Minority shareholders accept share buyback offer

Altynay IbraimovaJanuary 24, 2018

Yesterday, KMG EP announced the results of the EGM held the day before. 

According to the results of the EGM, 89.5% of shareholders voted "For" the change in the Methodology of valuation of shares in their redemption, and none of the shareholders voted "Against".

Thus, minority shareholders accepted the buyout of GDRs at the price of $ 14/GDR. The Board of Directors of KMG EP unanimously approved the launch of an offer to buy out all common shares issued or subject to issue at KASE at the price of $ 84.00 / share, but with payment in tenge.

The Company also announces the decision to convene a second EGM on March 12, 2018 to approve the elimination of GDRs from LSE and common shares from KASE, as well as the approval of certain amendments to the Charter. Due to the irrevocable obligation of NC KMG to vote in favor of the resolutions proposed at EGM 2, all proposed resolutions will be approved, and accordingly, the exclusion of shares from the exchanges will follow. Delisting of shares of KMG EP is scheduled for May 11, 2018.

Our view

As we expected, the results of the EGM confirmed the willingness of minority shareholders to accept the company's offer. We also note the positive effect of delisting KMG EP shares for the parent company of NC KMG in terms of freedom of action with respect to both cash and operating efficiency of KMG EP (regulation of selling prices for oil and oil products).

The conditions for the redemption of preferred shares have not changed and assume a buyback at the current market price. We maintain our Hold recommendation on preferred shares of KMG EP, noting high probability of dividend payment.