Pharmstandard Falls Most in 4 Years on Offer Price: Moscow Mover
OAO Pharmstandard, Russia’s biggest pharmaceutical company, slumped the most in four years after offering to buy out disgruntled investors at a discount.
The shares slumped 8.5 percent, the most since May 2009, to 2,042.30 rubles by the close in Moscow. The volume of trading was equivalent to almost 41 times the three-month average. The global depositary receipts dropped 18 percent to $16.50.
Pharmstandard will offer to buy out shareholders who don’t vote for the planned spinoff of its over-the-counter unit for 2,180 rubles a share, equivalent to about $16.50 a GDR, at a Sept. 27 meeting, Pharmstandard said, citing a board decision in a regulatory filing yesterday after Moscow trading finished. That was a discount of 2.3 percent to yesterday’s closing price in Moscow and 18 percent to the London close.
“This is poor corporate governance practice, they’re just trying to get rid of the shareholders on the cheap,” Ivan Kushch, an analyst at VTB Capital, said by phone from Moscow. “This buyout will affect most of the minority shareholders. And those shareholders that don’t accept the buyout will be left with the old Pharmstandard shares and a new unlisted and illiquid asset.”
Shares in the over-the-counter drug unit will be distributed proportionally to Pharmstandard stockholders, the Moscow-based company said in a separate statement yesterday, citing a board decision. Management will hold a conference call tomorrow to clarify details, Pharmstandard said.
VTB Capital cut the stock to sell from hold, citing “poor” corporate governance and visibility of the company’s business following the restructuring, according to an e-mailed note.
The drugmaker also said yesterday that it plans to purchase Bever Pharmaceutical Pte Ltd., based in Singapore, for $630 million. Pharmstandard plans a shareholder meeting Aug. 17 to vote on the purchase of Bever, a related-party transaction, according to a separate regulatory filing.
“Pharmstandard doesn’t have the free cash to finance Bever’s acquisition so the deal is likely to be financed by the OTC unit’s sale,” Ksenia Arutyunova, an analyst at Rye, Man & Gor Securities, said by phone in Moscow. Pharmstandard’s free cash flow was at about $306 million at the end of last year, according to data compiled by Bloomberg.
The Russian company didn’t describe Bever in the filing. Irina Bakhturina, an investor-relations executive for Pharmstandard, declined to comment on the acquisition in a telephone interview today.
Bever is owned by Andrey Osipov, according to company records filed with Singapore’s Accounting and Corporate Regulatory Authority. An executive by the same name worked at billionaire Roman Abramovich’s Millhouse LLC during the period Pharmstandard was being formed, leaving in about 2004. Bakhturina declined to comment.
In 2003, Abramovich and Viktor Kharitonin, now Pharmstandard’s chairman, bought the Russian plants of ICN Pharmaceuticals to create the company.
Pharmstandard’s GDRs started trading in London in 2007. Abramovich and his partner Evgeny Shvidler sold a 17 percent stake in the company to Kharitonin and board member Yegor Kulkov the following year. Kharitonin and Kulkov’s Augment Investments Ltd. holds 54 percent of the company, according to the drugmaker’s website. Kharitonin owns 38 percent of Pharmstandard, according to Forbes’s billionaires list this year.
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