to the opinion of the Board of Directors that preferred shares will remain in a free float, therefore, KMG EP does not plan to make such a voluntary offer regarding "prefs".
In case of disagreement, in accordance with the JSC Law, shareholders have the right to require the Company to redeem their shares, which implies a put option, the conditions of which presuppose redemption at a price set on the basis of the share valuation methodology with a discount of 10%.
As we already assumed earlier, the repurchase price of $ 14 / GDR was approved by the Board of Directors. We also do not see the preconditions for the refusal of minority shareholders to sell their GDRs at $ 14 / share and we recommend that minority shareholders accept the offer of KMG EP.