The Federal Antimonopoly Service granted permission to Highstat, controlled by Alexei Mordashov, to consolidate 100% of Power Machines. Highstat agreed to acquire 25% of Power Machines common equity plus one share from Siemens at an undisclosed price. Following the deal, Highstat's stake in Power Machines will increase to 95.3% and the company will have to make a mandatory repurchase offer to minorities.

Mandatory offer price issue
The offer should be made at the highest of either the 6M weighted average price or the price at which the stake was purchased from Siemens. Currently the 6M weighted average price is RUB 8.37, which is 21% higher than the current stock price of RUB 6.90. At the same time, if Highstat makes the repurchase offer two or three months from now, the premium to the current price could decrease significantly given the slump in the stock price in July-August.

In our view, an attractive repurchase offer could be made if Mordashov plans to take the company private and delist. However, recent stock price performance doesn't suggest that this is likely. We expect a short term positive impact on the stock price.

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