Rostelecom Preferred Stock Jumps on Buyout Report: Moscow Mover

OAO Rostelecom’s preferred shares rose to the highest level in more than two months on bets Russia’s state-run telecommunications operator will make a new buyout offer at a premium to the market.

The preferred stock gained 2.3 percent to 76.92 rubles by the close in Moscow, the highest since Aug. 23, compared with a 0.6 percent drop in the Micex Index. The amount of shares traded was equivalent to about 3 times the three-month average.

Rostelecom plans an extraordinary general meeting in the “coming weeks” to approve spinning off of mobile assets and will have to buy out shareholders who vote against the proposed reorganization or abstain from voting, Vedomosti reported today, citing two people familiar with the plan. The buyout price will be similar to this year’s offer, the newspaper reported, citing an unidentified person close to the board of directors. Andrey Polyakov, a Rostelecom spokesman, declined to comment by phone.

“Most likely, we’ll see Rostelecom offer a premium to the market in its buyout and shares are rising on that,” Alexander Vengranovich, an analyst at Otkritie Financial Corp., said by phone from Moscow. “Preferred shares are more sensitive to the report because they trade at a discount to ordinary shares and have more room for upside.” Vengranovich forecasts that the buyout will happen no earlier than in the first quarter of 2014.

Rostelecom bought back shares from investors who didn’t vote or voted against its merger with parent company OAO Svyazinvest between June and August, setting the buyout price of 136.05 rubles per common share and 95.24 rubles for each preferred share.

Rostelecom’s ordinary shares fell 0.3 percent to 116.89 rubles today. The premium for ordinary shares compared with preferred stock reached the highest level since April 2012 on Oct. 29, according to data compiled by Bloomberg. Rostelecom’s preferred shares are down 15 percent this year, compared with a drop of 2.7 percent for its ordinary shares.

The company’s London shares retreated 0.4 percent to $21.59 by 3:30 p.m.