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. Last Updated: 07/27/2016

Polyus Shares Jump On Prokhorov Offer

Shares of Polyus, the country’s leading gold producer, jumped  11 percent, or 163 rubles, on the MICEX exchange Monday after Onexim Group, Mikhail Prokhorov’s holding company, offered to boost his stake in the company by 6.54 percent.
The company’s shares climbed as much as 260.17 rubles to 1,750 rubles in early trading, later closing the day at 1,653.12 rubles.
The offer is the latest attempt by Prokhorov and his former partner, Vladimir Potanin, who both hold about 30 percent of Polyus’ shares, to gain the upper hand in the company. They have spent more than a year working out a messy divorce of their jointly held assets.
Onexim announced Friday that it would buy the 6.54 percent stake, currently held by Jennington International, a unit of the gold producer.
No financial details were disclosed, but Kommersant reported Monday that the offer, which is valid until June 6, could be worth $1 billion, or $80 per share.
A similar offer was made last month by the Moscow-based fund Kazimir Partners, which industry participants said had strong links to Potanin.
In an unsolicited offer, Kazimir Partners said it would pay $350 million or $73.44 per share for a 2.5 percent stake in Polyus, sending the company’s share price spiking to a record high on May 21 of $80 per share on the RTS.
Analysts said the transaction, if successful, would have transferred the 2.5 percent stake to shareholders loyal to Potanin and thus boost his voting strength at the company’s annual shareholders meeting.
The company’s board of directors did not approve the sale at its last meeting in May, however, and said in a statement that Kazimir’s offer undervalued the company.
Onexim’s offer indicates an escalation of the struggle for control of the gold producer, analysts said.
“At the moment, it is obviously a battle for control of Polyus,” said Michael Kavanagh, a metals analyst at UralSib. “It is not clear whether [Prokhorov] was just out to increase his stake or whether he wants to capitalize on the growth prospect in gold prices.”
Last month the company dropped independent director Lord Gillford as a nominee to its board, after accusations that he was linked to Interros, Vladimir Potanin’s holding company.
Alexei Sulinov, a metals analyst at Finam, said most investors saw the company’s stock as overvalued and “expect the company to make profits only in the next decade.”
Finam said in a note to investors Monday that the offer could lead to speculative buying that could temporarily boost share prices, but could lead to a big fall later.
Kavanagh said Prokhorov’s offer looked positive for minority shareholders in the short term, as the fight over the shares could lead to some form of minority share offer. “Theoretically, the company should be on the verge of growth even though there is no clarity in terms of capital cost, operating cost or whether or not the transaction could be done on time or on budget,” he said.