Re-organisation of Bashneft: creating value through corporate transformation

Transcription

1 Re-organisation of Bashneft: creating value through corporate transformation May 2017 Few analysts and investors imagined five years ago that the dark horse of the Russian oil sector Bashneft would evolve from a relatively small regional player with stagnant oil output into a growing, vertically-integrated company with an ambition to reach up to Top-5 Russian producers in the next 5-10 years. We believe such a rapid and remarkable transformation would be hardly possible without AFK Sistema Bashneft s consolidator and its core shareholder since April Sistema's involvement and strategic vision, its way of 'thinking big', has been the key driving force behind the company s evolution Otkritie, 5 October 2011

2 In the time that it owned shares in Bashneft and the Bashkir oil industry assets, Sistema transformed these separate and non-transparent companies into an efficient, vertically integrated oil holding All the transactions in the re-organisation obtained the necessary corporate approvals and were carried out in accordance with relevant legislation and in the interests of the shareholders of the companies involved Sistema facilitated maximum transparency in the Bashneft re-organisation process for all market participants and other stakeholders The terms of the re-organisation transactions were positively received by investors and investment analysts 2

3 Re-organisation of Bashneft in preparation for a public offering, Description Spin-off of Bashneft-Invest from, then merger of Bashneft-Invest with Bashneft Splitting the assets of between two companies: (100% subsidiary of Sistema) and Bashneft-Invest (100% subsidiary of Bashneft) Sistema s press release: Rationale Raising the investment profile of Bashneft in preparation for a public offering Elimination of cross-shareholding structure in Bashneft, which had created a discount in the value of Bashneft shares Separation of non-core assets Decisions of the Bashneft Board of Directors, and Sistema The re-organisation proposal was approved by all (4) of Bashneft s independent directors Corporate procedures Decisions by the extraordinary meeting of shareholders of Bashneft and Only 3.9% of Bashneft s shareholders voted against the the re-organisation Share buyback for those shareholders who disagreed with or did not vote for the re-organisation Independent valuation of Bashneft ordinary and preferred shares (appraiser was Stremlenie LLC, while Ernst & Young evaluated the methodology) Independent valuation of shares (including assets) of (by Stremlenie LLC) The re-organisation was an important step in preparing the company for a public offering and was carried out in strict accordance with all corporate procedures 3

4 Re-organisation and split-up of assets BEFORE RE-ORGANISATION Share in authorised share capital Sistema AFTER RE-ORGANISATION AND SHARE BUYBACK 100% Sistema 50.6% 50.1% 63.2% Bashneft 10.7% 49.4% Bashneft Bashneft-Invest 100% Merged with Bashneft 25.2% Enhanced transparency and higher valuation ahead of an SPO Assets: RUB 154 / 162* bln 25.24% in Bashneft (RUB / 121.2* bln) Liabilities and shareholder equity: RUB 154 bln Assets: RUB 73.3 / 81.5* bln 8.4% in Bashneft (RUB 40.5 / 40.5* bln) Liabilities and shareholder equity: RUB 73.3 bln** Bashneft-Invest Assets: RUB bln / 80.7* bln Liabilities and shareholder equity: RUB 80.7 bln 90.5% in BESK (RUB 4.5 / 12.3* bln) 21.5% in Ufaorgsintez (RUB 1.8 / 2.2* bln) Liabilities to shareholders, including the RUB 36.9 bln lawsuit claim 90.5 % in BESK (RUB 4.5 / 12.3* bln) 21.5% in Ufaorgsintez (RUB 1.8 / 2.2* bln) Liabilities to shareholders (RUB 73.3 bln) 17% in Bashneft (RUB 80.7 / 80.7* bln) Liabilities to shareholders, including the RUB 36.9 bln lawsuit claim Other assets (RUB 26.5 / 26.5* bln) Other assets (RUB 26.5 / 26.5* bln) * Book value / market valuation based on independent appraiser s report on ; Bashneft shares at market value on the date of the split-up ( ) * s assets were split up at market valuation in proportion to the size of the stakes of each shareholder. Liabilities and equity were divided based on the book value of the assets s assets were split up at market valuation in strict proportion to the size of the stakes of each shareholder 4

5 Re-organisation results and investment community response ANALYST S ASSESSMENT* Restructuring on the way to SPO; Raising PO to RUB 2,550, Offer price has premium to the 6m average prices and is in line with the market price The reorganisation is another step towards the SPO in London. We expect the SPO to improve share liquidity that still remains suboptimal and to expand investor base. Bashneft. Moving in the right direction, Core shareholder's interest in line with minorities'. Sistema is focused on increasing valuation of its assets and dividends from subsidiaries. This has 3 benefits: (i) it aligns its interests with those of Bashneft's minorities; (ii) it suggests that a negative change in dividend policy in the medium term is unlikely; iii) the company is technically ready for a liquidity boost through and SPO if the markets are right. The start of the buyback; important step towards SPO key catalyst, The buyback will support value creation at the company The current re-organisation will reduce the total number of shares by 21-23%, which will increase earnings per share (EPS) and dividends per share (DPS), as well as value for minority shareholders and it is an important step on the road to an SPO. This is a key catalyst for Bashneft shares. Bashneft re-organisation to result in decrease in share capital, We believe a more transparent shareholder structure is beneficial for the company especially ahead of the planned IPO. Bashneft share price rose by 3.1% on the day that the restructuring was announced The market warmly received news of the restructuring and split-up of assets as an important step in preparing for a public offering of Bashneft shares * BCS analyst report quote has been translated from Russian original 5

6 RUB Re-organization of Bashneft: market reaction Bashneft share price performance from 1 July 2013 through 26 June ,6% 6 May 2014 Announcements re completion of re-organisation Dec 2013 Re-organisation announcement Bashneft share price performance reflected the market s positive viewed of the re-organisation 6

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